Opinion
No. 3-029 / 02-0822.
Filed March 12, 2003.
Appeal from the Iowa District Court for Boone County, DAVID R. DANILSON, Judge.
Patricia Masel appeals the judgment against her in this tort suit based on negligent misrepresentation. AFFIRMED.
George Norman, Davenport, for appellant.
Bruce Anderson of Doran, Anderson Baltimore, P.L.C., Boone, for appellee.
Considered by HUITINK, P.J., and MAHAN and HECHT, JJ.
Patricia Masel appeals the judgment against her in this tort suit based on negligent misrepresentation. She claims the district court erred by: (1) denying her motion for summary judgment; (2) denying her motion to strike; (3) finding there was sufficient evidence of the elements of negligent misrepresentation; (4) finding she could be liable although she was not a party to the transaction; and (5) failing to recuse itself. We affirm.
I. Background Facts Proceedings
Masel, a resident of New York, was in the business of providing information on certificate of deposit (CD) rates to institutional investors. Masel sent a promotional letter to Boone County Community Credit Union, which stated:
By providing a toll free hotline to the national C.D. market, we can offer rates on hundreds of institutions across the country, while keeping your investment fully insured by the Federal Deposit Insurance Corporation (FDIC) or the Savings Association Insurance Fund (SAIF).
Jerry Ober, manager of the Credit Union, had several telephone conversations with Masel regarding C.D. rates. Upon the advice of Masel, in February 1998, the Credit Union obtained a $99,000 C.D. from the First National Bank of Keystone. The C.D. was held in a custodial account by Kislak National Bank.
Ober testified that on May 25, 1999, Masel told him that if he purchased a second C.D. from Keystone it would be insured by the FDIC because the first C.D. was held in a custodial account. The Credit Union then obtained a $99,000 C.D. directly from Keystone. Keystone failed, and the first C.D. was for the most part not insured by the FDIC. The Credit Union suffered a loss of $98,015.46.
Under FDIC rules, the Credit Union's accounts at Keystone were only insured up to $100,000. The FDIC reimbursed the Credit Union for the C.D. it obtained directly from Keystone, plus an amount on the first C.D. to bring the total up to $100,000. The FDIC considered the C.D. held in a custodial account as being owned by the Credit Union.
The Credit Union filed suit against Masel alleging breach of contract, negligence, and negligent misrepresentation. The district court denied Masel's motion for summary judgment and motion to strike. After a hearing, the district court entered judgment for $98,015.46, plus interest, against Masel based on negligent misrepresentation. The court found Ober reasonably relied on Masel's assertion that both of its Keystone CDs would be insured. Masel appealed.
II. Standard of Review
Our standard of review in this tort action is for the correction of errors at law. Iowa R.App.P. 6.4. The findings of fact in a law action are binding upon us if they are supported by substantial evidence. Iowa R.App.P. 6.14(6)(a). Evidence is substantial if a reasonable mind would accept it as adequate to reach the same findings. Frontier Props. Corp. v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992).
III. Summary Judgment
Masel contends the district court erred by denying her motion for summary judgment on the ground that she did not owe a duty to the credit union. The tort of negligent misrepresentation has its genesis in the Restatement (Second) of Torts section 552(1) (1977), which provides:
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.Freeman v. Ernst Young, 516 N.W.2d 835, 837 (Iowa 1994).
In Iowa liability for negligent misrepresentation arises only when the information is provided by persons in the business or profession of supplying information to others. Hendricks v. Great Plains Supply Co., 609 N.W.2d 486, 492 (Iowa 2000). This is because a person in the profession of supplying information for the guidance of others is acting in an advisory capacity and is manifestly aware of how the information will be used, and intends to supply it for that purpose. Sain v. Cedar Rapids Cmty Sch. Dist., 626 N.W.2d 115, 124-25 (Iowa 2001). "Such a person is also in a position to weigh the use for the information against the magnitude and probability of the loss that might attend the use of the information if it is incorrect." Id. at 125.
Because Masel was in the business of providing information regarding C.D. rates, we determine she owed a duty of care to the Credit Union. We find the district court properly denied Masel's motion for summary judgment.
IV. Motion to Strike
Masel contends the district court erred by denying her second motion to strike, which alleged the court did not have subject matter jurisdiction of the case because the "tort, if any, was no doubt committed in Pennsylvania or New York and not in Iowa." The district court determined the motion was untimely under Iowa Rule of Civil Procedure 1.441(1) because it was not filed prior to a responsive pleading.
Subject matter jurisdiction is an issue that can be raised at any time. DeVoss v. State, 648 N.W.2d 56, 62 (Iowa 2002). Subject matter jurisdiction refers to the court's power to hear and determine cases of the general class to which the matter or proceedings belong, not merely the particular case before the court. Smith v. Smith, 646 N.W.2d 412, 414 (Iowa 2002); Cargill, Inc. v. Conley, 620 N.W.2d 496, 501 (Iowa 2000). Subject matter jurisdiction is conferred by constitutional or statutory power. Hutcheson v. Iowa Dist. Ct., 480 N.W.2d 260, 263 (Iowa 1992). The district court clearly has subject matter jurisdiction to address tort cases, such as negligent misrepresentation.
By pointing out that the tort action was potentially committed in Pennsylvania or New York, Masel appears to be attempting to raise an issue of personal jurisdiction. See Roquette Am., Inc. v. Gerber, 651 N.W.2d 896, 899 (Iowa Ct.App. 2002). To the extent Masel is raising an issue other than subject matter jurisdiction, we find the district court properly denied the motion as untimely.
