IN THE COURT OF APPEALS OF IOWA

No. 17-0389

Filed January 10, 2018

SPENCER CONVENIENT HEALTHCARE, L.L.C.,

Plaintiff-Appellant,

vs.

ANGELA McGREGOR,

Defendant-Appellee.

________________________________________________________________

Appeal from the Iowa District Court for Dickinson County, David A. Lester, 

Judge.

Spencer Convenient Healthcare, L.L.C. appeals a district court ruling 

denying its petition for an injunction and damages and awarding Angela 

McGregor damages on her counterclaim for breach of contract. AFFIRMED IN 

PART, VACATED IN PART, AND REMANDED.

Jill M. Davis of Montgomery, Barry, Bovee, Steffen & Davis, Spencer, for 

appellant.

Matthew T. E. Early of Fitzgibbons Law Firm, L.L.C., Estherville, for 

appellee.

Considered by Danilson, C.J., and Doyle and Mullins, JJ.
2

MULLINS, Judge.

Spencer Convenient Healthcare, L.L.C. (SCH) appeals a district court 

ruling denying its petition for an injunction and awarding Angela McGregor 

damages on her counterclaim for breach of contract. SCH contends the district 

court erred in (1) concluding it breached the employment contract in terminating 

McGregor’s employment rather than finding McGregor breached the contract; (2) 

interpreting the student loan repayment provision of the employment contract; 

and (3) awarding damages that were not foreseeable. McGregor requests an 

award of appellate attorney fees. 

I. Background Facts and Proceedings

Based upon the evidence we find credible, we make the following findings 

of fact. SCH is an urgent-care medical clinic located in Spencer, Iowa that is 

owned and operated by John and Carol Lewallen. Carol is an advanced 

registered nurse practitioner. John and Carol opened SCH in November 2012. 

The business was successful from the onset and drew patients from 

approximately a fifty-mile radius. As a result of this success, the Lewallens 

decided to open a second clinic. They leased and remodeled a building in Spirit 

Lake and hired another nurse practitioner to be the medical provider at that 

location. In July 2013, the Lewallens officially opened Lakes Convenient 

Healthcare (LCH) in Spirit Lake. Over the next year, the Lewallens hired other 

nurse practitioners to serve as medical providers in both locations, but the 

turnover for those positions was rather high. 

In the summer of 2014, the Lewallens advertised for an opening for a 

provider. McGregor initiated communications with the Lewallens, but after a few 
3

weeks, she accepted a position with a different employer in southeast Iowa. 

Shortly after that, the Lewallens reopened negotiations with McGregor. On 

November 17, 2014, the parties executed an employment contract memorializing 

the terms of McGregor’s employment with SCH—the contract was prepared by 

the Lewallens without the assistance of legal counsel. The contract included a 

termination provision requiring both parties to provide ninety days written notice 

of any desire to terminate the employment relationship. The contract also 

included a non-compete clause which, upon termination, prohibited McGregor 

from working in another clinic within a sixty-mile radius of either SCH or LCH for 

two years. The contract also provided that SCH “agree[d] to take over the 

student loan repayment obligation that [McGregor] allegedly owe[d] to her [then] 

employer.” McGregor officially began her employment with SCH in December. 

During her employment, she primarily worked at the LCH location. 

Beginning in 2014, the Lewallens directed at least one of the nurses they 

employed, Tara Mixon, on more than one occasion to use outdated medical 

supplies before using newer supplies. Mixon advised Carol that this practice 

caused her concern, but Carol responded the outdated supplies needed to be

used because supplies are expensive. In January 2015, as a result of her 

concern for the continuing practice, Mixon filed a complaint with the Iowa Board 

of Nursing (Board). Also in January, Mixon approached McGregor, a fairly new 

employee at the time, and advised her of the informal outdated-supplies policy. 

Mixon showed McGregor some of the outdated supplies, upon which McGregor 

observed notations to “use these products first.” McGregor advised Mixon they 

could not use the outdated supplies. Mixon agreed but noted she was getting in 
4

trouble for not using them. McGregor made several attempts to discuss this 

practice with the Lewallens, but she was largely ignored. McGregor confronted 

John about the practice at one point, but he simply replied, “It’s my clinic. When 

you have your clinic, you can do what you want. And this stuff is expensive, you 

know.” 

