Standard Water Control Systems, Inc., plaintiff-appellees/counterclaim-defendants v. Michael D. Jones and Cori Jones, defendants-appellants/counterclaim-plaintiffs. , 888 N.W.2d 673 ( 2016 )

IN THE COURT OF APPEALS OF IOWA
No. 15-0458
Filed August 31, 2016
STANDARD WATER CONTROL SYSTEMS, INC.,
Plaintiff-Appellees/Counterclaim-Defendants,
vs.
MICHAEL D. JONES AND CORI JONES,
Defendants-Appellants/Counterclaim-Plaintiffs.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Lawrence P.
McLellan, Judge.
Homeowners appeal from a district court order foreclosing a mechanic’s
lien. AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
John F. Fatino of Whitfield & Eddy, P.L.C., Des Moines, for appellant.
Jodie C. McDougal and Elizabeth R. Meyer of Davis Brown Law Firm, Des
Moines, and Bradley M. Beaman of Bradshaw, Fowler, Proctor & Fairgrave, P.C.,
Des Moines, for appellee.
Heard by Tabor, P.J., and Bower and McDonald, JJ.
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MCDONALD, Judge.
Mike and Cori Jones contracted with Standard Water Control Systems to
waterproof the basement of their residence. Standard Water started work on
July 15, 2013. While working in the basement, one of Standard Water’s
employees struck a water line and a sewer line with a jackhammer. The water
and sewer lines were encased within the concrete floor and the footings. The
placement of the lines was unusual and not foreseeable. The ruptured water and
sewer lines caused damage to the Joneses’ property.
Standard Water continued to work on the basement on the day of July 15
but did not complete the job. Several witnesses testified the job was ninety-five
percent complete at the end of the day. The Joneses would not allow Standard
Water back on the property the next day or any day thereafter to finish the
remainder of the work. Standard Water tendered a bill to the Joneses for $5,400,
which represented the balance owed on the project. The Joneses stated they
would not pay the bill because the work was incomplete and because Standard
Water had damaged the property. The Joneses incurred costs to assess and
repair the damage to their property.
Sixteen days after its first and last day of work at the Joneses’ residence,
Standard Water filed a notice of commencement of work and mechanic’s lien. In
October 2013, the Joneses sent Standard Water a letter demanding foreclosure
of the mechanic’s lien pursuant to Iowa Code section 572.28 (2013). Standard
Water filed an action to foreclose the lien and for breach of contract, and the
Joneses filed an answer and counterclaims. The district court found the Joneses
were in breach of contract and entered judgment in personam against the
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defendants for $5400 plus interest at twelve percent and attorney fees in the
amount of $43,835.25. The district court concluded Standard Water was entitled
to in rem judgment against the property for the same amount and entitled to
foreclose the mechanic’s lien. The Joneses timely filed this appeal, challenging
the validity of the lien, the validity of the parties’ contract, and the amount of the
fee award.
I.
The Joneses argue Standard Water’s mechanic’s lien was invalid due to
Standard Water’s purported failure to comply with statutory filing and notice
requirements. Actions to enforce mechanic’s liens are equitable proceedings.
See Flynn Builders, L.C., v. Lande, 814 N.W.2d 542, 545 (Iowa 2012). Normally,
appeals from actions brought in equity are reviewed de novo. See Iowa R. App.
P. 6.907. However, this dispute raises issues of statutory interpretation and
construction. Our review of issues of statutory interpretation and construction is
for the correction of legal error. See Bank of Am., N.A. v. Schulte, 843 N.W.2d
876, 880 (Iowa 2014).
We look no further than the language of the statute when it is
unambiguous. Estate of Ryan v. Heritage Trails Assocs., Inc., 745 N.W.2d 724,
730 (Iowa 2008). If a statute is ambiguous, we turn to principles of statutory
interpretation. In re Estate of Bockwoldt, 814 N.W.2d 215, 223 (Iowa 2012). A
statute is ambiguous if reasonable people can disagree about its meaning. Id.
