Trustees of Iowa Laborers District Council Health & Welfare Trust v. Ankeny Community School District
865 N.W.2d 270
| Iowa Ct. App. | 2014Background
- Oldcastle (seller) supplied concrete masonry units (CMUs) to Grove Masonry (buyer) for two school projects; CMUs were required to meet ASTM C90 standards.
- Grove discovered two defects: patently defective "shotgun" blocks (pitted/chipped) and latent "bubble" blocks (protrusions noticeable after installation); Grove notified Oldcastle after some defective units had been installed.
- Grove stopped paying for further deliveries, incurred costly corrective measures, and later sued asserting implied warranties (merchantability and fitness); Oldcastle filed crossclaims including an open-account claim for $155,572.74.
- The district court found no open account, ruled for Grove on implied warranty of merchantability, awarded $783,096.68 in direct damages and $1,005,961 in consequential lost-profits; denied Oldcastle’s motion to amend its crossclaim.
- On appeal Oldcastle challenged (1) sufficiency/timeliness of Grove’s notice of breach, (2) foreseeability and certainty of consequential damages, and (3) the denial of its open-account claim.
Issues
| Issue | Plaintiff's Argument (Oldcastle) | Defendant's Argument (Grove Masonry) | Held |
|---|---|---|---|
| Whether buyer must plead notice of breach as condition precedent | Pleading notice is required as a condition precedent; failure bars recovery | Pleadings gave fair notice under modern notice-pleading; no strict pre-amendment requirement | Pleadings were sufficient; buyer not barred from recovery (affirmed) |
| Whether notice of patently defective (shotgun) blocks was timely | Installation before notice makes notice untimely as a matter of law | Timeliness is factual; district court’s finding entitled to deference | District court’s finding of timely notice lacked substantial evidence; reversed and remanded to apportion damages for installed shotgun blocks |
| Whether consequential lost-profits were foreseeable and non-speculative | Lost profits (due to loss of bonding/customers) were unforeseeable or speculative | Lost profits were measurable and reasonably foreseeable from poor performance on a high-profile project | Award of $1,005,961 for consequential damages affirmed (type and amount supported by evidence) |
| Whether an open account existed for unpaid accepted goods | Multiple unbroken deliveries created an open account; Oldcastle entitled to recover unpaid price | Transactions were independent contracts; no open continuous account | District court erred; Oldcastle entitled to recover $155,572.74 for accepted goods; reversed and remanded to offset damages |
Key Cases Cited
- Harrington v. Univ. of N. Iowa, 726 N.W.2d 363 (Iowa 2007) (substantial-evidence standard for appellate review of factual findings)
- Rogers Backhoe Serv., Inc. v. Nichols, 681 N.W.2d 647 (Iowa 2004) (creditor may recover contractual obligations even if elements of account stated are not established)
- Winter v. Honeggers' & Co., Inc., 215 N.W.2d 316 (Iowa 1974) (pre-amendment holdings that notice as condition precedent must be pleaded)
- Nachazel v. Miraco Mfg., 432 N.W.2d 158 (Iowa 1988) (consequential damages recoverable only if seller had reason to know buyer's probable losses at contracting)
- Beyond the Garden Gate, Inc. v. Northstar Freeze-Dry Mfg., Inc., 526 N.W.2d 305 (Iowa 1995) (scope of consequential damages under UCC)