Lead Opinion
This appeal presents questions of first impression on the meaning and constitutionality of Iowa Code section 573.2 (2011). That statute governs subcontractors’ remedies for unpaid work on public improvements when the state waives the performance bond for a general contractor that is a “Targeted Small Business” (TSB). Three subcontractors obtained default judgments against a TSB, which remain unsatisfied. The district court ruled that, in the absence of a bond, the subcontractors’ remedy against the state is limited to the funds the Iowa Department of Transportation (IDOT) retained on its contract with the TSB. The subcontractors argue section 573.2 allows broader recovery rights, requiring IDOT to step into the TSB’s shoes to pay the balances owed them for work on the public project. IDOT argues the district court’s ruling correctly interpreted the statute to limit its obligation to the retained funds. IDOT
For the reasons explained below, we construe section 573.2 as a waiver of sovereign immunity that allows subcontractors to recover from IDOT the unpaid balances TSBs owe for work on public improvements. Our interpretation effectuates the legislature’s intent to encourage the use of TSBs on state projects and expand the remedies available to subcontractors upon a TSB’s default. We reject IDOT’s constitutional challenge because article VII, section 1 of the Iowa Constitution does not prohibit state reimbursement for subcontractors’ work on public improvements owned by the state. Accordingly, we reverse the district court’s ruling and remand this case for further proceedings on the subcontractors’ claims against IDOT for unpaid work and attorney fees.
I. Background Facts and Proceedings.
In 2010, IDOT hired Universal Concrete, Ltd. as the general contractor for two public construction contracts. The purpose of these projects was to improve the rest areas along Interstate 80 in Adair County. Universal Concrete was a TSB, which is defined as a small business that is located in Iowa; operated for profit; has an annual gross income below $4 million; and is at least fifty-one percent owned, operated, and actively managed by minorities, women, or persons with disabilities. Iowa Code § 15.102. Because Universal Concrete qualified as a TSB, IDOT waived the requirement of a construction surety bond to guarantee the company’s performance on the contract. See Iowa Code § 12.44 (setting forth when bond can be waived for TSB).
Universal Concrete subcontracted with Star Equipment, Manatt’s, and Short’s Concrete. Star Equipment supplied rental equipment, Manatt’s furnished ready-mix concrete, and Short’s Concrete provided cement cutting services. No direct contractual relationship existed between IDOT and the subcontractors. The contract between Universal Concrete and IDOT expressly stated there were no third-party beneficiaries. IDOT paid Universal Concrete under the terms of their contract, and it was Universal Concrete’s responsibility in turn to pay its subcontractors.
The rest stop improvements were completed in 2011, and IDOT gave its final acceptance of the projects on September 1 of that year. Universal Concrete, however, failed to pay in full the three subcontractors for the work they performed. There was no surety bond against which the subcontractors could seek compensation, but IDOT had retained $3436.75 that it owed Universal Concrete. Star Equipment, Manatt’s, and Short’s Concrete filed claims with IDOT seeking reimbursement for their outstanding balances, claiming $10,851.44, $15,685.55, and $5775, respectively.
On October 13, 2011, Star Equipment filed this civil action against Universal Concrete and IDOT, as well as against Manatt’s and Short’s Concrete to adjudicate their competing interests in the funds retained by IDOT. Manatt’s and Short’s Concrete filed answers, counterclaims, and cross-claims. The subcontractors each contended Iowa Code section 573.2 imposes liability on IDOT for the amount that their claims exceeded the retained funds. They also sought attorney fees and interest. Universal Concrete failed to respond and was found in default.
IDOT agreed that the subcontractors were entitled to payment from the re
On January 20, 2012, the district court granted IDOT’s motion to dismiss the subcontractors’ claims to the extent they exceeded the retained funds. The district court explained that
[u]nder the scheme established in chapter 573, a subcontractor or supplier generally has a claim against the principal and the surety on the performance bond and against the public corporation to the extent of the amount retained from the payments to the contractor.
