Vogan v. Hayes Appraisal Associates, Inc., No. 97-1741

CourtUnited States State Supreme Court of Iowa
Writing for the CourtConsidered by McGIVERIN; CARTER
Citation588 N.W.2d 420
Decision Date21 January 1999
Docket NumberNo. 97-1741
PartiesSusan J. VOGAN and Rollin G. Vogan, Appellees, v. HAYES APPRAISAL ASSOCIATES, INC., Appellant.

Page 420

588 N.W.2d 420
Susan J. VOGAN and Rollin G. Vogan, Appellees,
v.
HAYES APPRAISAL ASSOCIATES, INC., Appellant.
No. 97-1741.
Supreme Court of Iowa.
Jan. 21, 1999.
Rehearing Denied March 12, 1999.

Page 421

Robert W. Goodwin of Goodwin Law Office, P.C., Ames, for appellant.

Patrick W. O'Bryan, Des Moines, and Toby Swanson, West Des Moines, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, CARTER, SNELL, and TERNUS, JJ.

CARTER, Justice.

Hayes Appraisal Associates, Inc. (Hayes Appraisal), the defendant in the district court, had been hired by MidAmerica Savings Bank (MidAmerica) to monitor the progress of new home construction for plaintiffs, Susan J. Vogan and Rollin G. Vogan. The Vogans had obtained a construction loan from MidAmerica. The contractor defaulted after all of the original construction loan proceeds and a subsequent portion of a second mortgage loan had been paid out by the bank.

The Vogans recovered judgment against Hayes Appraisal on a third-party beneficiary theory based on its alleged failure to properly monitor the progress of construction, thus allowing funds to be improperly released by the lender to the defaulting contractor. The court of appeals reversed the judgment on the basis that erroneous progress reports by Hayes Appraisal were not the cause of any loss to the Vogans. After reviewing the record and considering the arguments of the parties, we vacate the decision of the court of appeals and affirm the judgment of the district court.

Page 422

In June 1989 the Vogans moved to Des Moines. They wanted to build a home in West Des Moines. They met with builder Gary Markley of Char Enterprises, Inc. Markley agreed to build the home for $169,633.59. The Vogans contacted MidAmerica for a mortgage. MidAmerica orally contracted with Hayes Appraisal to do the initial appraisal and make periodic appraisals of the progress of the construction. The home, according to the plans, and lot were appraised at $250,000.

Thereafter, the Vogans obtained a $170,000 mortgage from MidAmerica. MidAmerica was to disburse progress payments to Markley based on progress reports received from Hayes Appraisal. On November 6, 1989, the Vogans purchased the lot for $66,000 with their own funds. Construction began on November 22, 1989. On December 28, 1989, Hayes Appraisal issued a progress report to MidAmerica that twenty-five percent of the home had been completed.

There were cost overruns on the job, and in February 1990 MidAmerica determined that there was less than $2000 remaining of the $170,000 loan proceeds. Markley determined that at this point it would take another $70,000 to complete the home. The Vogans then took out a second mortgage on the home for $42,050 and turned that money plus some of their own funds over to the bank to continue making progress payments to Markley based on Hayes Appraisal's progress reports. Prior to completion of the home, the Vogans decided to sell it rather than to occupy it.

On March 20, 1990, Hayes Appraisal certified that the home was sixty percent complete. Only eight days later, Hayes Appraisal issued another progress report indicating that ninety percent of the work had been completed on the home. During the trial, witnesses testified for the Vogans that this was an inaccurate report overstating the extent of the contractor's progress on the job. As late as October 1990, substantial additional work was required on the house. At this point, Markley defaulted on the job after having been paid all of the initial $170,000 and much of the additional monies raised by the Vogans. Another contractor estimated the completion of the home would cost an additional $60,000.

The Vogans stopped making mortgage payments, and MidAmerica brought an action to foreclose the mortgage. The Vogans counterclaimed, alleging that the bank had improperly authorized payment of funds to Markley. Allegedly, MidAmerica did not follow its loan procedure for disbursement of funds. At least thirty percent of the loan amount was to be retained until completion. An undisclosed settlement was reached in the litigation between Vogans and MidAmerica.

The Vogans then filed a petition against Hayes Appraisal, contending it negligently certified the extent of the construction that had been completed. Hayes Appraisal filed a motion for summary judgment, arguing, in part, that even if the March 28, 1990 appraisal was negligently issued, it could not have proximately caused harm to the Vogans because MidAmerica had already released most of the loan funds prior to receiving the March 1990 progress reports. The court denied the motion. On reconsideration, the court again denied the motion and stated that the Vogans' claims were based upon other oral and written appraisals that lead to the disbursement of the additional money that had been raised to cover cost overruns.

