Opinion
No. 5-897 / 05-0702
Filed February 1, 2006
Appeal from the Iowa District Court for Linn County, Kristin L. Hibbs, Judge.
The plaintiffs appeal from the district court order granting the defendant's motion for directed verdict. AFFIRMED.
Stanley R. Parker and Randy R. Debenham of Parker Hay, L.L.P., Topeka Kansas, and H. Raymond Terpstra II of Terpstra, Epping Willett, Cedar Rapids, for appellee.
James M. Powers of Powers Beard, L.L.P., Cedar Rapids, for appellant.
Heard by Huitink, P.J., and Vaitheswaran and Eisenhauer, JJ.
Steve and Dorla Voigt appeal from the district court order granting defendant Hiawatha Bank Trust's motion for directed verdict. They contend the bank breached its contract, causing them financial loss. We affirm.
I. Background Facts and Proceedings.
On September 7, 2001, Steve and Dorla Voigt entered into a contract with Executive Investment, L.L.C. and Gary Black for the construction of a home. Addendum C to the contract set forth the manner in which funds from a construction loan obtained by the Voigts were to be distributed to the contractor.
On September 12, 2001, the Voigts obtained a construction loan for $185,469.70 from Hiawatha Bank Trust (the Bank). In regard to the advancement of the money, the loan made reference to the terms set forth in Addendum C of the construction contract. The loan further stated, "BUILDERS RISK INSURANCE NEEDS TO BE IN PLACE BEFORE THE FIRST DRAW. ALL CHANGE ORDERS NEED TO BE APPROVED BY THE BANK. ALL LIEN WAIVERS COLLECTED BEFORE SUBSEQUENT DRAWS."
At the closing of the construction loan, the Bank made the required disbursements to the owner of the lot and to the contractor. The Voigts were present and consented to the disbursements. On October 26, 2001, following the installation of the basement, the Bank made a second disbursement to the contractor as provided in Addendum C. The Bank collected several lien waivers from Gary Black before disbursement was made.
In December 2001, the Voigts discovered two subcontractors had filed liens against the house. The Bank had received a lien waiver signed by one of the subcontractors, which had apparently been forged by Black. Two other lien waivers had also been issued on October 26, 2001 for work that had not taken place and for a building permit that had not been obtained.
The Voigts filed a petition against Executive Investments and Black, alleging breach of contract, fraudulent misrepresentation, and negligent misrepresentation. The petition was amended on December 19, 2002 to add the Bank as a party. The Voigts claimed the Bank was negligent in making the loan disbursements without requiring evidence that the work had been completed or the subcontractors paid. Summary judgment was granted to the Bank on the negligence claim. In its ruling on the motion for summary judgment, the court construed the petition to allege a breach of contract claim against the Bank. Despite the court's ruling, the Voigts submitted a motion for leave to amend and a second amended petition alleging the Bank "had a contractual obligation to administer the construction loan in a manner so as to protect the interests of the plaintiffs" and that the Bank breached that obligation. No ruling was entered on the motion. In an unusual procedural move, at trial the Voigts, apparently with no objection by the Bank, were allowed to try a breach of contract claim against the Bank.
A bench trial was held in February 2005. The court granted the Bank's motion for directed verdict, concluding the Voigts failed to establish the elements of a breach of contract claim, and had failed to prove any damages.
II. Scope and Standard of Review.
We review the district court's grant of a directed verdict for correction of errors at law. Regan v. Denbar, Inc., 514 N.W.2d 751, 752 (Iowa Ct.App. 1994). When considering a motion for a directed verdict, the trial court views the evidence in the light most favorable to the nonmoving party. Id. The movant is considered to have admitted the truth of all evidence offered by his adversary and every favorable inference which may fairly and reasonably be deduced from it. Id. A fact question is generated if reasonable minds can differ on how the issue should be resolved. Id.
III. Breach of Contract.
The Voigts contend the Bank breached the contract when it violated its loan policy to conduct on-site inspections. They further contend breach occurred when the bank made the second loan disbursement without receiving lien waivers from the borrowers.
In a breach-of-contract claim, the claimant must prove (1) the existence of a contract, (2) the terms and conditions of the contract, (3) he has performed all the terms and conditions required under the contract, (4) the defendant's breach of the contract in some particular way, and (5) damages as a result of the breach. Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998).
There is no disputing the parties had a contract. The question is whether the terms and conditions of the contract the Voigts claim the Bank breached were actually a part of the contract. Because they were not, we conclude the trial court properly granted the Bank's motion for directed verdict.
The Voigts first argue the contract required the Bank to follow its policy of conducting inspections prior to making disbursements, which it failed to do. Inspections are nowhere explicitly mentioned in any of the loan documents, nor is the Bank's loan policy. Instead, the Voigts base their argument on the testimony of Senior Vice President Timothy Vipond. Vipond testified that the term "discretion" in Addendum C included adhering to bank policies in the administration of the loan. However, Addendum C, while referenced in the loan agreement, is part of the contract between the contractor and the Voigts. It states that loan disbursements will be made at the discretion of the contractor and the Bank. Additionally, only the written terms of a credit agreement are enforceable. Iowa Code § 535.17 (2001).
The Voigts also argue the loan agreement required the borrowers to deliver to the Bank the lien waivers and the Bank breached this duty by allowing the contractor to deliver the waivers. Vipond testified that although the lien waivers could protect a borrower, they are primarily to protect the Bank. Assuming the delivery of the lien waivers was only to occur by the Voigts, their delivery was a duty the Voigts owed the Bank and they cannot base a breach of contract claim on their failure to honor the contract. Furthermore, the contract states the contractor "has the authority to do the advances." In essence, the contractor could act as an agent of the Voigts.
Accepting the above facts as true in evaluating the motion for a directed verdict, the trial court was correct inconcluding the Bank did not breach its contract with the Voigts. Because we concluded no breach of contract occurred we need not address the issues of damages. Accordingly, the district court properly granted the Bank's motion for directed verdict.