from the Iowa District Court for Polk County, Jeffrey D.
Hansen Company, Inc. appeals from an adverse jury verdict in
this breach-of-contract action. AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED WITH DIRECTIONS.
J. Demoret and Ross W. Johnson of Faegre Baker Daniels
L.L.P., Des Moines, and Jeffrey D. Stone of Whitfield &
Eddy, P.L.C., Des Moines, for appellant.
Matthew G. Sease of Kemp and Sease, Des Moines, Todd M. Lantz
of the Weinhardt Law Firm, Des Moines, and Jeremy R.
Masterson of Masterson & Bottenberg, L.L.P., Waukee, for
by Danilson, C.J., and Tabor and McDonald, JJ.
DANILSON, CHIEF JUDGE.
Hansen Company, Inc. appeals from an adverse jury verdict after
a five-day trial. The parties had entered into a contract
involving a demolition project of the Younkers building
located in Des Moines. The jury determined Hansen breached
the contract and committed willful and wanton conduct
resulting in a verdict for compensatory damages in the amount
of $1, 381, 387 and punitive damages of $250, 000. In a
nutshell, Hansen contends the claim for punitive damages
should have been dismissed, the compensatory verdict should
have been set aside because of insufficiency of the evidence,
and the damages awarded were not supported by the evidence
and were excessive. We affirm on the compensatory-damages
verdict and reverse the award of punitive damages.
Background Facts & Proceedings.
trial began upon RedNet's breach-of-contract and
fraudulent-misrepresentation claims, but RedNet withdrew the
fraud claim at the close of its evidence. On appeal, Hansen
contends the district court erred in overruling its motions
for directed verdict, motion for judgment notwithstanding the
verdict, and alternative motion for new trial.
parties entered into a stipulation prior to trial that the
following facts were true and undisputed:
1.In the spring of 2013 RedNet Environmental Services and the
Hansen Company entered into a contract to perform work on the
property located at 713 Walnut Street, Des Moines, Iowa.
2.Pursuant to the contract, RedNet Environmental Services was
to perform asbestos abatement, lead abatement, PCB/Mercury
disposal and demolition on the property.
3. Before RedNet Environmental Services was allowed to
perform any of the contracted work on the project, the Hansen
Company terminated RedNet Environmental Services'
contract on August 23, 2013.
adopt the following partial summary of the preliminary facts
noted by the district court in its ruling on post-trial
RedNet was a business owned by Robert and Lynn Knudsen that
performed demolition and hazardous material abatement work.
The Knudsens owned other companies that were interrelated,
most prominently, Redstone Painting, which was started in
2006. The Knudsens started RedNet in 2011. Lynn Knudsen was
the president of RedNet and Rob Knudsen was vice president.
However, Rob Knudsen was the face of the company and actively
managed its activities in the field. Lynn primarily performed
Hansen is a general contractor [that] was hired to renovate
the former Younkers Building in downtown Des Moines. On April
1, 2013, Hansen issued a request for proposal (RFP) for
demolition and hazardous material abatement at the Younkers
building. Rob Knudsen was very familiar with the building as
he had worked in the building for Hansen for approximately
[twenty] years. RedNet had submitted a bid based on an
earlier RFP in 2011, but the project did not proceed forward
at that time. In April of 2013, RedNet submitted a bid of $3,
330, 100, which did not include pricing on options. Tony
Garcia from Hansen informed Mr. Knudsen that RedNet was not
the low bidder, but invited an amendment with a breakdown on
the work so he could better compare it with other bidders.
Following that, Mr. Knudsen informed Mr. Garcia that RedNet
would pass on the project.
In mid-June of 2013, Hansen contacted RedNet and asked if it
would be willing to submit a new bid. Hansen had learned that
the subcontractor would not have to pay Davis-Bacon wages,
which was expected to substantially reduce the cost of
project. RedNet agreed to submit a new bid in light of the
new information. RedNet ultimately presented a bid of $2,
655, 100 that allowed it to keep and sell all scrap pulled
from the building. RedNet estimated the scrap as an
additional $257, 000 in revenue. This bid was accepted by
Hansen. The parties stipulated that a contract was formed at
that time, although they dispute some terms of the contract.
