Opinion
No. 1-733 / 99-1649.
Filed April 24, 2002.
Appeal from the Iowa District Court for Fremont County, GORDON C. ABEL, Judge.
Defendants appeal the district court rulings granting partial summary judgment, and subsequently, a judgment in favor of plaintiffs on their claims for slander of title, interference with past and prospective business relations, conversion, conspiracy, injunction, actual damages, and punitive damages. AFFIRMED.
Beverly K. Jones, Tarkio, Missouri, for appellant Howard Miller.
Jon H. Johnson of Johnson Graeser, P.C., Sidney, for remaining appellants.
Christopher J. Redmond, Bruce A. Moothart, Jerry D. Rank, and Rance E. Ames of Husch Eppenberger, L.L.C., Kansas City, Missouri, for appellees.
Heard by HUITINK, P.J., and HECHT and EISENHAUER, JJ.
Defendants appeal from the district court rulings granting partial summary judgment, and subsequently, a judgment in favor of plaintiffs on their claims for slander of title, interference with past and prospective business relations, conversion, conspiracy, injunction, actual damages, and punitive damages. We affirm.
I. Background Facts and Proceedings.
In 1984, Howard Miller formed Howard L. Miller Hamburg Apartments, Ltd. for the purpose of investing in real estate and a low-rent, subsidized housing complex. Miller was the original general partner, and Howard L. Miller Development Company was the original limited partner. In 1985, Howard L. Miller Development Company sold its limited partnership interest to Harvey Kline and Robert Ballard for $106,620.00. Miller continued as the general partner. Pursuant to the partnership agreement, the partnership acquired real property on which it built residential housing units in Fremont County, Iowa. This was the partnership's sole asset.
Miller developed a number of similar projects in which limited partnership interests were sold to other investors. Miller eventually experienced financial difficulties and defaulted on debts owed to Metro North Bank. Thereafter, Metro North Bank failed and reverted to the Federal Deposit Insurance Corporation, which sold Miller's defaulted loans to Larry Mueller.
In June of 1997, in an attempt to reduce his personal liability, Miller executed a deed purporting to transfer title to the limited partnership's Hamburg real estate to Keystar One, a Washington based limited liability company controlled by Mueller. The limited partnership obtained no monetary consideration from Mueller or Keystar One, and neither Ballard nor Kline received notice of or consented to the transfer. The limited partnership agreement precluded sale or transfer of property without written consent from Kline and Ballard. Miller was aware of this requirement, but admitted he did not notify the limited partners of the conveyance because he knew they would refuse to consent. Kline's demand for return of the property and an accounting was ignored by Mueller and Keystar One.
Because of the transfer of the partnership property, Harvey Kline, as limited partner, brought suit personally and as representative of the limited partnership against Keystar One, Mueller, Miller, and other business entities controlled by Mueller. In his petition, Kline sought actual and punitive damages for slander of title, interference with existing and prospective business relations, conversion, conspiracy, injunction, actual damages, and punitive damages. Kline entered into a "joint litigation agreement" with similarly situated plaintiffs in other states who were making similar claims against the same defendants.
Kline subsequently obtained a partial summary judgment in which the district court (1) found it was undisputed that Miller had acted without authority and in breach of the partnership agreement by transferring the property, and (2) determined Mueller and Keystar One were on notice of Miller's lack of authority to transfer because, although the Hamburg partnership agreement was not recorded in Iowa, the mortgage document was, and it indicated the property was owned by a Missouri limited partnership. Accordingly, the district court ordered that the purported transfer of the Hamburg real estate was void ab initio, quieted title in favor of the Hamburg partnership, and concluded Miller and the remaining defendants had no right to or interest in the property. The partial summary judgment order also enjoined Miller from acting in any capacity as the general partner for the apartments, ordered an accounting from Miller to effectuate his removal as general partner, and ordered the appointment of a temporary general partner in his stead.
