Court Opinion

ID: 4413685
Source: CourtListenerOpinion
Date Created: 2019-07-03 15:04:30.429229+00
Date Added: 2024-06-11T09:24:46.238662
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 17-1801
                                Filed July 3, 2019

JADE E. ROBINSON and SHANNON K. ROBINSON,
     Plaintiffs-Appellees,

vs.

WILLIAM A. WELP and JOYCE A. WELP,
     Defendants-Appellants.
________________________________________________________________

      Appeal from the Iowa District Court for Marshall County, Steven J. Oeth,

Judge.

      Home sellers appeal from the district court’s ruling finding they breached

their duty to disclose a snake problem in the home and awarding the home

buyers damages and attorney fees; home buyers cross-appeal the court’s

determination the sellers did not breach a duty in failing to disclose a pool leak

and the reduction of their requested award of attorney fees. AFFIRMED ON

BOTH APPEALS AND REMANDED.

      Barry S. Kaplan of Kaplan & Frese, LLP, Marshalltown, for appellants.

      Joseph M. Borg and Melissa A. Schilling of Dickinson, Mackaman, Tyler &

Hagen, P.C., Des Moines, for appellees.

      Heard by Potterfield, P.J., and Doyle and May, JJ.
                                        2

POTTERFIELD, Presiding Judge.

      Jade and Shannon Robinson purchased the home of William and Joyce

Welp. The Robinsons later initiated suit against the Welps, claiming the Welps

failed to disclose a number of known problems with the home. The district court

determined the Welps had a duty to disclose a snake problem pursuant to Iowa

Code chapter 558A (2016) and the purchase agreement, which they breached;

the court awarded the Robinsons damages in the amount of $64,216.42 and

costs and attorney fees of $55,212.

       On appeal, the Welps challenge the district court’s ruling, arguing the

evidence does not support that there was a snake problem while they owned the

home or that they had actual knowledge of any such problem. In the alternative,

they argue newly-discovered evidence presented in their post-judgment petition

to vacate requires that the court’s judgment be vacated or modified. Additionally,

they contest the district court’s determination of “reasonable attorney fees,”

maintaining the award of fees should be further reduced.

      On cross-appeal, the Robinsons maintain the district court should have

also determined that the Welps failed to properly disclose leaks in an in-ground

pool; they ask for additional damages. They also urge us to find that the district

court abused its discretion in reducing their attorney-fee request and ask for an

award of appellate attorney fees.

I. Background Facts and Proceedings.

      The Welps listed the property at issue for sale in 2014. After touring the

property a few times, the Robinsons made a full-price offer on the home for

$185,000 in late August 2014. The offer form included a requirement that the
                                           3

“Seller or Seller’s Agent . . . deliver a written disclosure statement to Buyer prior

to accepting an offer.” Additionally, paragraph 8b provided: “Seller and Buyer

acknowledge that the Seller of the real property has a legal duty to disclose

MATERIAL ADVERSE FACTS and MATERIAL DEFECTS of which Seller has

actual knowledge and which a reasonable inspection by Buyer would not reveal.”

It also included a provision that entitled either the buyer or the seller to costs and

attorney fees from the “party at fault.”

       The Welps filled out a disclosure form. One of the questions on the form

asked, “Is there a problem with mice, bats, snakes, spiders, roaches, etc?” The

form provided boxes to mark for “Yes,” “No,” or “Unknown,” and included a space

to explain the “yes” answer. The Welps marked “No.” Shannon Robinson signed

the acknowledgment as purchaser. The Welps accepted the Robinsons’ offer in

a purchase agreement signed by the Welps as sellers and by Shannon Robinson

as purchaser.

       Although closing was not scheduled to take place until October, the Welps

allowed the Robinsons to move into the home a few weeks early. Two or three

days after moving in, the Robinsons found two large bull snakes in the home—a

four-foot long snake downstairs on top of the bar and a second snake on the first

floor of the home. The Robinsons, through their realtor, contacted the Welps

about the snakes, and the Welps agreed to pay for professional pest control to

come to the home. The Welps did not amend the disclosure for the home and

did not otherwise inform the Robinsons of any history of snakes.

