Shelby County Cookers, L.L.C., an Iowa Limited Liability Company v. Utility Consultants International, Inc., a Michigan Corporation , 857 N.W.2d 186 ( 2014 )

IN THE SUPREME COURT OF IOWA
No. 13–0253
Filed November 7, 2014
SHELBY COUNTY COOKERS, L.L.C., an Iowa Limited Liability
Company,
Appellee,
vs.
UTILITY CONSULTANTS INTERNATIONAL, INC., a Michigan
Corporation,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Shelby County, James M.
Richardson, Judge.
A utility bill review consultant seeks further review after the
district court and court of appeals both concluded the consultant’s
short-lived contract with a bacon producer was a contract for services
terminable at will. COURT OF APPEALS DECISION VACATED;
DISTRICT COURT DECISION REVERSED AND CASE REMANDED.
M. Brett Ryan of Watson & Ryan, P.L.C., Council Bluffs, for
appellant.
James G. Powers and April N. Hook of McGrath North Mullin &
Kratz, P.C. L.L.O., Omaha, Nebraska, for appellee.
2
HECHT, Justice.
Hoping to reduce its expenses, a company contracted with a
consultant whose business is reviewing utility bills and pursuing refunds
of overpayments. The company terminated the contract after the
consultant reviewed four utility bills and informed the company it was
entitled to a substantial refund for sales tax overpayments. The
company sought a declaratory judgment establishing it had no remaining
contractual obligation to the consultant, and the consultant
counterclaimed for breach of contract. The district court determined the
company’s liability under the contract was limited to services the
consultant provided prior to termination and dismissed the consultant’s
counterclaim on the ground no payment was owed to the consultant
until the company actually receives a refund. The consultant appealed,
and the court of appeals affirmed. We granted the consultant’s
application for further review.
I. Background Facts and Proceedings.
The following facts are supported by substantial evidence in the
summary judgment record. Utility Consultants International, Inc. (UCI)
conducts utility billing reviews for its customers searching for errors or
overpayments that might lead to refunds or other savings. In late July
2011, Shelby County Cookers, LLC (SCC) received an unsolicited phone
call from Jackie Tanguay, a representative of UCI. Troy Schaben, SCC’s
plant controller, took the call. Tanguay told Schaben about UCI’s
services and offered to perform a utility review for SCC. 1
1During this telephone call, Tanguay did not reveal that UCI’s billing reviews
commonly scrutinized customers’ utility bills for sales tax overpayments. She explained
generally to Schaben that UCI could review SCC’s utility bills and search for any
possible errors.
3
Schaben expressed interest in UCI’s services during the initial
phone conversation with Tanguay, but no contract for services was
formed that day. Tanguay and Schaben had additional telephone
conversations over the next several days. Tanguay urged Schaben to
send to UCI copies of SCC’s utility bills covering a period of three
months. Tanguay proposed that UCI would perform a “free preliminary
review” of the bills. Schaben agreed to UCI’s proposal, sending four of
SCC’s utility bills to Tanguay. 2
In early August 2011, Tanguay contacted Schaben again,
indicating UCI had completed its preliminary review of the four SCC
utility bills. Tanguay informed Schaben that the preliminary review led
UCI to conclude it could obtain “a large refund” for SCC. During this
conversation, Tanguay did not specify the source or anticipated amount
of the potential refund, nor did she explain the process through which a
refund could be pursued.
On August 9, 2011, Schaben signed UCI’s form contract,
indicating he did so as SCC’s plant controller. UCI’s president, David
Dawson, signed the contract for UCI. The contract provides, in its
entirety:
This agreement authorizes UTILITY CONSULTANTS
INTERNATIONAL, INC. to pursue refunds and bill
reductions, on your behalf, on your utility billings.
If UTILITY CONSULTANTS INTERNATIONAL, INC. is
successful in obtaining a refund(s) for your company(ies),
you[r] fee obligation is 50% of the refund(s). Payable only if
and when a credit has been applied to your account or a
check has been issued to you. The future cost reductions,
as defined by when the utility adjusts your account(s) strictly
accrue to you.
2The record does not explain why Schaben actually sent only four bills to UCI,
instead of bills for the previous three months as Tanguay requested.