Following additional proceedings and a hearing on damages, the district court entered a ruling reiterating its earlier findings and making further findings. Among other things, the court concluded the defendants had intentionally interfered with the limited partnership's interests, slandered title to the property, converted partnership property, and conspired to defraud Kline and the partnership of the real property and its income stream. The court awarded Kline $36,081.39 in actual damages for attorney fees and nominal damages of $1.00, and awarded the Hamburg limited partnership $58,331 in actual damages. It further awarded the plaintiffs $283,237.17 in punitive damages. Miller, Mueller, and the other defendants appeal from these rulings.
II. Appeal of Howard Miller.
Miller contends the district court erred (1) in limiting his presentation of evidence as a discovery sanction, (2) in failing to grant a new trial because of newly discovered evidence and insufficiency of the evidence to support an award of actual and punitive damages, and (3) in quashing his property rights as a creditor of the limited partnership and the limited partners.
A. Discovery Sanction. As a sanction for failing to timely comply with discovery, the district court precluded the various defendants, including Miller, from offering evidence to rebut the plaintiffs' damages. A district court's order imposing discovery sanctions will not be disturbed unless the court abused its discretion. Troendle v. Hanson, 570 N.W.2d 753, 755 (Iowa 1997). An abuse of discretion consists of a ruling which rests upon clearly untenable or unreasonable grounds. Id.
Miller contends there was no factual basis to support a sanction against him pursuant to Iowa Rule of Civil Procedure 1.517(2). We disagree. Plaintiffs served discovery requests upon the Defendants in October of 1998. The defendants failed to answer the discovery, and on December 30, 1998 plaintiffs filed a motion to compel Miller's responses. On January 19, 1999, the district court sustained plaintiffs' motion to compel and ordered compliance by January 21, 1999. Miller failed to comply with the order. We conclude the district court did not abuse its discretion by precluding Miller from presenting evidence contradicting plaintiffs' evidence of damage under the circumstances of this case.
B. Actual Damages. The district court awarded the plaintiffs $58,331, the amount of gross revenue generated by the apartments after the property was conveyed to Keystar One. Miller subsequently filed a motion for new trial, contending, in part, the limited partnership's gross rents should have been offset by expenses in calculating damages. On appeal, Miller asserts the damages awarded by the district court are excessive and unsupported by substantial evidence. Our standard of review of a trial court's action on a motion for new trial is for abuse of discretion. Matthess v. State Farm Mut. Auto Ins. Co., 521 N.W.2d 699, 702 (Iowa 1994).
Miller asserts that by not considering the expenses incurred in operating the apartments, the actual damages award constitutes an undue windfall to the plaintiffs. However, there is no evidence in the record substantiating what those operating costs were. Whether damages awarded are adequate in a particular case depends on the facts of the situation. Id. The test we must apply is "whether the verdict fairly and reasonably compensates the injury the party sustained." Householder v. Town of Clayton, 221 N.W.2d 488, 493 (Iowa 1974).
We conclude the district court's utilization of gross revenues meets this test under the circumstances of this case. The evidence of $58,331 in gross receipts was undisputed. There is no evidence in the record as to what expense figures Miller argues should have been deducted from the award. Without such evidence, we find no abuse of discretion in the district court's ruling on the motion for new trial on the actual damage issue.
C. Punitive Damages. The district court awarded the plaintiffs punitive damages in the amount of $282,237.17 and later denied Miller's motion for new trial in which he claimed this award was excessive. On appeal Miller contends the district court erred in denying his request for a new trial. Our review is for an abuse of discretion. Matthess, 521 N.W.2d at 702.
Miller first asserts punitive damages were improper because the facts were insufficient to establish the necessary legal malice. Under Iowa Code section 668A.1 (1999), in order to receive punitive damages a plaintiff must prove by a preponderance of clear, convincing, and satisfactory evidence that the defendant's conduct amounted to a willful and wanton disregard for the rights of another. Merely objectionable conduct is insufficient to meet the standards of section 668A.1. Beeman v. Manville Corp. Asbestos Disease Compensation Fund, 496 N.W.2d 247, 255 (Iowa 1993). To receive punitive damages, a plaintiff must offer evidence of the defendant's persistent course of conduct to show that the defendant acted with no care and with disregard to the consequences of his acts. Id. A breach of contract alone, even if intentional, generally will not form the basis for punitive damages. Hockenberg Equip. Co. v. Hockenberg Equip. Supply Co. of Des Moines, Inc., 510 N.W.2d 153, 156 (Iowa 1993). However, we will uphold an award of punitive damages when conduct breaching a contract also constitutes an intentional tort, committed maliciously, that meets the standards of section 668A.1. Id.
