Court Opinion

ID: 4408359
Source: CourtListenerOpinion
Date Created: 2019-06-19 16:05:22.953466+00
Date Added: 2024-06-11T09:27:52.360908
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 18-1455
                               Filed June 19, 2019

ANDRES LECHUGA,
    Plaintiff-Appellant,

vs.

O & J ENTERPRISES, LLC,
      Defendant-Appellee,

and MANZANO GRAIN BIN SERVICES, LLC, and
GARCIA GRAIN STRUCTURE, LLC,
     Defendants.
________________________________________________________________

      Appeal from the Iowa District Court for Fremont County, Mark J. Eveloff,

Judge.

      In an interlocutory appeal, a plaintiff challenges the district court decision

granting summary judgment to O & J Enterprises, LLC, in his tort action.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

      Randall J. Shanks of Shanks Law Firm, Council Bluffs, for appellant.

      Joseph E. Jones and Elizabeth A. Culhane of Fraser Stryker, PC LLO,

Omaha, Nebraska, for appellee.

      Heard by Doyle, P.J., and Mullins and Bower, JJ.
                                        2

BOWER, Judge.

      In an interlocutory appeal, Andres Lechuga challenges the district court

decision granting summary judgment to O & J Enterprises, LLC (O & J) in his tort

action. We find there are genuine issues of material fact on the questions of

whether O & J had a subcontractor agreement with Garcia Grain Structures, LLC

(Garcia Grain), whether Ezekiel Garcia was O & J’s employee, and whether O & J

and Garcia or Garcia Grain had a principal-agent relationship. On these issues

we reverse the district court’s decision granting summary judgment to O & J and

remand for further proceedings.     We find the district court properly granted

summary judgment to O & J on the issue of whether O & J was in a joint venture

with Mid-States Millwright & Builders, Inc. (MMB) and Garcia or Garcia Grain, and

we affirm on this issue. We affirm in part, reverse in part, and remand for further

proceedings.

      I.       Background Facts & Proceedings

      The following facts are found in the affidavits, depositions, and documents

submitted by O & J in support of its motion for summary judgment. In the past,

MMB, a general contractor, used companies owned by Juan Manzano-Huerta

(Manzano) as subcontractors to erect grain bins.      Manzano first operated as

Manzano Grain Bin Services, LLC (Manzano Grain), and then he dissolved the

company and began operating as O & J.

      In prior instances when MMB hired Manzano Grain or O & J as a

subcontractor, Manzano and MMB signed a subcontractor agreement, which

required all subcontractors to provide a certificate showing the subcontractor had

workers’ compensation insurance. The agreement also provided Manzano Grain
                                            3

or O & J could not hire a subcontractor without prior written permission from MMB.

Despite this provision, Manzano stated he almost always used a subcontractor to

perform the work in erecting grain bins for MMB. The owner of MMB, Kevin Vier,

and the sales manager, Brian Ryerson, stated they were unaware of this practice

and had not given Manzano permission to hire subcontractors. Vier and Ryerson

stated they believed they had been working with Manzano directly, either through

Manzano Grain or O & J.

       In 2013, Manzano and Manzano Grain came under investigation by the

federal government for knowingly hiring undocumented workers.1 See United

States v. Manzano-Huerta, 809 F.3d 440, 442–43 (8th Cir. 2016). Manzano

claimed he paid the workers as subcontractors and therefore believed they were

subcontractors. Id. at 444. The Eighth Circuit found “Manzano’s relationship with

his workers was much more involved than the typical relationship between a

contractor and his subcontractors.” Id. Manzano pleaded guilty to harboring aliens

and conspiring to harbor aliens. Id. at 442. He was sentenced to thirty-three

months in prison. Id. Manzano was given an enhanced sentence based on a

finding he had attempted to obstruct justice by encouraging an employee, Ramon

Perez, to state Perez was a subcontractor who had hired the undocumented

workers rather than Manzano. Id. at 446.

       We turn now to the facts concerning the incident giving rise to this action.

In 2014, Heartland Coop hired MMB as a general contractor to build grain bins on

1
   Due to the investigation and resulting federal indictment, Manzano dissolved Manzano
Grain. He then started a new corporation, O & J, to build grain bins to “[s]tart all over,
fresh.”
                                          4

Heartland’s property near Randolph, Iowa. MMB entered into a subcontractor

agreement with L & D Construction to build the grain bins, but L & D was unable

to complete the work. Time was of the essence in finishing the construction of the

grain bins before the fall harvest in 2014.

