DeShaw v. Farmers Savings Bank ( 2017 )

IN THE COURT OF APPEALS OF IOWA
No. 16-2140
Filed December 6, 2017
MARTY DESHAW,
Plaintiff-Appellee,
vs.
FARMERS SAVINGS BANK and MARK E. WHITE,
Defendants-Appellants.
________________________________________________________________
Appeal from the Iowa District Court for Clayton County, John J.
Bauercamper, Judge.
A bank and its president appeal a jury verdict in favor of a borrower for
fraudulent misrepresentation and nondisclosure. AFFIRMED.
D. Flint Drake and Samuel M. Degree of Drake Law Firm, P.C., Dubuque,
for appellants.
Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellee.
Considered by Vaitheswaran, P.J., and Tabor and Mullins, JJ.
2
TABOR, Judge.
Farmers Savings Bank and its president, Mark White, appeal a jury verdict
in favor of borrower Marty DeShaw in his action for fraudulent misrepresentation
and nondisclosure. The jury decided White was complicit with bank customer Jeff
Rohner1 in deceiving DeShaw into mortgaging his home as security for a
promissory note to cover Rohner’s debt to the bank on his farmland. The bank
asserted a claim against DeShaw on the balance due on the note, seeking to
foreclose the mortgage. DeShaw denied the claim and successfully asserted the
bank’s fraud as a defense.
On appeal, White and the bank2 pose three questions: (1) Did DeShaw
prove Rohner’s fraudulent intent? (2) Did DeShaw prove White knew of Rohner’s
fraudulent intent? and (3) Did DeShaw prove White fraudulently failed to disclose
material information to induce DeShaw to enter the loan transaction in September
2011? Despite conflicting testimony about the circumstances of this transaction,
it was within the jury’s prerogative to credit DeShaw’s version of events. We find
substantial evidence supports the jury’s verdict and affirm.
I. Facts and Prior Proceedings
A detailed rendition of the facts is critical to addressing the issues on appeal.
We start by introducing White, Rohner, and DeShaw.
For nearly three decades, White has served as president of Farmers
Savings Bank, which started in Colesburg but expanded to several nearby
1
The district court dismissed Rohner as a defendant after he provided notice of his May
2015 chapter 7 bankruptcy.
2
Because the bank’s liability depends on White’s actions, our references to defendant
White in this appeal also encompass the defendant bank.
3
communities in northeast Iowa. In White’s words: “If you don’t get bigger you get
gobbled up.” White graduated from Loras College with a degree in finance. He
gained additional coursework in agricultural credit and commercial lending. White
had a long-time banking relationship with Rohner, a local businessman.
Fifty-seven-year-old Rohner owned and operated Rohner Refrigeration,
Plumbing, Heating and Air Conditioning, a fledgling enterprise. Rohner borrowed
money for the new business from White in 2009. The bank also held the 2007
note and $90,462 mortgage on the property at issue in this case—a fifty-two acre
farm that was mostly recreational timber and generated an annual income of only
$2500. The farm was originally much larger, but Rohner sold parcels of tillable
land to pay his debts to the bank and “was down to the last fifty-two acres.” In
addition to his farm debt, Rohner had a loan on his house and “a couple of
commercial vehicle loans also on the HVAC business.” Rohner “struggled” to
make his quarterly payments on the farm in 2008 and 2009. Before the quarterly
payments were due, White advanced Rohner two smaller loans—$6500 on April
14, 2009, and $9000 on March 15, 2010, which were secured by equity in the
farm—noting Rohner needed “a little operating money” for his business. During
his financial struggles, Rohner befriended DeShaw.
DeShaw attended high school with Rohner’s son; they hunted and rode four
wheelers in Rohner’s timber. After high school, DeShaw worked in manufacturing
before taking four years to care for his grandmother, who suffered from dementia.
When she died, he returned to manufacturing work. When he started receiving
unemployment in 2009, DeShaw worked as an unpaid intern for Rohner to learn
the HVAC trade. DeShaw owned two houses. His residence on Colesburg Road
4
was debt free; he paid his grandmother half the value and inherited the other half
from her estate. DeShaw had lived there for seventeen years. DeShaw also
rented out a house in Guttenberg purchased with a Fidelity Bank loan and
mortgage.
Delivery of Colesburg Road Abstract to White. Key trial testimony
focused on DeShaw’s home on Colesburg Road. Witnesses offered the jury
diametrically opposed reasons why DeShaw delivered the home’s abstract to the
bank in February 2011.
White’s testimony. White characterized Rohner as “a chronic past due”
customer. The banker’s comment sheet memorialized Rohner’s frequent requests
for extensions on existing loans, as well as new, smaller loans to increase his cash
flow. If any debtor was more than thirty days past due when the bank created its
quarterly reports, the loan was dubbed “troubled debt.” White explained, “[M]y
board frowns on troubled debt.”
In December 2010, White’s patience with Rohner’s debt level and payment
struggles ran out. The banker urged Rohner to sell the last portion of his farm—
the timber. But Rohner replied: “This is a family farm. This is all I have left.”
Rohner proposed: “If I can find an investor to pay it down, if I find a plan, will you
listen?” White agreed to listen.
According to White, during a January 8, 2011 meeting at the bank, Rohner
and DeShaw presented him with a plan for DeShaw to invest in Rohner’s farm.3
33
DeShaw insisted he did not attend this meeting and first met White several months later
in September 2011. In addition, the January 8 meeting was not listed on White’s comment
sheet concerning Rohner’s loans. Neither did White start a comment sheet on DeShaw
5
White recalled that Rohner walked in, introduced DeShaw as his employee, and
reminded White of his agreement to listen if Rohner found an investor. White said
Rohner convinced DeShaw the farm was worth between $175,000 and $200,000
and the bank was not being fair to Rohner in seeking a deed for $130,000. Rohner
proposed the farm be sold for $160,000, that DeShaw “would come up with
$80,000” and pay Rohner’s $130,000 obligation down to $50,000, then Rohner
would reimburse that $50,000 to the bank in monthly payments over twenty years.
White thought Rohner’s proposal was workable and asked DeShaw if he
had $80,000. DeShaw replied he did not, so White allegedly told DeShaw, “I need
the financial application. I need to know what I’m working with.” White helped
DeShaw fill out a loan application by asking him questions about his assets and
liabilities and recording his answers on the form. After DeShaw approved White’s
compilation of his assets and liabilities on the loan application, White dated it
January 8, 2011, and DeShaw signed it.
White told DeShaw he could have the same deal as Rohner: “[Rohner]
borrows 50, you borrow 50, you have to cough up $30,000.” White also told
DeShaw, he wanted a first mortgage on the Colesburg house and a second
mortgage on the Guttenberg house “so I have enough collateral.” According to
White’s testimony, DeShaw agreed to “the first but I won’t give you a second. If
this doesn’t work out, I am not going to be homeless.” White understood DeShaw
on January 8. White testified, because he made no loans on January 8 to DeShaw, he
wouldn’t have started a loan file. As to Rohner’s comment sheet, White testified: “I’m
much more diligent when I have an issue . . . again, not enough hours in my day . . . . I
have been chastised about this by management because I’m not good at comments.”
6
would give him a mortgage on his Colesburg Road house and would deliver that
abstract to the bank, which DeShaw did in February 2011.
