Morris v. Steffes Grp., Inc.

• Decision Date: 22 February 2019
• Docket Number: No. 17-1466,17-1466
• Citation: 924 N.W.2d 491
• Parties: Todd MORRIS, Appellant, v. STEFFES GROUP, INC., Appellee.
• Court: Iowa Supreme Court

924 N.W.2d 491

Todd MORRIS, Appellant,

v.STEFFES GROUP, INC., Appellee.

No. 17-1466

Supreme Court of Iowa.

Filed February 22, 2019

Rehearing Denied March 28, 2019

Billy J. Mallory and Allison M. Steuterman of Brick Gentry, P.C., West Des Moines, for appellant.

Collin M. Davison of Heiny, McManigal, Duffy, Stambaugh & Anderson, P.L.C., Mason City, for appellee.

APPEL, Justice.

In this case, we consider whether the district court correctly held that a seller of auction services of certain machinery is entitled to summary judgment on a claim brought by a buyer of those services under the Iowa Door-to-Door Sales Act (DDSA), Iowa Code chapter 555A (2017). In addition, we must consider whether the district court erred in dismissing without prejudice a declaratory action count of the petition challenging, among other things, the underlying sales contract because of an invalid execution by a third party and because of fraud in the inducement.

After the district court dismissed both claims, the buyer appealed. We transferred the case to the court of appeals. The court of appeals affirmed the district court.

We granted further review. For the reasons expressed below, we vacate the decision of the court of appeals. We reverse the judgment of the district court and remand the case to the district court for further proceedings consistent with this opinion.

I. Factual and Procedural Background.

A. Factual Background. Because this case involves an appeal of a district court order granting a motion for summary judgment, we review the facts in the light most favorable to the nonmoving party. Crippen v. City of Cedar Rapids , 618 N.W.2d 562, 565 (Iowa 2000). The nonmoving party offered evidence that showed that Todd Morris attended an agricultural trade show with his wife, Lacey Morris.¹ While at the trade show, they visited a friend’s booth. Steffes Group, Inc., which provides services that include farm equipment auctions and appraisals, had a booth next to the friend’s booth.

While Lacey was talking to her friend, Morris spoke with Duane Norton, a Steffes Group representative. Morris owned some equipment, including a tractor, which he claimed he used for playing around his farm, hunting purposes, food plots, and maintaining his house and property. Morris and Norton discussed the possibility of auctioning some of Morris’s equipment. Norton told Morris there was an upcoming auction suitable for Morris’s equipment, but they would have to act quickly to get his equipment into the auction. Morris left his contact information with Norton.

Shortly thereafter, Norton called Morris to find out when he could come to the Morris residence to view the equipment. Morris explained that he would be out of town. Norton responded that he only needed to see the equipment. Morris did not object to Norton visiting his residence to view the equipment while he was absent but informed Norton that any of the business associated with the equipment should be with himself and not his wife. Morris then gave Norton Lacey’s cell phone number. Norton and Lacey arranged a time for Norton to come to the Morris residence.

When Norton arrived at the residence, Lacey took Norton to the garage to view the equipment. Norton jotted down some notes about the equipment and associated identification numbers. Afterwards, Norton and Lacey went into the residence and sat in the kitchen, where Norton began filling out a document. Norton listed on the document the various pieces of equipment that Lacey had shown him and asked her to sign the document.

At some point while they were in the kitchen, Lacey and Norton each spoke with Morris by telephone. According to Morris and Lacey, Norton told each of them that the document was merely a nonbinding "asset list" to get the equipment into the auction. Norton also reiterated the necessity of moving quickly before the auction. During his telephone conversation with Norton, Morris told Norton there was a lien on one of the pieces of equipment—a tractor—and he was unwilling to part with the tractor for less than a certain amount. Since Morris had been unable to get in touch with his banker, they agreed to identify this amount later. Morris told Lacey that she could sign the document in his name, and she did so.