       In late August 2014, Ryerson, MMB’s sales manager, contacted Manzano

to ask O & J to complete the project. This was between the time Manzano pleaded

guilty to the federal charges and the time he reported to prison. According to

Manzano, he told Ryerson he would get a crew to complete the job but he could

not do it himself because he could not go to Randolph due to travel restrictions as

a result of his criminal proceedings. Ryerson stated he believed O & J was going

to do the job. Ryerson stated there was no discussion about O & J hiring a

subcontractor to put up the grain bins in Randolph. Ryerson told other MMB

employees “Juan’s crew” was going to put up the grain bins.

       Ryerson created a subcontractor agreement between MMB and O & J,

dated September 2, 2014, for the Randolph job, similar to contracts the parties had

for other projects. Ryerson stated he left the contract at the MMB office for

Manzano to sign and Manzano picked up the contract and took it with him.

Manzano stated he was not presented with a subcontractor agreement before the

accident. No parties have produced a signed copy of a subcontractor agreement

between MMB and O & J for the Randolph job.

       O & J states it entered into a written subcontractor agreement with Garcia

Grain, owned by Garcia, to perform work at the Randolph job site. Lechuga raises

concerns about the validity of the written subcontractor agreement between O & J

and Garcia Grain because there are two copies of the agreement; Lechuga claims
                                          5

Garcia’s signatures on the two documents do not match. Lechuga claims the

written subcontractor agreement may have been signed and dated at a later time

in an effort to protect O & J and Manzano from liability in this action. The contract

provided, “The Subcontractor shall make all decisions associated with how they

wish to perform the terms of the Contract and shall be responsible to determine

who, where and the length of the employment of any people hired by the

Subcontractor.”

       O & J did not inform MMB it was using Garcia Grain as a subcontractor.

MMB required all of its subcontractors to submit a certificate showing they had

workers’ compensation insurance. Ryerson stated because MMB was unaware of

a subcontractor agreement between O & J and Garcia Grain, it did not obtain an

insurance certificate from Garcia Grain.      Garcia Grain did not have workers’

compensation insurance.

       In his deposition, Manzano stated he spoke to Garcia about the progress

on the Randolph job, stating “I just get updates on stuff like that.” He stated, “I’ll

get an update sometimes every two days,” from Garcia. He stated if Garcia was

missing a part, he would call Manzano, who would then call Ryerson.

       On September 5, 2014, Garcia told Lechuga to stand on a wooden pallet,

which was then lifted by Garcia about fifteen feet in the air by a telehandler, a type

of forklift. Lechuga had a hard hat but was not provided with any other safety

equipment. Lechuga fell fifteen feet to the ground from the wooden pallet and

sustained injuries. There was a basket that could be attached to a lift at the site,

but it was not used. All of the witnesses giving depositions testified it was unsafe

to lift a person on a wooden pallet with a telehandler.
                                          6

       Garcia called Manzano to inform him about the accident. MMB’s safety

director, John Stephens, went to the job site and spoke to those he believed were

O & J workers. Manzano was not at the site, and Stephens spoke to Garcia, who

he thought was a foreman. Stephens stated, “I contacted Juan and told him I

wanted to see him and whoever he had in charge at the site and wanted a full

report of what happened.” Manzano did not say anything at that time about having

subcontractors at the job site.    Ryerson also called Manzano the day of the

accident and said, “Can you see what’s going on?” Manzano told Ryerson he had

contacted his workers’ compensation insurance carrier. Manzano did not say

Lechuga was not his employee.

       About three or four days later, Manzano called Ryerson and said Lechuga

was not an employee of O & J, as O & J had been using Garcia Grain as a

subcontractor.   Ryerson stated he was upset and had words with Manzano,

because Manzano knew he was supposed to get written permission to use a

subcontractor and had not done so.

       On September 12, 2014, Stephens had a meeting with Manzano and

Garcia.2 Stephens testified he did not remember Manzano or Garcia telling him a

company other than O & J was working at the Randolph job site. Stephens

presented Manzano with the written subcontractor agreement with MMB, and

Manzano refused to sign, stating he needed to study it further. Stephens produced

a Safety Violation Report, which named O & J Construction as the

“Subcontractor/Employer.” The line designated for the “Violator’s Signature” on

2
  A worker for Garcia Grain, Jesus Cruz, was also present to act as an interpreter for
Garcia.
                                           7

the report was signed by Garcia and the line for the “Supervisor’s Signature” was

signed by Manzano. Manzano claimed Stephens told him, “we’ve got to get this

clarified before you guys can get paid,” so he signed the Safety Violation Report.

