Court Opinion

ID: 4249736
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:20:47.969266+00
Date Added: 2024-06-11T07:48:12.883556
License: Public Domain

IN THE SUPREME COURT OF IOWA
                               No. 09–0325

                        Filed December 10, 2010

SENECA WASTE SOLUTIONS, INC.,

      Appellant,

vs.

SHEAFFER MANUFACTURING CO., LLC
and SHEAFFER PEN CORPORATION,
A Division of BIC USA INC.,

      Appellees.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Lee (North) County,

Cynthia H. Danielson, Judge.

      Contractor appeals from summary judgment ruling dismissing

contract action. COURT OF APPEALS DECISION VACATED; DISTRICT

COURT JUDGMENT REVERSED AND REMANDED.

      Brenda L. Myers-Maas, West Des Moines, for appellant.

      Benjamin P. Roach of Nyemaster, Goode, West, Hansell & O‘Brien,

P.C., Des Moines, for appellees.
                                     2

HECHT, Justice.

      After hiring a contractor to clean and decontaminate its pen

manufacturing plant, the owner of the plant refused to pay more than

the ―not to exceed‖ price designated in the cleaning contract.          The

contractor filed suit, claiming entitlement to a judgment in an amount

exceeding the not-to-exceed contract price because the scope of the work

defined in the contract was modified by the owner after the written

contract was formed. The district court granted summary judgment in

favor of the plant owner. On appeal, the court of appeals reversed and
remanded. We granted the plant owner‘s application for further review.

      I. Background Facts and Proceedings.

      A reasonable fact finder could find the following facts from the

summary judgment record. Sheaffer Manufacturing Company operated a

pen manufacturing plant in Fort Madison, Iowa. After deciding to cease

operations   at   that   location,   Sheaffer   took   bids   from   several

environmental contractors to clean and decontaminate the plant. Seneca

Waste Solutions submitted a letter bid on September 7, 2006. Sheaffer

offered the contract to Seneca on a time and materials basis but

specifically requested the inclusion of a not-to-exceed price of $170,000.

Seneca agreed, and the agreement was finalized in a written ―Contractor

Agreement.‖ The agreement included the following relevant terms:

      2. Scope of work. The Contractor will furnish all of the
      materials and perform all of the Work as described in the
      first page of the letter dated September 7, 2006, and sent by
      Seneca Waste Solutions, LLC to Michele Pancza, BIC
      Consumer Products Manufacturing Co. Inc, together with
      the itemized worksheet used to calculate the project cost
      estimate, which are attached hereto and made a part of this
      Agreement as Exhibit A.

      ....
                                     3
      5. Contract Price and Payments.             The work shall be
      charged on a Time and Materials Cost Basis at the rates
      quoted by the Contractor in Exhibit A, except that the Work
      shall not exceed One Hundred Seventy Thousand Dollars
      ($170,000.00), inclusive of all taxes, subcontractor fees, and
      any and all other surcharges, costs and expenses. Sheaffer
      will pay Contractor upon satisfactory completion of the Work
      and within forty-five (45) days of receipt of invoice.

      ....

      12. Complete Agreement. This Agreement, together with
      all exhibits attached hereto, constitutes the full and
      complete understanding and agreement of the parties
      relating to the subject matter hereof and supersedes all prior
      or contemporaneous understandings and agreements
      relating to such subject matter. Any waiver, modification or
      amendment of any provision of this Agreement shall be
      effective only if in writing signed by the parties hereto.

      The ―Exhibit A‖ referred to in the agreement included the first page

of Seneca‘s September 7 letter bid and a ―Budgetary T & M Estimate

Worksheet prepared for: Sheaffer Pen Plant Closure‖ (―worksheet‖).

      The first page of the September 7 letter bid provided, in relevant

part, as follows:
      Seneca Waste Solutions LLC, is pleased to submit to
      BIC/Sheaffer Pen this Budgetary T&M estimate for
      performing decontamination/cleaning/demolition services as
      per the scope of work specified in the Vendor-Provided
      Sheaffer Closure/Clean-up Activities Document. The project
      timeline is estimated at 20 working days. All vacuumed and
      rinsate residual and decontamination liquids shall be off
      loaded on site in approved containers. This project shall be
      performed on a Time and Materials Cost Basis Port-To-Port
      with an estimated cost based upon projects of similar
      nature, specified scope of work and onsite pre-estimate
      inspections. Attached is the itemized worksheet used to
      calculate the project cost estimate.

      Summary of Fees for service:

      Total–does not include Iowa State Sales Tax $143,520.67

      Note: All Seneca Waste Solutions LLC Work is to be
      completed on a T & M basis. Any materials, supplies or
      services NOT utilized or performed will NOT be billed.
                                     4
      Please note subcontractor terms, conditions and/or work
      scope modifications if applicable which will affect the project
      time and cost.