(Footnote omitted.) The district court concluded:
This court finds nothing in section 573.2 that creates or expands the liability of the public corporations under the statutory scheme of chapter 573 and accordingly finds no basis on which these claimants can recover against the DOT for any amounts in excess of the retain-age.
Because the court concluded the statute did not require IDOT to pay claims in excess of the retainage, the court did not reach the constitutional issue. Manatt’s sought an interlocutory appeal of this order, which our court denied.
Subsequently, the district court ruled on the subcontractors’ respective motions for summary judgment against Universal Concrete. Universal Concrete did not participate in the proceedings. The district court entered unresisted summary judgments in favor of each subcontractor and noted Universal Concrete was in default. First, on July 3, the district court awarded all of the retained funds to Manatt’s because it had filed its IDOT claim first. This left a balance of $12,248.80. The district court entered judgment against Universal Concrete for this amount, with interest, costs, and later, attorney fees of $11,936. On July 20, the district court granted Short’s Concrete’s motion for summary judgment against Universal Concrete, awarding $5775 in damages and $5500 in attorney fees with interest. Finally, on September 24, the court granted Star Equipment’s motion for summary judgment against Universal Concrete, awarding $10,851.44 in damages and $2560 in attorney fees plus interest.
Manatt’s and Short’s Concrete filed a joint appeal and Star Equipment filed a separate appeal. We consolidated and retained the appeals. The subcontractors seek reversal of the district court’s ruling on IDOT’s motion to dismiss. The subcontractors argue the court erred in ruling IDOT is not liable for claims exceeding the retainage amount when IDOT has waived the bond requirement. They also request that IDOT be required to pay the attorney fees they incurred in district court and on appeal. Universal Concrete is not a party to this appeal.
II. Scope of Review.
We review rulings on motions to dismiss for correction of errors at law. Rees v. City of Shenandoah,
The subcontractors seek payment from IDOT under Iowa Code chapter 573 for their unpaid work improving state-owned rest stops on Interstate 80. The subcontractors’ default judgments against Universal Concrete, the TSB general contractor hired and paid by IDOT, remain unsatisfied. Because mechanic’s liens do not attach to government-owned facilities, chapter 573 was enacted to provide other protections to secure payment for those working on public improvements. See Farmers Coop. Co. v. DeCoster,
This appeal presents our first opportunity to decide whether Iowa Code section 573.2, as amended in 1988, requires IDOT to pay more than the retained funds to subcontractors shortchanged by a TSB general contractor. We hold section 573.2 requires IDOT to step into the shoes of the TSB general contractor to pay subcontractor claims for unpaid work on public improvements when retained funds are insufficient and the bond had been waived. We reach this conclusion based on the text of the statute, its legislative history, and its purpose. We further hold this interpretation does not require the state to act as a surety, and therefore, we reject IDOT’s constitutional challenge under article VII, section 1. To give context to the parties’ statutory and constitutional arguments, we first examine the structure and purposes of chapter 573.
A. An Overview of Chapter 573. Entitled “Labor and Material on Public Improvements,” chapter 573 is Iowa’s counterpart to the Federal Miller Act. Lennox Indus.,
Bonds on public projects serve as a substitute for the protection of mechanics’ liens, which are unavailable when the landowner is the government:
To provide protection in public works projects for contractors, subcontractors and materialmen unable to utilize a mechanic’s lien, chapter 573 requires that the general contractor execute and deliver a bond running to the public corporation sufficient to insure the fulfillment of the conditions of the contract. See Iowa Code §§ 573.2, .5 (1987). This bond can be the object of a subcontractor’s or materialman’s claim, see Iowa Code § 573.7 (1987), and serves as a substitute for the protection of a mechanic’s lien.
Id. at 665. Iowa Code section 573.5 (2011) states that the amount of the bond must be “sufficient to comply with all requirements of [the] contract and to insure the fulfillment of every condition, expressly or impliedly embraced in [the] bond.” Bonds are typically required on all projects when the contract price equals or exceeds $25,000 and may also be required for contracts below that threshold. Id. § 573.2.
