Craig Williams v. Pocahontas Ford-Lincoln, Inc.

• Court: Court of Appeals of Iowa
• Decided: November 30, 2020
• Docket: 19-0639
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 19-0639 Filed November 30, 2020

CRAIG WILLIAMS, Plaintiff-Appellant,

vs.

POCAHONTAS FORD-LINCOLN, INC., Defendant-Appellee. ________________________________________________________________

Appeal from the Iowa District Court for Pocahontas County, Kurt J. Stoebe,

Judge.

Plaintiff appeals the district court’s ruling that denied his claims of breach of

an employment contract and failure to pay wages. AFFIRMED AND REMANDED.

Charles Gribble and Christopher Stewart of Gribble, Boles, Stewart &

Witkosky Law, Des Moines, for appellant.

Mitchell R. Kunert of Nyemaster Goode, P.C., Des Moines, for appellee.

Considered by Bower, C.J., and Doyle and Schumacher, JJ. 2

SCHUMACHER, Judge.

Craig Williams appeals the district court’s ruling that denied his claims of

breach of an employment contract and failure to pay wages under Iowa Code

chapter 91A (2017). We affirm the district court’s decision finding the employer

did not breach the parties’ employment agreement and that Williams is not owed

any unpaid wages. We remand for a calculation of the reasonable trial and

appellate attorney fees incurred by the employer.

I. Background Facts & Proceedings

Pocahontas Ford Lincoln, Inc. (PFL) is a car dealership in Pocahontas,

Iowa. The company has 1800 shares, which were valued at $550 per share, for a

total value of $990,000. Gustave Holzmueller is the majority shareholder, owning

900 shares.1 Holzmueller worked at PFL, as did his wife, Beverly Holzmueller

(Beverly).

In 2013, Holzmueller and Beverly were interested in selling PFL and retiring.

Williams is the son-in-law of Beverly’s sister. He contacted Holzmueller to express

an interest in buying PFL, although he had no experience as a car dealer and did

not have the finances to purchase the company. Holzmueller stated Williams

would be able to get a low-interest loan and could gradually purchase shares. In

June 2013, Williams, his wife, and his daughter moved from Las Vegas, Nevada,

to Pocahontas. Williams began working as a salesman at PFL in order to learn

about the business.

1 The other shareholders were Bernie Rost, Del Rost, and Colleen Kaiser. 3

Williams and PFL entered into an employment agreement for a term of five

years beginning January 1, 2014. The contract gave Williams five vacation days

each year and no sick leave. It gave Williams the right to purchase stock in PFL

but did not require him to do so.

The employment agreement provided:

3. Term and Termination. (a) .... (b) The Company and Employee may terminate this Agreement at any time upon at least ninety (90) days prior advance notice given to the other Party. (c) The Company may terminate this agreement at any time . . . upon either (A) the occurrence of a material breach of Employee’s duties under this Agreement, or (B) for Cause (as such term is defined below). For purposes of this Agreement, “Cause” shall mean that any one or more of the following has occurred and, with the exception of clause (i) and (iv) below (which shall not be subject to a cure period), is continuing to occur following receipt of notice by Employee from the Company of its occurrence for fifteen (15) days with respect to clause (ii) below, and thirty (30) days with respect to clause (iii) below: (i) Employee shall have been convicted by a court of competent jurisdiction of, or pleaded guilty or nolo contendere to, either (A) any felony, or (B) any crime involving fraud, embezzlement or misappropriation . . . ; or (ii) Employee shall lose or have revoked (A) any license required for Employee to conduct business for the Company, or (B) Ford’s approval of Employee as an approved Ford dealer and/or an owner with managerial authority, as such terms are defined by Ford; or (iii) Employee shall have engaged in either (A) willful or material misconduct relating to the duties incident to his employment with the Company, or (B) willful or material failure to perform, or chronic neglect of, the duties incident to his employment with the Company; or (iv) Employee’s death or disability.

The employment agreement stated Williams’s employment was “pursuant

to the terms and conditions of this Agreement and any employee handbook.” The

employee handbook lists minor and major offenses that could cause disciplinary 4

action. Major offenses included “Abusive treatment of others (physical and/or

verbal)”; “Physical violence”; and “Possession of an illegal weapon,” among other

offenses. The handbook stated that for major offenses, a person would receive a

written warning for a first offense and would be terminated for a second offense.

The handbook also states, “The management reserves the right to bypass any

step in the procedure when s/he considers that the seriousness of the offense

warrants it.”

At the same time Williams and PFL entered into the employment

agreement, they entered into a stock purchase agreement that gave Williams the

right to purchase shares in PFL. He purchased twenty-four shares of stock in

2014.

