Opinion ID: 1239804
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Heading: Scope of Surety Bond Coverage Under Iowa Code Section 322.4(7).

Text: A. Applicable law and issue. The applicable version of Iowa Code section 322.4(7) sets out the terms and conditions for recovery under a retail motor vehicle dealer license bond. It provides in pertinent part: Each person before engaging in this state in the business of selling at retail motor vehicles or representing or advertising that the person is engaged or intends to engage in such business in this state shall file in the office of the department an application for license as a motor vehicle dealer in the state in such form as the department may prescribe, duly verified by oath, which application shall include the following: .... 7. Before the issuance of a motor vehicle dealer's license to a dealer engaged in the sale of vehicles for which a certificate of title is required under chapter 321, the applicant shall furnish a surety bond executed by the applicant as principal and executed by a corporate surety company, licensed and qualified to do business within this state, which bond shall run to the state of Iowa, be in the amount of thirty-five thousand dollars and be conditioned upon the faithful compliance by the applicant as a dealer with all of the statutes of this state regulating or applicable to the business of a dealer in motor vehicles, and indemnifying any person who buys a motor vehicle from the dealer from any loss or damage occasioned by the failure of the dealer to comply with any of the provisions of chapter 321 and this chapter, including, but not limited to, the furnishing of a proper and valid certificate of title to the motor vehicle involved in the transaction. (Emphasis added.) As mentioned, the issue is whether the any person language in this section indemnifies a dealer who purchases at wholesale from another dealer and suffers a loss. B. The merits. We engage in statutory construction only when the meaning of statutory provisions is unclear. Iowa Code § 4.6; Krull v. Thermogas Co., 522 N.W.2d 607, 612 (Iowa 1994). Here the prefatory language in section 322.4 requires [e]ach person ... selling at retail motor vehicles to file an application for a license as a retail motor vehicle dealer. The language in section 322.4(7) requires that the statutory surety bond indemnifies any person who buys a motor vehicle from the dealer. Section 322.4(7) is open to two interpretations. On the one hand, the legislature could have intended the surety bond to indemnify anyone who buys a motor vehicle from a dealer. On the other hand, the legislature could have intended the surety bond to indemnify only consumers who buy a motor vehicle from a dealer. When a statute is open to more than one interpretation, we must engage in statutory construction to ascertain legislative intent. Certain well-established rules aid us in determining legislative intent. We look to what the legislature said rather than to what it should or might have said. Iowa R.App.P. 14(f)(13). We consider not only the language of the statute, but also its subject matter, the object sought to be accomplished, the purpose to be served, underlying policies, remedies provided, and the consequences of various interpretations. Probasco v. Iowa Civil Rights Comm'n, 420 N.W.2d 432, 434-35 (Iowa 1988); Iowa Code §§ 4.6(1), (5). We will not construe a statute in a way that would produce impractical or absurd results. Mortimer v. Fruehauf Corp., 502 N.W.2d 12, 14 (Iowa 1993). Finally, when searching for legislative intent, we look at the whole statute and not the separate parts. Id. In applying these rules, we conclude the legislature intended the bond provision in section 322.4(7) to indemnify only consumers. We are persuaded this is the case because of (1) the language in section 322.4, (2) the legislative scheme in chapter 322, and (3) the policy reasons underlying chapter 322. 1. The language in Iowa Code section 322.4. Iowa Code section 322.4 pertinently requires that [e]ach person before engaging... in the business of selling at retail motor vehicles ... shall file ... an application for license as a motor vehicle dealer. Subsection 7 of this section provides that [b]efore the issuance of a ... license to a dealer ... the applicant shall furnish a surety bond ... indemnifying any person who buys a motor vehicle from the dealer from any loss or damage occasioned by the failure of the dealer to comply with any of the provisions of chapter 321 and this chapter. Iowa Code section 322.2(4) defines at retail: `At retail' means to dispose of a motor vehicle to a person who will devote it to a consumer use. A wholesale dealer is not included in the normally understood meaning of the word consumer. See, e.g., Blacks Law Dictionary 316 (6th ed. 1990) (alternatively defining consumer as a (1) user of the final product, and (2) buyer (other than for purposes of resale) of any consumer product). The dictionary goes on to say that [c]onsumers are to be distinguished from manufacturers (who produce goods), and wholesalers or retailers (who sell goods). Id. See also Auto Value Lease Plan, Inc. v. American Auto Lease Brokerage, Ltd., 57 Wash.App. 420, 421, 788 P.2d 601, 602 (1990) (citation omitted) ([T]he `retail purchaser' is the buyer who is the final user of the goods, as distinguished from a middleman or a purchaser who plays a wholesaler role.). Giving operative effect to all parts of section 322.4, we think the legislature intended the bonding requirement to apply only to consumers. Had the legislature intended the bonding requirement to cover all purchasers it would not have used the words at retail as it did in section 322.4. The meaning of the language any person in section 322.4(7), while admittedly broad, must still be considered in context. Prior case law supports our conclusion that the broad language any person in section 322.4(7) is not conclusive and that the meaning of this language is affected by its context. Boone State Bank & Trust Co. v. Westfield Ins. Co., 298 N.W.2d 315, 317-18 (Iowa 1980) (concluding that the language any person in section 322.4(7) did not include lender of motor vehicle dealer because statute was intended to benefit persons purchasing motor vehicles from the dealer). 2. The legislative scheme in Iowa Code chapter 322. Iowa Code chapter 322 covers licensing of both dealers selling at retail and dealers selling at wholesale. There are also provisions pertaining to dealers generally, provisions that cover a number of matters common to both. See generally Iowa Code ch. 322. As mentioned, the licensing provision for dealers selling at retail requires a bond. See Iowa Code § 322.4(7). In contrast, the licensing provisions for dealers selling at wholesale do not have such a requirement. See, e.g., Iowa Code §§ 322.29 (providing for licensing of wholesalers with no requirement for bond); 322.27 (providing for the licensing of manufacturers with no bond requirement; permitting dealers in both used and new motor vehicles to wholesale such vehicles without additional license or bond). See also Iowa Code § 322.28 (prohibiting wholesalers from selling at retail unless licensed as new motor vehicle dealer). We think this legislative scheme further supports our conclusion that the bond requirement in section 322.4(7) was intended to apply only to consumers. 3. The policy reasons underlying Iowa Code chapter 322. We have described Iowa Code chapter 322 as a regulatory law and not merely a licensing act for raising revenue. Its overriding purpose is to protect consumers of motor vehicles from fraud and deception. State v. Miner, 331 N.W.2d 683, 687 (Iowa 1983) (citation omitted). We pointed out in Boone State Bank & Trust Co. that the relatively small bond would not provide much protection if it were intended to cover inventory financiers as well as vehicle purchasers. Boone State Bank & Trust Co., 298 N.W.2d at 317. Likewise, the $35,000 bond requirement would not provide much protection to consumers vying with wholesalers in multi-claim circumstances. Cf. United Fire & Cas. Co. v. First Fed. Sav. Bank, 460 N.W.2d 94, 96-97 (Minn.App.1990) (applying same reasoning to similar statute providing that bond was for benefit of any transferor, seller, or purchaser of a motor vehicle; held that this language did not include bank holding titles as security for money lent to dealer). The policy reasons underlying Iowa Code chapter 322 contemplate protecting consumers. They simply do not contemplate protecting sophisticated dealers from each other. For all of these reasons, we hold that the language any person in section 322.4(7) does not include a motor vehicle dealer who purchases at wholesale from a dealer selling at retail.