White claimed as the meeting continued, he “went to the assessor’s card”
to see what the Colesburg Road property was worth, which was $57,000. 4 White
allegedly told DeShaw that the Colesburg Road property “has got to appraise for
at least $50,000, or this deal isn’t going to go through.” White required Rohner’s
proposal be reduced to writing and volunteered the name of an attorney, Kim
Lange, who could “put the contract together for the sale between the two of you.”
According to White, Rohner and DeShaw agreed, and White contacted Lange.
White pulled DeShaw’s credit report at 11:05 a.m., January 8, 2011,
learning he had a good score. White believed he ran it “immediately following the
meeting.” White told the jury, “I have to have an application, either verbal or in
writing, to pull a credit report,” but “it’s best to have a written application.”
DeShaw’s testimony. DeShaw aspired to run his own HVAC company. His
sister and cousin testified DeShaw learned in 2010 that such a business might be
for sale in Elkader. DeShaw testified Rohner said he talked to White about loaning
DeShaw money to buy the Elkader business and White indicated his willingness
to do so if DeShaw had collateral.5 From that conversation with Rohner, DeShaw
understood he should deliver an abstract to the bank. DeShaw discussed
purchasing the HVAC business with Rohner because DeShaw did not have the
necessary licenses to operate the business and Rohner did. DeShaw proposed
4
The loan application White said he helped DeShaw complete at this meeting valued the
Colesburg Road house at $100,000.
5
At trial, Rohner denied discussing the Elkader business with DeShaw. White similarly
testified to having no knowledge of DeShaw’s interest in the Elkader purchase.
7
buying the Elkader business and combining it “with Rohner Refrigeration and
operat[ing] under his license.”
In early February 2011, DeShaw dropped off the abstract for his Colesburg
Road home at the Elkport/Garber bank branch to obtain a loan to buy the Elkader
HVAC business. DeShaw entered the bank and told a teller, “Mark White is
expecting this.” DeShaw did not discuss buying an interest in Rohner’s farm with
the teller. White did not work in that branch and was not present.
DeShaw also testified Rohner “had periodically discussed” DeShaw buying
a half interest in Rohner’s farm “and that is when they come up with the contract
for me purchasing half, where $30,000 would come out of my Guttenberg [rental]
house.” (Emphasis added.) DeShaw was willing to provide a mortgage on his
Guttenberg rental to purchase half of the farm but was not sure when he actually
saw the sale contract—Rohner “didn’t bring it out then. He waited. I don’t know
why.” It is undisputed attorney Lange prepared the real estate contract and faxed
it to White on February 11, 2011.6
Title Issue on Colesburg Road Abstract. White also asked Lange to
provide a title opinion on DeShaw’s Colesburg Road property. On February 24,
2011, her preliminary opinion stated “marketable title” was vested in DeShaw “by
6
The contract provided DeShaw would pay $80,000 and $30,000 “has been paid.”
DeShaw was to make annual payments of $4800 at 7% interest on the $50,000 balance.
As to who employed Lange to draft this contract, Rohner testified:
Q. Did attorney Kim Lange ever represent you? A. She may have.
I guess I’m not—I don’t remember.
Q. Was she your lawyer to prepare a contract between you and Mr.
DeShaw [sometime in February 2011]? A. After our deposition last time, I
kind of remembered something like that.
Q. At the time of your deposition, you said that she wasn’t your
lawyer when she prepared that contract; right? A. Correct.
8
virtue of a warranty deed dated April 22, 1998” and by virtue of the joint tenant’s
death as proven by the July 24, 2007 filing from the estate of DeShaw’s
grandmother. To provide clear title, Lange required White to “[o]btain an affidavit
of the surviving joint tenant prior to closing.”
DeShaw did not know Lange before February 24 and asserted he had not
told White the bank “could have a lien or a mortgage on [his] Colesburg house in
connection with buying an interest in [Rohner’s] farm.” Rohner disagreed, stating
DeShaw knew he would have a mortgage on his Colesburg Road house.
DeShaw Loan in March 2011. As with the reasons for DeShaw’s delivery
of the Colesburg Road abstract to the bank, the jury heard diametrically opposed
testimony on why DeShaw obtained a small loan in March 2011.
White’s testimony. On March 4, 2011, White ran a second credit report on
DeShaw, again observing a “very good” score. This report contained a “loan
application date” of March 30, 2011, even though White testified to a conversation
with Rohner two weeks earlier. On cross-examination, White stated: “Why we ran
it in early March, I’m not sure.” “I had to have it thirty days prior to making the loan”
to DeShaw.
In mid-March, White pressured Rohner to pay before the upcoming
quarterly report: “[I]f you don’t have it, we’re done and I’m foreclosing.” Rohner
said he would talk to DeShaw. White recalled hearing back from DeShaw, who
confirmed he wanted to continue with the farm deal. White said he told DeShaw
he needed “a payment by March 30th” or the bank would be “forcing the issue.”
“So [DeShaw] walked in on March 30th, signed a note for $3500, and took care of
the problem.” Rohner’s debt for the farm remained at $130,000, and because it
9
was worth at least $160,000, White believed it was “still a good deal for them.”
White claimed DeShaw took out the loan in March 2011 “to hold the status quo”
on the farm so he could still do the $80,000 deal. White first entered a comment
on DeShaw’s loan sheet on March 30, 2011.
But White’s testimony was at odds with his March 30, 2011 comment sheet
placed in Rohner’s loan file:
[Rohner] just can’t afford the debt on the farm and must sell.
[Rohner] has found a buyer (Marty DeShaw), but can’t sell until
judgments are cleared up. They had it worked out that [DeShaw]
would buy on contract, but with the huge medical judgments, can’t.
At this point we are stepping in. Asked if [Rohner] would give us a
deed in lieu and he said yes if we sell to [DeShaw]. We said that is
agreeable as long as [DeShaw] is the highest bidder. [DeShaw] is
willing to pay a minimum of $140,000 and will probably go to
$150,000. He has two properties clear or almost clear for the down
payment. Proceeding with attorney John Freund to get [the farm]
into [the bank’s] name.
White testified, despite his comments, he did not have “absolute certainty”
judgment liens existed against the farm. At trial, White asserted he did not know
the February 2011 sales contract was not feasible until the abstracting company’s
May 2011 lien search. But on cross-examination White admitted:
Q. And the comment sheets are things that you keep as a part
of the recordkeeping that the regulatory authorities and bank
examiners will look at when they come in and evaluate your loan
portfolio; correct? A. Yes.
Q. And so you try to be as accurate as possible when you
make comments in the comment sheet; correct? A. [Rohner] told
us that they are out there, and we were hoping they weren’t, but—
Q. Is there anything in your entry . . . that says anything about
possible or potential judgments? A. No.
Rohner’s testimony also casts doubt on White’s asserted belief the
February 2011 contract was viable when DeShaw took out the March 2011 loan.
Rohner testified, before the bank’s May 2011 lien search, he knew he had been
10
sued and that judgments had been entered against the farm for medical bills,
attorney fees, and unpaid business bills.
White claimed he knew the Colesburg Road property was free and clear
based on (1) Lange’s preliminary title opinion and (2) DeShaw’s January 8, 2011
loan application. But White’s evasive responses when asked about his March
2011 characterization of the Guttenberg rental property as “almost clear” bolsters
DeShaw’s claim he signed the loan application at the same time he signed the loan
documents—September 2011 and not January 2011:
Q. You’re saying your state of mind was the Guttenberg house
was almost free and clear; correct? A. There was debt against it.
