ENVIROGAS, LP v. Cedar Rapids

• Decision Date: 03 April 2002
• Docket Number: No. 99-1672.,99-1672.
• Citation: 641 N.W.2d 776
• Parties: ENVIROGAS, L.P., Appellee, v. CEDAR RAPIDS/LINN COUNTY SOLID WASTE AGENCY d/b/a Bluestem Solid Waste Agency, Appellant.
• Court: Iowa Supreme Court

641 N.W.2d 776

ENVIROGAS, L.P., Appellee, v. CEDAR RAPIDS/LINN COUNTY SOLID WASTE AGENCY d/b/a Bluestem Solid Waste Agency, Appellant.

No. 99-1672.

Supreme Court of Iowa.

April 3, 2002.

David F. McGuire and James H. Flitz, Cedar Rapids, for appellant.

Donald G. Thompson and Ellen Ramsey-Kacena of Bradley & Riley, P.C., Cedar Rapids, for appellee.

TERNUS, Justice.

The primary issue we decide in this case is whether appellant, Bluestem Solid Waste Agency, an entity created under Iowa Code chapter 28E (1995), must comply with the competitive bidding requirements of Iowa Code chapter 384. The trial court ruled that Bluestem was subject to the public bidding law and that its failure to comply with that law rendered an agreement between Bluestem and appellee, EnviroGas, L.P., unenforceable. Although the court denied any contractual recovery to EnviroGas, the court awarded damages to EnviroGas under a theory of fraud based on representations made by the executive director of Bluestem.

Upon our review, we conclude the trial court erred in holding that the competitive bidding law applied to the agreement between Bluestem and EnviroGas. Accordingly, we hold that EnviroGas was entitled to recover under the contract and affirm the award of damages on that basis. See In re Estate of Voss, 553 N.W.2d 878, 879 n. 1 (Iowa 1996) (holding appellate court may affirm "on any basis appearing in the record and urged by the prevailing party"). This ruling makes it unnecessary to consider EnviroGas's fraud claim.

Bluestem also claims error in the assessment of costs. EnviroGas concedes that certain deposition expenses were improperly taxed as costs. We reverse that part of the trial court's judgment awarding these expenses and remand for entry of a judgment consistent with our decision.

I. Background Facts and Proceedings.

In 1994 Linn County and the City of Cedar Rapids entered into a 28E agreement, creating Bluestem Solid Waste Agency to operate two landfills in Linn County. See Iowa Code ch. 28E (allowing local governments to exercise their powers jointly through a separate legal entity formed pursuant to the provisions of this chapter). Bluestem is administered by a board of directors; daily operations are the responsibility of Bluestem's executive director, David Hogan.

EnviroGas, L.P. is a limited partnership that owns the right to operate a system in place at one of the landfills that collects methane gas generated by the waste at the landfill. It sells the gas to utilities that use the gas to produce power.

In the early 1990s Bluestem was under a state mandate to install a system at the landfills to collect leachate, a liquid by-product of the waste materials deposited at the site. By coincidence, EnviroGas began planning in mid-1995 to expand its gas collection system. Hogan suggested that EnviroGas and Bluestem cooperate to build a combined gas and leachate collection system, resulting in significant cost savings to both parties.

Bluestem's finance committee approved the concept of a combined system and recommended a $400,000 contribution to construction of the project. It was asserted at trial that this recommendation included a limitation on the use of the $400,000 to materials, engineering services and equipment, based on a concern that payment of labor costs would require public bidding of the job. In addition, the finance committee, or at least its chairman, indicated that Bluestem would contribute no more than $400,000. Hogan sent a letter to EnviroGas, indicating Bluestem's willingness to participate in the project on a proportionate basis. This letter did not reveal any limitations on the use of funds paid by Bluestem, nor did it state that Bluestem would not pay more than its initial $400,000 contribution.

EnviroGas built the combined system, completing it in July 1996. It then sought to collect the balance owed by Bluestem. Bluestem refused to pay its proportionate share and this lawsuit followed.

EnviroGas sought to recover under several theories, including breach of contract, restitution, fraud, promissory estoppel, and quantum meruit. Bluestem's primary defense was that the project should have been publicly bid. Because it was not, argued Bluestem, it was prohibited by law from expending funds on the project, thereby rendering the contract void and precluding any recovery by EnviroGas. In a pre-trial motion to adjudicate law points and again at trial, the district court held that the competitive bidding law applied. Accordingly, the trial court ruled that EnviroGas could not recover under its contract, promissory estoppel, and quantum meruit claims. (The court did not address the restitution claim.) Nonetheless, the trial court awarded damages to EnviroGas based on a theory of fraudulent misrepresentation. Bluestem filed this appeal.

