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IN THE COURT OF APPEALS OF IOWA No. 6-148 / 04-1888 Filed May 10, 2006

PATRICIA A. RINIKER and MICHAEL J. RINIKER, Individually and as Executors of the Estate of Wendall W. Carter, Deceased, Plaintiffs-Appellants, vs. LOCUST STREET SECURITIES, INC., Defendant-Appellee.

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Appeal from the Iowa District Court for Dubuque County, Monica Ackley, Judge.

Patricia and Michael Riniker appeal from the order granting summary judgment and dismissing their action against Locust Street Securities, Inc. AFFIRMED.

David L. Hammer and Angela C. Simon of Hammer, Simon & Jensen, Dubuque, for appellants.

Terri L.Combs of Faegre & Benson, L.L.P., Des Moines, for appellee.

Heard by Mahan, P.J., and Hecht and Eisenhauer, JJ.

2 HECHT, J. Patricia and Michael Riniker appeal from the order granting summary judgment and dismissing their action against Locust Street Securities, Inc. (LSSI). We affirm. Background Facts and Proceedings. A reasonable person could find the following facts from the summary judgment record. Allan Rausch operates a financial services and insurance

company known as Rausch Financial Services, through which he offers clients an assortment of financial products such as mutual funds and insurance policies sold by LSSI and various other financial services companies. Raush was legally authorized to sell securities only if he marketed them through a licensed securities broker-dealer such as LSSI. In 1999, Wendall Carter sought investment advice from Rausch. With Rausch's advice and assistance, Carter elected to sell $1.2 million worth of Amoco stock and invest the proceeds in four charitable gift annuities issued by Mid-America Foundation. The annuity contracts obligated Mid-America to make fixed monthly annuity payments to Carter until his death; and after Carter's death to make such payments to the second annuitants, the Rinikers, until their deaths; and thereafter to pay the remainder to charities designated by Carter. Payments were made to Carter according to the terms of the contract until September of 2001 when Carter was notified that Mid-America had failed financially and would not make further payments. Soon after learning of Mid-America's failure, Carter died.

3 The Rinikers, individually and as executors of the estate of Wendall Carter, subsequently sued Rausch and LSSI. Against LSSI, the Rinikers

asserted claims of negligence, breach of fiduciary duty, equitable fraud, constructive fraud, negligent misrepresentation, unsuitability, breach of

oral/implied contract, breach of the duty of good faith and fair dealing, vicarious liability, and negligent supervision. LSSI later sought and the district court granted summary judgment concluding: (1) LSSI was Rausch's broker only as to sales of securities; (2) a charitable gift annuity is not a "security"; and (3) as Rausch was not an agent of LSSI in the sale of the annuities to Carter, LSSI was not vicariously liable for the claims asserted by the plaintiffs. The district court further held the fraud and misrepresentation claims against LSSI must fail because there was no evidence that the company made any representations to the plaintiffs about the MidAmerican annuity. The plaintiffs' case against Rausch concluded when a

settlement was reached in November of 2005. This appeal from the summary judgment ruling followed. Scope and Standards of Review. Our supreme court summarized rules governing our review of summary judgment rulings in Hegeman v. Kelch: We review a summary judgment ruling for correction of errors at law. Summary judgment is appropriate under Iowa Rule of Civil Procedure 1.981 only when the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law. We examine the record before the district court to determine whether any genuine issue of material fact exists and whether that court correctly applied the law.

4 Hegeman v. Kelch, 666 N.W.2d 531, 533 (Iowa 2003) (citations omitted). The facts in the summary judgment record are viewed in the light most favorable to the party opposing the motion. 1 Matherly v. Hanson, 359 N.W.2d 450, 453 (Iowa 1984). The Rinikers' appeal, in part, raises the issue of whether LSSI owed a duty to the plaintiffs in connection with Rausch's sale of the annuities to Carter. Because the existence of a duty is a legal issue for the court, summary judgment is a proper vehicle to resolve this issue. Kolbe v. State, 625 N.W.2d 721, 725 (Iowa 2001). Discussion. A. Duty. We first address the district court's conclusion that LSSI owed no duty to the plaintiffs in connection with the sale of the charitable gift annuities in this case. A legal duty "is defined by the relationship between individuals; it is a legal obligation imposed upon one individual for the benefit of another person or particularized class of persons." Sankey v. Richenberger, 456 N.W.2d 206, 209 (Iowa 1990). "Whether, under a given set of facts, such a duty exists is a question of law." Leonard v. State, 491 N.W.2d 508, 509 (Iowa 1992). We look to legislative enactments, prior judicial decisions, and general legal principles as a source for the existence of a duty. Van Essen v. McCormick Enters. Co., 599 N.W.2d 716, 718 (Iowa 1999).

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We reject the Rinikers' assertion that the district court's failure to expressly acknowledge its obligation to view the facts in a light most favorable to the non-movants must lead us to conclude the district court failed to apply that rudimentary principle of summary judgment law in this case. Our review of the challenged ruling is not compromised by the omission of the principle from the district court's ruling.

5 In their "Registered Representative's Agreement," LSSI appointed Rausch to solicit applications "for the purchase of all securities products which LSSI has approved for sale . . . ." All other business activities conducted by Rausch were considered "outside business activities," for which LSSI did not grant approval or exercise supervisory authority. LSSI engaged Rausch as an independent

contractor only with respect to the sales of its own securities products. The charitable gift annuity sold to Carter was, as a matter of law, not a security. 2 As the district court correctly noted, a "charitable gift annuity" is not a security under the Securities Act of 1933, 15 U.S.C.A. 77B(a)(1), the Securities Exchange Act of 1934, 15 U.S.C.A. 78C(a)(10), or the Iowa Securities Act. Iowa Code

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