Benskin, Inc. v. West Bank ( 2020 )

IN THE COURT OF APPEALS OF IOWA
No. 18-1966
Filed March 4, 2020
BENSKIN, INC.,
Plaintiff-Appellant,
vs.
WEST BANK,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Samantha Gronewald,
Judge.
Plaintiff appeals the district court decision dismissing its claims of breach of
contract, fraud, and slander of title. REVERSED AND REMANDED.
S.P. DeVolder of The DeVolder Law Firm, P.L.L.C., Norwalk, and William
W. Graham of Duncan Green, P.C., Des Moines for appellant.
Dennis P. Ogden and Thomas L. Flynn of Brick Gentry, P.C., West Des
Moines, for appellee.
Heard by Doyle, P.J., and Tabor and Schumacher, JJ.
2
SCHUMACHER, Judge.
Benskin, Inc. appeals the district court decision dismissing its action against
West Bank. The court found Benskin’s claims of breach of contract and fraud were
barred by the statute of limitations and its claim of slander of title failed to state a
claim upon which relief could be granted. Benskin’s petition adequately alleged
the doctrine of equitable estoppel as a response to West Bank’s statute-of-
limitations defense to make dismissal of the claims of breach of contract and fraud
improper. The petition adequately apprised West Bank of the claim of slander of
title, making dismissal of this count for failure to state a claim upon which relief
may be granted improper as well. We reverse the decision of the district court and
remand for further proceedings.
I. Background Facts & Proceedings
According to Benskin’s petition,1 on October 6, 2006, in a written loan
agreement, West Bank loaned Benskin $800,094, which was secured by loan
guarantees by Martin Benskin and Susan Benskin and a real estate mortgage on
property in Dickinson County. This agreement was renewed on August 1, 2007,
and carried a maturity date of August 1, 2008.
On October 24, 2007, Benskin entered into a written line of credit with West
Bank in which the bank agreed to loan Benskin up to $2,000,000. The line of credit
was secured by loan guarantees by Martin and Susan and real estate mortgages
1 On a motion to dismiss, “[w]e view the allegations in the petition in the light most
favorable to the plaintiff.” Ostrem v. Prideco Secure Loan Fund, LP, 841 N.W.2d
882, 904 (Iowa 2014).
3
on property in Dickinson and Polk Counties. Benskin never used the line of credit
prior to the date the loan matured on May 30, 2008.
Benskin believed West Bank would release the mortgages from the 2007
agreement after May 30, 2008. Despite representations by West Bank that it would
release the 2007 mortgages, it did not do so. Benskin states it first learned on
June 27, 2011, that West Bank would not release the 2007 mortgages, and
Benskin discovered on July 22, 2016, during the course of other litigation, that
West Bank had previously altered its records to show an unauthorized advance
from the line of credit to pay off the 2006 loan before the due date. As a result of
West Bank’s action, Benskin’s Polk County property remained encumbered by a
mortgage.
On May 18, 2018, Benskin filed an action against West Bank alleging (I)
breach of the 2007 contract, (II) breach of the 2006 promissory note, and (III)
breach of West Bank’s implied duties of good faith and fair dealing. West Bank
filed a motion to dismiss, claiming Benskin’s action was barred by the limitation
periods in Iowa Code sections 524.221(2) and 614.1(4) (2018). Benskin then
amended its petition to add counts (IV) fraud, and (V) slander of title. West Bank
claimed the amended petition was also barred by the statute of limitations.
Benskin resisted the motion to dismiss.
As the district court correctly noted, when considering a motion to dismiss,
the court’s review is limited to the facts and allegations contained within the four-
corners of the pleadings and the court may not consider factual allegations
contained in the motion or the documents attached to the motion except for those
facts of which judicial notice may be taken. See Crall v. Davis, 714 N.W.2d 616,
4
619 (Iowa 2006). “[F]acts not alleged cannot be relied on to aid a motion to dismiss
nor may evidence be taken to support it.” Rieff v. Evans, 630 N.W.2d 278, 284
(Iowa 2001) (quoting Ritz v. Wapello Cty. Bd. of Supers., 595 N.W.2d 786, 789
(Iowa 1999)).
After a hearing,2 the district court granted the motion to dismiss. The court
found equitable estoppel could apply as a defense to the statute of limitations on
the breach-of-contract claims, Counts I–III, but dismissed those three counts. The
court, while finding that equitable estoppel applied to breach-of-contact cases,
determined that Benskin “does still bear a burden to provide ‘clear and convincing’
evidence of fraudulent misrepresentation or concealment by West Bank.” The
court dismissed the first three counts, finding that Benskin had “failed to meet its
burden of proof to establish equitable estoppel.”
