Spring Crest Townhomes WDM v. Mickle Electric & Heating Co.

• Court: Court of Appeals of Iowa
• Decided: July 3, 2024
• Docket: 23-0647
• Status: Published

Opinion

IN THE COURT OF APPEALS OF IOWA

No. 23-0647 Filed July 3, 2024

SPRING CREST TOWNHOMES WDM, LLC, Plaintiff-Appellee/Cross-Appellant,

vs.

MICKLE ELECTRIC & HEATING CO., INC. d/b/a MICKLE ELECTRIC & HEATING, LLC, Defendant-Appellant/Cross-Appellee. ________________________________________________________________

Appeal from the Iowa District Court for Dallas County, Charles C. Sinnard,

Judge.

A subcontractor appeals a ruling determining that it breached a construction

contract. The developer cross-appeals the ruling awarding the subcontractor an

offset for unbilled labor. AFFIRMED ON APPEAL AND CROSS-APPEAL.

Billy J. Mallory and Trevor A. Jordison of Mallory Law, West Des Moines,

for appellant/cross-appellee.

John F. Fatino and Parker Howe of Whitfield & Eddy, P.L.C., Des Moines,

for appellee/cross-appellant.

Heard by Ahlers, P.J., and Chicchelly and Buller, JJ. 2

AHLERS, Presiding Judge.

After a developer terminated a contract with a subcontractor, the two parties

disagree over who breached the contract and is responsible for the additional cost

incurred by the developer to hire a new subcontractor to finish the job.

I. Background Facts and Prior Proceedings

Spring Crest Townhomes WDM, LLC (Spring Crest) contracted with Mickle

Electric & Heating, LLC (Mickle) to complete electrical work on three buildings

within its townhome development. The contract provided that Mickle had twenty-

one days from “the date of commencement” to complete all work. The contract

defined the date of commencement as “the date that the Construction Manager

notifies the Subcontractor in writing or email when the work is to commence.”

As to the start date, Mickle’s written bid, which was incorporated into the

terms of the written contract between the parties, included a note stating, “if you

choose to go with us, please let me know as soon as possible. We would like to

get material ordered.” Shortly after the contract was signed, representatives from

the two companies had a phone conversation wherein Mickle shared it wanted to

get to work right away because it had workers waiting for work. Ultimately, Mickle

began work within a day or two after the contract was finalized despite not receiving

notification in “writing or email” stating that work was to begin. As the contract was

signed by Mickle on April 19, 2021, and by Spring Crest on April 20, and Mickle

started work on the project within a day or two, the electrical work would have

needed to be completed by around May 14 if the twenty-one-day period had begun

to run. 3

The electrical work was not completed by that time. Spring Crest provided

Mickle with extensions to complete the work. But on August 3, Spring Crest’s

construction manager confronted Mickle in a text message noting no one from

Mickle was doing any electrical work on the project. A Mickle employee responded

by email, noting that Mickle was behind schedule because the townhomes were

not ready for the trim work when its employees went to install it. She then provided

Spring Crest with a “loose schedule” for the remaining electrical work. Under that

schedule, work on one townhome would be completed on August 12 with the rest

of the work on the other townhomes completed by August 31.

But by August 12, work on the first townhome was not completed as

provided for in the schedule provided by Mickle’s employee. That was the final

straw for Spring Crest. Its attorney sent a letter to Mickle on August 13, informing

Mickle that it had until 4:00 p.m. on August 15 to complete all outstanding work.

Mickle did not complete the work by August 15. On August 16, Spring Crest sent

notice to Mickle that it was terminating their contract for cause. Spring Crest

contracted with two other electricians to complete the remaining electrical work on

the townhomes.

Spring Crest then brought this action against Mickle to recover the

difference between its contracted cost with Mickle and the amount it spent to have

the townhomes finished by the different electricians. Mickle responded with a bill

to Spring Crest for work it had completed before termination of the contract but

had yet to bill. It brought a counterclaim against Spring Crest for payment for those

amounts. 4

The case proceeded to a bench trial. The district court determined that

Mickle breached the contract and awarded Spring Crest damages. However, the

court offset that award by the amount Mickle was due for work completed prior to

Mickle’s termination. The court determined that, under the contract, Spring Crest

was the prevailing party entitled to attorney fees.

Mickle appeals, arguing it did not breach the contract and that Spring Crest

is not the sole prevailing party entitled to attorney fees. Spring Crest cross-

appeals, arguing that the court erred by awarding Mickle an offset for unbilled work.

