IN THE COURT OF APPEALS OF IOWA
No. 16-0919
Filed July 19, 2017
DAVID BERTRAM,
Plaintiff-Appellant,
vs.
JAMES HARBERTS d/b/a EXCLUSIVE CONTRACTING L.L.C.,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Grundy County, David P. Odekirk,
Judge.
The plaintiff appeals from part of the district court’s ruling on a breach of
contract case. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Michael McDonough, Jacob W. Nelson, and Crystal R. Pound of Simmons
Perrine Moyer Bergmann PLC, Cedar Rapids, for appellant.
Chad A. Swanson (until withdrawal) and Nathan J. Schroeder (until
withdrawal), Waterloo, for appellee.
Considered by Vogel, P.J., Doyle, J., and Blane, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2017).
2
BLANE, Senior Judge.
David Bertram appeals from the district court’s ruling in an action involving
claims and counterclaims for breach of contract. Bertram challenges the district
court’s conclusion he materially breached the written contract into which he and
the defendant, James Harberts, d/b/a/ Exclusive Contract, L.L.C., entered.
Additionally, he challenges the district court’s ruling regarding damages.
I. Background Facts and Proceedings.
Bertram, a farmer, wanted a pole barn constructed on his land. Sometime
in 2012, he contacted Harberts,1 an experienced builder.
After some back and forth regarding proposals and estimates, Harberts
completed a written contractor’s agreement on June 3, 2013, and submitted it to
Bertram. The parties signed the agreement on June 25. The agreement
provided Harberts would build an 80 foot by 105 foot pole barn, complete with
concrete floors, spray-foam insulation, and the framing for a number of interior
walls and doorways. The total cost—$265,210.00—included the necessary
supplies and labor. Bertram, by the terms of the agreement, was to initially pay
Harberts “$172,386.50 (reflecting 65% of total cost) . . . before work beg[an].
After assembly and construction of [the] building[], a predetermined amount of
$66,302.50 (reflecting 25% of total cost) [was to] be paid to the Contractor. After
interior floor installation ha[d] been completed, a predetermined amount of
$26,521.00 (reflecting 10% of total cost)” was to be paid to Harberts. The
contract also specified what Harberts was not responsible for, including the large
“overhead doors and openers,” among other things.
1
We refer to both the defendant and his business as Harberts throughout.
3
Bertram maintained he and Harberts had also agreed orally, before
signing the contract, both that Harberts would have the building completed “by
winter” and that Harberts would keep the money Bertram gave to him for the
project in a separate account. Harberts agreed he gave Bertram a projected
completion date and that he hoped to have the project completed by winter, but
he disagreed that the completion date was a contractual term. Additionally,
Harberts testified he never told Bertram his money would be kept separate from
the money Harberts’ business was receiving for other projects. Bank records
introduced at trial showed that Bertram’s money was deposited into Harberts’
business account, along with the funds for other projects.
Bertram made the first payment to Harberts of $172,386.50 on or about
the day the contract was signed. Harberts began construction at some point in
early July. The building itself was up by October 21, 2013, at which time
Harberts requested the second installment payment. Bertram made the second
payment of $66,302.50.
Around the same time the building was finished, Harberts and Bertram
had a discussion about the large overhead doors. Bertram had yet to pick or
order the doors, and he had neither hired someone to complete nor personally
completed the work that had to be done before the doors could be installed—
tasks that were his to undertake and were not within the contract. Harberts
advised Bertram he would not complete the insulation or concrete work until after
the doors were installed.
After the second payment was made, Harberts and Bertram agreed
Harberts’ company would complete certain “extras” for Bertram, including
4
installing the liner panel and doing some work that had to be completed for the
overhead doors to be installed.
Bertram chose the overhead doors on November 1; he was told it would
take seven to eight weeks for the doors to be delivered. On November 4,
Harberts paid the $7051 deposit on the doors.
Bertram wanted Harberts to work on completing the insulation and
concrete floor while they waited for the doors to be installed, but Harberts refused
to do so. Harberts later testified that he always did flooring last, stating he did
not want to drive his heavy equipment over the newly poured floors and wanted
to make sure the doors were in place first so he could use the cement work to
make sure they sealed tightly.
On December 17, Bertram’s attorney sent Harberts a letter indicating “Mr.
Bertram does not want any more work performed this winter. You are currently
holding $123,490 of Mr. Bertram’s money.” The letter asked Harberts to “deduct
amounts that you expended for the ceiling steelwork and forward the balance of
the money” to Bertram’s attorney. Harberts did not respond to the letter.