As to Count IV, fraud, the court stated, “simply asserting fraudulent
concealment without any clear, specific factual allegations is not enough to warrant
the application of the discovery rule.” Accordingly, the district court concluded
Count IV was barred by the statute of limitations, finding Benskin failed to meet its
burden of proof. The court also dismissed Count V because Benskin did not allege
the element of “publication,” which was necessary for the claim of slander of title.
Benskin appeals the district court’s ruling.
II. Standard of Review
Our review of a district court’s ruling on a motion to dismiss is for the
correction of errors at law. Shumate v. Drake Univ., 846 N.W.2d 503, 507 (Iowa
2 We do not have a transcript of the hearing.
5
2014). In considering a motion to dismiss, “a court construes the petition in the
light most favorable to the plaintiff and resolves any doubts in the plaintiff’s favor.”
Young v. HealthPort Techs., Inc., 877 N.W.2d 124, 128 (Iowa 2016). “A motion to
dismiss admits the well-pleaded facts in the petition, but not the conclusions.”
Kingsway Cathedral v. Iowa Dep’t of Transp., 711 N.W.2d 6, 8 (Iowa 2006).
“[T]he statute of limitations bar may be raised by a motion to dismiss.” Rieff,
630 N.W.2d at 289. A motion to dismiss may be granted “if it is obvious from the
uncontroverted facts contained in the petition that the applicable statute of
limitations bars the plaintiff’s claim for relief.” Venckus v. City of Iowa City, 930
N.W.2d 792, 809 (Iowa 2019). A defendant has the burden to prove its statute of
limitations defense and the plaintiff has the burden to prove an exception to the
limitations period. Ranney v. Parawax Co., 582 N.W.2d 152, 154 (Iowa 1998).
“[W]e recognize that whether tolling [of the statute of limitations] is available
is often a fact-intensive inquiry for which a ruling on a motion to dismiss or at the
summary judgment stage is often inappropriate.” Mormann v. Iowa Workforce
Dev., 913 N.W.2d 554, 575 (Iowa 2018). “Where the nature of the claim or the
pertinent factual allegations are unclear, further development of the record may be
necessary.” Venckus, 930 N.W.2d at 809; see Turner v. Iowa State Bank & Tr.
Co., 743 N.W.2d 1, 5 (Iowa 2007). In Cutler v. Klass, Whicher & Mishne, 473
N.W.2d 178, 181 (Iowa 1991), the supreme court discussed “the special risks and
problems [that] attend premature attacks on litigation by motions to dismiss,”
stating:
We recognize the temptation is strong for a defendant to strike a
vulnerable petition at the earliest opportunity. Experience has
however taught us that vast judicial resources could be saved with
6
the exercise of more professional patience. Under the foregoing
rules dismissals of many of the weakest cases must be reversed on
appeal. Two appeals often result where one would have sufficed had
the defense moved by way of summary judgment, or even by way of
defense at trial. From a defendant’s standpoint, moreover, it is far
from unknown for the flimsiest of cases to gain strength when its
dismissal is reversed on appeal.
The supreme court neither recommends “motions to dismiss in litigation, the
viability of which is in any way debatable,” nor endorses “sustaining such motions,
even where the ruling is eventually affirmed.” Cutler, 473 N.W.2d at 181; see
Turner v. Iowa State Bank & Tr. Co., No. 06-0490, 2007 WL 601547, at *1–2 (Iowa
Ct. App. Feb. 28, 2007), aff’d, 743 N.W.2d 1 (Iowa 2007).
III. Breach of Contract Claims
Benskin claims the district court erred by finding Counts I, II, and III were
barred by the statute of limitations in section 524.221(2). This section provides:
All causes of action, other than actions for relief on the grounds of
fraud or mistake, against a state bank based upon a claim or claims
founded on a written contract, or a claim or claims inconsistent with
an entry or entries in a state bank record, made in the regular course
of business, shall be deemed to have accrued, and shall accrue for
the purpose of the statute of limitations one year after the breach or
failure of performance of a written contract, or one year after the date
of such entry or entries. No action founded upon such a cause may
be brought after the expiration of six years from the date of such
accrual.
Iowa Code § 524.221(2).
A. Benskin raises a defense to the statute of limitations based on the
doctrine of equitable estoppel. Benskin states that West Bank’s
misrepresentations and fraudulent concealment precluded it from knowing it had
a cause of action within the limitations period.
7
The doctrine of equitable estoppel provides a vehicle to toll the statute of
limitations. Mormann, 913 N.W.2d at 567. The doctrine “prevent[s] a party from
benefiting from ‘the protection of a limitations statute when by his own fraud he has
prevented the other party from seeking redress within the period of limitations.’”
