Opinion
No. 2-050 / 00-1341.
Filed November 25, 2002.
Appeal from the Iowa District Court for Linn County, DAVID REMLEY, Judge.
Ronald Myers, Ellis Yacht Club, River Moon and the Estate of Richard Glanz appeal a variety of issues arising from multiple verdicts entered against Myers and Ellis Yacht Club. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH INSTRUCTIONS.
David Elderkin and Robert Hogg of Elderkin Pirnie, Cedar Rapids, for appellants.
Vernon Squires of Bradley Riley P.C., Cedar Rapids, for appellees.
Web Wassmer of Simmons, Perrine, Albright Elwood, P.L.C., Cedar Rapids, for cross-appellee.
Heard by HECHT, P.J., and VAITHESWARAN and EISENHAUER, JJ.
Ronald Myers, Ellis Yacht Club, River Moon and the Estate of Richard Glanz appeal a variety of issues arising from multiple verdicts entered against Myers and Ellis Yacht Club. We affirm in part, reverse in part, and remand with instructions.
I. BACKGROUND FACTS AND PROCEEDINGS. This case arises out of a dispute over the sale of the Ellis Landing Restaurant in Cedar Rapids, Iowa. The restaurant was owned by Ron Myers and his corporation Ellis Yacht Club, Inc. In September 1997, Richard Glanz, through his two corporations, River Moon, L.L.C. and Ellis Real Estate, L.L.C., purchased the business assets of the restaurant and the real estate on which the enterprise was located. Ellis Real Estate executed a contract to buy the real property for $650,000. River Moon executed a separate contract to buy the business assets for $195,000. During the months before closing, Richard and his wife, Barbara, helped run the restaurant and advanced money to ensure the business continued its operations. Myers agreed to give River Moon a $20,000 credit upon receipt of documentation for such advances.
Shortly after closing, Myers issued three separate checks to River Moon totaling $19,500. Myers claimed this money was a loan to be repaid, but Glanz and River Moon viewed the checks as reimbursement for expenditures they made on behalf of Ellis Yacht Club.
By the end of 1997, Richard and Barbara Glanz realized they had underestimated the amount of capital needed to run the restaurant. Ellis Real Estate had paid none of the $650,000 owed on the real estate contract, although River Moon had paid the amount due under the asset purchase agreement. At the end of December, Myers served Ellis Real Estate with a notice of forfeiture. In January of 1998, Glanz returned the keys to the restaurant to Ron Myers. Myers interpreted Glanz's surrender of the keys as conduct consistent with an intent to abandon both the real estate and the business assets, and he acted accordingly.
In late January, Myers arranged to sell Ellis Landing Restaurant, real estate and business assets, to third parties. On February 24, 1998, Myers and Ellis Yacht Club filed suit against both River Moon and Richard Glanz seeking a declaration that the bill of sale for the business assets was void for nonpayment of $20,000 (the amount of the credit given to River Moon at closing) and that the business assets had been abandoned even if the bill of sale was not void. In April of 1998, River Moon filed a lawsuit against Ron Myers and Ellis Yacht Club seeking replevin of the business assets. In June, Myers and Ellis Yacht Club filed a recasted petition at law asserting abandonment, unpaid rent, a landlord's lien, and damage to a going concern.
On May 14, 1998, Richard Glanz committed suicide. An estate was opened, and Barbara Glanz was appointed executor. The estate sent Ellis Yacht Club and Myers a notice pursuant to Iowa Code section 633.304 directing them to assert any claims they might have against the estate or risk losing them. In August, Ron Myers and Ellis Yacht Club filed a probate claim against the estate, claiming debts also asserted against River Moon in the pending district court action. On January 6, 1999, the date hearing was scheduled on the claims in probate, Myers and Ellis Yacht Club voluntarily dismissed them.
Soon after filing the probate claim, Myers moved to substitute the estate of Richard Glanz as a party in the district court proceedings. This motion was granted, and in October 1998, River Moon, the executor, and Glanz's estate brought counterclaims against Myers and Ellis Yacht Club for conversion, breach of contract, abuse of process, intentional infliction of emotional distress, rule 80 (now Rule 1.413) sanctions, and attorney fees.
