Opinion
No. 4-038 / 03-0854
Filed April 14, 2004
Appeal from the Iowa District Court for Polk County, Richard G. Blane II (summary judgment) and Paul R. Huscher (trial), Judges.
Plaintiff appeals the district court's grant of summary judgment and its subsequent entry of judgment. AFFIRMED AS MODIFIED.
James Gilliam and Rebecca Brommel of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, for appellant.
Thomas Levis and Matthew Brick of Brick, Gentry, Bowers, Swartz, Stoltze, Schuling Levis, P.C., Des Moines, for appellees.
Considered by Huitink, P.J., and Vogel and Mahan, JJ.
American Healthcare Capital appeals the district court's grant of summary judgment on its claim for breach of contract and the district court's ruling holding American Healthcare Capital was not entitled to a constructive trust and granting attorney fees to Essential Healthcare Resources, Inc. We affirm as modified.
Background Facts.
Essential Healthcare Resources, Inc. (EHCR) is owned by Wilma Fleischacker and is a franchise of Nursefinders, Inc. Under the franchise agreement entered into by EHCR and Nursefinders, Inc. in May 1996, Nursefinders, Inc. had a right of first refusal on any bona fide offers to purchase EHCR.
The named defendants are Essential Healthcare Resources, Inc., a/k/a Willoe, Inc., d/b/a Nursefinders of Des Moines, and Wilma S. Fleischacker, collectively referred to as "EHCR."
On September 23, 1999, Jack Eskenazi d/b/a American Healthcare Capital (AHC) entered into an Exclusive Finder's Fee Agreement for the Sale of a Medical Business Opportunity (the Agreement) with EHCR. Pursuant to the Agreement, AHC would provide potential buyers to purchase EHCR. As compensation, AHC was to receive six percent of the purchase price or a minimum fee of $100,000 if three conditions were materially satisfied: a) one or more prospective buyers introduced to EHCR by AHC, Wilma Fleischacker as President of EHCR, or any other source offered to purchase all or a portion of the business opportunity, b) Fleischacker accepted the offer and terms from any of the prospective buyers, and c) any prospective buyers and Fleischacker closed on the purchase of all or any portion of the purchase price required for the business opportunity. The Agreement included a provision that AHC would be entitled to the six percent finder's fee if, within three years of the Agreement's expiration, EHCR was sold to a party that AHC had introduced to EHCR during the initial term of the Agreement.
In October 1999, Edmund McGuinness, vice president of operational services and recruiting at Nursefinders, Inc., received from one of its franchisees a "blast fax," that is a fax sent to multiple locations, originated by AHC announcing the sale of EHCR. McGuinness testified that he contacted Fleischacker expressing surprise at the sale, but did not discuss a purchase of the business.
The Agreement between AHC and EHCR expired on March 23, 2000. On March 29 through 31, Nursefinders, Inc. held its annual franchise owner's meeting at which time it announced it was interested in acquiring both Nursefinders, Inc. franchises and other businesses. The franchise owners were informed that if they were interested in selling their business, they should contact Nursefinders, Inc. Fleischacker approached Nursefinders, Inc. at the meeting and began negotiations for the sale of EHCR. As a result of those negotiations, Nursefinders, Inc. purchased EHCR on June 30 for $2,000,000.
On August 23, 2001, AHC filed a civil claim against EHCR in California Superior Court but later voluntarily dismissed the action. On April 1, 2003, AHC filed a petition in Iowa alleging breach of contract and fraud and seeking a constructive trust as restitution for EHCR's purported unjust enrichment. On EHCR's summary judgment motion, the district court dismissed AHC's claims of breach of contract and fraud but denied summary judgment on the issue of constructive trust. On April 28 and 29, 2003, following a bench trial, the district court determined a constructive trust was not warranted on the facts. The court further ordered AHC to pay EHCR's attorney fees in the amount of $18,923.25, which included $3,591.54 in attorney fees from the initial action in California. AHC appeals from the summary judgment ruling and subsequent decision of the district court.
Scope of Review.
Summary judgment rulings are reviewed for correction of errors at law. Iowa R. App. P. 6.4; General Car Truck Leasing Sys., Inc. v. Lane Waterman, 557 N.W.2d 274, 276 (Iowa 1996). Where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. Iowa R. Civ. P. 1.981(3); City of West Branch v. Miller, 546 N.W.2d 598, 600 (Iowa 1996). Our review of the district court's ruling is for correction of errors at law. Iowa R. App. P. 6.4.
Breach of Contract.
