Kunkle Water & Elec., Inc. v. City of Prescott
| Decision Date | 11 April 1984 |
| Docket Number | No. 68988,68988 |
| Citation | 347 N.W.2d 648 |
| Parties | KUNKLE WATER & ELECTRIC, INC., Appellant, v. CITY OF PRESCOTT, Iowa, Appellee. |
| Court | Iowa Supreme Court |
R.E. Feilmeyer of Taylor, Taylor, Feilmeyer, Miller & Dinkla, Guthrie Center, for appellant.
Dennis W. Johnson of Belin, Harris, Helmick & Heartney, Des Moines, for appellee.
Considered by REYNOLDSON, C.J., and UHLENHOPP, HARRIS, LARSON, and CARTER, JJ.
Plaintiff corporation sued defendant city to collect a $67,038.18 account, including interest, for labor and equipment furnished in repairing the city's water system. The city defended on the grounds of fraud and violation of the competitive bidding statute, Iowa Code section 384.96. 1 An Adams County jury found for the defendant. Judgment entered on this verdict was appealed and affirmed by the court of appeals. We granted further review and now affirm.
Richard Kunkle (Kunkle) is the principal stockholder, president and operating officer of the plaintiff corporation, and for convenience we cast him in the role of plaintiff. Defendant city of Prescott will be referred to as "the city."
The evidence disclosed that in 1978 the city's water was very rusty, presenting the appearance of tea. Residents were complaining to mayor James Gray and to the city council members, all of whom, with the exception of one council member, were new on the job. Neither they nor Myron Shires, a newly hired, inexperienced, water treatment operator, had the knowledge or experience to take or recommend corrective measures.
In April 1979 the city called in Kunkle, who had done prior work for the municipality, to "advise [it] of what [it] needed to do to correct the problem." Kunkle testified he had grown up "in the plumbing business" and had spent 32 years in the water treatment field. The city's evidence disclosed it relied on Kunkle's expertise and representations; the latter inspected the water plant, presented his proposed remedial measures, and estimated a total cost of $3500. A short time later Kunkle produced a contract dated April 25, 1979, which the mayor signed "on the hood of the fire truck." This contract called for replacement of the anthrafilt used to filter the water; installation of a backwash meter; and repair work on the manholes, water tower controls, meter bypass, gate valve and chemical tank. Each item listed had a price attached, for a total of $3240. The contract further provided, however, that "Payment for labor to install the above materials under this agreement shall be made to KUNKLE WATER & ELECTRIC on or before the 10th of the month, for all work done or completed the previous month at the rate of $34.00 per hour, for two men, machinery, tools and equipment ...." This was the only written contract between the parties.
Kunkle testified his recommendations and estimates were tailored carefully to the city's own analysis of its water problem. He was aware that the city was considering an enlargement of the plant and testified that "if the customer is having problems, we list all the systems and if they point out things that are bad, we go into those and do whatever they want to be done."
After Kunkle's employees started the repair work, they reported new problems almost daily. The city orally approved this additional work, the mayor testifying that
it seemed like as the work progressed we seemed to run into one problem right after another that kept cropping up and we didn't--it seemed like we had to fix--we would come to get one thing fixed and it didn't cure the problem, so we would have to fix another and just keep leading--one thing just led to another. So we were--we were kind of into the thing at that time and didn't have much choice but to go ahead with the repair.
Unfortunately, when the work was completed, the water was still rusty. The city ultimately built a new water system in which it used none of the repaired equipment, despite Kunkle's previous assurances that it would be able to do so. The city thus derived no benefit from Kunkle's work although Mayor Gray testified he was "satisfied with the work that was done."
