Opinion
22-1697
03-06-2024
GROWTH UNLIMITED CORP., Plaintiff-Appellant, v. GOOD VIBES and PATRICIA LURA, Defendant-Appellees.
Andrew J. Knuth, Atlantic, for appellant. Christopher J. Shald and Brody D. Swanson of Peters Law Firm, P.C., Council Bluffs, for appellees.
Appeal from the Iowa District Court for Montgomery County, Jeffrey L. Larson, Judge.
The plaintiff appeals an adverse judgment in a breach-of-contract claim. Affirmed.
Andrew J. Knuth, Atlantic, for appellant.
Christopher J. Shald and Brody D. Swanson of Peters Law Firm, P.C., Council Bluffs, for appellees.
Considered by Bower, C.J., and Buller and Langholz, JJ.
BULLER, JUDGE
This appeal concerns a contract dispute between a supplier of games of skill, Growth Unlimited Corp. ("Growth Unlimited"), and a sole-proprietorship arcade, Good Vibes and Patricia Lura (collectively "Good Vibes"). We are asked to decide who quit the contract first. Growth Unlimited asserts Good Vibes breached the leasing agreement when the arcade limited the supplier's access, while Good Vibes responds that Growth Unlimited repudiated the contract before any potential breach. The district court agreed with Good Vibes, as do we.
Good Vibes and Growth Unlimited contracted in writing that Good Vibes would lease machines to the arcade and the parties would share revenue as consideration. The practice of the parties was that, once per week, a Growth Unlimited employee would come to the arcade outside business hours to collect information from the machines to calculate and collect revenue-sharing payments.
About ten months after signing the agreement, the parties' relationship increased in difficulty. Surveillance footage caught one of Growth Unlimited's employees "pocketing the money"-stealing-while in the arcade after hours. After that theft, Good Vibes changed the locks and no longer allowed Growth Unlimited after-hours access to the property. Growth Unlimited still allowed access during business hours: 10:00 a.m. to 2:00 a.m.
Good Vibes also conveyed it did not want a particular Growth Unlimited employee to access the machines because that person also had a history of "sticky fingers." Good Vibes told Growth Unlimited "you can have anybody else come in here" to access the machines. And Growth Unlimited eventually sent an employee who was able to do so.
Tension between the parties came to a head on July 3, 2019, when the president of Growth Unlimited sent the following letter to Good Vibes with three options for terminating the agreement:
I'm not doing business with someone I cannot have communication with. I have called your cell phone many times and have not gotten an answer; I cannot leave a message because the mailbox is full. This is a problem, since I own the [fifteen] machines currently at Good Vibes that we are being denied access to.
At this point, you have [three] choices. (1) I can buy your business (it's such a short time until the new law takes effect, don't let that influence your selling price); (2) you can purchase from Growth what machines you want to keep and I will pick up the rest; or (3) I can pick up all of the machines I own and you can find another operator.
I will be in Norfolk on Tuesday, July 9 to discuss this with you.
On July 9, representatives of Growth Unlimited and Good Vibes met in person. Good Vibes confirmed it would take the third option. That same day, the owner of Growth Unlimited signed the following handwritten note to memorialize their conversation:
On this date, the General Manager told us to pick up the machines in [thirty] days. Calvin Brown agrees he will do that; we are tired of the hassle. August 9 we will be here to pick up the machines and doing [sic] a final meter reading on all machines. We expect to collect all monies owed to us at that time.
On the agreed-upon date, Good Vibes unplugged the machines on its property and placed them against a wall, expecting Growth Unlimited to pick them up. But Growth Unlimited did not collect machines until August 24-about a two-week lag from the date it had promised.
Growth Unlimited filed suit against Good Vibes for breach of contract, seeking more than $92,000 in damages for lost revenue and past-due collections. Good Vibes counterclaimed for almost $10,000 in lost revenue, based on the delay in picking up the machines.
Following a bench trial, the district court found Growth Unlimited repudiated the contract with its July 3 and July 9 letters. And the court denied Good Vibes's counterclaim for reasons immaterial to this appeal. Growth Unlimited appeals.
We review breach-of-contract claims for correction of errors at law. NevadaCare, Inc. v. Dep't of Hum. Servs., 783 N.W.2d 459, 465 (Iowa 2010). If substantial evidence in the record supports a district court's findings of fact, the reviewing court is bound by its findings. Id. But a district court's conclusions of law and its application of legal principles are not binding. Id.
To establish liability on a breach-of-contact claim, the plaintiff must prove five elements:
(1) the existence of a contract; (2) the terms and conditions of the contract; (3) that it has performed all the terms and conditions required under the contract; (4) the defendant's breach of the contract in some particular way; and (5) that plaintiff has suffered damages as a result of the breach.Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998). But, "[w]here one party to a contract repudiates the contract before the time for performance has arrived, the other party is relieved from its performance." Conrad Bros. v. John Deere Ins. Co., 640 N.W.2d 231, 241 (Iowa 2001). "Normally, repudiation consists of a statement that the repudiating party cannot or will not perform. The statement must be sufficiently positive to be reasonably understood . . . that the breach will actually occur." Id. (internal citations and quotation marks omitted).
We agree with the district court that Growth Unlimited repudiated the contract. The July 3 letter was sufficiently definite to communicate repudiation, with statements like "I'm not doing business with someone I cannot have communication with" and offering three choices on how-not if-the relationship would terminate. The July 9 letter further dispelled any arguable claim otherwise, indicating Growth Unlimited would pick up the machines and necessarily repudiated the agreement to lease them.
On appeal, Growth Unlimited claims Good Vibes had already breached the agreement when it put limits on access to the arcade. We reject that argument based on the written agreement and testimony at trial. First, the agreement lacks any terms related to accessing the machines. Second, we-like the district court- find Good Vibes limiting access to business hours and employees without a history of theft was reasonable and not a breach of the contract. We note the record on this point is essentially uncontroverted, as Growth Unlimited's president testified he thought it was reasonable and "makes sense" Good Vibes did not want a known thief accessing machines in the arcade after hours. Growth Unlimited's repudiation predated any arguable breach by Good Vibes, and we find the district court correctly ruled in favor of Good Vibes.
AFFIRMED.