Opinion ID: 1722937
Heading Depth: 1
Heading Rank: 3

Heading: Effect of exemption sections. We next consider the specific effect of this holding on plaintiffs' claims.

Text: A. Issue preclusion. Plaintiffs argue that the effect of sections 542.14 and 543.38 was established in favor of producers by the district court in Jannings v. State (Van Buren County No. 22631). The Jannings court considered the same issue and the issue arose out of the same financial failure of Prairie Grain. In that case the district court overruled the State's motion to dismiss based on the exemption sections. A motion for summary judgment by the State met the same fate. We granted interlocutory appeal from those rulings. During the pendency of that appeal the parties to that case settled it. The settlement document contained this clause: This release and indemnity agreement is executed as a compromise settlement of disputed claims, liability for which is expressly denied by the parties released, and the payment of the above sums does not constitute an admission of liability on the part of any persons or entity. We hold that the disposition of the Jannings case does not preclude the State from relying on the exemption sections in the present case. A requirement of issue preclusion is a final prior judgment. Restatement (Second) of Judgments § 13 (1982). See Catlin v. United States, 324 U.S. 229, 65 S.Ct. 631, 89 L.Ed.2d 911 (1945). The district court denied the State's motions in Jannings, but we granted an appeal and the parties then settled the case under a denial, and without an admission of, the State's liability. Undoubtedly the State would have gone through with the appeal but for the settlement. Under those facts the prior orders of the district court became a nullity by action of the parties themselves. B. Scope of exemption. The evidence of ICC's negligence dates from 1975 through 1980. Section 543.38 of the warehouse Act was enacted in 1967. Plaintiffs' claims under that act are therefore completely foreclosed. The exemption section in the grain dealer's act, however, was not effective until July 1, 1978. 1978 Iowa Acts ch. 1044, § 12. The State first urges that this exemption applies retrospectively. It contends the section is merely a rule of construction reinforcing legislative intent that no private cause of action is created by the acts. We think however that without the section the State would not have been exempt from liability. The section is more than a mere clarifying rule of construction. We recently construed a similar amendment in Pfiffner v. Roth, 379 N.W.2d 357 (1985). We there found an amendment exempting cities from the Iowa competition law was substantive. In the course of our opinion we stated: As a general observation, a change such as this, which provided for an exemption where none existed before, would have to be considered a substantive change. In interpreting such an amendment to a statute, there is a presumption of a change in legal rights. Id. at 359. Moreover, the 1978 act creating the exemption in chapter 542 contains no language or indication that the amendment is to be given retrospective effect. Hence the amendment is presumed to be prospective only. Iowa Code § 4.5. In holding section 542.14 is to be applied prospectively only, we leave open a window of liability as to the damages, if any, which plaintiffs prove accrued prior to July 1, 1978, from ICC's negligence under chapter 542. We thus proceed to several other issues as they may relate to any losses which accrued prior to July 1, 1978. III. Substantive basis of State's liability. The State challenges the basic holding of liability on its part. The trial court concluded the State was negligent prior to July 1, 1978, in the following respects: (a) It failed, during the 1977 [and] 1978 ... examinations to randomly select scale tickets from the numerical file of scale tickets issued since the last examination; (b) It failed, during the 1977 [and] 1978 ... examinations to verify what scale tickets had been issued since the last examination because the prior examination reports did not record the cutoff scale tickets for the series of scale tickets used for both corn and soybeans; (c) It failed in the examinations of 1977 and 1978, ... to select the number of scale tickets which the testimony indicated should have been selected in the examination of an elevator of this size, and in 1978 ... selected less scale tickets than the minimum required by the procedures of the Commission; (d) It used underqualified, undertrained and underpaid examiners to conduct the warehouse and grain dealer examinations; (e) It failed to conduct further investigation when at least one of the scale tickets selected during step 12 of the grain records audits in each of 1977 [and] 1978 ... was for a delivery for which no adequate customer account record was available; (f) It failed to correctly analyze the July, 1977, and June, 1978, financial statements submitted in support of the applications for license renewal; [and] (h) It failed to request CPA audited financial statements in support of applications for renewal of license. The court's findings base negligence of the State on both failing to perform statutory duties and performing statutory duties with lack of due care. Prior to July 1, 1978, section 542.2 of the grain dealer chapter provided that ICC administer the chapter and adopt rules. In addition to general supervisory powers in section 542.2, the commission licensed grain dealers upon compliance with the terms and conditions of chapter 542 and the rules of ICC. § 542.5. Section 542.11 provided that a license was required in order to engage in the business of grain dealer. Section 542.9 provided that ICC may inspect grain dealers. A prerequisite of negligence liability is a duty owed by the actor which requires conformity to a standard of conduct for the protection of the victim. Wilson v. Nepstad, 282 N.W.2d 664, 667 (Iowa 