Estate of Anderson ex rel. Herren v. Iowa Dermatology Clinic, PLC, 819 N.W.2d
408, 414 (Iowa 2012) (quoting Christy v. Miulli, 692 N.W.2d 694, 702 (Iowa 2005)).
The doctrine of equitable estoppel “precludes a defendant from asserting the
statute [of limitations] as a defense when it would be inequitable to permit the
defendant to do so.” Christy, 692 N.W.2d at 701. “[T]he plaintiff must show an
affirmative misrepresentation that the [defendant] knew or should have known
would delay the filing of a timely claim.” Mormann, 913 N.W.2d at 578.
In order to establish equitable estoppel, a party must show by clear and
convincing evidence “(1) The defendant has made a false representation or has
concealed material facts, (2) the plaintiff lacks knowledge of the true facts, (3) the
defendant intended the plaintiff to act upon such representations, and (4) the
plaintiff did in fact rely upon such representations to his prejudice.” Osmic v.
Nationwide Agribusiness Ins. Co., 841 N.W.2d 853, 864 (Iowa 2014) (quoting Hook
v. Lippolt, 755 N.W.2d 514, 524–25 (Iowa 2008)). “[A] party relying on the doctrine
of fraudulent concealment must prove the defendant did some affirmative act to
conceal the plaintiff’s cause of action independent of and subsequent to the
liability-producing conduct.” Christy, 692 N.W.2d at 702.
The district court found Benskin’s allegations did not constitute clear and
convincing evidence to support its claim of equitable estoppel. Contrary to the
district court’s analysis requiring the presentation of clear and convincing evidence,
8
a petition “need only allege facts that, if they were proven, would entitle [a party]
to recovery.” See Ostrem, 841 N.W.2d at 904. “To survive a motion to dismiss,
the petition need not allege the ultimate facts to support each element of a cause
of action.” Young, 877 N.W.2d at 127. “However, [the petition] must contain
factual allegations sufficient to give the defendant fair notice of each claim asserted
so the defendant can adequately respond.” Id.
In the amended petition, Benskin made the following allegations: (1) “West
Bank, through its officers and employees, made multiple representations, now
known to have been false”; (2) “Despite its obligation to release the 2007
Mortgages, and contrary to its representations and promises to do so, West Bank
failed and refused to release the 2007 Mortgages”; (3) “West Bank intentionally
misled [Benskin] by making made false statements and promises”; (4) “[A]n
unauthorized advance . . . . was wrongfully concealed by West Bank”; and (5)
“West Bank fraudulently misled [Benskin] . . . and . . . wrongfully concealed the
fact that it had made an unauthorized advance.” Benskin claimed “West Bank’s
fraud, concealment, misrepresentation, and deception induced [Benskin] to refrain
from bringing action on” its breach-of-contract claims.
We determine the petition alleges the elements of equitable estoppel. See
Osmic, 841 N.W.2d at 864. The petition alleges West Bank made false
representations or concealed material facts about the release of the 2007
mortgage and unauthorized advance, Benskin was unaware of the facts, West
Bank intended Benskin to refrain bringing a cause of action, and Benskin relied on
West Bank’s misrepresentations. See id. The petition alleges facts, that if they
were proven, would establish the statute of limitations should be tolled based on
9
equitable estoppel. See Ostrem, 841 N.W.2d at 904. We find Benskin’s petition
adequately set out specific evidence to give West Bank fair notice of its claims so
West Bank could adequately respond. See Young, 877 N.W.2d at 127.
We conclude the district court improperly granted West Bank’s motion to
dismiss the first three counts of the amended petition due to Benskin’s failure to
present clear and convincing evidence of fraudulent misrepresentation or
concealment.
B. Benskin raises several other issues concerning the dismissal of
Counts I–III. Benskin claims section 524.221(2) does not apply because West
Bank’s actions were not made in the regular course of business, the petition was
timely under the discovery rule, and section 524.221(2) does not apply to its claim
of breach of the duty of good faith and fair dealing. The district court addressed
only the issue of equitable estoppel and we conclude Benskin has not preserved
error on these claims. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002)
(“It is a fundamental doctrine of appellate review that issues must ordinarily be both
raised and decided by the district court before we will decide them on appeal.”).
IV. Fraud Claim
A. Benskin asserts the district court erred by granting West Bank’s
motion to dismiss Count IV, which alleged West Bank engaged in fraud. The
district court found the claim was untimely under the five-year statute of limitations
in section 614.1(4). The court rejected Benskin’s defenses, stating, “Benskin has
not offered any degree of certainty with the factual allegations it raises in support
of either equitable estoppel or application of the discovery rule.” The court found
10
Benskin did not make sufficiently “clear, specific factual allegations” for the
defenses to apply.