While Kunkle's employees were working in Prescott, the city received monthly invoices for parts and labor; some of these were substantially in excess of the $10,000 competitive bidding threshold. Those bills were designated simply "City of Prescott"; no attempt was made to break them down into separate repair projects. Similarly, plaintiff's employees made no attempt to charge their time to separate and distinct jobs. However, in pleadings and during trial, Kunkle insisted that he had really worked on ten separate projects for Prescott. These were broken down as follows:
Controls $5,807.66
Well line 9,689.26
Filter material 9,776.80
Aerator & detention tank 5,938.02
Pitless unit 6,952.66
Well leak and dirt work 3,359.50
Well 2,845.40
Booster pump 5,489.01
Chemical feed system 3,714.02
Meter materials 423.26
Each of these projects was, of course, under the $10,000 competitive bidding threshold. Kunkle admitted, however, that many of the projects were handled simultaneously and that all parts of a water system work together to produce potable water. He also conceded the ten-project breakdown of his total invoice was prepared by his attorney in anticipation of the present litigation.
Kunkle was not surprised by the city's failure to pay his bill; he had been informed at the outset that the city had no money and hoped to secure outside financing. However, when the Prescott council finally decided to work out a payment plan for Kunkle in the fall of 1979, it was advised by the city attorney of the competitive bidding statute. The mayor testified that neither he nor any of the council members was previously aware of the bidding requirement.
During trial the city sought to introduce evidence of Kunkle's transactions with other municipalities in order to show his awareness of the statute and his custom of circumventing it by dividing his work into small component parts. Trial court previously had sustained a motion in limine prohibiting use of this information, stating:
the facts and details of the other transactions ... could not be brought to the attention of the jury in their entirety and for that reason would present no evidence of a course of conduct sufficient to establish any fraud.
However, when on cross-examination at trial Kunkle was asked if he "had done work for a number of cities where [he was] paid more than $10,000 without going through the competitive bidding process," trial court overruled his counsel's objection. Kunkle then testified he had been paid $30,000 by the city of Truro and there had broken his bill down into segments of less than $10,000 in order to get paid. Trial court noted the motion in limine went to the presentation of collateral evidence and not to the cross-examination of Kunkle in order to show his knowledge and course of conduct. The court permitted cross-examination relating to these transactions with other cities.
Defense counsel was permitted to show that Kunkle's billings had exceeded the competitive bidding statute in 32 instances involving other Iowa cities, most of them small municipalities. In some cases he had broken down the total bills so that he "could get paid." Similar testimony was elicited later through the deposition of Robert Szczesny, a former Kunkle employee, who testified, without objection, that this "was happening" while he worked for Kunkle. Szczesny further testified this practice was used primarily in cities with a population of 8,000 or less. He opined that the probable competitive bidding price for the Prescott project would have been $23,965.52, a figure some $30,000 less than the amount actually billed by Kunkle. Szczesny's figure included a standard 20 percent profit margin and was, in his opinion, the "fair and reasonable value of [the] work performed."
Upon appeal Kunkle raises the following issues: (1) Did trial court err in permitting testimony relating to his transactions with other cities? (2) Was there substantial evidence to justify trial court's submission of the issue of fraud to the jury? (3) Did trial court err in instructing the jury that the city could avoid its contractual liability if Kunkle was guilty of fraud in the inducement, when the city had not rescinded the contract and offered to restore what it had received thereunder? (4) Did trial court err in failing to instruct on the inapplicability of the competitive bidding statute when work is estimated at a cost below $10,000? (5) Did trial court err in instructing the jury that no quantum meruit recovery is possible when the competitive bidding statute is violated? We consider these issues in the divisions that follow.
Confronting Kunkle on cross-examination, defense counsel sought to question him concerning a list of 32 instances in which municipalities in the last five years had paid him more than $10,000 without competitive bidding. This list had been furnished by Kunkle in response to discovery. Kunkle's counsel objected that the circumstances surrounding each project were not revealed; that the questions related to collateral matters and were beyond the scope of direct examination. Trial court overruled these objections on the ground the questions went "to the witness' knowledge and to his course of conduct." The city's counsel then secured Kunkle's concessions that in none of these cases was a statutory bidding procedure followed; in no case was his estimate above the statutory bidding requirement; and in some cases he had broken down the invoices into separate projects so he "could get paid."
Kunkle asserts trial court's evidentiary ruling was an abuse of discretion and erroneous.
The admission of testimony regarding similar acts is "a...
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