from the Iowa District Court for Clayton County, John J.
and its president appeal a jury verdict in favor of a
borrower for fraudulent misrepresentation and nondisclosure.
Flint Drake and Samuel M. Degree of Drake Law Firm, P.C.,
Dubuque, for appellants.
C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for
Considered by Vaitheswaran, P.J., and Tabor and Mullins, JJ.
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
Rohner 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.
appeal, White and the bank 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.
Facts and Prior Proceedings
detailed rendition of the facts is critical to addressing the
issues on appeal. We start by introducing White, Rohner, and
nearly three decades, White has served as president of
Farmers Savings Bank, which started in Colesburg but expanded
to several nearby 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
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.
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 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.
of Colesburg Road Abstract to White.
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.
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."
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.
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. 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.
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
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 would give him a mortgage on his
Colesburg Road house and would deliver that abstract to the
bank, which DeShaw did in February 2011.
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. 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.
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."
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. 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 buying the Elkader business and combining it
"with Rohner Refrigeration and operat[ing] under his
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.
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.
Issue on Colesburg Road Abstract.
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 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."
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
Loan in March 2011.
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.
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.
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 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.
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.
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?
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?
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 sued and that
judgments had been entered against the farm for
medical bills, attorney fees, and unpaid business bills.
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;
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.
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
. [DeShaw]'s recollection is he signed it in
September . 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 .
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 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.
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.
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 "bad debt" in the March quarterly
report and the bank gained no advantage in using
the differing dates. But White's explanation shows his
willingness to backdate official bank documents.
Lien Search on the Farm.
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." 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.
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 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.
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.
[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
(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
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 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.
Voluntary Foreclosure-May 2011.
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. 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.
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,
Owns the Farm.
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 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."
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."
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."
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 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.
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.
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 ...