Sheer Const., Inc. v. W. Hodgman and Sons, Inc., 66741

• Decision Date: 24 November 1982
• Docket Number: No. 66741,66741
• Citation: 326 N.W.2d 328
• Court: Iowa Supreme Court
• Parties: SHEER CONSTRUCTION, INC., Appellant, v. W. HODGMAN AND SONS, INC., Iowa Department of Transportation and U.S. Fidelity and Guaranty Co., Appellees.

Page 328

326 N.W.2d 328

SHEER CONSTRUCTION, INC., Appellant, v. W. HODGMAN AND SONS, INC., Iowa Department of Transportation and U.S. Fidelity and Guaranty Co., Appellees.

No. 66741.

Supreme Court of Iowa.

Nov. 24, 1982.

Morris C. Hurd, Ida Grove, for appellant.

Thomas L. McCullough, Sac City, for appellees.

Considered by REYNOLDSON, C.J., and HARRIS, LARSON, SCHULTZ, and CARTER, JJ.

REYNOLDSON, Chief Justice.

Plaintiff Sheer Construction, Inc. (Sheer), sued W. Hodgman and sons, Inc. (Hodgman), Hodgman's surety company U.S. Fidelity & Guaranty Co., and the Iowa Department of Transportation (DOT) for $5420 allegedly due under a highway improvement subcontract. At trial the parties stipulated DOT out of the suit. Sheer rejected Hodgman's offer to confess judgment for $3500, dictated into the record at commencement of the trial. In rendering judgment against Hodgman for $3500, district court credited Hodgman with $1920 for completing Sheer's work, and for Sheer's share of a DOT penalty assessment for delay in the completion of the project. Sheer's claims for interest and attorney fees were disallowed. Costs of the trial following Hodgman's offer to confess judgment were assessed to Sheer. Sheer appeals. We affirm in part, reverse in part, and remand with direction.

The $361,985.57 contract between DOT and Hodgman was for resurfacing highway 169 in Kossuth County. It provided the project would be "completed on or before" fifty working days but also specified an October 28, 1977, completion date. Liquidated damages for delay in completion were fixed at $140 per day. Hodgman subcontracted the installation of railings, guard posts and rail anchors on one of the bridges to Sheer for an agreed compensation of $5420. In this subcontract Sheer agreed "to keep [itself] informed of the actual progress of operations and to begin the work herewith contracted for as soon as the Project is ready for such work or, in any event, within 15 days after being notified by [Hodgman] so to do." Sheer also promised "[t]o accept the assessment of liquidated damages for delays occasioned by the failure of [Sheer] to carry out the provisions of this Sub-Contract."

Early in October Hodgman notified Sheer it should start the guardrail work on November 15, 1977. Sheer, however, did not begin this work until December 7, 1977, and after a total of three and one-half working days, completed it on December 13, 1977.

After allowing for adverse weather, DOT charged Hodgman with 69 working days, an overrun of 19 days, generating a liquidated damage assessment of $2660. Hodgman protested, asserting its surfacing work was completed on November 18, 1977, and the road was then available to the public. DOT, relying on its specification that the road was not open and safe to the traveling public while men and machines (required by the guardrail work) were on the road shoulders, was not persuaded.

Sheer requested payment of $5420 from Hodgman. Hodgman, replying by letter, accepted responsibility for six and one-half days of the penalty but proposed to deduct from Sheer's compensation the sum of $1750, representing twelve and one-half days of liquidated damages. Sheer then filed this action, which was transferred to equity under the provisions of Iowa Code section 573.16.

On the morning of trial, before the first witness was sworn, Hodgman's counsel dictated into the record an "offer to confess judgment" for $3500, together with costs not including Iowa Code section 573.21 attorney fees. Pressed to declare whether the offer included interest, counsel stated "the record speaks for itself." Sheer's counsel moved to strike the offer because it was not in writing, it allegedly failed to comply with other Iowa Code chapter 677 requirements, and because Sheer did not receive three days' notice. Trial court required Sheer to declare whether it accepted the offer. Sheer declared it unacceptable. Trial court later overruled the motion.

Trial court's decree awarded Sheer judgment against Hodgman for $3500, after crediting the latter for Sheer's share of the penalty, computed as above set out, and for cleanup work Sheer did not complete. The court denied Sheer interest and attorney fees on the ground "that a good faith effort on the part of [Sheer] would have resulted in a settlement of its claim in the sum of $3500.00 in the spring or summer of 1978 and prior to filing suit." Costs were assessed against Sheer from the time the offer to confess judgment was rejected.