Williams attempted to get financing from a bank to purchase the company

but was unable to obtain a loan in a sufficient amount. Williams and his family

expressed an interest in returning to Las Vegas. Although Williams did not

purchase any additional shares in PFL, he continued to work there as a salesman.

Williams initially did well and received bonuses for his work.

At the end of 2016 and the beginning of 2017, Williams missed some

periods of work because he was suffering from diverticulitis.2 Williams had surgery

in April 2017 and returned to work on May 1. Holzmueller informed Williams that

sales had slowed in 2017 and the company was not doing well financially. Williams

was scheduled to go on vacation from June 6 to 15. According to Williams, he

2 Williams testified he became depressed due to the pain from diverticulitis and his inability to find employment in Las Vegas. He did not obtain a medical diagnosis of depression and did not seek treatment for the condition. Holzmueller and Beverly testified Williams discussed committing suicide. 5

asked Holzmueller if he should still take his vacation and Holzmueller told him to

go. However, Holzmueller stated he asked Williams not to go on vacation due to

the dealership’s financial situation and the decrease in sales.

On June 5, the day before he was to leave, Williams told Holzmueller that

unless he got a real vacation, he was going to go to a water tower and start

shooting. Williams stated he said this as a joke and such was in reference to an

ongoing joke between himself and Holzmueller. Holzmueller testified Williams

stated he would start shooting people from the top of a grain elevator, which was

next to the car dealership. Holzmueller denied there was an ongoing joke on the

matter.3 He became concerned and contacted the sheriff’s department. Williams

left on his planned vacation on June 6.

On June 12, while Williams was away, Holzmueller held a meeting with the

other shareholders. The record in this case included an audio recording of the

meeting. Beverly was not a shareholder but acted as the secretary for the meeting.

Holzmueller discussed Williams’s statement about shooting from a tower and

noted Williams owned several guns. The shareholders decided to terminate

Williams’s employment based on the failure to purchase additional shares in the

company, poor job performance, and absenteeism. The written minutes state,

“‘Craig A. Williams[’s] employment contract will be terminated for Cause; i.e. the

occurrence of a material breach of Employee’s duties under the Agreement.’

(3.c.).” The written minutes do not include any statements about Williams’s threat

to start shooting, but the audio recording reflects discussion of the threat.

3Holzmueller also testified he was aware that Williams owned semi-automatic weapons. 6

Holzmueller further relayed to the other shareholders that arrangements had been

made with the sheriff to be present at the time of termination. Concerns were

expressed by more than one shareholder about Williams returning with a gun.

Beverly testified she did not include the discussion in the written minutes because

she did not want to cause Williams difficulty in obtaining a new job.

Williams returned to work on June 16. He was fired by Holzmueller that

day. Williams was not told a reason for his termination at that time. Beverly

testified that she mailed Williams a copy of the written minutes, but Williams stated

he never received it. Williams did not perform any work after June 16, but he was

paid for an additional two weeks. He also received a bonus of $5000 for the quarter

ending on June 30. PFL purchased the twenty-four shares of stock held by

Williams. Williams and his family moved back to Las Vegas, and he resumed

working for his former employer.

On August 27, 2017, Williams filed an action against PFL, claiming breach

of his employment contract and failure to pay wages under Iowa Code chapter

91A. After a bench trial, the district court entered a ruling on April 18, 2019.4 The

4 Williams argues that our court should scrutinize the record more carefully because of the use of the proposed findings of fact and conclusions of law by the district court and the almost verbatim adoption of PFL’s filing. Our supreme court has recognized the crucial role district courts play in making credibility determinations. See Rubes v. Mega Life & Health Ins. Co., 642 N.W.2d 263, 266 (Iowa 2002). It has also found that “our ability to apply the usual deferential standard is undermined by the court’s verbatim adoption of [a party’s] proposed factual findings and legal conclusions” and has cautioned district “courts about the perils of such practice.” Id. “[T]he customary deference accorded [district] courts cannot fairly be applied when the decision on review reflects the findings of the prevailing litigant rather than the court’s own scrutiny of the evidence and articulation of controlling legal principles.” Id. (citing Phoenix Engineering & Supply Inc. v. Universal Electric Co., 104 F.3d 1137, 1140 (9th Cir. 1997), for the proposition that where a district court adopts one party’s proposed findings, close 7

district court found Holzmueller and Beverly were credible witnesses. The court

determined Williams’s statement about shooting people from the grain elevator

“triggered the meeting and the termination of Williams’s employment.” The court

concluded Williams was terminated for a material breach of his employment duties

and so was not entitled to notice, and therefore there was no breach of the

employment contract by PFL. The court also found PFL did not owe Williams any

unpaid wages. The court found PFL was entitled to attorney fees. Williams

appealed the district court’s decision.

