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Cannon v. Bodensteiner Implement Co.

Court of Appeals of Iowa

March 22, 2017

JASON CANNON, Plaintiff-Appellant,

         Appeal from the Iowa District Court for Clayton County, John J. Bauercamper, Judge.

         Jason Cannon appeals the district court's grant of summary judgment to defendants. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Judith M. O'Donohoe of Elwood, O'Donohoe, Braun & White, L.L.P., Charles City, for appellant.

          A. John Arenz, McKenzie R. Hill, and Brenton M. Tunis of O'Connor & Thomas, P.C., Dubuque, for appellee Bodensteiner Implement Company.

          Andrew P. Nelson of Meyer, Lorentzen & Nelson, Decorah, for appellee Windridge Implements, LLC.

          Michael A. McEnroe and Erin Patrick Lyons of Dutton, Braun, Staack & Hellman, P.L.C., Waterloo, for appellee Eck & Glass, Inc., d/b/a EPG Insurance Inc.

          Richard J. Kirschman of Whitfield & Eddy, P.L.C., Des Moines, for appellee CNH America, LLC, d/b/a Case IH.

          Considered by Vaitheswaran, P.J., and Doyle and Mullins, JJ.

          MULLINS, Judge.

         This action arises from Jason Cannon's purchase of a defective tractor, for which Cannon brought numerous causes of action against Bodensteiner Implement Company (Bodensteiner), ECK & Glass, Inc., d/b/a EPG Insurance, Inc. (EPG), and CNH America, LLC, d/b/a Case IH (CNH) (collectively, the defendants).[1] The defendants filed their respective motions for summary judgment, which were granted by the district court. Cannon appeals. Upon our review, we affirm in part, reverse in part, and remand.

         I. Background Facts and Proceedings

         Cannon is an independent contractor who hauls manure in tanks and spreads the manure across fields as fertilizer. Cannon's business requires the use of a tractor to pull and operate this equipment. In October 2012-the beginning of the fall hauling season-Cannon found himself in need of a tractor.

         Although Cannon had previously used John Deere equipment, he was impressed by the Case IH tractors used by his coworkers.[2] Cannon communicated with Roger Monroe, [3] a salesman at Bodensteiner, through whom Cannon had previously acquired tractors. Bodensteiner is a John Deere dealership that also deals in used farm equipment from other manufacturers. Cannon asked Monroe if Bodensteiner had any used Case IH tractors. Monroe was aware Cannon would use the tractor for manure-hauling purposes. After inquiring, Monroe learned Bodensteiner had a Case IH Magnum 305 at another branch location.

         The Case IH Magnum 305 (the tractor) was manufactured by CNH in March 2008. The tractor was sold in April 2008 by a Case IH dealer to a company that engaged in liquid-manure disposal. As part of the sale, CNH issued a two-year limited warranty to the original purchaser (the Case warranty). In addition, a purchased protection plan (the PPP) issued, which states it "is a contract between the Provider and the Customer." "Provider" is defined as "EPG Insurance, Inc., " and "Customer" is defined as "the purchaser . . . or an assignee thereof." The PPP provided extended coverage for specific parts of the tractor from April 2010 until April 2013.[4] To be covered by the PPP, the labor for repairs had to be "approved by" EPG and performed "by a service center authorized by [EPG]." Here, that "service center" was Windridge.[5]

         The tractor was later traded to Bodensteiner in 2010. Monroe spoke with the Bodensteiner salesman who took the tractor in on trade. That salesman informed Monroe that, to the best of his knowledge, it was a good tractor and it had passed a test drive. Monroe informed Cannon of his conversation with the other salesman and that the tractor had been in and through Bodensteiner's shop and was ready to go. Monroe stated he had no knowledge of the tractor having had issues but it had previously been used in a manure-hauling operation. Both Monroe and a mechanic at Bodensteiner indicated the Case IH Magnum 305 model was a good tractor with adequate horsepower for Cannon's purposes. Cannon understood, however, neither Monroe nor the Bodensteiner mechanic had actually seen the tractor he was purchasing; they were speaking generically about tractors of that make and model. Based on Cannon's past experience with Monroe and Bodensteiner, he assumed Bodensteiner would have inquired about the tractor and any past problems and had a mechanic inspect the tractor.