After the project was completed, Vier signed a contractor’s affidavit listing

subcontractors on the Randolph job, which named only O & J for “hopper bin

erection.”

        On November 24, 2015, Lechuga filed suit against Heartland, MMB, O & J,

Manzano Grain, and Garcia Grain, claiming the defendants were negligent and

their negligence caused his injuries.3 Lechuga claimed MMB, O & J, and Garcia

Grain were engaged in a joint enterprise. Alternatively, Lechuga claimed O & J

and Garcia Grain had a principal-agent relationship, so O & J was liable for the

acts of its agent, Garcia Grain. Manzano Grain and Garcia Grain did not respond

to the action and were found to be in default.

        O & J filed a motion for summary judgment, claiming it did not exert any

control over the job site and it did not sign a subcontractor agreement with MMB.

O & J stated its sole involvement was to hire Garcia Grain as a subcontractor and

it did not retain any control over the work performed by Garcia Grain. O & J stated

none of its employees were at the job site.

        The district court granted O & J’s motion for summary judgment. The court

found Lechuga had not presented evidence to show O & J was in control of the

work of Garcia Grain. The court stated, “The Court agrees with [O & J] at this time

[Lechuga] has not offered any evidence wherein a reasonable juror could conclude

3
    Lechuga settled with Heartland and MMB, and they were dismissed with prejudice.
                                         8

that O & J had an equal right of control over Garcia’s actions to call this a joint

enterprise.” The court also found, “there is no showing that there was a principal-

agent relationship between O & J and Garcia.” The court concluded, “there is no

genuine issue of material fact existing and that it is appropriate to grant Defendant

O & J’s motion for summary judgment.”

       Lechuga filed an application for an interlocutory appeal, which was granted

by the Iowa Supreme Court. The case was subsequently transferred to the Iowa

Court of Appeals.

       II.      Standard of Review

       “We review district court summary judgment rulings for corrections of errors

at law.”      McQuistion v. City of Clinton, 872 N.W.2d 817, 822 (Iowa 2015).

“Summary judgment is properly granted when there is no genuine issue of material

fact and the moving party is entitled to judgment as a matter of law.” Id. We view

the record in the light most favorable to the nonmoving party. Banwart v. 50th St.

Sports, L.L.C., 910 N.W.2d 540, 545 (Iowa 2018). “Even if facts are undisputed,

summary judgment is not proper if reasonable minds could draw from them

different inferences and reach different conclusions.” Goodpaster v. Schwan’s

Home Serv., Inc., 849 N.W.2d 1, 6 (Iowa 2014).            “The burden of showing

undisputed facts entitling the moving party to summary judgment rests with the

moving party.” Morris v. Steffes Grp., Inc., 924 N.W.2d 491, 496 (Iowa 2019).

       III.     Subcontractor Agreement

       Generally, “an employer of an independent contractor is not vicariously

liable for injuries arising out of the contractor’s negligence.” Downs v. A & H

Constr., Ltd., 481 N.W.2d 520, 523–24 (Iowa 1992). This is due to “the lack of
                                           9

control by the employer over the details of the contractor’s work.”4 Id. at 524. O & J

claims it hired Garcia Grain as an independent contractor and is not vicariously

liable for the negligence of Garcia Grain under this rule, making summary judgment

appropriate.

       Lechuga claims the district court should not have granted summary

judgment because there are genuine issues of material fact as to whether O & J

was the employer of an independent contractor or whether O & J was the employer

of the workers putting up the grain bins at the Randolph job site. Lechuga disputes

O & J’s claim there was a valid subcontractor agreement between O & J and Garcia

Grain. Lechuga states there is evidence to show after the accident Manzano

created the fiction there was a subcontractor agreement in order to insulate himself

and O & J from liability. Lechuga states the written subcontractor agreement

between O & J and Garcia Grain could have been created after the accident.

Under Lechuga’s theory, the rule in Downs does not apply and O & J would be

vicariously liable for the negligence of its employees, including Garcia.