Because McGregor believed that some of her reference books had 

previously been stolen from her office at LCH, on February 9, she removed the 

remainder of her books from her office. However, she left personal effects and 

medical equipment in her office. On this date, McGregor also advised the office 

manager that she had some issues she needed to discuss with the Lewallens. 

The office manager relayed this message to John, but he did not want to talk to 

McGregor. Concerned, McGregor contacted the Board and CLIA1on February 

12. Both bodies advised McGregor she should file an official report outlining her 

concerns. On February 13, McGregor filed a complaint with the Board alleging, 

among other things, lab supplies are expired and medications are outdated.2 A 

complaint was also filed with CLIA.3 

February 14 was McGregor’s scheduled day off, but she worked on 

February 15. On February 16, SCH and LCH staff met at a local grocery store to 

discuss health-insurance options. McGregor attended this meeting. After the 

meeting, McGregor returned to the clinic in Spencer and worked for an hour but 

 

1 According to testimony, CLIA is a federal regulatory body that oversees medical 

laboratory procedures. 

2

In November, the Board notified the Lewallens that the complaint filed by McGregor 

was closed with no further action. 

3 CLIA’s investigation found expired products and deficiencies in the clinics’ 

documentation practices. SCH developed a plan of correction which was ultimately 

approved by CLIA. 
5

then went home sick. McGregor called in sick on February 17 as well. That 

evening, McGregor reported she would be at work on February 18, but John 

directed her to take another day off if she was not at one-hundred percent. Prior 

to this, John had no problem with McGregor working while she was ill. The next 

two days, February 19 and 20, were McGregor’s scheduled days off. 

On February 18, John called the office manager and advised her he 

recently heard one of the staff members turned SCH in to the State for using 

expired supplies. In a separate phone call later that day, John advised the office 

manager that he planned to ask McGregor if she was the one who filed a 

complaint, that if she responded in the affirmative, “he doesn’t want her back,” 

and, if she responded in the negative, he “knows she is lying.” The office 

manager relayed this information to McGregor. McGregor testified that, upon 

receiving this information, she realized she may have to start exploring other 

employment opportunities. 

On February 20, the Lewallens called an impromptu staff meeting 

regarding McGregor’s continued employment with SCH. It does not appear that 

McGregor was invited to or otherwise aware of this meeting. After the meeting, 

John called McGregor and left a voicemail directing her to turn in her keys 

because he and Carol had not had any communication with her in sixteen days.4 

McGregor responded with a text message that evening, advising she would turn 

her keys in when she received her final paycheck. Shortly after the separation, 

 

4

It is unclear why John provided this reasoning for his direction that McGregor turn in 

her keys. Based on the facts that McGregor attended a staff meeting on February 16 

and, despite being sick, attempted to come to work on February 18, we conclude John’s 

stated reasoning is pretextual. 
6

McGregor accepted a position with Crown Clinic, another urgent-care provider. 

In July, Crown Clinic opened its facility near the LCH clinic.5 

Prior to the conclusion of McGregor’s employment with SCH, the 

Lewallens did not make any payments towards McGregor’s student-loan 

obligation. After the separation, McGregor’s prior employer notified her that the 

entire outstanding balance of her loan, $21,735.47, was due and noted it was 

unsuccessful in its attempts to contact SCH for payment. The notice advised, 

“Because you are ultimately responsible for the loan, we are looking to you for 

repayment.” McGregor was able to settle this loan obligation with her prior 

employer by paying it $20,000.00 rather than the full amount. Because her 

financial resources were limited at this time, McGregor withdrew funds from her 

403(b) retirement plan to meet the obligation. A certified public accountant and 

valuation analyst testified McGregor’s withdrawal of these funds subjected her to 

state and federal taxes at a rate of thirty-three percent and an additional earlywithdrawal penalty of ten percent. Applying these figures to the amount paid 

would result in a total penalty of $8600.00. 

