6

IN THE COURT OF APPEALS OF IOWA

No. 1-435 / 00-1070

Filed May 31, 2002

CAROLYN SLOCUM,

Plaintiff-Appellee/Cross-Appellant,

vs.

FIRSTAR BANK OF CEDAR RAPIDS, f/k/a THE MERCHANTS NATIONAL BANK OF CEDAR RAPIDS,

Defendant-Appellant/Cross-Appellee,

JUDITH E. HASSON and ROBERT W. SLOCUM,

Defendants.

Appeal from the Iowa District Court for Linn County, Lynne E. Brady, Judge.

Defendant Firstar Bank of Cedar Rapids appeals and plaintiff cross-appeals from a judgment for the plaintiff following trial on her action for conspiracy and conversion based on the repossession of her vehicle. AFFIRMED.

Lynn Wickham Hartman and Leonard T. Strand of Simmons, Perrine, Albright & Elwood, P.L.C., Cedar Rapids, for appellant.

Steven E. Ballard of Leff, Haupert, Traw & Willman, Iowa City, for appellee.

Heard by Vogel, P.J., and Miller and Eisenhauer, JJ.


MILLER, J.

Defendant Firstar Bank of Cedar Rapids, f/k/a Merchants National Bank of Cedar Rapids,[1] appeals, and plaintiff Carolyn Slocum cross-appeals, from a judgment for Slocum following trial on her action for conspiracy and conversion based on the repossession of her vehicle. The bank contends (1) it was entitled to a directed verdict on the conspiracy claim because it had no knowledge of any forgery and had a legal right under the original loan document to reposses Slocum’s vehicle, (2) it was entitled to a directed verdict on the conversion claim because it had a legal right under the original loan document to repossess the vehicle, (3) the court erred in refusing to instruct that an element of conversion is “wrongful” control or dominion, (4) the court erred in dismissing its counterclaim for nonpayment of the car loan, (5) the record does not support the compensatory and punitive damages awards, and (6) it is entitled to a new trial or a substantial remittitur on the punitive damages award. Slocum maintains the trial court erred in dismissing her consumer credit claims against the bank because the bank had waived the statute of limitations defense. We affirm.

I. BACKGROUND FACTS.

In 1988, Carolyn Slocum and her mother-in-law, Judith Hasson, signed a promissory note to purchase a 1988 Chevy Nova for Slocum and her husband. The sixty-month note was assigned to the bank, and for a period of time the payments were made on a timely basis. Initially, Hasson made the payments from an “allotment” taken out of her son (and Slocum’s husband) Robert’s military paycheck. However, Hasson subsequently did not use the allotment to pay the loan and instead mailed the money back to Robert when he so requested. The note went into default in the summer of 1989. The bank sent a notice of right to cure default to Hasson and Slocum, but Slocum did not receive it. The bank also attempted to contact Slocum by telephone, but was informed she had moved. In September of 1989, Hasson requested permission from the bank to defer two monthly payments. The bank then sent her an extension agreement and requested that both Hasson and Slocum sign it. Hasson returned the document on which she had signed both her name and Slocum’s name. Slocum knew nothing of the extension. This extension was approved by bank employee, Mary Kacere, who was Hasson’s friend.

In 1990, the note again went into default. Again, the bank attempted to reach Slocum, but was informed she had moved. Hasson requested another extension from Kacere. Hasson did not send this extension agreement to Slocum. Hasson signed both their names and returned it to the bank. Kacere approved this extension as well. In January 1991, the note went into default, and Hasson requested to rewrite the terms of the note. The bank granted this request, and a new note was issued on March 20, 1991. The original note was cancelled. As with the extension agreements, Hasson forged Slocum’s name to the rewrite document, and Slocum was never informed of the rewritten loan.

After the rewrite of the loan, the payments continued to be delinquent. Throughout the spring and summer of 1992, efforts were made to collect on the rewritten loan, but payments were not made. On August 19, 1992, the bank
repossessed the car from Slocum and sent a notice of repossession to her. She claims this was the first time she knew of any problems with the loan repayments. She contacted the bank and requested loan documents. She also alerted bank employees that she did not sign any extension or rewrite documents. The bank later sold the car for $1892.00 and applied the proceeds to the loan balance.

