Van Sickle Constr. Co. v. Wachovia Commercial Mortgage Inc

• Decision Date: 25 June 2010
• Docket Number: No. 07-1602.,07-1602.
• Citation: 783 N.W.2d 684
• Parties: VAN SICKLE CONSTRUCTION COMPANY and Matthew J. Van Sickle, Appellees,v.WACHOVIA COMMERCIAL MORTGAGE, INC., f/k/a The Money Store Commercial Mortgage, Inc., Appellant.
• Court: Iowa Supreme Court

783 N.W.2d 684

VAN SICKLE CONSTRUCTION COMPANY and Matthew J. Van Sickle, Appellees,v.WACHOVIA COMMERCIAL MORTGAGE, INC., f/k/a The Money Store Commercial Mortgage, Inc., Appellant.

No. 07-1602.

Supreme Court of Iowa.

June 25, 2010.

John T. Clendenin and Brad C. Epperly of Nyemaster, Goode, West, Hansell & O'Brien, P.C., Des Moines, for appellant Wachovia.

Theodore F. Sporer of Sporer & Flanagan, P.C., Des Moines, for appellees.

HECHT, Justice.

After purchasing two vehicles from a bank at a public auction, Matthew Van Sickle did not receive title to the vehicles for several months. He sued the bank, alleging fraudulent and negligent misrepresentation and seeking compensatory and punitive damages. After a jury verdict in favor of Van Sickle on both counts, the bank appealed. The court of appeals reversed, and we granted Van Sickle's application for further review.

I. Factual and Procedural Background.

In 2003, Wachovia Commercial Mortgage foreclosed a mortgage against commercial real estate owned by Ivan and Jeanne Van Loon. After a sheriff's sale of the property left a significant deficiency judgment, Wachovia levied on certain personal property owned by the Van Loons, including two vehicles, a 1980 Peterbilt tractor and a 1989 International semi-tractor. On April 7, 2005, just days before the scheduled sheriff's sale of the Van Loons' personal property, Wachovia and the Van Loons agreed to conduct a public auction instead of the sheriff's sale. On April 11, Kelly Daugherty, as an agent of Wachovia, conducted the auction. Daugherty announced at the sale that the auction company would “guarantee the titles,” meaning the buyers' funds would not be dispersed to Wachovia until the auction company had the titles in its possession and was able to transfer them to the buyers.

Matthew Van Sickle purchased the Peterbilt tractor and the International semi-tractor at the auction. When he asked, he was told that he would receive the title to the vehicles after his check cleared, but no specific timeframe was discussed. Van Sickle assumed he would have the titles within a few weeks to a month after the auction. He took possession of the trucks and began making repairs to them, using parts from two other trucks he owned, rendering the other trucks unusable.

In the weeks after the sale, Daugherty sought from the county treasurer's office duplicate titles to the vehicles sold at the auction but was told he lacked the authority to obtain them because the auction had not proceeded as a sheriff's sale. Daugherty informed counsel for Wachovia of the complication. On May 27, 2005, Wachovia's counsel contacted the Van Loons' attorney and requested the titles be transferred but received no response. Wachovia then provided the treasurer's office with copies of the sheriff's levy and the court order for the auction. The treasurer transferred the title to the Peterbilt, and Wachovia forwarded it to Van Sickle in July 2005. The treasurer declined to transfer the title to the International, however, as the title to it and several other vehicles had been transferred by Ivan Van Loon to another recently-formed corporation after the sheriff had levied on them but before the auction had taken place.

On July 6, counsel for Wachovia filed a motion requesting a contempt order against Van Loon. After the contempt order was issued on July 21, 2005, Wachovia received the title certificate for the International. However, Wachovia still was unable to transfer the title to Van Sickle as the certificate had not been signed by Van Loon. After another unsuccessful demand to Van Loons' counsel, Wachovia filed a motion for a court order effecting the transfer of title. The motion was granted on August 25, 2005, and almost five months after the sale, Van Sickle finally received title to the International.

Van Sickle sued Wachovia, alleging fraudulent and negligent misrepresentation and claiming damages for economic losses. He also sought punitive damages. After a jury trial, Wachovia moved for a directed verdict, alleging Van Sickle's claim amounted to nothing more than a breach of contract claim-that he had not established the elements of fraudulent misrepresentation and that Van Sickle's claims for both fraudulent and negligent misrepresentation were barred by the economic loss doctrine. The district court overruled the motion, and the jury returned a verdict in favor of Van Sickle on both the fraudulent misrepresentation and the negligent misrepresentation theories, awarding actual damages of $27,000 and punitive damages of $250,000. Wachovia's motion for judgment notwithstanding the verdict was denied.

