Summary
reversing grant of motion to dismiss where farmer pleaded conversion of grain proceeds
Summary of this case from Sheeder v. JamisonOpinion
No. 5-743 / 04-1721
Filed November 23, 2005
Appeal from the Iowa District Court for Polk County, Scott D. Rosenberg, Judge.
Maurice Mitchell Sr. appeals the district court's ruling dismissing his counterclaims for breach of contract and conversion. REVERSED AND REMANDED.
Peter Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.
David Phipps of Whitfield Eddy, P.L.C., Des Moines, for appellee.
Heard by Huitink, P.J., and Mahan and Hecht, JJ.
Maurice Mitchell Sr. appeals the district court's ruling dismissing his counterclaims for breach of contract and conversion. With respect to his breach of contract claim, he claims the district court misconstrued the contract he alleged. With respect to his conversion claim, Mitchell claims the district court made a factual determination contrary to the allegations in his petition. We reverse and remand.
I. Background Facts and Proceedings
This action arises from a settlement agreement between Mitchell and a Whitfield Eddy, P.L.C. client, Agriliance. At the time of the negotiations, Mitchell was also engaged in settlement negotiations in a separate case with FarmPro and Central Bank (hereinafter FarmPro). The three parties negotiated together until Agriliance decided it wanted to negotiate with Mitchell alone. On September 17, 2003, Mitchell and Agriliance reached an agreement. The portion of the Agriliance/Mitchell settlement agreement relevant to this case reads as follows:
2. Wheat Settlement. In full settlement of the Foreclosure Lawsuit, the parties agree that the law firm of Whitfield Eddy, PLC shall distribute from its trust account one-half (1/2) of the Wheat Crop Proceeds to Agriliance and one-half (1/2) of the Wheat Crop Proceeds to Maurice Mitchell, (the "Wheat Crop Proceeds Distributions") and the law firm of Whitfield Eddy, PLC is discharged from any further obligations or claims for the Wheat Crop Proceeds and each party shall be responsible for payment of the taxes on their respective share.
The agreement went on to list various conditions precedent to the distribution of the wheat proceeds.
According to the pleadings of both parties, Whitfield Eddy agreed with Mitchell at the time to hold Mitchell's wheat proceeds pending the completion of Mitchell's negotiations with FarmPro. Mitchell continued negotiations with FarmPro. According to Mitchell's pleadings, the only agreement reached between the two, however, was reinstatement of some mortgages and Mitchell's guaranty.
This fact is based on Mitchell's pleadings. According to Whitfield Eddy's interpleader petition and to the contrary of Mitchell's pleadings, the settlement negotiations between Mitchell and FarmPro ended in an agreement that included "payment of the Mitchell's share of the Wheat Proceeds from the Mitchell Litigation to Agriliance in partial satisfaction of the settlement FarmPro and Bank had reached with Agriliance."
On September 25, 2003, after the settlement agreement's conditions were fulfilled, Mitchell orally demanded the wheat proceeds be paid directly to him. Whitfield Eddy contacted FarmPro, who refused to consent to the release of the proceeds to Mitchell. On September 26, Mitchell's attorney wrote to Whitfield Eddy. He explained that Mitchell wanted the wheat proceeds paid directly to him rather than applied to his guarantor obligation to FarmPro. When Mitchell failed to receive a written objection to the release of the proceeds from either Whitfield Eddy or FarmPro, Mitchell's attorney sent another demand for the proceeds on September 30. On that same day, FarmPro sent the following letter to Whitfield Eddy:
As you know, FarmPro Services, Inc. ("Farmpro") believes it is entitled to $77,000 of the funds held in trust at your firm on behalf of Maurice Mitchell. Farmpro has not yet had an opportunity to determine the source of these funds, but believes the funds may have originated from the sale of Farmpro's collateral. As you know, Mr. Riley has previously agreed that these funds be paid to Farmpro.
On September 30, Whitfield Eddy filed an interpleader petition against Mitchell and FarmPro. Whitfield Eddy sought to have the court determine to whom the wheat proceeds belonged. In response to the petition, Mitchell filed a counterclaim against Whitfield Eddy for breach of contract and conversion. Whitfield Eddy filed a motion to dismiss Mitchell's counterclaim. The district court granted the motion on December 31, 2003.