In March, SCH petitioned for a temporary and permanent injunction,

alleging McGregor’s employment with Crown Clinic was in violation of the noncompete clause contained in her employment contract and requesting an order 

enjoining McGregor from working for Crown Clinics and an award of damages. 

In her answer, McGregor forwarded a number of counterclaims—the only one 

relevant to this appeal is breach of contract. The district court subsequently 

denied SCH’s petition for a temporary injunction and set the matter for trial. 

 

5 Unable to compete with Crown Clinic, the Lewallens decided to close LCH in August. 
7

Following a two-day trial, the district court entered a written ruling. With 

regard to SCH’s claim, the court concluded (1) John terminated McGregor’s 

employment on February 20, 2015; (2) the termination, which was unjust and 

unfair and was effectuated without proper notice, was a breach of the termination 

provision contained in the contract; and (3) as such, SCH was not entitled to 

enforcement of the non-compete clause or an award of damages. 

As to the relevant portion of McGregor’s breach-of-contract counterclaim, 

the district court interpreted the student-loan provision of the contract to require 

SCH “to assume payment of the full principal amount” of the loan and concluded 

SCH “remained obligated to pay that amount in full at the time [it] terminated 

McGregor’s employment on February 20, 2015.” The district court awarded 

McGregor damages in the amount of $28,600.006in relation to SCH’s breach of 

the student-loan provision of the contract. The district court denied SCH’s 

subsequent motion to enlarge or amend. This appeal followed. 

II. Standard of Review

The parties disagree as to the appropriate standard of review. SCH 

argues, because the district court tried this case in equity, our review should be 

de novo. See, e.g., Davis-Eisenhart Mktg. Co., Inc. v. Baysden, 539 N.W.2d 

140, 142 (Iowa 1995). McGregor contends, because the case contemplates 

legal, rather than equitable claims, our review should be for correction of errors at 

law. See, e.g., Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 

2013) (“The standard of review for a breach of contract action is for correction of 

 

6 This amount equals the sum of the amount paid by McGregor to settle the obligation, 

$20,000.00, and the tax liability and penalties associated with McGregor’s withdrawal of 

the funds from her retirement account, $8600.00.
8

errors at law.”); Hartig Drug Co. v. Hartig, 602 N.W.2d 794, 797 (Iowa 1999) (“We 

generally review the construction and interpretation of a contract as a matter of 

law.”). 

During the trial on the merits, the district court specifically noted, due to 

the presence of an equitable claim, it was trying the case in equity. See Matlock 

v. Weets, 531 N.W.2d 118, 121 (Iowa 1995) (“A request for an injunction invokes 

the court’s equitable jurisdiction.”). In fact, the court advised the parties “[i]t will 

be a de novo review if appealed.” Neither party objected. Because of the parties 

implicit agreement to have this case tried in equity, we will review this case de 

novo. See Iowa Waste Sys. v. Buchanan Cty., 617 N.W.2d 23, 32 (Iowa Ct. App. 

2000). 

Under a de novo review, our duty is to review the facts as well as the law 

and adjudicate rights anew. Abodeely v. Cavras, 221 N.W.2d 494, 504 (Iowa 

1974). Where, as here, the testimony is conflicting, we give great weight to the 

factual findings of the district court, especially when considering the credibility of 

witnesses, but we are not bound by them. Iowa R. App. P. 6.904(3)(g); Albert v. 

Conger, 886 N.W.2d 877, 880 (Iowa Ct. App. 2016). “This is because the trial 

court is in a far better position to weigh the credibility of witnesses than the 

appellate court.” Albert, 886 N.W.2d at 880. 

III. Breach of Employment Contract

SCH challenges the district court’s finding that it breached the 

employment contract. SCH contends McGregor breached the contract first by 

voluntarily quitting her position without providing ninety days written notice and, 

as such, she subsequently breached the contract by violating the non-compete 
9

clause. This is largely a challenge to the district court’s factual findings and the 

legal conclusions flowing from those findings. As noted above, we give great 

weight to the district court’s factual findings. Id. Further, the finder of fact “is free 

to believe or disbelieve any testimony as it chooses and to give weight to the 

evidence as in its judgment such evidence should receive.” State v. Thornton, 

498 N.W.2d 670, 673 (Iowa 1993). “In fact, the very function of the [factfinder] is 

to sort out the evidence and ‘place credibility where it belongs.’” Id. (quoting 

State v. Blair, 347 N.W.2d 416, 420 (Iowa 1984)). 

