Iconco v. Jensen Const. Co., s. 79-1824

• Decision Date: 12 June 1980
• Docket Number: Nos. 79-1824,79-1860,s. 79-1824
• Citation: 622 F.2d 1291
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: 27 Cont.Cas.Fed. (CCH) 80,493 ICONCO, a corporation, Plaintiff, Appellee, and Cross-Appellant, v. JENSEN CONSTRUCTION COMPANY, a corporation, Defendant, Appellant, and Cross-Appellee.

Page 1291

622 F.2d 1291

27 Cont.Cas.Fed. (CCH) 80,493

ICONCO, a corporation, Plaintiff, Appellee, and Cross-Appellant, v. JENSEN CONSTRUCTION COMPANY, a corporation, Defendant,

Appellant, and Cross-Appellee.

Nos. 79-1824, 79-1860.

United States Court of Appeals,

Eighth Circuit.

Submitted April 17, 1980.

Decided June 12, 1980.

W. Don Brittin, Jr., Nyemaster, Goode, McLaughlin, Emery & O'Brien, Des Moines, Iowa (argued), and Randall G. Horstmann, Des Moines, Iowa, on brief, for Jensen.

Wade H. Hover, Los Gatos, Cal. (argued), Richard G. Langdon and William R. Clark, Jr., Herrick, Langdon & Langdon, Des Moines, Iowa, on brief, for Iconco.

Before HEANEY and ARNOLD, Circuit Judges, and WRIGHT, ^* District Judge.

ARNOLD, Circuit Judge.

This is a diversity case. Iconco, the plaintiff below, was the second lowest bidder on a small-business "set aside" construction contract let by the Corps of Engineers. Jensen Construction Company, the low bidder, was awarded the contract. Iconco filed suit in the United States District Court for the Southern District of Iowa claiming that Jensen, in making its bid, falsely certified that it was a small business under federal law and was awarded the contract based upon that certification. Iconco claimed damages and lost profits based upon fraud and unjust-enrichment theories under Iowa law. The jury awarded Iconco $61,503 on its unjust-enrichment claim, and $10,000 actual damages and $30,000 punitive damages for fraud. The District Court, the Hon. Donald E. O'Brien, entered judgment in the amount of $61,503, but set aside the award for fraud, finding insufficient evidence to support the verdict. We affirm.

I.

On October 10, 1974, the Corps of Engineers issued an invitation for bids for the removal of structures and the building of barricades in connection with the construction of the Saylorville Reservoir in central Iowa. Only "small businesses" were eligible to bid. The invitation for bids stated that the average annual receipts of the bidder and its affiliates for the preceding three fiscal years could not exceed $7,500,000. Both Jensen and Iconco submitted bids, and each certified that it was qualified under this standard. Fourteen bids in all were submitted. The bids were opened on November 12, 1974, and Jensen was declared the low bidder and Iconco the second low. On December 4, 1974, at the Corp's request, Jensen and Iconco granted the Corps an additional 30 days in which to consider their bids.

On December 6, 1974, in connection with an entirely separate project, the Corps received a protest from Orvedahl Construction questioning Jensen's status as a small business. That same day, as required by 13 C.F.R. § 121.3-5(b) (1974), the Corps sent the protest to the Small Business Administration for a determination of Jensen's status. On December 10, the SBA wrote to ask Jensen to respond. Jensen's Controller, Leslie Walker, received the letter from the SBA on December 12. He did not understand the regulations and phoned the SBA for an explanation. He was told that the gross receipts of Jensen's subsidiaries, Jensen Construction Company of Oklahoma and States Construction Company, should be included in calculating Jensen's average gross annual receipts for purposes of small-business eligibility. The average annual gross receipts of Jensen alone did not exceed $7,500,000. If the receipts of Jensen's two subsidiaries were included in the calculation, however, the resulting figure would exceed $7,500,000, and Jensen would not be eligible to bid. Mr. Walker did not respond to the SBA letter. And at that time, and for some time thereafter, he was not aware that Jensen had submitted a bid on the Saylorville project certifying itself as a small-business concern.

Iconco, meanwhile, knew nothing about the Orvedahl protest and was not aware that Jensen was not a small business. Corps officials handling the letting of the Saylorville contract were also unaware. So, on December 16, 1974, the Corps awarded the Saylorville contract to Jensen.

On December 18, 1974, the SBA advised the Corps, in connection with the Orvedahl protest, that Jensen did not qualify as a small business; Jensen was also notified and advised of its right to appeal this determination to the SBA Size Appeals Board. The notification was received by Jensen on December 23. On December 24, Jensen filed an appeal; that same day, Jensen was advised by the Corps to begin work on the Saylorville project. Jensen did so soon thereafter.

