Opinion ID: 1801819
Heading Depth: 1
Heading Rank: 4

Heading: Fraudulent Misrepresentation Claim.

Text: Next, Magnusson argues that the district court erred in granting PENCO's motion for JNOV on the fraudulent misrepresentation claim. In its ruling on the motion, the court stated that the elements of falsity, scienter, and intent were not supported by substantial evidence. Magnusson asserts that he presented substantial evidence that PENCO committed fraud by allowing Dale to make promises it had no intention of honoring. We disagree. On this claim, the district court instructed the jury, consistent with Iowa Civil Jury Instruction 810.1 (1987), that Magnusson had to prove all of the following: 1. The Defendant on or about October 22, 1992, made a representation to Plaintiffs that Defendant would only provide a quote to the independent agent who provided Defendant with the first signed, completed application, and budget for insurance. 2. The representation was false. 3. The representation was material. 4. The Defendant knew the representation was false. 5. The Defendant intended to deceive Plaintiffs. 6. The Plaintiffs acted in reliance on the truth of the representation and were justified in relying on the representation. 7. The representation was a proximate cause of the Plaintiffs' damage. 8. The amount of damage. See Hyler v. Garner, 548 N.W.2d 864, 871 (Iowa 1996). The court correctly instructed the jury that each of the seven elements must be established by a preponderance of clear, satisfactory, and convincing evidence. McGough v. Gabus, 526 N.W.2d 328, 331 (Iowa 1995); Robinson v. Perpetual Servs. Corp., 412 N.W.2d 562, 565 (Iowa 1987). We conclude that Magnusson has not satisfied all the elements of this claim. The first three elements require that a material misrepresentation must have been made. In Clark v. McDaniel, 546 N.W.2d 590 (Iowa 1996), we stated: a misrepresentation may occur when one with superior knowledge, dealing with inexperienced persons who rely on him or her, purposely suppresses the truth respecting a material fact involved in the transaction. Clark, 546 N.W.2d at 592 (quoting Kunkle Water & Elec., Inc. v. City of Prescott, 347 N.W.2d 648, 653 (Iowa 1984)). Clearly, Dale made a representation and it was material. She told Magnusson that he would get PENCO's bid if he submitted the first completed application. The representation was material because it influenced Magnusson enough to spend several hours preparing the application on the same day he talked to Dale. He did this in order to have the best chance to submit the first application. However, Magnusson has not offered sufficient evidence to prove that the representation was false. To satisfy this element, it is necessary to establish that the representation was false at the time it was relied upon. Hagarty v. Dysart-Geneseo Community Sch. Dist., 282 N.W.2d 92, 95 (Iowa 1979) (emphasis added). Even though PENCO later offered its bid to the second applicant, that fact alone is not enough to show that the earlier representation was false. To the contrary, Dale testified that she was stating company policy and procedures. A fraudulent misrepresentation claim also requires that the defendant knew the representation was false (scienter), and that the defendant intended to deceive the plaintiff. See McGough, 526 N.W.2d at 331-32. We conclude there was insufficient evidence to satisfy either element. Scienter is knowledge of the falsity of a material representation. Hyler, 548 N.W.2d at 871. It can be proved by showing that the defendant had actual knowledge of the falsity, possessed reckless disregard for the truth, or falsely stated or implied that the representations were based on personal knowledge or investigation. Id. Intent to deceive is closely related to scienter, and the same general analysis applies. Hyler, 548 N.W.2d at 871; Beeck v. Aquaslide `N' Dive Corp., 350 N.W.2d 149, 155 (Iowa 1984). Here, the representation involved Dale's statement that PENCO would perform a future act. In Robinson, we held that a statement of intention to perform a future act is actionable if, when made, the speaker had an existing intention not to perform. Robinson, 412 N.W.2d at 565. However, in establishing intent, the fact that an agreement was not performed does not alone prove that the promisor did not intend to keep the promise when it was made. Id. In other words, a false statement innocently but mistakenly made will not establish intent to defraud unless the statement was recklessly asserted. McGough, 526 N.W.2d at 332. In Prosser & Keeton on the Law of Torts, it states: Unless the present state of mind is misstated, there is of course no misrepresentation. When a promise is made in good faith, with the expectation of carrying it out, the fact that it subsequently is broken gives rise to no cause of action, either for deceit, or for equitable relief. Otherwise any breach of contract would call for such a remedy. The mere breach of a promise is never enough in itself to establish the fraudulent intent. It may, however, be inferred from the circumstances. W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 109, at 764-65 (5th ed. 1984). There is no substantial evidence that, at the time she made the statement to Magnusson, Dale knew that PENCO would not follow its company policy or that it always intended to use Holt as its agent for the Webster County account. There is no substantial evidence that Dale intended to deceive Magnusson. Despite the fact that Dale made a September 15 entry on an activity report, which noted that Holt was a prospective agent for Webster County, the entry also stated that Holt's insurance agency wasn't sure if they were bidding or not. But thought they might. Although there is substantial evidence that Weible lied, made false representations, and tried to cover-up the events surrounding the receipt of Magnusson's application, that does not necessarily amount to a fraudulent misrepresentation. All false statements and the cover-up by Weible occurred after Magnusson had submitted a completed application. Magnusson took no action in reliance on Weible's representations. In addition to the actual knowledge component of scienter, we must also determine whether there is any evidence of reckless behavior involving the statement made by Dale during the phone conversation. Here, Magnusson must show that Dale should have made further inquiries before telling Magnusson what she did. We do not believe there was any substantial evidence of reckless behavior by Dale. In Garren v. First Realty, Ltd., 481 N.W.2d 335 (Iowa 1992), we stated that even if the speaker could have been more careful by making further inquiry, that is insufficient to prove that he or she acted in reckless disregard of the truth. Garren, 481 N.W.2d at 338. We conclude there was insufficient evidence to justify submitting the fraudulent misrepresentation claim to the jury. Because substantial evidence did not support each element of Magnusson's claim, the district court was correct in granting the motion for JNOV.