PENDER STATE BANK, Plaintiff-Appellant/Counterclaim Defendant, vs. HARRIETT A. REMINGTON, Defendant-Appellant/Counterclaim Plaintiff. HARRIETT A. REMINGTON, Third-Party Plaintiff, vs. JOHN KOERSELMAN, Third Party Defendant-Appellee.
Annotate this Case
Download PDF
IN THE COURT OF APPEALS OF IOWA
No. 9-543 / 08-1799
Filed November 12, 2009
PENDER STATE BANK,
Plaintiff-Appellant/Counterclaim Defendant,
vs.
HARRIETT A. REMINGTON,
Defendant-Appellant/Counterclaim Plaintiff.
________________________________________
HARRIETT A. REMINGTON,
Third-Party Plaintiff,
vs.
JOHN KOERSELMAN,
Third Party Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Adair County, William H. Joy,
Judge.
Harriett Remington appeals the district court’s grant of summary judgment
to Pender State Bank and John Koerselman on her counterclaims and third-party
claims of fraudulent inducement and Iowa securities laws violations in the bank’s
mortgage foreclosure action against her. AFFIRMED AND REMANDED.
Thomas D. Hanson and Jonathan D. Bergman of Hanson, Bjork &
Russell, L.L.P., Des Moines, for appellant.
Jeffrey N. Bump of Bump & Bump, Panora, for appellee.
Heard by Vaitheswaran, P.J., Mansfield, J., and Miller, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2009).
2
MILLER, S.J.
I.
Background Facts & Proceedings
Harriett Remington owned more than 500 acres of farmland in Adair and
Madison Counties.
She and her son, Scott Remington, operated a livestock
operation on the farm. They had an operating loan of $125,000 from Union State
Bank that they were interested in refinancing.
On August 26, 2004, Harriett
signed a general power of attorney designating Scott as her attorney-in-fact.
Scott had previously been in prison in South Dakota, and there he became
acquainted with Jack Irons. Irons approached Scott about investing in Columbia
Advanced Wireless, Inc. (Columbia), a start-up company based in Vancouver,
Washington.1 Scott discussed the matter with Harriett. Harriett and Scott both
expressed interest in investing in Columbia, but stated they did not have any
money to invest.2
Another individual, Terry Svejda, became involved in helping the
Remingtons find money to invest in Columbia. Scott and Svejda approached
Union State Bank. Scott stated he was seeking to borrow between $150,000 to
$175,000.3 He expressed surprise that Svejda suggested a loan of $400,000.
Union State Bank rejected the loan request for the larger amount.
John Koerselman, the CEO of Pender State Bank in Pender, Nebraska,
became aware Svejda was seeking an agricultural loan for farmland in Iowa.
1
The company was also known as Columbia International, Inc. and Columbia Card
Services International, L.L.C.
2
Both Harriett and Scott stated they were told that if they invested money in Columbia
the company would buy back their stock at double the price within one year.
3
This amount represented $125,000 to refinance the operating loan, plus between
$25,000 to $50,000 to invest in Columbia.
3
Koerselman discussed the matter with Svejda, and then with Scott, and met with
them to view the Remington land. Koerselman had a telephone conversation
with Harriett to verify her income sources. Koerselman was aware Harriett and
Scott intended to use some of the proceeds from the loan to purchase stock in
Columbia. Pender State Bank approved a loan to Harriett, with her farmland
used as collateral.
On April 12, 2005, Scott, Harriett, and Svejda drove to Pender so that
Harriett could sign the loan documents. Harriett and Koerselman met alone in
Koerselman’s office, while Scott and Svejda waited outside. Harriett stated she
was very surprised to see the loan was for $530,000, and expressed concerns
about the large amount.4 Harriett told Koerselman she did not want to lose her
farm. In a deposition, Harriett stated Koerselman told her she would not lose her
farm because the loan would be paid for by sale of the stock in Columbia.
Koerselman testified in a deposition he instead replied, “if you don’t want to lose
the farm, you shouldn’t put a mortgage on it because you’re putting it at risk by
mortgaging it.”
Harriett signed the loan documents and mortgage on her farmland. She
also signed a letter, which stated:
This letter is to inform you that our bank has not studied nor
have we endorsed in any way any investments in publicly traded
stock, privately held stock, or any other way that you may decide to
use the proceeds from our loan funding. Your use of any of these
monies is strictly under your own volition, and not under the
guidance or opinion of our institution.
4
Harriett also stated she expected the loan to be for between $150,000 to $175,000,
with $125,000 needed to refinance the Union State Bank loan and $25,000 to $50,000 to
invest in Columbia.