[DeShaw] had already told me that he will not give me that house.
Q. Your words were, “He has two properties clear or almost
clear for the down payment.” That’s what you wrote in the comment
sheet that the regulators look at; right? A. Yeah, but he wasn’t going
to give me both of them.
Q. Do you consider a $45,000 mortgage on an $80,000
property almost clear? Really? A. He wasn’t going to give it to me
anyhow. [DeShaw] had already made it very clear. He didn’t give
me the abstract. I was not going to get that [Guttenberg] house.
Q. My question is: Do you want the jury to believe that you
think a $45,000 mortgage on an $80,000 property is almost clear?
It’s a yes or no question, sir. A. It’s an opinion.
Further, White hedged in his testimony concerning the signing date of the
loan application:
[Deshaw] testified that at some point he gave me this information.
This was recognizable to him . . . . My recollection is, I’m 99% sure,
he signed it in January [2011]. [DeShaw]’s recollection is he signed
it in September [2011]. Banking law requires that I have a signed
application at time of closing. So whether he signed it in January or
he signed it in September at that closing, it really makes no difference
. . . . The big thing is it had to be signed prior to the closing [of
DeShaw’s loan for $152,800] in September [2011].
DeShaw’s testimony. DeShaw testified to a different path leading up to his
March 2011 loan for $3500. Rohner told DeShaw he was waiting for earnings from
11
a job and “had to pay up the interest on his loans, and that if I borrowed the money,
[Rohner] would pay me back right away.” DeShaw agreed to help, and on March
30, signed a three-month personal note with the bank. DeShaw believed, “within
a matter of a month or two,” Rohner had repaid this loan. But the bank’s records
show otherwise.
March 2011 loan documents. Although DeShaw did not receive the loan
proceeds, the bank’s “disbursement request and authorization form” stated the
note’s proceeds were paid directly to him. A related bank debit, dated March 28,
2011—two days before DeShaw signed the note—showed a $3473.00 transfer
from DeShaw’s account was applied to two different loans. A handwritten note on
the debit states: “The money was paid on interest on both of Jeff Rohner’s loans.”
But the application of the loan’s proceeds to Rohner’s loans is not listed on
DeShaw’s comment sheet. White’s notes on Rohner’s comment sheet stated the
bank agreed to give Rohner “one more extension.” White testified “the two [Rohner
loans] that [DeShaw] took care of were the larger loans.” On cross-examination,
White admitted the loan’s $1974.20 in closing costs assigned to DeShaw included
$50 charged by attorney Lange to prepare the February 2011 sales contract for
$80,000 that White asked her to draft.
The bank processed the debit on March 30, the same day DeShaw signed
the note. But White had already extended Rohner’s loans on March 28, 2011, “to
allow more time for this farm transaction to work itself out.” On cross-examination,
White blamed the bank’s computer systems for the differing dates on the
documents, stating he “had to backdate” so Rohner’s loans would not be listed as
12
“bad debt” in the March quarterly report7 and the bank gained no advantage in
using the differing dates. But White’s explanation shows his willingness to
backdate official bank documents.
White’s Lien Search on the Farm. White requested a formal lien search
on the farm. On May 13, 2011, the report showed the farm was subject to four
creditors’ judgments of about $25,000 and to unpaid real estate taxes. White
claimed he did the lien search to protect DeShaw, who would have assumed
Rohner’s liens under the February 2011 contract for $80,000. White claimed he
then “advised [DeShaw] against buying or entering into the [February 2011]
contract agreement” because the lien search “pretty much throws [the February
2011 contract] out.”8 White also “talked to [Rohner] and said [the contract for
$80,000] is not going to work. We have to have a deed in lieu of foreclosure.”
White did not note these discussions on the loan comment sheets for either Rohner
or DeShaw. On cross-examination, White admitted that one purpose for the lien
search was to provide the bank’s attorney, Freund, with the report so he would
know who to serve with the voluntary-foreclosure documents.
White claimed DeShaw “still felt, 130, 140, 150, is still a good deal for him.
So they told me to proceed on, we were going to do a deed in lieu, the bank would
own it, the bank would sell” the farm to DeShaw. The “big thing” for White was
7
Rohner’s status as a nonpaying debtor continued the next month. On April 5, 2011, the
bank sent him a letter about his delinquent loan for the purchase of a vehicle and trailer.
When Rohner did not respond, White’s April 29 letter told him to pay or make satisfactory
arrangements within twenty-one days or the bank would “commence collection action.”
8
DeShaw denied having such discussions with White.
13
getting the farm in the bank’s name so White “could control the destiny, whether I
call a realtor or I work something out” with DeShaw.
DeShaw did not see White’s lien report but found out about the farm’s liens
“sometime in the spring of 2011” and was no longer interested in a contract to
purchase for $80,000. DeShaw knew if he bought part of the farm, “the judgments
would still be on the property, and they would affect me.” According to DeShaw,
when the $80,000 contract was dropped, Rohner then approached him with a
“solution that would allow [Rohner] to get around” the judgment liens.
DeShaw testified:
[Rohner] said he had discussed it with Mark White, and they came
up with the idea of [Rohner] to sign in lieu of foreclosure note, the
bank would take it back, and that would dismiss any judgments
against it. Then I would buy it out. It would be in my name no more
than three months. [Rohner] would file bankruptcy and take it back
[free and clear].
(Emphasis added.) DeShaw discussed this plan only with Rohner, not with White
or anyone else at the bank. Rohner, who had taken bankruptcy and had executed
a reaffirmation agreement with the bank in the past, understood if he gave the
property back to the bank, “took bankruptcy, those judgments would be
extinguished if [he] then took the property back.” According to Rohner, before his
voluntary foreclosure in May 2011, he had “some discussions” with DeShaw about
“buying the farm or an interest in the farm.” But he and DeShaw had “a lot of
discussion about it after [Rohner] signed the voluntary foreclosure.”
At this point, DeShaw was still considering buying the HVAC business, but
when he broached the subject with Rohner, he “would talk me out of it again, and
we would just go back and forth on it.” DeShaw ultimately decided he was willing
14
to help Rohner and take temporary title to the farm because he “felt sorry for him.
It was in his family . . . it was breaking his heart” and “he wanted to keep it. And it
was financially beyond me to buy and keep. And [Rohner] found a way where he
could clear his debts, and he would take it back.” DeShaw was not aware Rohner
had filed for bankruptcy twice before 2011.
Rohner’s Voluntary Foreclosure—May 2011. White explained the steps
he took for the voluntary foreclosure as “we identify the debt against the farm and
debt against the house and debt against the commercial business. I sent all the
paperwork to attorney Freund” and “gave instructions” to get the farm out of
Rohner’s name and extinguish the judgment liens.9 On May 23, 2011, Rohner
executed a deed and agreement of voluntary foreclosure in favor of the bank.
Rohner knew his debt secured by the farm was paid off, the judgment liens were
extinguished, and his unsatisfied debt was $115,100. In sum, Rohner extinguished
around $119,800 of his $234,937 debt with the bank.
On June 1, 2011, attorney Freund, on behalf of the bank, served notices on
the four lienholders by certified mail. See Iowa Code § 654.18(3) (2011) (giving
lienholders thirty days to redeem). Also on June 1, White wrote on Rohner’s
comment sheet: “Notices sent, would like to close [with DeShaw] in June but the
thirty days won’t be up, will have resolved by early July, hoping.”
Bank Owns the Farm. When the lienholders took no action, the bank
recorded its deed and the voluntary foreclosure agreement on June 23, 2011. But
the sale to DeShaw did not close in early July. White needed to have the property
9
White explained the creditors would still have judgments against Rohner but not a lien
on the farm property.
15
appraised and also needed to clear up the title issue. White continued discussions
with DeShaw and asserted whether to go forward was up to DeShaw. “I wanted
130 out of it, whether [DeShaw] took it over or I sold it to someone else. I didn’t
really care.”
DeShaw acknowledges he had phone conversations with White before
closing his September 2011 loan with the bank. But DeShaw claims he told White
he was “not willing to give a mortgage” on the Colesburg Road property in
connection with the farm deal. At trial, DeShaw explained why he was willing to
provide a mortgage on his home to further his purchase of the Elkader HVAC
business but not for a loan on the farm: “Because the business would be for myself,
and dealing with someone else, just on the faith that they were going to make the
payments, I was not willing to put the only house I had free and clear up for
collateral.”
Appraisals. White explained: “If you’re taking a mortgage, you have to have
an appraisal.” On July 1, 2011, White ordered an appraisal on the Colesburg Road
home, telling the appraiser DeShaw was “refinancing (down payment loan)” and
the valuation would be used for a mortgage. On the same date, White ordered an
appraisal of the farm, stating DeShaw was purchasing the farm for $150,000 but
“there is no purchase agreement at this time.”
At the end of August 2011, the completed appraisals valued the Colesburg
Road home at $82,000 and valued “the market cash value of the [timber] being
purchased by Marty DeShaw” at $153,737. White then proceeded on the loan,
“[w]e ordered the deed packages and eventually prepared the closing docs for the
loans in September.” On behalf of the bank, White signed and notarized a deed
16
transferring the farm from the bank to DeShaw on September 11, nine days before
the transaction closed. White explained he probably received the deed package
on September 11 and “just took care of business and signed it.” White told the jury
the loan closing was delayed due to Lange’s title objection.
Title Objection. White testified he asked DeShaw for help in clearing title to
the Colesburg Road house and DeShaw then “talked to his attorneys,” who e-
mailed or faxed an affidavit to White. White then “forwarded it on” to Lange, and
Lange cleared title on the afternoon of September 19, 2011.
But on cross-examination, White admitted: (1) the document he presented
as a newly prepared affidavit was a December 2008 affidavit from DeShaw’s sister,
not DeShaw; (2) this 2008 affidavit would have been in the abstract before Lange’s
February 2011 preliminary title opinion; and (3) Lange cleared title to the Colesburg
Road house based on her examination of the 2007 “Report and Inventory” of the
estate recorded in the county clerk’s office. Also on cross-examination, DeShaw’s
counsel pointed out Lange’s original requirement asked White to obtain an affidavit
of the surviving joint tenant before closing. White responded he had “no idea” who
that would be and was evasive when questioned about the estate inventory:
Q. Do you see . . . who is the co-tenant, co-owner with [the
grandmother] on this house? A. It says Marty DeShaw.
Q. Would you agree that Marty DeShaw is the joint tenant that
Miss Lange is saying you need affidavit from [to clear title]? A. Again,
I’m not an attorney . . . . I mean, that’s why banks get title opinions,
so attorneys can tell us, and when she told me we we’re good to go
[in her September 19, 2011 e-mail], I assume she reviewed all of
these documents . . . .
....
A. Okay. According to the documents, yeah, [DeShaw] was
co-tenant.
Q. And what Kim Lange is saying is obtain an affidavit of
surviving joint tenant prior to closing. That means get an affidavit
17
from Marty DeShaw; right? A. Again, I’m not an attorney . . . . You’re
asking me to make an opinion of law . . . .
Q. All right. And you didn’t get an affidavit from the co-tenant,
Mr. DeShaw, did you? A. I sent it to an attorney . . . .
DeShaw’s September 2011 Loans. DeShaw testified he first met White
on September 20, 2011, while signing the loan documents to temporarily purchase
the farm from the bank. DeShaw also gave White the information to fill out the
loan application.10 DeShaw’s signature is his only contribution to the loan
application, and DeShaw does not dispute he signed it.11
According to DeShaw, on September 20, he and Rohner were working on
a heating job near Colesburg, DeShaw still as an unpaid intern. Rohner was
driving and “out of the blue” said to DeShaw, “Let’s swing by the bank, and you
can sign the papers on that loan.” DeShaw described what happened in the five
to ten minutes he and Rohner met with White at his Colesburg office:
[W]e walked in. [Rohner] said, “I have Marty [DeShaw] here to sign
the papers.” [White] had them all ready on his desk. And I was just
told to sign here, sign here. I signed everywhere I was told. And
[White] said, “I need you to sign this loan application to make this
legitimate,” and I signed it, and he said he would fill in the rest.
“Everything was put with the signature on top, this stack, this stack, this stack.”
DeShaw did not ask how much he was borrowing because it “was supposed to be
a temporary, three-month deal” and he trusted Rohner. DeShaw gave White the
10
The loan application listed (1) DeShaw’s home on Colesburg Road at $100,000 in value
and no debt and (2) DeShaw’s Guttenberg rental property at $80,000 with $45,000 in debt
to Fidelity Bank. He had no other debts and $1575 gross monthly income—$1200
unemployment payment and $375 rent payment.
11
In his deposition and at trial, Rohner testified there was only one meeting at the bank
between the three men and it occurred in the fall of 2011. But on cross-examination,
Rohner stated: “Q. If I told you that Mr. White testified in his deposition that he first met
with you and Mr. DeShaw on January 8, 2011, at the bank to have a discussion about
that, could that be right? A. Yeah.”
18
name of his insurance company and information about his vehicles and
employment so White could fill out the credit application. DeShaw testified this
meeting was the first time he, Rohner, and White were all together and White
“never really spoke” to him other than just to tell him where to sign. But DeShaw
admitted no one at the bank lied to him to get him to sign the documents. And
DeShaw admitted he was foolish to not read the documents before signing.
In contrast, White testified he went over each of the documents with
DeShaw and specifically pointed out the mortgage on his Colesburg Road home.
DeShaw borrowed $154,874 in two, twenty-year promissory notes—one for
$66,000 and one for $86,874. White testified the farm “is worth roughly 150 and
the loan is worth 150” and the bank would not “finance 100%,” so DeShaw did not
receive proceeds because he was “pledging the house for the down payment on
a farm.”12
12
Both note disbursement pages stated DeShaw received the note proceeds directly and
the other disbursement option: “Deposited to Account # ______” was left blank, even
though DeShaw did not receive the note proceeds. The interest rate was around 6%.
DeShaw paid $1974.20 for fees, costs, and the title opinion. For each two-page note,
DeShaw signed the second page and other documents—an errors and admissions
agreement, a disbursements page, and a notice of final agreement. DeShaw also signed
two documents relating to insurance on his Colesburg Road home.
19
The bank’s summary of the loans, a document DeShaw did not sign, stated:
Loan for the farm $ 86,87413
Loan for the house & farm $ 66,00014
Net $152,874
Less closing fees -$ 1974
Less pay off [DeShaw’s March 2011] loan -$ 3656
Net deposit $147,244
Balance applied to Jeff [Rohner]’s loan per Marty [DeShaw]
$147,244
White contended this summary also showed DeShaw the mortgage on his
Colesburg Road house.
The summary reveals Rohner did not pay off DeShaw’s March 2011 loan
for $3500 as DeShaw believed. Rather, the bank rolled DeShaw’s March loan into
the September 2011 transaction. DeShaw testified he was unaware the March loan
was in default because the bank did not send him any default notices after the loan
went past due in June 2011. White testified he didn’t send any thirty-day “right to
cure” letters on the March loan “because this was all in progress.” DeShaw did not
know Rohner had not paid the March loan until White’s testimony at trial.
To secure the notes, DeShaw entered into an open-ended $180,000
“purchase money mortgage” on the farm, which he signed twice on the last page.
White notarized his signatures. The second mortgage was a $90,000 “purchase
money mortgage” on his Colesburg Road home. Similarly, DeShaw signed twice
and White again notarized DeShaw’s signatures. Thus, DeShaw signed $270,000
13
White arrived at this amount as the “balance of what we agreed to as far as paying off
[Rohner]’s notes plus closing fees for abstract, title opinion, recording, doing all the closing
fees.”
14
White arrived at this amount as being 80% of the appraised value of the Colesburg Road
house. His “standards and regulations” required a residential mortgage to have 20%
down.
20
in mortgage encumbrances for around $153,000 in loans after Rohner had
discharged around $120,000 in debt in the voluntary foreclosure.
DeShaw and Rohner returned to Rohner’s vehicle and drove to the shop.
Rohner had told DeShaw his debt was around $90,000; DeShaw believed he was
borrowing that amount. DeShaw testified:
We went into the shop, and I had asked [Rohner]—I had looked
through some of the papers and seen there was a lien against my
house, and I asked him, “Why is there a mortgage against my
house?” And he said, “I don’t know, but I swear, I will pay this. Don't
worry about it. This is only temporary.”
At that time, DeShaw trusted Rohner would make the payments. He did not
contact White because he trusted Rohner’s assurances “[i]t was only temporary,
and I would have my house back.”
White explained why the September 2011 loan to DeShaw increased from
the $120,000 debt extinguished in the voluntary foreclosure and from the $130,000
he had testified he wanted to receive: “Once we got the appraisal . . . we were
looking at fair-market value, what’s fair. And that’s where we came up with the
[$150,000, which] took care of all the farm debts. It did clear up the commercial
debts” on Rohner. (Emphasis added.) On cross-examination, White testified, “I
don’t think it’s right for the bank to pocket the difference” “between 147 and 119,”
the difference “is not the bank’s money.”
Q. So the bank took it? A. No. I gave it to Jeff [Rohner]. I
mean I applied it to his debt. I mean, you want to be fair about it.
....
Q. . . . Are there documents to show that? A. . . . I would have
to go back and restructure and see what all of those were, because
I don’t think we have those all here . . . .
....
Q. . . . The effect of this transaction was, you got the same
security you had taken in satisfaction of the debt, [the farm,] plus
21
[DeShaw’s] house free and clear, and were able to make then a
significant pay down on the debt of somebody who you have already
called someone who was chronically in default? A. Yeah, there was
a substantial pay down to Jeff [Rohner] because—at that point we
owned it.
(Emphasis added.)
Further, White was not willing to finance more than $150,000. “But in that
150 we also included the [$3500] debt of [DeShaw’s] that he took out in March. So
[his] debt wasn’t going to be three notes; it was going to be two notes.” White
asserted, once the bank had the farm, legally, he could sell it for whatever he
wanted and was not limited by the amount of debt Rohner satisfied in the May
voluntary foreclosure. Specifically,
Q. It wasn’t like this was some special transaction that
wouldn’t have benefited the bank any different than you could have
done with anybody else? A. The only one that benefited was
probably Jeff [Rohner] because I allowed him to put it on his debt.
Actually, I could have taken the [excess over the farm debt]. We
owned the farm.
At trial, DeShaw argued the $30,000 the bank received “over and above”
the $120,000 Rohner discharged in his voluntary foreclosure was newly secured
profit for the bank. When Rohner was asked whether the $120,000 debt he
discharged in his voluntary foreclosure grew to $150,000 from May to September
2011, Rohner replied: “I guess I don’t know. There may have been some late
charges. I guess I don’t know how that works.”
Payments on DeShaw’s September 2011 Loans. DeShaw testified he
did not make any payments to the bank in connection with the September 2011
loans. DeShaw could not afford to pay even one-half of the monthly amounts due
22
on those loans in 2011—“[i]t was well beyond my income.” It appears Rohner
made the payments on DeShaw’s loans.
At trial White first testified, “The payment was made, it didn’t go past due, I
didn’t look at it.” But during White’s 2016 deposition shortly before trial, he
acknowledged knowing the September 2011 transaction with DeShaw was really
Rohner’s loan:
Q. And do you recall after the closing getting any contact from
Mr. DeShaw complaining about the transaction. A. The only
complaints were when Jeff [Rohner] went past due when [DeShaw]
was getting nasty letters [from the bank] saying pay up because . . .
then he was upset [Rohner]’s not making the payments.
....
Q. I thought this was Mr. DeShaw’s loan? A. Yes. And that
caught me off guard when the first payment was made, because
[Rohner] said it was on automatic payments [but] nothing was on
automatic payments. [Rohner] started sending us checks and his
story to me was I’m taking [DeShaw]’s paycheck, [DeShaw] is
working for me, and this is [DeShaw]’s payment. Okay. I thought it
was odd that [Rohner] was making the payments, but [he had
explained it].
At trial, White claimed his deposition testimony contained errors—the first
excerpt above was made “without reviewing the facts” and his second excerpt
described “what happened in early [20]12.” White’s new version at trial was that
when DeShaw’s loan payments were “past due,” White “researched it” and
discovered Rohner “would call in, transfer money into [DeShaw]’s account, and
then [DeShaw] was transferring the money from his account on the loan. The loan
payments were made by [DeShaw], but it looked like the money came from
[Rohner].” White then confronted Rohner and asked, “‘What’s going on here?’
‘Well, that’s [DeShaw]’s pay. We are still working together, and that’s how I pay
23
him.’ Okay. I guess I’m getting my payment . . . .” But White did not introduce
any documents showing this process was used.
Although Rohner did not follow through on what DeShaw believed was their
plan—DeShaw taking “temporary” ownership and Rohner immediately declaring
bankruptcy and taking back the lien-free farm, DeShaw stated he did not go talk
with White until “at least a good four or five months after Rohner [had made] up
excuses that he hadn’t filed bankruptcy and taken it back.”
For yet another variation, Rohner claimed, in September 2011, Rohner and
DeShaw entered into an oral agreement that Rohner would make half of the
payment DeShaw owed to the bank, DeShaw would pay the other half, and
eventually Rohner would re-own half the property. Rohner claims he discussed
this plan with DeShaw, not with White. In support of the oral agreement, Rohner
claimed to have paid DeShaw the entire time DeShaw worked for him; but Rohner
did not introduce any documentation from his business to support this assertion.
Under the plan, “the bank took [all] the money out of [Rohner’s] account, and then
[Rohner] took the money from what [DeShaw] was otherwise owed as wages.”
