Case Title: Muchmore Equipment, Inc. v. Grover

Citation: 315 N.W.2d 92

Docket Number: 66162

State: iowa

Court: Iowa Supreme Court

Date: 1982-03-12T00:00:00Z

Document:
315 N.W.2d 92 (1982) MUCHMORE EQUIPMENT, INC., an Iowa Corporation, Appellee, v. Jim GROVER, Appellant, Robert Muchmore and Diana Muchmore, Appellees. No. 66162. Supreme Court of Iowa. January 20, 1982. As Corrected March 12, 1982. *93 A. F. Craig, Jr. of Craig, Wilson & Flickinger, Independence, and George E. Wright of Napier, Wright & Wolf, Fort Madison, for appellant. Franklin W. Sauer of Hoeger, McClintock & Sauer, Independence, for appellees. Considered by REYNOLDSON, C. J., and UHLENHOPP, HARRIS, McGIVERIN, and SCHULTZ, JJ. *94 UHLENHOPP, Justice. This appeal presents four issues in an action on a construction contract by a builder against an owner. The pleadings involve considerable procedural entanglement of parties, but in the disposition we make of the case we need only consider Robert Muchmore individually as the builder asking recovery and Jim Grover individually as the landowner for whom the building was constructed. At the time of construction Grover had been a farmer for over thirty years and a substantial farmer in Buchanan County for twenty-three years. In 1978 he and his sons operated about 1500 acres of land. They had a large corn crop that year. In the fall of 1978 Grover decided to place his corn in the federal reserve program. He contacted two firms which sell and build grain storage bins, but they were unable to construct the bin in time for the 1978 crop. Grover therefore contacted Muchmore, a nearby farmer who also built and constructed grain storage facilities. Grover and Muchmore negotiated about construction of the bin that fall so that Grover could store his standing crop in it. Muchmore ascertained from suppliers that he could have the material on hand in three weeks, and he told Grover that he could obtain the labor to pour the concrete for the foundation and floor; Grover was to provide the fill. Muchmore's personnel were to construct the building itself. Muchmore gave the impression that construction would be completed within six weeks, but he did not expressly so promise. On September 25, 1978, the parties entered into a written agreement in which Grover agreed to pay $39,755.12 for the constructed building. The written contract did not contain a completion date, did not cover the fill, and left the concrete work open. It also contained this term on the reverse side: The contract which Muchmore filed with the local Agricultural Stabilization and Conservation Service, through which Grover obtained a loan for the building, was somewhat different, and this apparently got Muchmore into some difficulty. We are satisfied, however, that the actual agreement was as we have stated. The material arrived on time, and Grover obtained the fill. The laborers who were to pour the concrete proved to be unsatisfactory, however, and this part of the process dragged on and consumed valuable time when Grover and his sons should have been combining and storing the crop. Eventually Grover put additional personnel on this part of the work. Those individuals asked $8 an hour but finally accepted $7.50 an hour from Grover, in Muchmore's presence. Muchmore eventually completed construction of the building, and in the process utilized the labor of two of Grover's sons one for 114 hours and the other for 7 hours. Construction was not completed, however, until about five or six weeks later than originally anticipated. Considerable snow then lay on the ground, and corn lodging and droppage occurred. One field of eighty acres could not be combined until spring. As a result, Grover lost a substantial amount of corn. Grover paid $5755.12 when the contract was signed plus $25,000 when the material was delivered. The balance was to be paid on completion of the building. Some "extras" were installed, however, and Muchmore did not get around to final settlement until March 15, 1979. That day he came to Grover's farm home, and the two men went over the bills and arrived at a final settlement of $16,862.04. Two items remained outstanding. Part of the structure moved somewhat in the wind, and Muchmore promised to install a "truss kit." The men agreed at the time that Grover should withhold $500 to secure performance of that promise, reducing the present amount to be paid to $16,362.04. (Subsequently the truss kit became unnecessary, restoring the balance due to $16,862.04.) The other item involved the work of Grover's sons. Muchmore did not dispute that he owed them, *95 since he was to construct the building. He also apparently did not materially dispute their hours; the two men went over the records of their work. But Grover thought his sons should have $7.50 per hour, the same as the laborers he had paid, while Muchmore thought this was too much. Grover wanted Muchmore to pay the sons directly; he did not want to take their pay out of his check to Muchmore and then pay them himself. The two men differed markedly at trial as to how this difference was resolved. Apparently it was resolved in some fashion because Grover drew and delivered his check to Muchmore for $16,362.04, and Muchmore endorsed a check payable to him and Grover for Grover's loan from A.S.C.S. Grover testified that Muchmore said he would come back that day with a check for the sons. Muchmore testified he only agreed he would "try." Just what he meant by that is not clear. He did not return or otherwise settle with the sons. The men were questioned about this point several times at trial. The following excerpts are illustrative. Grover testified: Muchmore testified: Q. Did you tell him you would return and pay those boys? A. He wanted me to return right away and pay them. I said I will