Opinion
No. 3-114 / 02-0262.
Filed June 25, 2003.
Appeal from the Iowa District Court for Polk County, George W. Bergeson, Judge.
Defendant appeals from the district court's order granting plaintiff's motion for summary judgment on its petition for declaratory judgment. REVERSED.
Thomas Reavely of Whitfield Eddy, P.L.C., Des Moines, for appellant.
Glenn Smith and Tamara Hackmann of Finley, Alt, Smith, Scharnberg, Craig, Hilmes Gaffney, P.C., Des Moines, for appellee.
Heard by Zimmer, P.J., and Hecht and Eisenhauer, JJ.
Defendant Bay Hill Owners' Association appeals from the district court's order granting plaintiff Allied Mutual Insurance Company's and denying Bay Hill Owner's Association's motions for summary judgment on its petition for declaratory judgment. It contends the district court erred in concluding there is no enforceable settlement agreement between the parties. Bay Hill Owners' Association also contends the district court erred in concluding its claim was not covered by Allied Mutual Insurance Company's insurance policy. We reverse.
I. Background Facts and Proceedings. Colby Development Company (Colby) constructed eighteen two-unit townhomes in the Bay Hill Townhouse Complex in Clive. Allied Mutual Insurance Company, now known as Nationwide Mutual Insurance Company (Allied), issued a commercial general liability policy to Colby covering the period from September 1, 1997 until September 1, 1998. On April 27, 1998, the Bay Hill Owners' Association (Bay Hill) presented a claim for roof damage caused by faulty workmanship occurring during the construction of the townhome roofs. Negotiations for a settlement commenced.
In a letter to Bay Hill president Jim Speicher dated June 30, 1999, Allied claim representative David Schmidt wrote:
We are prepared to offer the Association the full $1,000,000 limit in an effort to bring this claim to a mutually agreeable conclusion. Additionally, we are working with a roofing subcontractor, also insured by ALLIED, to contribute additional funds to help cover other costs of the project.
Please contact me so arrangements can be made to obtain a copy of the Association bylaws, along with a copy of the releases (sic) forms. . . . Thank you for your continued cooperation while we worked towards this settlement.
Schmidt claims he orally communicated to Speicher that the $1,000,000 settlement offer was contingent upon the parties defining a mutually agreeable release form, and Allied's receipt of evidence that would satisfy it that Speicher had legal authority to execute and finalize a release on behalf of Bay Hill.
Speicher asked Bay Hill attorney Wendy Carlson to determine whether he could execute a release on Bay Hill's behalf. In a July 2, 1998 letter to Speicher, Carlson wrote:
As you requested, I have reviewed the question whether, as President of the Bay Hill Owners' Association, Inc. (the "Association"), you have the legal power and authority to enter into a settlement with the insurance carrier for Colby Development Company and related parties in connection with the faulty construction and installation of many of the roofs in the Bay Hill Complex. As a part of the settlement, the insurance carrier has requested you to execute a Release on behalf of the Association and the owners. As discussed more fully below, it is our opinion that the Board of Directors has the power to approve the settlement and to authorize you to execute all necessary documents, including the Release.
Speicher claims he delivered Bay Hill's resolution of the board of directors, which officially accepted Allied's offer, to Schmidt at his West Des Moines office on July 2, 1998. Bay Hill contends Schmidt also received Carlson's July 2, 1998 letter outlining Speicher's authority to execute a release and conclude a settlement. Allied denies receipt of the letter, but acknowledges Schmidt received a proposed release form. Allied contends the proposed release form was unacceptable.
On July 13, 1999, Allied hired attorney Sean O'Brien of the law firm of Bradshaw, Fowler, Proctor and Fairgraves P.C. to draft a proposed release form. O'Brien drafted a release form and sent it to Carlson with a letter dated July 22, 1999, which states:
As I indicated in my voice mail message to you today, attached is a copy of the Release that Allied proposes regarding settlement of the above-referenced claim. After you have a chance to review the document, please advise as to whether it is acceptable to you and your client.
In addition, do you have copies of the Bay Hill Owners' Association Articles of Incorporation and Declaration of Covenants, Conditions and Restrictions? I need copies of both of those documents to confirm James Speicher's authority as president of the association to execute the Release on behalf of the members.
The language of Allied's proposed release differed from the release drafted by Carlson in that Carlson's release was limited to "claims for property damage, arising out of faulty roof workmanship and installation as described in the inspection report of Wood Roofing and Sheet Metal, dated April 27, 1998. . . ." Allied's release was broader, encompassing "claims for property damage, arising out of faulty roof workmanship and installation. . . ." Other language proposed by Allied broadened the scope of the release. O'Brien claims Carlson never told him Bay Hill accepted Allied's drafted release or forwarded Bay Hill's Articles of Incorporation and Declaration of Covenants, Conditions and Restrictions. Carlson recalls at least one telephone call with O'Brien in which they discussed "cosmetic" changes. Carlson claims there were no issues or disputes that would have prevented execution of the release.
In a letter to Speicher and Carlson dated July 30, 1999, an Allied representative withdrew the settlement offer until the company was able to evaluate the implications of Pursell Construction, Inc. v. Hawkeye-Security Insurance Co., 596 N.W.2d 67 (Iowa 1999), which was filed on July 8, 1999. The letter stated:
As you are both aware, we made an offer to resolve the roof claims pursuant to a letter dated June 30, 1999, which offer was contingent on our reaching a mutually agreeable release form, and obtaining satisfactory evidence of authority for Mr. Speicher to execute whatever release was finalized on behalf of the association. No formal acceptance of this offer has been made, although certain information has been given to use with respect to these contingencies.
On September 17, 1999, Allied filed a petition for declaratory judgment naming Colby and Bay Hill as defendants. Allied sought a ruling that there was no insurance coverage for claims submitted to it by Bay Hill, and that there was no enforceable settlement agreement between the parties. Bay Hill answered and counterclaimed for breach of contract. On February 19, 2000, Bay Hill filed a motion for summary judgment, alleging there was an enforceable settlement agreement because Carlson orally conveyed acceptance of Allied's proposed release agreement to O'Brien. On April 16, 2001, Allied filed its resistance to Bay Hill's motion for summary judgment and filed a cross-motion for summary judgment, alleging there was no insurance coverage under the policy and no enforceable settlement agreement. In its January 25, 2002 ruling, the district court denied Bay Hill's motion for summary judgment and sustained Allied's cross-motion for summary judgment as to both Bay Hill and Colby. Only Bay Hill has appealed.
II. Standard of Review. Although equity cases are generally reviewed de novo, review of a case in equity resulting in summary judgment is for correction of errors at law. Iowa R.App.P. 6.4; Keokuk Junction Ry. Co. v. IES Indus., Inc., 618 N.W.2d 352, 355 (Iowa 2000).
III. Summary Judgment. Summary judgment is properly granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Iowa R.Civ.P. 1.981(3). A factual issue is material only if the dispute is over facts that might affect the outcome of the suit, given the applicable law. Lewis v. State ex rel. Miler, 646 N.W.2d 121, 124 (Iowa Ct.App. 2002). The party moving for summary judgment has the burden of proving the facts are undisputed. Id.
In ruling on a motion for summary judgment, the court must view the facts in the light most favorable to the resisting party. Id. Furthermore, every legitimate inference that can be reasonably deduced from the evidence should be afforded the resisting party. Id. An inference is legitimate if it is "rational, reasonable, and otherwise permissible under the governing substantive law." Id. ( citing Butler v. Hoover Nature Trail, Inc., 530 N.W.2d 85, 88 (Iowa Ct.App. 1994)). An inference is not legitimate if it is based upon speculation or conjecture. Id. If reasonable minds may differ on the resolution of an issue, a genuine issue of material fact exists. Id.
The first issue in dispute is whether Bay Hill and Allied had entered into an enforceable settlement agreement. Settlement agreements are essentially contractual in nature. Phipps v. Winneshiek County, 593 N.W.2d 143, 146 (Iowa 1999). We utilize contract principles when interpreting settlement agreements. Id.
In determining whether two parties have entered into a contract, we must consider:
the extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations.Horsfield Constr., Inc. v. Dubuque County, 653 N.W.2d 563, 571 (Iowa 2002) (citations omitted). In order to be binding, a settlement must be complete in itself and certain. H W Motor Exp. v. Christ, 516 N.W.2d 912, 914 (Iowa Ct.App. 1994). A contract is generally not found to exist when the parties agree to a contract on a basis to be settled in the future. Whalen v. Connelly, 545 N.W.2d 284, 294 (Iowa 1996). An agreement to agree to enter into a contract is of no effect unless all of the terms and conditions of the contract are agreed on and nothing is left to future negotiations. Crowe-Thomas Consulting Group, Inc. v. Fresh Pak Candy, 494 N.W.2d 442, 444-45 (Iowa Ct.App. 1992).
For a contract to be valid, the parties must express mutual assent to the terms of the contract. Schaer v. Webster County, 644 N.W.2d 327, 338 (Iowa 2002). Mutual assent is based on objective evidence, not the hidden intent of the parties. Id. The mode of assent is termed offer and acceptance. Heartland Express, Inc. v. Terry, 631 N.W.2d 260, 268 (Iowa 2001).
