Opinion
No. 2-652 / 01-0795
Filed March 26, 2003
Appeal from the Iowa District Court for Pottawattamie County, J.C. Irvin, Judge.
The plaintiff appeals, and defendant cross-appeals, from a district court ruling on plaintiff's contract action. AFFIRMED.
Larry Melcher, Council Bluffs, and Robert O'Brien, Council Bluffs, for appellant.
Joseph Hrvol, Council Bluffs, for appellee.
Heard by Sackett, C.J., and Vaitheswaran and Eisenhauer, JJ.
The plaintiff, R.L. Pelshaw Company, appeals, and the defendant, City Motors, cross-appeals, from a district court ruling on plaintiff's action and defendant's counterclaim for breach of contract. Pelshaw contends the district court erred in (1) ruling it was not entitled to recover lost profit for the installation of the insulation in the defendant's building and (2) awarding the defendant $15,000 as reasonable damages for down time while the floor drainage problem is corrected. On cross-appeal, City Motors contends the district court's damages award was inadequate. We affirm.
For the purposes of this appeal, the parties are treating the consolidated actions initiated by R.L. Pelshaw and Bob Leonard as one. Accordingly, we will refer to the plaintiff as Pelshaw.
I. Background Facts and Proceedings. On August 7, 1998, Robert Pelshaw, owner of R.L. Pelshaw Co., met with City Motors to discuss bidding on the construction of a new 175-foot metal building addition. Pelshaw proposed to receive $30,000 for construction of the addition, plus $39,000 for installation of the concrete foundation and flooring. As part of the discussion with Pelshaw, City Motors expressed a desire to install a floor drainage system and provided Pelshaw with diagrams outlining the system's specifications. Pelshaw sent a letter to City Motors stating Scott Grimm, one of its subcontractors, would be responsible for installing the floor system, and that all questions regarding the drains should be directed to him.
Several days after the concrete floor was poured, and construction on the building had begun, problems occurred. Rains resulted in significant pooling of water on the concrete floor. The drainage system failed to work. A dispute arose between the parties concerning the best method of fixing the problem. The parties' main concern was the heating coil system that had been installed in the concrete floor. Pelshaw insisted it would be best to wait until the building was completed, so an epoxy overlay could be applied. City Motors, however, suggested that the floor be totally recast, since an overlay would result in the heating coils taking additional time to heat up and cool down, creating additional energy expenses. A totally new floor was estimated to cost $59,000, while the bonded overlay was estimated to cost $24,000. Pelshaw offered to correct the drainage problem by applying the bonded overlay, but City Motors declined, citing lack of confidence in Pelshaw's abilities.
The parties also disputed whether the building's insulation was included in the original construction costs. Pelshaw claimed installation of insulation was not part of the original construction contract, but part of a second contract, and that City Motors was liable for payment for its installation. City Motors, however, maintained the parties discussed installation of insulation during discussions on the original contract and that Pelshaw should have assumed installation was included.
City Motors concluded the building was not completed in a workmanlike manner and declined to pay Pelshaw. Pelshaw filed a claim for $35,280 based on breach of contract. City Motors filed a counterclaim for damages resulting from Pelshaw's poor workmanship and delays caused by the installation of a new drainage system. The district court concluded the costs for installation of the insulation was included in the original contract. The court awarded Pelshaw $34,280, but also awarded City Motors $24,000 as replacement costs for the floor and $15,000 as reasonable compensation for closing the business while the floor was repaired. Pelshaw has appealed, and City Motors has cross-appealed.
II. Scope of Review. Because the breach of contract claim was tried as a law action, our scope of review is for corrections of errors of law. Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000). The district court's findings of fact are binding on us if supported by substantial evidence. EnviroGas, L.P. v. Cedar Rapids/Linn County Solid Waste Agency, 641 N.W.2d 776, 780-81 (Iowa 2002). Evidence is substantial for purposes of sustaining a finding of fact when a reasonable mind would accept it as adequate to reach a conclusion. Land O'Lakes, 610 N.W.2d at 522. The evidence is viewed in a light most favorable to the district court's judgment. Van Oort Constr. Co. v. Nuckoll's Concrete Serv., Inc., 599 N.W.2d 684, 689 (Iowa 1999).
III. Installation of Insulation. Pelshaw argues the district court erred in concluding installation of the insulation was part of the terms of the original contract. Pelshaw contends the original contract was silent regarding installation of insulation, and that the parties entered into a separate contract for that service. City Motors, however, contends installation was assumed under the original contract, and the price of installation was included in the total price.
A contract may either be express or implied. Frank Millard Co. v. Housewright Lumber Co., 588 N.W.2d 440, 441-42 (Iowa 1999). When parties manifest their agreement by words, the contract is said to be express, and when it is manifested by conduct, it is said to be implied in fact. Ringland-Johnson-Crowley Co. v. First Cent. Serv. Corp., 255 N.W.2d 149, 152 (Iowa 1977). Both types of contracts are true contracts formed by mutual manifestations of assent. Id. In the present case, the original contract is silent regarding installation of insulation. We must therefore examine the words and actions of the parties to determine whether insulation was an included cost in the total construction price.