When interpreting statutes, we seek the legislature’s intent. Schaefer v. Putnam,
841 N.W.2d 68, 75 (Iowa 2013). Rather than analyzing words or phrases in
isolation, we assess the entire statute. Hardin Cty. Drainage Dist. 55 v. Union
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Pac. R.R. Co., 826 N.W.2d 507, 512 (Iowa 2013). We consider a statute’s
legislative history, including prior versions of the statute. State v. Romer, 832
N.W.2d 169, 176 (Iowa 2013). Under the pretext of construction, we may not
extend a statute, expand a statute, or change its meaning. Id.
At issue is Iowa Code section 572.13A(1)—a matter of first impression for
this court, as section 572.13A was only enacted in 2013. That subsection
provides, in pertinent part:
A general contractor or owner-builder who has contracted or will
contract with a subcontractor to provide labor or furnish material for
the property shall post a notice of commencement of work to the
mechanics’ notice and lien registry [MNLR] internet website within
ten days of commencement of work on the property. A notice of
commencement of work is effective only as to any labor, service,
equipment, or material furnished to the property subsequent to the
posting of the notice of commencement of work.
Iowa Code § 572.13A(1). The terms “general contractor,” “owner-builder,” and
“subcontractor” are all defined by statute. See Iowa Code § 572.1.
The parties have different interpretations of the statute. The Joneses
argue the doctrine of the last antecedent means the clause “who has contracted
or will contract” modifies only the term “owner-builder.” The Joneses thus
contend the statute applies to (a) all general contractors and (b) those owner-
builders who have contracted or will contract with a subcontractor to provide
labor or furnish material to the property. Standard Water, as a covered general
contractor, did not post a notice of commencement of work within ten days of first
furnishing materials or furnishing labor. As a result, the Joneses claim, Standard
Water was prohibited from filing and enforcing its mechanic’s lien. Standard
Water contends the last-antecedent rule is inapplicable here and the phrase “who
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has contracted or will contract” modifies both “general contractor” and “owner-
builder.” Standard Water did not contract with a subcontractor. Standard Water
thus concludes it did not have to file a notice of commencement of work on the
MLNR within ten days of commencing work as a prerequisite to filing and
enforcing its mechanic’s lien.
We conclude the challenged phrase could reasonably bear both
interpretations and is thus ambiguous. See Bockwoldt, 814 N.W.2d at 223.
Under the circumstances, the last-antecedent rule is not dispositive, and we turn
to other interpretive aids. See Fjords N., Inc., v. Hahn, 710 N.W.2d 731, 738
(Iowa 2006) (“[T]he last-antecedent rule is not inflexible, and it does not apply
where the entire act reveals that the qualifying sentence applies to several
preceding subjects. Ultimately, we look to the intent of our legislature.”).
We first look to the purpose of the statute. “The statute is intended to
provide a mechanism by which owners of residential real estate receive notice of
who was working on the property and claims by the same party.” IAB Vol. XXXV,
No. 11 (11/28/2012) p. 935, ARC 0464C. The Joneses argue that the phrase
“claims by the same party” suggests the MNLR’s primary purpose is to alert
owners to liens filed against the property. The Joneses assert that exempting an
entire subset of contractors from this notice requirement, viz. general contractors
who do not hire subcontractors, defeats the spirit of the law. We disagree. The
purpose of the statute is twofold. It requires identification of “who was working on
the property” and notice of any claims by those persons. In short, the statute is
intended to provide the owner with the identity of subcontractors unknown to the
owner who might have potential claims against the property and provide a
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mechanism to force the subcontractors to file notice of any potential claims. The
Joneses’ interpretation of the statute is overbroad in the sense that it would
require a contractor who did not hire any subcontractors to provide notice to the
homeowner that the contractor was performing work on the property. This is
obviously unnecessary and puts form over substance. In contrast, Standard
Water’s interpretation—that only general contractors who hire subcontractors
provide the required notice—is in accord with the purpose of the statute without
requiring the general contractor to engage in unnecessary filing.
The Joneses contend the statute as a whole supports their interpretation.