Upon our de novo review of the record, we conclude SCH terminated 

McGregor’s employment on February 20, 2015. Although there is some 

evidence McGregor may have intended to seek other employment, this flowed 

from McGregor’s receipt of information that John did not “want her back” as a 

result of his assumption that she filed official complaints with the Board and 

CLIA. And at the time she was terminated by John, McGregor had not taken any 

overt act to officially end her employment with SCH. Cf. Peck v. Emp’t Appeal 

Bd., 492 N.W.2d 438, 440 (Iowa Ct. App. 1992) (“[Q]uitting requires an intention 

to terminate the employment relationship accompanied by an overt act carrying 

out that intent.”). She stated her intention to report to work on February 18, but 

John directed her not to do so. She was scheduled to have days off on February 

19 and 20 but was ultimately terminated by John on the 20th. 

Under these circumstances, we agree with the district court that McGregor 

did not voluntarily quit. We limit our analysis on this issue to SCH’s sole 

argument on appeal, that McGregor breached the contract first by voluntarily 
10

quitting.7 See Iowa R. App. P. 6.903(2)(g)(3). We therefore affirm the district 

court’s determination that SCH breached a material provision of the employment 

contract by terminating McGregor’s employment and, accordingly, that the noncompete clause is unenforceable against her. 

IV. Interpretation of Student-Loan Provision

SCH contends the district court erred in its interpretation of the studentloan-repayment provision of the employment contract. As noted above, the 

district court interpreted the student-loan provision of the contract to require SCH 

“to assume payment of the full principal amount” of the loan and concluded SCH 

“remained obligated to pay that amount in full at the time [it] terminated 

McGregor’s employment on February 20, 2015.” 

Contract “[i]nterpretation is the process for determining the meaning of the 

words used by the parties in a contract.” Pillsbury Co. v. Wells Dairy, Inc., 752 

N.W.2d 430, 435 (Iowa 2008). “The cardinal rule of contract interpretation is to 

determine what the intent of the parties was at the time they entered into the 

contract.” Id. at 437; see also Peak v. Adams, 799 N.W.2d 535, 543 (Iowa 

2011). Unless the contract contains an ambiguity, we determine the parties’ 

intent from the language of the contract alone and enforce it as written. Petty v. 

Faith Bible Christian Outreach Ctr., Inc., 584 N.W.2d 303, 306 (Iowa 1998). 

The provision contained in McGregor’s employment contract provides the 

following: 

 

7 SCH does not challenge the district court’s determination that its termination of 

McGregor’s employment was a material breach of the employment contract that 

rendered unenforceable the non-compete clause. 
11

[SCH] agrees to take over the student loan repayment obligation 

that [McGregor] allegedly owes to her current employer. Currently 

the principal amount due is $21,735.47. SCH will make every effort 

to determine if this loan is legitimately owed to the [current 

employer] or if any of the amount was already paid by the federal 

loan forgiveness program. If the amount is found to be accurate 

and due, SCH may take a business loan for the entire amount with 

an extended repayment term up to 4 years to lower the current 

payment to better fit into the business budget. In return for 

repayment of this loan, a 4 year obligation of [McGregor] to work for 

[SCH] is expected as a term of agreement to cover the student 

loan. If [McGregor] would terminate employment prior to 

completion of the loan repayment term, the balance of the noted 

minus the reduced pro-rated amount for credit during the time 

employed, is expected to be reimbursed by [McGregor] to [SCH]. 

At the end of the loan repayment term, and after the employment 

obligation has been met, the entire amount of this loan is 

considered paid in full by both parties. 