Jason Fett, an employee of City Motors, testified he was a part of the planning process of the new building. He stated they wished to construct a more secure, warmer building to entice a better grade of mechanics. Jason testified the parties discussed the installation of insulation when the building was designed and it was assumed the labor costs were included in the total cost of construction. He stated they reached an agreement where City Motors would purchase the insulation materials and Pelshaw would install it. Although Pelshaw relied on its December 1, 1998 proposal as evidence a second contract for installation was contemplated, Jason stated no one from City Motors signed it because they assumed the labor costs were already included in the total price. He testified he informed Pelshaw that City Motors would not sign the proposal since the installation was part of the original contract, and Pelshaw installed the insulation despite City Motor's stated intent not to pay for it.
Wayne Anderson, at the time the City Motor's employee responsible for signing contracts, also testified it was their intent to create a warmer and more hospitable environment for its mechanics and insulation was a part of that plan. Gary Fett, general manager of City Motors, further told Anderson not to sign the insulation proposal, because the price was included in the original construction costs. He maintained he told Pelshaw he would not pay for installation, but that Pelshaw installed it anyway despite no new contract being signed.
Robert Pelshaw testified his partner, Bob Leonard, submitted a second proposal to install the insulation and that City Motors signed and executed it. However, the record reveals City Motors never signed that proposal. Despite Pelshaw's claim Leonard personally showed him a copy of a signed insulation contract, no such contract was produced at trial. Pelshaw admitted the Fetts provided specific details regarding the purpose of the building, including the ability to heat the building efficiently. He testified, however, it was his understanding that because the building was going to have doors open and radiant heat from the floor, insulation was unnecessary.
In construction contracts, there is an implied warranty that the building to be erected will be built in a reasonably good and workmanlike manner and that it will be reasonably fit for its intended purpose. Kirk v. Ridgway, 373 N.W.2d 491, 493 (Iowa 1985). We agree with the district court that installation of insulation was assumed by the parties to be part of the original contract based on the words and actions of the parties. The Fetts specifically informed Pelshaw regarding their desired purpose for the building, and it was reasonable to assume that insulation was a part of their intended goal of providing a warm and dry area for its mechanics. Pelshaw produced no signed second contract. Despite Gary Fett's explicit notice he would not pay for installation because he believed it was included in the total cost, Pelshaw proceeded to install it. We affirm the district court on this ground.
IV. Down Time Compensation. Pelshaw next contends the district court erred in awarding City Motors $15,000 as compensation for down time resulting from any business closure due to efforts to correct the faulty drainage system. Pelshaw contends that while there is no dispute the floor's installation was defective, City Motors is not entitled to extra compensation for "down time" since it was denied the opportunity to correct its mistakes.
Under Iowa law, when a contract has been breached, the nonbreaching party is generally entitled to be placed in as good a position as he or she would have occupied had the contract been performed. Midland Mut. Life Ins. Co. v. Mercy Clinics, Inc., 579 N.W.2d 823, 831 (Iowa 1998). The nonbreaching party's recovery is limited to the loss actually suffered by reason of the breach; it is not entitled to be placed in a better position than it would have been had the contract not been breached. Id.
We find substantial evidence supports the district court's calculation of down-time damages. The trial court had the opportunity to evaluate the credibility of the witnesses. Tim O'Neill Chevrolet v. Forristall, 551 N.W.2d 611, 614 (Iowa 1996). City Motors introduced Exhibit 26, which set forth estimates for how much it would cost to shut down the business for several days in order to repair the defective floor. City Motors initially determined such a shut down would cost it over $129,527 over a fifteen-day period. Gary Fetts also provided detailed testimony regarding the costs associated with fixing or replacing the floor. Based on its conclusion that $24,000 would put City Motors in a position the same as if the floor been correctly installed, the district court concluded that $15,000 was reasonable compensation for a five-day shut down.
Pelshaw contends these damages are too speculative, since there was no evidence of how many sales City Motors would lose because of the shutdown. Proof of damages, however, need not be shown with mathematical certainty. Data Documents, Inc., v. Pottawattamie County, 604 N.W.2d 611, 616 (Iowa 2000). Rather, the evidence must be sufficient to allow a factfinder to make an approximate estimate of the loss. Id.at 617.
We likewise reject Pelshaw's claim City Motors could not recover damages for down time since it denied it an opportunity to correct the drainage problems. If defendant's actions caused the performance of the contract to be more expensive or burdensome, the plaintiff is entitled to damages. RTL Distributing, Inc. v. Double S Batteries, Inc., 545 N.W.2d 587, 590 (Iowa Ct.App. 1996). In the present case, Pelshaw's poor workmanship caused considerable delays in the building's construction, and the failure to properly install the drainage system caused City Motors to incur additional expenses in correcting it. We find no error here.
V. Cross-appeal. On cross-appeal ,City Motors contends the district court erred in failing to award it all requested damages. City Motors asserts it was entitled to $119,000 for replacement of the defective flooring. The district court, however, concluded the fiber overlay remedy was the most reasonable at $24,000. Based on the record, we believe the district court's findings of fact are credible on this issue. City Motors is not entitled to an additional damages award. We find no error here.