Opinion
No. 2-591 / 01-1857
Filed October 30, 2002
Appeal from the Iowa District Court for Polk County, George W. Bergeson, Judge.
The plaintiff appeals the district court's grant of summary judgment in favor of defendants Merits Health Products, Inc. and Roslei Inc. AFFIRMED.
Thomas J. Reilly and D. M. Statton of Thomas J. Reilly Law Firm, P.C., Des Moines, for appellant.
William A. Wickett and M. Kathleen Brown of Patterson, Lorentzen, Duffield, Timmons, Irish, Becker Ordway, L.L.P., Des Moines, for appellee Roslei Inc.
Joseph A. Happe and Teri A. McMurtry-Chubb of Huber, Book, Cortese, Happe Brown, P.L.C., Des Moines, for appellee Merits Health Products, Inc.
Heard by Vogel, P.J., and Zimmer and Hecht, JJ.
The plaintiff, Lillian Gorman, appeals the district court's grant of summary judgment in favor of defendants Merits Health Products, Inc. and Roslei Inc. We affirm.
I. Background facts and proceedings.
On June 22, 1999, seventy-five year-old Lillian Gorman purchased a four-wheeled walker known as the "Liberty Excel" from Roslei, Inc. (Roslei) d/b/a Sandler Medical Services to replace her two-wheeled walker. While shopping for walkers, Roslei salesperson Kenneth Houfek had apparently informed Gorman the Liberty Excel would suit her needs and that it was the "Cadillac of walkers." Gorman was later injured when one of the front wheels of the walker dislodged, causing her to fall forward.
Based on the injuries allegedly sustained in the accident, Gorman filed suit naming as defendants Sandler Health Care Consulting, Inc., Roslei, Inc., National Health Medical Supplies, Inc., Merits Health Products Co. Inc. (Merits Inc.), Merits Health Products Co. Ltd. (Merits Ltd.), and a partnership of Merits Inc. and Merits Ltd. At the time of the hearing on the motion for summary judgment which is the basis for this appeal, the only remaining defendants were Roslei, which sold the walker and Merits Inc. The district court dismissed the claims against Merits Inc. after finding no evidence supported that Merits Inc. either manufactured or distributed the walker in question. With respect to Roslei, the court dismissed the claims based on its conclusions Roslei was not in the business of supplying information, the walker was not to be used for any special purpose other than to assist walking, and Roslei had no reason to know the walker was dangerous. Gorman appeals from this ruling.
II. Standard of review.
Our review of a grant of summary judgment is for correction of errors at law. Krause v. Krause, 589 N.W.2d 721, 724 (Iowa 1999). Summary judgment is only appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id. We review the record in the light most favorable to the party opposing summary judgment, Keystone Elec. Mfg. v. City of Des Moines, 586 N.W.2d 340, 345 (Iowa 1998), and the moving party carries the burden of showing the absence of a material fact issue. Schuver v. E.I. Du Pont de Nemours Co., 546 N.W.2d 610, 612 (Iowa 1996). Summary judgment is inappropriate if reasonable minds would differ on how the issue should be resolved. Keystone, 586 N.W.2d at 345.
III. Summary judgment on claims against Roslei .
The district court dismissed three particular causes of action against Roslei, negligent misrepresentation, implied warranty of fitness for a particular purpose, and negligent failure to inspect. In addition, Gorman raises the applicability of Iowa Code chapter 126 (1999), the "Iowa Drug, Device, and Cosmetic Act."
A. Iowa Code chapter 126. On appeal, Gorman contends that Roslei, as retailer of the walker, is required by chapter 126 to adhere to a higher statutory standard regarding representations made while selling the walker. However, the district court did not address this contention. Accordingly, we have nothing to review as error has not been preserved. See Metz v. Amoco Oil Co., 581 N.W.2d 597, 600 (Iowa 1998) ("issues must be presented to and passed upon by the district court").
B. Negligent misrepresentation. Gorman claimed she relied on the Roslei salesman's claims that the walker was safe, from a reputable manufacturer, and that it was the "Cadillac of walkers." Based on this allegation, Gorman sought recovery under a theory of negligent misrepresentation.
Our supreme court has determined that this duty arises only when the information is provided by persons in the business or profession of supplying information to others. Hendricks v. Great Plains Supply Co., 609 N.W.2d 486, 492 (Iowa 2000). The court's approach in the application of the tort of negligent misrepresentation has been to consider the facts of each case to determine if the defendant is in the business or profession of supplying information to others. See Sain v. Cedar Rapids Community School Dist., 626 N.W.2d 115, 125 (Iowa 2001).
We conclude the district court properly granted summary judgment against Gorman on this claim. Here, we concur in the court's conclusion Roslei was not in the business of supplying information. Roslei was merely a retailer in the business of selling medical equipment. See Meier v. Alfa-Laval, Inc., 454 N.W.2d 576, 581 (Iowa 1990) ("the tort of negligent misrepresentation is generally not applicable to a retailer in the business of selling and servicing his merchandise.").
C. Implied warranty of fitness for a particular purpose. Gorman contends generally the walker she purchased was not to be used in the "ordinary" way a two-wheeled walker is used as an aid in walking. Accordingly, she claims Roslei breached the implied warranty of fitness for a particular purpose.
