Peterson v. First Nat. Bank of Iowa

Decision Date04 June 1986
Docket NumberNo. 85-14,85-14
Citation392 N.W.2d 158
PartiesKeel PETERSON and Linda Peterson, Appellants/Cross-Appellees, v. FIRST NATIONAL BANK OF IOWA, Appellee/Cross-Appellant.
CourtIowa Court of Appeals

Peter C. Riley of Tom Riley Law Firm, P.C., Cedar Rapids, for appellants/cross-appellees.

Robert Tilden, Roger Stone of Simmons, Perrine, Albright & Ellwood, and David McManus of Olinger & McManus, Cedar Rapids, for appellee/cross-appellant.

Heard by DONIELSON, P.J., and SNELL and SCHLEGEL, JJ.

DONIELSON, Presiding Judge.

Plaintiffs appeal and defendant cross-appeals from the order granting a new trial in an action for intentional interference with existing and prospective contracts and breach of an oral contract.

Plaintiffs, Keel and Linda Peterson, farmed two rental properties (Staskal Farm of at least 580 acres and Caraway Farm of 550 acres) and a tract that he and his sister owned (Home Farm of 160 acres). Defendant, First National Bank of Iowa, extended him approximately $300,000 in 1982, which was intended to be the maximum loan amount for his farming operation in addition to a carryover debt of $45,000 from 1981. The bank held a security interest in his crops and equipment. Peterson apparently spent all of these funds and was unable to pay the Caraway Farm rent when it was due in September of 1982. Keel Peterson executed a promissory note with the bank on September 27, 1982, in the amount of $40,000 to pay the Caraway Farm rent. This note was due on March 17, 1983. At this point, Peterson owed the bank approximately $430,000.

On November 1, 1982, the rent for the Staskal Farm was due. Petersons did not have sufficient funds to pay this rent. The Petersons decided to borrow money from the Commodity Credit Corporation (CCC), a reserve program sponsored by the United States Department of Agriculture through the Agricultural Stabilization and Conservation Service (ASCS), and use his harvested 1982 crops as collateral. On November 23, 1982, the Petersons obtained a lien waiver, required for participation in the CCC program, from the owner of one of the rental properties, Everett Staskal, who also owned the elevator in which Peterson stored his grain.

Keel Peterson met with Craig Symons, a bank officer, regarding his financial situation. It is disputed whether Symons promised to loan Petersons money to pay the Staskal Farm rent in return for the CCC proceeds. In any event, Keel Peterson subsequently tendered to Staskal, his landlord, a check in the amount of $49,675 for fall rent which had been due since November 1, and he apparently told Staskal that it could not be cashed until the proceeds were received from the CCC. Staskal attempted to cash the check on December 1, 1982, but the bank refused to honor the check because the CCC proceeds were not in Petersons' account. On the morning of December 6, 1982, Staskal had a conversation with Symons, the substance of which was disputed because Staskal died a month later. Later that day, Keel Peterson deposited four checks which listed Keel Peterson and the bank as joint payees totalling $220,438.93, and two checks which listed only Keel Peterson as a payee totalling $19,836.87 in the bank. After applying the $240,275.80 towards existing debt, Petersons still owed $191,000 according to the bank. The record indicates Keel Peterson executed three other promissory notes with the bank: on June 30, 1982, a note was executed in the amount of $55,000, which was due on December 30, 1982; on September 17, 1982, a note was executed in the amount of $143,178.06, which was due on March 17, 1983; and on December 6, 1982, a note was executed in the amount of $6,282.16, which was due on March 17, 1983. On the afternoon of December 6, the bank refused to extend Keel Peterson a loan to cover the check held by Staskal.

On December 14, 1982, Staskal filed a lawsuit naming Keel Peterson and the bank as defendants. As a result of failure to pay the rental debt represented by the check, Keel Peterson's lease of the Staskal Farm was terminated in February of 1983. Lack of money prevented Keel Peterson from renting other farm property and one attempt to arrange a loan from another bank was unsuccessful. Keel Peterson and his wife then commenced an action against the bank on theories of intentional interference with existing and prospective contracts and breach of an oral promise to lend the money needed for payment of the rent that he owed. The bank counterclaimed for judgment upon the loans that had been extended to both plaintiffs.