The propositions Sheer relies on for reversal may be combined into three issues: (1) Did trial court err in finding Sheer breached the subcontract? (2) Did trial court err in overruling Sheer's motion to strike Hodgman's offer to confess judgment, and finally assessing to Sheer all costs incurred after the offer? (3) Did trial court err in disallowing Sheer's claims for attorney fees and interest?

I. Breach of Subcontract.

The record is clear that Hodgman timely requested Sheer to begin work not later than November 15, 1977. It is also undisputed that Sheer did not commence work until December 7. Sheer contends that because of the October 28, 1977, completion date specified in the DOT-Hodgman contract, it was justified in scheduling its crews on other projects in November and not returning them to Kossuth County when requested. It asserts Hodgman's delay in making the project ready for the subcontracted work triggered its failure to appear at the work site in November. Hodgman relies on the subcontract provision requiring Sheer "to begin the work ... as soon as the Project is ready for such work or, in any event, within 15 days after being notified by [Hodgman] so to do."

In order to recover in full, it was Sheer's burden to show a "full, complete, and substantial performance" of the subcontract. Central Wisconsin Supply Co. v. Johnston Brothers Clay Works, 194 Iowa 1126, 1132, 190 N.W. 961, 963 (1922); accord Pfaudler Co. v. American Beef Packing Co., 338 F.Supp. 701, 706 (S.D.Iowa 1972) (applying Iowa law); Roland A. Wilson & Associates v. Forty-O-Four Grand Corp., 246 N.W.2d 922, 925 (Iowa 1976). In all contracts, however, "there is an implied term that the person for whom the work is contracted to be done will not obstruct, hinder or delay the contractor, but, on the contrary, will in all ways facilitate the performance of the work to be done by him." Kaltoft v. Nielsen, 252 Iowa 249, 258, 106 N.W.2d 597, 602 (1960); see Hardin v. Eska Co., 256 Iowa 371, 377-78, 127 N.W.2d 595, 598 (1964).

The facts of this case do not bring it within the exception applied in Kaltoft and Hardin. Sheer was given more than a month's time to adjust its schedule. Assuming Hodgman's inaction did hamper the timeliness of Sheer's performance, there is no evidence that Hodgman "render[ed] performance impossible by any act of [its] own." Hardin, 256 Iowa at 377-78, 127 N.W.2d at 598 (emphasis added). Sheer merely had both of its crews working near Waverly and elected not to pull off for the Kossuth County work that, in good weather, could have been completed in about two days.

Sheer's president testified he thought the guardrail work would be done in October because the main contract completion date was October 28, 1977. As president of a company doing guardrail work on road projects all over the state, however, it is reasonable to infer he knew of the DOT's practice of permitting the working days allowed in the contract to extend beyond the completion date in case of inclement weather. The contract completion date was not made a condition of the subcontract. Rather, the subcontract appears purposely drafted to require Sheer to keep itself "informed of the actual progress of operations" (emphasis added). We agree with trial court that the intent of the subcontract was to require Sheer to do the guardrailing when the project had progressed to that point, or in any event, upon fifteen days' notice from Hodgman. This it failed to do.

We also agree with trial court's finding that Sheer was responsible for $1750 of the liquidated damages, and owed Hodgman an additional $170 for the reasonable value of the latter's efforts in completing Sheer's work to DOT's satisfaction. Thus we affirm trial court in granting Sheer a net judgment against Hodgman for $3500.

II. Offer to Confess Judgment.

Sheer asserts Hodgman's offer to confess judgment was defective because it was not in writing, did not include costs, interest and attorney fees, and was submitted without prior notice. These contentions disclose Sheer's failure to distinguish among four separate methods of offering to confess judgment outlined in Iowa Code chapter 677. ¹

The first method is incorporated in Iowa Code sections 677.1-.3, and provides a mechanism for making an offer before an action is commenced. The third is included in Iowa Code sections 677.7-.10 and provides for a written offer before trial and apparently requires plaintiff's notice of acceptance to be in writing and delivered within five days. The fourth "conditional offer" procedure is found at sections 677.11-.13 and permits a written offer "in writing that, if [defendant] fails in his defense, the amount of recovery shall be assessed at a specified sum." Iowa Code § 677.11 (1981).

The second method of offering to confess judgment in the chapter under scrutiny is the one employed here and is found at Iowa Code sections 677.4-.6. Iowa Code section 677.4 provides that "[a]fter an action for the recovery of money is brought, the defendant may offer in court to confess judgment for part of the amount claimed." (Emphasis added.) Section 677.5 then provides that "[i]f the plaintiff, being present, refuses to accept judgment ..., or, having had three days' notice ..., and on the trial does not recover more than was offered ..., he shall pay the costs of the defendant incurred after the offer." (Emphasis added.) The advantage to the defendant in making the offer is the saving of court cost...