Opinion
No. 4-380 / 03-0071.
July 28, 2004.
Appeal from the Iowa District Court for Wayne County, Dale B. Hagen, Judge.
Defendants appeal from an adverse decision of the court foreclosing a mechanic's lien. They further appeal from a decision of the jury denying the claim for damages on their counterclaim. AFFIRMED.
Bruce Stoltze of Brick, Gentry, Bowers, Swartz, Stoltze, Schuling Levis, P.C., Des Moines, for appellant.
Verle Norris, Corydon, for appellee.
Considered by Vogel, P.J., Vaitheswaran, J., and Hendrickson, S.J.
Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2003).
This appeal and cross-appeal arise out of a mechanic's lien filed by plaintiff Holmes Tiling, Inc. for labor and materials in digging a basement, installing a water line and a septic sewage system in preparation for a house to be moved on the site by the defendants Rex and Roberta Allen. The principal question with respect to the Allens' appeal from granting the foreclosure of the mechanic's lien is whether an enforceable contract existed as a condition precedent to the foreclosure. The Allens' cross-appeal is based on whether substantial evidence supports the jury's verdict denying damages to the Allens on their counterclaim. We affirm.
I. Background Facts and Proceedings.
Kenny Holmes and David Foster operate the business known as Holmes Tiling, Inc. (Holmes), the plaintiff in this action. The company is engaged in the installation of farm tile, sewer systems, water lines, and the excavation of basements in Wayne County, Iowa, and surrounding areas.
Defendants Rex and Roberta Allen had purchased a house south of the Des Moines Airport. The house had to be moved as a part of the Des Moines Airport expansion. The Allens intended to move the house to a parcel of property adjacent to Highway 2, Humeston, Wayne County, Iowa. The property was owned by the Allens' son, who transferred the parcel to the Allens on October 11, 2000.
On July 20, 2000, the Allens and Kenny Holmes met and discussed the possibility of Holmes digging a basement for the house the Allens intended to move on the property. Kenny Holmes quoted a figure of $850 to dig the basement. In addition, Kenny quoted a figure of $3,000 to $3,200 to install septic sewer system. Finally, Kenny quoted a figure of $1.15 per foot to install a water line.
When Kenny Holmes left the meeting on July 20, he understood that he was to dig a basement, and install a sewer system and water line. On the other hand, the Allens testified they specifically told Holmes not to install the water line or septic sewer system but only dig the basement.
Wayne County Ordinance No. 204 pertaining to waste water treatment and disposal systems requires that contractors performing work obtain proof from the customer that a permit has been secured by the owner of the property prior to start of work on the system.
Sometime prior to August 8, 2000, Rex Allen called Randy Taylor, Wayne County Sanitarian, and requested a permit to construct a sewer system. A permit was filled out on August 8, 2000, from information supplied over the telephone by Rex Allen, including the fact that Holmes would be doing the work. However, the permit was not signed by Rex Allen or his wife until August 29.
Holmes started excavation on the basement on August 7, 2000. At this time, no permit had been issued regarding the sewer system. Furthermore, the Allens had not received a deed to the property although their son had entered into an agreement in July to purchase 40 acres which included the three-acre building site deeded to the Allens in October 2000. The owner of the property agreed that Rex Allen and his wife could work and place a house on the property although title had not been transferred.
Randall Taylor, in his capacity as the Wayne County Sanitarian, went to the site on August 10, 2000, and did a pipe and tank inspection. He found the pipe and the septic tank appeared to be installed properly and approved the installation. Further facts will be detailed as they pertain to issues raised on the appeal and cross-appeal.
Holmes filed a mechanic's lien and an action for foreclosure of the lien. The Allens filed a counterclaim alleging that Holmes failed to complete the contract, did more work than was appropriate to be performed, filed a false mechanic's lien, and caused damage due to the need to replace defective work performed by Holmes.