       The closing took place as scheduled in October.
                                          4

       The Robinsons found another five or six bull snakes inside the basement

of their home in the spring of 2015 and an additional three bull snakes in the fall

of 2015. They found two more in spring 2016—before construction began—and

another six or seven after.      Altogether, the Robinsons estimate they found

between eighteen and twenty-two live bull snakes in the home, including one that

fell out of the drop ceiling onto Jade Robinson’s head. They also found a snake

in the pool on approximately three occasions. Additionally, they estimate they

found forty snake skins in the insulation in the walls and drop ceilings.

       In spring 2016, the Robinsons hired a construction contractor, Thomas

Campbell, to remove the patio that abutted the home. Once the concrete was

removed, they found two snake nests with the remains of a number of eggs that

had been in a hollow spot under the patio. Additionally, once the concrete was

removed, Campbell noted that although the outside of the home was brick,

beneath the doorways was neither brick nor a wooden box sill, but rather bead

board insulation. The insulation had several holes through it into the basement

of the home, which Campbell and the Robinsons presumed was where snakes

had entered the home.       Campbell put in box sills.     For the demolition and

construction work, he charged the Robinsons $7200.           He also prepared an

estimate for the Robinsons, in which he stated that he could not say the snake

problem had been eradicated because it was possible there were still snakes

living in the walls and ceilings. He stated, “The only way I can see to eradicate

the problem is to basically remove interior wall coverings on main floor and lower

level including insulation and [attic] insulation along with [front] stoop of home.”
                                          5

He estimated it would cost $55,000 to complete the work and opined that the

home would be uninhabitable for the two months the work would take.

       In early November 2016, the Robinsons offered to rescind the sale of the

property; the Welps refused to take the property back. The Robinsons then filed

a lawsuit against the Welps, alleging that by not disclosing the snake problem or

an issue with the in-ground pool leaking, the Welps breached both the

requirements of the purchase agreement and the statutory requirement to

disclose pursuant to Iowa Code chapter 558A.            Based on the purchase

agreement, the Robinsons also claimed the right to recover reasonable attorney

fees and costs incurred in litigating the action.

       The matter proceeded to a two-day bench trial in October 2017. At trial,

William Welp testified he owned and lived in the property at issue from 1982 to

2014. Joyce lived in the home with him from 2003 until 2014. During the years

he lived in the home, there were five times Mr. Welp found or knew someone

else found a snake in the home.         Additionally, he saw three or four snakes

outside on the property each year, and other snakes made their way into the in-

ground pool located on the property. Mr. Welp also testified about the pest-

control measures he undertook while living in the home, including hiring a pest

control specialist to spray the home for bugs four times annually, placing mouse

traps and mouse bait in the home and garage, and applying insecticide in the

yard and against the foundation of the home. During his deposition, Mr. Welp

admitted that he undertook the pest control in an attempt to prevent snakes in

and around the home, as he was deathly afraid of them.
                                         6

       Shannon Robinson testified about the snakes she and her husband had

found in the home; with the most recent snake being found in January or

February 2017. She also testified about how the family was unable to use the

pool in 2015 because it consistently lost water, which made it difficult to keep the

ratio of chemicals in balance. They had completed some repairs to the pool but

believed there were others that still needed to be done. She testified they had

made an offer on another home because they no longer felt able to live at the

property in question.

       The realtor the Robinsons worked with in buying the property in question

also testified; she opined the home was “not marketable” and gave it a $0 value.

       Clifford Giesking, who the Welps had relied upon for their pool

maintenance and repair throughout many years, also testified. He testified that

he put in a new pump and re-caulked the pool at the Welps’ request in late

August 2014. He also stated that he checked the lining of the pool at that time

and did not find any holes. He opined that when he left, the pool was working as

it was supposed to.

       The district court found that, regarding the snake problems, the Welps

breached both the purchase agreement and the statutory requirement to

disclose, stating:

       The court concludes that the Welps did not know the extent of the
       snake problem; that is, that there were 22 snakes in the house.
       However, the court concludes that the Welps had knowledge of the
       existence of snakes in and on the property and did not properly
       disclose what they knew about the snakes. . . . The court believes
       that the knowledge of five snakes and one snakeskin being found in
       the house, even over many years passing as happened in this
       case, coupled with the knowledge of the existence of many snakes
       in the yard on the property and in the pool as admitted to by William
                                        7

       Welp, coupled with all the snake prevention measures taken by
       William Welp, results in a requirement that the Welps, in good faith,
       should have disclosed the problem to the extent they were aware of
       the problem.

