Opinion
No. 2-252 / 01-1350
Filed January 29, 2003
Appeal from the Iowa District Court for Poweshiek County, Dan F. Morrison, Judge.
Robert Moore appeals district court's grant of summary judgment to appellees in this action for breach of an employment contract and tortious interference with that contract. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.
Wade R. Hauser III of Ahlers, Cooney, Dorweiler, Haynie, Smith Allbee, P.C., Des Moines, for appellees.
Heard by Huitink, P.J., and Zimmer and Miller, JJ.
Robert Moore appeals district court's grant of summary judgment to appellees in this action for breach of an employment contract and tortious interference with that contract. He claims the district court erred by: (1) refusing to enforce the contract on the grounds of frustration of purpose; (2) finding there was no basis to pierce the corporate veil; and (3) finding David and Linda Sutherland did not interfere with his employment contract. We affirm in part and reverse in part.
I. Background Facts and Proceedings
In reviewing a motion for summary judgment, we consider the evidence in a light most favorable to the party opposing the motion, here Moore. See Crippen v. City of Cedar Rapids, 618 N.W.2d 562, 565 (Iowa 2000). Moore came to work at Sutherland Printing Company in July 1996 as the chief financial officer. David Sutherland was the majority shareholder. Linda Sutherland, his wife, worked at the company. At that time, Sutherland Printing was involved in Chapter 11 bankruptcy proceedings. On February 11, 1997, Moore and Sutherland Printing entered into a written employment contract for a term of five years. The contract provided for premature termination of Moore's employment only upon his death, disability, neglect of duties or willful misconduct.
In May 1997 Master Graphics, Inc. purchased all of the assets of Sutherland Printing. Master Graphics took over operation of the business of the former Sutherland Printing. Moore continued with his same job at the same location. He expressed concerns to Master Graphics' management that David and Linda were charging personal expenses to the company. At one point, David attempted to fire Moore, but Master Graphics countermanded that order, and Moore was reinstated as an employee.
At the time of the purchase, Master Graphics was known as Master Printing, Inc. Our references to Master Graphics also include the former entity Master Printing. Sutherland Printing became known as T D Marketing, Inc., but did not continue as a business entity under either name.
The situation continued to deteriorate. Moore believed David and Linda were opening his mail and intercepting his faxes, and he did not receive required financial statements from Master Graphics' headquarters. According to Moore, David placed bank statements in his desk, so they were unavailable to him. Linda disparaged him to other employees. Moore was unable to successfully complete his work. In August 1998 Master Graphics gave Moore a deadline to complete certain financial statements. During this process his desk was moved while he was not present and when he returned he was forced to reorganize his work. Moore did not complete the financial statements and was discharged from his employment by Master Graphics on August 17, 1998.
Moore filed suit against Sutherland Printing and Master Graphics alleging breach of his employment contract. He asserted Master Graphics had assumed his contract. In the alternative, he asserted if Sutherland Printing was still liable on the contract, then the corporate veil of that company should be pierced so David and Linda would be individually liable. In addition, Moore alleged David and Linda tortiously interfered with his employment contract. Master Graphics declared bankruptcy, and Moore dismissed his suit against it.
Sutherland Printing, David, and Linda filed motions for summary judgment. The district court determined Moore's employment contract was assumed by Master Graphics. The court concluded "Any contract claims the plaintiff might have would be with Master Graphics." The court granted summary judgment to Sutherland Printing on the breach of contract claim. Based on this finding, the court also granted summary judgment to defendants on Moore's request to pierce the corporate veil of Sutherland Printing.
The court granted summary judgment to David and Linda on Moore's claims of tortious interference with contract. The court stated the record did not establish an intentional or improper interference on the part of the individual defendants. The court concluded there were no material facts in dispute regarding why the plaintiff was terminated other than the plaintiff's own statements. Moore appeals.