During the spring of 1999, Myers' attempted resale of the restaurant property failed and possession of the property reverted to Myers. In April, he transferred the business to two corporations owned by his brother, Wayne. The consideration for this transfer was Wayne's assumption of a $370,000 mortgage and forgiveness of $35,000 in loans to Ron Myers. River Moon later added Wayne Myers and his corporations as third party-defendants on claims of fraudulent conveyance, conspiracy to defraud, and constructive trust/equitable lien.
On June 10, 1999, in district court, Myers and Ellis Yacht Club dismissed with prejudice all of their claims against the estate and the executor except the claim for damage to a going concern. In October, the district court granted a motion for summary judgment against Myers and Ellis Yacht Club on that remaining claim against the estate, but declined to impose rule 80 sanctions against them, finding that they filed and argued their claims in good faith. In March 2000, the district court granted another summary judgment against Myers and Ellis Yacht Club for all their claims against River Moon except their claim of abandonment.
Trial was held from May 8 through 12, 2000. The jury returned verdicts against Myers and Ellis Yacht Club on all claims except River Moon's breach of contract claim. Myers and Ellis Yacht Club moved for judgment notwithstanding the verdict or for a new trial. This motion was overruled and judgment on the verdict was entered (1) in the amount of $37,345 on River Moon's conversion claim; (2) in the amount of $10,252 for compensatory damages and $120,000 for punitive damages on the estate's abuse of process claim; and (3) in the amount of $75,000 for compensatory damages and $100,000 for punitive damages on Barbara Glanz's claim for intentional infliction of emotional distress. The district court also set aside as fraudulent the conveyance of real estate and personal property from Ron Myers to Wayne Myers. Attorney fees in the amount of $46,178.20 and expenses of $2,325.47 were awarded to River Moon. The trial court denied River Moon's motion for rule 80 sanctions. River Moon moved the court to enlarge its findings, and the court subsequently held that the judgment in the amount of $37,345 for conversion should also be entered against Wayne Myers and his corporations.
Notice of appeal was timely filed by the Myers and his corporations. They raise eight claims on appeal: (1) the evidence was insufficient to support a finding of abuse of process; (2) the evidence was insufficient to support a finding of intentional infliction of emotional distress; (3) the evidence was insufficient to find conversion; (4) the trial court abused its discretion by excluding the testimony of Susan Green; (5) the judgment for attorney fees was not supported by the claim for conversion and was excessive; (6) the evidence was insufficient to support a finding of fraudulent conveyance; (7) the evidence was insufficient to support a finding of conspiracy; and (8) the trial court abused its discretion by allowing executor Barbara Glanz to testify about Richard Glanz's suicide.
River Moon cross-appealed and made the following contentions: (1) the district court abused its discretion by not appointing a receiver to manage and sell the restaurant; (2) the trial court should have awarded attorney's fees against Wayne Myers on the fraudulent conveyance and conspiracy counts; and (3) the trial court abused its discretion by not ordering rule 80 sanctions against Ellis Yacht Club's trial attorney. River Moon also requests an award of appellate attorney fees.
II. ABUSE OF PROCESS. Appellee Estate of Richard Glanz argues that error has not been preserved on this issue because the motion for directed verdict and motion for judgment notwithstanding the verdict filed by Myers and Ellis Yacht Club were not sufficiently specific. However, we find that the issue was adequately addressed in both motions. Error has been preserved, and we will address the issue. We review this issue for errors at law. James v. Burlington N., Inc., 587 N.W.2d 462, 464 (Iowa 1998).
There are three elements to an abuse of process claim: (1) the use of a legal process; (2) in an improper or unauthorized manner; (3) causing damage to the plaintiff. Fuller v. Local Union No. 106, 567 N.W.2d 419, 421-22 (Iowa 1997). To demonstrate that the legal process was used in an improper manner, proof of a "definite act or threat outside the [legal] process" is required. Wilson v. Hayes, 464 N.W.2d 250, 266 (Iowa 1990). Proof of improper motive or malicious purpose will not satisfy that element of an abuse of process claim. Grell v. Poulsen, 389 N.W.2d 661, 664 (Iowa 1986). We view the evidence in the light most favorable to the plaintiffs, who prevailed at trial. Bethards v. Shivers, Inc., 355 N.W.2d 39, 42 (Iowa 1984).
In this case, the record does not support a finding that Myers committed any act or threat outside the legal process. In fact, no evidence was presented to support this element of an abuse of process claim. Accordingly, we conclude the district court erred in failing to grant Myers and Ellis Yacht Club's motions for directed verdict and for judgment notwithstanding the verdict on the abuse of process claim. See Grell, 389 N.W.2d at 664-665. We reverse the judgment for actual and punitive damages for abuse of process.
III. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS. Executor Barbara Glanz claimed, and the jury found, she suffered severe emotional distress when, after her husband's suicide, Myers and Ellis Yacht Club filed frivolous probate claims in the estate. Myers and Ellis Yacht Club contend the district court should have granted their motion for judgment notwithstanding the verdict on this claim because the record does not contain substantial evidence tending to prove Barbara Glanz suffered severe emotional distress as a consequence of the filing of the probate claim. Although Glanz contends Myers and Ellis Yacht Club failed to preserve error on this issue, we conclude it was addressed adequately in the motions for directed verdict and judgment notwithstanding the verdict, and we will therefore address it. Our review is for errors at law. James, 587 N.W.2d at 464. As noted above, we view the evidence in the light most favorable to the plaintiffs, who prevailed at trial. Bethards, 355 N.W.2d at 42.
The elements for a claim of intentional infliction of emotional distress are: (1) the defendant acted outrageously; (2) the defendant intentionally caused, or recklessly disregarded the probability of causing, emotional distress; (3) the plaintiff suffered severe or extreme emotional distress; and (4) the defendant's conduct was the actual and proximate cause of the emotional distress. Fuller, 567 N.W.2d at 423 (citation omitted). To establish severe or extreme emotional distress, the plaintiff must provide "substantial evidence of emotional harm [with] direct evidence of either physical symptoms of the distress or a clear showing of a notably distressful mental reaction." Steckelberg v. Randolph, 448 N.W.2d 458, 462 (Iowa 1989). "The law intervenes only where the distress inflicted is so severe that no reasonable man could be expected to endure it." Restatement (Second) of Torts § 46 Cmt. j at p. 77) (1965). A plaintiff must show more than that he felt bad or was disappointed. Steckelberg, 448 N.W.2d at 461. Our supreme court has concluded that plaintiffs who "quivered," lost sleep, and were "shook-up, mad and nervous," as a consequence of damage to their farm field failed to meet their burden to produce substantial evidence of "severe emotional distress." Bethards, 355 N.W.2d at 44-45. Evidence that a plaintiff felt as if "he had lost everything" has been deemed to fall short of severe emotional distress. Poulsen v. Russell, 300 N.W.2d 289, 297 (Iowa 1981); cf. Meyer v. Nottger, 241 N.W.2d 911 (Iowa 1976) (plaintiff was nauseous, had difficulty breathing, and suffered acute myocardio ischemia); Randa v. U.S. Homes, Inc., 325 N.W.2d 905 (Iowa Ct.App. 1982) (hospitalization of plaintiff with near nervous breakdown). Although we do not minimize the highly unpleasant circumstances surrounding Richard Glanz's death or the subsequent probate proceedings, we do not find in the record substantial evidence of extreme or severe emotional distress. Ms. Glanz testified she felt "very angry" when she received the probate claim, that the probate claim was "another kick in the teeth," and that the notice of the hearing "didn't make that first Christmas any easier." There was no evidence that Ms. Glanz underwent medical or psychiatric care to deal with distress precipitated by the filing of the probate claim. Moreover, we find no evidence that she took medications or suffered physical manifestations of her emotional distress as a consequence of the conduct of Myers and Ellis Yacht Club. We conclude the district court erred by not granting Myers' and Ellis Yacht Club's motions for directed verdict and judgment notwithstanding the verdict on the claim of intentional infliction of emotional distress. Accordingly we reverse the verdict and judgment for actual and punitive damages on this tort theory.
IV. CONVERSION. Ellis Yacht Club and Myers contend that part of the judgment for conversion should be reversed as a matter of law because Myers held a security interest in the assets allegedly converted. They contend error was preserved by filing a timely motion for directed verdict and judgment notwithstanding the verdict. However, the security interest issue was not raised in either of these motions. Therefore we conclude the appellants failed to preserve error on this issue and will not address it. Leaf v. Goodyear Tire Rubber Co., 590 N.W.2d 525, 528 (Iowa 1999).
V. TESTIMONY OF SUSAN GREEN. Appellants contend the district court abused its discretion by excluding the testimony of Susan Green regarding the conversation that took place between Ron Myers and Richard Glanz when Glanz returned the keys to the restaurant. However, no offer of proof was made at trial when this testimony was excluded, and we conclude error was not preserved on this issue. State v. Schutz, 579 N.W.2d 317, 318-19 (Iowa 1998). Even if we were to overlook this deficiency, Ellis Yacht and Myers suffered no prejudice as a result of the district court's ruling excluding Green's testimony. Both Ron and Wayne Myers were allowed to testify about the conversation with Glanz on the day in question.
VI. ATTORNEY FEES FOR CONVERSION CLAIM. In their original petition, plaintiffs Ellis Yacht Club and Myers claimed Glanz and River Moon failed to make payments owed on the asset purchase agreement. The terms of the asset purchase agreement, then, would govern the award of attorney fees. The asset purchase agreement calls for attorney fees to the prevailing party in a case brought to enforce "any right hereunder" and allows indemnification for attorney fees in "all actions, suits, proceedings" incident to breach by Seller. Appellants contend the award of attorney fees for the conversion judgment should be reversed because the contract upon which the award was based does not authorize an award of attorney fees for conversion claims. For the award of attorney fees, our review is for correction of errors of law. Iowa R.App.P. 6.4; Bidwell v. Midwest Solariums, Inc., 543 N.W.2d 293, 296 (Iowa Ct.App. 1995). For the amount of attorney fees awarded, our review is for abuse of discretion. EFCO Corp. v. Norman Highway Constructors, Inc., 606 N.W.2d 297, 301 (Iowa 2000).
The record contains substantial evidence that River Moon incurred attorney fees and expenses as a result of the litigation commenced against it by Ellis Yacht Club and Myers. The amount awarded was within the range permitted by the evidence, and we find no abuse of discretion by the district court. We affirm the award and amount of attorney fees for the conversion judgment.
VII. FRAUDULENT CONVEYANCE. Our review of fraudulent conveyance claims is de novo as they involve an equitable remedy. Iowa R.App.P. 6.4. We give weight to but are not bound by the jury's findings. Iowa R.App.P. 6.14(6)( f). River Moon has the burden of proving a fraudulent conveyance by clear and convincing evidence. Hartford-Carlisle Sav. Bank v. Shivers, 552 N.W.2d 909, 911 (Iowa Ct.App. 1996). A fraudulent conveyance is a transaction by which the owner of real or personal property has sought to place land or goods beyond the reach of his creditors and which operates to the prejudice of their legal or equitable rights. Id. Indicia of fraud include inadequacy of consideration, insolvency of the transferor, pendency or threat of third-party creditor litigation, secrecy or concealment, departure from the usual method of business, any reservation of benefit to the transferor, and the retention by the debtor of possession of the property. Id. A familial relationship between the transferor and transferee, while not dispositive, may also indicate a fraudulent transaction. Benson v. Richardson, 537 N.W.2d 748, 756 (Iowa 1995). The claimant also has the burden of showing that the transferee intentionally participated in the fraud. Monona County v. Schoenherr, 105 N.W.2d 91, 94 (Iowa 1960). The record shows that while River Moon's replevin suit was pending, Ron Myers transferred the restaurant and assets to his brother, Wayne Myers. Not only did the transfer take place during litigation, but the restaurant was sold for substantially less than it was worth. The restaurant alone was valued at $655,000, but both the restaurant and assets were transferred to Wayne Myers for approximately $400,000. The record also indicates that Wayne Myers instigated the transfer. We conclude the evidence in the record is clear and convincing and supports a verdict for fraudulent conveyance.
