State Sur. Co. v. Lensing, 2--58053

• Citation: 249 N.W.2d 608
• Decision Date: 19 January 1977
• Docket Number: No. 2--58053,2--58053
• Parties: STATE SURETY COMPANY, Appellant, v. Jerome H. LENSING et al., Appellees.
• Court: United States State Supreme Court of Iowa

Page 608

249 N.W.2d 608

STATE SURETY COMPANY, Appellant, v. Jerome H. LENSING et al., Appellees.

No. 2--58053.

Supreme Court of Iowa.

Jan. 19, 1977.

Miller, Pearson, Gloe & Burns, Decorah, for appellant.

Strand, Anderson & Raduenz, Decorah, for appellee Jerome Lensing.

Warren L. De Vries, Mason City, for appellees Richard Knauer, d/b/a Midway Car Sales Co., Central States Auto Auction, Inc., and Joel J. Bittner, d/b/a Joe's Auto Sales.

Meyer & Zahasky, Decorah, for appellees James Bohr, John Fossenkemper and Zimmerman Buick, Inc.

Heard by MOORE, C.J., and MASON, UHLENHOPP, HARRIS and McCORMICK, JJ.

MOORE, Chief Justice.

Plaintiff Surety Company appeals from judgment holding it liable to Arizona purchasers on the bond required by Code section 322.4, for Iowa Motor Vehicle Dealers. We reverse and remand.

There are no disputed fact issues. The parties stipulated that defendant Jerome Lensing was duly licensed under chapter 322, 1971 Code, as a retail motor vehicle dealer in Festina, Iowa. Pursuant to section 322.4(7), plaintiff corporate Surety Company had issued a $10,000 surety bond conditioned upon Lensing's faithful compliance with the statutes set out in Code chapters 321 and 322.

In early 1972 Lensing traveled to Tucson, Arizona and there made two used car sales. On February 28 he sold a 1971 Buick LeSabre to one John Fossenkemper, an Arizona resident. On March 29 he sold a 1971 Buick Riviera to Zimmerman Buick, an Arizona corporation engaged in the sale of motor vehicles in Phoenix. Unknown to Lensing, both cars which he had previously purchased for resale were stolen and thus the Iowa Certificates of Title which were transferred in connection with the transactions were invalid. Thereafter, the insurance company which had paid the rightful owner of the car purchased by Zimmerman Buick, Inc., made claim on that Arizona car dealer, which subsequently paid the insurance carrier in order to obtain a valid Arizona Certificate of Title to the car and thus it retained possession. The Arizona police later confiscated the stolen car which had been purchased by Fossenkemper. It is undisputed that the entire transactions from preliminary negotiations through actual delivery and payment for the cars took place in Arizona.

Plaintiff Surety then commenced the present action in interpleader alleging defendants, other than Lensing, were claimants to a $10,000 fund held by it to cover any obligations owing under the dealer licensing bond as the result of transactions involving stolen vehicles. Other than the two Arizona purchasers, the claimants were Iowa residents and purchasers of cars from Lensing which had been stolen.

In its petition plaintiff denied liability under the surety bond to Zimmerman and Fossenkemper on the basis that the sales were made out of Iowa to non-residents. The surety bond was posted under the provisions of section 322.4(7), Code 1971, which provided:

'Each person before engaging in this state in the business of selling at retail motor vehicles or representing or advertising that he is engaged or intends to engage in such business in this state shall file in the office of the department an application for license as a motor vehicle dealer in the state in such form as the department may prescribe, duly verified by oath, which application shall include the following:

'* * *.

'7. A financial statement of the applicant showing his true financial condition as of a date not more than six months prior to the date of such application. Before the issuance of a motor vehicle dealer's license to a dealer engaged in the sale of vehicles for which a certificate of title is required, under the provisions of chapter 321, the applicant for such license shall furnish a surety bond executed by the applicant as principal and executed by a corporate surety company, licensed and qualified to do business within this state, which bond shall run to the state of Iowa, be in the amount of ten thousand dollars and be conditioned upon the faithful compliance by said applicant as a dealer, if the license be issued to it or him, that such dealer will comply with all of the statutes of this state regulating or being applicable to the business of said dealer as a dealer in motor vehicles, and indemnifying any person dealing or transacting business with said dealer in connection with any motor vehicle from any loss or damage occasioned by the failure of such dealer to comply with any of the provisions of chapter 321 and this chapter, including, but not limited to, the furnishing of a proper and valid certificate of title to the motor vehicle involved in any such transaction, and that such bond shall be filed with the department prior to the issuance of license provided by law. The aggregate liability of the surety of all persons, however, shall in no event exceed the amount of said bond.

'* * *.'

Section 322.3 enumerates several requirements and prohibited acts of persons 'engaged in this state' in the business of selling new or used motor vehicles. Included is a prohibition against Sunday sales.

The trial court expressly found the legislature did not intend to exclude casual out-of-state sales from the protection of the statutory motor vehicle dealers surety bond. The court's conclusions include:

'It is the opinion of the Court that the statute, while talking of engaging in this state in the business of selling of motor vehicles, contemplates the status of his business as a dealer being in the State of Iowa and does not contemplate where each individual or casual transaction may take place. * * *.

'The Court is of the opinion that had the legislature intended to exclude a casual out-of-state sale from the business acts of an established dealer, that it would have specifically so stated in Section 322.3, pertaining to prohibited acts.'

The court awarded each defendant (except Lensing) a share of the fund proportionate to his loss. Plaintiff Surety Company appeals the award as to Zimmerman Buick, Inc., and Fossenkemper.

The sole issue in this appeal is one of statutory construction, namely: Does the surety bond given pursuant to the provisions of section 322.4(7), protect an aggrieved non-resident purchaser who suffers damages as a result of the casual out-of-state sale by an Iowa licensed car dealer?

I. We are not bound by the trial court's determination of the applicable law. We are not precluded from inquiry into whether the trial court applied erroneous rules of law which materially affected its decision. In re Estate of Northup, Iowa 230 N.W.2d 918, 921; Farmers Insurance Group v. Merryweather, Iowa, 214 N.W.2d 184, 186, 187.

II. Several general principles are applicable to guide us in interpreting the scope of this statutory bond. Where the bond is a statutory bond, the surety's liability than by the form of the bond. Indeed, the than by the form of the bond. Indee, the provisions of the statute are read into the bond and nonessential matters are treated as mere surplusage and of no effect. Community Sav. Bk. v. Western Surety Co., 232 Iowa 1381, 1385, 8 N.W.2d 427, 429; Jaeger Mfg. Co. v. Massachusetts Co., 229 Iowa 158, 161, 294 N.W. 268, 270; City of Charles City v. Rasmussen, 210 Iowa 841, 847, 232 N.W. 137, 139. In Zapf v. Ridenour, 198 Iowa 1006, 1009, 200 N.W. 618, 619, we state:

'We are committed to the doctrine that, where a strictly statutory bond is given, there can be no liability on such bond beyond the terms and provisions of the statute, * * *.'

See also 53 C.J.S. Licenses § 36b; 12 Am.Jur.2d Bonds, section 26.

A surety's liability may not be enlarged by implication. Andrew v. Austin, 213 Iowa 963, 967, 232 N.W. 79, 81; Conley v. Jamison, 205 Iowa 1326, 1328, 219 N.W. 485, 486. However, statutory bonds should be construed in light of the purpose as expressed by the statute. 11 C.J.S. Bonds § 39, page 418.

With these...