II. Scope of Review
We review a district court's ruling on a motion for summary judgment for correction of errors of law. Financial Mktg. Servs., Inc. v. Hawkeye Bank Trust, 588 N.W.2d 450, 455 (Iowa 1999). Summary judgment will be upheld when the moving party shows there are no genuine issues of material fact and the party is entitled to judgment as a matter of law. See Iowa R.Civ.P. 1.981(3). A fact is material only when its determination might affect the outcome of the suit. Keokuk Junction Ry. Co. v. IES Indus., Inc., 618 N.W.2d 352, 355 (Iowa 2000).
III. Breach of Contract
On appeal, Moore asserts the district court erred in these statements:
The purpose for the employment agreement was frustrated when [Sutherland Printing] was forced to sell its assets and to go out of business. Mel Frank Tool Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802 (Iowa 1998). The employment agreement was rendered impracticable when [Sutherland Printing] went out of business. American Soil Processing, Inc. v. Comprehensive Petroleum Underground Storage Tank Fund Bd., 586 N.W.2d 325 (Iowa 1998).
While the district court made these statements in its ruling, we do not believe they were the basis for the court's grant of summary judgment. The doctrines of frustration of purpose or impractibility of performance would only be applicable if Sutherland Printing were still liable under the contract at the time Moore was discharged from his employment in August 1998.
The district court found the asset purchase agreement provided for the assumption of the employment contract by Master Graphics. In his petition and in his deposition Moore stated he was discharged by Master Graphics. The court concluded:
The plaintiff was clearly an employee of Master Graphics at the time of his termination. Master Graphics had purchased the employment contract in the APA [Asset Purchase Agreement], and they decided to employ the plaintiff under the terms of the agreement. Any contract claims the plaintiff might have would be with Master Graphics.
(Emphasis added.) The evidence clearly supports the court's conclusion. When David attempted to fire Moore, he was reinstated by Master Graphics. In his appellate brief as well, Moore concedes, "he was clearly employed by Master Graphics." We affirm the district court's decision on this issue.
IV. Piercing the Corporate Veil
Moore asserts that while Sutherland Printing lacks the wherewithal to satisfy his breach of contract claim, David and Linda may be individually liable under a theory of piercing the corporate veil. A court may disregard a corporate structure by piercing the corporate veil only under circumstances where a corporation is a mere shell, serving no legitimate business purpose. In re Marriage of Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000) (citations omitted). Because we have affirmed the district court's determination that Sutherland Printing was not liable under the contract, we do not address Moore's assertions regarding piercing the corporate veil.
V. Tortious Interference with Contract
Moore contends the district court erred by granting summary judgment to David and Linda on his claims of tortious interference with his employment contract. The elements of this tort are: (1) plaintiff had a contract with a third party; (2) defendant knew of the contract; (3) defendant intentionally and improperly interfered with the contract; (4) the interference caused the third-party not to perform, or made performance more burdensome or expensive; and (5) damage to the plaintiff resulted. Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 399 (Iowa 2001).
Here, Moore had an employment contract with Master Graphics, and David and Linda knew of the contract. We find there is a genuine issue of material fact concerning whether David and Linda intentionally and improperly interfered with the contract, and whether this interference contributed to Moore's termination from employment. As outlined above, Moore alleged David and Linda intercepted his mail and faxes. David did not allow Moore to have access to bank statements. Moore stated he was discharged after he failed to get his financial statements up to date in the period requested by Master Graphics. Moore stated he was not able to complete the work in time because he did not have the information he needed. We conclude the district court improperly granted summary judgment on the claim of tortious interference with a contract.
We realize there may be a question concerning whether David and Linda were third parties to Moore's employment contract or whether they were agents of the employer. See Grimm v. U.S. West Communications, Inc., 644 N.W.2d 8, 12 (Iowa 2002); Harbit v. Voss Petroleum, Inc., 553 N.W.2d 329, 331 (Iowa 1996). This issue was not raised below, and we do not consider it on appeal. See Meier v. Senecaut, 641 N.W.2d 532, 540 (Iowa 2002).
We affirm the grant of summary judgment to Sutherland Printing on the breach of contract claim. We reverse summary judgment for David and Linda Sutherland on Moore's claims of tortious interference with a contract. We remand for further proceedings in district court. Costs of this appeal are assessed one-half to Moore and one-half to David and Linda Sutherland.