II. Breach of Contract

Williams contends PFL breached the employment contract by terminating

him without giving him notice and the opportunity to correct his behavior, which he

asserts was required by the terms of the contract.

In order to prevail on a claim of breach of an employment contract, a plaintiff

must prove:

(1) the existence of a contract; (2) the terms and conditions of the contract; (3) that [he] 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.

Kern v. Palmer Coll. of Chiropractic, 757 N.W.2d 651, 657–58 (Iowa 2008)

(alteration in original) (quoting Molo Oil Co. v. River City Ford Truck Sales, Inc.,

scrutiny of the record is required). Although our supreme court has refused to adopt a higher standard of review in such cases, it has instructed that “we must scrutinize the record more carefully when conducting our appellate review.” NevadaCare, Inc. v. Dep’t of Human Servs., 783 N.W.2d 459, 465 (Iowa 2010); see also Soults Farms, Inc. v. Schafer, 797 N.W.2d 92, 97 (Iowa 2011). We apply the supreme court’s mandate in review of this record. 8

578 N.W.2d 222, 224 (Iowa 1998)). “The question of whether the plaintiff has

proved a breach of contract is for the judicial fact-finder.” Id. at 658.

For breach-of-contract actions, our review is for correction of errors at law.

Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 2013). We are

bound by the district court’s factual findings if they are supported by substantial

evidence in the record. Id.

Williams states the shareholders voted to discharge him for cause, citing (1)

failure to purchase additional shares of the company, (2) poor job performance,

and (3) absenteeism. Williams states that these items do not meet the definition

of “cause” in the employment contract. He also states that to the extent the items

could be considered “willful or material misconduct relating to the duties incident

to his employment” or “willful or material failure to perform, or chronic neglect of,

the duties incident to his employment” under section 3(c)(iii) of the contract, he

should have been given notice and then could only be discharged if the conduct

continued for thirty days.

The written minutes from the meeting state, “Craig A. Williams[’s]

employment contract will be terminated for Cause; i.e. the occurrence of a material

breach of Employee’s duties under the Agreement.” Holzmueller and Beverly

testified they did not use the term “cause” as it was defined in the employment

agreement but used it to mean the reason for Williams’s discharge.5 The district

court found this explanation credible. “As the finder of fact, weighing the proffered

5 The term “cause” may mean “the reason or motive for some human action.” Cause, https://www.dictionary.com/browse/cause (last visited Nov. 18, 2020). 9

testimony and determining its credibility was the district court’s duty.” Hutchison

v. Shull, 878 N.W.2d 221, 230 (Iowa 2016).

Additionally, the language of the written minutes makes sense if the term

“cause” means reason, so the minutes state in effect that the reason for Williams’s

termination is the occurrence of a material breach of his duties under the contract.

Using the definition of “cause” in the contract, the statement that Williams was

terminated for cause, which was the occurrence of a material breach, does not

make sense as “the occurrence of a material breach of Employee’s duties under

this Agreement,” and “Cause” are two different things and a material breach is not

a “cause” listed in the contract. See Alta Vista Props., LLC v. Mauer Vision Ctr.,

PC, 855 N.W.2d 722, 727 (Iowa 2014) (“[A]n interpretation which gives a

reasonable, lawful, and effective meaning to all terms is preferred to an

interpretation which leaves a part unreasonable, unlawful, or of no effect.”

(alteration in original) (quoting Fashion Fabrics of Iowa, Inc. v. Retail Investors

Corp., 266 N.W.2d 22, 26 (Iowa 1978)).

Furthermore, Holzmueller and Beverly testified Williams was discharged

from his employment at PFL based on his statement that if he did not get a real

vacation, he would go to the top of a water tower or grain elevator and start

shooting people. Williams made the statement to Holzmueller, who became very

concerned and called the sheriff. Taken in the context of the discussions between

Williams and Holzmueller about whether Williams should take his vacation

scheduled for the next day, the statement can be interpreted as a threat of physical

violence if Holzmueller prohibited Williams from leaving. According to the

employee handbook, the regular multi-step disciplinary process could be bypassed 10

based on the seriousness of an offense. The threat of physical violence is in line

with other actions considered major offenses, and based on the seriousness of the

threat, PFL could bypass giving Williams a written warning prior to terminating his

employment.

Under the contract, there is no provision for notice prior to discharge when

an employee is discharged based on the occurrence of a material breach of the

employee’s duties. We find no error in the district court’s conclusion that Williams’s

threat of physical violence was a material breach of his employment duties.