Chapter 573 provides an additional protection for subcontractors in the form of a retained percentage fund. Section 573.12(1) requires the state entity, or “public corporation,” in charge of the project to pay the general contractor monthly. Iowa Code § 573.12(1). From the amount payable to the general contractor, the public corporation is allowed — but not required— to retain up to five percent of the amount owed.
Subcontractors owed money on public construction projects may submit their claims to the responsible public corporation. Id. § 573.16. If necessary, the court is tasked with adjudicating these claims and is directed to award a claimant the costs of the action. Id. § 573.18. The court may tax reasonable attorney fees as costs. Id. § 573.21. If the retained percentage is sufficient, the public corporation pays the claimants from that fund. Id. § 573.18. If no claims are submitted against the retained funds, or if excess funds remain after all claims have been satisfied, the balance is released to the general contractor. Id. § 573.14.
B. Statutory Construction. This appeal arises due to the exception to the bond requirement for TSBs and the parties’ disagreement regarding the meaning of a 1988 amendment to section 573.2. Iowa Code section 12.44, enacted in 1987, requires state agencies to waive the bond requirement for TSBs that “are able to demonstrate the inability of securing such a bond because of a lack of experience, lack of net worth, or lack of capital.”
We now turn to the operative statutory language at issue. See State v. DeCamp,
If the requirement for a bond is waived pursuant to section 12.44, a person, firm, or corporation, having a contract with the targeted small business or with subcontractors of the targeted small business, for labor performed or materials furnished, in the performance of the contract on account of which the bond was waived, is entitled to any remedy provided under this chapter. When a bond has been waived pursuant to section 12.44, the remedies provided for under this paragraph are available in an action against the public corporation.
(Emphasis added.)
The 1988 Senate File that added this second paragraph to section 578.2 begins by stating the bill is “[a]n Act relating to claims against public corporations for nonpayment of moneys due on public improvements.” S.F. 2271, 72d G.A., 2d Sess. (Iowa 1988). The final version of the Senate File also included an explanation stating:
This bill extends the remedies afforded a person contracting with a bond-paying public contractor to a person, firm, or corporation contracting with a targeted small business when a bond requirement has been waived pursuant to section 12.44.
Id. (emphasis added). “ ‘[W]e give weight to explanations attached to bills as indications of legislative intent.’ ” Root v. Toney,
The subcontractors argue the second paragraph of section 573.2 entitles them to collect from IDOT the amounts owed by the TSB when the bond has been waived and the retained funds are insufficient. Their interpretation fits with the plain text of the statute and with the legislative explanation accompanying the statutory amendment adding this provision. IDOT counters that the provision merely confirms that subcontractors are entitled to seek compensation from the retained percentage when the bond requirement has been waived. IDOT candidly concedes that under its interpretation section 573.2 provides the same remedies with or without the second paragraph. Under IDOT’s interpretation, the second paragraph is surplusage, and the amendment adding that provision left the statute unchanged.
Our problem with IDOT’s interpretation is that it flies in the face of our rules of statutory construction. “[W]hen the legislature amends a statute, it raises a presumption that the legislature intended a change in the law.” Postell,
The legislature knows how to limit remedies for those working on state projects. See, e.g., Iowa Code § 573.7 (“A person furnishing only materials to a subcontractor who is furnishing only materials is not entitled to a claim against the retainage or bond under this chapter....”). If the legislature had intended to limit the remedy of subcontractors of TSBs to the retainage, it could have said exactly that. Cf. Oyens Feed & Supply, Inc. v. Primebank,
Our construction of section 573.2 effectuates the legislature’s purpose in enacting sections 12.44 and 573.2. See Hook v. Trevino,
For these reasons, we conclude the district court erroneously interpreted section 573.2. Section 573.2 permits the subcontractors to recover from IDOT amounts they could have recovered from the surety if IDOT had not waived the bond. We reject IDOT’s sovereign immunity argument because section 573.2, so interpreted, constitutes the state’s express consent to be sued. See Anthony v. State,
C. Constitutionality of Section 573.2. We must now reach IDOT’s argument that section 573.2, so interpreted, is unconstitutional under article VII, section 1 of the Iowa Constitution.
