Woods v. Schmitt

• Decision Date: 19 April 1989
• Docket Number: No. 87-549,87-549
• Citation: 439 N.W.2d 855
• Court: Iowa Supreme Court
• Parties: Donald J. WOODS and Lola Jean Woods, Appellants, v. Richard SCHMITT, Marguerite Schmitt, Defendants, Thorp Sales Corporation; J.G. Johnson; Saur & Johnson--Attorneys at Law; Richard L. Donohue; Thorp Credit, Inc.; Thorp Finance Corporation of Wisconsin; and ITT Thorp Corporation, Appellees.

Page 855

439 N.W.2d 855

Donald J. WOODS and Lola Jean Woods, Appellants, v. Richard SCHMITT, Marguerite Schmitt, Defendants Thorp Sales Corporation; J.G. Johnson; Saur & Johnson--Attorneys at Law; Richard L. Donohue; Thorp Credit, Inc.; Thorp Finance Corporation of Wisconsin; and ITT Thorp Corporation, Appellees.

No. 87-549.

Supreme Court of Iowa.

April 19, 1989.

Rehearing Denied May 11, 1989.

As Amended on Denial of Rehearing

May 19, 1989.

Michael F. Lacey, Jr. and Ronald M. Rankin, Des Moines, and Larry F. Woods, Oelwein, for appellants.

William H. Carmichael, Cedar Rapids, for appellees, J.G. Johnson and Saur & Johnson, Attys. at Law.

William H. Roemerman of Crawford, Sullivan, Read & Roemerman, Cedar Rapids, for appellee, Richard L. Donohue.

Mark E. Schantz and Jon P. Sullivan of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, for appellees, Thorp Sales Corp., Thorp Credit, Inc., Thorp Finance Corp. of Wisconsin, and ITT Thorp Corp.

Considered by HARRIS, P.J., and SCHULTZ, CARTER, NEUMAN, and ANDREASEN, JJ.

SCHULTZ, Justice.

In the present case, defeated litigants in an earlier action seek to recoup their losses. On December 12, 1974, plaintiffs Donald J. and Lola Jean Woods signed an offer to purchase a 285-acre Clayton county farm for $90,000. The offer was accepted and the Woods took possession. However, the vendors, Richard and Marguerite Schmitt, had previously sold the farm in 1971. Between the two sales Schmitts' mortgage was foreclosed and I.T.T. Thorp purchased the property at the sheriff's sale. Woods obtained title by a sheriff's deed after the sheriff's certificate of sale was assigned to them. The initial vendees brought an action for specific performance and to quiet title. Following numerous appeals to this court, the Woods were dispossessed of the farm and held liable for damages. See Moser v. Thorp Sales Corp., 256 N.W.2d 900 (Iowa 1977) (Moser I); Moser v. Thorp Sales Corp., 312 N.W.2d 881 (Iowa 1981) (Moser II); Moser v. Thorp Sales Corp., 334 N.W.2d 715 (Iowa 1983) (Moser III); see also Neylan v. Moser, 400 N.W.2d 538 (Iowa 1987) (Moser IV). The detailed facts set forth in the prior appeals reveal the background for the present action.

Plaintiffs' amended petition sought relief from several parties. We list only those counts relevant to this appeal. Count I of the petition was directed against the Schmitts and the Schmitts' lawyer, Richard L. Donohue, seeking recovery under a covenant of warranty and for "bad faith conveyance" of the real estate to Woods. In counts II and III, plaintiffs alleged legal malpractice and breach of contract against their lawyer, J.G. Johnson, and his law firm, Saur & Johnson (collectively referred to as Johnson), who had examined the abstract of title to the real estate. Count IV asserted a "bad faith conveyance" theory against Thorp Credit Inc., Thorp Finance Corp. of Wisconsin, Thorp Sales Corp., and I.T.T. Thorp Corp. (hereinafter collectively referred to as Thorp). Several of these corporations had individually financed Schmitts, assisted in the initial sale of the farm, foreclosed the mortgage, purchased the property at sheriff's sale and subsequently sought punitive damages from Johnson and Donohue in addition to the actual damages sought in counts I, II and III. Finally, count VI requested actual and punitive damages from Donohue for fraud.

Thorp filed various motions to dismiss count IV, which Judge C.W. Antes sustained. Because the Schmitts neither appeared, nor answered Woods' petition, a default judgment was entered against them. Judge Carl D. Baker ruled on the other pertinent pretrial motions and presided at the jury trial involving the remaining parties.

In addition to the present case, an additional action captioned Federal Land Bank of Omaha v. Woods remains pending. Federal Land Bank is seeking recovery of the loan made to Woods to finance the farm purchase price. Woods counterclaim that Federal Land Bank committed acts and omissions which induced them to purchase, and eventually lose, the farm. Donohue and Johnson unsuccessfully sought to consolidate these cases.

