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IN THE COURT OF APPEALS OF IOWA No. 7-847 / 07-0085 Filed December 28, 2007

ERIC REYNOLDS AND MARY REYNOLDS, d/b/a AMANA COLONY RV SERVICE & REPAIR, Plaintiffs-Appellants, vs. SOLON STATE BANK, Defendant-Appellee, and AMANA SOCIETY, INC., Defendant. ________________________________________________________________ Appeal from the Iowa District Court for Johnson County, Marsha M. Beckelman, Judge.

Plaintiffs appeal the jury's verdict on their claim of negligence, and the district court's grant of a directed verdict on their claims of fraudulent misrepresentation, fraudulent nondisclosure, and breach of fiduciary duty. AFFIRMED.

Edward M. Blando and James W. Affeldt of Elderkin & Pirnie, P.L.C., Cedar Rapids, for appellants. H. Raymond Terpstra II and Gregory J. Epping of Terpstra, Epping & Willett, Cedar Rapids, for appellee.

Heard by Vogel, P.J., and Mahan, J. and Robinson, S.J.* Baker, J. takes no part. *Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2007).

2 ROBINSON, S.J. I. Background Facts & Proceedings

Eric and Mary Reynolds operated a recreational vehicle (RV) repair service. In 1999 they proposed to open a RV repair center near an Amana Colony RV park. Amana Society, Inc. agreed. The Amana Society picked the location for the RV repair center building and built the building to the Reynolds' specifications. The Amana Society and the Reynolds entered into a lease

agreement for the building, with an option to purchase. The Reynolds financed the project with a loan for $88,100 from Solon State Bank. The loan was guaranteed by the Small Business Association (SBA). The SBA agreement required that if "any portion of the collateral is located in a special flood hazard zone, Lender must require Borrower to obtain Federal flood insurance, or other appropriate special hazard insurance . . . ." At the time of the SBA loan, in June 1999, the site for the building had not been finally determined. Moreover, the Reynolds did not have an ownership interest in the building, and it was not used for collateral. The Reynolds' residence in Oxford, Iowa, was used for collateral. The Solon State Bank obtained a statement that the Oxford

residence was not in a flood zone. 1 In 2001, the Reynolds decided to exercise their option to purchase the building. In December 2001, George Davis of Appraisal Resources Company performed an appraisal on the building and valued it at $300,000. The appraisal report noted, "Subject is located partially in a flood plane area. There is a creek
A representative of Solon State Bank admitted a flood zone determination should have been done on the building, not because the building was collateral, but because tools and equipment which were collateral were used in the building.
1

3 that borders the east side of the site." None of the parties apparently noticed this statement. The Reynolds obtained a loan for $146,637 from Solon State Bank to purchase the property in April 2002. The Reynolds had problems servicing all of their debts. They borrowed $6000, and then an additional $2200 from the Solon State Bank late in 2002. In 2003, they began looking for financing for a proposed new business called EMR Innovations, which would design, produce, and sell after-market RV products. The Reynolds were unable to obtain additional financing from Solon State Bank. They negotiated with Corridor Management Company, a venture capital firm, but no agreement was reached. The Reynolds then approached Roger Hoffman, senior vice-president for State Central Bank of Keokuk. Hoffman met them at the RV repair center

building in September 2004 to discuss their new business proposal. Hoffman noticed the creek immediately outside the back of the building, and asked how much they paid for flood insurance. This brought the issue of the flood plain to the Reynolds' attention. Mary Reynolds contacted Steven Berner of Solon State Bank concerning the question about flood insurance. Solon State Bank received a statement from First American Flood Data Services on October 11, 2004, that the building was not in a flood zone. The next day, however, on October 12, 2004, they received a revised statement that the building was in a special flood hazard area. Federal flood insurance was not available because the Amana Society did not participate

4 in the Federal Flood Insurance Program. Due to the issue of flood insurance, State Central Bank did not agree to lend funds to the Reynolds. In November 2004, the Reynolds learned that prior to the construction of the building, the Amana Society should have obtained a permit from the Iowa Department of Natural Resources because the property was in a flood plain. The building was about 0.1 feet below the 100-year flood plain mark. On March 11, 2005, the Reynolds filed suit against Solon State Bank and the Amana Society, claiming they were damaged because the defendants failed to advise them earlier that the property was in a flood zone. Eventually the Reynolds entered into a settlement agreement with the Amana Society. As part of the agreement the Reynolds sold the building back to the Amana Society. The Reynolds used the settlement proceeds to pay their loans to Solon State Bank. The district court granted Solon State Bank's motion for summary judgment on the issues of interference with prospective contractual relationship, breach of good faith and fair dealing, violation of federal banking regulations, and interference with an existing contract. The case proceeded to a jury trial on the issues of negligence, breach of fiduciary duty, negligent misrepresentation (including fraudulent nondisclosure), and fraudulent misrepresentation. By the agreement of the parties, Solon State Bank made its motion for directed verdict at the close of all the evidence. The district court granted a directed verdict on the issues of breach of fiduciary duty, fraudulent misrepresentation, and fraudulent nondisclosure, finding there was insufficient