We begin with the well-established principles governing our review of constitutional challenges:
“We review constitutional challenges to a statute de novo. In doing so, we must remember that statutes are cloaked with a presumption of constitutionality. The challenger bears a heavy burden, because it must prove the unconstitutionality beyond a reasonable doubt. Moreover, the challenger must refute every reasonable basis upon which the statute could be found to be constitutional.”
State v. Thompson,
First and foremost, we give the words used by the framers their natural and*458 commonly-understood meaning. However, we may also examine the constitutional history and consider the object to be attained or the evil to be remedied as disclosed by the circumstances at the time of adoption.
State v. Briggs,
Article VII of the Iowa Constitution pertains to state debts and section 1 of that article is entitled “Credit not to be loaned.” It provides:
The credit of the state shall not, in any manner, be given or loaned to, or in aid of, any individual, association, or corporation; and the state shall never assume, or become responsible for, the debts or liabilities of any individual, association, or corporation, unless incurred in time of war for the benefit of the state.
Iowa Const, art. VII, § l.
This particular section of our Constitution was taken bodily from the Constitution of New York. As a part of the Constitution of New York, it was the result of past experience in the history not only of New York, but of other states as well, whereby aspiring new states had loaned their credit freely and extravagantly to corporate enterprises which had in them much seductive promise of public good. These enterprises included railways, canals, water powers, etc. The corporate body in each case was the primary debtor; the state became the underwriter; it loaned its credit always with the assurance and belief that the primary debtor would pay. Pursuant to these secondary liabilities, the state became overwhelmed with millions of dollars of indebtedness which never would have been undertaken as a primary indebtedness, and which never would have been permitted by public sentiment, if it had been known or believed that the secondary liability would become a primary one through the universal failure of the primary debtor.
We held in Grout, “[n]o public purpose can be meritorious enough, and no obligation of equity appealing enough, to override [article VII, section 1].” Id. at 472,
It will not do to say that the character of the act is to be judged by its main object; that, because the purpose is public, the means adopted cannot be called a gift or a loan. To do so would be to make meaningless the provision adopted by the convention of 1846. Gifts of credit to railroads served an important public purpose. That purpose was distinctly before the Legislatures that made them. Yet they were still gifts and so were prohibited.
People v. Westchester Cnty. Nat’l Bank of Peekskill,
Yet, article VII, section 1 is a narrow prohibition. Grout recognized that the state “loans its credit” when it acts as a surety for another. Id. at 472,
Accordingly, the question we must answer under Grout is whether the second paragraph of section 573.2 makes IDOT a surety for the TSB or rather imposes primary liability on IDOT to unpaid subcontractors. The key to this inquiry is whether the state benefits from the subcontractors’ work. IDOT already paid Universal Concrete the contract price for the public project. To the extent IDOT must pay a second time for work performed by the subcontractors, it is paying an obligation of a private party, Universal Concrete. In that regard, IDOT is a co-obligor with the TSB. But, we conclude IDOT is not a surety as defined by our precedent because Iowa Code section 573.2 obligates IDOT to pay subcontractors for work improving state-owned facilities — a benefit to the state.
As we recognized in Grout, “[t]he liability of the surety is always secondary and not primary.” Id. at 472,
Guidance as to what constitutes primary liability is provided in our caselaw applying the statute of frauds. Under the statute of frauds, evidence of a secondary obligor’s oral promise to pay the debt of another is inadmissible unless the secondary obligor made the promise for its own benefit. See Maresh Sheet Metal Works v. N.R.G., Ltd.,
In Maresh, a defendant orally guaranteed a corporation’s debts, and we were asked to decide if this promise was original or collateral.
The court of appeals applied these principles in Gallagher, Langlas & Gallagher v. Burco, stating:
Collateral promises are made when a promise is made in addition to an already existing contract and the surety has no personal concern in the debtor’s obligation and gains no benefit from the debtor’s obligation. The “main purpose” of the promise must not be the benefit of the surety.