In determining that the mechanic's lien should be foreclosed, the district court concluded that a contract existed between the plaintiff and the defendants based on several circumstances, including:
1. The testimony of the county sanitarian that Rex Allen had told him that Holmes Tiling was going to be installing the septic system.
2. The permit application had the name of Holmes Tiling on it as the contractor and it was signed by Rex Allen, and his signature in effect verifies the information contained in that application.
3. The court stated it found the testimony of the plaintiff that there was a contract for the septic and drainage system to be more credible than that of the defendants.
4. The court found the defendants knew or should have known the system was installed and they made no objection to it, and their silence in that regard would amount to an acquiescence if in fact there had not been such an agreement.
The Allens' counterclaim was submitted as a law action to a jury, and the verdict was rendered in favor of Holmes. The trial court denied the Allens' motion for judgment notwithstanding the verdict and motion for new trial.
II. Mechanic's Lien Foreclosure.
A. Scope of Review.
An action to enforce a mechanic's lien is triable in equity and the review is de novo. Baumhoefener Nursery v. A D, 618 N.W.2d 363, 366 (Iowa 2000); Carson v. Roediger, 513 N.W.2d 713, 715 (Iowa 1994). We give weight to the district court's factual findings, but we are not bound by them. Id.
B. Discussion.
In this appeal, the Allens assert that notwithstanding their contention an agreement was not reached for Holmes to install a sewer system, there was not an enforceable contract between Holmes and the Allens because a written permit as required by Wayne County was not secured before the work was performed. They contend that without the written permit, there was not a valid contract which would entitle Holmes to a mechanic's lien.
Holmes urges that the Allens never raised the issue of the so-called illegality of the agreement because of a lack of permit with the district court and therefore this issue should be deemed waived. While it is a close question, we choose to address the issue of whether the lack of a signed permit nullifies enforcement of a mechanic's lien in this case.
We first address the question of whether there was an agreement for Holmes to install the septic sewer system. While we are not bound by the district court's findings in this regard, we conclude in this instance the district court's findings should be given weight, especially regarding the findings that the testimony of the plaintiff was more credible than that of the defendants on this issue. The trial court was in a better position to judge the credibility of the witnesses after observing their demeanor on the witness stand.
Additionally, our de novo review of the record leads us to agree with the trial court that the information supplied by the Allens to the county sanitarian regarding the work that was going to be performed by Holmes and the fact Rex Allen signed the permit application which indicated that Holmes was going to be installing the septic system is consistent with a conclusion the Allens agreed to have Holmes install the system. We therefore conclude, as did the district court, that the parties entered into an agreement for Holmes to install a septic sewer system.
The question then becomes whether the fact Holmes performed the work prior to the time a valid permit was secured from Wayne County is a bar to Holmes recovering in this case.
Wayne County Ordinance No. 204, as amended, provides, in part:
3. . . . Contractors performing work on an on-site wastewater treatment and disposal system which is located within Wayne County are required to obtain proof from the customer that a permit has been secured by the owner of the property on which the on-site wastewater treatment and disposal system is located prior to start of work on said system.
. . . .
5. Penalties Section: Any person being found to have violated any of the provisions of this ordinance shall be assessed a civil penalty of not more than $100.00 for each violation.
There is no dispute that the work Holmes performed was completed before the application for a permit was signed by Rex Allen on August 29, 2000, and, of course, before the permit was issued. Further, the record does not reveal that the Wayne County Board of Health ever took steps to impose a penalty for violating the ordinance either against Holmes or the Allens. Finally, notwithstanding the fact a permit had not been issued prior to the work being performed, the county sanitarian did an inspection and rendered services within the scope of his duties as though the permit had been issued.
It is also important to note that the obligation to secure a permit was the Allens' and now they seek to be relieved from responsibility under the contract for their failure to timely obtain the permit.
In Water Development Co. v. Lankford, 506 N.W.2d 763 (Iowa 1993), the court addressed a similar issue of whether a contract for the purchase of water from a supplier of water is illegal because the supplier did not obtain written permits from governmental bodies having jurisdiction to install a water main system.