The parties agreed that work often begins on a project before
a final written contract is executed.
RedNet prepared for work on the Younkers project. Work was
initially scheduled to start on July 15, 2013. RedNet applied
for a permit to remove asbestos from the building and filed
notices with other government agencies. RedNet purchased
needed supplies. The start date was delayed, but Hansen
continued to confer with RedNet while preparing for the
project. As an example, the parties met on July 11, 2013, to
sort through contract terms, scope of work, schedules, and
other matters. As of that meeting, work was expected to begin
on August 5, 2013.
by late July 2013 circumstances began to arise that gave
cause for the instant action. On July 26, 2013, Knudsen sent
a letter to the president of Hansen, Craig Faber, regarding
discrepancies with the asbestos and lead inspection reports
provided by Hansen. The discrepancies, according to Knudsen,
could result in widespread exposure to asbestos to other
subcontractors and violate many laws and even result in
imprisonment. About the same time, and although the parties
had worked together in many prior projects, Hansen had become
increasingly concerned about the financial viability of
RedNet and Knudsen's related companies. Redstone was
providing space for RedNet's headquarters but
Redstone's landlord filed a forcible entry and detainer
action to evict Redstone in mid-July. RedNet had also
subcontracted some of the labor on the demolition contract to
Redstone, and Hansen received notice that Redstone's
workers' compensation policy had been cancelled. On
behalf of Hansen, Garcia contacted Knudsen on two occasions
expressing concern about RedNet's ability to complete the
demolition project and the rumors that the Knudsen companies
were near bankruptcy. Knudsen insisted Redstone's
problems would not affect RedNet.
Hansen's bonding company recommended that Hansen obtain a
bond from RedNet for the demolition project to protect Hansen
in the event RedNet could not complete the project. On August
12, 2013, Garcia notified Knudsen of the recommendation for a
bond and gave RedNet until August 21, 2013-later extended to
August 23-to procure a bond. Garcia also represented that
Hansen would pay for the bond. Lynn Knudsen stated a bond had
never been required of RedNet in any other project. Further,
the project specifications did not recite a bonding
requirement and no other subcontractor employed by Hansen was
required to submit a bond. Garcia admitted that at the time
the contract was awarded no bond was required. Craig Hansen,
owner and chief executive officer of Hansen, acknowledged it
was his decision to require a bond of RedNet, and if a bond
was not provided, RedNet would not be permitted to work on
the project. Nonetheless, Knudsen made efforts to procure a
RedNet having been recently formed (in 2011) and its
financial condition-caused in large part by accounts
receivable that were not being paid-RedNet had difficulties
obtaining a bond by Hansen's deadline. Although Knudsen
located a friend who could arrange for the bond, the efforts
were ceased when Knudsen learned on August 26, 2013, Hansen
had decided to move on with a new subcontractor. The next
day, RedNet closed its business.
pled and raised at trial the defense that it was fraudulently
induced to enter into the contract by representations made by
RedNet or the Knudsens. Jury Instruction No. 20 informed the
jury that if the defense of fraudulent inducement was proved,
Hansen was entitled to rescind the contract, and RedNet was
not entitled to damages.
defense of fraudulent inducement was premised upon e-mail
communications from the Knudsens after the initial bids in
2013. In a May 2, 2013, 3:11 a.m. e-mail sent by Robert
Knudsen to Craig Faber, Knudsen expressed disappointment that
RedNet was not selected for the Younkers project. The e-mail
also explained how Knudsen's companies were all doing
well financially and how RedNet had been sought out to bid on
the project, and then later told the Younkers project was
"off the table" for RedNet. About a month and a
half later, Hansen decided to rebid the project and requested
RedNet to submit a new bid without the Davis-Bacon wages.