The overhead doors were installed on December 21, and Harberts’
company was sent an invoice for the rest of the bill by the door company, totaling
$14,452.
Bertram’s attorney sent Harberts another letter on January 3, 2014. It
stated the attorney had been “instructed” to “demand $135,000 payable to the”
firm’s trust account to “be held in escrow” at the firm’s office until Harberts
finished the project. It further indicated that once Harberts “finish[ed] the project
5
in the spring, that amount” would be paid to him. Harberts was told he had seven
days to respond to the letter before Bertram commenced litigation.
The parties then scheduled a meeting, which took place on January 10 at
the lending bank. At the meeting, Bertram demanded Harberts immediately
resume construction. Harberts testified he agreed he would get back on the job
site as soon as the weather allowed. At trial, Bertram expressed that he believed
Harberts had agreed to return to work “immediately.”
Harberts did not immediately return to the job site. He did submit an
invoice to the bank for the “extras” his company had completed and for the
amount owed to the door company, totaling $48,153. $21,503 of the balance
was for the doors—both the $7051 Harberts had paid in deposit and the
remaining balance after installation.
On January 16, both Bertram and his attorney sent Harberts letters.
Harberts responded in kind on January 29. No more work was completed on the
project before February 18, when Bertram’s attorney sent Harberts a letter
terminating the contract.
Bertram initiated this lawsuit on April 30. He claimed Harberts had “failed
and neglected to complete the construction of the building, ha[d] constructed
portions in a defective and unworkmanlike manner, . . . [and had] failed to return
the unearned funds paid to [him] despite demand for return of them by
[Bertram].” Harberts answered and filed a counterclaim, maintaining it was
Bertram who had breached the contract.
The matter proceeded to a bench trial in June 2015. At trial, Bertram and
his witnesses testified that the roof of the pole barn was leaking in several areas.
6
Evidence was introduced that Harberts and his employees had incorrectly placed
nails, which had left holes in the roof. Additionally, the overlap of the metal
panels was less than recommended by the manufacturer. The cost for the
replacement of the roof would be $32,486.70.
The court issued its written ruling on January 8, 2016. The court found
that neither the winter completion date nor the segregation of funds from other
business monies were terms that had been integrated into the contract. The
court then concluded Harberts had materially breached the contract by failing to
complete the building in a workmanlike manner. “This material breach, made
prior to the final payment becoming due, excuses [Bertram’s] payment of the final
contract payment.” The court awarded Bertram the following damages: $1905 to
replace gutters; $2400 to fix problems with the installation of the side paneling;
$32,486.70 to replace the roof. However, the court determined Bertram did owe
Harberts for the “extras” that he had performed, in the amount of $32,701. 2
Additionally, the court found that it was the fault of Bertram, not Harberts, that the
project was never completed. The court ruled:
The Court finds [Bertram] should not receive damages for
the installation of the concrete floors, insulation, or interior walls,
and he will also not receive damages to fix the drip cap, replace the
ceiling panels, or to regrade the floors. The work on the barn was
not complete at the time [Bertram] terminated the contract, nor was
it required to be complete because the reasonable time for
completion had not yet passed. As a result, [Harberts] was
excused from further performance on these portions of the project.
2
Although it was Harberts’ company that was billed by the door company, Bertram had
paid the balance directly. Thus, the total was comprised of the deposit Harberts paid to
the door company, the fur and coil around the door, the liner panel ceiling, the extra
footing required after Bertram changed the plans for the interior framing, and the grade
and compact for plumbing.
7
The court offset the damages owed to Bertram for the construction issues
with the extras still owed and entered judgment in favor of Bertram in the amount
of $4090.70.
Bertram filed a motion pursuant to Iowa Rule of Civil Procedure 1.904(2),
asking the court to “expand and enlarge findings and legal conclusions and
modify the judgment accordingly to award [Bertram] a money judgment for either
the return of unearned funds prepaid to [Harberts] or for the additional costs of
completion caused by [Harberts] breach of contract.” Bertram maintained that
Harberts was entitled to only the reasonable value of the work he actually
performed—not payments for the insulation, concrete flooring, or interior framing.
Bertram claimed the value of the completed work was only $145,300 and asked
the court to order Harberts to return $93,389 in “pre-payments” that he received.
