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Pro Commercial LLC v. Mallory Fire Protection Services, Inc.

Court of Appeals of Iowa

December 21, 2016

PRO COMMERCIAL LLC, Plaintiff-Appellee,
v.
MALLORY FIRE PROTECTION SERVICES, INC., AND WESTERN SURETY COMPANY, Defendants-Appellants.

         Appeal from the Iowa District Court for Story County, Timothy J. Finn, Judge.

         Defendants appeal the trial court's judgment in this breach of contract action. AFFIRMED.

          Jesse Linebaugh and Angela Morales of Faegre Baker Daniels LLP, Des Moines, for appellants.

          Brenton D. Soderstrum of Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C., Des Moines, for appellee.

          Heard by Vogel, P.J., and Vaitheswaran and McDonald, JJ.

          MCDONALD, Judge.

         This matter arises out of a construction contract dispute. The matter was tried to the district court. The district court found defendant subcontractor, Mallory Fire Protection Services, Inc. (Mallory), breached its contract with plaintiff general contractor, Pro Commercial, LLC (Pro Commercial). The district court found Pro Commercial suffered $262, 105.36 in damages and entered judgment accordingly. On appeal, Mallory contends Pro Commercial failed to prove its damages were reasonable, the trial court erred in not requiring the replacement subcontractor to testify as to its hourly rates, Pro Commercial failed to mitigate its damages properly, and Pro Commercial failed to provide the pre-termination notice required under their subcontract agreements.

         I.

         These parties disagree on the applicable standard of review. The matter was tried at law. See Iowa R. App. P. 6.904(3)(a). Generally, our review would be for the correction of legal error. See Iowa R. App. P. 6.907; NevadaCare, Inc. v. Dep't of Human Servs., 783 N.W.2d 459, 465 (Iowa 2010); EnviroGas, L.P. v. Cedar Rapids/Linn Cty. Solid Waste Agency, 641 N.W.2d 776, 780 (Iowa 2002). Under this standard, the district court's findings of fact "shall have the effect of a special verdict." Iowa R. App. P. 6.907. The district court's findings of fact are binding if supported by substantial evidence. See Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000); Van Oort Constr. Co. v. Nuckoll's Concrete Serv., Inc., 599 N.W.2d 684, 689 (Iowa 1999). Evidence is substantial "when a reasonable mind would accept it as adequate to reach a conclusion." Falczynski v. Amoco Oil Co., 533 N.W.2d 226, 230 (Iowa 1995). Evidence is viewed in a light most favorable to the trial court's judgment. See Van Oort Constr., 599 N.W.2d at 689; Arbie Mineral Feed Co. v. Nissen, 179 N.W.2d 593, 595 (Iowa 1970) ("We do not weigh the evidence; we only decide if there is a proper basis upon which the trial court could find as it did."); Grall v. Meyer, 173 N.W.2d 61, 63 (Iowa 1969) ("[W]e construe the evidence broadly to uphold, rather than defeat, the trial court's judgment."). Evidence is not insubstantial "merely because [the court] 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." Raper v. State, 688 N.W.2d 29, 36 (Iowa 2004); see Portzen Constr., Inc. v. Cal-Co Insulation, Inc., No. 13-0758, 2014 WL 2347821, at *4 (Iowa Ct. App. May 29, 2014) ("Our role as the reviewing court is not, however, to dissect the record anew to reach our own factual findings.").

         Mallory contends a less deferential standard of review is required here. The district court adopted Pro Commercial's proposed findings and conclusions verbatim, Mallory argues. See NevadaCare, 783 N.W.2d at 465 ("We have recognized counsels' submission of proposed findings of fact and conclusions of law can be extremely valuable in assisting the district court, especially in highly technical or complicated cases. Nonetheless, we have criticized the practice of a district court's verbatim adoption of the proposed findings of fact and conclusions of law prepared by a prevailing attorney because '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.'" (citations omitted)). Our comparison of the district court's order with Pro Commercial's proposed findings and conclusions shows the district court did not adopt Pro Commercial's posttrial filing verbatim. Instead, the district court's findings and conclusions used some of Pro Commercial's proposed language but made significant and material changes, changes which demonstrate the exercise of independent judgment. We thus reject Mallory's contention that less deferential review should be applied here.

         II.

         In 2013, Iowa State University (ISU) solicited bids for installation of a fire sprinkler system in one of its dormitories, Friley Hall. Pro Commercial submitted the low bid on the project. This bid included a bid from Mallory as subcontractor. ISU accepted the bid.

         The project was split in two phases: 1A and 1B. Because ISU wanted the dormitory to be available to students when classes commenced, the ISU-Pro Commercial agreement included strict completion deadlines, which were enforced by a $100 per day per room liquidated damages clause, a total of $20, 200 for every day Pro Commercial was late.

         ISU required Pro Commercial to post a performance bond. In turn, Pro Commercial's bonding company required Pro Commercial to obtain a bond from Mallory. Mallory had bonding limitations at $250, 000. To meet those requirements, Pro Commercial and Mallory entered into three separate subcontract agreements: (1) a $250, 000 Phase 1A labor subcontract; (2) a $250, 000 Phase 1B labor subcontract; and (3) a $515, 000 Phase 1A and 1B subcontract covering costs of materials and bonding. Mallory obtained bonds from Western Surety Company; Pro Commercial was named the obligee.

         Under the Pro Commercial-Mallory subcontract agreements, Mallory was to submit payment applications. Pro Commercial was to pay Mallory once it had been paid by ISU. Pro Commercial could terminate Mallory if the subcontractor became insolvent, failed to supply sufficiently skilled workers, or failed to meet its contractual obligations. If terminated, Mallory was ...


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