       After examining all of the evidence submitted with O & J’s motion for

summary judgment and Lechuga’s resistance, we find there are genuine issues of

material fact on the question of whether Garcia Grain was a subcontractor to O & J

or whether O & J was the employer of Garcia and the other workers erecting the

grain bins.

4
   There are exceptions to the general rule when the owner is the possessor of the land,
the employer retains a high degree of control over the contractor’s work, or the work
involves a peculiar risk or is inherently dangerous. Downs, 481 N.W.2d at 524–26.
                                        10

       We first note all of the witnesses from MMB stated they believed Manzano’s

company, which they sometimes referred to as “Juan’s crew,” was putting up the

grain bins. When Ryerson initially discussed the project with Manzano, Ryerson

stated he believed O & J was going to do the job. Ryerson stated there was no

discussion about O & J hiring a subcontractor to put up the grain bins in Randolph.

Based on previous contracts, Manzano was aware he was not supposed to use a

subcontractor without prior written permission from MMB, and he did not obtain

permission to use a subcontractor for this job. After the accident, Manzano told

Ryerson he had contacted his workers’ compensation insurance carrier. Manzano

did not say Lechuga was not his employee. Also, after the project was completed,

O & J was the only subcontractor listed for “hopper bin erection” in a contractor’s

affidavit for the Randolph project.

       On the day of the accident, Stephens told Manzano, “I wanted to see him

and whoever he had in charge at the site and wanted a full report of what

happened.”      Manzano did not tell Stephens he was using a subcontractor.

Additionally, Stephens testified he did not remember Manzano or Garcia telling

him a company other than O & J was working at the Randolph job site at the

September 12, 2014 meeting. On the Safety Violation Report, O & J Construction

was named as the “Subcontractor/Employer.” Manzano signed the report as the

supervisor of Garcia, who signed as the violator. Manzano’s interactions with

Stephens and the safety report could lead to a finding Manzano and Garcia had

an employer-employee relationship rather than a contractor-subcontractor

relationship.
                                        11

       There is also evidence Garcia took direction from Manzano. Manzano

testified he got an update about every two days from Garcia. He stated Garcia

informed him of the crew’s progress on the job, stating “I just get updates on stuff

like that.” Manzano stated if Garcia was missing a part, he would call Manzano,

who would then call Ryerson, to resolve the situation. Garcia called Manzano to

inform him of the accident.

       Furthermore, a similar situation led to Manzano getting a sentencing

enhancement in his federal criminal case due to evidence of obstruction of justice.

Manzano-Huerta, 809 F.3d at 446. The Eighth Circuit found Manzano encouraged

an employee, Perez, to falsely state Perez was a subcontractor to Manzano Grain

and the undocumented workers at issue were employees of Perez, rather than

Manzano Grain. Id. at 445–46. Manzano stated in his deposition in this case

Manzano Grain usually used subcontractors, rather than having employees, but

the Eighth Circuit found Manzano’s “actions were consistent with those of an

employer” in regard to Manzano Grain. See id. at 444. Lechuga points out the

similarity to this case where Manzano is claiming Garcia was actually a

subcontractor, not his employee. The factual circumstances in Manzano’s federal

criminal case raise questions about his credibility in stating he hired Garcia Grain

as a subcontractor.

       Finally, Lechuga raises concerns about the validity of the written

subcontractor agreement between O & J and Garcia Grain. He states there are

two copies of the agreement, from two different dates, but the signatures of Garcia

on the two documents do not match. Lechuga claims the written subcontractor

agreement might have been signed and dated at a later time in an effort to protect
                                         12

O & J and Manzano from liability in this action. Due to the disparities between the

two subcontractor agreements, there is a factual issue concerning the validity of

the agreements.

       As noted, O & J had the burden to show there was no genuine issue of

material fact and it retained this burden at all times. See Morris, 924 N.W.2d at

496. “To obtain a grant of summary judgment on some issue in an action, the

moving party must affirmatively establish the existence of undisputed facts entitling

that party to a particular result under controlling law.” Swainston v. Am. Family

Mut. Ins. Co., 774 N.W.2d 478, 481 (Iowa 2009). Also, as the party seeking to

show there was a contract between O & J and Garcia Grain, O & J has the burden

of showing there was a contract. See Hawkeye Land Co. v. Iowa Power & Light

Co., 497 N.W.2d 480, 486 (Iowa Ct. App. 1993) (“A party who seeks recovery on

a contract has the burden to prove the existence of a contract.”).