We conclude that because the legislature’s main purpose in obligating the state to pay subcontractors’ unsatisfied claims was to secure a benefit for the state, a
IDOT argues its liability to subcontractors is secondary to the TSB’s liability as general contractor. We rejected a similar argument in a constitutional challenge to the Iowa Tort Claims Act. In Graham v. Worthington,
IDOT has the “heavy burden” to establish the statute is unconstitutional. Seer-ing,
The evils sought to be avoided by article VII, section 1 are not present here. IDOT has assumed liability for its own benefit— improvements to state-owned facilities. This is quite unlike the costly state government bailouts of investors in privately owned canals and railroads that prompted the adoption of the New York provision used by the Iowa framers as the model for article VII, section 1. See Grout,
For these reasons, we hold that section 573.2, as interpreted today, is constitutional. Article VII, section 1 does not prohibit the state from paying the subcontractors after the TSB’s default. That statute puts IDOT in the position of a coprincipal, not a surety, with its TSB, Universal Concrete. We therefore decline to affirm the district court on the alternative ground raised by IDOT.
IV. Attorney Fees.
The subcontractors have now prevailed on their claims against IDOT. Section 573.21 states, “The court may tax, as costs, a reasonable attorney fee in favor of any claimant for labor or materials who has, in whole or in part, established a claim.” Fee awards under this section are discretionary. Sheer Constr., Inc. v. W. Hodgman & Sons, Inc.,
The district court did not reach the subcontractors’ claims for attorney fees against IDOT because it erroneously ruled IDOT was not liable beyond the retainage. The district court did award each subcontractor attorney fees in the uncontested summary judgments entered against Uni
We hold the subcontractors, as prevailing parties, are eligible, in the district court’s discretion, to recover their reasonable attorney fees from IDOT, including fees incurred obtaining the default judgments against Universal Concrete and the additional fees incurred litigating against IDOT in district court and on appeal. In determining whether to award fees under section 573.21, the court may consider nonexclusive factors used in other discretionary fee-shifting statutes, such as
“(a) [the] reasonableness of the parties’ claims, contentions, or defenses; (b) [whether a party] unnecessarily prolong[s] litigation; (c) [the parties’] relative ability to bear the financial burden; (d) [the] result obtained by the litigation and prevailing party concepts; and (e) whether a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons in the bringing or conduct of the litigation.”
In re Trust No. T-1 of Trimble,
On remand, the district court shall determine whether to award the subcontractors attorney fees to be paid by IDOT and, if so, shall calculate the amount of fees to be awarded each subcontractor.
Y. Disposition.
We reverse the district court’s ruling that granted IDOT’s motion to dismiss the subcontractors’ claims in excess of the retained funds. We remand this case to allow the subcontractors’ claims to proceed against IDOT for unpaid work on the projects, interest, costs, and reasonable attorney fees incurred in district court and on appeal.
REVERSED AND REMANDED WITH INSTRUCTIONS.
Notes
. The general contractor is also authorized by section 573.12(1) to retain five percent from the amount it owes its subcontractors. Iowa Code § 573.12(1).
. Section 12.44 was adopted as a part of a larger bill that also established a targeted small business linked deposit program. 1987 Acts ch. 233, §§ 128, 129 (codified at Iowa Code §§ 12.43-44 (Supp. 1987)). In its current form, section 12.44 states in full:
Agencies of state government shall be required to waive the requirement of satisfac*454 tion, performance, surety, or bid bonds for targeted small businesses which are able to demonstrate the inability of securing such a bond because of a lack of experience, lack of net worth, or lack of capital. This waiver shall not apply to businesses with a record of repeated failure of substantial performance or material breach of contract in prior circumstances. The waiver shall be applied only to a project or individual transaction amounting to fifty thousand dollars or less, notwithstanding section 573.2. In order to qualify, the targeted small business shall provide written evidence to the department of inspections and appeals that the bond would otherwise be denied the business. The granting of the waiver shall in no way relieve the business from its contractual obligations and shall not preclude the state agency from pursuing any remedies under law upon default or breach of contract.
The department of inspections and appeals shall certify targeted small businesses for eligibility and participation in this program and shall make this information available to other state agencies.