VIII. CONSPIRACY. Appellant argues that the evidence was insufficient to support a finding of conspiracy. Our review is for corrections of errors at law. James, 587 N.W.2d at 464. A reasonable juror could find from the evidence in the record that a conspiracy to defraud River Moon existed between Ron and Wayne Myers when the restaurant and assets were transferred. Appellants' main contention on appeal is that, even if Ron Myers intended to defraud River Moon, Wayne Myers was innocent of the scheme. However, substantial evidence in the record supports a finding that Wayne acquired the restaurant and assets while litigation was pending for at least $255,000 less than they were worth. Moreover, there is substantial evidence in the record tending to prove that the two brothers shared a lawyer (who represented Ron Myers and Ellis Yacht Club in the litigation), and that Wayne Myers instigated the transaction which resulted in the transfer of the assets in question. A reasonable juror could find from this constellation of facts find the existence of a conspiracy between Wayne and Ron Myers. The district court did not err by overruling Ron and Wayne Myers' motion for judgment notwithstanding the verdict.
IX. BARBARA GLANZ'S TESTIMONY. Because we have found the verdicts for abuse of process and intentional infliction of emotional distress were not supported by sufficient evidence and have reversed them, we need not reach the issue of whether the district court erred in allowing Barbara Glanz to testify about the circumstances surrounding her husband's death.
X. CROSS-APPEAL ISSUES.
A. Preservation of Error. Myers and Ellis Yacht Club contend River Moon did not timely file its cross-appeal, and thus we should not consider the issues raised therein. Iowa Rule of Appellate Procedure 6.5(1) states that a "cross-appeal may be taken within the 30 days for taking an appeal or in any event within 5 days after the appeal is taken." The district court entered its orders and judgment entry on July 12, 2000. River Moon filed a motion to enlarge under rule 1.904 on July 19. The court ruled on this motion on August 2, and River Moon filed its cross appeal on August 21. We conclude that River Moon's cross-appeal was timely filed within thirty days of the district court's order on River Moon's motion to enlarge. We note, however, that using rule 1.904 to seek expanded rulings in a case tried to a jury is an exception rather than the rule. Bellach v. IMT Ins. Co., 573 N.W.2d 903, 905 (Iowa 1998). However, the two subjects raised in River Moon's 1.904 motion to enlarge were proper subjects for such a motion. First, River Moon's request that judgment be entered consistent with Special Verdict No. 2 on the conspiracy theory requested the district court to enlarge its legal conclusions consistent with the verdict. Suckow v. Boone State Bank Trust Co., 314 N.W.2d 421, 424 (Iowa 1982) (holding the rule applies to court's legal conclusions as well as factual findings). Second, the request for appointment of a receiver was sought in River Moon's post-trial motions filed May 23, 2000, but not granted or addressed in the district court's orders and judgment entry of July 12, 2000. The post-trial request for appointment of a receiver alleged that a receivership was factually and legally justified. This post-trial legal and factual dispute is also a proper subject of rule 1.904. Beck v. Fleener, 376 N.W.2d 594, 596 (Iowa 1985) (holding a motion to reconsider was "in substance" a timely 1.904 motion dealing with post-trial factual dispute over plaintiffs' opportunity to object to a revised instruction before jury arguments commenced); Woody v. Machin, 380 N.W.2d 727, 729 (Iowa 1986) (involving a challenge to the court's post trial factual findings concerning costs and the scope of an abatement order).
B. The appointment of a receiver. The decision to appoint a receiver is within the sound discretion of the district court. Smith v. Bitter, 319 N.W.2d 196, 201 (Iowa 1982). We will reverse the district court's decision only if an abuse of discretion is proved. South Ottumwa Sav. Bank v. Sedore, 394 N.W.2d 349, 352 (Iowa 1986). We find an abuse of discretion only when the party claiming such shows the discretion was exercised on grounds or for reasons clearly untenable or to an extent clearly unreasonable. State v. Vanover, 559 N.W.2d 618, 627 (Iowa 1997). "A ground or reason is untenable when it is not supported by substantial evidence or when it is based on an erroneous application of the law." Graber v. City of Ankeny, 616 N.W.2d 633, 638 (Iowa 2000). We find no error in the district court's refusal to appoint a receiver. In its ruling on River Moon's motion to enlarge orders and judgment entry, the district court concluded River Moon's claim for equitable relief was moot "for the reason that the conveyance of the real estate and personal property in question has been set aside." In its ruling on River Moon's motion to enlarge orders and judgment entry, the district court determined that Iowa Code section 684.7(1)(c)(2) (1999) did not give the court the authority to both set aside the fraudulent conveyance and appoint a receiver. River Moon provides no authority to contradict this conclusion. The district court's reasoning is not clearly untenable or clearly unreasonable, and we affirm.
