Title: State Surety Co. v. Lensing
Citation: 249 N.W.2d 608
Docket Number: 2-58053
State: Iowa
Issuer: Iowa Supreme Court
Date: January 19, 1977

249 N.W.2d 608 (1977) STATE SURETY COMPANY, Appellant, v. Jerome H. LENSING et al., Appellees. No. 2-58053. Supreme Court of Iowa. January 19, 1977. *609 Miller, Pearson, Gloe &amp; Burns, Decorah, for appellant. Strand, Anderson &amp; Raduenz, Decorah, for appellee Jerome Lensing. Warren L. De Vries, Mason City, for appellees Richard Knauer, d/b/a Midway Car Sales Co., Central States Auto Auction, Inc., and Joel J. Bittner, d/b/a Joe's Auto Sales. Meyer &amp; Zahasky, Decorah, for appellees James Bohr, John Fossenkemper and Zimmerman Buick, Inc. Heard by MOORE, C. J., and MASON, UHLENHOPP, HARRIS and McCORMICK, JJ. MOORE, Chief Justice. Plaintiff Surety Company appeals from judgment holding it liable to Arizona purchasers on the bond required by Code section 322.4, for Iowa Motor Vehicle Dealers. We reverse and remand. There are no disputed fact issues. The parties stipulated that defendant Jerome Lensing was duly licensed under chapter 322, 1971 Code, as a retail motor vehicle dealer in Festina, Iowa. Pursuant to section 322.4(7), plaintiff corporate Surety Company had issued a $10,000 surety bond conditioned upon Lensing's faithful compliance with the statutes set out in Code chapters 321 and 322. In early 1972 Lensing traveled to Tucson, Arizona and there made two used car sales. On February 28 he sold a 1971 Buick LeSabre to one John Fossenkemper, an Arizona resident. On March 29 he sold a 1971 Buick Riviera to Zimmerman Buick, an Arizona corporation engaged in the sale of motor vehicles in Phoenix. Unknown to Lensing, both cars which he had previously purchased for resale were stolen and thus the Iowa Certificates of Title which were transferred in connection with the transactions were invalid. Thereafter, the insurance company which had paid the rightful owner of the car purchased by Zimmerman Buick, Inc., made claim on that Arizona car dealer, which subsequently paid the insurance carrier in order to obtain a valid Arizona Certificate of Title to the car and thus it retained possession. The Arizona police later confiscated the stolen car which had been purchased by Fossenkemper. It is undisputed that the entire transactions from preliminary negotiations through actual delivery and payment for the cars took place in Arizona. Plaintiff Surety then commenced the present action in interpleader alleging defendants, other than Lensing, were claimants to a $10,000 fund held by it to cover any obligations owing under the dealer licensing bond as the result of transactions involving stolen vehicles. Other than the two Arizona purchasers, the claimants were *610 Iowa residents and purchasers of cars from Lensing which had been stolen. In its petition plaintiff denied liability under the surety bond to Zimmerman and Fossenkemper on the basis that the sales were made out of Iowa to non-residents. The surety bond was posted under the provisions of section 322.4(7), Code 1971, which provided: "* * *. "* * *." Section 322.3 enumerates several requirements and prohibited acts of persons "engaged in this state" in the business of selling new or used motor vehicles. Included is a prohibition against Sunday sales. The trial court expressly found the legislature did not intend to exclude casual out-of-state sales from the protection of the statutory motor vehicle dealers surety bond. The court's conclusions include: The court awarded each defendant (except Lensing) a share of the fund proportionate to his loss. Plaintiff Surety Company appeals the award as to Zimmerman Buick, Inc., and Fossenkemper. The sole issue in this appeal is one of statutory construction, namely: Does the surety bond given pursuant to the provisions of section 322.4(7), protect an aggrieved non-resident purchaser who suffers damages as a result of the casual out-of-state sale by an Iowa licensed car dealer? I. We are not bound by the trial court's determination of the applicable law. We are not precluded from inquiry into whether the trial court applied erroneous rules of law which materially affected its decision. In re Estate of Northup, Iowa, *611 230 N.W.2d 918, 921; Farmers Insurance Group v. Merryweather, Iowa, 214 N.W.2d 184, 186, 187. II. Several general principles are applicable to guide us in interpreting the scope of this statutory bond. Where the bond is a statutory bond, the surety's liability must be measured by the statute rather than by the form of the bond. Indeed, the provisions of the statute are read into the bond and nonessential matters are treated as mere surplusage and of no effect. Community Sav. Bk. v. Western Surety Co., 232 Iowa 1381, 1385, 8 N.W.2d 427, 429; Jaeger Mfg. Co. v. Massachusetts Co., 229 Iowa 158, 161, 294 N.W. 268, 270; City of Charles City v. Rasmussen, 210 Iowa 841, 847, 232 N.W. 137, 139. In Zapf v. Ridenour, 198 Iowa 1006, 1009, 200 N.W. 618, 619, we state: See also 53 C.J.S. Licenses § 36b; 12 Am.Jur.2d Bonds, section 26. A surety's liability may not be enlarged by implication. Andrew v. Austin, 213 Iowa 963, 967, 232 N.W. 79, 81; Conley v. Jamison, 205 Iowa 1326, 1328, 219 N.W. 485, 486. However, statutory bonds should be construed in light of the purpose as expressed by the statute. 11 C.J.S. Bonds § 39, page 418. With these principles in mind we come to the real and decisive question of whether the provisions of section 322.4(7) apply beyond the limits of this state. It is a question of first impression with this court. The general rule is thus stated in 73 Am.Jur.2d, Statutes, section 359, page 492: After diligent search we have found only one other court which has ruled on the exact question herein presented. In Peerless Insurance Company v. Clark, 29 Colo. App. 436, 487 P.2d 574, the Colorado Court of Appeals held the motor vehicle dealer's bond did not extend to protect an Indiana purchaser in a purely Indiana sales transaction. The basis for this opinion was the aforementioned well-settled rule that statutes are not presumed to have any extraterritorial effect and the mere use of the words "any fraud" and "any person" are insufficient to overcome the presumption. The court explained its reasoning as follows: In addition to the well-reasoned opinion in Ore-Ida Potato Products, Inc. v. United Pacific Ins. Co. cited in Peerless Insurance Company v. Clark, supra, see also Black Hills Packing Co. v. S. D. Stockgrowers Ass'n, D.S.D., 397 F. Supp. 622, 626, 627; Securities &amp; Exch. Com'n v. North American Research &amp; D. Corp., S.D.N.Y., 280 F. Supp. 106, 123; Sandberg v. McDonald, 248 U.S. 185, 196, 39 S. Ct. 84, 86, 63 L. Ed. 200, 204; American Banana Co. v. United Fruit Co., 213 U.S. 347, 357, 29 S. Ct. 511, 513, 53 L. Ed. 826, 832 (All legislation is prima facie territorial). We cannot ignore the general rule that a state's statutes are presumed not to have extraterritorial effect. Nothing within the statutory scheme encompassed by chapter 322 convinces us the regulation of out-of-state transactions to non-residents was ever contemplated. The expanded interpretation urged by appellees and adopted by the trial court is unwarranted after careful reading of the statute. We agree with the following paragraph in appellant's amendment to its brief: REVERSED AND REMANDED.