try. We had a sow having *96 pigs. My wife called out she was having trouble with the sows having pigs and I tried at least to go home, and he said here sign this A.S.C.S. check and I signed it and left. Also: Muchmore's deposition testimony was read to him at trial and he expressed no disagreement with it. That testimony included this: When Muchmore did not return to pay Grover's sons, Grover tried unsuccessfully to contact Muchmore by telephone and then stopped payment on the check of $16,362.04, intending thereby to require Muchmore to settle with the sons. Muchmore also tried unsuccessfully to contact Grover by telephone. At a later time Grover paid his sons at the rate of $7.50 per hour and took assignments from them of their claims against Muchmore. Muchmore eventually commenced this action against Grover on the contract asking for the balance of $16,862.04, plus interest at 1% per month, attorney fees, costs, and $50,000 as punitive damages for Grover's stopping payment on the check. Division I of the petition was on the contract itself and prayed for "judgment in the sum of $16,862.04 plus interest at the rate of 1% per month from March 15, 1979, until paid, plus attorney fees and costs of this action." Division II incorporated division I, alleged that Grover fraudulently stopped payment on the check and is liable on the check for $16,362.04 plus $500 withheld for the truss kit, and prayed for "judgment in the amount of $16,362.04 plus interest at the *97 rate of 1% per month for the wrongful dishonor of the check drawn by Plaintiff and for the costs of this action." Division III incorporated divisions I and II, alleged malice, wantonness, and recklessness, and prayed for $50,000 exemplary damages. Grover answered and also counterclaimed for damages on various grounds, principally for late completion of construction causing loss of corn and for his sons' assigned labor claims. The trial court tried the case by ordinary proceedings. The court held for Muchmore in the amount of $16,292.04 on the contract ($16,862.04 less $570 for the sons' labor), found that the contract did not specify a completion date and denied the portion of the counterclaim for loss of corn, allowed the counterclaim for the sons' labor in the sum of $570, granted Muchmore interest on the difference of $16,292.04 at 1% per month from March 15, 1979, awarded Muchmore punitive damages of $10,000, and required Grover to pay Muchmore's attorney fees. The portions of the judgment material to Muchmore's claim state (as corrected by nunc pro tune entries): Grover appealed. In his appeal he raises these issues: the court erred in (1) granting 1% per month interest; (2) allowing Muchmore attorney fees; (3) awarding punitive damages; and (4) denying the damages asked in the counterclaim over the amount of $570 on the wage claim. I. Interest. Although the contract denominates the item of 1% per month as a "service charge," the item amounts to interest. State ex rel. Turner v. Younker Brothers, Inc., 210 N.W.2d 550, 560 (Iowa 1973). Grover urged at trial and urges here that chapter 535 of the Code applies to this transaction, that 1% per month exceeds the permissible rate under that chapter, and that under the provisions of the chapter interest is therefore not recoverable. A. The contract was entered into on September 25, 1978. At that time the Code provided in section 535.2(3)(a): At the time this contract was made the maximum rate under section 535.2(3)(a) was 10.25% per annum. III Iowa Admin. Bull. 17 (July 9, 1980). The interest charge in the contract exceeded the rate allowed by chapter 535. B. Muchmore claims, however, that the transaction comes under the Consumer Credit Code, chapter 537 of the Code, and specifically under section 537.2601(2): We may assume for purposes of decision that 1% per month would not "exceed amounts allowed for finance charges for consumer credit sales pursuant to open end credit." We may likewise assume, for the purpose of determining whether this "would be a consumer credit transaction if a finance charge were made," that a finance charge was in fact made. The question is, with a finance charge so assumed to have been made, was this a "consumer credit transaction"? For the purpose of chapter 537, section 537.1301(12) defines a consumer credit transaction thus: A "consumer credit sale" is defined in section 537.1301(13), but this transaction does not meet requirements (a)(1) or (a)(5) of that definition. A "consumer loan" is defined in section 537.1301(15), but this transaction fails to meet requirements (a)(1) and probably (a)(5). A "consumer lease" is defined in section 537.1301(14), but this transaction does not fulfill requirements (a), (d), and probably (e). If a finance charge were made here, this contract would not be a consumer credit transaction, for it does not come within the definition of such a transaction. Moreover, this contract itself was not on "credit"; it called for the balance in full upon completion of the building. See State ex rel. Miller v. National Farmers Organization, 278 N.W.2d 905 (Iowa 1979). Muchmore charges generally that such a result is unconstitutional, that if others can have the benefit of interest rates permitted by the Consumer Credit Code he too should have that right. He cites us to pages 148 and 149 of the transcript, where he argued in the trial court that chapter 535 "discriminates unreasonably" against him. Essentially he is asserting unconstitutional classification. The Consumer Credit Code is rife with classifications, and indeed that code is itself a classification. A consumer credit transaction is only one of the many classifications in the code. Consumer credit classifications regarding interest have generally been upheld against constitutional attack. See Aldens