Court Opinion

ID: 3154074
Source: CourtListenerOpinion
Date Created: 2015-11-12 16:07:30.627856+00
Date Added: 2024-06-11T12:06:05.811355
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 15-0164
                            Filed November 12, 2015

DINSDALE CONSTRUCTION, LLC,
     Plaintiff-Appellee,

vs.

LUMBER SPECIALTIES, LTD.,
     Defendant-Appellant.
________________________________________________________________

      Appeal from the Iowa District Court for Grundy County, Kellyann Lekar,

Judge.

      A   defendant    appeals    following   a   jury   verdict   in   a   negligent

misrepresentation case, asserting the district court should have granted the

motion for a judgment notwithstanding the verdict. AFFIRMED.

      Michael Carmoney and Allison J. Frederick of Carmoney Law Firm,

P.L.L.C., Des Moines, for appellant.

      Chad A. Swanson and Nathan J. Schroeder of Dutton, Braun, Staack &

Hellman, P.L.C., Waterloo, for appellee.

      Heard by Danilson, C.J., and Mullins and McDonald, JJ.
                                            2

MULLINS, Judge.

       Lumber Specialties, Ltd., appeals the district court’s denial of its posttrial

motion for judgment notwithstanding the verdict after the jury found it to be at

fault in a negligent misrepresentation case brought by Dinsdale Construction,

L.L.C. Lumber Specialties asserts the case should be dismissed because, as a

product manufacturer, it does not owe a duty of care to Dinsdale to supply

information.1 After considering the claims made on appeal, we affirm the district

court’s decision.

I. Background Facts and Proceedings.

       Phelps Implement wanted to build a large combine repair shop addition to

its farm implement dealership. It hired Moeller & Walter to manage and design

the construction of the shop. Moeller & Walter contacted Dinsdale Construction,

who agreed to supply the labor and the materials for building. Moeller & Walter

contracted with Lumber Specialties to provide the roof trusses, headers and

columns for the large garage-type openings, design engineering services, and an

inspection when the building was complete. Moeller & Walter specifically chose

Lumber Specialties because the company provided in-house engineering

services through Steve Kennedy, the Lumber Specialties engineering intern—a

service that would otherwise have to be contracted out to a different company.

1
  Lumber Specialties also claims the district court erred in its ruling denying the motion
for judgment notwithstanding the verdict by giving preclusive effect to the denial of
Lumber Specialties’s motion for summary judgment. Because we conclude Lumber
Specialties owed a duty to Dinsdale Construction as a matter of law, we need not
address this claim.
                                          3

       The roof trusses were delivered with a generic installation guide that

provided instructions on how to install the trusses and support them with

temporary bracing. Lumber Specialties also provided a site specific engineering

design for the permanent bracing for the roof. These plans were prepared by

Lumber Specialties’s employees and approved by Select Structural Engineering.

       Dinsdale Construction erected the walls and began installing the roof

trusses on June 26, 2012. After Dinsdale installed nineteen seventy-foot trusses,

Lynn Trask of Moeller & Walter informed Kirk Dinsdale that he was going to

contact Lumber Specialties to make sure the trusses had adequate temporary

bracing. Trask sent an email to Ryan Callaway, the sales contact with Lumber

Specialties, on June 28, stating,

              Ryan,
              I will be out of the office this afternoon. If you are in the area
       would you please stop by the Phelps job and look at what they
       have done. The 70’ roof trusses were set on Tuesday. They feel
       they are braced well and stabilized to anchor the balance of the
       roof system. They did not set yesterday because of the wind.
              They are setting the 80’ trusses today. If there is any
       bracing that they are missing please let Kirk or I know so we can
       address ASAP.
              Thanks, Lynn

Ryan went out to the job site and looked around for a few minutes. Kirk noticed

Ryan walking around the job site while Kirk was on the roof with his crew. Ryan

explained to Kirk that Lynn had asked him to check out the bracing. Ryan went

on to say, “Everything looks great. Keep doing what you are doing.” The next

day, Friday, June 29, Ryan emailed Lynn:

               Lynn—
               I stopped by the Phelps site yesterday. They were still
       installing purlins and bracing on the trusses that they had set.
                                          4

       Steve Kennedy will be doing the final inspection on the building
       which will include inspecting the bracing.           If needed,
       recommendations will be made at that time. Please give Steve at
       least three day lead time to schedule the final inspection on the
       building. Thank you.

Lynn wrote back a few hours later:

              Thanks Ryan,
              I am aware Steve will be doing the inspection when done.
       Just thought it would be good to have you stop and check progress
       see if there are any obvious things that you see that could create
       more stability during the set stage. Thanks for stopping. Let me
       know if you have any suggestions or saw anything that I need to be
       aware of.
              Thanks, Lynn

Ryan responded, “Lynn—Nothing ‘jumped’ out at me that needed more

temporary bracing.      I thought everything looked good on what they had

completed.” Lynn then replied, “That’s what I was really asking for. I have a lot

of confidence in your expertise and opinion.”

       The following week, Kirk continued setting the rest of the trusses

consisting of forty, eighty-foot trusses over the span of the building. Kirk and his

crew also installed all the permanent bracing and began working on the purlins.

At the end of the day on Friday, July 6, Kirk noticed some of the trusses on the

north half of the building began to bow. Kirk used his lift with a telescoping boom

to attempt to stabilize the trusses over the weekend until his crew could return to

fix the problem the following Monday. He checked on the building on Saturday

and noticed the bowing had gotten worse. With the help of his son, Kirk used

another of his lifts to put tension on the trusses to stabilize it until his crew could

return. He visited the site again on Sunday morning July 8, and based on the

look of the trusses, he knew the building was going to collapse. He contacted
                                          5

the manager of Phelps Implement and Lynn with Moeller & Walter. As Kirk was

going to attempt to get his lifts out of the building, a Phelps Implement employee

drove onto the lot.    Kirk got ten feet out of the building to speak with the

employee, and the building collapsed.

       Kirk again contacted Lynn and the manager of Phelps Implement to notify

them of the collapse and stayed on site until others arrived, including Ryan

Callaway.    The scene was left undisturbed for a few days while engineers

attempted to determine the cause of the collapse. It was ultimately decided the

collapse was due to inadequate temporary bracing of the roof trusses.

       Both Kirk and Lynn testified Steve Kennedy stated during the postcollapse

inspection that the employees of Lumber Specialties would have known and

understood the guidelines with respect to temporary bracing.        Steve denied

making any such statement and testified it would not have been reasonable for

Kirk and Lynn to rely on Ryan’s advice on temporary bracing in light of the fact

that Ryan was a sales person, not an engineer.

       Ryan confirmed in his trial testimony he sent those emails to Lynn and told

Kirk to keep doing what he had been doing during his courtesy site visit. He

explained he felt comfortable going to the site and reviewing the bracing that had

been erected. He further testified that Kirk and Lynn should have been able to

rely on the review and advice he gave in June regarding the temporary bracing

for the trusses that had been installed at that time.

       The jury returned a verdict against Lumber Specialties for negligent

misrepresentation, assigning 64% of the fault to Lumber Specialties and 36% of
                                        6

the fault to Dinsdale Construction. Lumber Specialties appeals, maintaining the

court erred in denying its motion for judgment notwithstanding the verdict

because it did not owe a duty to Dinsdale Construction.

II. Scope and Standard of Review.

       We review a court’s denial of a motion for judgment notwithstanding the

verdict for correction of errors at law. Royal Indem. Co. v. Factory Mut. Ins. Co.,

786 N.W.2d 839, 846 (Iowa 2010). We ask only whether a fact question was

generated after viewing the evidence in the light most favorable to the nonmoving

party. Id. The issue in this case is whether Lumber Specialties owed a duty to

Dinsdale Construction. Whether a legal duty exists is a question of law for the

court to decide. McCormick v. Nikkel & Assocs., Inc., 819 N.W.2d 368, 371

(Iowa 2012).    Normally, the existence of a duty focuses on the relationship

between the parties and public policy. Id.

III. Negligent Misrepresentation.

       Dinsdale Construction sued Lumber Specialties asserting Lumber

Specialties’s   employee,   Ryan    Callaway,   negligently   misrepresented   the

adequacy of the temporary bracing supporting the roof trusses.           Negligent

misrepresentation is defined as:

              “(1) One who, in the course of his business, profession or
       employment, or in any other transaction in which he has a
       pecuniary interest, supplies false information for the guidance of
       others in their business transactions, is subject to liability for
       pecuniary loss caused to them by their justifiable reliance upon the
       information, if he fails to exercise reasonable care or competence in
       obtaining or communicating the information.”
                                             7

Pitts v. Farm Bureau Life Ins. Co., 818 N.W.2d 91, 111 (Iowa 2012) (quoting

Restatement     (Second)    of   Torts   §       552   (1977)).   When   a   negligent

misrepresentation results in personal injury or property damage, the claim is

treated like any other negligence claim.               Id. at 110.   However, “when

misrepresentation based on negligent acts results solely in an interference with

intangible economic interests, more restrictive rules of recovery have been

developed” because of “the fear that liability for misinformation could be virtually

unlimited and include unknown claimants under the traditional foreseeability

limitation applicable to negligence claims.” Sain v. Cedar Rapids Cmty. Sch.

Dist., 626 N.W.2d 115, 123 (Iowa 2001). In such a case, we restrict who can be

liable to “only those who are ‘in the business of supplying information to others.’”

Pitts, 818 N.W.2d at 111 (citation omitted).

              This narrowing of the universe of potential defendants liable
       for negligent misrepresentations promotes fairness by ensuring that
       those liable are only those who supply information in an advisory
       capacity and are “manifestly aware” of how the information will be
       used and “intend[ ] to supply it for that purpose.” The restriction
       also ensures that those liable are “in a position to weigh the use for
       the information against the magnitude and probability of the loss
       that might attend the use of the information if it is incorrect.”

Van Sickle Constr. Co. v. Wachovia Commercial Mortg., Inc., 783 N.W.2d 684,

691 (Iowa 2010) (alteration in original) (citations omitted).

       The factors we consider in determining whether a person is “in the

business of supplying information” include: (1) whether the relationship between

the parties is at arm’s-length and adversarial or advisory; (2) whether the person

providing the information is “manifestly aware of the use that information will be

put and intends to supply it for that purpose”; (3) whether the information is given
                                         8

“gratuitously or incidental to a different service”; and (4) what role the defendant

was playing when the misrepresentation occurred. Pitts, 818 N.W.2d at 111–12.

Our courts have found “accountants, appraisers, school guidance counselors,

and investment brokers all fall within this class of potential defendants.” Id. at

112.

       However, we have refused to allow a suit for negligent
       misrepresentation where the defendant was a retailer in the
       business of selling and servicing merchandise, a seller who made
       misrepresentations pursuant to the sale of a business, a bank
       officer negotiating a loan guarantee with a bank customer, or an
       employer negotiating with an employee for employment.

Id.

       Lumber Specialties asserts it did not owe a duty to Dinsdale Construction

under a negligent misrepresentation claim because Lumber Specialties is not in

the business of supplying information.2      It claims the advice Ryan Callaway

offered regarding the temporary bracing was incidental to, or gratuitously

provided as part of, the sale of its product—roof trusses. Dinsdale Construction

asserts Lumber Specialties owed it a duty in light of the fact that it did not just

supply a product—the trusses—but also provided information—engineering

services.

       To determine whether Lumber Specialties was in the business of

supplying information, so as to subject it to a duty to provide accurate

information, we consider the following factors outlined in Pitts, 818 N.W.2d at

111–12:

2
  Neither party asserts the negligent misrepresentation claim resulted in property
damage in this case; thus, we proceed to address whether Lumber Specialties is in the
business of supplying information.
                                         9

      1. Whether the relationship between the parties is at arm’s-length and

adversarial or advisory. Lumber Specialties sold the trusses and engineering

services to Moeller & Walter. Moeller & Walter then sold the trusses to Dinsdale

Construction to use in the project, which ultimately billed Phelps Implement for

the building.   Lumber Specialties had no direct relationship with Dinsdale

Construction by virtue of the construction contract or any other arrangement.

Commercial transactions over goods and services are typically considered arms-

length transactions and are not advisory. See Molo Oil Co. v. River City Ford

Truck Sales, Inc., 578 N.W.2d 222, 227 (Iowa 1998) (“We refuse however to

apply this rule to a retailer in the business of selling and servicing its goods.”);

Meier v. Alfa-Laval, Inc., 454 N.W.2d 576, 581 (Iowa 1990) (concluding the tort of

negligent misrepresentation will not apply to a retailer who later services his

merchandise because the law of contract and warranty provide more appropriate

remedies for misstatements during the sale and servicing of a product).

However, there was not a traditional arm’s-length transaction between Dinsdale

Construction and Lumber Specialties in this case as Dinsdale Construction did

not negotiate and purchase the roof trusses or engineering services directly from

Lumber Specialties.

      Kirk met with Steve Kennedy from Lumber Specialties before construction

began for a prebuild meeting where they discussed the permanent bracing that

would be used to support the trusses. Lumber Specialties, in conjunction with

Select Structural Engineering, had prepared a site specific “roof framing and

permanent web bracing” plan. Steve walked Kirk through the steps involved in
                                        10

applying the permanent bracing for the structure. This was not a negotiation over

the sale of the product but was advice given on how to use or install the product

as a component part of the building.

      When questions developed regarding the temporary bracing during

construction, Lynn contacted Ryan to provide an opinion on the temporary

bracing during the construction. Kirk had not previously met Ryan before the day

Ryan provided his advice regarding the temporary bracing.         But the sale by

Lumber Specialties to Moeller & Walter was complete, and Ryan considered the

visit to be a courtesy call to maintain a good relationship with his customer—

Moeller & Walter. See Pitts, 818 N.W.2d at 112–13 (noting it is important to

analyze the parties’ relationship when the misrepresentation took place not when

relationship first began).      We conclude that at the time when the

misrepresentation took place, the relationship between the parties was not at

arm’s length and adversarial, but was advisory.

      2. Whether the person providing the information is manifestly aware of the

use that information will be put and intends to supply it for that purpose. In this

case, Ryan was specifically asked by Lynn to provide information regarding the

adequacy of the temporary bracing on the roof trusses being installed. If Ryan

was not competent to give an opinion on the adequacy of the bracing in light of

his status as a sale person with Lumber Specialties, Ryan could have refused to

give the advice or requested a consultation with someone more qualified, such

as Steve Kennedy. The information provided by Ryan was meant for Dinsdale

Construction’s benefit, and Ryan knew the information would be used by
                                        11

Dinsdale Construction. We conclude Ryan was manifestly aware of the reason

for the request for information, i.e., to support the structure during construction,

and intended to supply the information to the two people he knew needed the

information to complete the project. See Larson v. United Fed. Sav. & Loan

Ass’n, 300 N.W.2d 281, 286–87 (Iowa 1981) (noting the bank owed duty to the

home buyer under a theory of negligent misrepresentation when the appraisal

the bank prepared failed to disclose critical defects in the home to be purchased).

       3. Whether the information is given gratuitously or incidental to a different

service. The information provided here was occasioned by the sale of the roof

trusses by Lumber Specialties to Moeller & Walter. Manufacturers and sellers

are not normally considered to be in the business of supplying information when

they make, sell, or service their products. See Greatbatch v. Metro. Fed. Bank,

534 N.W.2d 115, 117 (Iowa Ct. App. 1995) (“On one hand, manufacturers and

dealers of merchandise have not generally been considered to be in the business

of supplying information. Their businesses involve making, selling and servicing

products, and any information provided during the course of the business is

incidental.”); Meier, 454 N.W.2d at 581 (concluding the tort of negligent

misrepresentation will not apply to a retailer because the opinion regarding the

fitness of the product was rendered when the retailer was employed to service or

repair the product).

       However, the information provided was not given as part of the negotiated

sale of the roof trusses. Ryan testified he considered the visit to be a courtesy to

his customer and was not a part of the contract. The structural inspection that
                                       12

was part of the contract was to be done when the building construction was final

and was focused on the permanent bracing.          Ryan was not acting to sell

products when he made the site visit but was arguably seeking to keep a

customer happy so as to secure future sales. See Nationwide Agribusiness v.

Structural Restoration, Inc., 705 F. Supp. 2d 1070, 1080–81 (N.D. Iowa 2010)

(noting the inspection in question was not incidental to any arm’s length

transaction between the parties but it also was not given gratuitously because the

defendant viewed it as a “sales tool” having an indirect financial benefit for the

company to obtain future work).

      4.   What role the defendant was playing when the misrepresentation

occurred. Lynn knew Ryan was a sales person for Lumber Specialties but asked

him to specifically render an opinion as to the adequacy of the temporary

bracing.   Lynn stated he had “a lot of confidence in [Ryan’s] expertise and

opinion.” Both Lynn and Kirk testified regarding Steve Kennedy’s statement at

the postcollapse investigation that all employees of Lumber Specialties are

aware of how bracing needs to be done on buildings and they understand the

temporary bracing guidelines. Ryan testified he was comfortable reviewing the

bracing and confirmed Kirk and Lynn should have been able to rely on the advice

he gave regarding the temporary bracing.

      While neither the contract nor Ryan’s job description placed a duty on

Ryan to render an opinion as to the temporary bracing, Ryan voluntarily agreed

to visit the construction site and give his opinion as to the adequacy of the

temporary bracing.
                                         13

        One who undertakes to do an act or perform a service for another
        has the duty to exercise care, and is liable for injury resulting from
        his failure to do so, even though his undertaking was purely
        voluntary or gratuitous, and he was not under any obligation to do
        such act or perform such service, or there was no consideration for
        the promise or undertaking sufficient to support an action ex
        contractu based thereon.

McCrady v. Sino, 118 N.W. 592, 597 (Iowa 1962); see also 65 C.J.S. Negligence

§ 40 (2010) (“A volunteer can be liable for injury resulting from his or her failure

to use reasonable care even though the undertaking was a purely voluntary

undertaking or even though it was completely gratuitous, and he or she was not

under any obligation to do such act or perform such service.”). Ryan, as an

agent of Lumber Specialties, voluntarily agreed to come to the site, observed the

temporary bracing, and provided an opinion as to the adequacy of that bracing.

See Jane Doe 3 ex rel v. White, 951 N.E.2d 216, 228–29 (Ill. App. Ct. 2011)

(concluding    an   employer    could   be    liable   under   theory   of   negligent

misrepresentation where the employer voluntarily undertook duty to supply an

employment reference); Singer v. Beach Trading Co., 876 A.2d 885, 892 (N.J.

Sup. Ct. App. Div. 2005) (same).

        We conclude based on our consideration of the four factors, when Lumber

Specialties gave advice to Dinsdale Construction about the installation of its

product, it was in the business of supplying information such that it owed a duty

to exercise care in giving that advice to Dinsdale Construction.         Through its

agent, Ryan Callaway, Lumber Specialties voluntarily offered the advice about

the adequacy of the temporary bracing in response to a specific inquiry from

Lynn.    There was no traditional arm’s-length transaction between Dinsdale
                                         14

Construction and Lumber Specialties as Dinsdale Construction never negotiated

directly with Lumber Specialties for any products or services. The contract at

issue, between Lumber Specialties and Moeller & Walter, involved both the

purchase of a product—roof trusses—and also the purchase of information—

engineering services. After the purchase, Lumber Specialties employee, Steven

Kennedy, provided advice and information regarding the steps involved in

applying the permanent bracing for the structure.      In addition, the advice in

question was given by someone (Ryan) who was aware of the reason for the

request and intended to supply the information for an expressed purpose, and

the advice was not given gratuitously.

      Lumber Specialties was “manifestly aware” of how the information would

be used and intended to “supply it for that purpose.” Van Sickle Constr., 783
N.W.2d at 691. Lumber Specialties was in a unique position as the supplier of

both the product and the information of how to install the product “to weigh the

use for the information against the magnitude and probability of the loss that

might attend the use of the information if it is incorrect.”    Id.   We are not

concerned under the facts of this case that liability for misinformation “could be

virtually unlimited and include unknown claimants under the traditional

foreseeability limitation applicable to negligence claims.” See Sain, 626 N.W.2d

at 123. The claimant, Dinsdale Construction, was known to Lumber Specialties;

Dinsdale Construction and Moeller & Walter specifically requested the

information; and the consequences of misinformation were well known to all

parties—building collapse.
                                         15

       Therefore, under the unique facts of this case, we conclude that when

Lumber Specialties agreed to and did provide an opinion to Dinsdale

Construction regarding the temporary bracing of the roof trusses, it owed a duty

to provide accurate information. The district court properly denied the motion for

judgment notwithstanding the verdict, and the jury was entitled to determine

whether that duty was breached.3

       AFFIRMED.

       Danilson, C.J., concurs; McDonald, J., dissents.

3
 Dinsdale Construction seeks an award of appellate attorney fees and expenses. “[A]n
award of attorney fees is not allowed unless authorized by statute or contract.” W.P.
Barber Lumber Co. v. Celania, 674 N.W.2d 62, 66 (Iowa 2003). Dinsdale cites no
authority to support such an award in this case. The request is therefore denied.
                                       16

MCDONALD, Judge. (dissenting)

       I respectfully dissent.     Under Iowa law, a claim for negligent

misrepresentation lies only where the person who supplies the information owes

a duty to the person to whom the information is provided. See Sain, 626 N.W.2d

at 124. The Iowa Supreme Court has “narrowed the scope of the tort to claims

stated against those in the business of supplying information to others.” Van

Sickle, 783 N.W.2d at 691 (internal quotation marks omitted). “Without facts to

show a person is in the business of supplying information to others, no duty

arises.”   Hendricks v. Great Plains Supply Co., 609 N.W.2d 486, 492 (Iowa

2000). Thus, it is immaterial whether Lumber Specialists’s employee provided

information incidental to the sale of Lumber Specialists’s trusses.           The

undisputed material fact remains—Lumber Specialists is a product manufacturer

and not in “the business of supplying information to others.” It thus owed no duty

to Dinsdale and is entitled to judgment as a matter of law.      See Meier, 454
N.W.2d at 581 (holding claim for negligent misrepresentation did not lie against

manufacturer and dealer of milking equipment); see also Amana Soc. Inc. v.

GHD, Inc., No. 10_CV-168-LRR, 2011 WL 3515475, at *5 (N.D. Iowa Aug. 11,

2011) (holding company designing anaerobic digester was not in business of

supplying information as a matter of law even where it made multiple

representations regarding the design and operation of the product sold); The

Conveyor Co. v. Sunsource Tech. Servs. Inc., 398 F. Supp. 2d 992, 1015 (N.D.

Iowa 2005) (holding seller of hydraulic equipment was not in the business of

supplying information where it provided information incidental to sale of
                                         17

equipment and noting the “the pecuniary interest in its business of selling

hydraulic lift packages simply does not create the sort of duty that would sustain

a negligent misrepresentation claim”); Employers Mut. Cas. Co. v. Collins &

Aikman Floor Coverings, Inc., No. 4:02-CV-30467, 2004 WL 840561, at *22 (S.D.

Iowa Feb. 13, 2004) (stating “[m]anufacturers are generally not considered to be

in the business of supplying information” and holding manufacturer and seller of

commercial carpet was not subject to claim of negligent misrepresentation); Fox

Assocs., Inc. v. Robert Half Int’l, Inc., 777 N.E.2d 603, 607-08 (Ill. Ct. App. 2002)

(collecting cases and stating negligent misrepresentation generally does not

apply to “manufacturers and sellers of tangible goods such as computers and

construction materials”); Wachs Tech. Servs., Ltd. v Praxair Distr., Inc., No.

COA11-633, 2012 WL 945215, at *5 (N.C. Ct. App. Mar. 20, 2012) (holding

manufacturer of welding materials was not in the business of supplying

information).