In its written ruling on the motion, the court amended its previous order “to
clarify [Bertram] not only partially breached when he failed to pay for the contract
extras, but also materially breached on the contract when he frustrated the
construction process and wrongfully terminated the contract on February 18,
2014.” The court determined Bertram was not entitled to the return of any
“prepayments” because Harberts “credibly testified at trial that he had prepaid for
materials and labor prior to [Bertram’s] termination of the contract and would
have been able to complete the project had he been allowed to do so.” The court
altered its ruling on Harberts’ breach, concluding, “[T]he Court amends its prior
findings to find that this constituted a partial breach of the warranty of
workmanlike construction, not a material breach of the contract.”
8
Bertram appeals.3
II. Standard of Review.
“A breach-of-contract claim tried at law to the district court is reviewed by
us for correction of errors at law.” NevadaCare, Inc. v. Dep’t of Human Servs.,
783 N.W.2d 459, 465 (Iowa 2010). Although “[t]he district court’s findings of fact
have the effect of a special verdict[,]” “[t]he trial court’s ‘legal conclusions and
application of legal principles are not binding on the appellate court.’” Id.
(citations omitted). “We will reverse a district court’s judgment if we find the court
has applied erroneous rules of law, which materially affected its decision.” Id.
III. Discussion.
The district court found that there was no contractual term regarding the
completion date of the project and determined a reasonable time for completion
would have been the spring of 2014, rather than the winter of 2013. See Fausel
v. JRJ Enters., Inc., 603 N.W.2d 612, 619 (Iowa 1999) (“When a contract fails to
specify time for performance, the parties must perform within a reasonable
time.”). Thus, the court determined Harberts was not yet in breach of the
contract when Bertram cancelled the agreement in February 2014.
Bertram maintains the district court erred in its determination; he asserts
the court based its finding on an inaccurate memory of Harberts’ testimony
regarding the number of workers he had, the court faulting Bertram for the delay
3
Harberts’ attorneys were permitted to withdraw from these proceedings during appeal.
Harberts did not enlist another attorney to file an appearance on his behalf, and
Harberts—as a non-attorney—was not allowed to represent a corporation. See
Timberline Builders, Inc. v. Donald D. Jayne Trust, No. 09-0168, 2010 WL 2383916, at
*1–4 (Iowa Ct. App. June 16, 2010). Thus, his cross-appeal was dismissed, and he has
filed no appellate brief in this matter.
9
because of his failure to order the overhead doors created an implied condition
precedent that was not actually part of the contract, and Bertram’s January 2014
letter allowing Harberts “until spring” to complete the project was not a waiver of
Harberts’ deadline to complete the contract.
What constitutes “a reasonable time depends upon the nature of the act to
be done, the nature of the contract, and all the circumstances relating to the
same.” R.P. Andreas & Son v. Hempy, 276 N.W. 791, 796 (Iowa 1937). Here,
based on the circumstances surrounding the completion of the contractor’s
agreement, we agree with the district court’s finding that spring 2014 was a
reasonable time. Despite Bertram’s protestations, the court was correct to
attribute some of the delay in finishing the project to him. Bertram failed to order
the overhead doors in a timely fashion, which prevented them from being
installed until December 21, 2013. The contract was silent as to whether the
overhead doors needed to be installed before Harberts would complete the
insulation and concrete floor, but Harberts testified he always left flooring for last
in his construction projects because of possible issues with or damage to the
floor that could occur during other parts of construction. Furthermore, Bertram’s
own construction expert testified “it is the contractor [as opposed to the owner]
that controls the sequencing of the erection of the building through means and
methods.” Iowa Code section 554.2202(1) (2014) allows the court, when reading
a written contract between two parties, to consider the “usage of trade” to explain
or supplement the written terms. See Iowa Code § 554.1303(3) (defining a
“usage of trade” as “any practice of method of dealing having such regularity of
10
observance in a place, vocation, or trade as to justify an expectation that it will be
observed with respect to the transaction in question”).
Because Harberts had the authority to decide the insulation and flooring
would not be completed until the doors were installed and Bertram’s delay in
ordering the doors prevented them from being installed until December 21, it
would not be reasonable to determine the project should have been finished
before that date. And on December 17, Bertram had sent Harberts a letter telling
him to suspend all work “for the winter.” Following a January 10 meeting,
Harberts expected to return to work on the project, so it could be completed by
spring 2014, but the weather in the days directly following the meeting interfered,
and Bertram sent Harberts another letter with new demands on January 16. In
these circumstances, spring 2014 is a “reasonable time” for completion.4 We
agree with the district court that Bertram materially breached the contract when
he cancelled it before the reasonable time for the project to be completed had
passed.