We find this language clear and unambiguous: SCH “agree[d] to take over the 

student loan repayment obligation.” Under this provision, upon the 

commencement of McGregor’s employment, SCH had the option to “take a 

business loan for the entire amount with an extended repayment term up to 4 

years.” If SCH selected that option, then, in return for payment of the business 

loan, “a 4 year obligation of [McGregor] to work for [SCH] [was] expected as a 

term of agreement to cover the student loan.” But, if McGregor left employment 

prior to the completion of the four-year business-loan term, she would be 

required to reimburse SCH for any payments made after her separation.

SCH took no steps to exercise the four-year business-loan option. Thus, 

we need not determine whether McGregor’s involuntary departure from 

employment triggered the repayment provision of the student loan provision. 

SCH’s failure to exercise the business-loan option at the commencement of 

McGregor’s employment leaves it with its obligation to “take over the student loan 
12

repayment obligation” which was due in full at the time McGregor terminated her 

employment with her prior employer. We accordingly affirm the district court’s 

conclusion that SCH is responsible for payment of the student loan in its entirety. 

In doing so, we repeat the district court’s admonition that “employers should not 

attempt to draft something as important as an employment contract without the 

assistance of an attorney trained in such matters.” 

V. Foreseeability of Damages

Finally, SCH argues the district court erred in awarding McGregor 

damages that were not foreseeable. SCH specifically argues the income taxes 

and the penalty to which McGregor was subjected as a result of liquidating her 

retirement account to pay off her student loan were not foreseeable results of 

SCH’s breach. McGregor contests error preservation on this argument, 

contending “[t]his argument was neither raised at trial nor raised in SCH’s post 

trial motion.” However at the hearing concerning SCH’s motion to enlarge or 

amend, SCH specifically argued, “[T]he whole balance of the student loans and 

then the penalty and expenses that she incurred when she had to use her . . . 

retirement funds in order to pay off that loan, . . . those damages are not 

foreseeable.” The district court rejected SCH’s foreseeability-of-damages 

argument in its entirety. We conclude error was preserved. See Meier v. 

Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). 

“[D]amages based on breach of contract must have been foreseeable or 

have been contemplated by the parties when the parties entered into the 

agreement.” Kuehl v. Freeman Bros. Agency, Inc., 521 N.W.2d 714, 718 (Iowa 

1994). “Whether the damages were reasonably anticipated by the parties when 
13

the contract was formed may be discerned from ‘the language of the contract in 

light of the facts, including the nature and purpose of the contract and 

circumstances attending its execution.’” Id. (quoting 22 Am. Jur. 2d Damages

§ 460 (1988)). “Damages which a reasonable person would expect to follow 

from breach of a contract are direct and thus should be awarded.” Id. 

With these principles in mind, we conclude, although McGregor’s 

obligation to pay the student loans flowed directly from SCH’s breach, her 

decision to incur the resulting of tax and early-withdrawal penalties could not 

have been reasonably anticipated by the parties when the contract was formed. 

As such, we vacate the portion of the damage award relating to the tax and earlywithdrawal penalties and remand the case to the district court to enter judgment 

consistent with our decision. 

VI. Appellate Attorney Fees

McGregor requests an award of appellate attorney fees under Iowa Code 

section 91A.8, which allows an award of attorney fees for claims brought under 

the Iowa wage payment collection law. Because this appeal did not contemplate 

McGregor’s wage claim, we decline McGregor’s request for an award of 

appellate attorney fees. 

VII. Conclusion

We affirm the district court’s (1) determination that SCH breached a 

material provision of the employment contract by terminating McGregor’s 

employment and, accordingly, that the non-compete clause is unenforceable 

against her and (2) interpretation and application of the student-loan-repayment 

provision of the employment contract. We conclude, although McGregor’s 
14

decision to incur tax and early-withdrawal penalties flowed directly from SCH’s 

breach, such penalties could not have been reasonably anticipated by the parties 

when the contract was formed. As such, we vacate the portion of the damage 

award relating to the tax and early-withdrawal penalties and remand the case to 

the district court to enter judgment consistent with our decision. We deny 

McGregor’s request for an award of appellate attorney fees.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED.