css2-enterprise-inc-plaintiff-appelleecross-appellant-v-farmers ( 2015 )

IN THE COURT OF APPEALS OF IOWA
No. 14-1686
Filed August 19, 2015
CSS2 ENTERPRISE, INC.,
Plaintiff-Appellee/Cross-Appellant,
vs.
FARMERS COOPERATIVE COMPANY,
DOWS, IOWA, STEVE MUHLENBRUCH,
and NEW COOPERATIVE, INC.,
Defendants-Appellants/Cross-Appellees.
_______________________________________________________________
Appeal from the Iowa District Court for Wright County, Colleen D. Weiland,
Judge.
The defendants appeal and the plaintiff cross-appeals the district court’s
judgments entered on the defendants’ offer to confess judgment. AFFIRMED IN
PART AND REVERSED IN PART ON APPEAL; AFFIRMED IN PART AND
REVERSED IN PART ON CROSS-APPEAL; REMANDED.
Gary D. Goudelock and Brian R. Kohlwes of Idleman, Greene &
Goudelock, Des Moines, for appellants/cross-appellees.
Stephen D. Marso of Whitfield & Eddy, P.L.C., Des Moines, for
appellee/cross-appellant.
Heard by Tabor, P.J., McDonald, J., and Miller, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2015).
2
MILLER, S.J.
I. Background Facts and Proceedings
CSS2 is a small farming corporation. Steve Muhlenbruch is the agronomy
manager of Farmers Cooperative Company. At Muhlenbruch’s direction, an
employee of Farmer’s Cooperative Company entered CSS2’s property and
sprayed chemicals that killed the corn crop. (Hereafter we refer to Farmers
Cooperative Company and Muhlenbruch jointly as “the Coop.”) On April 25,
2013, CSS2 sued the Coop for negligence, trespass, and conversion. CSS2’s
November 2013 first-amended petition added a claim for punitive damages.
CSS2 sought to file a second-amended petition, and on February 26,
2014, the court granted the request. This petition added claims under Iowa Code
chapter 717A (2013) to each of the three counts by including a new paragraph in
each count: “Defendants’ conduct was in willful and wanton disregard for the
rights of Plaintiff.” See Iowa Code § 717A.3(1)(a) (stating a “person shall not . . .
willfully destroy or damage a crop”). The second-amended petition also
requested additional relief found in Iowa Code sections 717A.3(2)(a)(1) (allowing
damages in “an amount equaling three times all actual and consequential
losses”) and 717A.3(2)(b) (stating a “prevailing plaintiff . . . shall be awarded
court costs and reasonable attorney fees, which shall be taxed as part of the
costs of the action”).1
1
Specifically, the second-amended petition’s prayer for relief stated:
WHEREFORE, CSS2 requests that the court enter judgment for it
and against Defendants, jointly and severally, for compensatory
damages, costs, expenses, interest, three times the amount of all actual
and consequential losses as provided in Iowa Code Section 717A.3,
3
The Coop filed a pre-answer motion to dismiss CSS2’s “claim for treble
damages and attorney fees under Iowa Code section 717A.3,” alleging “a
property owner is not allowed to recover both statutory treble damages under
Iowa statute[2] and a claim for punitive damages.” CSS2 responded by moving to
amend its petition to eliminate its request for punitive damages. The district court
sustained the motion and ruled that in light of the amendment, the motion to
dismiss was moot.
The Coop filed an answer, including a counterclaim asserting CSS2 had
“failed to pay amounts due and owing on the open account.” At the end of March
2014, the Coop filed a motion for partial summary judgment:
[T]he facts do not establish any claim for trespass or
conversion under Iowa Code section 717A.3 . . . thus, the claims for
trespass, treble damages and attorney fees should be dismissed
from this case as a matter of law.
....
WHEREFORE, [the Coop] . . . request[s] this court to enter
an order . . . dismissing any claim for trespass against all
defendants, dismissing any claim for intentional conversion,
attorney fees or treble damages under Iowa Code [section] 717A.3
in this case as a matter of law.
CSS2 filed a resistance, citing to case law on willfulness and asserting, as
relevant here, the Coop “willfully destroyed or damaged a crop” in violation of
section 717A.3(1)(a), and also asserting the Coop’s actions of negligence,
trespass, and conversion “arose to the level of triggering a claim for treble
damages and attorney fees under Iowa Code section 717A.3.”
punitive damages, attorney fees, and any other relief the court determines
is appropriate.