In its ruling, the district court found, contrary to Mitchell's pleadings, that an agreement between Mitchell and FarmPro awarded the wheat proceeds to FarmPro. According to the district court,
After learning that Agriliance was unsuccessful, Mitchell reached an agreement with FarmPro and Central Bank. Under the terms of the agreement, Mitchell consented to reinstatement of the mortgages that FarmPro had released and the payment of the Mitchell's [sic] share of the wheat proceeds resulting from the Mitchell Litigation to Agriliance in partial satisfaction of the debt FarmPro and Central Bank now owed Agriliance.
(Emphasis added.)
The district court concluded that Mitchell failed to state a claim on both his breach of contract and conversion claims. According to the ruling, the contract breach Mitchell alleged was a breach of an oral, implied contract. However, the court concluded, "Mitchell failed to plead a claim for breach of express contract because Mitchell failed to plead consideration." Later, the court concluded
Mitchell failed to plead breach of an implied in fact contract because he failed to provide any evidence or statement regarding consideration. In addition, Mitchell failed to plead breach of an implied in law contract, because Mitchell failed to show that Whitfield Eddy were unjustly enriched.
Thus, despite its analysis concerning the type of contract Mitchell alleges, the court appears to conclude that Mitchell failed to state a claim under any theory of contract. According to the ruling, Mitchell's conversion claim failed because he failed to show he had a possessory right to the proceeds. Mitchell appeals.
II. Standard of Review
We review a district court's ruling on a motion to dismiss for correction of errors at law. Pa. Life Ins. Co. v. Simoni, 641 N.W.2d 807, 810 (Iowa 2002). In doing so, we construe the facts in the light most favorable to the nonmoving party. Haupt v. Miller, 514 N.W.2d 905, 911 (Iowa 1994). We accept as true the facts alleged in the nonmoving party's pleading. Pa. Life, 641 N.W.2d at 810. As a result, our decision must be based on legal grounds. Haupt, 514 N.W.2d at 907. We also cannot rest a conclusion on grounds not asserted in the district court. Id. We look to the pleadings to ensure they are not so deficient that the other party was deprived of notice of the claims being made. Id. at 909. "A motion to dismiss is sustainable only when it appears to a certainty that the plaintiff would not be entitled to relief under any state of facts that could be proved in support of the claims asserted." Id. at 911. If facts material to a claim are disputed, the case cannot be dismissed on a motion to dismiss. Pa. Life, 641 N.W.2d at 810. It is rare that a case will not survive a motion to dismiss. Haupt, 514 N.W.2d at 909.
III. Merits
First, Mitchell argues that the district court misconstrued his breach of contract claim. According to Mitchell, the contract Whitfield Eddy breached was the Agriliance/Mitchell settlement agreement, not necessarily an oral, implied contract. Whitfield Eddy argues that Mitchell's claim is barred because he failed to file a motion to enlarge the district court's ruling pursuant to Iowa Rule of Civil Procedure 1.904. Alternatively, Whitfield Eddy argues that there was no contract between Whitfield Eddy and Mitchell because the settlement agreement specifically lists Mitchell and Agriliance, but not Whitfield Eddy, as parties to the agreement. If we find there was a contract between Whitfield Eddy and Mitchell, Whitfield Eddy argues they fulfilled their duty under the law by bringing the interpleader action. Finally, Whitfield Eddy argues Mitchell's claim is moot because the wheat proceeds have already been paid to him.
Second, Mitchell argues the district court made factual determinations contrary to his pleading when it determined he had agreed to have the wheat proceeds paid to FarmPro. As a result, it erred when it determined he failed to plead a possessory right to the wheat proceeds. Whitfield Eddy argues that at no time did it claim an interest in the wheat proceeds. It argues its interpleader action was an attempt both to determine to whom the proceeds belonged and to avoid a conversion claim. We address each of the issues in turn.