1979); W. Keeton, Prosser and Keeton on Torts § 30 (5th ed. 1984). We stated in Lewis v. State, 256 N.W.2d 181, 188 (Iowa 1977): It is immaterial whether the standard is one imposed by the rule of common law requiring the exercise of ordinary care not to injure another, or is imposed by a statute designed for the protection of others. We look to the grain dealer act to determine if a duty was created. The act provides that ICC shall license dealers in compliance with the act, § 542.5, and shall establish rules necessary for the administration of the act. § 542.2 (emphasis added). These provisions create a duty on the part of ICC so to act. Iowa Code § 4.1(36)(a) (shall imposes a duty); see Hildenbrand v. Cox, 369 N.W.2d 411, 416 (Iowa 1985). The State's duty is breached by its failure to perform these duties in the manner the statute requires. National Carriers, Inc. v. United States, 755 F.2d 675 (8th Cir.1985) (meat inspectors had nondiscretionary responsibility to carry out federal statutes and regulations to tag or condemn damaged meat, and federal government liable for losses where inspectors failed to comply); Nearing v. Weaver, 295 Or. 702, 670 P.2d 137 (1983) (failure to comply with statute mandating specific action by law enforcement officers creates liability); Campbell v. City of Bellevue, 85 Wash.2d 1, 530 P.2d 234 (1975) (Failure to obey statute resulted in city liability where city officer failed to sever connections in hazardous underwater wiring as required by statute. The State however could not be held liable because of statute specifically providing immunity for negligent inspection. Wash.Rev.Code § 19.28.340 (1961).). On the other hand, the inspection provision of chapter 542 was merely permissive at the time. § 542.9 (ICC may inspect grain dealers). Section 4.1(36)(c) of the Code provides that may generally confers a power rather than a duty. Thus inspection by ICC was not mandated. Negligence could not be predicated solely on failure to act. When ICC did act, however, whether in accordance with a statutory duty or under a statute conferring authority to act, it had a responsibility to act with due care. Performance of a function without due care, resulting in damages, creates liability. Cross Bros. Meat Packers, Inc. v. United States, 705 F.2d 682 (3rd Cir.1983) (negligent supervision and grading of meat creates liability for lost profits); Doe v. United States, 520 F.Supp. 1200 (S.D.N.Y.1981) (unreliably and irresponsibly providing FBI with information gives rise to claim for damages); Raymer v. United States, 455 F.Supp. 165 (W.D.Ky.1978) (negligently assumed inspection and regulation under Federal Coal Mine Health Act creates liability); Brennen v. City of Eugene, 285 Or. 401, 591 P.2d 719 (1979) (city liable to plaintiff injured by taxi driver for negligently licensing taxi cab driver having insufficient insurance); Namauu v. City and County of Honolulu, 62 Hawaii 358, 614 P.2d 943 (1980); Hudleasco, Inc. v. State, 90 Misc.2d 1057, 396 N.Y.S.2d 1002 (Ct.Cl.1977), aff'd, 63 A.D.2d 1042, 405 N.Y.S.2d 784 (1978) (involving certificate under UCC § 9-407(2) and other laws); Baerlein v. State, 92 Wash.2d 229, 595 P.2d 930 (1979). Similarly, negligent performance under rules of governmental agencies establishes liability. JM Mechanical Corp. v. United States, 716 F.2d 190 (3rd Cir.1983) (negligence in performance of regulations requiring investigation and verification of validity of payment and performance bondsvalid claim under Federal Tort Claims Act); Griffin v. United States, 351 F.Supp. 10, 30 (E.D.Penn.1972), aff'd, 500 F.2d 1059 (3rd Cir.1974) (negligence in implementing regulation in release of oral polio vaccine). The statute here was for the benefit of the class to which plaintiffs belongproducers doing business with grain dealers. The statutory provisions clearly exhibit the legislature's intent that producers receive payment for their grain. Cf. Wilson, 282 N.W.2d at 672 (fire inspection statutes designed for the protection of ... lawful occupants of multiple dwellings). ICC itself has stated: The general legislative intent of the [Grain Dealers] Act, passed in 1973 is to assure that anyone selling grain actually receives payment. Annual Report of Iowa State Commerce Comm'n (1975). In opposition to substantive liability the State asserts that it would only be liable for negligent licensing or inspecting which results in physical harmciting Restatement (Second) of Torts § 324A (1965). We believe however that liability exists where the very purpose of the statute in question is protection against economic loss and the governmental agency negligently fails to perform under the statute or performs negligently, resulting in such loss. See National Carriers, Inc. v. United States, 755 F.2d 675 (8th Cir.1985); JM Mechanical Corp. v. United States, 716 F.2d 190 (3rd Cir.1983); Cross Bros. Meat Packers, Inc. v. United States, 705 F.2d 682 (3rd Cir.1983). Moreover, our tort claims act expressly covers loss of property. § 25A.2(5). The State also asserts the public duty doctrine. We rejected the doctrine in Wilson with regard to municipalities, as a `form of sovereign immunity, which is a matter dealt with by statute ... and not to be amplified by court created doctrine.' Wilson, 282 N.W.2d at 668, quoting Adams v. State, 555 P.2d 235, 241-42 (Alaska 1976). In Wilson we said that [t]he legislature could not have expressed better or more consistently its intention to impose in the same manner as in the private sector municipal tort liability for negligence based on breach of a statutory duty. Id. at 669 (emphasis added). The state tort claims act provides that the State is liable in the same manner, and to the same extent as a private individual under like circumstances.... § 25A.24. It clearly excludes the public duty doctrine. We hold that failure of ICC to perform mandated duties and performance by ICC of authorized functions without due care constitute negligence.