Rohner set it up with the bank so the whole payment on DeShaw’s loans came
from Rohner’s account. DeShaw “was supposed to set up an account for his half,
but he didn’t.”
But Rohner admitted he had no record showing he “ever took any money”
from DeShaw. White testified DeShaw had an account at the bank and Rohner
was incorrect in asserting DeShaw did not. In other testimony, Rohner stated he
paid DeShaw mostly in cash because Rohner “had a problem with checkbooks.”
24
In contrast, DeShaw testified Rohner paid him wages only for the last year he
worked for him and paid by check.
Maintenance of the Farm. DeShaw testified Rohner acted as if he was
still the owner of the property after DeShaw’s September 2011 purchase of the
farm. For example, Rohner’s family would use the property to ride four wheelers.
Also, Rohner bought a trailer home and moved it to the property for camping.
Rohner mowed the farm or paid someone else to mow.
DeShaw Loans in Default in 2013. When DeShaw got bank notices of
nonpayment of the farm debt, he would confront Rohner, who replied that he
periodically would just not pay and then “he would catch the payment up.” At some
point, DeShaw listed the farm for sale, but Rohner got angry and talked DeShaw
into withdrawing the listing.
Rohner testified he did not know when the bank stopped taking payments
out of his account to pay DeShaw’s loans. White sent DeShaw a “notice to cure”
on June 20, 2013. The non-payment notice upset DeShaw, and even though
White claimed to be unaware of any “side agreement” between Rohner and
DeShaw, White was willing to talk to Rohner. White testified:
[DeShaw’s] take on this was [Rohner] got me into this mess.
[Rohner] should make these payments. And I told [Deshaw], “I’ll talk
to [Rohner]. I’ll do what I can, you know. You’re my customer. I’ll
do what I can. If you want me to talk to [Rohner], I’ll talk to [Rohner].”
So, I talked to [Rohner].
....
Q. . . . [S]o you were going to see if Mr. Rohner was going to
do it? A. Yes.
Q. What did he say? A. I talked to [Rohner] about it, and said,
“Hey,” and [Rohner] said, “Well, I should—” you know, [Rohner] kind
of felt responsible for some of this, yeah. “I should probably do
something here.”
25
According to DeShaw, he talked to Rohner about the notice and Rohner
told him: “I am not paying it anymore”; DeShaw could sue Rohner and take his
house.
According to Rohner:
Q. Isn’t it true that the relationship between you and Mr.
DeShaw broke up when you quit paying the bank on the loan? A. No.
Q. You dispute that? A. I waited until he had a job before.
Q. Once he had a job, you quit making payments to the bank?
A. Yeah, it was around that time.
DeShaw listed the farm for sale at $150,000. He was good friends with
Rohner’s parents and asked for their help. They agreed to speak with Rohner.
DeShaw quit working for Rohner. White testified Rohner’s earlier willingness to
help with the payments ended when Rohner had a falling out with DeShaw:
I get a phone call and [Rohner] was really, really mad . . . . There
was a conversation between [DeShaw] and . . . [Rohner’s] parents.
There must have been words between the parents and [Rohner] that
upset [Rohner]. I think [Rohner] and [DeShaw] had a conversation
after that that didn’t go so well. My next conversation with [Rohner]
was basically, “I’ll be damned if I pay anything on that.” So they had
a falling out and it wasn’t pretty.
At trial, Rohner blamed DeShaw for the demise of their September 2011
oral agreement in which Rohner would rebuy one-half—DeShaw had a “negative
mind” in 2013:
That’s when DeShaw said he didn’t want to make payments
anymore; he was done, and just walked away.
....
Q. So you stopped making your payments? A. Yeah, once it
fell apart. I couldn’t afford the whole thing. That was part of going in
on the [oral] agreement, with the half.
....
Q. Did you have a concern that if you made your payments,
that at some point, because of the attitude, [DeShaw] wouldn’t deed
the property to you anyway and you would never get your interest?
A. . . . [Y]eah, it was basically just like throwing away money, you
26
know. But, you know, I was willing to step up to the plate and have
faith, I guess.
(Emphasis added.)
On July 26, 2013, White and DeShaw talked about DeShaw’s efforts to sell
the property. DeShaw believed the bank had to consent to a sale because of the
mortgages. DeShaw told White he had an offer for $125,000, and after talking,
they agreed that wasn’t enough; White and DeShaw passed on the offer. Also on
that date, White composed a letter to DeShaw stating he had ten days to resolve
his nonpayment or the bank would turn the matter over to its attorney.
But instead of turning to attorneys, on August 30, 2013, the bank sent
DeShaw another notice of default. DeShaw hired local attorney Mike Schuster,
who asked the bank for documents. According to DeShaw, White refused to
provide any documents and Schuster then referred him to attorney Peter Riley.
Riley then asked White for documents, providing DeShaw’s signed authorization.
DeShaw testified White asked him to come to the bank for a meeting. When he
walked in, White said, “This shit really pisses me off,” threw down DeShaw’s signed
authorization, and added, “I am not sending them a damn thing.” White told
DeShaw they could resolve the matter without lawyers. DeShaw testified:
[T]hat’s when [White] wrote out for me to call the lawyer off, he said,
“If you sign this, I realize this is not your debt, this is Jeff Rohner’s,
and I know you are not getting along. Do not speak to him yourself.
I will handle this. I can convince him to take over the rest of this
loan.” And that’s when I signed calling [my attorney] off.
DeShaw did not hear anything from the bank for a few months; then the
bank resumed sending him foreclosure notices. DeShaw returned to attorney
Riley to discuss the matter
27
2014 Sale of Farm. DeShaw eventually sold the farm for $150,000. After
paying a 7% realtor’s fee, DeShaw applied the remaining proceeds to his notes,
reducing his debt to $30,000. At trial, White claimed he had told DeShaw that if
he accepted the offer, “there is a $30,000 shortfall.” White believed DeShaw’s net
proceeds were lower than they could have been because DeShaw allowed his
realtor to charge a high commission. White also testified DeShaw “got a check for
$139, and we paid the farm off, we applied the balance to the house” on Colesburg
Road.
Rohner testified DeShaw’s sale of the farm before Rohner filed for
bankruptcy ended their September 2011 oral agreement for Rohner to rebuy half
of the farm. At that point, Rohner decided DeShaw no longer owed him any
money, even though Rohner had made the payments for almost two years—“why
fight about it anymore, you know?”
Litigation. In April 2014, the bank sent a default notice to DeShaw,
charging him accelerated default interest of 21%. DeShaw received similar notices
until July 2014, when he filed suit against Rohner, White, and the bank for
fraudulent misrepresentation and against White and the bank for fraudulent
nondisclosure that the September 2011 loans placed a mortgage on his house.
White and the bank answered and filed a compulsory counterclaim for foreclosure
of the mortgage on DeShaw’s Coleman Road property.
Rohner’s 2015 Bankruptcy. In May 2015, Rohner filed for chapter 7
bankruptcy, listed DeShaw as an unsecured creditor with a $40,000 claim, and
notified the district court in this matter of his bankruptcy petition.