A. Breach of Contract
In order to preserve an issue for appeal, a rule 1.904 motion is necessary only when the district court fails to resolve an issue, claim, or legal theory properly submitted for adjudication. Explore Info. Sys. v. Court Info. Sys., 636 N.W.2d 50, 57 (Iowa 2001). "One of the primary purposes of [rule 1.904] is to advise counsel and the appellate court of the basis of the trial court's decision in order that counsel may direct his attack upon specific adverse findings or rulings in the event of an appeal." Berger v. Amana Soc., 254 Iowa 1036, 1040, 120 N.W.2d 465, 467 (1963). Whitfield Eddy argues that in order to preserve his argument that the alleged contract was the Agriliance/Mitchell agreement, Mitchell should have filed a rule 1.904 motion. Because the district court concluded that Mitchell failed to plead consideration for any type of contract, we conclude the issue of breach of contract is sufficiently preserved.
According to the district court, "Mitchell failed to plead a claim for breach of express contract because Mitchell failed to plead consideration." Later, the district court writes, "Mitchell failed to plead breach of an implied in fact contract because he failed to provide any evidence or statement regarding consideration. In addition, Mitchell failed to plead breach of an implied in law contract, because Mitchell failed to show that Whitfield Eddy were unjustly enriched." Again, despite the court's analysis as to what type of contract Mitchell alleged, it appears the court determined he failed to plead consideration under any theory of contract.
We also conclude that Mitchell's claim is not moot. A claim is considered moot when the issue no longer involves a justiciable controversy. Lewis Invs., Inc. v. City of Iowa City, 703 N.W.2d 180, 183 (Iowa 2005). Our test is whether any decision regarding Mitchell's allegations would have force or effect in the underlying controversy. Id. Because Mitchell alleges damages as a result of the breach, we cannot conclude such a decision would be purely academic. Id.
In order to show a breach of contract, Mitchell must prove (1) existence of a contract; (2) the terms and conditions of the contract; (3) performance of those terms and conditions; (4) Whitfield Eddy's breach of the contract; and (5) damages from the breach of the contract. See Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998). In his pleading, Mitchell alleged the existence of at least two agreements with Whitfield Eddy. The first was Paragraph 2 of the Agriliance/Mitchell settlement agreement whereby Whitfield Eddy agreed to pay Mitchell the wheat proceeds. The second was the oral agreement between Mitchell and Whitfield Eddy that the law firm would hold the wheat proceeds for Mitchell. The issue before the district court should have been whether Mitchell had sufficiently pled the existence of a contract, not whether he could actually prove one existed at trial.
In determining whether Mitchell sufficiently pled the existence of a contract, we look to his pleadings. First, Mitchell provided the court with the written settlement agreement. Second, though he has little evidence to show in the way of an oral agreement, Whitfield Eddy's interpleader petition as much as admits an agreement between the firm and Mitchell regarding the disbursement of the wheat proceeds. Furthermore, Mitchell alleged (1) the conditions of the agreements; (2) his own performance of the conditions; (3) Whitfield Eddy's failure to perform under the conditions; and (4) damages as a result of Whitfield Eddy's failure to perform. Given all of these factors, we think Mitchell sufficiently stated a claim for breach of contract. In coming to this conclusion, we are not stating an opinion on the merits of Mitchell's claim. Instead, he should be given the chance to prove in court whether any contract existed.
B. Conversion
The district court concluded that Mitchell failed to state a claim of conversion because he failed to show a possessory interest in the wheat proceeds. In coming to that conclusion, the district court found that Mitchell had agreed to pay the wheat proceeds to FarmPro. This finding is clearly at odds with Mitchell's pleadings. As a result, we cannot uphold the district court's ruling on the grounds stated.
"A conversion occurs when a person or entity exercises wrongful control or dominion over the property of another in denial of or inconsistent with the other's possessory right to the property." Larson v. Great West Cas. Co., 482 N.W.2d 170, 173 (Iowa Ct.App. 1992). In order to show conversion, a plaintiff must show (1) a possessory right in the property; (2) defendant's exercise of dominion or control over the property inconsistent with, and in derogation of, plaintiff's possessory rights; and (3) damages. In re Estate of Bearbower, 626 N.W.2d 392, 394 n. 1 (Iowa 1998). Mitchell alleged that he (1) had a right to the wheat proceeds; (2) Whitfield Eddy refused to turn the proceeds over to him; and (3) he suffered damages. We conclude Mitchell's pleading was sufficient to withstand a motion to dismiss.
We reverse and remand the case to the district court for further proceedings consistent with this opinion.
REVERSED AND REMANDED.