4
In a private memo to his file, Koerselman noted the “unusual and possible risky
use of the loan proceeds.”
Of the loan proceeds, $124,293 was used to retire the operating loan from
Union State Bank. The amount of $399,260 was placed in Harriett’s checking
account. The remainder was used for loan fees and expenses. On April 14,
2005, Harriett approved a wire transfer of $380,000 from her checking account to
Columbia. Harriett and Scott were jointly issued 400,000 shares of stock, and
Scott was individually issued 50,000 shares.
Harriett and Scott did not receive the expected return on their investment
in Columbia. Harriett came into default on her loan from Pender State Bank. On
April 23, 2007, Pender State Bank filed a petition for foreclosure of the mortgage.
Harriett raised affirmative defenses of equitable estoppel, promissory estoppel,
conspiracy to engage in predatory practices, conspiracy to commit fraud, and
equitable rescission. She also filed counterclaims against Pender State Bank.
Harriett raised third-party claims against several parties, including Koerselman,
Svejda, and Irons. Her counterclaims and third-party claims raised the issues of
civil conspiracy, fraudulent inducement, violation of federal securities laws, and
violation of Iowa securities laws.5 She raised an issue of equitable rescission
against Pender State Bank. Against the third-party defendants she raised an
additional claim of breach of contract.
5
The claims of civil conspiracy were dismissed by the district court on motions to
dismiss filed by Pender State Bank, Koerselman, and Svejda. The court also dismissed
Central States Marketing Group, L.L.C., as a third-party defendant.
5
Pender State Bank and Koerselman filed a motion for summary judgment.
Harriett resisted the motion and filed a memorandum of authorities which raised
arguments on the claims of fraudulent inducement and Iowa securities laws
violations, as well as other issues.
The district court issued a decision on October 10, 2008, granting the
motion for summary judgment. The court found Harriett was not entitled to relief
on her affirmative defenses of promissory estoppel, equitable estoppel, equitable
rescission, or conspiracy. The court then concluded Pender State Bank was
entitled to summary judgment against Harriett as a result of her default on the
mortgage and notes. The court ordered the Bank was entitled to foreclosure of
the mortgage.
On the counterclaims and third-party claims, the court found that Harriett
conceded that the motion for summary judgment should be granted on the claims
of fraudulent inducement and federal securities laws violations. The court also
found that Harriett had conceded that Koerselman was entitled to summary
judgment on claims that he had violated the Iowa securities laws as a primary
violator. The court then considered whether he was an aider and abettor under
Iowa Code section 502.509(7)(c) (2007). The court found Koerselman did not
have knowledge of the Iowa Securities Act violations, and granted summary
judgment to him.6 The court granted summary judgment to Pender State Bank
on Harriett’s counterclaims against it. The court granted summary judgment to
6
Svejda had also filed a motion for summary judgment. The court found summary
judgment was not appropriate on the claims of violations of the Iowa securities laws
against Svejda as an aider and abettor. The court granted summary judgment to Svejda
on other claims against him.
6
Koerselman on all claims against him, and he was dismissed as a third-party
defendant. All other third-party claims remained in litigation.
A judgment and decree of foreclosure was filed. Harriett has appealed the
decision of the district court, disputing only the court’s ruling on the issues of
fraudulent inducement and the Iowa securities laws as against Pender State
Bank and Koerselman.
II.
Standard of Review
We review the district court’s ruling on a motion for summary judgment for
the corrections of errors at law. See Iowa R. App. P. 6.4. Summary judgment is
appropriate only when there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3);
Kistler v. City of Perry, 719 N.W.2d 804, 805 (Iowa 2006). A court should view
the record in the light most favorable to the non-moving party. Kern v. Palmer
College of Chiropractic, 757 N.W.2d 651, 657 (Iowa 2008).
In determining
whether there is a genuine issue of material fact, the court affords the nonmoving party every legitimate inference the record will bear. Id.
III.
Fraudulent Inducement
Harriett contends the district court erred by granting summary judgment to
Pender State Bank and Koerselman on her claim of fraudulent inducement.
Pender State Bank and Koerselman assert that this issue has not been
preserved for our review because the district court found Harriett had conceded
this issue, and Harriett did not file any post-trial motions to challenge the court’s
ruling. At the same time, however, the Bank and Koerselman state, “Although
7
Remington conceded that summary judgment was appropriate on several of her
other claims and defenses, she resisted summary judgment on her fraudulent
inducement claim.” We determine error was adequately preserved in this case.