We conclude substantial evidence supports the district court's award of punitive damages against Miller. Miller was fully aware the partnership agreement required him to secure the written consent of the limited partners prior to attempting to transfer the partnership's property. Miller never informed Ballard or Kline of his intention, and failed to even request their consent to the transfer. He admitted he knew neither Ballard nor Kline would have consented to the transfer. Miller's conduct was in reckless disregard of the rights of the two limited partners under the limited partnership agreement. Moreover, Miller's actions were clearly intended to improve his own deteriorating financial situation, to the clear, admitted detriment of the limited partners. The district court properly awarded punitive damages against Miller.
Miller additionally asserts the punitive damages award is inappropriate because the plaintiffs failed to establish a "legally viable claim for actual damages." We reject this contention. An award of actual damages is not necessary to support an award of punitive damages. Hockenberg, 510 N.W.2d at 156 (citing Pringle Tax Serv., Inc. v. Knoblauch, 282 N.W.2d 151, 154 (Iowa 1979)). A plaintiff need only show that the defendant actually caused plaintiff some injury to sustain a verdict for nominal compensatory damages and punitive damages. Pringle, 282 N.W.2d. at 153-54. In this case, plaintiffs clearly proved they sustained actual damage as a result of Miller's actions. We have carefully reviewed all of Miller's other contentions with respect to the punitive damages issue and find them to be without merit. Accordingly, we affirm the punitive damages award against Miller.
D. Newly Discovered Evidence. The district court awarded the plaintiffs $36,081.39 for attorney fees. In his motion for new trial, Miller provided the court a "joint litigation agreement" which had been entered into between Kline and the law firm of Husch Eppenberger. This agreement created a per share allocation of the total litigation expenses charged by Husch Eppenberger in litigating fourteen lawsuits against the defendants. Miller apparently became aware of this agreement following trial, and claimed in his motion for new trial that it was "newly discovered evidence" the court should consider. He argued the attorney fee figures presented by Kline to the district court were not really the amount Miller was responsible for, but rather that he would only incur a portion of those fees pursuant to the joint litigation agreement. The district court denied the motion.
We affirm the district court's ruling on this issue because the joint litigation agreement cannot be characterized as newly discovered evidence. A party seeking a new trial on such grounds must demonstrate three things: (1) the evidence is newly discovered and could not, in the exercise of due diligence, have been discovered prior to the conclusion of the trial; (2) the evidence is material and not merely cumulative or impeaching Iowa R. Civ. P. 1.1004(7); and (3) the evidence will probably change the result if a new trial is granted. Benson v. Richardson, 537 N.W.2d 748, 762 (Iowa 1995). Miller presented no evidence in his motion for new trial or on appeal that the joint litigation agreement could not have been discovered, in the exercise of due diligence, prior to the conclusion of the trial. Miller makes no claim that he requested plaintiffs to produce information about the claim for attorney fees before judgment was entered. The district court therefore properly denied the motion for new trial on this ground.
E. Quashing of Miller's Property Rights. Miller argues the district court erred in failing to conclude that, as a creditor of the partnership, he has a right to the distribution of the partnership assets upon its dissolution. We review this issue for errors of law. In particular, Miller contends the district court's order improperly provided judicial forgiveness of the partnership debt due and owing to him. We conclude the court did not err in this respect. Miller's brief on appeal does not allege in what manner he was a creditor of the partnership, and there is no evidence as to the amount or type of debt Miller asserts was improperly forgiven as a consequence of the district court's rulings. Without such evidence, we conclude Miller was not prejudiced by the district court's rulings and affirm on this issue.