4
If you accept our money saving proposal, please sign where
indicated.
Thank you,
UTILITY CONSULTANTS INTERNATIONAL, INC.
After UCI received the signed contract from SCC, Tanguay called
Schaben and requested that SCC transmit copies of its utility bills for the
previous thirty-six months. 3 During this conversation, Tanguay first
disclosed to Schaben the reason for the potential refund: overpayments
of sales taxes detected in SCC’s utility bills. 4 It is undisputed that SCC
did not know it had a claim for a refund of sales tax overpayments until
Tanguay disclosed the information to Schaben after the parties formed
their contract.
Upon learning UCI’s review had revealed a potential refund claim,
Schaben notified SCC’s secretary and treasurer, Bradley Poppen.
Poppen instructed Schaben not to release more information to UCI until
SCC clarified the scope of UCI’s services. When Tanguay called later to
ask why SCC had not yet sent the additional utility bills she had
requested, Schaben explained that Poppen’s approval of the transaction
was required and that Poppen was now handling the matter. After this
call, Schaben had no further communication with UCI. However, he
3It does not appear from the record that the term of thirty-six months was
discussed before the parties signed the written agreement. However, it appears
Tanguay requested billings for thirty-six months because UCI understood tax refund
claims are time-limited. See Iowa Code § 422.73(1) (2011) (allowing taxpayers three
years to claim refunds).
4UCI’s president, David Dawson, explained in his deposition that UCI’s primary
business focus is on sales tax reviews. Dawson further testified it is UCI’s practice not
to tell clients—until after a written contract with UCI is signed—that refunds will likely
be based on sales tax overpayments. According to Dawson, UCI follows this approach
because if potential clients realized the utility bill review would be focused on tax
overpayments, they would not hire UCI, and instead assign the project to their tax
accountants.
5
decided to investigate SCC’s tax payments to determine how much tax
SCC had overpaid on its utility bills.
On September 2, 2011, Poppen sent an email message to Dawson
requesting specific details about the scope of UCI’s services and a
proposed percentage or hourly rate for those services. Dawson
interpreted Poppen’s message as suggesting the parties should form a
new contract. Dawson’s response to Poppen asserted no new contract
was needed because the parties already had a signed agreement for UCI’s
services.
The parties’ relationship deteriorated. Poppen presented an
ultimatum to UCI: unless an acceptable agreement could be reached as
to the precise scope of UCI’s proposed work, SCC would terminate the
existing contract. Dawson responded that the existing contract was
sufficiently detailed and also asserted UCI had already performed when it
“identified erroneous taxes that [SCC was] being charged.” 5 On
September 20, 2011, Poppen sent a letter to UCI, denying the existence
of a valid contract between the parties 6 and stating alternatively that “to
the extent [the] agreement is valid, it is hereby TERMINATED effective as
of today’s date.” UCI performed no additional services for SCC after
receiving the notice of termination. SCC hired an accounting firm to
pursue a refund for sales tax overpayments.
SCC filed a petition for declaratory judgment requesting the court’s
determination that the parties had no binding agreement and that UCI
5The record does not reveal whether UCI disclosed to SCC a projected or
estimated amount of the potential refund before litigation of this case began.
6Although SCC initially denied the written agreement was supported by valid
consideration and claimed Schaben was not authorized to sign the written agreement
with UCI, this argument was later abandoned and is not before us on appeal.
6
was not authorized to pursue refunds on SCC’s behalf. UCI
counterclaimed, alleging SCC breached the parties’ contract by refusing
to provide UCI with copies of SCC’s utility bills and denying UCI the
opportunity to procure the refunds.
SCC filed a motion for summary judgment. The district court
granted the motion, holding the contract was limited in duration to the
period between August 9, 2011, when Schaben signed the contract for
SCC, and September 20, 2011, when Poppen’s letter terminated it. The
district court also determined that although the parties’ signed writing
left the scope of the agreement unspecified, their actions indicated the
only service UCI actually provided was its review of four utility bills.
Thus, the district court ruled UCI was entitled to fifty percent of any
refund SCC receives for overpayment of sales taxes on those four bills.