The case proceeded to jury trial on a contract theory. The court denied Hayes Appraisal's motions for directed verdict in which it argued the Vogans were not third-party beneficiaries of its contract with MidAmerica and the March 1990 progress reports did not proximately cause the damages alleged. The jury returned a verdict for the Vogans. Hayes Appraisal's motion for judgment notwithstanding the verdict was denied.

Hayes Appraisal appealed. It contended the evidence was insufficient to prove the Vogans were third-party beneficiaries or that its conduct proximately caused any damage to the Vogans. It believed the trial court erred in failing to grant its motions for summary judgment, directed verdict, and judgment notwithstanding the verdict on these issues.

The court of appeals reversed. It concluded the March 1990 progress reports did not

Page 423

result in any damage to the Vogans because the bank had already released more funds than recommended in those reports. The court concluded...

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29 practice notes
  • Kent v. Iowa, No. 4:06-cv-00402.
    • United States
    • United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa
    • September 10, 2009
    ...performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. Vogan v. Hayes Appraisal Assoc., Inc., 588 N.W.2d 420, 423 (Iowa 1999) (citing Tredrea v. Anesthesia & Analgesia, P.C., 584 N.W.2d 276, 281 (Iowa 1998) (quoting Restatement (Second) of Contra......
  • Goebel v. Dean & Associates, No. C 97-4082-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • March 10, 2000
    ...hence a third-party beneficiary of Dean's contract with Goss and Dean's contract with Norton. In Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420 (Iowa 1999), the Iowa Supreme Court explained the principles applicable to the question of whether a stranger to a contract is nevertheless......
  • 6305 SW 9th Street, L.L.C. v. Sons of Geil, L.L.C., No. 7-330/06-1381 (Iowa App. 11/15/2007), No. 7-330/06-1381
    • United States
    • Iowa Court of Appeals
    • November 15, 2007
    ...follow from a breach of contract under these special circumstances so known and communicated. Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420, 425 (Iowa 1999) (quoting Hadley v. Baxendale, 9 Exch. 341, 344 (1854)). Stated another way, the damages must be either the natural, direct re......
  • Osmic v. Nationwide Agribusiness Ins. Co., No. 12–1295.
    • United States
    • United States State Supreme Court of Iowa
    • January 10, 2014
    ...by the promisee as one of the motivating causes of his making the contract.’ ” ( quoting Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420, 423–24 (Iowa 1999))). We have adopted the [841 N.W.2d 860]Restatement (Second) of Contracts section 302 concerning third-party beneficiaries. See ......
  • Request a trial to view additional results
29 cases
  • Kent v. Iowa, No. 4:06-cv-00402.
    • United States
    • United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa
    • September 10, 2009
    ...performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. Vogan v. Hayes Appraisal Assoc., Inc., 588 N.W.2d 420, 423 (Iowa 1999) (citing Tredrea v. Anesthesia & Analgesia, P.C., 584 N.W.2d 276, 281 (Iowa 1998) (quoting Restatement (Second) of Contra......
  • Goebel v. Dean & Associates, No. C 97-4082-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • March 10, 2000
    ...hence a third-party beneficiary of Dean's contract with Goss and Dean's contract with Norton. In Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420 (Iowa 1999), the Iowa Supreme Court explained the principles applicable to the question of whether a stranger to a contract is nevertheless......
  • 6305 SW 9th Street, L.L.C. v. Sons of Geil, L.L.C., No. 7-330/06-1381 (Iowa App. 11/15/2007), No. 7-330/06-1381
    • United States
    • Iowa Court of Appeals
    • November 15, 2007
    ...follow from a breach of contract under these special circumstances so known and communicated. Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420, 425 (Iowa 1999) (quoting Hadley v. Baxendale, 9 Exch. 341, 344 (1854)). Stated another way, the damages must be either the natural, direct re......
  • Osmic v. Nationwide Agribusiness Ins. Co., No. 12–1295.
    • United States
    • United States State Supreme Court of Iowa
    • January 10, 2014
    ...by the promisee as one of the motivating causes of his making the contract.’ ” ( quoting Vogan v. Hayes Appraisal Assocs., Inc., 588 N.W.2d 420, 423–24 (Iowa 1999))). We have adopted the [841 N.W.2d 860]Restatement (Second) of Contracts section 302 concerning third-party beneficiaries. See ......
  • Request a trial to view additional results

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