“Iowa Nice” Not Legally Required, but Legally Malicious Not Okay
The case is J.A. Smith Machinery Company, Ltd. vs K.E. Builders, LLC et. al, No. 20-1310 (Iowa Ct. App. Jan. 27, 2022).
On January 27, 2022, the Iowa Court of Appeals overturned a district court’s award of punitive damages in a conversion claim. On summary judgment, the trial court found that the defendants acted with malice towards the plaintiff when they refused to return a skid loader that was located on recently foreclosed property after the owner of the skid loader demanded its return. The Court of Appeals, in a split decision, overturned the portion of the judgment awarding punitive damages.
Facts
The Kellers bought the home of Ryan Smith through a sheriff’s sale in March of 2019. On the property was a 1989 skid loader owned by Smith Machinery. The owner of Smith Machinery is James Smith, who is also Ryan’s father.
On the day of the sale, Ryan attempted to retrieve the skid loader, but could not find the key. The day after the sale, James Smith went to the property to retrieve the skid loader. At this time, he loudly confronted the Kellers’ agent and demanded the return of the skid loader. The Kellers refused to return the skid loader. On April 2, James’ attorney demanded the return of the skid loader. The Kellers ignored the letter.
On April 8, James filed suit alleging conversion of the skid loader. Conversion is the wrongful taking of another’s property. It is sometimes referred to as the civil law version of theft. Blessing v. Norwest Bank Marion, 429 N.W.2d 142, 144 (Iowa 1988). The Kellers counter-sued alleging that the property was abandoned.
James filed a motion for summary judgment. The Kellers did not file a resistance or response to the motion. The district court ruled that Kellers had converted the skid loader. The only issue remaining in the case was the amount of damages, which the court determined was the market value of the skid loader at the time of the taking. See, F.S. Credit Corp. v. Shear Elevator, Inc., 377 N.W.2d 227, 234–35 (Iowa 1985).
At the damages hearing, the Kellers testified that they had found the skid loader in the garage with the key after the sale. They also testified that they did not like James’ attitude or the amount of dog feces in the house. Further, they had twice contacted the Story County Sherriff’s Department. Each time they contacted the department, they were “told that all the items in the home were included in the sale.”
The trial court found that the 1989 skid loader’s value was $10,000. The Court also found that the Kellers had acted with malice when they willful ignored the ownership rights of James and ordered an additional $5,000 in punitive damages.
The Kellers appealed the trial court’s decision, arguing that the trial court improperly granted summary judgment and that the award of punitive damages should be overturned.
Court of Appeals Decision
Reversing the award of punitive damages, the Court of Appeals found that there was not clear, convincing, and satisfactory evidence to show that the Kellers did not act with malice. There are two types of malice – legal malice and actual malice. “Actual malice is shown by such things as personal spite, hatred, or ill will. Legal malice is established by showing wrongful conduct committed with a willful or reckless disregard for the rights of another.” Larson v. Great W. Cas. Co., 482 N.W.2d 170, 174 (Iowa Ct. App. 1992).
Although there was some testimony about the amount of dog feces left in the home, the court found there was not enough evidence to show that the Kellers acted out of personal spite towards James.
The court also found no legal malice. While only briefly discussed, the court noted that there could be no legal malice for two reasons. First, James did not provide any evidence of ownership until December 2019. Second, the Kellers had a reasonable belief the skid loader was purchased in the sale because of their discussions with the Sherriff’s department.
Dissent Found Malice
One judge on the three-judge panel found that there was enough evidence of malice to support the award of punitive damages. Judge Greer found that the Kellers were obstinate in their opposition to James. Specifically, he stated that the Kellers acted legally maliciously by ignoring the April 2nd letter from James’ attorney and continuing to advocate for abandonment at the time of the damages hearing.