We have already determined the petition alleges the elements of equitable
estoppel. See Osmic, 841 N.W.2d at 864. If the facts set out in the petition were
proven, the petition would show the statute of limitations should be tolled based on
equitable estoppel. See Ostrem, 841 N.W.2d at 904. We find Benskin’s petition
set out sufficiently specific evidence in Count IV to give West Bank fair notice of its
claims so West Bank could adequately respond. See Young, 877 N.W.2d at 127.
We conclude the district court erred by granting West Bank’s motion to dismiss the
claim of fraud by requiring Benskin to make clear, specific factual allegations for
the defense to apply.
B. Benskin also contends the court improperly rejected its assertion that
the time period should be extended based on the discovery rule. Under the
discovery rule, “the statute of limitations does not begin to run until the injured
person has actual or imputed knowledge of all the elements of the action.” Franzen
v. Deere & Co., 377 N.W.2d 660, 662 (Iowa 1985). Where the discovery rule
applies, it tolls the statute of limitations. Skadburg v. Gately, 911 N.W.2d 786, 793
(Iowa 2018). The discovery rule applies to claims of fraud. Hallett Constr. Co. v.
Meister, 713 N.W.2d 225, 231 (Iowa 2006).
Because we have concluded the district court improperly granted the motion
to dismiss on the claim of fraud, we do not consider the alternative argument
concerning the application of the discovery rule to the facts of this case. Cf. Next
Generation Realty, Inc. v. Iowa Realty Co., 686 N.W.2d 206, 208 (Iowa 2004)
11
(noting where the district court dismisses a petition on alternative grounds, we can
consider only one if it is dispositive).
V. Claim of Slander of Title
The district court dismissed Count V, slander of title, on the ground the
petition failed to adequately set out the elements of a claim for slander of title.
Benskin asserts the district court erred by dismissing its claim of slander of title. It
states West Bank was apprised of the nature of the claim and no more was
required at this stage of the proceedings.
Iowa Rule of Civil Procedure 1.421(1)(f) provides for a pre-answer motion
to dismiss for “[f]ailure to state a claim upon which any relief may be granted.” The
Iowa Supreme Court has stated:
Under our notice-pleading standards, nearly every case will
survive a motion to dismiss for failure to state a claim upon which
any relief may be granted. To survive a motion to dismiss, the
petition need not allege the ultimate facts to support each element of
a cause of action. However, it must contain factual allegations
sufficient to give the defendant fair notice of each claim asserted so
the defendant can adequately respond. The allegations in a petition
comply with this fair-notice requirement if the petition informs the
defendant of the general nature of the claim and the incident giving
rise to it. In ruling on a motion to dismiss, a court construes the
petition in the light most favorable to the plaintiff and resolves any
doubts in the plaintiff’s favor.
Young, 877 N.W.2d at 127–28 (citation omitted); see also Rees v. City of
Shenandoah, 682 N.W.2d 77, 79 (Iowa 2004) (“The petition need not allege
ultimate facts that support each element of the cause of action.”).
A claim of slander of title has the following elements: “(1) an uttering and
publication of slanderous words; (2) falsity of those words; (3) malice; (4) special
damages to the plaintiffs; and (5) an estate or interest of the plaintiff in the property
12
slandered.” Davitt v. Smart, 449 N.W.2d 378, 379 (Iowa 1989). The petition states
West Bank engaged in slander of title by the “false use of words and documents
to encumber the property and [this] was done with malice and lack of good faith.”
Benskin also alleged it sustained special damages “from its inability to pursue
investment and financial opportunities available to it which required unencumbered
use of the Des Moines Properties.”
The element of publication is essential to a claim of slander of title. Belcher
v. Little, 315 N.W.2d 734, 737 (Iowa 1982). “‘Publication’ merely means a
communication of the statement to some third person or persons.” Id. While the
petition did not specifically allege “publication of slanderous words,” the petition
informs West Bank of the general nature of the claim and includes the other
elements of a claim of slander of title. The petition does not need to allege the
ultimate facts to support each element of a cause of action, including the element
of publication. See Young, 877 N.W.2d at 127. We conclude the district court
erred by granting the motion to dismiss the claim of slander of title.
VI. Conclusion
We reverse the decision of the district court and remand for further
proceedings. With this ruling, we make no findings on the merits of the action. We
merely find the case should not be dismissed through a pre-answer motion to
dismiss based on the district court’s findings that the first three counts should be
dismissed due to lack of clear and convincing evidence, the district court’s finding
that Count IV should be dismissed due to failing to offer any degree of certainty
with the factual allegations raised, and the district court’s finding that Count V
should be dismissed for failure to state to whom the publication was made. Where
13
the nature of the claim or the pertinent factual allegations are unclear, further
development of the record may be necessary. The case may still be subject to
dismissal on statute of limitations grounds when more facts have been presented.
REVERSED AND REMANDED.