See Meier v. Senecaut, 641 N.W.2d 532, 540 (Iowa 2002) (“The claim or issue
raised does not actually need to be used as the basis for the decision to be
preserved, but the record must at least reveal the court was aware of the claim or
issue and litigated it.”).
The court was aware of the issue, but determined
incorrectly that it had been conceded by Harriett.
We turn then to the merits of Harriett’s claim of fraudulent inducement
against Pender State Bank and Koerselman.
fraudulent inducement are:
The elements of a claim of
(1) representation; (2) falsity; (3) materiality; (4)
scienter; (5) intent to deceive; (6) reliance; and (7) resulting injury and damage.
Whalen v. Connelly, 545 N.W.2d 284, 294 (Iowa 1996). These elements must be
established by clear and convincing evidence. Id.
This case does not involve a misstatement; Harriet alleges a failure to
disclose.7 A failure to disclose may be actionable if the party has a legal duty to
7
Harriett had previously urged there was a misstatement based on Koerselman’s
statement to her that she would not lose her farm. On appeal, however, she states,
“Remington’s fraudulent inducement claim is based upon Koerselman and the Bank
disclosing very little if anything to Remington about her loan as well as the entire loan
process until the time of the actual closing of the loan.” She additionally states she
should have been made aware of “Bank loan policies which were overlooked, waived, or
not followed in the Bank’s decision to approve Remington’s loan.” She is claiming a
breach of the duty to disclose by concealing material facts. Her reliance, on appeal, on
a theory of failure to disclose is emphasized by her statement in her reply brief that “[a]s
Remington’s fraudulent inducement claims involved allegations of concealment on the
part of the Bank and Koerselman, it is necessary to find that both owed Remington a
fiduciary duty.” We determine she has waived her claim of misrepresentation. See Iowa
R. App. P. 6.14(1)(c) (“Failure in the brief to state, to argue or to cite authority in support
of an issue may be deemed waiver of that issue.”).
8
communicate the concealed fact to the other party. Wright v. Brooke Group Ltd.,
652 N.W.2d 159, 174 (Iowa 2002). The duty to communicate may “arise[ ] from a
relation of trust, from confidence, from inequality of condition and knowledge, or
other attendant circumstances.” Sinnard v. Roach, 414 N.W.2d 100, 105 (Iowa
1987) (citations omitted). “[O]ur analysis of the duty-to-reveal issue parallels the
same analysis in a breach of fiduciary or confidential relationship case.” Id.
Harriett argues there is a genuine issue of material fact about whether
Pender State Bank and Koerselman owed a fiduciary duty to her. She states
Koerselman had superior knowledge of the loan, and that she was an
unsophisticated elderly woman.
Harriett testified in her deposition that she
trusted Koerselman and his professional judgment. She contends that if she had
known Koerselman believed the loan was risky she would not have signed the
loan documents.
A fiduciary relationship may arise between a bank and a borrower.
Weltzin v. Cobank, ACB, 633 N.W.2d 290, 293 (Iowa 2001). A bank-customer
relationship, however, does not automatically create a fiduciary duty. Engstrand
v. West Des Moines State Bank, 516 N.W.2d 797, 799 (Iowa 1994). Whether
there is a fiduciary relationship depends upon the facts and circumstances of
each individual case.
Weltzin, 633 N.W.2d at 293.
We consider whether
“confidence is reposed on one side, and dominion and influence result on the
other.”
Kurth v. Van Horn, 380 N.W.2d 693, 695 (Iowa 1986).
Factors to
consider are:
the acting of one person for another; the having and the exercising
of influence over one person by another; the reposing of confidence
9
by one person in another; the dominance of one person by another;
the inequality of the parties; and the dependence of one person
upon another.
Id. (citation omitted).
In discussing Harriett’s affirmative defense of equitable estoppel, the
district court found Harriett was unable to prove the elements necessary to
establish a fiduciary duty. The court noted Harriett had spoken to Koerselman on
the telephone only one time, and had never met him prior to the occasion when
she signed the loan documents. There was no evidence to show Koerselman
knew Harriett was relying on him in making her decision to sign the documents.
The court found, “No facts were presented to support a finding that Koerselman
exercised such influence over the defendant.”
We further note that there was no evidence Harriett was incapable of
handling her own financial affairs. She testified she signed the power of attorney
so that Scott could take care of things if she got sick, and it was merely as a
precaution. Harriett had previously taken out loans and signed mortgages for the
farm, and admitted she knew how mortgages and collateral worked. There was
no evidence Koerselman or the Bank were acting as advisors to Harriett, or that
they exercised influence over her business decisions.
