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Wild v. Willey

Court of Appeals of Iowa

March 6, 2019

DAVID A. WILD, Plaintiff-Appellant,
BRUCE A. WILLEY, BRUCE A. WILLEY, P.C., and WILLEY O'BRIEN, L.C., Defendants-Appellees.

          Appeal from the Iowa District Court for Linn County, Sean McPartland, Judge.

         David Wild appeals district court rulings granting summary judgment in favor of defendants.

          Marc S. Harding of Harding Law Office, Des Moines, for appellant.

          Matthew G. Novak and Bradley J. Kaspar of Pickens, Barnes & Abernathy, Cedar Rapids, for appellees.

          Heard by Doyle, P.J., and Mullins and McDonald, JJ.

          MULLINS, JUDGE.

         David Wild appeals district court rulings granting summary judgment in favor of defendants on his claims of legal malpractice, breach of a business partner's fiduciary duty, fraudulent misrepresentation, and equitable indemnity. As to his legal-malpractice claims, Wild argues expert testimony is not required because Willey's conduct was so clearly negligent that it can be recognized by laypersons or, alternatively, the court should have granted him additional time to designate an expert. As to the court's grant of summary judgment on his claims of breach of fiduciary duty and fraudulent misrepresentation on statute-of-limitations grounds, Wild argues he commenced his action within the limitations period and Willey should be equitably estopped from relying on the statute of limitations. Finally, Wild challenges the district court's grant of summary judgment on his equitable-indemnity claim after concluding Willey did not owe him an independent duty.

         I. Background Facts and Proceedings[1]

         Wild is an experienced businessman, being self employed as a project developer since 1975. Bruce Willey is an Iowa attorney who has provided Wild legal services in personal and business matters. In 2007, Wild signed a consent and waiver concerning conflicts of interests arising in relation to Willey entering into business transactions with Wild.

         The transactions resulting in this litigation occurred in 2008. Catalyst Resource Group, LLC (Catalyst) is owned by two other entities, Braveheart Equity Holdings, LLC (Braveheart) and Orion's Pride, LLC (Orion). Wild is the sole member of Braveheart; Willey is the sole member of Orion. Willey was both a personal attorney to Wild and an attorney for Catalyst. In these capacities, Willey provided legal services to Wild and Catalyst in relation to negotiating, drafting, and executing third-party loan agreements.

         In May 2008, Willey negotiated a loan agreement between Catalyst and Laurus Technologies, Inc. (Laurus), under which Catalyst would borrow $500, 000 from Laurus. Willey negotiated a similar arrangement between Catalyst and Midwest S.N. Investors, LLC (Midwest), for a loan in the amount of $200, 000. The intent was for Catalyst to transfer the borrowed funds to third parties to secure high-value assets, which Catalyst could use as collateral for even larger loans in the future. Willey insisted that Wild agree to the loans and provide personal guarantees as security. Willey assured Wild the funds provided to third parties would be secured by collateral as highly rated as United States treasury bonds. Wild executed promissory notes and personal guarantees in relation to both loans.

         After Catalyst's receipt of the funds, Catalyst-at Willey's direction-loaned $500, 000 to a third party but did not receive collateral in return for the loan. The $200, 000 loan from Midwest went unaccounted for. By approximately June 2008, not receiving any funds and being aware the third-party loan was unsecured, Wild knew there was a problem. In his deposition, Wild stated the reason he did not sue Willey at this time "was because he was a friend, he was a partner, and he was my attorney, personally and corporately." Wild further acknowledged in his deposition that he was aware he could have filed suit against Willey in 2008, but he waited to do so because Laurus was willing to work with Catalyst.

         The third party never repaid the loan from Catalyst. Consequently, Catalyst had insufficient funds to repay the Laurus loan. The note securing the loan was extended several times over the next few years, during which Willey assured Wild the loan to the third party would be secured by collateral and the third party would perform. Laurus assigned its note (with interest) and the personal guarantee to a third-party creditor. The creditor obtained judgment against Catalyst in 2013. In April 2014, judgment was granted against Wild on his personal guarantee in the amount of $827, 753.34.

         During the foregoing loan transactions, Willey was acting as an attorney for Laurus and was a close friend with, and acting as an attorney for, one of its officers. Willey was also acting as an attorney for Midwest and as an attorney and accountant for one of its members.