A. Was the June 30, 1999 letter from claim representative David Schmidt an offer? An offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. Heartland Express, Inc., 631 N.W.2d at 268. We determine whether an offer has been made objectively, not subjectively. Id. The test for an offer is whether it induces a reasonable belief in the recipient that he or she can, by accepting, bind the sender. Id.
In determining whether an offer has been made, we look for terms with precise meaning that provide certainty of performance. Id. If an offer is indefinite, there is no intent to be bound. Id. A lack of essential detail would negate a belief of intent, since the sender could not reasonably be expected to empower the recipient to bind him to a contract of unknown terms. Id. The recipient of a hopelessly vague offer should know that it was not intended to be an offer that could be made legally enforceable by being accepted. Id.
In his June 30, 1999 letter, claim representative David Schmidt stated that Allied was prepared to offer Bay Hill $1,000,000 in an effort to bring the claim to "a mutually agreeable conclusion." Schmidt wrote that Allied was working with a roofing subcontractor, also insured by Allied, to contribute additional funds to help cover "other costs" of the project. Schmidt requested that Speicher contact him to make arrangements to obtain a copy of Bay Hill's bylaws and a copy of the release form.
The district court concluded the June 30, 1999 letter did not constitute an offer because it failed to specify what Allied would receive in exchange for its tender of $1,000,000. However, in its July 30, 1999 letter, an Allied representative states, "[W]e made an offer to resolve the roof claims pursuant to a letter dated June 30, 1999." We conclude that the June 30, 1999 letter was an offer.
B. Was any offer made by Allied accepted by Bay Hill? A binding contract also requires acceptance of the offer. Magnusson Agency v. Public Entity Nat'l Co.-Midwest, 560 N.W.2d 20, 26 (Iowa 1997). Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. Heartland Express, 631 N.W.2d at 270 ( citing Restatement (Second) of Contracts § 50). When an offer prescribes the time, place or manner of acceptance, its terms must be complied with to create a contract. Flanagan v. Consolidated Nutrition, L.C., 627 N.W.2d 573, 578 (Iowa Ct.App. 2001).
Allied acknowledges that Jim Speicher delivered to it a release form and Bay Hill's resolution of the board of directors. Bay Hill's resolution of the board of directors states:
RESOLVED, that, in connection with the disputes concerning the faulty construction and installation of many of the roofs in the Bay Hill Complex, the offer of settlement by the insurance carrier for Colby Development Company, and certain other parties, in the amount of $1 million shall be and is hereby accepted;
RESOLVED FURTHER, That the President of the Association shall be and hereby is authorized and directed to execute a Release substantially in the form attached hereto;
RESOLVED FURTHER, That the President of the Association shall be and hereby is authorized and directed to take all further actions and execute all other documents he deems necessary and desirable to finalize the above described settlement.
The attached release form was patterned after a release form previously used by Bay Hill to settle another claim against Allied. That settlement was negotiated by Schmidt, who authored the June 30, 1999 settlement letter that requested "a copy of the releases (sic) forms."
The district court concluded Bay Hill did not accept any offer before its withdrawal. The court concluded the offer was contingent upon (1) the parties' mutually agreeing upon a release form, and (2) the satisfactory provision of documentation to substantiate Mr. Speicher's authority to sign a release on behalf of Bay Hill. We disagree and conclude the June 30 letter constituted a promise to pay one million dollars in exchange for Bay Hill's promise to execute a legally enforceable release. Although the offer did refer to the by-laws and releases, it concluded by thanking Bay Hill's counsel for her "continued cooperation [as] we worked towards this settlement." We conclude the requests for the by-laws and the releases are merely the consideration to be provided by Bay Hill in exchange for the money to be paid to Allied.
We determine a contract was formed when Speicher delivered to Allied a written corporate resolution accepting Allied's offer to settle the claim for $1,000,000. All that remained at that point was performance by both parties; Bay Hill to execute a release and Allied to pay. Therefore, Allied was unable, as a matter of law, to revoke its settlement offer when it purported to do so in the July 30, 1999 letter. Bay Hill's execution of the revised release was only a formality of performance that had not been completed on July 30, 1999. Bay Hill's failure to execute the revised release and provide Allied with a copy of its bylaws did not defeat its acceptance of the offer. Accordingly, Bay Hill is entitled to specific performance of the settlement agreement.
IV. Conclusion. We reverse the district court's order denying Bay Hill's motion for summary judgment and granting Allied's cross-motion for summary judgment.