II. Issues Raised on Appeal.

Bluestem challenges the court's ruling on EnviroGas's fraud claim, asserting that to allow a tort recovery for public improvements that were not subjected to competitive bidding would defeat the purpose of the competitive bidding statute. Alternatively, Bluestem argues that the necessary elements of fraudulent misrepresentation were not supported by substantial evidence. Bluestem also attacks the trial court's calculation of damages and its taxation as costs of depositions that were not introduced into evidence.

EnviroGas contends that the judgment should be affirmed because it was entitled to recover under its contract claim or one of the equitable theories alleged in its petition. It also asserts that judgment was correctly rendered on its claim of fraud and that the court's calculation of damages is supported by substantial evidence. As for Bluestem's challenge to the taxation of costs, EnviroGas concedes that the costs of two depositions, those of William J. Kinney and Jeffrey Schott, should not have been included in the judgment. On the other hand, EnviroGas claims that the cost of the deposition of the mayor of Cedar Rapids, Lee Clancy, was properly recoverable.

In response to EnviroGas's claim that the judgment should be affirmed on the basis of its contract claim, Bluestem argues that EnviroGas was required to file a cross-appeal to preserve that issue for review. Alternatively, Bluestem asserts (1) the contract was void because the parties did not comply with the competitive bidding law, and (2) the elements of a contract were not established.

As noted earlier, we find EnviroGas's contract claim to be dispositive of Bluestem's challenge to the trial court's finding of liability on the part of Bluestem, so we will discuss only the issues pertinent to that theory of liability. In addition, we will address Bluestem's claimed error in the award of damages and the assessment of costs made by the trial court.

III. Standard of Review on Contract Claim.

Where a breach-of-contract claim is tried as a law action, our review is for correction of errors of law. See Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000). To the extent the validity of the contract turns on an interpretation of chapter 384, we also review for correction of legal error. See Top of Iowa Coop. v. Sime Farms, Inc., 608 N.W.2d 454, 460 (Iowa 2000). The trial court's "legal conclusions and application of legal principles are not binding on the appellate court." See Land O'Lakes, 610 N.W.2d at 522. In contrast, any findings of fact made by the trial court are binding on appeal if supported by substantial evidence. See Van Oort Constr. Co. v. Nuckoll's Concrete Serv., Inc., 599 N.W.2d 684, 689 (Iowa 1999). "`Evidence is substantial for purposes of sustaining a finding of fact when a reasonable mind would accept it as adequate to reach a conclusion.'" Land O'Lakes, 610 N.W.2d at 522 (quoting Falczynski v. Amoco Oil Co., 533 N.W.2d 226, 230 (Iowa 1995)). The evidence is viewed "in a light most favorable to the trial court's judgment." Van Oort Constr.,599 N.W.2d at 689.

IV. Correctness of Ruling on Contract Claim.

As indicated in our recitation of the facts, the trial court denied recovery under a theory of breach of contract on the basis that the public bidding law should have been followed and was not. See Kunkle Water & Elec., Inc. v. City of Prescott, 347 N.W.2d 648, 656 (Iowa 1984) (noting that contracts let without required public bidding are "void, not merely voidable"). The first step in our analysis, therefore, is to decide whether the court's determination that the competitive bidding statute applied is correct. Before we consider this issue, however, we address Bluestem's concern that error was not preserved.

A. Error preservation. The district court's initial consideration of the competitive bidding law was in its ruling on Bluestem's motion to adjudicate law points. In that ruling, the court held that the public bidding requirements of division VI of Iowa Code chapter 384 applied if the cost thresholds established by statute were met. See Iowa Code §§ 331.341(1) (requiring county to submit project for public bidding where cost to county exceeds amount specified in section 309.40 ($50,-000)), 384.96 (requiring city to submit project for public bidding where cost to city exceeds $25,000). The court observed whether these cost thresholds were satisfied was a factual issue that would be determined at trial. In its ruling after trial, the court again addressed the public bidding requirements. Referring to its earlier ruling, the court summarily stated that the competitive bidding law applied to the project undertaken by Bluestem and EnviroGas. It held, therefore, that EnviroGas was precluded from recovering under its contract with Bluestem. Nonetheless, EnviroGas was ultimately successful at trial, obtaining a judgment of damages on its fraud claim.

Ordinarily, "a successful party need not cross-appeal to preserve error on a ground urged but ignored or rejected" by the trial court. Johnston Equip. Corp. v. Indus. Indem., 489 N.W.2d 13,...