         In June 2015, Wild filed a petition at law against defendants forwarding claims of legal malpractice, [2] breach of a business partner's fiduciary duty, fraudulent misrepresentation, and equitable indemnity. Defendants answered on March 23, 2016, denying all claims and asserting defenses. In May, a trial scheduling and discovery plan was entered requiring Wild to designate his expert witnesses by September 19. See Iowa Code § 668.11(1)(a) (2015) (requiring plaintiffs in professional-liability cases to designate experts within 180 days of defendant's answer). Wild did not designate an expert or move for an extension before or after the deadline.

         On November 3, defendants moved for summary judgment on all claims, arguing such claims require expert testimony concerning the standard of care and noting Wild had failed to timely designate any expert witnesses. Wild resisted, arguing expert testimony is unnecessary because a layperson could easily recognize Willey failed to meet a reasonable standard of care. At a hearing on the motion, Wild's counsel related the failure to timely designate an expert was a result of communication issues with an expert and a "computer meltdown" that affected counsel's calendared deadlines. Counsel orally moved for an extension of time to designate an expert witness. Counsel alternatively repeated his argument that the presentation of expert testimony was unnecessary.

         Upon questioning from the court, counsel advised his "computer meltdown" occurred in July or August, agreed the deadline to designate expert witnesses was September 19, and conceded he still had access to the court's electronic filing system and could have utilized it to ascertain the deadline following the computer issues. The court went on to point out that defendants' motion for summary judgment for failure to designate was filed in early November, yet Wild made no request for an extension until the hearing on the motion, in January 2017. Wild's counsel agreed with the court that his failure to move for an extension in response to the summary-judgment motion was not a result of his previous computer issues. In response to the court's questioning about whether a layperson could understand the nature of Wild's claims due to the "complicated set of business transactions that are involved," Wild's counsel stated his opinion that some matters are "pretty clear, straightforward" while other matters would even be "difficult for lawyers to understand."

         The court denied Wild's motion for an extension of time to designate experts and granted summary judgment in favor of defendants on Wild's legal-malpractice claims, concluding "the issues here are not so plain and obvious as to fall into the exceptional case not requiring expert testimony." The court explained "the transactions described were matters involving highly technical business transactions" and "Willey's failure to comply with his duties related to conflicts of interest or breaches of fiduciary duties as an attorney . . . would be outside the understanding of a lay person." The court denied defendants' motion as to Wild's claims of breach of fiduciary duty as a business partner, fraudulent misrepresentation, and equitable indemnity. As a result of the ambiguous nature in which the surviving claims were pled, the court directed Wild "to recast and replead the surviving claims . . . to better reflect the nature of such remaining claims."

         Wild filed his amended petition in March, restating his surviving claims, and naming only Willey as a defendant. In its answer, Willey asserted numerous defenses, including a statute-of-limitations defense. In April, Willey filed a second motion for summary judgment. Willey argued the breach-of-fiduciary-duty and fraudulent-misrepresentation claims were time barred by the statute of limitations contained in Iowa Code section 614.1(4). As to the equitable-indemnity claim, Willey argued the claim had yet to accrue, because Wild had yet to make payment on the judgment against him. In October, following a hearing, the court granted summary judgment in favor of Willey on the first two claims, concluding the claims accrued in 2008 and Wild's initial petition, filed in 2015, was not filed within the five-year limitations period.[3] As to the equitable-indemnity claim, the court concluded the 2014 entry of judgment against Wild was sufficient to accrue the claim.

         In November, Willey filed a third motion for summary judgment as to the remaining claim, arguing, among other things, Wild could not establish Willey owed him an independent duty, a necessary element of the claim. Wild resisted, arguing Willey owed him fiduciary duties of loyalty and care as business partners. Willey responded that a breach of professional duties must be established by expert testimony and Willey was unable to meet his burden in the absence thereof. The court found that the transactions underlying the claims related to a business not directly owned by either Wild or Willey, Catalyst, but which was instead owned by two other business entities, Braveheart and Orion, which were in turn separately owned by Wild and Willey. In determining whether Willey owed Wild an independent duty in relation to Catalyst, the court considered the nature of the relationship and found the parties, both experienced businessmen, structured their ownership of the business through shell entities to shield them from personal liability. Based on the nature of the relationship and notions ...

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