In fact, however, the document was a consignment contract. The contract provided that Morris employed Steffes Group to sell the identified equipment at auction and that the equipment "may not be sold or withdrawn prior to the auction except by mutual agreement." Under the contract, all property was to be sold for cash to the highest bidder. The contract does not state that Morris could cancel the contract and Norton did not provide a notice of cancellation form. Norton also did not tell Morris or Lacey that they could cancel the contract. The equipment to be sold pursuant to the contract included a tractor, a rototiller, a mower, a fertilizer spreader, a planter, and various other equipment.

Over the next few weeks before the auction, Morris and Norton communicated several times. At one point, Morris text messaged Norton asking if he would be able to approve or deny the sale price during the auction. Norton responded by text message that they could protect the sale price by putting a reserve on the tractor ahead of time. The two then spoke by phone. Norton explained Steffes Group’s reserve process to Morris, informing him that Steffes Group would watch the bidding and if the reserve was not going to be met then Steffes Group would bid the reserve and return the tractor to Morris. With that understanding, Morris asked Norton to put a reserve on the tractor for $20,000. Subsequently, on the day before the auction, the parties again confirmed that the reserve on the tractor was $20,000.

At the auction, the tractor sold for $14,500. Lacey attended the auction. The tractor’s sale price concerned her because it was less than the reserve amount. She phoned Morris, who was at a job site. Morris told her not to worry because Norton had assured him that if the tractor was not going to sell for at least $20,000 it would be pulled from the auction and returned to Morris.

Morris phoned Norton numerous times later that day but was unable to get in touch with him. The next day, Morris went to the auction site to get his tractor. The tractor was gone. Morris found a field hand at the site and, using the field hand’s phone, was able to get in touch with Norton. Norton told Morris that he would "make this right" and offered to reduce the commission from some of the other items that sold. Morris refused as these amounts would be significantly less than the difference between the tractor’s reserve and the sale price. Morris demanded the return of the tractor, and Norton told him that he would not get it.

B. District Court Proceedings. Morris filed a two-count petition in the Marion County District Court. In count I, Morris claimed a violation of the DDSA. Morris alleged that a Steffes Group sales representative personally solicited the transaction at his personal residence; that the sales representative did not furnish the plaintiff with a notice of cancellation as required by Iowa Code section 555A.3 ; that the sales representative did not inform him in any manner of the right to cancel or perform the other duties of a seller under Iowa Code section 554A.4; that he had provided notice of cancellation of the transaction on multiple occasions; and that he had demanded, to no avail, the return of his property and any payments made under the transaction. Morris alleged that a violation of the DDSA is also a violation of the Iowa Consumer Frauds Act, under Iowa Code chapter 714. Morris sought injunctive relief, compensatory damages, interest, and attorney fees.

In count II, Morris sought a declaratory judgment concerning the parties’ rights. In addition to the facts alleged under count I, Morris alleged that he did not execute the written agreement and that the written agreement was induced by fraud. He further asserted that he sent a notice of cancellation to the defendant but that the defendant refused to cancel the transaction or take other action as a result of the cancellation. Morris asserted that a controversy existed between the parties regarding their rights and sought a declaration that the alleged agreement was void, that he provided a valid cancellation of the contract, and that he rightly cancelled the transaction. Although styled as seeking a declaratory judgment, Morris sought various other remedies under count II, including the return of all property and a judgment for compensatory damages, interest, costs, and attorney fees.

In its answer to count I, Steffes Group denied all of Morris’s allegations claiming that the transaction was subject to the DDSA and its various cancellation and notice provisions. Steffes Group specifically denied that its sales representative personally solicited the transaction at Morris’s residence.

In its answer to count II, Steffes Group incorporated its denials with respect to the DDSA. Steffes Group also denied allegations that the execution of the written contract was invalid and that the written contract was induced by fraud.

After a round of discovery, Morris moved for summary judgment, asserting that the transaction was covered by the DDSA and there was no genuine issue of material fact that the defendant failed to comply with the notice and cancellation provisions of the DDSA. In response, Steffes Group resisted and filed its own motion for summary judgment, claiming that on the undisputed facts it was entitled to judgment as a matter of law.

In a brief order, the district court granted summary judgment in favor of Steffes Group. The district court stated that the "fighting issue" before the court was whether the DDSA applies to the facts of the case. The district court determined that the DDSA "does not apply to a contract for auction services, such as here." Based on that conclusion, the district court dismissed...