IN THE COURT OF APPEALS OF IOWA by jEAi786W

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									                     IN THE COURT OF APPEALS OF IOWA

                                 No. 4-384 / 03-0676
                                Filed October 14, 2004

K & L LANDSCAPE & CONSTRUCTION INC., an Iowa Corporation,
      Plaintiff-Appellee,

vs.

DAKOTA CONTRACTORS, INC.,
    Defendant-Appellant,

SIOUX CITY COMMUNITY SCHOOL DISTRICT and WESTERN SURETY
COMPANY,
     Defendants.


       Appeal from the Iowa District Court for Woodbury County, Michael S.

Walsh, Judge.



       A general contractor appeals following the entry of judgment on a sub-

contractor’s claim for breach of contract. AFFIRMED.



       Robert Lengeling of Richard Rinehart & Associates, L.L.P., Sioux City, for

appellant.



       David Vohs, Sioux City, for appellee.



       Dawn Mastalir of Berenstein, Moore, Berenstein, Heffernan & Moeller,

L.L.P., Sioux City, for school district.



       Considered by Vogel, P.J., and Hecht and Vaitheswaran, JJ.
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VOGEL, P.J.

          This is an appeal from the judgment of the district court on K&L

Landscape and Construction, Inc.’s (K&L) action for breach of contract against

Dakota Contractors, Inc. (Dakota) and Dakota’s counterclaim against K&L. We

affirm.

Background Facts and Proceedings.

          In 2000 the Sioux City Community School District hired Dakota as general

contractor for the construction of new athletic fields. Prior to that time, Dakota

had entertained bid estimates from several subcontractors, including K&L, to

complete certain portions of the work. Later, Dakota contacted K&L asking it to

make certain reductions on its bid. Based on K&L’s response, in September, the

bid was lowered from $113,298.46 to $96,721.86.         In October of 2000, K&L

started work on the project and advised Dakota it was working from its amended

bid.

          On October 4, Dakota submitted a contract to K&L for a total price of

$79,536; however, because this was lower than the previous quote, they held

discussions on what work K&L was supposed to be doing. After the discussions

failed to result in a contract, K&L sent a fax to Dakota, on November 1, pointing

out the discrepancies between the contracts and seeking guidance on its

intended work. The fax also stated that K&L would proceed according to its

earlier bid prices. Dakota’s response, which it sent the following March, set forth

the prices for the work it sought from K&L. K&L did not respond further, and did

not inform Dakota it was rejecting the price and work breakdown.
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       After a winter shut-down, work continued in the spring of 2001, when

plans for the field were altered. Due to this change, the contract amount was

adjusted to $87,199. After K&L had completed most of the work on the project,

Dakota and the school district found certain work to be unacceptable. By this

time, Dakota had paid K&L $40,123.62. During a July 2001 meeting between

Dakota, K&L, the school district and the architect, the problems were discussed.

K&L then informed Dakota it considered the project complete, and would do no

further work on the contract. The project was finally accepted by the school

district after Dakota supplied additional workforce and materials to complete

certain items.

       K&L subsequently filed a petition against Dakota, the school district, and

Western Surety Company, which furnished a bond for the work. The petition was

filed in equity and sought recovery for breach of an oral contract.            Dakota

counterclaimed for breach of contract and negligent performance. Following a

bench trial, the district court concluded that K&L “established that it is entitled to

payment for work completed but not paid” in the amount of $60,796.66, and that

Dakota “established that it is entitled to damages for breach of contract by K&L in

the amount of $7,444.50.” Consequently, it awarded K&L a net judgment of

$53,352.16. Dakota appeals from this judgment.1




Scope and Standards of Review.

1
   The Sioux City Community School District has filed an appellee’s brief for the sole
purpose of arguing that if this court reverses the district court’s judgment, we should
order that K&L disgorge any funds paid directly to it by the school district.
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       Quantum meruit recovery based on an implied-in-fact contract is normally

reviewed for correction of errors at law. See Frontier Prop. Corp. v. Swanberg,

488 N.W.2d 146, 147 (Iowa 1992). However, because this case was tried in

equity our review is not at law but de novo. Weinhold v. Wolff, 555 N.W.2d 454,

458 (Iowa 1996). Equity jurisdiction allows the court the necessary flexibility to

determine the equities between the parties. Farmers Sav. Bank v. Gerhart, 372

N.W.2d 238, 245 (Iowa 1985). We give weight to the fact findings of the trial

court, especially when considering the credibility of witnesses, but are not bound

by them. Iowa R. App. P. 6.14(6)(g). However, where the question is whether

the district court properly applied the law, our review is for the correction of errors

at law. Benton v. Slater, 605 N.W.2d 3, 4 (Iowa 2000).

The District Court’s Judgment.

       The district court found there was no written contract between the parties,

but noted that the parties “concede there was a contract between them.”              It

further found that “[n]either party has established that the parties reached a

meeting of the minds or an agreement as to specific terms of a contract such as

the extent of the work or the amount to be paid.”