AHC argues that because the Agreement was exclusive and AHC introduced the sale of EHCR to Nursefinders, Inc., EHCR breached the Agreement by failing to pay AHC its six percent fee. EHCR contends that AHC raises for the first time on appeal that it is entitled to the finder's fee because it introduced Nursefinders, Inc. to EHCR. Because we conclude that AHC did not introduce Nursefinders, Inc. to EHCR under the Agreement, we will address the issue without deciding whether it was preserved for appeal.
By its terms, the Agreement is governed by California law. To be entitled to damages for breach of contract, a plaintiff must establish "(1) a contract, (2) plaintiff's performance or excuse of nonperformance, (3) defendant's breach, and (4) damage to plaintiff." Walsh v. West Valley Mission Cmty. Coll. Dist., 78 Cal.Rptr.2d 725, 733 (Cal.Ct.App. 1998) (citations omitted).
On summary judgment, the district court found that AHC had failed to establish that EHCR and Nursefinders, Inc. commenced discussions during the six-month term of the Agreement. The court further found that AHC conceded that it did not introduce EHCR to Nursefinders, Inc. so as to be able to make a claim for its finder's fee under the three-year tail provision in the Agreement.
We agree. During the six-month agreement period there is no evidence of discussions between EHCR and Nursefinders, Inc. regarding the sale. In October 1999, McGuinness did contact Fleischacker after receiving the fax from another franchisee but he testified that there was no discussion of purchasing the business at that time. It wasn't until the annual meeting at the end of March 2000, after the Agreement expired, that Nursefinders, Inc. made its announcement that it was interested in acquiring its franchises. Fleischacker responded to the announcement and discussions commenced regarding the purchase of EHCR by Nursefinders, Inc.
On April 10, 2000, after the Agreement expired and in order to protect its interests, AHC sent a letter to EHCR listing the potential buyers it introduced to EHCR during the six-month agreement term; Nursefinders, Inc. was not included on that list. Further, in AHC's statement of disputed facts filed with its motion resisting summary judgment it acknowledged that the three-year provision in the Agreement did not apply to this case because it had not introduced Nursefinders, Inc. to EHCR.
We conclude that EHCR did not breach the Agreement by not compensating AHC with the six percent finder's fee on the sale to Nursefinders, Inc. as the subsequent sale to Nursefinders, Inc. was outside the terms of the Agreement.
Constructive Trust.
AHC next claims that EHCR was unjustly enriched by failing to pay AHC the six-percent finder's fee under the Agreement, therefore, a constructive trust is the appropriate remedy. "A constructive trust is not an actual trust but is simply a legal construct expressing a right to restitution based on unjust enrichment." Orud v. Groth, 652 N.W.2d 447, 452 n. 2 (Iowa 2002) (citing Restatement (Second) of Trusts § 404 introductory note (1959)). Because there is no evidence in the record of unjust enrichment, we concur with the district court's analysis determining a constructive trust is not appropriate in this case.
Trial Attorney Fees.
The district court awarded attorney fees to EHCR in the amount of $18,923.25, of which $3,591.54 was attributed to the California action. AHC contends that the district court erred in awarding the fees stemming from the California action as it voluntarily dismissed that action.
The Agreement states, "[i]f legal action is instituted by either party under this agreement, the losing party shall pay all reasonable attorney's fees, costs and expenses incurred by the prevailing party in accordance with California Civil Code Section 1717." California Civil Code section 1717 provides, in part, "[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section." Cal. Civ. Code § 1717(b)(2).
The district court did not make a finding as to who was the prevailing or losing party in the California action, instead it combined all the attorney fees in its award to EHCR. Under the California Civil Code, there was no "prevailing party" nor "losing party" in the California action as it was voluntarily dismissed by AHC. See Cal. Civ. Code § 1717(b)(2). As such, the district court erred in awarding EHCR attorney fees for the California action. Accordingly, we modify the district court's award by striking $3,591.54 from the order, reducing the award of attorney fees to $15,331.71.
Appellate Attorney Fees.
EHCR requests appellate attorney fees pursuant to the Agreement and Iowa Code section 625.22 (2003). "When judgment is recovered upon a written contract containing an agreement to pay an attorney's fee, the court shall allow and tax as a part of the costs a reasonable attorney's fee to be determined by the court." Iowa Code § 625.22. The Agreement provided that the losing party in a legal action shall pay all reasonable attorney's fees, costs and expenses incurred by the prevailing party. The prevailing party is EHCR. We accordingly award attorney fees of $4,200, plus costs of $432.