The court awarded the Robinsons damages in the amount of $64,216.42, which

included $55,000 based on Campbell’s estimate to eradicate the snakes from the

home, $1000 per month living expenses for the two months Campbell estimated

the home would be uninhabitable during the eradication, and $7216.42 to

reimburse the Robinsons for the money already spent to fix the problem—

including the removal of the patio and placement of the box sills.      The court

declined to award the Robinsons any damages related to the pool leak, as the

court concluded the Welps were justified in relying upon Giesking’s

representation that the pool was in good working order at the time the house was

sold. In its order, the court also granted the Robinsons’ request for costs and

attorney fees and ordered the amount to be determined at a later hearing.

       In November 2017, the Robinsons filed an application for attorney fees,

requesting “a reasonable amount of attorneys’ fees and expenses in the total

amount of $105,589.50, and expenses in the amount of $1677.17.” The Welps

resisted.

       Then, in February 2018, the Welps filed a petition to vacate the judgment

and grant a new trial. In support of their motion, the Welps maintained there was

newly-discovered evidence warranting a new trial; namely, that the Robinsons

had listed the property at issue for sale in December 2017 at a purchase price of

$197,500. In their own disclosure, the Robinsons had checked both the “yes”

and “no” box on the form regarding the pest question and supplemented their
                                        8

answer by writing, “Snakes in the home, removed back patio in back of home,

down to foundation, installed rim board and moisture barrier, have not had any

for about a year now.” The Welps asserted this evidence established that the

Robinsons had obtained judgment by committing fraud upon the court.

       On March 1, 2018, the court heard both the motion for fees and the motion

to vacate the judgment. The Welps called Shannon Robinson to testify. She

testified she and her husband had just accepted an offer to sell the home at issue

for $160,000. Since they first listed the property in December 2017, they had

reduced the price a number of times.        Additionally, they had updated their

disclosure form on February 26—just a few days earlier—to disclose a new

snake skin that had just been found in the home.        The Robinsons had not

undertaken the eradication measures outlined by Campbell and did not plan to;

the new buyers had signed an indemnity agreement regarding the snake issue.

Mrs. Robinson testified her family closed on a different home soon after trial

ended and then placed the property at issue for sale as they could not afford to

pay two mortgages. Based on their remaining mortgage on the property at issue

and other costs associated with the property and closing, she estimated the net

total to her and her husband—assuming the house sale closed at the $160,000

offer—was a loss of $31,144.20. Following her testimony, the Welps called the

Robinsons’ attorney to testify regarding some of the charges included on the

attorney-fee affidavit he submitted.

       In its written ruling, the court acknowledged the sale of the home at issue

for $160,000 was at odds with the opinion testimony of the realtor that the home

had no value and was unmarketable. But the court noted it had never relied on
                                        9

this testimony and also believed “the Robinsons had no option but to try and sell

the home.” The court also recognized the Robinsons had initially asked the

Welps to rescind the contract selling the Robinsons the home, which the Welps

refused to do. It concluded the allegations the Robinsons committed fraud were

not legally sufficient to justify vacating the judgment, as the Welps were alleging

intrinsic fraud and only extrinsic fraud can justify vacating a judgment.

Additionally, the court concluded that listing of the home and possibly selling it

did not constitute newly discovered evidence. In denying the motion to vacate,

the court stated:

       Nothing the Robinsons did constitutes a basis for vacating the
       judgment or granting a new trial. Even if the Robinsons have now
       resold the home, they are doing so at a significant loss. Even if the
       Robinsons are not required to take the measures contemplated by
       the court ($55,000 repair by Campbell Construction), their damages
       based on the reduced selling price, coupled with the costs of sale,
       are comparable to the damages awarded by the court.

       Regarding the Robinsons’s application for attorney fees, the court

considered the hours and rate requested and eliminated hours from thirteen

separate billing time periods. Overall, the court reduced the number of hours of

services from the requested 388.4 to 249 hours and reduced the hourly

compensation to $215.     Of the $105,589.50 requested, the court determined

$53,535 was a reasonable award of attorney fees and awarded the requested

expenses of $1677.17.