The court further concluded, however, that UCI is owed nothing under
the contract until the Iowa Department of Revenue actually refunds any
overpayments to SCC. 7
UCI appealed, and we transferred the case to the court of appeals.
The court of appeals affirmed the district court’s ruling. UCI sought, and
we granted, further review.
II. Scope of Review.
Generally our standard of review for declaratory judgment actions
“is determined by the manner in which the action was tried to the district
court.” SDG Macerich Props., L.P. v. Stanek Inc., 648 N.W.2d 581, 584
(Iowa 2002). However, in this case we need not determine whether the
7When the motion for summary judgment was filed, SCC’s application for a
refund of more than $250,000 from the state was pending. As SCC had not yet received
a refund, however, the district court concluded UCI’s claim for contract damages was
not yet ripe. Accordingly, the court dismissed UCI’s counterclaim.
7
case was tried at law or in equity, because we are reviewing the district
court’s decision to grant summary judgment. “Thus, we base our review
on the propriety of the district court’s summary judgment ruling, not the
declaratory judgment.” Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d
494, 500 n.1 (Iowa 2013); see also Ferguson v. Allied Mut. Ins. Co., 512
N.W.2d 296, 297 (Iowa 1994). We review the district court’s summary
judgment ruling for correction of errors at law. Boelman, 826 N.W.2d at
500; SDG Macerich Props., 648 N.W.2d at 584. Because UCI is the
nonmoving party, we make all reasonable factual inferences in its favor.
Boelman, 826 N.W.2d at 501.
III. The Parties’ Positions.
The parties’ main disagreement concerns the effect of SCC’s letter
of September 20, 2011. SCC insists the letter constituted reasonable
notice that it was terminating a written contract for services which
included no durational term. In contrast, UCI characterizes the letter as
a repudiation of the contract constituting a material breach.
A. Utility Consultants. UCI maintains that while it only reviewed
four of SCC’s utility bills before repudiation, the information it revealed
to SCC after reviewing those bills constituted performance with value far
exceeding the potential refund expected for sales tax overpayments on
those four bills. Accordingly, UCI asserts the district court committed
legal error in deciding UCI’s expectation interest is limited to damages
based on any refund derived from only the four bills it reviewed before
SCC repudiated the contract. UCI further contends a genuine issue of
material fact on the damage issue precludes summary judgment.
B. Shelby County Cookers. SCC urges us to affirm the district
court’s judgment and the decision of the court of appeals. As the written
contract for services had no specific duration, SCC contends it was
8
lawfully terminated, not repudiated, by the September 20 letter. SCC
further contends the scope of the contract was properly limited to any
refunds derived from the four bills UCI actually reviewed. Finally, SCC
asserts the district court correctly concluded UCI had no claim for
damages at the time summary judgment was entered because SCC had
not yet received a tax refund.
IV. Analysis.
Our adjudication of the contract’s durational term significantly
affects the merits of the parties’ contentions. Accordingly, we address
that subject first.
A. Duration of the Contract. To determine whether SCC’s
September 20 letter constituted evidence of a lawful termination or an
anticipatory repudiation precluding the summary judgment granted by
the district court, we first ask whether “the language within the four
corners of the document” expresses the contract’s duration. Clinton
Physical Therapy Servs., P.C. v. John Deere Health Care, Inc., 714 N.W.2d
603, 615 (Iowa 2006) (noting contract analysis almost always begins with
the contract’s plain language). In this instance, however, the contract
document does not prescribe a durational term for the parties’
relationship.
“The law in Iowa is not well developed regarding the duration of
contracts where the parties fail to specify a duration.” Keppy v.
Lilienthal, 524 N.W.2d 436, 439 (Iowa Ct. App. 1994). SCC relies heavily
on language from Hess v. Iowa Light, Heat & Power Co., 207 Iowa 820,
221 N.W. 194 (1928) (per curiam), in asserting the contract with UCI was
indefinite and SCC’s termination was proper under the circumstances
presented here. In Hess we stated, “where no time limitation is inserted
in a contract for the performance of services, . . . the contract is regarded
9
as terminable by either party on reasonable notice.” Hess, 207 Iowa at
826, 221 N.W. at 196–97. However, SCC’s reliance on Hess is misplaced.
In Hess, the plaintiff sued on a contract entitling him to receive
free heat and electricity “in consideration of [his] services as director of
the Carroll Light & Heat Company . . . .” Id. at 822, 221 N.W. at 195
(emphasis omitted). Carroll Light subsequently went out of business and
the Iowa Light, Heat & Power Company succeeded it. Id. The successor
company sent a letter to Hess, notifying him that he would no longer
receive free utilities because he was no longer serving as a director of
Carroll Light. Id. Hess maintained he was entitled to continue receiving
free electricity and heat indefinitely and sued to enjoin Iowa Light from
discontinuing the arrangement. Id. at 823, 221 N.W. at 195–96. The
district court dismissed the action, and we affirmed on the ground that
Iowa Light owed Hess no obligation under his contract with Carroll Light.
Id. at 825, 221 N.W. at 196. We reasoned further that, because Hess no
longer served as a corporate director of Carroll Light, he had no
continuing entitlement for free utilities under the express terms of the
contract. Id. Put another way, our decision in Hess was firmly based on
our interpretation of an express contract term. It is therefore clearly not
dispositive in this case, which turns on a term not expressed in the
parties’ written contract.
SCC points to the above-quoted language in our Hess opinion
suggesting that even if the contract had conferred upon Hess an
entitlement with no express time limitation, Iowa Light could have
terminated the contract for services at will upon reasonable notice. See
id. at 826, 221 N.W. at 196–97. That language is clearly dicta, however,
and does not control our decision in this case.
10
Because Hess is not controlling, we look to other courts’ decisions
for guidance and find a commonly expressed framework applied in cases
addressing contracts omitting a durational term. A California court has
described the framework in this way:
The court first seeks an express term. If one is absent, the
court determines whether one can be implied from the
nature and circumstances of the contract. If neither an
express nor an implied term can be found, the court will
generally construe the contract as terminable at will.
Zee Med. Distrib. Ass’n, Inc. v. Zee Med., Inc., 94 Cal. Rptr. 2d 829, 835
(Ct. App. 2000); see also Consol. Theatres, Inc. v. Theatrical Stage Emps.
Union, Local 16, 447 P.2d 325, 333 (Cal. 1968). Other courts utilize a
similar framework. See, e.g., Loftness Specialized Farm Equip., Inc. v.
Twiestmeyer, 742 F.3d 845, 853 (8th Cir. 2014) (applying Minnesota law
and noting termination of an indefinite contract is allowed upon
reasonable notice, but only if the contract has neither an express
durational term nor a term that can be implied); S. Bell Tel. & Tel. Co. v.
Fla. E. Coast Ry., 399 F.2d 854, 858 (5th Cir. 1968) (“[A] contract in
which the parties express no period for its duration and no definite time
can be implied . . . can be terminated at will by either party . . . .”
(emphasis added)); Haines v. City of New York, 364 N.E.2d 820, 822 (N.Y.
1977) (“It is generally agreed that where a duration may be fairly and
reasonably supplied by implication, a contract is not terminable at will.”).
Finding no express durational term in the contract between SCC
and UCI, we next inquire whether the omitted term can be implied from
the nature and circumstances of the contract. To aid us in this inquiry,
we look to the Restatement (Second) of Contracts section 204. This
section provides that when contracting parties “have not agreed with
respect to a term which is essential to a determination of their rights and
11
duties, a term which is reasonable in the circumstances is supplied by
the court.” Restatement (Second) of Contracts § 204, at 96–97 (1981);
see also Nat’l Util. Serv., Inc. v. Cambridge-Lee Indus., Inc., 199 F. App’x
139, 144 (3d Cir. 2006) (“A contract whose obligations are of indefinite
duration should be interpreted to require performance for a reasonable
period of time.”); Haines, 364 N.E.2d at 822 (“[W]here the parties have
not clearly expressed the duration of a contract, the courts will imply
that they intended performance to continue for a reasonable time.”).
The durational term of the contract between UCI and SCC is
essential in adjudicating whether UCI has a viable claim for breach of
contract. As the durational term of the asserted contract is essential, it
is a term properly within the purview of section 204. Although we have
not previously applied section 204 in this precise context, we relied on it
when parties to a loan commitment agreement did not expressly state
their obligations in the event the borrower defaulted on its payments to a
third party. Taylor Enter., Inc. v. Clarinda Prod. Credit Ass’n, 447 N.W.2d
113, 116 (Iowa 1989). We have also endorsed the Restatement (Second)’s
approach in many other contract contexts. See, e.g., Rucker v. Taylor,
828 N.W.2d 595, 602 (Iowa 2013); Pavone v. Kirke, 807 N.W.2d 828, 833
(Iowa 2011); Lewis Elec. Co. v. Miller, 791 N.W.2d 691, 695 (Iowa 2010).
We find the approach instructive in reaching our decision in this case.
Section 204 provides a framework for adjudicating contract
disputes that cannot be resolved by interpreting express contract terms.
Restatement (Second) of Contracts § 204 cmt. c, at 97 (“[S]upplying . . .
an omitted term is not within the definition of interpretation.”); see also
Richard E. Speidel, Restatement Second: Omitted Terms and Contract
Method, 67 Cornell L. Rev. 785, 798 (1982) [hereinafter Speidel]
(“[S]ection 204 is inapplicable until . . . the process of contract
12
interpretation is completed.”). In supplying a reasonable durational term
not expressed by the parties, we consider several factors. Most
important are the parties’ intent and the contract’s main purpose. See
Koenigs v. Mitchell Cnty. Bd. of Supervisors, 659 N.W.2d 589, 594–95
(Iowa 2003) (determining the duration of maintenance obligations
contained in an express easement); Keppy, 524 N.W.2d at 439
(considering that one party “entered the agreement in order to revitalize
their [swine] herd and earn money”). “[T]he probability that a particular
term would have been used if the question had been raised” also bears
upon reasonableness. Restatement (Second) of Contracts § 204 cmt. d,
at 98. This probability inquiry is a factor, but is not dispositive. The
court’s ultimate goal is reasonableness—not just an approximation of a
term the particular parties might hypothetically have negotiated. See id.;
Speidel, 67 Cornell L. Rev. at 803. A term is reasonable in this context
when it “comports with community standards of fairness and policy.”
Restatement (Second) of Contracts § 204 cmt. d, at 98. We deem a
contract for services terminable at will only if we cannot ascertain a
durational term by considering these factors.
The circumstances surrounding the contract between SCC and
UCI reveal the parties’ common purpose. UCI does not volunteer detailed
information about its services unless the client demands it before signing
a written contract because UCI recognizes the information it provides is
valuable and worthy of protection. Thus, UCI enters contracts with
clients before revealing the specific source and amount of their potential
refunds. Because its compensation under the standard contract is based
on a percentage of the refund its clients receive, UCI’s goal is to maximize
the size of clients’ refunds. Although SCC did not know the amount of
its potential refund or how many bills UCI would need to examine to
13
maximize the potential refund recovery, its primary purpose for
contracting was also to recover the largest possible refund.
Having identified the parties’ common purpose of achieving as
large a refund for SCC as possible, we consider the duration of the
agreement the parties would have deemed reasonable had the question
been raised. It seems indisputable that both parties likely would have
characterized their agreement as extending for the period of time
necessary to complete a review of SCC’s bills and obtain the largest
possible refund from the appropriate authority. See Keppy, 524 N.W.2d
at 439 (discussing the district court’s finding that an oral contract with
no express duration was “intended . . . to be in effect until [the] herd [of
pigs] could be revitalized and the parties could make a profit”). As we
have noted, the maximum refund is dictated by the three-year limitation
period for tax refunds.
We next consider whether supplying a reasonable durational term
under the circumstances presented here comports with our state’s
“standards of fairness and policy.” Restatement (Second) of Contracts
§ 204 cmt. d, at 98. Iowa law affirms the proposition that information
can be valuable and attests the principle that valuable information
deserves protection. See Comes v. Microsoft Corp., 775 N.W.2d 302, 311
(Iowa 2009) (discussing a protective order intended “to protect valuable
business information . . . from disclosure,” and concluding that a
modified protective order would still keep valuable information shielded);
cf. Iowa Code § 550.2(4) (2013) (defining “trade secret” as information
that, in part, has actual or potential economic value). Therefore, we
conclude supplying a durational term that protects the value of UCI’s
information is consistent with standards of fairness and this state’s
policy.
14
Other utility review cases disclose some disagreement about
whether consultants performing services similar to UCI’s provided
valuable information to their clients. Compare Nat’l Util. Serv., Inc. v.
Callahan Mining Corp., 799 F. Supp. 1004, 1006 (N.D. Cal. 1990)
(suggesting the client may have intended “to stiff” the consultant by
using the provided information and not paying for it, and refusing to
permit “such shenanigans”), with Wis-Pak, Inc. v. Nat’l Util. Serv., Inc., 65
F. App’x 84, 92–93 (7th Cir. 2003) (refusing to compensate the
consultant for providing a recommendation when the client discovered its
utility overcharges through entirely independent means). However, when
viewed in the light most favorable to UCI, we conclude the summary
judgment record includes evidence from which a reasonable fact finder
could find both parties believed the information UCI supplied was
valuable.
SCC did not know it was overpaying sales tax before UCI revealed
that fact. Armed with new knowledge, SCC undertook its own
investigation to determine how large the potential refund might be.
Then, after sending the September 20 letter terminating the contract
with UCI, SCC hired an accounting firm to pursue a refund. The new
and valuable information UCI supplied was essential to this sequence of
events leading to SCC filing a refund claim. See Terrell v. Star Coal Co.,
327 N.W.2d 771, 774 (Iowa Ct. App. 1982) (finding that a contract to
reveal possible mining locations “conveyed new, valuable knowledge . . .
for which plaintiff should be compensated,” because Star Coal had no
idea there were coal deposits “in their own ‘backyard’ ”); see also Nat’l
Util. Serv., Inc. v. Blue Circle, Inc., 793 F. Supp. 52, 55 (N.D.N.Y. 1992)
(“No consideration had been given by [Blue Circle] to the use of
interruptible power prior to . . . plaintiff’s recommendation. Plaintiff is
15
thus entitled to receive the benefits of its recommendation.”); cf. Masline
v. N.Y., N.H. & H. R.R., 112 A. 639, 640 (Conn. 1921) (“[I]mparting
[valuable] information in a situation like this must involve an active
process resulting in arousing or suggesting ideas or notions not before
existent in the mind of the recipient.”); Soule v. Bon Ami Co., 195 N.Y.S.
574, 575 (App. Div. 1922) (denying recovery to a plaintiff claiming he
provided valuable information, because his idea to increase profits by
increasing prices “was not new, it was not original,” and was simply
“call[ing] attention to a fact already known”).
SCC acted on the valuable information it obtained from UCI, and
the summary judgment record suggests it could derive value from the
contract far beyond the four bills UCI reviewed. See Nat’l Util. Serv., Inc.
v. Hop-In Food Stores, Inc., No. 92–74460, 1993 WL 839797, at *4 (E.D.
Mich. Nov. 10, 1993) (“By its very actions, Michigan Hop-In . . . took
advantage of the information supplied by NUS pursuant to the
agreement.”); Nat’l Util. Serv., Inc. v. J.R. Sexton, Inc., No. N–88–324(JAC),
1989 WL 343048, at *2–3 (D. Conn. Nov. 3, 1989) (awarding summary
judgment to the consultant after the client implemented a
recommendation the consultant made, but never “forward[ed] its utility
bills . . . or ma[d]e payments of any kind”); see also Apfel v. Prudential-
Bache Sec. Inc., 616 N.E.2d 1095, 1097 (N.Y. 1993) (“[Prudential]
received something of value here; its own conduct establishes that.”).
Because the value SCC derived from the contract could far exceed a
refund derived from overpayments on the four utility bills UCI reviewed,
it is reasonable that the term of the contract should not be limited to the
short period covered by those bills.
SCC protests that UCI’s employee, Tanguay, never uttered the
word “tax” until after the contract was signed. Although the record
16
supports a finding Schaben expected UCI’s review to focus on amounts
paid for utility services—not on tax overpayments—the contracting
parties’ fundamental objectives were clear: SCC wished to obtain refunds
of money it paid to a utility company, and UCI wanted compensation
from SCC for producing refunds. The source of, or reason for, any
refunds obtained as a result of the contract was inconsequential to
achieving these objectives. “When the parties’ intent is ascertained, a
reviewing court may not b[y] judicial construction create a new contract
based on one party’s unilateral understanding of the terms.” Terrell, 327
N.W.2d at 774; see also Peak v. Adams, 799 N.W.2d 535, 544 (Iowa
2011) (refusing to credit one party’s “unilateral intent” regarding a
contract); Waechter v. Aluminum Co. of Am., 454 N.W.2d 565, 568 (Iowa
1990) (noting we evaluate contracts according to the parties’ objective
intent, not any “undisclosed intention they may have had in mind, or
which occurred to them later”).
Applying the relevant factors identified in Restatement (Second) of
Contracts section 204, we conclude a reasonable durational term under
the circumstances in this case is determined by the limitation period
prescribing the maximum possible tax refund. Stated another way, the
contract permitted UCI to review SCC’s utility bills and seek a tax refund
on as many of SCC’s utility bills as the law allows. Because tax refund
claims are limited to three years, see Iowa Code § 422.73(1), UCI’s
expectation interest is limited to compensation at the contract rate on
refunds received for that duration. This term prevents SCC from
“eva[ding] . . . the spirit of the bargain.” See Restatement (Second) of
Contracts § 205 & cmt. d (noting the duty of good faith inherent in every
contract and suggesting that evading the spirit of the bargain might
violate that duty). Most importantly, the durational term based on the
17
three-year limitation period will allow UCI to claim the value of the
information it conferred upon SCC. This durational term will also
effectuate both contracting parties’ fundamental purposes. 8
B. Remaining Issues.
1. UCI’s counterclaim. The determination of whether a party has
breached a contract is ordinarily for the fact finder. Kern v. Palmer Coll.
of Chiropractic, 757 N.W.2d 651, 658 (Iowa 2008); Iowa-Ill. Gas & Elec.
Co. v. Black & Veatch, 497 N.W.2d 821, 825 (Iowa 1993). As we have
determined a reasonable durational term for the contract that was not
found by the district court, we conclude the district court erred in
granting summary judgment in favor of SCC. On remand, the district
court shall determine whether SCC’s September 20 letter constituted a
repudiation amounting to an anticipatory breach of the contract
supporting a judgment in favor of UCI on its counterclaim. See Lane v.
Crescent Beach Lodge & Resort, Inc., 199 N.W.2d 78, 82 (Iowa 1972)
(stating “[a]nticipatory breach requires a definite and unequivocal
repudiation of the contract” indicating the intent to refuse future
performance); see also Restatement (Second) of Contracts §§ 250, 253, at
272, 286.
2. Damages. If the fact finder determines on remand that SCC
breached the contract, the damages, if any, resulting from the breach
8However, we acknowledge the seeming dissonance between our holding in this
case and one of the time-honored principles aiding our interpretation of contracts. We
typically resolve contract ambiguities or deficiencies against the drafter. Peak, 799
N.W.2d at 548; Vill. Supply Co. v. Iowa Fund, Inc., 312 N.W.2d 551, 555 (Iowa 1981).
Although the reasonable durational term we supply is—under the peculiar
circumstances of this case—advocated by and beneficial to the drafter, UCI, contracting
parties are urged to reach an express agreement on the important terms of their
bargains. It of course goes without saying that express agreements produce more
predictable results than implied terms supplied by courts.
18
shall also be found. See Midland Mut. Life Ins. Co. v. Mercy Clinics, Inc.,
579 N.W.2d 823, 831 (Iowa 1998) (noting the measure of damages for a
breach of contract should place the nonbreaching party “in as good a
position as [they] would have occupied had the contract been
performed”); Restatement (Second) of Contracts § 344(a), at 102.
V. Conclusion.
The district court erred in granting SCC’s motion for summary
judgment. Accordingly, we vacate the court of appeals decision, reverse
the district court’s order granting summary judgment, and remand the
case for further proceedings consistent with this opinion.
COURT OF APPEALS DECISION VACATED; DISTRICT COURT
DECISION REVERSED AND CASE REMANDED.