28
Rohner had completed two other bankruptcies and had entered into
reaffirmation agreements in his prior bankruptcies, including “a reaffirmation
agreement to keep a tractor” he had financed through the bank. In his third
bankruptcy, Rohner also signed a reaffirmation agreement with White on July 14,
2015, for $106,922; the bank retained a first mortgage on Rohner’s home.15 White
explained: “For the reaffirmation all that was left was the house, because the rest
of it was taken care of with the sale of the farm at fair value,” i.e., the bank had
used DeShaw’s September 2011 purchase of the farm to pay off Rohner’s
commercial debts. In February 2016, Rohner filed a motion to dismiss, attaching
the bankruptcy court’s discharge and noting his motion did not affect any of the
other defendants. The court dismissed Rohner.
2016 Proceedings. The district court held a jury trial over several days in
November 2016. White asked the jury to find DeShaw in default on the note tied
to his Colesburg Road home and to allow the bank to proceed with foreclosure.
DeShaw called witnesses who corroborated his interest in purchasing the Elkader
HVAC business and who observed Rohner’s use of the farm did not change and
DeShaw never acted as though he owned the property.
The jury was instructed on “Affirmative Defense—Excused Performance,”
stating DeShaw’s “failure to make payments on the Note may be excused if the
Note was procured by fraudulent misrepresentation or nondisclosure.” If DeShaw
proved one or both of those claims, then “the Farmers Savings Bank cannot
15
White testified Rohner would have lost $60,000 in home equity if he had not reaffirmed.
Similarly, Rohner testified, if he hadn’t signed that agreement, he would have “lost the
house and moved.”
29
recover on its note.” On November 18, 2016, the jury returned a verdict in
DeShaw’s favor. Three days later, the court entered judgments in favor of DeShaw
and against White, noting “[n]o money judgment is entered against any party on
any of the claims.” Also on November 21, White filed a motion for judgment
notwithstanding the verdict. DeShaw resisted. The district court set the matter for
a December hearing. But before the hearing, White filed a notice of appeal. The
district court declined to rule on the motions because it “lost jurisdiction.” We turn
to the
appeal.
II. Scope and Standard of Review
A district court directs a verdict “only if there was no substantial evidence to
support the elements of the plaintiff’s claim.” Deboom v. Raining Rose, Inc., 772
N.W.2d 1, 5 (Iowa 2009) (citation omitted). Where reasonable minds would accept
the evidence as adequate to reach the same findings as the factfinder, the
evidence is substantial. Pavone v. Kirke, 801 N.W.2d 477, 487 (Iowa 2011).
Further, “[w]here reasonable minds could differ on an issue, directed verdict is
improper and the case must go to the jury.” Id. (citation omitted).
We review the district court’s ruling on White’s motion for directed verdict
for correction of errors at law. See id. On appeal, we resolve whether the district
court correctly ruled “there was substantial evidence to submit the issue to the
jury.” Id. In our analysis we consider “all reasonable inferences” the jury could
fairly make and “must view the evidence in the light most favorable to the
nonmoving party,” here, DeShaw. Id.30
III. Fraudulent Misrepresentation
For fraudulent misrepresentation, DeShaw had to prove by a
preponderance of clear, satisfactory, and convincing evidence the following
elements:
1. Jeff Rohner, prior to September 11, 2011, made
representations to Marty DeShaw that Farmers Savings Bank would
foreclose on Rohner’s farm, transfer the farm to DeShaw, Rohner
would make payments on the loan, take bankruptcy to discharge the
judgments, and have the property transferred back to Rohner.
2. White and Farmers Savings Bank aided and abetted Jeff
Rohner . . . .
3. The representation was false at the time it was made.
4. The representation was material.
5. Jeff Rohner knew the representation was false when he
made it.
6. Jeff Rohner intended to deceive Marty DeShaw.
7. Marty DeShaw acted in reliance on the truth of the
representation and was justified in relying on the representation.
8. The representation was a proximate cause of Marty
DeShaw’s damages.
On appeal, White challenges the first, second and sixth elements.16
16
In addition to these elements, White also broadly challenges on appeal the fifth element.
White must raise error with some specificity in a directed verdict motion. See Pavone,
801 N.W.2d at 487. White’s first motion for directed verdict argued two grounds: (1)
DeShaw failed to prove Rohner intended to deceive DeShaw when Rohner promised to
go into bankruptcy and make payments and (2) DeShaw failed to prove White’s “fraud in
the inducement to get Mr. DeShaw to skip reading those documents.” The court denied
the motion. At the close of the evidence, White renewed his motion on the first two
grounds and raised a new ground: “[N]o substantial evidence exists . . . White knew of any
fraudulent intent by [Rohner] if it indeed existed.” Because White did not challenge the
fifth element at trial and because our appellate review is limited to those grounds raised in
White’s motion, we will not address the issue on appeal. See id.
31
A. Did the record include substantial evidence Rohner intended to
deceive DeShaw?
White argues Rohner had no motivation to induce his friend, DeShaw, to
buy the farm because Rohner’s real-estate debts were satisfied in the nonjudicial
foreclosure. White claims the only “potential evidence” suggesting Rohner made
representations with an intent to deceive was testimony Rohner “did not
immediately file bankruptcy” and “did not continue to make all the payments on the
property.” According to White, the evidence Rohner did make payments for about
two years and eventually did file bankruptcy makes it “equally probable” Rohner
intended to follow through with the promises” to DeShaw “when he made them,”
but “later changed his mind or was unable to perform.” White concludes the fact
finder cannot infer fraudulent intent from Rohner’s actions under the “clear,
satisfactory, and convincing” evidence standard.
The instructions defined “a representation” as “any word or conduct
asserting the existence of a fact.” Under this definition, a representation of fact
includes “an opinion expressed for the deliberate purpose of deceiving another”
and “a promise to perform a future act.” The instructions defined “intent to deceive”
as follows:
Jeff Rohner intended to deceive Marty DeShaw if any of the following
situations existed when he made a representation:
1. Jeff Rohner wanted to deceive Marty DeShaw or believed
that Marty DeShaw would in all likelihood be deceived.
2. Jeff Rohner had information from which a reasonable
person would conclude that Marty DeShaw would be deceived.
3. Jeff Rohner made the representation without concern for
the truth.
32
The elements of fraud “are seldom susceptible to direct proof and may be
proven by circumstantial evidence.” Kunkle Water & Elec., Inc. v. City of Prescott,
347 N.W.2d 648, 653 (Iowa 1984). From the circumstantial evidence at trial
detailed above, a reasonable jury could conclude the following: Rohner intended
DeShaw’s debt-free Colesburg Road house be the security for DeShaw’s purchase
of Rohner’s farm, as discussed solely by Rohner and White on January 8, 2011.
Rohner then convinced DeShaw he should deliver the Colesburg Road abstract to
White by falsely telling DeShaw (1) Rohner had spoken with White on DeShaw’s
behalf and (2) White agreed to finance DeShaw’s purchase of the Elkader HVAC
business. After DeShaw delivered the Colesburg Road abstract, Rohner
intentionally sidetracked any further discussions of DeShaw’s purchase of the
Elkader business, knowing DeShaw could not move forward without using
Rohner’s existing HVAC licenses.
A reasonable jury could have found Rohner told DeShaw he needed help
for only a few months on his March 2011 interest payments for the farm and then
Rohner would repay DeShaw’s loan. But Rohner did not pay off this loan on its
June 30, 2011 due date and did not tell DeShaw of his inaction because (1) Rohner
never intended or recklessly asserted he would make the payment and (2)
Rohner’s default would likely affect DeShaw’s willingness to go forward with the
larger September 2011 loans Rohner wanted DeShaw to complete.