In the jury instructions, the trial court submitted four of plaintiffs' claims. As to Johnson, the breach of contract for legal services and negligence claims were submitted. Against Donohue, the court submitted claims for breach of the contract warranting title and fraud in the sale of the farm. The court also submitted the issue of punitive damages against Donohue, but only on a finding of fraud. Additionally, Johnson's and Donohue's affirmative defenses of the statute of limitations on the negligence and fraud claims were submitted.

The jury found against Johnson and Donohue on each theory of recovery submitted. On Johnson's negligence count, the jury was required to apportion the total combined negligence between the Woods, and Johnson. They attributed 35% of the negligence to Donald Woods, 0% to Lola Jean Woods, and 65% to Johnson.

The court submitted a single verdict form to assess damages against both Johnson and Donohue. The jury completed the form as follows:

For a return of purchase price of the farm: $ 0.

For the cost of defending title to the farm: $32,200.

For rent paid by the Woods to the Mosers for 1975, 1976 and 1977: $12,500.

For improvements made to the farm by the Woods: $10,069.

For punitive damages against Donohue: $37,500.

The verdict form also required the jury to answer an interrogatory if it found Johnson liable. The interrogatory and its answer stated:

Of the total amount of damages assessed against Johnson and Donohue, the jury finds that the damages to be assessed against Johnson for negligence are as follows: $13,692.25.

An order was entered awarding plaintiffs judgment against Schmitts, Johnson and Donohue. The judgment against the three parties was later modified to reflect pre-commencement interest.

Plaintiffs' appeal attacks the dismissal of Thorp and asserts numerous errors in the awarding of damages. Donohue appeals the award based on the fraud count, the punitive damages and the allowance of additional interest. Finally, Johnson appeals both verdicts against him. We shall first review the claims asserted on each theory of recovery and then discuss the damages issues.

I. Thorp. Plaintiffs urge that the district court erred in dismissing their action against the various Thorp entities. They claim they were damaged when Thorp undertook to transfer its interest in the real estate via the assignment of a sheriff's certificate. Thorp maintains the trial court's pretrial dismissal was correct.

Our review of a motion to dismiss ruling is narrow. Generally, a motion to dismiss must stand or fall solely on matters alleged in the petition, except those facts of which judicial notice may be taken. Reidiger v. Marrland Dev. Corp., 253 N.W.2d 915, 916 (Iowa 1977); see Berger v. General United Group, Inc., 268 N.W.2d 630, 634 (Iowa 1978). A motion to dismiss admits the well-pleaded facts for the purpose of testing their legal sufficiency. Berger, 268 N.W.2d at 634. It should be sustained only when it appears to a certainty that the pleader has failed to state a claim upon which any relief may be granted under any state of facts which could be proved. Haugland v. Schmidt, 349 N.W.2d 121, 123 (Iowa 1984).

Our first search is to determine whether plaintiffs have stated a claim upon which any relief may be granted. In their appellate brief, plaintiffs are rather vague as to the theory of recovery which entitles them to relief. They allege that Thorp acted in bad faith in the execution of the assignment and failed to convey title in fee simple to them. They further state that they were attempting to allege bad faith in accordance with the case of Foley v. McKeegan, 4 Iowa 1 (1856).

Examination of plaintiffs' petition and its attached exhibits indicates no claim that they had an express agreement with Thorp. Instead, plaintiffs allege an agreement existed between Thorp and Schmitts which settled Thorp's foreclosure action and Schmitts' counterclaims. As a part of that agreement, Thorp was to deliver to Schmitts' attorney an assignment of the sheriff's certificate in which the name of the assignee was left blank. The agreement, in turn, required Schmitts to pay Thorp the amount due on the foreclosure judgment. Plaintiffs assert that they relied on the assignment, paying $90,000 for it. They acknowledge that Schmitts and their attorney, rather than Thorp, warranted that the sheriff's deed would provide them good title to the property.

Thorp maintains that plaintiffs' petition sought recovery on a theory of bad faith conveyance. It supports the trial court's dismissal on the grounds that the property was conveyed to plaintiffs by Schmitts, rather than by Thorp. They point to Moser II wherein we held that plaintiffs "are purchasers from Schmitts and not assignees of ITT Thorp." Moser II, 312 N.W.2d at 889. Although we agree that the trial court can properly take judicial notice of the decisions of this court, Mathews v. Turner, 212 Iowa 424, 432, 236 N.W. 412, 415 (1931), we need not address the validity of Thorp's contention because we believe simpler principles answer the propriety of the dismissal.

If we assume that plaintiffs acquired rights against Thorp when Lola Jean Woods' name was placed on the assignment as the assignee, what rights to plaintiffs now claim? The assignment gave her a right to receive a sheriff's deed. However, plaintiffs admit that they acquired the sheriff's deed and took possession of the land. Plaintiffs' damages arose when they were dispossessed because of not having good title. Their stated cause of action against Thorp is centered on the assignment failing to convey title in fee simple. Stated otherwise, plaintiffs' claim is nothing more than a breach of warranty of title. Yet no one contends the assignment expressly warranted title. Consequently, the narrow issue remaining is...