In September of 1992, the bank agreed to payment arrangements with Robert. However, after he failed to follow through with the payments, the bank pursued collection against Hasson, apparently on the principal and interest remaining on the rewritten loan. She eventually confessed judgment for the balance of the debt. She subsequently reached a settlement with the bank, paid part of the judgment, and was released. The bank did not attempt to collect the deficiency from Slocum.

Slocum thereafter brought suit against the bank, Hasson, and Robert, from whom she was then divorced. Robert failed to appear for trial, and a default judgment was entered against him. After a trial, the jury entered a finding against the bank for conspiracy and conversion and a finding against Hasson for conspiracy, forgery, and fraudulent misrepresentation/non-disclosure. The jury instructions and verdict show that in finding the bank, Hasson, and Robert liable for conspiracy, the jury specifically found that “[d]efendant Firstar knew [the bank documents on which Hasson signed Slocum’s name without Slocum’s permission] were forged but nonetheless has proceeded to assert its purported rights under the terms of the documents.”

Compensatory damages were awarded against the bank, Hasson, and Robert in the amount of $36,200. Punitive damages were entered against the bank and Robert in the amount of $150,000 each. The bank appeals from the judgment against it, and Slocum cross-appeals.

II. SUBSTANTIAL EVIDENCE TO SUPPORT JURY FINDING.

As a preliminary matter, we must address whether there is substantial evidence supporting the jury’s finding that the bank “knew these documents were forged but nonetheless has proceeded to assert its purported rights under the terms of the documents” because this finding is key to our resolution of this appeal. Findings of fact in a law action, such as the action here, are binding upon the appellate court if supported by substantial evidence. Iowa R. App. P. 6.14(6)(a).

We conclude there is substantial evidence supporting the jury finding. The bank made no attempt to verify the authenticity of Slocum’s signature on the documents in question. There was evidence the bank processed the loan rewrite through the mail, although that was not typical for the bank, it did not control the mailing of paperwork itself, and Hasson had no significant customer relationship with the bank. Hasson has had a twenty-year friendship with Kacere, who subsequently hired Hasson to work for her for a different employer despite Hasson’s forgeries. The obviously forged signatures, the timing of the loan rewrite, and the other circumstances of the transaction support the finding that the bank, through Kacere, engaged in a conspiracy. The bank sent Slocum notices at wrong addresses. The evidence may be seen as showing the bank’s managers and compliance officers created false and misleading memoranda
purporting to show that this transaction was handled routinely and appropriately when the bank’s file showed otherwise. The bank’s failure to investigate Slocum’s allegations of forgery belies the bank’s claims that it responded appropriately and suggests that the bank did not inquire for fear that its wrongful actions would be discovered, recorded, and reported. Furthermore, there was a clear line of communication between Robert, Hasson, and the bank.

III. CONSPIRACY CLAIM.

The bank contends the district court erred in failing to grant it a directed verdict at the close of all the evidence on Slocum’s conspiracy claim. It argues it had no knowledge of any forgery and had a legal right under the original loan document to repossess the 1988 Chevy Nova.

A. Scope and standards of review. We review the denial of a motion for directed verdict for the correction of errors at law. Top of Iowa Coop. v. Sime Farms, Inc., 608 N.W.2d 454, 466 (Iowa 2000). We must determine whether there was “sufficient evidence to generate a jury question.” Id. We view the evidence in the light most favorable to the nonmoving party, regardless of whether the evidence was contradicted. Id. We afford the nonmoving party every legitimate inference that can reasonably be drawn from the evidence. Id. If reasonable minds could differ on resolution of the issue, then it should be submitted to the jury. Id.