       The court concluded:

       To the extent Dakota requested or prescribed certain work and it
       was performed by K&L, K&L should be paid for the work it
       performed properly. Certainly, the parties by their performance and
       actions and the acquiescence to those actions that K&L would be
       permitted to perform work on the project and would be paid for that
       work.
       ....
       There was a breach of contract between the parties to the extent
       Dakota offered certain work to K&L, and K&L accepted the offer by
       performing the work.
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       ....
       If there is no express agreement as to the amount of compensation
       to be paid, the law implies a promise to pay a reasonable
       compensation. . . . While the parties dispute the quality and extent
       of work performed by K&L, there is no apparent dispute regarding
       whether the amount charged by K&L is reasonable.

Contract Analysis.

       On appeal, Dakota alleges the district court failed to apply principles of

contract law to determine whether the contract at issue is express or implied. It

urges that the first determination to be made is whether there was a contract and,

if so, whether it was express or implied.

       In describing the distinctions between various types of contracts, our

supreme court has stated:

              Contracts are either express or implied. A contract is
       express if the parties reach it by words. In contrast, a contract is
       implied if the parties manifest it by their conduct.
              There are two types of implied contracts: implied in fact and
       implied in law. We have already spoken of the implied in fact
       contract. As to these, all of the traditional rules of contract law—
       offer and acceptance, consideration, and breach—apply. . . .
              In contrast, implied in law contracts—also known as
       constructive or quasi-contracts—rest on a legal fiction arising from
       considerations of justice and the equitable principle of unjust
       enrichment. Such contracts do not arise from bargaining. And so,
       they are not real contracts. For that reason, the general rules of
       contracts do not apply to them. In short, a quasi-contract is "simply
       a rule of law that requires restitution to the plaintiff of something
       that came into the defendant's hands but belongs to the plaintiff."

Hunter v. Union State Bank, 505 N.W.2d 172, 177 (Iowa 1993) (citations

omitted).

       Upon our review of the district court’s ruling, we believe it is apparent the

district court concluded K&L was entitled to recover under a theory of implied-in-

fact contract. The district court made the following fact finding, which upon our
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de novo review of the record we also find supported by the evidence: “Neither

party has established that the parties reached a meeting of the minds or an

agreement as to specific terms of a contract such as the extent of the work or the

amount to be paid.” The district court was correct in this regard.

       We then turn to the court’s implicit determination K&L was entitled to

recovery under a theory of implied contract, specifically an implied-in-fact

contract. In describing the elements of an action on an implied contract, our

supreme court stated in Roger's Backhoe Service, Inc. v. Nichols, 681 N.W.2d

647, 651 (Iowa 2004), that the party seeking recovery must show (1) the services

were carried out under such circumstances as to give the recipient reason to

understand (a) they were performed for him and not some other person, and (b)

they were not rendered gratuitously, but with the expectation of compensation

from the recipient; and (2) the services were beneficial to the recipient. “[O]ne

may recover under a claim of quantum meruit, or more accurately a breach of an

implied-in-fact contract, for the reasonable value of the services provided and the

market value of the materials furnished.” Iowa Waste Sys., Inc., v. Buchanan

County, 617 N.W.2d 23, 30 (Iowa Ct. App. 2000).

       Here, there is no dispute that K&L’s services conferred a benefit to

Dakota.    Although the quality of some work was questioned by Dakota,

substantial work was clearly performed.       Several forms of a contract were

originally circulated between the parties. Despite the fact none of them were

ever signed and finalized, K&L began work on the project. This work continued

without dissent from either Dakota or the school district, and in fact occurred with
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their cooperation. Judging from the invoices provided by K&L, these services

were clearly not rendered gratuitously, but rather were done with the expectation

of compensation. Therefore, the court properly determined these circumstances

formed an implied-in-fact contract.

       We further believe the remedy applied by the district court does equity

between the parties. As noted, under a claim for breach of an implied-in-fact

contract, a party may generally recover “for the reasonable value of the services

provided and the market value of the materials furnished.” Iowa Waste Sys., 617

N.W.2d at 30. However, because this case was tried in equity, the court still

possesses the necessary flexibility to determine the equities between the parties.

Farmers Sav. Bank, 372 N.W.2d at 245.

       As the district court correctly found, K&L submitted invoices in the amount

of $103,599.16 to Dakota for payment for work completed. These bills were then

forwarded to the school district. Based on the fact K&L had already been paid

over $40,000 by Dakota, the court determined Dakota was liable to pay K&L

$60,796.66.     It then set off against that amount the sum of $7,444.50

representing damages caused by K&L’s own breach of contract and deficiencies

in their work.2 These sums represented the work which was necessary to repair

K&L’s unsuitable work, such as filling gaps in the sod, fixing the sprinkler system

leak, and repairing washouts. The district court’s calculus equitably accounts for

the efforts provided by K&L, which were accepted by Dakota, despite the fact no

express contract existed.      We therefore conclude the district court properly

2
  The record certainly contains conflicting evidence regarding these deficiencies. To the
extent the district court made findings regarding the blame for and cause of these
problems, we find them supported by the record, and adopt them as our own.
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awarded damages pursuant to its determination an implied-in-fact contract

existed.

      AFFIRMED.

								
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