On appeal, Wachovia asserted the district court erred in submitting the fraudulent misrepresentation claim to the jury because Van Sickle failed to present substantial evidence of a misrepresentation and intent to deceive. Wachovia also contended the district court erred in submitting to the jury the question of punitive damages. Wachovia further argued on appeal that the district court should not have submitted the negligent misrepresentation claim to the jury because Wachovia was not in the business of supplying information to others and because the loss claimed by Van Sickle was a purely economic loss. We transferred the case to the court of appeals, which reversed the district court, concluding Van Sickle failed to produce substantial evidence of fraudulent misrepresentation and Van Sickle's negligent misrepresentation claim was barred by the economic loss doctrine. We granted Van Sickle's application for further review.

II. Scope of Review.

A motion for judgment notwithstanding the verdict is intended to allow the district court to correct any error in denying a motion for directed verdict. Easton v. Howard, 751 N.W.2d 1, 4 (Iowa 2008). Accordingly, the motion for judgment notwithstanding the verdict must rely on the matters raised in a previous motion for directed verdict. Id. at 4-5. We review the denial of a motion for judgment notwithstanding the verdict for correction of errors at law. Channon v. United Parcel Serv., Inc., 629 N.W.2d 835, 859 (Iowa 2001). Our role is to decide whether there was sufficient evidence to justify submitting the case to the jury when viewing the evidence in the light most favorable to the nonmoving party. Id. Each element of the plaintiff's claim must be supported by substantial evidence to warrant submission to the jury. Magnusson Agency v. Pub. Entity Nat'l Co.-Midwest, 560 N.W.2d 20, 25 (Iowa 1997). Evidence is substantial if a reasonable mind would find it adequate to support a finding. Id. We must take into consideration all reasonable inferences that could fairly be made by the jury. Id. “Simply put, we ask, was there sufficient evidence to generate a jury question?” Johnson v. Dodgen, 451 N.W.2d 168, 171 (Iowa 1990).

III. Discussion.

A. Fraudulent Misrepresentation. To establish a claim for fraudulent misrepresentation, Van Sickle has the burden of proving each of the following elements: “(1) representation, (2) falsity, (3) materiality, (4) scienter, (5) intent to deceive, (6) reliance, and (7) resulting injury and damage.” Lloyd v. Drake Univ., 686 N.W.2d 225, 233 (Iowa 2004). These elements must be established by “a preponderance of clear, satisfactory, and convincing proof.” Id. Wachovia contends Van Sickle has failed to prove several of these elements.

First, Wachovia argues that Van Sickle failed to prove Wachovia made the representation attributed to it in Van Sickle's petition. The petition alleged Wachovia falsely “represented to [Van Sickle] that it had title to the vehicles in issue.” However, the trial transcript reveals that neither Wachovia, nor Daugherty as its agent, made such a representation. Van Sickle himself testified that no one told him that Wachovia actually had the titles to the vehicles. Instead, he testified that “it was represented to me that once my check cleared, I would have my titles,” so it was “an assumption” on his part that Wachovia had possession of the titles at the time of the auction.

Van Sickle cites Iowa Code section 321.45(3) (2007) contending that because Iowa law requires every seller of a motor vehicle to transfer title, every person offering to sell a vehicle in this state implicitly represents that he or she has title to the vehicle. While we agree that a seller must normally transfer the title of a vehicle to a buyer, we find Van Sickle's argument overstated. See Iowa Code § 321.45(3) (“Upon the transfer of any registered vehicle, the owner, except as otherwise provided in this chapter, shall endorse an assignment and warranty of title upon the certificate of title for such vehicle....”). We think a seller's implied representation, particularly in an auction situation such as the one at issue here, is that the seller has a legal right to transfer the titles at issue and will effect the transfer in a reasonable time. Cf. Fausel v. JRJ Enters., Inc., 603 N.W.2d 612, 619 (Iowa 1999) (“When a contract fails to specify time for performance, the parties must perform within a reasonable time.”); U.C.C. § 1-204(3) (2004) (“An action is taken ‘seasonably’ when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time.”).

Assuming without deciding that Wachovia, explicitly or implicitly, represented it would deliver titles to the vehicles within a commercially reasonable time after Van Sickle's check cleared but failed to do so, it was Van Sickle's burden to also establish scienter and intent to deceive-specifically that Wachovia knew the representation was false when it was made and that Wachovia intended to deceive Van Sickle. See Lloyd, 686 N.W.2d at 233. Scienter and intent to deceive are closely related elements of the tort, and the same general analysis applies for each. Magnusson, 560 N.W.2d at 28. “Scienter and intent to deceive may be shown when the speaker has actual knowledge of the falsity of his representations or...