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VanVelzen v. Security State Bank

Court of Appeal of Iowa

October 2, 2013

JOEDY VANVELZEN and DEBORAH VANVELZEN, Plaintiffs-Appellees,
v.
SECURITY STATE BANK, Defendant-Appellant.

Appeal from the Iowa District Court for Polk County, Robert A. Hutchison, Judge

A bank contends insufficient evidence supports the jurors’ finding that its breach of a construction loan contract caused the homeowners’ damages.

Chester C. Woodburn III of Hansen, McClintock & Riley, Des Moines, for appellant.

Benjamin P. Long and Clark I. Mitchell of Grefe & Sidney, P.L.C., Des Moines, for appellees.

Heard by Vogel, P.J., and Danilson and Tabor, JJ.

TABOR, J.

Joedy and Deborah VanVelzen entered into a construction contract with homebuilder Silverado Homes LC (Silverado), and a construction loan contract with Security State Bank (SSB). As Silverado requested construction advances, SSB paid the advances without obtaining lien waivers. Silverado defaulted on the construction contract, and subcontractors placed liens on the VanVelzens' unfinished home. The VanVelzens paid to have the liens released and to have the home finished. They also incurred additional interest charges on a long-term mortgage. The VanVelzens sued SSB for breach of the construction loan contract term requiring future advances to be "in person or by phone upon receipt of lien waivers in multiples of $1000." The jury found SSB breached the contract and awarded damages.

On appeal, SSB concedes the VanVelzens offered sufficient evidence to show it breached the construction loan contract, [1] but contends the district court erred in denying its motion for judgment notwithstanding the verdict (JNOV). SSB argues insufficient evidence supports the jury's finding SSB's breach caused the VanVelzens' damages, and as a matter of law, the VanVelzens did not present substantial evidence of foreseeability.

I. Background Facts and Proceedings

The VanVelzens entered into a residential construction contract with Silverado—signed by homebuilder Jim Crotty. The construction contract provides:
Contract Price and Payment Procedures. The contract sum, subject to additions and deductions made by the Owner is:
a. Land Cost: $82, 500.
b. Estimated Cost of Improvements: $380, 000 . . . . The Contract Price shall be paid in periodic draws, not to exceed two per month.
c. Total Estimated Cost: $462, 500.
d. Final draw will withhold $5000 until Owners review all work has been completed to their satisfaction.
Final payment also depends on Silverado Homes providing the Owners with completed waivers of lien forms from suppliers and subcontractors that state they have been paid in ...

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