5 evidence to support these issues. The court also determined the issue of

punitive damages would not be submitted to the jury. The district court drafted jury instructions on the claims of negligence and negligent misrepresentation. The Reynolds objected to the court's failure to give their requested jury instruction No. 13, which was a listing of federal statutes and regulations relating to the loans guaranteed by the SBA and regulated by the Federal Deposit Insurance Corporation (FDIC). objection. The jury returned a verdict finding Solon State Bank was at fault, but its fault was not a proximate cause of the Reynolds' damages. The jury found the Amana Society was at fault, and its fault was the proximate cause of plaintiffs' damages. The jury assessed fault 100% to the Amana Society. The district court denied plaintiffs' motion for a new trial. The Reynolds now appeal. II. Standard of Review The court overruled the

This case was tried at law, and our review is for the correction of errors at law. Iowa R. App. P. 6.4. In law actions, findings of fact are binding upon the appellate court if supported by substantial evidence. Iowa R. App. P. 6.14(6)(a). III. Jury Instructions

The Reynolds contend the district court should have submitted their proposed instruction No. 13 to the jury. We review jury instructions to decide if they are a correct statement of the law and are supported by substantial evidence. Bride v. Heckart, 556 N.W.2d 449, 452 (Iowa 1996). Evidence is substantial when a reasonable mind would accept it as adequate to reach a

6 conclusion. Id. If a court errs in admitting or refusing to submit an instruction, we will reverse only if the error has caused prejudice. Kessler v. Wal-Mart Stores, Inc., 587 N.W.2d 804, 806 (Iowa Ct. App. 1998). Generally, a court should give a requested instruction if it correctly states the law applicable to the facts of the case and if the concept is not found in the other instructions. Olson v. Prosoco, Inc., 522 N.W.2d 284, 287 (Iowa 1994). However, "[i]nstructions should not marshal the evidence or give undue prominence to any particular aspect of a case." Stover v. Lakeland Square

Owners Ass'n, 434 N.W.2d 866, 868 (Iowa 1989). Jury instructions should not "give undue emphasis to any particular theory, defense, stipulation, burden of proof, or piece of evidence." Olson, 522 N.W.2d at 287. As long as the issues involved in a case are adequately covered, the court may choose its own language, and parties are not entitled to any particular instruction. Hutchinson v. Broadlawns Med. Ctr., 459 N.W.2d 273, 275 (Iowa 1990). Jury Instruction No. 15 provided: The plaintiffs claim the defendant was at fault in one or more of the following particular(s): a. In failing to obtain a flood plain determination for the location where the equipment would be placed in connection with the June 15, 1999, SBA loan; b. In failing, contrary to FDIC regulations, to give notice to plaintiffs or failing to arrange for the Amana Society to give notice that the building was located in a flood plain for which no federal flood plain insurance was available because Iowa County did not participate in the National Flood Insurance Program prior to execution of the April 30, 2002, building purchase loan. The Reynolds claim the instruction is insufficient because it did not instruct the jury that Solon State Bank was required to give them notice advising whether

7 flood insurance was available on the collateral securing the loan, or warn them the property was in a flood zone. We conclude the instruction given by the court adequately covered these concepts. The Reynolds' proposed instruction

contained the same concepts, but in more technical and less understandable language. The Reynolds' proposed instruction would have unduly emphasized their theory of the case, and furthermore, the court was free to choose the language of the instructions. The court's instruction was a clear, plain English statement of plaintiffs' claim of negligence. We conclude the district court did not err in rejecting plaintiffs' proposed jury instruction No. 13. IV. Directed Verdict

Our standard of review on appeal from the grant of a motion for directed verdict is for correction of errors at law. Mensink v. American Grain, 564 N.W.2d 376, 379 (Iowa 1997). The court should review the evidence in the light most favorable to the nonmoving party to determine whether a fact issue was generated. Dettman v. Kruckenberg, 613 N.W.2d 238, 250-51 (Iowa 2000).

Where substantial evidence does not exist to support each element of a plaintiff's claim, the court may sustain the motion. Olson v. Nieman's Ltd., 579 N.W.2d 299, 313 (Iowa 1998). A. Fiduciary Duty

The Reynolds claim they were in a fiduciary relationship with Solon State Bank. They state they placed full trust and confidence in Steven Berner from the Bank, and relied upon him for business decisions. The Reynolds contend Solon

8 State Bank breached its fiduciary duty to them by failing to inform them that the RV repair center building was in a flood zone. "A fiduciary relationship exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation." Kurth v. Van Horn, 380 N.W.2d 693, 695 (Iowa 1986) (citing Restatement (Second) of Torts

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