Iowa law recognizes both statutory and common-law implied warranties of fitness for a particular purpose. See Chicago Cent. Pac. R.R. Co. v. Union Pac. R.R. Co., 558 N.W.2d 711, 715; Iowa Code § 554.2315 (2001). A warranty of fitness for a particular purpose is based on a special reliance by the buyer on the seller to provide goods that will perform a specific use envisaged and communicated by the buyer . Van Wyk v. Norden Laboratories, Inc., 345 N.W.2d 81, 83 (Iowa 1984). Recovery under section 554.2315 depends upon a showing that (1) the seller had reason to know of the buyer's particular purpose; (2) the seller had reason to know the buyer was relying on the seller's skill or judgment to furnish suitable goods; and (3) the buyer in fact relied on the seller's skill or judgment to furnish suitable goods. Renze Hybrids, Inc. v. Shell Oil Co., 418 N.W.2d 634, 637 (Iowa 1988).
Like the district court we conclude the Roslei had no reason to believe the walker would be used for anything other than to assist her in walking, the very purpose for which such walkers are designed. Ms. Gorman agreed in a deposition that the customary and ordinary purpose of a walker is to help her to walk, and she purchased the walker in question to do just that. Thus, there is no particular usage other than, or different in kind or extent from, the ordinary use the walker was intended to meet. See Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104, 111 (Iowa 1981). Accordingly, no genuine issue remains as to the applicability of the implied warranty of fitness for a particular purpose. The court was correct in granting summary judgment on this claim.
D. Negligent failure to inspect. Gorman finally asserts the court erred in granting summary judgment on her claim that Roslei breached a duty to inspect the walker before Roslei sold it to her and that such an inspection would have discovered the faulty wheel. A seller of goods has no duty to inspect or test a product for danger "who neither knows nor has reason to know that it is, or is likely to be, dangerous. . . ." Spaur v. Owens-Corning Fiberglass Corp., 510 N.W.2d 854, 864 (Iowa 1994) (citing Restatement (Second) of Torts § 402). Here, this is no evidence to suggest Roslei knew, or had reason to know, the wheel was in danger of becoming dislodged. We conclude the court was correct in granting summary judgment on this claim as well.
IV. Summary judgment on claims against Merits Inc.
Gorman alleged several causes of action against Merits Inc. In granting summary judgment against Merits Inc., the court concluded that because no evidence was presented that Merits Inc. either manufactured or distributed the walker, it could not be held liable under any of the theories asserted by Gorman.
A. Discovery. Gorman appears to contend Merits Inc.'s refusal to respond to her May 31, 2001 request for production hindered her ability to present sufficient material facts to avoid summary judgment at the September 24, 2001, hearing. She does not offer any statutory or case law support for this proposition, and we therefore deem it waived. See Iowa R.App.P. 6.14(c). B. Partnership between Merits, Inc. and Merits, Ltd. Gorman asserts the court erred in failing to conclude there was a partnership between Merits Inc. and Merits Ltd. for the manufacture and distribution of walkers in the United States. However, the trial court's ruling sustaining Merits Inc.'s motion for summary judgment made no reference to this alleged partnership. Accordingly, we again conclude Gorman has failed to preserve this issue for our review. See Metz, 581 N.W.2d at 600 ("issues must be presented to and passed upon by the district court").
We note that on May 29, 2001, Gorman deposed Winston Anderson of Merits Inc., who disclosed the identity of Merits Inc.'s shareholders and the number of shares held by each. On August 22, 2001, some requested documents were in fact provided to Gorman. Invoices for all imports of Merits Inc. were also provided. Furthermore, the trial court found Gorman failed to file a motion to compel production and failed to state why production of other documents would raise a genuine issue of material fact.
C. Piercing the corporate veil. Gorman essentially argues the Merits Inc. corporate entity should be disregarded and considered as Merits Ltd.'s "alter ego." Such an argument is made necessary due to the fact that Merits Ltd. was never served notice of this action and because Gorman was unable to present any evidence that Merits Inc. manufactured, distributed, or assembled the walker in question.
A court may disregard a corporate structure by piercing the corporate veil only under circumstances "where the corporation is a mere shell, serving no legitimate business purpose, and used primarily as an intermediary to perpetuate fraud or promote injustice." C. Mac Chambers Co. v. Iowa Tae Kwon Do Academy, Inc., 412 N.W.2d 593, 597 (Iowa 1987). The burden is on the party seeking to pierce the corporate veil to show the exceptional circumstances required. Id. at 598. Factors that would support such a finding include (1) the corporation is undercapitalized; (2) it lacks separate books; (3) its finances are not kept separate from individual finances, or individual obligations are paid by the corporation; (4) the corporation is used to promote fraud or illegality; (5) corporate formalities are not followed; and (6) the corporation is a mere sham. Id.
A review of the summary judgment record reveals no information was presented to the court as to whether Merits Inc. was undercapitalized or whether it lacked separate books. Nor was Gorman able to present any evidence that Merits Inc. itself distributed or manufactured the walker in question. Moreover, there was only simple conjecture and argument that the Merits Inc. corporate entity was being used to promote fraud or illegality and that it was a sham. Accordingly, on this state of the record, we conclude the district court did not err in granting summary judgment against Gorman on her various claims against Merits Inc.