       The Welps appeal from the district court’s verdict and denial of their

petition to vacate.   The appeals were consolidated.       The Robinsons cross-

appeal.
                                            10

II. Standard of Review.

         We review the district court’s ruling regarding breach of contract and the

violation of a statute for correction of errors at law.    Iowa R. App. P. 6.907.

Similarly, “[a]ctions under [Iowa Rule of Civil Procedure 1.1012][1] are law actions,

not equity actions.” In re Marriage of Cutler, 588 N.W.2d 425, 429–30 (Iowa

1999). “Accordingly, the district court’s finding that fraud had not been prove[d]

[i]s binding on the court of appeals if supported by substantial evidence.” Id. at

430.

         “We review the court’s award of attorney fees for an abuse of discretion.”

Boyle v. Alum-Line, Inc., 773 N.W.2d 829, 832 (Iowa 2009).

III. Discussion.

         A. Snake Problem.

         The Welps raise a number of issues with the district court’s conclusion

they violated their duty—based on the purchase agreement and the statute—to

disclose a snake problem with the property. They take issue with the definition of

the word “problem,” the fact that the question is written on the disclosure form in

the present tense—when they contend they had not seen a snake in the home

for fourteen years, whether it can be said they had actual knowledge of a

problem with bull snakes specifically, and the definition of “adverse material fact.”

         The purchase agreement provides that the sellers have a legal duty to

disclose any material adverse facts and material defects. In past cases, our

court has determined that similar language “incorporates by reference the

disclosure mandates of chapter 558A.” Johnson v. Baum, No. 09-1340, 2010

1
    Formerly Iowa Rule of Civil Procedure 252.
                                        11

WL 2757192, at *4 (Iowa Ct. App. July 14, 2010); see also Bramwell v. Tisue,

No. 99-2057, 2002 WL 532225, at *2 n.4 (Iowa Ct. App. Mar. 27, 2002). The

Welps disagree with this determination but do not distinguish their circumstances

from those in the cases we have decided before; we are persuaded by our

previous rationale.

       Iowa Code section 558A.3(1) requires the sellers to make their disclosures

“in good faith.” We agree with the district court that checking “no” to the question

asking, “Is there a problem with . . . snakes?” was a violation of their duty. The

Welps argue they did not understand the snakes they were aware of in and

around the property—five in the house over thirty-two years, three to four in the

yard each year, and additional snakes found in the pool yearly—to be a

“problem,” but their extensive efforts to minimize the snakes in the yard and the

food supply of the snakes in and around their home contradicts their contention.

The presence of snakes in the structure of the home in the days following the

Robinsons’ move and in the following months indicate there was a snake

problem to an extent the Welps knew about it when they completed the

disclosure form.

       Additionally, we are not persuaded by the Welps’ assertion they did not

have a duty to disclose because the question on the form was written in present

tense—asking if there “is” a snake problem—as they had not seen a snake inside

in fourteen years. First, nothing in the disclosure form limits the disclosure of

“material adverse facts” to those affecting just inside the home as opposed to

those outside on the property. Second, section 558A.3(2) requires the sellers to

amend the disclosure statement “if information disclosed in the statement is or
                                         12

becomes inaccurate or misleading, or is supplemented.”           The Robinsons’

discovery of two large bull snakes in the home two or three days after moving in

but before closing should have alerted the Welps of the need to amend their

disclosures. And finally, even if we were convinced the Welps were unaware of a

current snake problem, the question being written in the present tense does not

curb the Welps’ duty to disclose a material previously-existing condition. See

Stone v. Ford, No. 17-0723, 2018 WL 2084849, at *2 (Iowa Ct App. May 2, 2018)

(stating, “Iowa courts have repeatedly found a seller can be liable to a buyer for

failing to disclose a known previously- or currently-existing condition so long as

the condition is material” and collecting cases).

       As to whether the Welps had actual knowledge of the snake issue,

substantial evidence supports the district court’s finding that while the Welps

were likely not aware of the extent of the snake problem within the home, they

did, in fact, have actual knowledge a snake problem existed. The Welps argue

the snakes they found in and around their home over the years were garter

snakes, which did not make them aware of the bull snake problem, but this

argument is not supported by the evidence presented at trial. While many of

their witnesses testified the snakes they saw in the home were garter snakes,

Joyce Welp admitted that during her deposition, she had been shown a picture of

what she later learned was a bull snake and that she agreed the picture matched

the type of snake she saw on the property.