      The   ―Vendor-Provided     Sheaffer    Closure/Clean-up    Activities‖

document (―vendor-provided document‖) referenced in the bid was six

pages in length. It included a detailed description of the work to be done

and multiple references to the parties‘ expectation that most of the

―rinsate‖—washwater collected in the cleaning process—would be

transferred to Sheaffer‘s on-site wastewater treatment facility for

treatment and disposal.    The contracting parties contemplated that a
limited amount of the wastewater (4000 gallons) would be transported

off-site and decontaminated by a third party, Heritage Environmental

Services. The worksheet prepared by Seneca and referenced in both the

letter bid and the written contract is a spreadsheet containing an

estimate of the materials and labor needed to complete the cleaning of

the facility. The estimate included the sum of $5,186, the cost of the off-

site disposal of 4000 gallons by Heritage.

      After the contract was executed and about the time Seneca began

its work in November 2006, Sheaffer shut down its on-site wastewater

treatment facility. Sheaffer directed Seneca to dispose of all wastewater

through Heritage.    Seneca complied with this directive, but neither

Seneca nor Sheaffer requested a written modification to the contract.

      On January 5, 2007, as it neared completion of the project, Seneca

contacted Michele Pancza, Sheaffer‘s Environmental Manager, and

indicated that it ―may be approaching the ‗not-to-exceed‘ price.‖ Pancza

communicated this information to other Sheaffer managers in an email

message:

      I received a call late this afternoon from Seneca indicating
      they may be approaching the ―not-to-exceed‖ price agreed
      upon by the contract. They claim the difference is in the
                                      5
        volume of wastewater which they have had to dispose.
        Obviously, I did not agree to exceeding the contract price and
        I asked them to keep me informed as work concludes next
        week.

        But, they may have a point.         Looking at my original
        worksheet, I had assumed (as we all discussed) that Sheaffer
        would be treating much of the wastewaters from power
        washing, etc, on site in the wastewater treatment unit which
        would be the last equipment cleaned and dismantled. But,
        as I understand it, this was the first unit cleaned and then
        all wastewaters were subsequently sent off site for treatment
        via pumper truck.

        Even though this was not our original plan, dismantling the
        treatment unit first may not have been a bad idea. If we had
        treated these additional wastewaters on sight [sic], we very
        well may have had more and worse exceedances of the
        NPDES permit limit than the two we already experienced
        before the shutdown of outfall 001. (And we might be
        looking at fines or other enforcement actions.) So, though I
        am not thrilled at the possibility of a higher closure/clean up
        cost, these potential extra cost [sic] are not so bad when put
        into perspective.

        On January 15, 2007, Seneca‘s project manager sent an email

message to Pancza summarizing the work left to be done and indicating

that the work would be completed later that week. He noted that Seneca

was ―keeping an eye on the total costs of the project as we near our price

cap.‖
        Sheaffer paid Seneca $145,980.87 before receiving the final

invoice.   By the time Seneca completed its work under the contract,

Heritage had treated and disposed of more than 18,000 gallons of

wastewater, far in excess of the 4000 gallons contemplated in the

estimate attached to Seneca‘s bid. Seneca submitted invoices to Sheaffer

totaling $211,599.47.      Sheaffer tendered to Seneca payment in the

amount of $24,019.13 as the final payment on the contract, an amount

that would have brought Sheaffer‘s total payments under the contract to
$170,000. Seneca rejected the tender and filed suit seeking judgment for

the full amount of its invoices.
                                     6

      Both parties moved for summary judgment.           The district court

granted Sheaffer‘s motion and dismissed Seneca‘s claim in its entirety,

concluding Seneca was bound by the not-to-exceed price included in the

contract.    The   court   further   concluded   there   were      no   written

modifications to the contract which would have allowed Seneca to exceed

the price cap.     The court also rejected Seneca‘s contract claim for

additional payment under the contract because Seneca‘s answers to

interrogatories revealed the contractor‘s total billings for subcontracted

services, including those provided by Heritage, were less than estimated
by the contracting parties.

      Seneca appealed, and we transferred the case to the court of

appeals. The court of appeals reversed the district court, concluding that

while the not-to-exceed clause was unambiguous,              the summary

judgment    record—including      documents   fully   integrated    into   the

contract—engendered a genuine issue of material fact as to the amount

owed by Sheaffer to Seneca under the contract. We granted Sheaffer‘s

application for further review.

      II. Scope of Review.

      We review a district court‘s grant of a motion for summary

judgment for errors of law. Iowa R. App. P. 6.907. Summary judgment

is appropriate
      if the pleadings, depositions, answers to interrogatories, and
      admissions on file, together with the affidavits, if any, show
      that there is no genuine issue as to any material fact and
      that the moving party is entitled to a judgment as a matter of
      law.