         Monroe told Cannon he would not have the tractor brought from the other dealership unless Cannon wanted it. In deposition testimony, Cannon said: "[S]o I said I want the tractor. If it is a good running tractor, if it is going to work for me I want the tractor. He said it is fit, it is ready, it is ready, it is field ready." Cannon further testified Monroe had informed him the tractor was "ready to go." Cannon chose not to go to where the tractor was to inspect or test drive it but told Monroe he wanted the tractor.[6]

         On October 6, 2012, Cannon signed a purchase agreement, paid $1000 for the transport of the tractor, traded in his John Deere tractor, and took possession of the tractor at issue. Later that day, Cannon called Monroe to tell him he was having mechanical problems. At that time, Monroe told Cannon that when the tractor arrived from the other dealership the tractor had been in Bodensteiner's shop and everything tested out.[7] Monroe claims he told Cannon there would be no warranty given by Bodensteiner on the tractor.

         Within the first few days of acquiring the tractor, Cannon discovered a number of issues with it, including malfunctioning of the turbo and the nineteenth gear. When Cannon looked at the turbo, he discovered multiple bolts were rusted and broken, a condition Cannon contends should have been discovered by a mechanic's examination. Then the hydraulic pump exploded, the transmission overheated, and the brakes failed.

         In November 2010, Cannon rented a tractor as Windridge performed repairs on his tractor over the winter of 2010 to 2011. In April 2011, the transmission overheated; following repairs, Cannon used the tractor until October 2011, when the transmission overheated again. Windridge again performed repairs from October 2011 through the beginning of 2012.[8] The tractor was returned to Cannon in April 2012, at which time the transmission overheated and the brakes failed. The tractor has not been usable since that date.

         Unbeknownst to Cannon, the tractor had a history of issues, including brake failure. Some of the issues with the tractor manifested as early as October 2008, when the tractor was still under the Case warranty. Cannon was informed of this history by Schermann's Implement, which had serviced the tractor when it was owned by the original purchaser.

         Following the above numerous attempts to resolve the issues with the tractor, Cannon became convinced the tractor was unrepairable and unusable. Neither the mechanics at Windridge nor the Case mechanics have been able to tell Cannon what is wrong with the tractor. EPG denies the tractor is unrepairable, as a Case IH employee was working on a plan to have additional diagnostics done but those efforts were halted when Cannon filed suit.

         In April 2013, Cannon initiated this action. Following multiple amendments, Cannon brought the following relevant claims[9] against the defendants: (1) fraudulent misrepresentation (Bodensteiner), (2) breach of implied warranties (Bodensteiner), (3) breach of the implied covenant of good faith and fair dealing (Bodensteiner), (4) equitable rescission (Bodensteiner), (5) breach of contract (EPG), (6) negligent design, manufacture, assembly, testing, and warning (CNH), (7) breach of implied and express warranties (CNH), and (8) fraudulent concealment and nondisclosure (CNH). The defendants filed their respective motions for summary judgment, which Cannon resisted.[10] In March 2015, a hearing was held on the motions. On March 30, the district court granted summary judgment on all of the above claims. Cannon appeals.

         II. Standard and Scope of Review

         Our review of the district court's grant of summary judgment is for correction of errors at law. See Jones v. Univ. of Iowa, 836 N.W.2d 127, 139 (Iowa 2013).

A court should grant summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In other words, summary judgment is appropriate if the record reveals a conflict only concerns the legal consequences of undisputed facts. When reviewing a court's decision to grant summary judgment, we examine the record in the light most favorable to the nonmoving party and we draw all legitimate inferences the evidence bears in order to establish the existence of questions of fact.

Id. at 139-40 (quoting Pitts v. Farm Bureau Life Ins. Co., 818 N.W.2d 91, 96-97 (Iowa 2012)). "[A] 'factual issue is "material" only if "the dispute is over facts that might affect the outcome of the suit."'" Peak v. Adams, 799 N.W.2d 535, 542 (Iowa 2011) (quoting Phillips v. Covenant Clinic, 625 N.W.2d 714, 717 (Iowa 2001)). The burden rests with the movant to show the nonexistence of a material fact. Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 434 (Iowa 2008). However, "[t]he resisting party must set forth specific facts showing that a genuine factual issue exists." Peak, 799 N.W.2d at 542 (quoting Huber v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993)). "[A] fact question is generated if reasonable minds can differ on how the issue should be resolved." Pillsbury, 752 N.W.2d at 434; see also Bank of the W. v. Kline, 782 N.W.2d 453, 456-57 (Iowa 2010).

         III. Analysis

         Cannon asserts separate claims against each of the defendants, all of which were dismissed on summary judgment by the district court. We address each claim in turn.

         A. Claims Against Bodensteiner

         1. Fraudulent Misrepresentation and Nondisclosure[11]

         The elements of fraudulent misrepresentation are "(1) representation, (2) falsity, (3) materiality, (4) scienter, (5) intent to deceive, (6) reliance, and (7) resulting injury and damage." Van Sickle Constr. Co. v. Wachovia Commercial Mortg., Inc., 783 N.W.2d 684, 687 (Iowa 2010) (citation omitted). With regard to fraudulent nondisclosure, Cannon must also demonstrate a duty to disclose. See Reynolds v. Solon State Bank, No. 07-0085, 2007 WL 4553648, at *5 (Iowa Ct. App. Dec. 28, 2007) ("The tort of fraudulent nondisclosure may arise if a party fails to disclose material information and the party had a duty to communicate that information." (citing Wright v. Brooke Grp. Ltd., 652 N.W.2d 159, 174 (Iowa 2002))). "A duty of disclosure may arise 'from a relation of trust, a relation of confidence, inequality of condition and knowledge, or other circumstances as show[n] by a particular fact situation.'" Id. (quoting Irons v. Cmty. State Bank, 461 N.W.2d 849, 854 (Iowa Ct. App. 1990)).

         "Scienter and intent to deceive are closely related elements of [fraudulent misrepresentation], and the same general analysis applies for each." Van Sickle, 783 N.W.2d at 688. "Scienter and intent to deceive may be shown when the speaker has actual knowledge of the falsity of his representations or speaks in reckless disregard of whether those representations are true or false." Id. (citation omitted).

         In his appellate brief, Cannon asserts "the information provided by Roger Monroe and the mechanic . . . about the tractor being fit, ready to go, having been in the shop and inspected are material misrepresentations." However, in his deposition testimony, Cannon admitted he did not believe Monroe knew these representations were false.[12] He further admitted he knew the mechanic had not seen the tractor and the mechanic just discussed "the size of the tractor and the horsepower, " that "it was a good tractor[, and] that [Cannon] would be happy with the horsepower and what [he] was getting." Cannon admitted the mechanic was just talking generically about the make and model of the tractor and that he had no disagreement with what the mechanic had said. Cannon further stated he "honestly c[ould]n't answer" whether he had "any reason to believe . . . Monroe or anyone else at Bodensteiner actually knew that there was something wrong with th[e] tractor as far as the oil overheating and the brakes overheating."

         Cannon now claims there is a dispute of fact on this issue because "[c]learly Monroe wanted to sell a tractor" and "Cannon indicated that any inspection of the tractor, however cursory, would have revealed the broken off and rusted bolts on the turbo." The assertion that Monroe wanted to sell a tractor does not create an issue of fact. As to the inspection claim, Cannon himself testified it would require a mechanic to identify the issues with the tractor.[13]Regardless, neither of these purported facts make the statements of Monroe and the mechanic-who had not yet seen the tractor at issue-knowingly false. Finally, Cannon claims "there is no evidence despite the representations by Monroe that anyone . . . looked at the tractor, got it into the shop, inspected it or tested it in any manner." Monroe provided an affidavit stating neither he nor any of the Bodensteiner staff "had any knowledge of any defect or mechanical problem with the [t]ractor." Cannon's claim that there is no evidence supporting Monroe's statements does not create a genuine issue of fact as to whether those statements were true. As noted above, Cannon himself admitted he believed Monroe was unaware of any problems with the tractor and the mechanic was only talking generically about the make and model of the tractor, not this specific tractor itself. Cannon has provided no facts supporting the scienter and intent elements of his claim or creating a genuine issue of material fact as to those elements. Without a knowing misrepresentation, Cannon's claim fails. See Spreitzer v. Hawkeye State Bank, 779 N.W.2d 726, 735 (Iowa 2009) (noting fraudulent misrepresentation requires "the defendant knew the representation was false"); see also Wright, 652 N.W.2d at 175 (noting a duty to disclose may arise in a business transaction where "matters [are] known to [the defendant] that [the defendant] knows to be necessary to prevent [the defendant's] partial or ambiguous statement of the facts from being misleading"). Accordingly, Bodensteiner is entitled to judgment as a matter of law on the fraudulent misrepresentation and nondisclosure claims.

         2. Breach of Implied and Express Warranties

         a. Implied Warranties

         Cannon alleges Bodensteiner breached the implied warranties of merchantability and fitness for a particular purpose. See Iowa Code §§ 554.2314, 554.2315 (2009). However, the two-page sales contract clearly, conspicuously, and repeatedly disclaimed any warranties, including implied warranties. See id. § 554.2316 (providing the means by which the implied warranties of merchantability and fitness may be excluded); see also id. § 554.1201(2)(j) ("Whether a term is 'conspicuous' or not is a decision for the court."). The first page indicates:

IMPORTANT WARRANTY NOTICE: The John Deere warranty applicable to new John Deere product(s) is printed on the back side of this document. There is no warranty on used products. . . . IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS ARE NOT MADE AND ARE ...

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