The Joneses rely on section 572.13A(4): “A general contractor who fails to
provide notice pursuant to this section is not entitled to a lien and remedy
provided by this chapter.” They assert this section compels all general
contractors to provide the notice of commencement of work as a prerequisite to
filing and enforcing a mechanic’s lien. The Joneses’ position is circular. While
the section upon which they rely provides that a general contractor who fails to
provide notice pursuant to the statute is not entitled to the lien, the statute does
not identify the class of general contractors required to provide notice pursuant to
the statute. The Joneses’ reliance on this provision merely presumes the answer
to the relevant question.
We conclude the statute as a whole supports Standard Water’s
interpretation. Standard Water invokes section 572.13, the “owner notice”
section. That section requires a “general contractor who has contracted or will
contract with a subcontractor” to provide the owner with a notice that persons or
companies improving real property may be entitled to a lien upon the improved
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property. Iowa Code § 572.13. A nearly identical section (substituting the
phrase “original contractor” for “general contractor”) was in effect prior to 2013 as
well. See Iowa Code § 572.13 (2011). Standard Water argues that because
section 572.13 relates to general contractors who hire subcontractors, it follows
that section 572.13A also relates to general contractors who hire subcontractors.
There is persuasive force in creating a parallel between the two provisions.
Section 572.13B also provides support for Standard Water’s interpretation.
That section requires subcontractors to provide a “preliminary notice” identifying
themselves. Iowa Code § 572.13B(1). Such notice is posted on the MNLR site.
Iowa Code § 572.13B(1). The notice is also mailed to the owner by the secretary
of state. Iowa Code § 572.13B(2). The notice is not, however, mailed to owner-
builders. Iowa Code § 572.13B(2). Presumably, this is because owner-builders
have the same relationship with subcontractors as do general contractors with
subcontractors; that is, they are directly contracting with one another and do not
need to identify themselves.
Three sections of the chapter thus effectuate the twofold purpose of the
statute: a general contractor who hires subcontractors unknown to the owner
provides the owner with notice of said subcontractors (section 572.13), a general
contractor or owner-builder who has contracted or will contract with a
subcontractor posts a notice when work commences (section 572.13A), and a
subcontractor posts a notice identifying themselves in situations where they
might otherwise be unknown to owners (section 572.13B). These three sections
work in concert to identify persons working on the property and to provide
adequate notice of any claims by those persons.
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The Joneses contend the administrative code controls the issue, relying
on rule 721-45.4(1). The rule provides: “A general contractor for residential
construction shall post a notice of commencement of work to the MNLR within
ten days of commencement of work, or the general contractor is not entitled to a
lien or remedies provided in Iowa Code chapter 572.” Iowa Admin. Code r. 721-
45.4(1). The Joneses argue the rule clearly required Standard Water to file a
notice of commencement of work within ten days as a prerequisite to obtaining
and enforcing a lien and lien remedies and the rule is entitled to deference. The
Joneses state agency deference is proper when the legislature has “clearly
vested an agency with the authority to interpret the statutory provision at issue.”
The argument fails, however, because the legislature has not done so in this
case. The Iowa legislature gave the secretary of state the power to “creat[e] and
administ[er] the [MNLR].” Iowa Code § 572.34(1). The power to create and
administer an online registry is not the same as interpretive power. See NextEra
Energy Res. LLC v. Iowa Utils. Bd., 815 N.W.2d 30, 37 (Iowa 2012) (“[T]he fact
that an agency has been granted rule making authority does not ‘give an agency
the authority to interpret all statutory language.’” (citations omitted)). “[B]road
articulations of an agency’s authority, or lack of authority, should be avoided in
the absence of an express grant of broad interpretive authority.” Renda v. Iowa
Civil Rights Comm’n, 784 N.W.2d 8, 14 (Iowa 2010). If an agency has not clearly
been vested with the authority to interpret, the court does not owe that agency’s
interpretation deference. See Iowa Code § 17A.19(10)(c).
In sum, we conclude Standard Water’s interpretation of the statute is
superior to the Joneses’. Standard Water’s interpretation does the most service
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to the stated intent of the law. It is consistent with the text of the statute. It is
consistent with other language used in the statute as a whole. It advances the
public policy interest in informing homeowners of subcontractors of whom they
may otherwise not be aware who may be filing a late lien against the property. In
contrast, in reading the statute, we find no public policy interest in informing
homeowners of general contractors whom they themselves have hired.
II.