V. Negligent Misrepresentation
Masel contends several elements of the tort of negligent misrepresentation were not supported by substantial evidence. As noted above, the district court's findings of fact in this tort action are binding upon us if they are supported by substantial evidence. Iowa R.App.P. 6.14(6)( a).
A. Masel first claims there is insufficient evidence she told Ober that if the Credit Union purchased a second C.D. from Keystone it would be insured by the FDIC because the first C.D. was held in a custodial account. Masel testified she made between 175 to 200 telephone calls each day and did not remember a specific conversation with Ober. Ober, on the other hand, had a specific recollection of a conversation with Masel about the possibility of purchasing a second C.D. from Keystone. The district court found Ober to be more credible. We determine Ober's testimony provides substantial evidence to support the court's factual findings on this issue.
B. Masel claims there was insufficient evidence in the record to show the Credit Union justifiably relied on her alleged statement. She states Ober was a professional investor and that by using ordinary care he could have determined the statement was false.
Reliance is justifiable if a person acting with reasonable and ordinary prudence and caution would have a right to rely on the representations. Kaiser Agric. Chems. v. Ottumwa Prod. Credit Ass'n, 428 N.W.2d 681, 683 (Iowa Ct.App. 1988). Reliance is not justified if the person receiving the information knows or in the exercise of ordinary care should know that the information is false. Pollmann v. Belle Plain Livestock Auction, Inc., 567 N.W.2d 405, 410 (Iowa 1997).
On this issue the district court noted that Ober's banking/credit union experience did not specifically involve matters pertaining to federal insurability of deposits, and that as the sole executive officer of the Credit Union, he frequently contracted out for services and relied upon the professional advice of others. There was no evidence Ober knew Masel's information was false. We also note that in the promotional material disseminated by Masel, Ober was assured Masel would be "keeping your investment fully insured by the Federal Deposit Insurance Corporation (FDIC) or the Savings Association Insurance Fund (SAIF)." We find there is substantial evidence in the record to support the district court's conclusion that the Credit Union justifiably relied on Masel's misrepresentation.
C. Masel contends there was insufficient evidence in the record to show she was the proximate cause of the Credit Union's damages. She asserts it was the Credit Union's own negligence which was the proximate cause of its losses. She states, "A cursory examination of the insurance question could have prevented Plaintiff's loss." She also claims fraud by Keystone, which caused its failure, was an intervening proximate cause.
Proximate cause is an element of negligent misrepresentation. Sain, 626 N.W.2d at 127. Conduct is a proximate cause of damage when it is a substantial factor in producing damage and the damage would not have happened except for the conduct. Bazel v. Mabee, 576 N.W.2d 385, 389 (Iowa Ct.App. 1998). Proximate cause includes both cause in fact and legal causation. Diemer v. Hansen, 545 N.W.2d 573, 575 (Iowa Ct.App. 1996).
The district court found:
The information negligently supplied by Defendant Patricia A. Masel was a proximate cause of the Plaintiff's damage. In reaching this conclusion the Court finds that given the investment history of Boone County Community Credit Union and the practices established in the course of conduct and dealing between the parties that had Ms. Masel provided accurate information, or had even asserted that she did not know the accurate information, the second certificate of deposit would not have been acquired, and the loss accordingly would not have been suffered.
In order to show proximate cause, a plaintiff must establish that, but for the defendant's negligence, the plaintiff's injury would not have occurred. Hasselman v. Hasselman, 596 N.W.2d 541, 545 (Iowa 1999). We determine there is substantial evidence in the record to show that but for Masel's negligent misrepresentation to the Credit Union, it would not have suffered a loss.
Generally, questions of proximate cause are for the fact-finder, and only in exceptional cases may they be decided as a matter of law. Blackhawk Bldg. Sys., Ltd. v. Law Firm of Aspelmeier, Fisch, Power, Warner Engberg, 428 N.W.2d 288, 291 (Iowa 1988). Masel has not presented sufficient evidence to show, as a matter of law, that the Credit Union or Keystone was the sole proximate cause of the Credit Union's damages.
VI. Party to Transaction
Masel asserts the district court erred in finding Masel should be liable when she was not a party to the investment transaction between the Credit Union and Keystone. She states that under Restatement (Second) of Torts section 552C(d), strict liability for a misrepresentation only occurs when both the buyer and the seller are parties to the transaction.
Restatement (Second) of Torts section 552C deals with innocent misrepresentation, which was not the theory raised in this case. See Eldred v. McGladrey, Hendrickson Pullen, 468 N.W.2d 218, 219 (Iowa 1991). This case was brought under a theory of negligent misrepresentation, arising from Restatement (Second) of Torts section 552. See Larsen v. United Fed. Sav. Loan Ass'n, 300 N.W.2d 281, 287 (Iowa 1981). The tort of negligent misrepresentation does not depend on the existence of a contractual relationship between the parties. Barske v. Rockwell Int'l Corp., 514 N.W.2d 917, 924 (Iowa 1994). We find the district court did not err in finding Masel could be liable under the facts of this case.
VII. Recusal
Masel claims the district court abused its discretion by failing to recuse itself. This issue was raised for the first time on appeal. We will not address an issue on appeal that was not raised in the district court. Pollmann, 567 N.W.2d at 410.
We affirm the judgment against Masel based on negligent misrepresentation.