       We conclude the district court erred by granting summary judgment to O & J

on the basis it was not liable for the negligence of a subcontractor, as there are

genuine issues of material fact concerning whether O & J had a subcontractor

agreement. O & J has not affirmatively established the existence of undisputed

facts that entitle it to relief. See Swainston, 774 N.W.2d at 481.

       IV.    Joint Venture

       Lechuga claims there are genuine issues of material fact concerning

whether O & J entered into a joint venture with MMB and Garcia or Garcia Grain

to build the grain bins at the Randolph job site. The Iowa Supreme Court has

stated:
                                         13

               A joint venture is defined as an association of two or more
       persons to carry out a single business enterprise for profit; also as a
       common undertaking in which two or more combined their property,
       money, efforts, skill or knowledge.
               As a general rule, a joint venture is characterized by a joint
       proprietary interest in the subject matter, a mutual right to control, a
       right to share in the profits and a duty to share the losses.

Farm-Fuel Prods. Corp. v. Grain Processing Corp., 429 N.W.2d 153, 156 (Iowa

1988) (quoting Brewer v. Cent. Constr. Co., 43 N.W.2d 131, 136 (Iowa 1950)). “In

deciding whether a joint venture agreement exists, we have said that ‘no particular

form of expression or formality of execution is necessary. It need not be expressed

but may be implied in whole or in part from the conduct of the parties.’” Id. (quoting

Pay-N-Taket, Inc. v. Crooks, 145 N.W.2d 621, 625 (Iowa 1966)).

       “Summary judgment is proper when the plaintiff’s claim lacks evidence to

support a jury question on an essential element of the claim.” Ranes v. Adams

Labs., Inc., 778 N.W.2d 677, 685 (Iowa 2010). O & J had a specific job at the

Randoph job site—to erect the grain bins. The undisputed facts show O & J did

not have a joint proprietary interest with MMB and Garcia or Garcia Grain to build

the grain bins. There is no evidence to show O & J had a right to share in the

profits or a duty to share in any losses. See Farm-Fuel Prods. Corp., 429 N.W.2d

at 156. We find the district court properly granted summary judgment to O & J on

Lechuga’s claims regarding a joint venture.

       V.     Principal-Agent

       Finally, Lechuga claims there are genuine issues of material fact as to

whether O & J had a principal-agent relationship with Garcia or Garcia Grain. An

agency has been defined as “the fiduciary relationship that arises when one person

(a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall
                                        14

act on the principal’s behalf and subject to the principal’s control, and the agent

manifests assent or otherwise consents so to act.” Deeds v. City of Marion, 914

N.W.2d 330, 349 (Iowa 2018) (quoting Restatement (Third) of Agency § 1.01, at

17 (Am. Law Inst. 2006)). “Generally, an agency relationship exists when an agent

has actual or apparent authority to act on behalf of a principal and both principal

and agent have mutually manifested assent to create it.” Hutchison v. Shull, 878

N.W.2d 221, 235 (Iowa 2016). A principal-agent relationship may be shown by

circumstantial evidence. Id.

      As we discussed above, there is evidence Garcia acted subject to O & J’s

control. Garcia gave Manzano updates about the Randolph job about every two

days. Garcia informed Manzano him of the crew’s progress on the job. When

Garcia was missing a part needed to complete the job, he would call Manzano.

Additionally, Garcia called Manzano to inform him of the accident. The degree of

control O & J exercised over Garcia may well depend on a finding of whether

Garcia was O & J’s employee or a subcontractor, and we have already determined

there are genuine issues of material fact on this issue. We conclude there are also

genuine issues of material fact on the question of if Garcia or Garcia Grain was

acting as an agent of O & J. We determine the district court erred in granting

summary judgment on this issue.

      VI.    Conclusions

      We find there are genuine issues of material fact on the questions of

whether O & J had a subcontractor agreement with Garcia Grain or Garcia was

O & J’s employee and whether O & J and Garcia or Garcia Grain had a principal-

agent relationship.   On these issues we reverse the district court’s decision
                                     15

granting summary judgment to O & J and remand for further proceedings. We find

the district court properly granted summary judgment to O & J on the issue of

whether O & J was in a joint venture with MMB and Garcia or Garcia Grain, and

we affirm on this issue.

       AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.