Subdivisions of state government may also grant such a waiver under similar circumstances.
Iowa Code § 12.44 (2011).
. The legislature enacts the bill — not the accompanying explanation. But, the internal rules governing the general assembly require the title and explanation to be accurate. See Iowa Senate Rule 28 ("The subject of every bill shall be expressed in its title.”); id. r. 29 ("No bill ... shall be introduced unless a concise and accurate explanation is attached.”); Iowa House Rule 27 ("All bills ... introduced shall be prepared by the legislative services agency with title, enacting clause, text and explanation as directed by the chief clerk of the house.”); Iowa Legislative Services Agency, Iowa Bill Drafting Guide and Style Manual (2013 Iowa Law CD-ROM, partially updated Aug. 2012) ("House and Senate bills ... must have explanations of their contents, which explanations follow the body of the document.... An explanation of a bill written by a bill drafter must be concise and accurate, explaining exactly what the bill does, without attempting to comment upon its merits or editorializing.”). An explanation or
. Chapter 573 makes clear that the general contractor is the principal on the bond. The first paragraph of section 573.2 states, "Contracts for the construction of a public improvement shall ... be accompanied by a bond.” Iowa Code § 573.2. Section 573.3 requires the "contractor to execute and deliver said bond....” Id. § 573.3. Section 573.6(1) refers to the obligation of the "principal and sureties” to pay those "having contracts directly with the principal or subcontractors, all just claims due them for labor performed or materials furnished.” Id. § 573.6(1).
. This is only one of the ways in which the state seeks to foster TSBs. See Iowa Code § 73.16 (requiring government entities to procure goods and services from TSBs); id. § 15.108(7), (10) (instructing the Economic Development Authority to provide assistance to TSBs and requiring reports regarding TSB activity); id. § 714.8(13) (criminalizing fraudulently claiming to be a TSB).
. The public corporation retains the right to pursue remedies against the general contractor. See Iowa Code § 12.44 ("The granting of the [bond] waiver shall in no way relieve the business from its contractual obligations and shall not preclude the state agency from pursuing any remedies under law upon default or breach of contract.”).
. Manatt’s and Star Equipment argue we lack subject matter jurisdiction to reach the constitutional issue because it was not decided by the district court and we are a court of appellate, not original, jurisdiction under article V, section 4 of the Iowa Constitution. We disagree. We are exercising appellate review of the district court’s ruling. IDOT raised the constitutional challenge in district court and on appeal as an alternative ground for affirming the dismissal. We may decide an issue presented to, but not decided by, the district court when it is urged on appeal by the appel-lee as an alternative ground for affirmance. DeVoss v. State,
. Thirty-eight other states have adopted a similar constitutional provision. Ralph L. Finlayson, State Constitutional Prohibitions Against Use of Public Financial Resources in Aid of Private Enterprises, 1 Emerging Issues St. Const. L. 177, 181 & n. 9 (1988).
. "Governor Wright of New York in 1845 reported that more than three-fifths of the debt chargeable on the general fund had been incurred by loans of the state's credit to railroad corporations which subsequently failed.” Utah Tech. Fin. Corp. v. Wilkinson,
A historian has explained why many state-financed canals failed due to competition from railroads:
Most canals were financed by the States, hoping to enhance their economic development.
In the 1850s, it was an even contest between the canals and railroads for dominance. But, soon, the interior canals were operating in the shadow of the railroads. Many canals were eventually abandoned.
[[Image here]]
Compared to canals, railroad construction was not as seriously challenged by topography. Moreover, many canals were frozen and inoperable during winter months. As a result, railroads were found to be a more economical, reliable, and expeditious means of transport, and many canals soon fell into decline and disuse.
Paul Stephen Dempsey, Transportation: A Legal History, 30 Transp. L.J. 235, 246-47 (2003) (footnote omitted).
