Opinion
No. 3-147 / 02-1182
Filed March 26, 2003
Appeal from the Iowa District Court for Polk County, William H. Joy, Judge.
Lawrence Feldhacker appeals the district court's entry of summary judgment in favor of Community State Bank for the balance due on a promissory note. AFFIRMED AND REMANDED.
Jerrold Wanek and Randall Jackson of Garten Wanek, Des Moines, for appellant.
Thomas Flynn, Margaret Callahan, and Michael Reck of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, for appellee.
Considered by Huitink, P.J., and Mahan and Hecht, JJ.
Lawrence Feldhacker appeals the district court's entry of summary judgment in favor of Community State Bank for the balance due on a promissory note. Feldhacker claims the trial court erred by determining as a matter of law that he ratified his obligations to the bank notwithstanding evidence that his signature on relevant documents was forged. He also claims the trial court erred by determining as a matter of law that the bank owed him no fiduciary duty under these circumstances. We affirm, but remand for a hearing on appellate attorney fees.
I. Background Facts Proceedings
The summary judgment record contains undisputed evidence of the following: Feldhacker, together with Robert Happel and John Crane, invested in a new company, Des Moines Production Plating, Inc. (DMPP). DMPP obtained a $590,000 credit line from Community State Bank. On August 12, 1998, Feldhacker signed a continuing guaranty of DMPP's obligation to Community State Bank. The terms of the guaranty provided: "This guaranty is without limit as to time or the amount or character of such liabilities or obligations as are, or may be, created hereby." Withdrawals against DMPP's credit line required the signature of all three investors. DMPP eventually exhausted its $590,000 limit. In December 1998 Feldhacker became concerned that his signature had been forged on some of the withdrawal instruments, and he so informed Happel. Feldhacker, however, did not inform the bank of these concerns. On March 11, 1999, DMPP refinanced its line of credit at a lower interest rate. Feldhacker, Happel, and Crane all signed a new promissory note on behalf of DMPP.
DMPP eventually defaulted on its obligation to the bank. The bank demanded payment from Feldhacker based on his guaranty. Feldhacker denied liability, claiming his signature had been forged on instruments authorizing withdrawals on DMPP's line of credit. The bank subsequently sued Feldhacker, DMPP, and Happel for the unpaid balance of DMPP's obligations to the bank. Feldhacker counterclaimed, alleging the bank breached its fiduciary duty to him by releasing money to DMPP without his approval.
The district court granted the bank's motion for summary judgment. The court concluded:
After first suspecting fraud in December of 1998, Feldhacker entered into a second promissory note in which he was the guarantor. Without alleging fraud had occurred concerning any of the advances, Feldhacker signed the second promissory note on March 11, 1999 with [the bank]. When Feldhacker signed the March 11, 1999 promissory note, he ratified the full amount of all prior advances.
The court also entered summary judgment against Feldhacker dismissing his counterclaim after determining as a matter of law that the bank owed no fiduciary duty to Feldhacker. Feldhacker appeals.
II. Standard of Review
We review a district court's ruling on a motion for summary judgment for correction of errors of law. Financial Mktg. Servs., Inc. v. Hawkeye Bank Trust, 588 N.W.2d 450, 455 (Iowa 1999). Summary judgment will be upheld when the moving party shows there are no genuine issues of material fact and the party is entitled to judgment as a matter of law. See Iowa R.Civ.P. 1.981(3). In reviewing a motion for summary judgment, we consider the evidence in a light most favorable to the party opposing the motion. Crippen v. City of Cedar Rapids, 618 N.W.2d 562, 565 (Iowa 2000).
III. Ratification
Feldhacker claims he did not ratify DMPP's obligations by signing the March 11, 1999, promissory note refinancing DMPP's debt. He argues that the claimed forgeries excuse his obligations under the guaranty and the resulting fact questions preclude entry of summary judgment in favor of the bank.
Our supreme court has held, "When a person with knowledge of a potential fraud enters into a new agreement concerning the same subject matter, he waives his claim to fraud in the original transaction." Whalen v. Connelly, 545 N.W.2d 284, 294 (Iowa 1996) (citing 37 C.J.S. Fraud § 69 (1943)). See also Lex v. Selway Steel Corp., 203 Iowa 792, 823, 206 N.W. 586, 600 (1925) (finding person's unauthorized signature may later be ratified); Second Nat'l Bank v. Hults, 191 Iowa 353, 358, 182 N.W. 175, 177 (1921) (noting a forged signature may be ratified and adopted).
Citing Smith v. Framel, 68 Iowa 488, 27 N.W. 471 (1886), Feldhacker argues that there are genuine issues of fact concerning his intent to ratify his obligation to the bank. In that case, the plaintiff, Smith, was aware Framel's signature might have been forged, and he questioned Framel about it. Framel suspected his brother, and did not admit the forgery. The court concluded Framel's silence did not show an intention to ratify the forgery. Smith, 68 Iowa at 490-91, 27 N.W. at 472. Smith, however, is not controlling because there was no new agreement made in that case.
By signing the new note, Feldhacker waived any claim that he was defrauded. See Whalen, 545 N.W.2d at 294. We conclude the district court did not err by granting summary judgment to the bank on this issue.
IV. Breach of Fiduciary Duty
Feldhacker contends the district court erred by granting summary judgment to the bank on his claim of breach of fiduciary duty. A fiduciary relationship exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relationship. Weltzin v. Cobank, ACB, 633 N.W.2d 290, 294 (Iowa 2001) (citing Restatement (Second) of Torts § 874 cmt. a, at 300 (1979)). There is typically no fiduciary relationship between a bank and its customers. Id. Our supreme court has stated that in a borrower-lender context, there is generally no fiduciary relationship outside of the actual servicing of the loan. Id.
Feldhacker has not alleged a special relationship with the bank in this case. We conclude the district court properly determined the bank had no fiduciary duty to Feldhacker.
V. Appellate Attorney Fees
Community State Bank seeks attorney fees for this appeal. The guaranty provides Feldhacker may be liable for "all costs, expenses, fees and attorney fees at any time paid or incurred in endeavoring . . . to realize upon this Guaranty. . . ." Where a written agreement does not limit attorney fees to those incurred in the trial court, appellate attorney fees are justified. Bankers Trust Co. v. Woltz, 326 N.W.2d 274, 278 (Iowa 1982).
The issue of appellate attorney fees is frequently determined in the first instance in the district court because of the necessity of making a record. Schaffer v. Frank Moyer Constr., Inc., 628 N.W.2d 11, 23 (Iowa 2001). In this case, we prefer that the district court determine the reasonable amount of attorney fees for this appeal. We therefore remand for a hearing on the matter of appellate attorney fees. We do not retain jurisdiction.
We affirm the district court's grant of summary judgment on the bank's claims and on Feldhacker's counterclaims. We remand for a hearing to allow the district court to determine the bank's appellate attorney fees.