Therefore, the employment contract did not require notice to Williams before he

was discharged from his employment. PFL did not breach the employment

agreement when it terminated Williams’s employment.

Further, even if PFL needed to comply with notice under paragraph 3(c),

PFL could bypass that notice if Williams’s actions went to the “essence or

fundamental purpose” of the contract. We find, based on the record, that

Williams’s statements threatening to climb to the grain elevator and start shooting

went to the essence or fundamental purpose of the contract. The district court

relied on this alternate theory, set forth by the supreme court in Larken, Inc. v.

Larken Iowa City Limited Partnership, 589 N.W.2d 700, 702–04 (Iowa 1998). We

agree with the district court’s findings that it would be reckless to require PFL to

give Williams an opportunity to cure, allowing him to remain in the workplace.

III. Chapter 91A

Williams claims PFL owes him wages under chapter 91A, the Iowa Wage

Payment Collection Law. See Iowa Code § 91A.1. He asserts PFL improperly

terminated his employment under the terms of the employment agreement and he 11

is owed wages, bonuses, and benefits for the remainder of the five-year term of

the contract. We review claims under chapter 91A for the correction of errors of

law. See Gabelmann v. NFO, Inc., 571 N.W.2d 476, 483 (Iowa 1997).

Chapter 91A “imposes liability only when the employer fails to pay the

amount of wages actually due to the employee.” Condon Auto Sales & Serv., Inc.

v. Crick, 604 N.W.2d 587, 596 (Iowa 1999). An employee has no claim for

nonpayment under chapter 91A unless wages are actually owed to the employee.

See Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 202 (Iowa 1997) (citing

Iowa Code § 91A.8).

Williams has not shown any wages are due to him that PFL failed to pay.

For this reason, the wage collection provisions of chapter 91A do not apply. PFL

properly terminated Williams’s employment on June 16, 2017, and Williams was

paid for all of his services prior to that date. Williams has not shown any additional

wages are owed to him.

IV. Damages

Although the district court found Williams was not entitled to any damages,

the court discussed Williams’s claims concerning the amount of damages he

asserted should be awarded. We find Williams was not successful on his claims

regarding breach of contract or unpaid wages under chapter 91A. We do not

further analyze his various arguments concerning the amount of damages he

believes should have been awarded.

V. Attorney Fees

Lastly, Williams argues even if he was not entitled to notice prior to

discharge, the district court erred in awarding attorney fees to PFL. The district 12

court determined PFL should be awarded reasonable attorney fees and costs.6

Williams contends the employment agreement did not provide for the award of

attorney fees under the circumstances in this case.

The employment agreement states:

Indemnification. Employee shall defend, indemnify and hold the Company and its respective shareholders, directors, officers, employees and agents harmless from and against any suit, action, proceeding, demand, claim, counterclaim, loss, liability, damage, cost or expense, including court costs and attorneys’ fees, in any way arising in connection with or resulting from any breach or non- fulfillment of, or default under, any term or condition of this Agreement by Employee. The Company shall recover from Employee its reasonable attorneys’ fees and costs incurred to enforce or remedy any breach of this Agreement by Employee, including, but not limited to, a breach of Section 4 or Section 5.

The employment agreement provided that PFL could recover from Williams

the reasonable attorney fees and costs the company incurred “to enforce or

remedy any breach” of the employment agreement by Williams. Williams

breached the employment agreement by making a threat to shoot people, which

was a material breach of his duties under the agreement. Under the terms of the

employment agreement, PFL could then recover its attorney fees and costs from

Williams.

“When a contract contains a clear and express provision regarding attorney

fees, the court’s award must be for reasonable attorney fees.” NevadaCare, 783

6 The amount of attorney fees and costs has not yet been determined. PFL was ordered to submit an itemization of fees and costs within thirty days. Before PFL submitted an itemization of its fees and costs, however, Williams filed a notice of appeal. The issue on appeal concerns whether attorney fees could be awarded, not the amount of an attorney fee award. We conclude the issue raised on appeal is not interlocutory in nature. See Virginia Manor, Inc. v. City of Sioux City, 261 N.W.2d 510, 513 (Iowa 1978) (finding a ruling that merely preserved the right to bring a claim for attorney fees in the future was a final appealable decision). 13

N.W.2d at 470. We determine the district court may properly award PFL

reasonable attorney fees under the terms of the employment agreement. We

remand for a calculation of PFL’s reasonable trial and appellate attorney fees and

costs.

We affirm the district court’s decisions finding PFL did not breach the

parties’ employment agreement and that Williams is not owed any unpaid wages.

We remand for a calculation of the reasonable trial and appellate attorney fees

incurred by PFL.

AFFIRMED AND REMANDED.