B. Merits. Civil conspiracy requires proof of an agreement or understanding to effect a wrong against another. Robbins v. Heritage Acres, 578 N.W.2d 262, 265 (Iowa Ct. App. 1998). A conspiracy is a combination of two or more persons by concerted action to accomplish an unlawful purpose, or to accomplish by unlawful means some purpose not in itself unlawful. Basic Chems., Inc. v. Benson, 251 N.W.2d 220, 232 (Iowa 1977). As noted above, we find substantial evidence supports the jury finding that the bank knew of the forgery of certain documents, participated in the forgery of the documents through Kacere, and nevertheless proceeded to partially enforce the forged rewritten note. For the reasons stated in divisions II and III, we affirm.

IV. CONVERSION CLAIM.

The bank contends the district court erred in failing to grant it a directed verdict at the close of all the evidence on Slocum’s conversion claim. It argues it had a legal right under the original loan document to repossess the 1988 Chevy Nova.

A. Scope and standards of review. Our scope and standards of review are as set forth at division III-A above.

B. Merits. Conversion is the act of wrongful control or dominion over chattels in derogation of another’s possessory rights thereto. Welke v. City of Davenport, 309 N.W.2d 450, 451 (Iowa 1981). To maintain a conversion action, the plaintiff must have a possessory right in the property converted. Id. at 452. Actual possession at the time of conversion is sufficient to enable the plaintiff to maintain the action. Id. Except as to titleholders and their privy, the possessor is generally treated as having the entire property interest. Id. Generally, the original note would not be extinguished by its surrender when the surrender and extensions of time were obtained by fraud. See Hubbard v. Hart, 71 Iowa 668, 669, 33 N.W. 233, 233 (1887). If the original note was not extinguished, the bank
had an interest in the vehicle, and its repossession would be legal. The question presented in this appeal is whether, at the time of the repossession, the bank had a right in the vehicle as titleholder. We find it did not.

We conclude that the bank was unable to rely on the original note to support its repossession of the vehicle because, as found by the jury, it had knowledge of Hasson’s forgery of Slocum’s name on the loan rewrite. See Farmers’ Sav. Bank of Arispe v. Arispe Mercantile Co., 139 Iowa 246, 248, 117 N.W. 672, 673 (1908) (stating that the giving of a renewal note had no effect in the absence of an agreement therefore to discharge either the makers or endorsers of the original obligation, if, for any reason not chargeable to the wrong or fraud of the holder, the renewal proves to be invalid). The forgery here is chargeable to both Hasson and the bank. The original note was discharged. Thus, the bank could not pursue repossession based on the original note, given the bank’s knowledge of the forgeries as found by the jury.

We also determine that the bank is estopped from relying on the original note. The bank accepted the loan rewrite, knowing of the forgery, and discharged the original note. We believe this behavior estops it from collecting on the original note. See Hubbard, 71 Iowa at 670, 33 N.W. at 234 (stating that if creditor represents to surety that the debt is paid, and thereby induces him to surrender the security which he holds for his own indemnity, or even to forgo the steps necessary for his protection, he will be estopped in the future from asserting the claim against him).

Additionally, we conclude the bank could not pursue repossession based on the original note because it elected to repossess the vehicle and then pursue Hasson based on the replacement note rather than the original note, despite its knowledge of Hasson’s forgery on the replacement note. Thus, it is bound to that election, and it cannot collect on the original note. See Reints & De Buhr v. Uhlenhopp, 149 Iowa 284, 293, 128 N.W. 400, 403 (1910) (having relied on the second note to collect against one surety, the bank could not pursue the other surety on the first note).

We affirm on this issue.

V. JURY INSTRUCTION ON CONVERSION.

The bank contends it is entitled to a new trial because the court erred by refusing to instruct the jury in the marshalling instruction on conversion that an element of conversion is “wrongful” control or dominion.

A. Scope and standards of review. We review jury instructions for the correction of errors at law. Iowa R. App. P. 6.4; Herbst v. State, 616 N.W.2d 582, 585 (Iowa 2000). The standard of review for jury instructions is whether prejudicial error by the trial court has occurred. Thavenet v. Davis, 589 N.W.2d 233, 236 (Iowa 1999). Jury instructions must be considered as a whole, and if the jury has not been misled, then there is not reversible error. Id.