The court quoting from Beneficial Finance Co. v. Lamos, 179 N.W.2d 573, 580 (Iowa 1970) (citing 6A Arthur L. Corbin, Corbin on Contracts § 1534 (1962)), said:
"The fact a statute provides an administrative or criminal penalty for its violation is not the test for determining contractual rights of parties to a transaction involving some form of illegality. The degree of the illegal factor, extent of public harm that may be involved, and the moral quality of the conduct of the parties in light of prevailing mores and standards of the community are influential factors in determining whether some judicial remedy will be granted."
Lankford, 506 N.W.2d at 766.
We believe that the application of this general rule leads to the conclusion the alleged illegality in this case does not void the contract upon which Holmes is seeking to foreclose the mechanic's lien. The degree of illegality is slight because a permit was ultimately issued although belatedly under the strict terms of the ordinance. The extent of public harm was negligible since the county sanitarian conducted on-site inspections of the project during construction and approved the work. The moral quality of the conduct of the parties in light of prevailing mores and standards of the community are likewise negligible. This is particularly true in this case where the burden of obtaining a permit is on the Allens and their failure to timely do so is now being raised a defense to the contractual obligation.
For these reasons, we are convinced from our de novo review of the evidence the oral contract upon which the mechanic's lien foreclosure is based was valid notwithstanding the delay in obtaining the permit until after the work had been commenced and mostly completed.
III. Cross Appeal.
A. Standard of Review.
When considering a motion for judgment notwithstanding the verdict, we view the evidence in the light most favorable to the party against whom the motion was directed. Bangs v. Maple Hills, Ltd., 585 N.W.2d 262, 268 (Iowa 1998). A motion for judgment notwithstanding the verdict should be denied if there is an absence of substantial evidence to support the claim. Faught v. Budlong, 540 N.W.2d 33, 35 (Iowa 1995). "Evidence is substantial when a reasonable mind would accept it as adequate to reach a conclusion." Johnson v. Dodgen, 451 N.W.2d 168, 171 (Iowa 1990).
Also, the trial court has broad but not unlimited discretion in ruling on motions for new trial and ascertaining whether the verdict effectuates substantial justice between the parties. Iowa R. App. P. 14(f)(3); Rinken v. Wilson, 623 N.W.2d 220, 229-30 (Iowa App. 2000).
B. Discussion.
The Allens maintain the trial court erred and, as a result, the jury verdict was undermined when it informed the jury a contract existed for the installation of the septic system. We have concluded otherwise.
In addition, Allens contend the jury verdict should not be sustained because there is substantial evidence in the record to support a verdict in their favor. They list numerous statements of alleged facts purportedly supported by the evidence to demonstrate their claim of substantial evidence.
Our review of the record leads to the conclusion that most of the evidence is in dispute. For instance, the testimony that the lines from the basement to the septic tank sloped the wrong way towards the house, causing water to flow from the septic tank to the house, was disputed by Wayne County Sanitarian Randy Taylor. He testified he had inspected the lines and found the fall of the lines sloped towards the septic tank and not towards the house.
In addition, Holmes introduced testimony a filter on the septic tank had slipped because dirt had been placed over the septic tank after Holmes was told to leave the job. The slipped filter caused the outlet on the septic tank not to work and therefore water would back up into the basement.
The foregoing testimony was in contradiction to evidence presented by the Allens that Holmes failed to properly install the septic tank.
It is also undisputed that Allens chose to have another system installed without ever trying or testing the one installed by Holmes. It is also undisputed that Holmes was told to leave the project before their work was completed, including the construction of a berm and installation of backfill around the system.
These facts alone lead us to conclude that there is substantial evidence in the record to support the verdict in favor of Holmes on its counterclaim.
In summary, after reviewing the evidence in the light most favorable to Holmes, we concur in the trial court's conclusion that the motions for a judgment notwithstanding the verdict and for a new trial should be overruled. A jury question was established.
AFFIRMED.