In January, 1975, Iconco became aware for the first time that Jensen might not qualify as a small business. On January 16, Iconco wrote the Corps of Engineers protesting the award of the contract to Jensen and demanding that the Corps terminate the contract with Jensen and award it to Iconco. On January 20, 1975, Colonel W. H. Johnson, contracting officer for the Corps, wrote Iconco advising that under the regulations Jensen's certification of eligibility had to be accepted at face value absent a timely protest, that there was no protest before the contract was awarded to Jensen on December 16, 1974, that Jensen had completed six per cent of the work on the Saylorville contract, and that the Corps would not terminate the contract with Jensen. Iconco on January 23 and on February 3, 1975, wrote Jensen demanding that Jensen relinquish the contract and threatening to sue if it did not do so. Jensen refused, and completed the work under the contract, for which it was fully paid by the government.

Suit was filed by Iconco in the Court below on July 28, 1975. The initial pleading was styled "Complaint for Money Received (Fraud)." Although no basis of jurisdiction other than diversity was expressly alleged, the complaint stated that "it would be inequitable under applicable Iowa or federal law, to allow defendant JENSEN to retain the benefits of its fraud . . . ." On February 18, 1976, the District Court sustained Jensen's motion to dismiss that portion of the complaint which attempted to state a claim under federal law. The Court noted, however, that the complaint might state a claim under state law, and Iconco was ordered to plead its state-law theory with particularity. Iconco filed its first amended complaint on March 11, 1976, and made two claims under the common law of Iowa. Count I alleged that Jensen had been unjustly enriched in the amount of $68,627.48 at the expense of Iconco and that Iconco had suffered an additional $10,000 in consequential damages. Count II alleged fraud and asked for $78,627.48 in actual damages, trebled. This amended pleading survived a motion to dismiss.

After trial, the jury awarded Iconco $61,503 on its claim for unjust enrichment (the amount found to be Jensen's profits), and on its fraud claim $10,000 actual and $30,000 punitive damages. At Jensen's motion, the District Court set aside all damages for fraud but refused to set aside the damages for unjust enrichment, and judgment was entered accordingly.

Jensen makes several arguments on appeal. Its primary argument is that an unsuccessful bidder on a small-business set-aside contract, as a matter of law, has no claim against the successful bidder who did not qualify as a small business. Both parties agree that the Small Business Act, 15 U.S.C. § 631 et seq., does not expressly authorize a suit like this. The Act is silent about an unsuccessful bidder's civil remedies. There is no question before us of whether a federal right of action may be implied. At the outset of this case, the District Court dismissed that portion of the complaint which arguably attempted to state an implied federal right of action; Iconco does not appeal that dismissal, and the issue is not before us. Iconco based its claims in the District Court, and argues on appeal, that it is entitled to recover for fraud and unjust enrichment under the common law of Iowa. The first question before us, then, is whether Iconco stated a claim of unjust enrichment or fraud under Iowa law.

II.

Our inquiry begins with an analysis of Iconco's claims. Count I of the complaint sought recovery based on the theory of money had and received in other words, unjust enrichment. "Money had and received" was developed at early common law as one of the common counts, or subordinate categories, of the form of action known as general assumpsit. Although it developed gradually in English common law, by the mid-eighteenth century it became the preferred remedy where a defendant had received money which he was "obliged by the ties of natural justice and equity to refund." Moses v. MacFerlan, 2 Burr. 1005, 1012, 97 Eng.Rep. 676, 681 (K.B.1760); Ames, The History of Assumpsit, 2 Harv.L.Rev. 53 (1888). In this country, the remedy was recognized early by the courts. By the 1930's, the principle against unjust enrichment had become a major topic of law deserving of a Restatement. Section 1 of the Restatement of Restitution (1937) began simply: "A person who has been unjustly enriched at the expense of another is required to make restitution to the other."

The courts of Iowa adopted the general principle against unjust enrichment at an early date. Norway v. Clear Lake, 11 Iowa 506 (1861) (if money is received by one which belongs to another, the law implies a promise to pay it over); McClean v. Stansberry, 151 Iowa 312, 131 N.W. 15, 16 (1911). ("If the defendant has money in his hands which in equity and good conscience belongs to plaintiff, the law implies an agreement or obligation on his part to pay it on demand . . . "). The requirements of proof are neither technical nor complicated. "(I)t is essential merely to prove that a defendant has received money which in equity and good conscience belongs to plaintiff." In Re Estate of Stratman, 231 Iowa 480, 488, 1 N.W.2d 636, 642 (1942). The unjust-enrichment principle has been consistently applied and favored by the courts of Iowa. E. g., Key Pontiac, Inc. v. Blue Grass Savings Bank, 265 N.W.2d 906 (Iowa 1978); Hulme...