III. Appeal by Mueller and Related Entities.
A. Failure to allow additional time prior to summary judgment. After the plaintiffs filed their motion for partial summary judgment the defendants requested a continuance seeking additional preparation and discovery time before the hearing. The court denied the motion, concluding the issues presented in this case were substantially similar to the facts and circumstances surrounding the other related claims in other jurisdictions, and thus the defendants had sufficient facts to properly defend against the motion. Mueller appeals from this denial. When a party opposing a motion for summary judgment files a motion requesting continuance to permit discovery, our review is for abuse of discretion. Bitner v. Ottumwa Community School Dist., 549 N.W.2d 295, 302 (Iowa 1996).
We conclude the court did not abuse its discretion in refusing to grant a continuance. Crucial to this determination is the fact there is no evidence in the record Mueller was pursuing any discovery at this time of the request. There were no outstanding discovery requests or depositions scheduled. Nor does Mueller describe the evidence he believes he would have sought to discover if additional time had been granted. Mueller correctly cites Carter v. Jernigan, 227 N.W.2d 131, 135 (Iowa 1975), for the proposition that a party against whom a summary judgment motion is made should first be allowed to discover the facts if he desires. However, in Carter, the party seeking extra time was in fact attempting to obtain defendants' answers to interrogatories and to take defendants' depositions. Carter, 227 N.W.2d at 134. Defendants here served no interrogatories or requests for production and failed to notice a single deposition before the summary judgment ruling was entered. Under these circumstances, we conclude the court did not abuse its discretion in failing to grant defendants additional time for discovery.
B. Determination that the deed to Keystar One was void ab initio. In its summary judgment ruling, the district court concluded the defendants were not bona fide purchasers without notice, and therefore ordered the transfer void ab initio. On appeal, Mueller and his business entities contend the court erred because there exists a genuine issue of material fact as to whether Keystar One was a bona fide purchaser of the property. We review a district court's ruling on a motion for summary judgment for correction of errors of law. See American Family Mut. Ins. Co. v. Allied Mut. Ins. Co., 562 N.W.2d 159, 163 (Iowa 1997).
A landpurchaser has the burden to establish the status of bona fide purchaser. To do so, Keystone must show the purchase was made without either actual or constructive notice of existing rights in the property. Bartels v. Hennessey Bros., Inc., 164 N.W.2d 87, 94 (Iowa 1969). "Actual notice depends upon the purchaser having either (1) actual knowledge of the existing rights, or (2) knowledge of sufficient facts to charge the purchaser with a duty to make inquiry that would reveal the existence of such rights. National Properties Corp. v. Polk County, 351 N.W.2d 509, 511 (Iowa 1984). Mueller admitted he was told Miller had lost control of the partnerships and could not sell them. This conversation provided Mueller with actual knowledge that Miller might not have authority to transfer the property
The district court's decision on this issue is also supported by principles of constructive knowledge. Compliance with the recording statutes affords constructive notice of existing rights in the property. Sun Valley Iowa Lake Ass'n v. Anderson, 551 N.W.2d 621, 637-38 (Iowa 1996). A mortgage on file in the Fremont County Recorder's office disclosed the subject real estate was owned by a Missouri partnership. Because Keystar was armed with actual knowledge of Miller's admitted "loss of control" of the partnership and constructive knowledge of the partnership's nexus with the State of Missouri, knowledge of the partnership agreement provision requiring the limited partners' written consent prior to the conveyance is imputed to Keystar. Had Mueller and Keystar undertaken a reasonable inquiry they would have discovered Miller lacked the authority to convey the property without the written consent of Kline and Ballard. Therefore, the district court properly concluded no genuine issue of material fact remains and that Keystar lacks the protection of the status of a bona fide purchaser.
C. Conversion. The district court concluded the defendants Miller, Keystar and Mueller converted the partnership's real and personal property. Mueller and Keystar now contend a transfer of real estate is not actionable under the theory of conversion in Iowa. Mueller failed to make this argument in the district court and has therefore failed to preserve it for our review. See Podraza v. City of Carter Lake, 524 N.W.2d 198, 203 (Iowa 1994) (stating our function is to review trial court's consideration of arguments raised before it and not arguments counsel raises for the first time in this forum).