Iowa R. Civ. P. 1.981(3). If reasonable minds can differ on how an issue

should be resolved, then a genuine issue of fact exists. Walderbach v.
Archdiocese of Dubuque, Inc., 730 N.W.2d 198, 199 (Iowa 2007). A fact is
                                        7

material ―only when its determination might affect the outcome of the

suit.‖ Baratta v. Polk County Health Servs., 588 N.W.2d 107, 109 (Iowa

1999). When we review a motion for summary judgment, we must view

the evidence in the light most favorable to the nonmoving party. Id.

      III. Discussion.

      On appeal, Seneca contends the district court erred in two

respects. First, Seneca claims the September 7 letter bid, the worksheet,

and the vendor-provided document were fully integrated into the contract

and that language in these documents entitles Seneca to exceed the not-
to-exceed price.    Seneca also contends the district court erred by

dismissing Seneca‘s claim in its entirety because even if Seneca was

bound to the $170,000 not-to-exceed price, it only received payments

totaling $145,980.87 from Sheaffer and is therefore entitled to an

additional payment of $24,019.13.

      A. Integration of the September 7 Letter, Worksheet, and

Vendor-Provided Document.          Seneca contends the letter bid, the

worksheet,   and     the    vendor-provided       document    are       expressly

incorporated parts of the integrated agreement.         Seneca contends the

language in the documents confirms its position that a fact question

exists as to whether Seneca is allowed to exceed the not-to-exceed price

under the circumstances presented here. Specifically, Seneca points to

language in the letter bid which provided that ―subcontractor terms,

conditions and/or work scope modifications if applicable . . . will affect

the project time and cost.‖ Seneca further relies on language within the

worksheet providing Heritage‘s services would be billed to Sheaffer at

―cost plus 15% subject to change based on waste analysis and volume.‖
Seneca   posits    the   incorporated       documents   confirm   the    parties‘

agreement that the contract price owed by Sheaffer could exceed
                                    8

$170,000 if the amount of wastewater sent to Heritage for disposal

exceeded 4000 gallons.

      Sheaffer contends the bid letter, the worksheet and the vendor-

provided document were not integrated in their entirety into the contract.

Pointing to language in the contract suggesting only limited portions of

the documents are incorporated into the contract, specifically the

description of work to be performed contained in the first page of the

September 7 letter bid and the worksheet, Sheaffer asserts the clauses

discussing the variability of the charges are not included in the portions
of the documents expressly incorporated.

      Sheaffer further argues that, even if the entirety of the letter bid

and the worksheet were incorporated, including the clauses relied on by

Seneca to avoid the not-to-exceed price provision, they do not have the

effect advocated by Seneca. Sheaffer contends the language relied upon

by Seneca is not necessarily at odds with the price cap.           Seneca

submitted two bids, the first estimating a contract price of $143,520.67

and a revised bid estimating a price of $128,756.72.       The agreement

adopted a formula for calculating the price clearly expressing the parties‘

understanding that the amount paid by Sheaffer would vary depending

on the amount of time and materials expended by Seneca in completing

the work.   However, the agreement specifically states that ―[t]he work

shall be charged on a Time and Materials Cost Basis at the rates quoted

by the Contractor in Exhibit A, except that the Work shall not exceed One

Hundred Seventy Thousand Dollars ($170,000.00).‖       (Emphasis added.)

Even if we assume the language relied upon by Seneca was incorporated

in the written agreement, we do not believe it can reasonably be
interpreted as an agreement to exceed the price cap.      To do so would

render the price cap provision superfluous.
                                     9
             Because a contract is to be interpreted as a whole, it is
      assumed in the first instance that no part of it is
      superfluous; an interpretation which gives a reasonable,
      lawful, and effective meaning to all terms is preferred to an
      interpretation which leaves a part unreasonable, unlawful,
      or of no effect.

Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859,

863 (Iowa 1991). When we interpret the written agreement as a whole,

whether or not the additional documents in their entirety are included,

we find it clear and unambiguous that the contract must be interpreted

in a way giving effect to both the time and materials price formulation

and the price cap. Accordingly, we conclude the language of the written

contract does not support Seneca‘s claim based on a contract price in

excess of $170,000.

      B. Modification of the Written Contract.         Seneca contends in

the alternative that Sheaffer is not entitled to summary judgment

because the price cap in the contract applies only to the scope of work

described in the written contract.         Because the contract clearly

contemplated that all of the rinsate collected from the Sheaffer plant,

except 4000 gallons of wastewater to be processed off-site by Heritage,

would be processed on-site at Sheaffer‘s wastewater facility, Seneca

asserts Sheaffer substantially modified the scope of the work when it

closed the facility and directed Seneca to send all of the rinsate to

Heritage.

