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Phipps v. Winneshiek County4/28/1999
No. 33
Appeal from the Iowa District Court for Winneshiek County, James L. Beeghly, Judge.
Appeal from a district court order dismissing a claim for fraud in obtaining a judgment. REVERSED AND REMANDED.
A conservator appeals from a district court ruling dismissing his claim for damages resulting from alleged misrepresentation in the settlement and dismissal of a personal injury action. We reverse the district court decision and remand for further proceedings.
I. Background Facts & Proceedings
Thomas and Rosean Phipps, and their two children, were injured in an automobile accident at the intersection of a highway and a county road near Decorah, Iowa. As a result, the Phipps brought a personal injury action against several defendants, including Winneshiek County. The claim against the County alleged negligence in the design and improvements made to the intersection by the County approximately six years prior to the accident.
During pretrial discovery, the attorney representing the Phipps deposed the county engineer. The engineer was questioned about the plans used by the County in making the improvements to the intersection. The engineer testified that to the best of his knowledge the intersection was reconstructed according to the plans. However, the engineer subsequently inspected the intersection and discovered the location of the traffic island deviated from the plans by five feet and was smaller in size than the plans specified. Despite this discovery, neither the engineer nor county officials informed the Phipps about the inaccuracy.
The Phipps ultimately settled their claims with the County. Under the settlement, the Phipps agreed to dismiss their cause of action against the County in exchange for $125,000. A dismissal with prejudice was subsequently filed and the settlement funds were distributed.
While pursuing the lawsuit against the remaining defendants, the Phipps became convinced the deposition testimony by the engineer was false. Their conservator then initiated this suit against the County for fraudulent misrepresentation, negligent misrepresentation, and fraudulent nondisclosure. The petition sought damages based on the difference between the settlement that would have been received from the County without the false deposition statements and the amount of the actual settlement.
The County responded to the petition by filing a motion to dismiss. It claimed the settlement and dismissal of the prior personal injury accident barred relitigation of the claim for damages. It asserted the Phipps' only remedy was to vacate the prior adjudication.
The district court dismissed the petition. It reasoned intrinsic fraud should not be available as a basis for an independent action for fraudulent settlement and dismissal of a lawsuit when the same grounds are not recognized to vacate the prior judgment.
On appeal the Phipps claim the district court erred by dismissing the action for damages against the County for fraudulent misrepresentation in obtaining the settlement. They maintain the contract principle of election of remedies should be applied to permit them to affirm the settlement and pursue an independent claim for damages based upon the intrinsic fraud.
II. Standard of Review
We review the district court's decision on a motion to dismiss for correction of errors of law. Crookham v. Riley, 584 N.W.2d 258, 264 (Iowa 1998); Iowa R. App. P. 4.
III. Remedy for Fraudulently Obtained Dismissal
Iowa has followed the long-standing rule that when a contract is procured by fraud by one party, the defraude
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