Inc. v. Miller, 466 F. Supp. 379 (S.D. Iowa), aff'd, 610 F.2d 538 (8th Cir. 1979), cert. denied, 446 U.S. 919, 100 S. Ct. 1853, 64 L. Ed. 2d 273 (1980); Committee Against Unfair *99 Interest Limitation v. State, 95 Cal. App. 3d 801, 157 Cal. Rptr. 543 (1979); see also 45 Am.Jur.2d Interest and Usury § 6 (1969); 47 C.J.S. Interest § 5 (1946). We do not find merit in Muchmore's argument of unconstitutionality. C. What are the effects of this usurious clause in the contract? Section 535.5 of the Code provides: Under this section, Muchmore can recover only the principal of the contract remaining unpaid. Burrows v. Cook, 17 Iowa 436 (1864). This principal, after deducting the offset allowed by the trial court for the labor of Grover's sons, is $16,292.04. Moreover, Muchmore is not entitled to court costs; the statute expressly so provides. Grover is thus liable to Muchmore for $16,262.04 principal and also, under the statute, to the State for interest on $16,262.04 at 8% per annum from March 15, 1979, until judgment, for the use of the Buchanan County school fund. Sheldon v. Mickel 40 Iowa 19 (1874). II. Attorney fees. Muchmore claims he is entitled to attorney fees on two bases under section 625.22 of the Code of 1981: Muchmore asserts that the contract contains an agreement to pay attorney's fees ("plus legal fees") so that the first paragraph of section 625.22 applies, and that Grover gave his check in violation of chapter 714 of the Code so that the second paragraph also applies. One of Muchmore's problems is that under the first paragraph attorney fees are allowed and taxed "as part of the costs," and that under the second paragraph the plaintiff may recover "all court costs incurred, including a reasonable attorney's fee. . . . " (Emphasis added.) But section 535.5 expressly provides in usury cases that the plaintiff obtains judgment for the principal sum "without costs." This court has held that this means the plaintiff is not only disentitled to the costs; he is liable for them. Garth v. Cooper, 12 Iowa 364 (1861). The court also stated in City of Ottumwa v. Taylor, 251 Iowa 618, 621, 102 N.W.2d 376, 378 (1960), "Substantially all authorities agree attorney fees are not taxable as costs unless specifically authorized by statute." See also Virginia Manor, Inc. v. City of Sioux City, 261 N.W.2d 510, 513 (Iowa 1978); Rauch v. Senecal, 253 Iowa 487, 491, 112 N.W.2d 886, 888 (1962) ("The general rule is that attorney fees are not recoverable by a successful litigant against his adversary."). In addition, section 535.5 expressly provides that "in no case" shall the plaintiff have judgment "for more than the principal sum. . . ." *100 We hold that by virtue of the usury statute, Muchmore cannot recover attorney fees. Whether he would be entitled to them but for the usury statute we need not inquire. III. Exemplary damages. The action is for breach of contract. We stated in Pogge v. Fullerton Lumber Co., 277 N.W.2d 916, 919-20 (Iowa 1979): See also Pringle Tax Service, Inc. v. Knoblauch, 282 N.W.2d 151 (Iowa 1979). Under these principles, the evidence here does not support an award of exemplary damages on either side. In settling their affairs under the contract, a controversy arose between the two men over the amount of the wages of Grover's sons. The case is a typical contract dispute; practically every such action involves a dispute of some kind, otherwise a lawsuit would not be brought. Were we to permit punitive damages here, such damages would be recoverable in contract actions as a matter of course, contrary to the general rule. We hold that Muchmore is not entitled to exemplary *101 damages. See Holcomb v. Hoffschneider, 297 N.W.2d 210 (Iowa 1980). IV. Counterclaim. Grover asserts that the trial court erred in holding against him on his counterclaim (which he also asserted as a third-party claim) except to the extent of $570 for his sons' wages. Without question Grover sustained substantial damages from lodged and down corn as a result of the late completion of the building. Also without question, Grover generated a fact issue on his claim that the hourly rate for his sons should be $7.50, rather than a lesser rate allowed by the court. The case was tried, however, by ordinary proceedings, and the trial court's fact findings, if supported by substantial evidence, have the force of a special verdict. Iowa R.App.P. 14(f)(1). We view the evidence in the light most favorable to the judgment. Nora Springs Co-op Co. v. Brandau, 247 N.W.2d 744 (Iowa 1976). The trial court could have found for Grover on his claim for lost corn and for a wage rate of $7.50 per hour, but was not bound to do so. Grover had the burden of proof on these items, and seldom does a party having the burden sustain it as a matter of law. Johnson v. Svoboda, 260 N.W.2d 530, 536 (Iowa 1977). The court could find from the evidence that the contract had no fixed completion date and, indeed, that Muchmore refused to promise a date when the project would be finished. The court could also find that the reasonable wage rate for the sons was as low as $3 per hour. The court's findings on the counterclaim must stand. We thus return the case to district court with directions to vacate the present judgment and to enter judgments (1) for Muchmore and against Grover for $16,292.04, and (2) for the State of Iowa for the use of the Buchanan County school fund and against Grover for a sum equal to 8% per annum times $16,292.04 from March 15, 1979, until the date of the judgment. Interest on the judgments will run at the legal rate for judgments from their respective dates until paid. We further direct the district court to assess the costs in that court against Muchmore. Costs in this court are likewise assessed against him. MODIFIED, AFFIRMED, AND REMANDED WITH DIRECTIONS.