Although DeShaw eventually decided to help Rohner in September 2011,
the jury could have reasonably determined Rohner did not take bankruptcy
immediately, even though he was familiar with the process, because Rohner never
intended to do so. Rohner understood the cash flow from his new business would
33
not let him keep the farm, or as Rohner testified, even one-half of the farm.
Rohner’s motive for involving DeShaw was his belief DeShaw, who Rohner was
helping to learn a new trade, would continue to allow Rohner and his family
extended use of the farm, which happened, and DeShaw would therefore help
Rohner postpone the inevitable—lack of access to the recreational timber that long
had been in his family.
Rohner also intended to deceive DeShaw because he knew—based on
Rohner’s familiarity with bankruptcy and reaffirmation agreements—Rohner had
no ability “to have the property transferred back” as any such transfer would be
determined solely by the bank’s determination of Rohner’s credit and not based on
Rohner’s wishes. Rohner also knew he had been “chronically past due” on his
debt obligations to the bank since 2008. “A misrepresentation may occur when
one with superior knowledge, dealing with inexperienced persons who rely on him
or her, purposely suppresses the truth respecting a material fact involved in the
transaction.” Id.Reviewing the record as a whole in the light most favorable to DeShaw and
taking into consideration all reasonable inferences that could be fairly made by the
jury, we find no error in the district court’s denial of the directed verdict. The jury
heard differing versions of the events from White and Rohner and, being aware of
their biases, ultimately did not believe them on key points. We will not disturb the
jury’s determination Rohner and White were less credible witnesses than DeShaw.
See State v. Morgan, 877 N.W.2d 133, 138-39 (Iowa Ct. App. 2016) (noting it is
the “very function of the jury” to determine witness credibility and the jury is free to
believe or disbelieve any testimony as it chooses).
34
B. Did the record include substantial evidence White knew of
Rohner’s fraudulent intent?
For White to be liable for Rohner’s actions by aiding and abetting, DeShaw
had to prove by a preponderance of clear, satisfactory, and convincing evidence
all of the following: (1) Rohner made fraudulent representations; (2) White knew of
Rohner’s fraudulent representations; and (3) White gave substantial assistance or
encouragement to Rohner in the making of fraudulent misrepresentations. The
jury instructions defined “knowledge of falsity” as, “White actually knew or believed
the representation was false.”
On appeal, White challenges the second element,17 pointing out DeShaw
did not offer evidence of conversations or other communications between White
and Rohner discussing a fraudulent scheme. According to White, the court erred
in not directing verdict on that ground. As outlined above, we can look to
circumstantial evidence to establish the elements of fraud.
A reasonable jury could find White and Rohner worked closely together
since 2007—White loaned money to Rohner so he could keep the farm and start
a new business. The jurors, who observed the demeanor of all three men, could
credit DeShaw’s testimony he did not attend the January 8, 2011 meeting. Instead,
Rohner and White discussed DeShaw being an investor, White looked up the
appraised value of DeShaw’s Colesburg Road house, and White assisted Rohner
by having Lange draw up a contract for Rohner’s proposal. The jurors could decide
17
White also contends on appeal DeShaw did not offer substantial evidence White
“substantially assisted” in a fraud perpetrated by Rohner. Because White did not
challenge the third element at trial, we will not address the issue on appeal.
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White met DeShaw for the first time in September 2011 and White intentionally
backdated DeShaw’s credit application to create a “paper trial” showing why
DeShaw had delivered his Colesburg Road abstract to the bank in February, even
though White admitted DeShaw expressed concern about using the house as
security and becoming “homeless.”
While White tried to convince the jury he erred in his deposition testimony
that indicated White knew the September 2011 transaction was really Rohner’s
loan going past due, a reasonable jury could credit his deposition testimony and
ignore White’s excuses at trial. Further, jurors could justifiably wonder why White
would talk to Rohner about making payments on a loan White claimed was solely
DeShaw’s obligation. The jury could also note White failed to present any
documents supporting his trial claim that the loan payments came from DeShaw’s
account. Also, White told DeShaw that White knew this was Rohner’s loan when
DeShaw sought legal advice on paying the $30,000 deficiency.
The jury’s verdict is supported by DeShaw’s description of Rohner and
White hatching a “plan” together: Rohner “had discussed it with Mark White, and
they came up with the idea.” A jury could also reasonably infer White knew of
Rohner’s fraudulent representations because White intentionally withheld notices
from DeShaw in July, August, and September 2011 that would inform DeShaw, in
fact, Rohner had not paid off the smaller March 2011 loan. White’s inaction thus
foreclosed potential questions from DeShaw before DeShaw moved forward with
a much larger transaction in September 2011. The circumstantial evidence of
White’s knowledge of Rohner’s misrepresentations also arises from White’s
evasive cross-examination testimony on clearing title to Colesburg Road, and his
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incredible testimony he did not know Lange had asked him to get a sworn affidavit
from DeShaw before closing the larger loan.
Finally, the bank would profit from Rohner’s misrepresentations as
DeShaw’s loans cleared about $120,000 of Rohner’s farm debt, and the $27,000
excess White “gave to [Rohner]”—his troubled debtor. In return, the bank gained
a new lien on the farm from a debtor with good credit, as well as a first mortgage
on the Colesburg Road house that DeShaw had told White he would not use for
collateral for any farm transaction. We find substantial evidence in the record to
support the jury’s verdict.
IV. Fraudulent Nondisclosure
DeShaw had to prove all of the following elements “by a preponderance of
clear, satisfactory, and convincing evidence” for his fraudulent-nondisclosure claim
against White:
1. Special circumstances existed which gave rise to a duty of
disclosure between Marty DeShaw and Mark White on behalf of [the
bank].
2. While such relationship existed, Mark White . . . knew Marty
DeShaw would be signing a mortgage on his homestead.
3. While such relationship existed, Mark White . . . concealed
or failed to disclose that Marty DeShaw would be signing a mortgage
on his homestead.
4. The undisclosed information was material to the
transaction.
5. Mark White . . . knowingly failed to make the disclosure.
6. Mark White . . . intended to deceive Marty DeShaw by
withholding such information.
7. Marty DeShaw acted in reliance upon [Mark White’s] failure
to disclose and was justified in such reliance.
8. The failure to disclose was a cause of Marty DeShaw’s
damage.
On appeal, White challenges only the third element. He argues, “while
fraudulent misrepresentation may excuse” DeShaw “from being charged with
37
knowledge of the contents of the promissory note and mortgage documents, the
fact that the disclosure was expressly made in writing” to DeShaw “is not changed
as a result. In other words,” DeShaw’s “failure to read the documents does not
mean that the bank did not attempt to make such disclosures in writing.”
First, White waived this argument by failing to cite any supporting authority.
See Iowa R. App. P. 6.903(2)(g)(3). Second, even if not waived, this argument is
without merit. White testified he discussed the mortgage on Colesburg Road with
DeShaw in detail at the loan closing. DeShaw testified White did not. The jury
resolved the issue, and as discussed above, the jury had good reasons to discount
White’s testimony and credit DeShaw’s testimony.
V. Conclusion.
The district court properly submitted DeShaw’s claims of fraudulent
misrepresentation and fraudulent nondisclosure to the jury. The record included
substantial evidence to support the jury’s findings on the challenged elements.
AFFIRMED.