Next, we consider the district court’s conclusion Harberts was entitled to
keep all of the “prepayments” for work he was never obliged to complete. “Under
4
We note that Bertram makes a number of arguments regarding the district court’s
alleged error involving his expert’s estimate, in a chart, of a reasonable completion date.
While we agree that we could simply move the start date on the chart back to match the
actual date construction started, we believe there are other issues with the chart. First,
Harberts testified he “had [a crew of] four guys and then one guy was [his] mechanic.”
However, the expert’s estimates were not always based on that number. For example,
his chart states the concrete can be laid in two days, but the expert admitted at trial that
was based on a nine-person crew. The expert’s chart also showed that construction
work would continue in the barn two days after the concrete was poured, but he testified
the flooring required a seven-day cure time. In contrast, Harberts testified, “[D]uring 70-
or 80-degree weather during the summertime, six inches of concrete can take 28 days to
cure out, and it’s still not completely cured. Well, if you’re driving a 21,000 pound lift on
it, it has to cure for at least that in the wintertime and be heated while it’s curing.”
11
Iowa law, when a contract has been breached the nonbreaching party is
generally entitled to be placed in as good a position as he or she would have
occupied had the contract been performed.” Midland Mut. Life Ins. v. Mercy
Clinics, Inc., 579 N.W.2d 823, 831 (Iowa 1998). While this allows the non-
breaching party to receive the benefit of the bargain, it does not allow him “to be
placed in a better position than he would have been in if the contract had not
been broken.” Id. Here, the district court concluded Bertram was not entitled to
receive any of his money back because Harberts had pre-paid for materials and
labor before the termination of the contract. We are not convinced the record
supports such broad findings, and insofar as they are supported, Harberts is
required to at least give Bertram the materials that were purchased for the
completion of his project or, if such materials were used by Harberts on other
projects, reimburse Bertram their cost.
Harberts is entitled to keep his expected profits. Ritam Corp. v. Applied
Concepts, Inc., 387 N.W.2d 619, 622 (Iowa Ct. App. 1986). He is not required to
reimburse Bertram for any “pre-paid” labor that he was not then allowed to utilize
on the project. Id. at 621 (“When a contract is breached, the nonbreaching party
is entitled to recover profits from the breach equal to the net pecuniary gain
represented by gross pecuniary gains diminished by cost of obtaining them.”).
But Harberts is not allowed to keep more than he would have received if the
contract had been completed. Harberts testified he had purchased interior doors
for the project and still had them; those should be given to Bertram, or if Harberts
no longer has them, then Harberts should pay Bertram the purchase price.
Additionally, while Harberts told Bertram at various times before the contract was
12
cancelled that he had already purchased certain materials, Harberts testified
differently at trial. He stated he “had 70 percent of the insulation already
purchased, but now [he had] used it on other jobs so it didn’t expire.” Harberts
should not be able to recover the value for the 30% of insulation Bertram had not
yet purchased. Harberts also cannot be benefitted by the cancellation of the
contract such that he is allowed to use Bertram’s insulation to complete other
jobs. Similarly, Harberts testified he had used $12,000 to $14,000 of the
concrete to create the frost footings. The contract shows the “concrete floors,
wall, and footings” to be worth $56,050. It is unclear if Harberts had prepaid for
the concrete, and whether he used that concrete on other jobs, in which case
Bertram should be refunded the cost. If Harberts did not prepay, Bertram is to
receive the money he prepaid that was not spent to install the concrete floor.
However, such amount for concrete work may be reduced by the amount
Harberts was required to expend to change the concrete footings due to Bertram
changing the design of the pole barn after construction had been started.
The trial court erred in determining that Harberts was not required to
return money and materials he had as a result of the job not being finished.
Because we are unable to determine from the record before us what materials
were actually pre-purchased, what materials Harberts had for the job when the
contract was cancelled, and whether they have since been used by Harberts, we
remand to the district court to modify the judgment award for Bertram as
13
necessary in accord with the holding in Midland Mututal Life Insurance v. Mercy
Clinics, Inc., 579 N.W.2d at 831.5
IV. Conclusion.
We affirm the district court’s ruling that Bertram materially breached the
contract when he cancelled it in February 2014. However, we find the district
court erred in its determination of damages; we reverse the award and remand
for further proceedings.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
5
We do not find error with the district court’s ruling that Bertram owed Harberts $32,701
for the “extras” he completed as agreed. We also find no error with the district court’s
ruling that Harberts was responsible for the repair or replacement of the gutters, the
damages to side paneling, and the roof—worth $32,486.70.