       Finally, the Welps contend that the snake problem does not fall within the

term “material adverse fact”—as used in the purchase agreement and defined by

section 543B.5(15). We need not consider this argument, as the requirement in
                                        13

the purchase agreement that the sellers disclose any material adverse facts is an

extension of the duty—not a limitation upon it—to complete the disclosure form in

good faith. See, e.g., Johnson, 2010 WL 2725192, at *4 (finding the legal duty to

disclose “material adverse facts” within “the purchase agreement subsumes the

disclosure requirements”).      Failing to disclose the snake problem on the

disclosure form explicitly required by the purchase agreement is sufficient to

violate the duty to disclose.

       We agree with the district court that the Welps violated their contractual

and statutory duty to disclose the snake problem on the property.

       B. Pool Leak.

       The Robinsons argue the district court was wrong to conclude the Welps

did not violate their duty to disclose by marking “yes” to the question on the

disclosure form whether the pool equipment was working. They maintain the

Welps had a duty to disclose the past issues with the pool leak even though they

believed—based on Giesking’s report—that the pool was in good working order

at the time of the sale. See Yeboah v. Emans, No. 12-0900, 2013 WL 1453231,

at *3 (Iowa Ct. App. Apr. 10, 2013) (concluding the district court did not err in

finding statutory liability based on non-disclosure of a sunroom leak the sellers

believed was a repaired problem because chapter 558 “does not limit the

required disclosures to active problems”). Unlike the snake issue above, we

cannot say the past pool leak was a “material” issue that required disclosure. Cf.

Stone, 2018 WL 2084849, at *2 (stating “Iowa courts have repeatedly found a

seller can be liable to a buyer for failing to disclose a known” previously-existing

condition “so long as the condition is material”). Giesking, who had worked on
                                        14

and with pools for “probably forty years,” testified re-caulking pools to prevent or

stop leaks is a regular part of maintenance on a pool—not a material issue. As

to other issues with the pool the Robinsons later uncovered, Giesking was

unaware of any such issues at the time he did his final pool maintenance in

August 2014. The district court found no fault with Giesking’s testimony that the

pool was in good working order the last time he saw it and concluded the Welps’

reliance on Giesking’s statement was justified.      We agree.    See Iowa Code

§ 558A.6(1) (providing the transferor “shall not be liable under” chapter 558A “for

the error, inaccuracy, or omission in information required in a disclosure

statement, unless that person has actual knowledge of the inaccuracy, or fails to

exercise ordinary care in obtaining the information” (emphasis added)).

      C. Motion to Vacate or Modify Decision.

      The Welps maintain the district court should have vacated the judgment

and granted a new trial on the merits because of fraud and newly-discovered

evidence.

      The Welps maintain the Robinsons committed fraud upon the court by

allowing their real estate agent to testify that the property was unmarketable and

without value due to the snake problem and then, after obtaining judgment in

their favor, listing the home for $197,500 without completing the eradication

process. First, we agree with the district court that the Robinsons, even if their

real estate agent believed it did not have value and would not sell, had little

choice but to attempt to sell the property once they obtained a different home—

which they testified they were in the process of doing at trial. Second, the fact

that an uninvolved third party was willing to pay $160,000 for the property in
                                         15

question does not invalidate the real estate agent’s opinion testimony that she

did not believe the home was marketable. Moreover, the district court did not

rely upon the real estate agent’s testimony when reaching its determination of

damages. And finally, even if the real estate agent’s testimony contained an

exaggerated opinion, “[a] claim of false testimony constitutes intrinsic fraud.”

Phipps v. Winneshiek Cty., 593 N.W.2d 143, 146 (Iowa 1999). Intrinsic fraud is

not a ground to vacate a judgment. Id.

       The Welps also maintain the judgment should be vacated and a new trial

granted based on the “newly discovered evidence” that the Robinsons were able

to sell their home for $160,000 without completing the work outlined by Campbell

to eradicate the snakes. We agree with the district court that this does not

warrant a new trial. See Benson v. Richardson, 537 N.W.2d 748, 762 (Iowa

1995) (“We do not favor motions for new trial based on newly discovered

evidence. We will not disturb a trial court’s ruling unless the evidence clearly

shows the court has abused its discretion.” (citation omitted)).