D. Slander of Title and Conspiracy. The district court concluded Miller, Keystar, and Mueller slandered the partnership's title to the real estate when they recorded the deed. In their brief, the defendants challenge the district court's findings on slander of title with the following argument: "[T]here is no evidence under which a court could find that defendants Mueller, Keystar, and Kanwest satisfied the five elements for slander of title." Appellants fail to suggest any particular in which the evidence is insufficient to sustain the judgment. Because substantial evidence supports each element of the plaintiffs' slander of title claim, we find no error on this issue.
Defendants' brief devotes the following single sentence to his contention the court erred in finding the defendants engaged in a civil conspiracy:
Concerning the conspiracy finding by the court, civil conspiracy is not in itself actionable: rather it is the acts causing injury undertaken in the furtherance of the conspiracy which gives rise to the action.
Although the foregoing statement is a correct statement of the law, Robert's River Rides, Inc. v. Steamboat Development Corp., 520 N.W.2d 294, 302 (Iowa 1994), it is of no avail to the defendants. After a careful review of the district court's ruling, we conclude the court awarded damages to plaintiffs for the tortious acts of the defendants in furtherance of a civil conspiracy. Accordingly, we conclude this assignment of error is without merit.E. Intentional Interference. The district court held the actions of Miller, Keystar, and Mueller constituted an intentional interference with existing and prospective business operations and activities of the partnership and Kline. On appeal, Mueller and the Keystar defendants contend there is no evidence they acted with a purpose to financially harm or destroy the plaintiffs. We disagree. Upon his discovery of Miller's wrongful conveyance, Kline notified defendants that Miller lacked authority to transfer ownership of the property and demanded its reconveyance to the limited partnership. Defendants, who were not good faith purchasers for value, declined to do so and forced the plaintiffs to incur the expense of litigation to reclaim the real estate. We find this conduct of the defendants is substantial evidence from which a reasonable juror could conclude defendants intended to injure or destroy plaintiffs.
Although the main purpose of the defendants' actions may have not been specifically to financially harm Kline, it was certainly a "necessary consequence" of the conduct or Miller and Mueller. See Nesler v. Fisher Co., Inc., 452 N.W.2d 191, 197 (Iowa 1990). Accordingly, we conclude the court did not err in this regard.
F. Actual damages, punitive damages, and attorney fees. Based on the above discussion regarding the award of actual damages against defendant Miller, we affirm the court's award of actual damages against Mueller. We also reject Mueller's contention the court should have granted a new trial on the issue of attorney fees based on the joint litigation agreement. Based on the reasoning we applied above, the agreement is not newly discovered evidence warranting a new trial.
As noted, the court awarded the plaintiffs $36,081.39 representing attorney fees. Mueller appeals from this award. Our review of this matter is de novo. Hockenberg, 510 N.W.2d at 158. 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). Courts have recognized a rare exception to this general rule, however, "when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Hockenberg, 510 N.W.2d at 159. 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.
We conclude substantial evidence supports the award of attorney fees. The record shows Miller informed Mueller he was in a limited partnership, and that Mueller and Keystar took the property without contacting the limited partners, or even investigating their status in the partnership. Mueller admitted Miller informed him he had lost control over the partnership and was unable to sell it, yet he still went ahead with the transfer. Further, Mueller and Keystar One paid nothing for the property despite the fact Mueller was aware other limited partners, and not just Miller, held an interest in the property. Mueller and Keystar One then exercised control over the property and accepted its income even after being informed of Miller's lack of authority to transfer the property. We believe these factors exhibit more than simply a lack of care, and constitute vexation and oppression. We therefore affirm the award of attorney fees.
G. Mueller's Personal Liability. Mueller asserts the district court erred in finding him personally liable for the acts of Keystar One regarding the purchase of the Hamburg apartment. In particular, he asserts Iowa law provides that no member of a limited liability company may be personally liable for the acts or debts of the company. See Iowa Code § 490A.601. Mueller does not cite in his brief how this issue was preserved for appellate review. We conclude it has not been preserved and therefore refuse to consider it.
IV. Conclusion.
We have reviewed all contentions raised by appellants in this appeal. Those which we do not expressly address in this opinion are either not preserved for our review or without merit. We affirm.
AFFIRMED.