C. Attorney fees against Wayne Myers. River Moon asserts that the district court erred by not awarding attorney fees against Wayne Myers and his corporations on the fraudulent conveyance and conspiracy verdicts. Wayne Myers and his corporations were not parties to the purchase agreement which provided for the award of attorney fees against Ron Myers and Ellis Yacht Club. A party generally has no claim for attorney fees as damages in the absence of a statutory or written contractual provision allowing such an award. Suss v. Schammel, 375 N.W.2d 252, 256 (Iowa 1985). In this case, the jury found no breach of contract by Wayne Myers or his corporations. Courts have recognized a rare exception to the general rule "when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Hockenberg Equip. v. Hockenberg's E. S., 510 N.W.2d 153, 159 (Iowa 1993). An award of common law attorney fees requires conduct that is intentional and likely to be aggravated by cruel and tyrannical motives. Id. Such conduct lies far beyond a showing of mere "lack of care" or "disregard for the rights of another." Id. River Moon cites no authorities and makes no persuasive argument in support of the proposition that the general rule does not control in this case. We affirm on this issue.
D. Rule 80 Sanctions. River Moon asserts that the district court should have imposed rule 80 (now rule 1.413) sanctions against Myers' and Ellis Yacht Club's trial counsel for filing the claim in probate on August 25, 1998. We will reverse only if we determine the district court has abused its discretion. Schettler v. Iowa Dist. Court for Carroll County, 509 N.W.2d 459, 464 (Iowa 1993). Trial counsel, Todd Forsythe, asserts that this claim should have been brought only in the probate proceeding. However, River Moon correctly notes that the district court expressly authorized the Estate to pursue the claim in this proceeding, so we reject Forsythe's assertion and will address the issue.
The reasonableness of the signer-attorney's judgment is viewed "as of the time the paper in question was filed, not with hindsight gained [thereafter]." Weigel v. Weigel, 467 N.W.2d 277, 280 (Iowa 1991). Although the record shows Forsythe learned later that some of the claims asserted in the probate by Ronald Myers and Ellis Yacht Club were without merit, the district court correctly concluded such after-acquired knowledge was not dispositive. We find no abuse of discretion on this issue.
E. Appellate attorney fees. River Moon requests permission to file an application for appellate attorney fees. Because the asset purchase agreement permits a prevailing party to recover attorney fees, we conclude River Moon may assert a claim for appellate attorney fees against Ellis Yacht Club and Ron Myers. We remand this issue to the district court to make findings and conclusions regarding the appropriate amount of appellate attorney fees to be paid in this case.
XI. CONCLUSION. The district court erred in submitting the abuse of process and intentional infliction of emotional distress claims to the jury, and we reverse the judgments for actual and punitive damages on those claims. Error was not preserved on Ron Myers' and Ellis Yacht Club's challenge to the verdict and judgment for conversion. Similarly, error was not preserved on the trial court's ruling excluding the testimony of Susan Green. The district court did not abuse its discretion in the award of attorney fees for the conversion claim, and we affirm. The fraudulent conveyance verdict was supported by clear and convincing evidence, and we affirm it. We find no error by the district court in submitting the conspiracy claim to the jury, and we affirm that verdict and judgment as well. The cross-appeal was timely filed. The district court did not abuse its discretion by refusing to appoint a receiver to manage the disposition of the restaurant. We affirm the district court's determination that River Moon and the Estate are not entitled to judgment for attorney fees against Wayne Myers and his companies. The district court did not abuse its discretion by failing to impose rule 1.413 sanctions against trial counsel for Ron Myers and Ellis Yacht Club. River Moon is entitled to reasonable appellate attorney fees under the asset purchase agreement, and we remand to the district court for entry of findings of fact and conclusions of law regarding the appropriate amount.