      Sheaffer contends it ―did not request additional work and did not

enter any agreement to pay for extra work.‖             The heart of the

disagreement between the parties is the definition of the ―scope of the

work.‖   Sheaffer broadly characterizes the scope of the work as the

―cleaning and decontaminating [of] the facility.‖ While certainly that was
the parties‘ general purpose, the language of the written agreement was
                                         10

not so generalized. The agreement describes in detail the scope of the

work to be done, and it specifically contemplates the disposal of roughly

4000 gallons of 50/50 sludge with Heritage, not the disposal of 18,000

gallons of wastewater, which a fact finder could find was actually treated

off-site at Sheaffer‘s direction.1

       A reasonable fact finder could find Sheaffer‘s directive to transport

the wastewater off-site for treatment made Seneca‘s performance

substantially more onerous and resulted in a modification of the

contract.   Although the written contract states that any modifications
must be in writing, a written contract may be modified by a subsequent

oral contract having the essential elements of a binding contract.

Passehl Estate v. Passehl, 712 N.W.2d 408, 417 (Iowa 2006); see also

Whalen v. Connelly, 545 N.W.2d 284, 291 (Iowa 1996). Consent to the

modification may be either express or implied from acts or conduct.

Passehl Estate, 712 N.W.2d at 417. When a party to a contract modifies

the scope of the work by requesting ―extras‖ or additional work, the party

must pay the fair and reasonable value of the extra work.                   DeMuth

Landscaping & Design v. Heggestad, 461 N.W.2d 354, 356 (Iowa Ct. App.

1990) (contract implied from the evidence when contractor hired to

landscape north side of lakeshore bank but then requested additional

landscaping of south side of bank); S. Hanson Lumber Co. v. DeMoss, 253
Iowa 204, 208, 111 N.W.2d 681, 684 (1961) (concluding that agreements

made after the execution of a written contract which modify or add to it

are valid and enforceable).

       1Sheaffer   does not concede that it directed Seneca to transport all of the
contaminants to Heritage‘s facility for treatment and disposal. As this case was
adjudicated in the district court at the summary judgment stage, however, we view the
record in the light most favorable to Seneca.
                                     11

      Sheaffer attempts to distinguish DeMuth Landscaping and Hanson

Lumber as cases controlling the modification of ―fixed price contracts,

which are different than time and materials contracts with a maximum

price.‖ However, Sheaffer does not explain why the parties to a time and

materials contract with a not-to-exceed price should be precluded from

orally modifying their contract if they conclude changed circumstances

require it.

      The written agreement explicitly called for most of the wastewater

to be processed on-site at Sheaffer‘s wastewater treatment facility. While
the price provision could be reasonably understood to shift to Seneca the

risk of underestimating the amount of wastewater to be processed at

Sheaffer‘s on-site treatment facility, a reasonable fact finder could find

the parties‘ written agreement did not shift the risk that Sheaffer would

make Seneca‘s performance more onerous by directing the processing be

undertaken    off-site   by   Heritage   at   a   substantially   higher   cost.

Accordingly, we conclude a genuine issue of fact as to whether the

written contract between the parties was modified is engendered in the

summary judgment record.

      C. Other Issues. Sheaffer contends that even if the not-to-exceed

price term was modified by the parties, Seneca failed at the summary

judgment stage to establish the off-site treatment of an unexpected

amount of wastewater was the reason Seneca‘s charges exceeded

$170,000. As we have determined a fact question exists as to whether

the parties‘ written contract was modified, any discussion of whether a

breach of contract occurred and the amount of damages, if any, resulting

from any breach, is premature at this juncture.
      We also note Sheaffer asserted on appeal that the summary

judgment ruling dismissing Seneca‘s claims against codefendant Sheaffer
                                       12

Pen Company (SPC) should be affirmed on the alternative grounds that

SPC was not a party to the contract, SPC did not own or operate the

facility in Fort Madison, and SPC did not benefit from the work done by

Seneca. Although this issue was raised before the district court, neither

the district court nor the court of appeals addressed the issue, and

Sheaffer did not reassert the issue in its application for further review.

Accordingly, we will not address it.

      IV. Conclusion.

      We conclude the district court correctly determined that Seneca
was not entitled to more than the $170,000 price cap under the written

contract. However, we conclude the district court erred in concluding as

a matter of law that the written contract was not orally modified to allow

Seneca a contract remedy in excess of $170,000. Because we conclude

there is a genuine issue of material fact as to whether the parties

modified the written contract, summary judgment was inappropriate.

We therefore vacate the decision of the court of appeals, reverse the

judgment of the district court, and remand for further proceedings.

      DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT REVERSED AND REMANDED.