       Finally, the Welps maintain that even if we do not agree that vacating the

judgment is appropriate, we should modify the awarded damages.                They

maintain the loss the Robinsons took on the sale of the property ($31,144.20)

plus the amount they spent on the snake problem before trial ($7216.42) is

significantly less than the $64,216.42 the district court awarded. This issue is not

preserved for our review. The Welps filed a petition to vacate—not a motion to

modify the judgment.      We recognize the district court raised the issue of

modification with the parties at the hearing on the motion, asking if the parties

objected if the court considered a modification of the judgment “based on a
                                             16

diminution of value argument, taking what they had in it, what they’re getting out

of—they’re not spending the [$55,000] on Campbell assuming this goes

through—and recalculating the judgment amount.”2 But the court’s written ruling

is silent as to the issue of modification. See In re Det. of Anderson, 895 N.W.2d

131, 138 (Iowa 2017) (“In order for error to be preserved, the issue must be both

raised and decided by the district court.”).

         We will not upset the district court’s denial of the Welps’ motion to vacate

the trial court judgment.

         D. Trial Attorney Fees.

         Both the Welps and the Robinsons appeal the district court’s award of trial

attorney fees to the Robinsons. The Robinsons assert that the court abused its

discretion in its reduction of the requested fees from $105,589.50 to $53,535,

and the Welps maintain the award should have been further reduced.

         “The reasonableness of the hours expended and the hourly rate depends,

of course, upon the facts of each case. ‘The district court is considered an expert

in what constitutes a reasonable attorney fee.’”            Boyle, 773 N.W.2d at 832

(citations omitted).       There are a number of factors to be considered in

determining the amount of a reasonable attorney fee, and the district court’s

decision must include findings of fact to support its determination. Id. at 833.

         Based on the district court’s explicit findings regarding the appropriate

factors and its role as an expert in making the determination, we cannot say the

district court abused its discretion in awarding $53,535 in trial attorney fees.

2
    The Robinsons objected; the Welps did not directly respond to the court’s question.
                                        17

       E. Appellate Attorney Fees.

       The Robinsons maintain they may also recover appellate attorney fees

and request a remand to the district court to determine the amount. The Welps

are silent on the issue.

       We agree with the Robinsons that the language of the purchase

agreement that provides for the award of attorney fees does not limit itself to

counsel’s fee for litigation in the trial court. See Bankers Trust Co. v. Woltz, 326

N.W.2d 274, 278 (Iowa 1982); see also Iowa Code § 625.22 (“When judgment is

recovered upon a written contract containing an agreement to pay an attorney

fee, the court shall allow and tax as a part of the costs a reasonable attorney fee

to be determined by the court.”).

       We grant the Robinsons’ request to remand to the district court for a

determination of the reasonable amount of attorney fees the Robinsons should

be awarded on appeal. Bankers Trust, 326 N.W.2d at 278; see also Lehigh Clay

Prods., Ltd. v. Iowa Dep’t of Transp., 545 N.W.2d 526, 528 n.2 (Iowa 1996)

(stating the issue of appellate attorney fees is “frequently determined in the first

instance in the district court because of the necessity for making a record”). We

therefore remand to the district court for the limited purpose of an evidentiary

hearing on and the fixing of appellate attorney fees.

IV. Conclusion.

       We affirm the district court’s ruling that the Welps breached their duty to

disclose a snake problem on the property in question but did not breach a duty to

inform the Robinsons of a past pool leak. We also affirm the district court’s

denial of the Welps’ motion to vacate and the reduced award of attorney fees to
                                        18

the Robinsons.3     Because the purchase agreement does not preclude the

recovery of appellate attorney fees, we remand to the district court for the limited

purpose of an evidentiary hearing on and the fixing of appellate attorney fees.

       AFFIRMED ON BOTH APPEALS AND REMANDED.

3
  In their appellate brief, the Welps state in passing that Jade Robinson should be
removed from the judgment because the relief granted the Robinsons was based on the
purchase agreement, to which Jade was not a party. No one mentioned this perceived
error until after the judgment was issued. When asked about the issue at appellate
argument, the Welps conceded it was an issue of form over substance. We do not rule
on this issue.