At trial, Keel Peterson testified that Craig Symons had on more than one occasion assured him that a loan for payment of rent would be forthcoming. The officer initially denied making such assurances, either to Peterson or Staskal. Symons' trial testimony on this point went as follows:

Q. (Mr. Riley) Is there any--You have no uncertainty sitting here today as to that conversation, no uncertainty that you told Mr. Staskal that the bank was going to take the entire proceeds of the checks Mr. Peterson was bringing in even though you knew of this claim for fall rent? A. (Mr. Symons) Yeah, I believe we told him that we would be taking the entire proceeds.

Q. Well, you're saying you believe you told him that. Do you remember what your conversation was? A. Not exactly.

Q. All right. Is it possible he could have been led to believe that he would get his money out of that? A. It's possible.

Thus, the officer conceded that he may have left Staskal with the impression that he would be paid out of CCC proceeds during a conversation on the morning of the day that the CCC proceeds were received. Shortly after such conversation, Staskal, an experienced elevator operator who knew the importance of liens and other priority matters, prepared a letter releasing his warehouseman's lien in the manner required before the CCC would release grain proceeds to Keel Peterson. Staskal died approximately a month later.

The Petersons presented evidence concerning emotional distress that he experienced and presented evidence concerning profits that he would have made after 1982 through, inter alia, participation in the United States Department of Agriculture's Payment-in-Kind (PIK) Program if he had been able to continue his farming operation as he had before. The jury returned a verdict for the Petersons in the amount of $400,000 in actual damages and $150,000 in punitive damages. A verdict was returned for the bank upon its counter-claim in the amount of $206,769.21.

The bank filed a motion for new trial raising fifty-one grounds including, inter alia, that the verdict failed to effectuate substantial justice. The trial court granted a new trial solely on the ground that three instructions failed to adequately state that the tort of intentional interference with a prospective contract required proof that the bank acted with improper purpose or by improper means to destroy or injure Petersons' business. The instructions regarding the tort of intentional interference with a prospective contract were submitted to the jury in a form similar to the proposed instructions requested by the bank. The bank's sole objection to such instructions was limited to the theory that the evidence was insufficient to support submitting the issue to the jury.

The Petersons assert that the bank's motion for new trial should not have been sustained because an issue regarding such instructions was raised for the first time in the motion for new trial and that any error in instruction was harmless and/or invited on cross-appeal. On cross-appeal, the bank asserts: (1) that the evidence was in any event insufficient to support the jury's verdict with regard to issues of both liability and certain elements of damage, and that certain issues should not have been submitted to the jury; (2) that the evidence was sufficient as a matter of law to establish the affirmative defense of justification; (3) that the evidence was insufficient to support the manner in which the court instructed on consideration; (4) that an instruction on contract theories misstated the record; (5) that the evidence was insufficient to support the manner in which the jury was instructed on damages and that an instruction on the new business rule should have been given; (6) that the jury was erroneously instructed in a manner permitting an award of emotional distress damages for breach of contract; (7) that the evidence was insufficient to support submitting the issue of punitive damages to the jury and, in any event, the jury's damage award was excessive; and (8) that judgment on its counterclaim should be entered. In reply Petersons basically assert that error was not preserved with regard to certain issues and arguments raised on cross-appeal and that certain errors assigned on appeal were harmless assuming, arguendo, that error occurred.

I. Appeal Regarding New Trial.

The initial issue we address is whether the trial court erred in granting a new trial because the instructions as submitted to the jury did not properly state the law in Iowa on the tort of interference with prospective contractual relations.

Iowa law provides:

In ruling upon motions for new trial the trial court has a broad but not unlimited discretion in determining whether the verdict effectuates substantial justice.

Iowa R.App.P. 14(f)(3). It is also clear that we are more reluctant to interfere with the grant of a new trial than with its denial. Iowa R.App.P. 14(f)(4).

In Erickson v. Thompson, 257 Iowa 781, 785-86, 135 N.W.2d 107, 109-10 (1965), the

court held that even though the plaintiff, who was in an automobile accident, failed to object to an erroneous instruction, the appellate court could still review the trial court's decision to determine if it abused its discretion in granting a new trial when there was a failure to achieve substantial justice. Preservation of error is not a prerequisite to reviewing the trial court's decision to grant a new...

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