STATE EX REL. MILLER v. CUTTY’S, 690 N.W.2d 463 (Iowa App. 2004)

No. 4-203 / 03-0934.Court of Appeals of Iowa.
June 23, 2004.

Appeal from the Iowa District Court for Polk County, Darrell J. Goodhue, Judge.

The State appeals from the district court’s grant of the defendant’s motion for summary judgment in a consumer fraud action. AFFIRMED.

Thomas J. Miller, Attorney General, and Kathleen Keest and Benjamin Bellus, Assistant Attorneys General, for appellant.

David A. Tank of Davis, Brown, Koehn, Shors Roberts, P.C., Des Moines, for appellee.

Heard by Sackett, C.J., Huitink, J., and Harris, S.J.[*]

PER CURIAM

The attorney general brought this state action under the Iowa Consumer Fraud Act (Act), Iowa Code section 714.16
(2001),[1] seeking injunctive relief, alleging the defendant Cutty’s Des Moines Camping Club, Inc., engaged in “unfair practices” under the Act. This appeal is from the district court’s dismissal of the action on summary judgment. The court determined that the mischief alleged had only to do with the manner in which the club operated, and it had nothing to do with the manner in which it was organized, certainly not by the defendant club, and therefore did not involve “unfair practice . . . in connection with the . . . sale . . . of any merchandise” as required by the Act. See Iowa Code § 714.16(2)(a) (defining “unlawful practice”).[2] Because we think the determination and conclusion were correct, we affirm.

Cutty’s, Inc. (Cutty’s) owned land near Des Moines which was used for public camping and recreation. A number of years ago Cutty’s, in order to convert the operation from a public to a private campground, sold to the public 1/3000 undivided interests in the property. The purchase of such an interest made its owner a member of defendant Cutty’s Des Moines Camping Club, Inc. (Club), an entity separate from Cutty’s, the property’s developer. Club members were allowed to camp at the facility and undertook a number of obligations which were clearly detailed in a written “Declaration of Restrictions,” and which were to run with the land The Club was to manage and operate the campground, and was given sole discretion and power to, among other things:

(1) assess and collect fees, dues, taxes and assessments from its members; (2) maintain the property; (3) pay taxes and assessments; (4) enforce charges, restrictions, rules, conditions and covenants; (5) spend the dues and assessments collected; and (6) establish such rules and regulations for the use of the property and the facilities.

Although the plan was to sell 3000 shares, only 2100 were sold. The seller corporation retains 900 shares; the Club retains another 400. The 1300 shares do not obligate the two corporate holders to pay assessments to cover the costs of the operation.

Catalyst for this litigation was a hard-nosed undertaking by the Club to collect past-due assessments from a large number of shareholders who had fallen behind. Dues are substantial. They were $96 per year at the start in 1980 and rose until they reached $391 per year. Many of the customers who purchased shares nearly twenty years previously never used the campground facilities, or ceased using campground facilities long ago. Some became physically limited. Others moved away or otherwise became unable to use the campground or enjoy camping in the campground. Many had financial setbacks and could no longer afford it. Some thought the Club had sold their memberships for them. Others unsuccessfully tried to sell their memberships. At least one other customer managed to find a buyer, but was prevented from selling the membership by the Club. Some tried to give their memberships to the Club. Some stopped paying the membership dues, and thereafter heard nothing from the Club for many years.

We can assume, without deciding, the alleged conduct was unjust. We can also assume, again without deciding, that the two corporations, acting in concert at the inception of the venture, should each be responsible for the doings of the other. It remains, however, that the actions complained of had nothing to do with the sale of the shares. The plan did not go awry until some years later. Iowa’s consumer fraud provision, unlike statutes in some jurisdictions, extends only to sales of merchandise, and no sale is implicated in the matters complained of here.[3]

The State cites cases from other jurisdictions for the proposition that matters occurring after the purchase can be grounds for consumer fraud. See, e.g., In re MTBE Prods. Liab. Litig., 175 F. Supp.2d 593, 630-31 (S.D.N.Y. 2001); People ex rel. Daley v. Datacom Sys. Corp., 585 N.E.2d 51, 64-65 (Ill. 1991). However, these and other cases cited by the State involved distinct statutes and factual situations that render them inapplicable to the case here. Our provision does not, as State would have it, extend to later conduct that is unrelated to the sale.

AFFIRMED.

Huitink, J., and Harris, S.J., concur; Sackett, C.J., concurs specially without opinion.