See Engstrand, 516
N.W.2d at 799 (finding no fiduciary relationship where there was no evidence
bank exercised influence over plaintiffs). We find no error in the district court’s
determination that the Bank and Koerselman have established there is no
genuine issue of material fact as to whether there was a fiduciary duty between
Koerselman and Harriett.
10
Harriett also claims the facts concealed from her were material.
She
further claims the evidence is sufficient to prove the elements of scienter, intent
to deceive, reliance, and damages. Because there was no fiduciary relationship,
there was no duty to disclose. See Sinnard, 414 N.W.2d at 105. Since Pender
State Bank and Koerselman had no duty to disclose, Harriett is unable to prove
her claim of fraudulent inducement. Therefore, we are not required to address
the additional elements of a claim of fraudulent inducement.
If we were to
address these elements, however, we would find Harriett has not established a
genuine issue of material fact so as to preclude the entry of summary judgment.
We determine summary judgment on the issue of fraudulent inducement was
appropriate.
IV.
Iowa Securities Laws
Harriett asserts Pender State Bank and Koerselman should be civilly liable
for aiding and abetting violations of the Iowa Uniform Securities Act, Iowa Code
chapter 502. Section 502.509(7)(c) provides for joint and several liability for:
An individual who is an employee of or associated with a
person liable under subsections 2 through 6 or a person, whether
an employee of such person or otherwise, who materially aids in
the act or transaction constituting the violation, and who materially
aids the conduct giving rise to the liability, unless the individual
sustains the burden of proof that the individual did not know and, in
the exercise of reasonable care could not have known, of the
existence of conduct by reason of which the liability is alleged to
exist.
11
“[A] person who merely aids and abets the violation has no liability if he or she
can prove a reasonable lack of knowledge of such facts.”8 State ex rel. Miller v.
Pace, 677 N.W.2d 761, 769 (Iowa 2004).
The Iowa Insurance Commissioner issued a cease and desist order on
February 15, 2008, finding Iowa securities laws violations by Columbia, William
Read, the president of Columbia, Irons, and Corporate Solutions, L.L.C., a
company operated by Irons, under sections 502.301, 502.402, and 502.501. The
order found they had “participated in the offer or sale of promissory notes, stock
and/or investment contracts that were not federally covered securities,” they had
made untrue statements of material fact in the sale of securities, they had made
omissions of material fact in the sale of securities, and Read and Irons had acted
as unregistered agents.
Harriett contends Pender State Bank and Koerselman aided and abetted
Columbia, Read, Irons, and Corporate Solutions in violating the Iowa Uniform
Securities Act. The district court found Koerselman, and through him, Pender
State Bank, did not have knowledge of the securities laws violations. The court
noted, “The knowledge that a person is going to invest in a risky start-up
company with money borrowed from a bank does not demonstrate knowledge of
a securities law violation.”
8
In the past the Iowa Supreme Court has employed a test requiring the plaintiff to show
knowledge of the securities law violation by the alleged aider and abettor. See Tubbs v.
United Central Bank, N.A., 451 N.W.2d 177, 182 (Iowa 1990) (citing Metge v. Baehler,
762 F.2d 621, 624 (8th Cir. 1985)). The discrepancy between this test and the language
of the statute was recognized in State ex rel. Goettsch v. Diacide Distributors, Inc., 561
N.W.2d 369, 377 (Iowa 1997).
12
While Koerselman knew Harriett intended to invest in Columbia, a start-up
company, we find no evidence in the record to show Koerselman knew, or should
have known, the parties named in the cease and desist order were violating the
Iowa securities laws. There was no evidence Koerselman had any contact with
any of the parties named in the cease and desist order. The letter signed by
Harriett at the time she signed the loan documents provides that the Bank “has
not studied nor have we endorsed in any way any investments . . . .” We
conclude the district court properly granted summary judgment to Pender State
Bank and Koerselman on Harriett’s claims based on violations of Iowa securities
laws.
V.
Appellate Attorney Fees
Pender State Bank seeks attorney fees and court costs, as provided for in
the language of the promissory note and mortgage signed by Harriett.
We
determine the matter of attorney fees should be remanded to the district court.
VI.
Disposition
We affirm the decision of the district court granting summary judgment to
Pender State Bank on Harriett’s counterclaims, and to Koerselman on Harriett’s
third-party claims.
We remand to the district court to determine appellate
attorney fees. Costs of this appeal are assessed against Harriett.
AFFIRMED AND REMANDED.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.