. We note that New York has moved away from this strict construction of their constitutional provision. Over two dissents, the New York Court of Appeals recently held that "appropriations to the State Department of Agriculture and Markets to fund agreements with not-for-profit organizations for the promotion of agricultural products grown or produced in New York” were valid because the appropriations had "a predominant public purpose and any private benefit [was] merely incidental.” Bordeleau v. State,
Either overruling Westchester County National] Bank or shrinking it beyond recognition, the majority seemingly decides that any gift or loan of money to private recipients is valid as long as it has "a predominantly public purpose." It is hard to see what is left of the constitutional prohibition.
Id.,
. Courts often interpret public purpose tests expansively. See, e.g., Empress Casino Joliet Corp. v. Giannoulias,
. We have repeatedly rejected constitutional challenges to state statutes creating financing programs that allowed private corporations to develop projects. In each of these cases, we held that the state assumed primary liability. See, e.g., Train Unlimited Corp. v. Iowa Ry. Fin. Auth.,
. An ancillary benefit to the state is that the bond waiver promotes TSBs by enabling them to bid on public projects.
. We also recognize that the state has the ability to limit its exposure to subcontractors' claims because it is the owner of these public projects. Cf. State v. Exec. Council of State of Iowa,
. Even when the state did have security for its debts, such security was sometimes later found to have little or no value. The first mortgage lien on the New York and Erie Railroad Company’s assets securing [a] $3 million loan ... covered only the track and roadbed, and not the much more valuable rolling stock, stations, or yards.
Peter J. Galie & Christopher Bopst, Anything Goes: A History of New York’s Gift and Loan Clauses, 75 Alb. L.Rev.2005, 2011-12 (2012).
. We found one case holding a state constitutional prohibition like Iowa’s was violated in a dispute between a subcontractor, general contractor, and the state. In that case, the State of Michigan retained contractual liquidated damages from payments due a general contractor in order to cover losses that resulted from a subcontractor’s delays. Solomon v. Dep’t of State Highways & Transp.,
Concurrence Opinion
(concurring specially).
The majority notes that this is a case of first impression and then chides the Iowa Department of Transportation (IDOT) for not citing a case striking down a statute equivalent to Iowa Code section 573.2. Of course, the subcontractors did not cite a case supporting the opposite proposition. The lack of cited authority is thus not dispositive or even indicative of the proper result. We often face a lack of authority, one way or another, when considering questions of first impression. In these cases, we may be called upon to think on our own.
The court’s independent research has uncovered one case from another jurisdiction, however, that is close to the present case. In Solomon v. Department of State Highways & Transportation,
If there had been no Iowa caselaw on the question, I would perhaps be inclined to follow the approach in Solomon. Certainly, there is nothing in the history of article VII, section 1 that helps us. Nothing in the text suggests a contrary result. The somewhat open-ended provisions of article VII, section 1, however, have been subject to a judicial gloss. Specifically, in Grout v. Kendall,
Looking further into Grout, where judicial doctrine under article VII, section 1 begins, this court held the strong prohibitions in article VII, section 1 did not prohibit the state from incurring indebtedness by borrowing money to directly pay for obligations with a public purpose, namely, the payment of bonuses to veterans of World War I. Id. at 468, 473,
In this case, unlike in Grout, IDOT is not the primary obligor. The primary obligor was the original contractor, Universal Concrete. Yet, although IDOT will pay twice for most of the concrete services if the subcontractors prevail in this case, and although IDOT will pay what was once a primary obligation of the subcontractor, IDOT will arguably still receive a benefit: it will be more likely that minority subcontractors will feel secure in providing services related to state-owned highways.
I think it is a closer question than does the majority whether these kinds of relationships are outside the scope of article VII, section 1. The relationships are similar to surety relationships in the sense that the primary obligation is not one of IDOT. I am not at all convinced that the formal niceties of the law of suretyship with its fine slicing and dicing provides a sound basis for the interpretation of a constitutional provision in all cases. When dealing with open-textured constitutional provisions, I would look more to the underlying constitutional values and spirit rather than legal arcana.
On balance, however, and consistent with the evolving constitutional doctrine, I conclude that because IDOT in its proprietary capacity is the beneficiary of all of the work of all of the contractors, be they the
WIGGINS, J., joins this special concurrence.