II. Standard of Review

“[O]ur review of the district court’s contract interpretation and construction

is at law.” Homeland Energy Sols., LLC v. Retterath, 938 N.W.2d 664, 683 (Iowa

2020). “The district court’s factual findings have the effect of a special verdict and

are binding on us if supported by substantial evidence.” Metro. Prop. & Cas. Ins.

Co. v. Auto-Owners Mut. Ins. Co., 924 N.W.2d 833, 839 (Iowa 2019). “We view

the evidence in the light most favorable to the judgment when a party argues the

trial court’s ruling is not supported by substantial evidence.” Meincke v. Nw. Bank

& Tr. Co., 756 N.W.2d 223, 227 (Iowa 2008). “Evidence is substantial when

reasonable minds accept the evidence as adequate to reach a conclusion.” Id.

“Evidence is not insubstantial merely because we may draw different conclusions

from it; the ultimate question is whether it supports the finding actually made, not

whether the evidence would support a different finding.” Id. (citation omitted).

III. Discussion

Generally, when interpreting a contract, we look to the language used within

the four corners of the document. DuTrac Cmty. Credit Union v. Radiology Grp. 5

Real Est., L.C., 891 N.W.2d 210, 216 (Iowa 2017). “In the construction of written

contracts, the cardinal principle is that the intent of the parties must control, and

except in cases of ambiguity, this is determined by what the contract itself says.”

Id. (citation omitted). When the parties’ intent “is clear and unambiguous from the

words of the contract itself, we will enforce the contract as written.” Id. “If the

language of the contract is ambiguous, then we engage in interpretation in order

to determine ‘the meanings attached by each party at the time the contract was

made.’” Id. (citation omitted).

A. Mickle’s Appeal

1. Breach of contract

Mickle contends that the district court erred in concluding it breached the

contract for three reasons: (1) Spring Crest never sent written notice of

commencement, so the twenty-one-day clock never began; (2) it was impossible

for Mickle to perform within twenty-one days; and (3) Spring Crest actually

breached when it terminated the contract.

We find it unnecessary to resolve Mickle’s claim that the twenty-one-day

clock never began to run. This is because the district court appropriately found an

independent basis for Spring Crest to terminate the contract. Under section 6.3 of

the contract, Spring Crest had the right to terminate the contract if Mickle “at any

time and for any reason” failed to perform its work under the contract “in a diligent,

efficient, timely, workmanlike, safe and careful manner.”

There is no dispute Mickle began working on the project within a day or two

after both parties signed the contract in April, yet Mickle had not completed its part

of the project by early August. While Spring Crest may have been dissatisfied with 6

the timeliness of Mickle’s work even earlier, there is no question Spring Crest

notified Mickle of its dissatisfaction no later than August 2 when it notified Mickle

of upcoming deadlines it had to meet and it would accept “NO EXCUSES” for

Mickle not getting its work done. There is also no question that Mickle then

provided Spring Crest with a schedule Mickle created to complete the project by

August 31. Despite providing this new schedule over three months after starting

the project and the new schedule contemplated a period to complete the project

that exceeded the twenty-one days for project completion called for by the contract,

Mickle missed the very first deadline provided for in its new schedule. This was

the final straw that caused Spring Crest to deem Mickle in default and exercise its

right under section 6.3 to give Mickle a forty-eight-hour notice to cure the default.

Mickle did not cure the default after receiving the notice, entitling Spring Crest to

terminate the contract. The district court’s finding that Mickle breached the contract

is supported by substantial evidence, so we are bound by it. See Iowa R. App.

P. 6.904(3)(a).

We turn next to Mickle’s contention that it was impossible to complete the

work in a timely manner and therefore its failure to do so does not constitute a

breach of the contract entitling Spring Crest to terminate it. “In order to excuse

nonperformance, the term must be objectively impossible to perform. The

impossibility of performance cannot be due to the fault of the nonperforming party.”

DuTrac, 891 N.W.2d at 217 (internal citation omitted).

Mickle did not persuade the district court that it was prevented from

performing, and the district court’s finding is supported by substantial evidence.

Section 2.2.3 of the contract required Mickle to “immediately notify the 7

Construction Manager of any . . . problems that would cause a delay . . . under [its]

phase of work.” So under the terms of the contract, Mickle was required to inform

Spring Crest of any issues that would delay its work. But nothing in the record

establishes Mickle informed Spring Crest it could not complete the electrical work

due to delays caused by others.

The only evidence in the record that Mickle informed Spring Crest that it

could not complete its work due to lack of progress by others is an email from the

Mickle office manager sent on August 3 in response to Spring Crest demanding

completion with “NO EXCUSES.” In that email, Mickle’s representative claimed

Mickle went to complete trim work during “the weeks of 7/19, 7/26 & 8/2 but the

units weren’t ready.” This falls short of establishing that it was impossible for

Mickle to complete the work within the allotted time, particularly because the

contract required Mickle to inform Spring Crest of any delays, which would have

allowed Spring Crest to intervene with the other trades to help keep the project on

schedule. Furthermore, the email raising claimed delays for the first time also

included a new schedule created by Mickle for completing the project, but, as

previously noted, Mickle failed to follow that schedule too with no claim that its

failure was caused by others.

Finally, the replacement electrical contractor who finished the work after

Spring Crest terminated the contract with Mickle testified that it was able to

complete its work immediately after taking over the project. This evidence further

refutes Mickle’s claim that it was hampered by others in fulfilling its contractual

obligations. The district court’s finding that it was not impossible for Mickle to fulfill 8

its contractual obligation is supported by substantial evidence, and we are bound

by it. See Iowa R. App. 6.904(3)(a).

For the same reasons we find Mickle breached the contract and Spring

Crest properly terminated it, we reject Mickle’s contention that Spring Crest

breached the contract. Accordingly, we affirm the district court’s ruling determining

that Mickle breached the contract and awarding damages to Spring Crest.

2. Attorney Fees

Next, Mickle challenges the district court’s determination that Spring Crest

is the sole prevailing party and entitled to attorney fees under the contract. It

reasons that because the district court also determined that Mickle is entitled to an

offset to cover work it had completed but not billed prior to termination of the

contract, both parties prevailed and it should not be responsible for Spring Crest’s

attorney fees.

Section 11.2 of the contract provides, “The prevailing party in any legal

proceeding related to this Agreement, shall be entitled to payment of reasonable

attorney’s fees, costs, and interest at the legal rate.” Our supreme court

considered similar language in NCJC, Inc. v. WMG, L.C., 960 N.W.2d 58 (Iowa

2021). The contract in that case stated, “If either party files suit to enforce any of

the terms of this Lease, the prevailing party shall be entitled to recover court costs

and reasonable attorney’s fees.” NCJC, Inc., 960 N.W.2d at 62. Our supreme

court emphasized the use of “the prevailing party” makes clear only a singular party

can be the prevailing party rather than multiple parties. See id. That same singular

language is used here, meaning either Spring Crest or Mickle can be the prevailing

party, not both as Mickle contends. While the district court did award Mickle an 9

offset, ultimately Spring Crest prevailed as a whole after establishing Mickle

breached the contract. Accordingly, we agree with the district court that Spring

Crest was the prevailing party for purposes of awarding attorney fees under the

contract.

We affirm the district court.

B. Cross-Appeal

We turn our attention to Spring Crest’s cross-appeal. It argues “[t]he district

court erred in offsetting the amount due [to] Spring Crest based upon Mickle’s

unbilled invoices.” Mickle provided the court with a list of hours Mickle employees

worked on the project between the time Spring Crest had paid its prior invoice and

termination of the contract. Its representative testified that the unbilled labor

amounted to 171 hours of work at a rate of $80 per hour. And section 6.3.1 of the

contract provided that should the contract be terminated then Mickle would be

entitled to an offset for work that it had completed prior to termination for which it

had not yet been paid.

But Spring Crest contends that “the work was never billed because it was

worthless and [Mickle’s representative] knew it.” It highlights testimony from one

of the electricians who finished up the electrical work after Spring Crest terminated

the contract with Mickle. That individual testified that he had to redo some of the

work that was done by Mickle because it was not done correctly. Yet nothing in

the record establishes that the unbilled work was the work that had to be redone.

Regardless, we are bound to affirm the district court if its findings are supported by

substantial evidence. See Metro. Prop. & Cas. Ins. Co., 924 N.W.2d at 839. We

agree with the district court that the terms of the contract dictate that Mickle is 10

entitled to an offset for its labor completed after the work itemized on the last

invoice and prior to termination of the contract. While reasonable minds could

differ on the value of that labor, we conclude the district court’s valuation of the

offset is supported by substantial evidence, so we affirm on the cross-appeal.

AFFIRMED ON APPEAL AND CROSS-APPEAL.