The Joneses next argue a portion of the parties’ contract is unenforceable.
Our scope of review is for correction of errors at law. See LeMars Mut. Ins. Co.
v. Farm & City Ins. Co., 494 N.W.2d 216, 217 (Iowa 1992). Section 7 of the
parties’ agreement states:
[Standard Water] will not be responsible for any damages to hidden or
unknown installments under the floor, or under or behind the walls.
[Standard Water] will not be responsible for any damages to any framed
wall components that shift, move, fall or are altered during interior drain
tile installation. It is [the Joneses’] responsibility to bring walls, floors, and
other impacted areas back to their original condition and [Standard Water]
will not be liable for damages attributable thereto.
The Joneses argue this clause is void under Iowa law because it is an improper
indemnity clause under Iowa Code section 537A.5(2), which provides:
[A] provision in a construction contract that requires one party to the
construction contract to indemnify, hold harmless, or defend any other
party to the construction contract, including the indemnitee’s employees,
consultants, agents, or others for whom the indemnitee is responsible,
against liability, claims, damages, losses, or expenses, including attorney
fees, to the extent caused by or resulting from the negligent act or
omission of the indemnitee or of the indemnitee’s employees, consultants,
agents, or others for whom the indemnitee is responsible, is void and
unenforceable as contrary to public policy.
The district court found that the statute only “voids indemnification clauses and
section 7 is not an indemnification clause.” The district court found this clause
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did not apply to claims between the parties and that indemnity occurs when a
claim is “brought by persons not a party to the provision.”
We agree with the district court. The contract section is not void because
it is not an indemnity clause. “An indemnification clause ‘does not apply to
claims between the parties to the agreement. Rather it obligates the indemnitor
to protect the indemnitee against claims brought by persons not a party to the
provision.’” FNBC Iowa, Inc. v. Jennessey Grp., L.L.C., 759 N.W.2d 808, 811
(Iowa Ct. App. 2008) (citation omitted). In this action between the parties, there
is no indemnity clause.
III.
Finally, the Joneses dispute the attorney fees award. In a mechanic’s lien
action, a prevailing plaintiff may be awarded reasonable attorney fees. Iowa
Code § 572.32. The supreme court has stated that the following are appropriate
factors to consider in taxing a fee in such a case:
a. the time necessarily spent;
b. the nature and extent of the service;
c. the amount involved;
d. the difficulty of handling and importance of the issues;
e. the responsibility assumed and results obtained;
f. the standing and experience of the attorney in the profession and the
customary charges for similar service.
See Schaffer v. Frank Moyer Constr., Inc., 628 N.W.2d 11, 24 (Iowa 2001).
Standard Water sought an attorney fees award of $56,014.25. The district
court granted an award of fees but reduced the amount to $43,835.25 upon
review of the fees requested. The award of attorney fees “is vested in the district
court’s broad, but not unlimited discretion.” Baumhoefener Nursery, Inc. v. A & D
P’ship, II, 618 N.W.2d 363, 368 (Iowa 2000). “The district court must look at the
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whole picture and, using independent judgment with the benefit of hindsight,
decide on a total fee appropriate for handling the complete case.” Landals v.
George A. Rolfes, Co., 454 N.W.2d 891, 897 (Iowa 1990).
In light of our consideration of the Schaffer factors, we are not persuaded
the attorney fees award should stand. While recognizing that undue emphasis
on the size of the judgment is improper, the fee award exceeded 800% of the
underlying judgment. Cf. Paper’s Lumber & Supply v. Schipper, No. 12-0103,
2013 WL 750410, at *5 (Iowa Ct. App. Feb. 27, 2013) (rejecting argument fee
award “above a certain percentage of the underlying judgment is per se
unreasonable,” but noting fee award was “just over forty percent of the underlying
judgment”). In addition, the district court underemphasized the time necessarily
spent on this matter given the limited amount at issue and the limited factual
issue presented. We remand for additional fact-finding to determine an award
consistent with the facts presented in this case and the Schaffer factors.
IV.
We have considered each of the Joneses’ arguments, whether set forth in
full herein. We affirm the judgment of the district court in part and remand for
further proceedings on the attorney fees award.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.