Hansen contends this was essentially a negotiated bid and
Hansen had the opportunity to select whomever they desired to
later e-mail by Lynn Knudsen, she expressed that their bank
had doubled their line of credit. Hansen claims that what
this e-mail failed to disclose was that the line of credit
was already "maxed" out. Hansen claimed the
financial information in the e-mails was false, and it relied
upon the information to decide to accept RedNet's second
bid. But Hansen never requested any financial information
from RedNet until August 17, 2013. By that date, Hansen had a
bid from another company that Hansen had solicited two or
more weeks earlier.
the time the other company was working on their bid, Hansen
made representations to RedNet that suggested everything was
proceeding forward, including selecting additional options to
the contract and setting the date to begin work. Initially,
work was to begin July 15, then it was moved to August 5,
then to August 15, then to August 21, and finally, RedNet was
told they were off the job on August 26, although RedNet was
able to obtain a bond the very next day. During the time
between the acceptance of the bid and late August, RedNet did
extensive work preparing for the job.
also contends that even if it breached the contract, there
was no evidence RedNet suffered damages as a result of the
breach; RedNet was a new company and its evidence could not
support the damages awarded; and punitive damages were not
proper because there was no intentional tort. RedNet sought
damages for lost profits. Robert Knudsen testified to a
breakdown of RedNet's bid based upon the plans, reports,
labor cost, and materials. The bid also included an estimated
profit of $1, 124, 387, with a total contract price of $2,
655, 100. The profit was calculated into the bid based upon
production rates of other jobs and RedNet's profits on
past jobs. Past jobs included the Des Moines building, the
Fleming building, Quality Manufacturing, and Southridge Mall.
In addition, under the contract, RedNet was entitled to sell
any scrap from the project, totaling an estimated $257, 000
in additional profits. Hansen argues that due to RedNet's
financial condition it could not have finished the job to
earn such profits. Because of the loss of the contract,
RedNet was forced to close its doors.
claim for punitive damages is based upon the facts
surrounding Hansen's termination of the contract. RedNet
contends Hansen knew the financial significance of the
Younkers project to RedNet; Hansen was aware RedNet turned
down another project to purse the Younkers project at
Hansen's request; Hansen was aware of RedNet's cash
flow problems and the forcible entry and detainer action
against one of its related companies, yet still allowed
RedNet to prepare to begin work on the project including
attending preconstruction meetings; and Hansen unreasonably
requested RedNet to obtain a bond although it was not a part
of the original agreement, no other subcontractor was
required to post a bond, and Hansen knew it would be
difficult for RedNet to obtain a bond. RedNet claims in
addition to these facts supporting willful and malicious
conduct, three specific communications reflect personal spite
and ill will. First, on a draft written subcontract
agreement, Hansen's project manager (Anderson) wrote that
he hoped the Knudsens and their companies "rot in
hell." Second, upon terminating RedNet's contract,
Faber communicated to RedNet, "[N]ext time don't
bite the hand that feeds you." Finally, in an e-mail
from Faber to Garcia after RedNet's termination, Faber
said Hansen should make similar requests for bond from any
replacement subcontractors or else it would "kill [them]
if this comes up later."
Preservation of Error.
contends three arguments raised on appeal by Hansen were not
properly preserved for our review. Ordinarily, we only review
issues that have been raised and decided by the district
court. See Meier v. Senecaut, 641 N.W.2d 532, 537
(Iowa 2002). If an issue raised by a party is not decided,
the party must "request a ruling from the district court
to preserve error for appeal." Id. at 539.
Where a party makes a request and the district court
"generally overrules the motion without addressing its
specifics, error is preserved." Ellis v. City of Le
Mars, No. 11-1239, 2012 WL 1612003, at *5 (Iowa Ct. App.
May 9, 2012).
to RedNet, the three arguments not preserved are (1) the
claim the contract was modified to include the bond
requirement, (2) Hansen's claim of lack of causation for
damages, and (3) the claim that RedNet failed to mitigate
damages. We agree.
respect to issues (1) and (3), Hansen neither pled nor sought
jury instructions relative to a contract modification or a
duty to mitigate damages, and, therefore, has failed to
preserve error on those issues. See Tarrell v.
Erdmann, 221 N.W.2d 504, 507 (Iowa 1974) (noting jury
instructions stand as the law of the case and timely
objections must be made to the instructions to preserve
issue (2)-causation-Hansen's motion for judgment
notwithstanding the verdict included an argument on the
sufficiency of the evidence to show causation, but the court
never ruled on the issue. Further, "[a] motion for
judgment notwithstanding the verdict must stand on grounds
raised in the directed verdict motion." Royal Indem.
Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839, 845 (Iowa
2010). The issue of causation was not raised by Hansen in its
motion for directed ...