RUEFER INSULATION, INC. , Plaintiff - Appell ant , vs. CHERI RUEFER , Defendant - Appell ee .
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IN THE COURT OF APPEALS OF IOWA
No. 8-820 / 07-1861
Filed December 17, 2008
RUEFER INSULATION, INC.,
Plaintiff-Appellant,
vs.
CHERI RUEFER,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Dubuque County, Monica L.
Ackley, Judge.
The plaintiff appeals from the district court order awarding judgment in its
favor. AFFIRMED AS MODIFIED.
David Lemanski, Dubuque, for appellant.
Cheri Ruefer, Longmont, Colorado, pro se appellee.
Considered by Vogel, P.J., and Mahan and Miller, JJ.
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VOGEL, P.J.
Ruefer Insulation, Inc. (Ruefer), through one of its shareholders, Donald
Ruefer Jr., appeals from a district court ruling awarding judgment in its favor and
against Cheri Ruefer for $36,312.92. In addition to claiming the damages were
inadequate, Ruefer seeks punitive damages and attorney fees. We affirm as
modified.
Donald and Cheri were married in 1988, and operated Ruefer Insulation,
Inc. together as officers and shareholders. They separated in February 2003 and
their marriage was dissolved in November 2003. The decree of dissolution of
marriage contained a stipulation of the parties, which noted the only area of
disagreement was whether Donald would pay Cheri spousal support and if so, in
what amount.
As to Ruefer Insulation, Inc., the stipulation contained this
provision: “Husband and wife agree that this family business shall continue to be
jointly owned (50/50) by them and that the current debt thereon as well as any
future debt thereon be owed jointly (50/50).” Additionally, a buy-out provision
was included, which the parties did not utilize, and Cheri remained a 50%
shareholder. Cheri continued in her capacity essentially as office manager and
accountant for the business until November 2004.
On August 31, 2006 Ruefer filed a petition against Cheri, seeking
damages, punitive damages, and attorney fees for alleged breach of fiduciary
duties to Ruefer.
Scope of Review. Our review is de novo. Iowa R. App. P. 6.4; Midwest
Mgmt. Corp. v. Stephens, 353 N.W.2d 76, 78 (Iowa 1984).
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Judgment Amount.
At the outset, we, like the district court, are
compelled to comment on the lack of coherent evidence in the record. Neither
party requested a professional audit of Ruefer, which would have provided a
clear picture of the income and expenses of the business. To complicate the
spotty financials admitted into evidence, the record was supplemented post-trial,
with no opportunity for the parties to challenge the enhanced record. Needless
to say, many questions remain in the record on appeal. Nonetheless, it is the
parties, not the court, who create the record, and if it is sketchy, the court must
work with the evidence provided. In this case, the district court sifted through the
exhibits and testimony, arriving at an amount which was close to what Cheri
admitted she actually owed the company. In its post-trial motion and now on
appeal, Ruefer challenges the district court’s judgment as it lacks detail in its
calculations.
Although our de novo review is hampered by the lack of clear
financial evidence in the record, we are able to discern clear support for the
district court’s ruling.
Ruefer introduced several documents purporting to demonstrate Cheri’s
inappropriate taking of money from Ruefer’s accounts and using those monies
for herself or for the benefit of her adult children from a previous marriage. We
agree with Ruefer that the reasons Cheri gave for taking money from the
company should not minimize her wrongdoings as a fiduciary of Ruefer.
Nonetheless, we also acknowledge the district court’s observations that Cheri’s
actions were in part a by-product of the unresolved financial issues from the
dissolution of marriage. Cheri was helping herself to what she thought she was
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owed from Donald, by using the company bank accounts. This was clearly the
wrong method to satisfying the dissolution of marriage issues.
Because of the stipulation in Donald and Cheri’s decree of dissolution of
marriage, we will not consider any allegations of wrong-doing prior to November
6, 2003. From the records available, it appears Cheri withdrew $40,523.87 from
the Liberty Bank account from November 18, 2003 to November 30, 2004. The
record does not disclose a complete explanation for each withdrawal, as some
could have been for the business while others are clearly personal.
Cheri
acknowledged many of the withdrawals were for her personal benefit or for the
benefit of her adult children. Those items were: $23,490.86 (cash); $1,600.00
(daughter Michelle’s school tuition); $3,500.00 (payments on behalf of son
Robert);
$2,463.63 (daughter
Michelle’s
attorney).
In
addition,
Cheri
acknowledged $9,104.87 in personal charges to the company’s American
Express credit card. These combined withdrawals and charges total $40,159.36.
The district court entered judgment against her in the amount of $36,312.92. On
our de novo review, we modify the award to reflect judgment against Cheri in
favor of Ruefer in the total amount of $40,159.36.
Attorney Fees and Punitive Damages.
Although Ruefer requested
attorney fees and punitive damages, we decline to make this award. Ruefer is
correct in its position that this suit was to recover assets wrongfully taken from a
corporation by a shareholder, but we cannot overlook the fact that this also is the
end product of a dissolution of marriage between Donald and Cheri. Sorting out
the financials of the company was intertwined with the unsettled issue of alimony
following the dissolution trial. Cheri, while helping herself to company assets, did
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so in part to recover what she thought was due to her from the unresolved
dissolution issue and judgment in the dissolution decree.
In addition, she
retained a fifty percent ownership as a shareholder of Ruefer, so in essence, her
post-dissolution withdrawals from the business resulted in her robbing her own
assets. Had she triggered the buy-out provision contained in the dissolution of
marriage decree, the value of the company would have been greatly reduced by
her own actions. Thus, under the facts of this case, we affirm the district court’s
denial of attorney fees and punitive damages. See Hockenberg Equip. Co. v.
Hockenberg’s Equip. & Supply Co. of Des Moines, Inc., 510 N.W.2d 153, 158-60
(Iowa 1993) (stating that a plaintiff seeking the rare remedy of common law
attorney fees “must prove that the culpability of the defendant’s conduct exceeds
the willful and wanton disregard for the rights of another”); First Nat’l Bank of
Counsel Bluffs v. One Craig Place, Ltd., 303 N.W.2d 688, 699-700 (Iowa 1981)
(stating that an award of exemplary damages depends on the particular facts in a
case, such as whether an award is appropriate to punish a party or discourage
others from similar wrongful conduct).
AFFIRMED AS MODIFIED.
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