2
The Coop’s language, “claim . . . under Iowa Code section 717A.3” and “under Iowa
statute,” shows the Coop’s recognition of CSS2 making a statutory claim under chapter
717A in the second-amended petition.
4
In July 2014 the court denied the Coop’s motion, stating (1) the Coop had
moved “for dismissal of the trespass, conversion and lowa Code section 717A.3
treble damages claims” and (2) “Defendants first argue that Plaintiffs claims for
trespass, conversion and treble damages fail under lowa Code section 717A.3
because there is no evidence that Defendants’ actions were intentional or willful.”
The court concluded:
[E]vidence has been presented that Muhlenbruch sent a text
message to [CSS2] after the post-emergent spraying took place,
asking about the type of corn planted. This suggests that
Muhlenbruch did not know what type of corn he was spraying. In
short, facts regarding Muhlenbruch’s intent and state of mind are in
dispute.
On September 2, 2014, the Coop’s counsel sent an email to CSS2’s
counsel requesting the amount of CSS2’s attorney fees. CSS2’s counsel
responded: “If you simply want it for purposes of settlement analysis to determine
the amount for which your clients have risk, then we can . . . email you the
amount.” The Coop’s counsel replied: “The purpose . . . is to determine the
amount of risk at this time and to try and predict the amount of risk in the future.”
CSS2’s counsel replied, stating “total fee and costs” are $55,843.34. The next
day, September 3, the Coop filed an offer to confess judgment, stating in its
entirety:
Come now [the Coop] and through [counsel] hereby enter[s]
an Offer to Confess Judgment pursuant to Iowa Code chapter 677.
[The Coop] hereby offer[s] to confess judgment in the amount of
Two Hundred Eighty Seven Thousand Five Hundred and 00/100
dollars ($287,500.00). [The Coop] make[s] this Offer to Confess
without any binding affect on the pending counter-claim against
[CSS2].
Plaintiff is hereby notified.
5
On September 8, 2014, CSS2 timely filed notice to the court, including its
acceptance, stating:
On September 3, 2014, [the Coop] served upon plaintiff
[CSS2] the attached Offer to Confess Judgment. The Offer states
that it is being made pursuant to Iowa Code Chapter 677, and that
[the Coop] “hereby offer[s] to confess judgment in the amount of
Two Hundred Eighty Seven Thousand Five Hundred and 00/100
dollars ($287,500.00).”
By operation of law, [the Coop’s] Offer includes the specified
sum of $287,500.00 plus costs. Because Plaintiffs are seeking
attorney fees against Defendants pursuant to Iowa Code section
717A.3 and because that statutory section defines costs to include
attorney fees, by operation of law [the Coop’s] Offer to pay costs
includes payment of attorney fees.
Based upon the above understanding of the Offer, Plaintiff
hereby accepts Defendants’ Offer. After advising the court of its
acceptance of the Offer, Plaintiff will submit a written application to
the court for the taxation of costs, including but not limited to
attorney fees, as well as for the imposition of any interest on the
judgment that may be allowed by law.
The Coop filed a September 10, 2014 motion to enforce settlement
agreement and in the alternative, motion to strike CSS2’s acceptance. The Coop
requested an emergency hearing due to the upcoming October 6 trial date and
emailed the court: “There is a dispute as to whether or not the case is settled.”
The next day, the court held an unreported hearing on the Coop’s motion, which
first asserted the court should enforce CSS2’s “acceptance without the taxation
of costs, interest, or attorney fees.”3 Alternatively, the motion asserted the court
3
The Coop contended the court should rule CSS2 accepted the offer without the caveat
because chapter 677 does not allow for a conditional acceptance as filed by CSS2. The
Coop also claimed “a literal construction of section 677.7 clearly reveals that the offer to
confess . . . of $287,500 included the court costs and attorney fees.” See Iowa Code
§ 677.7 (authorizing an offer “for a specified sum with costs”). Citing to cases from other
jurisdictions holding the word “costs” in those states’ statutes did not include a claim for
attorney fees, the Coop claimed CSS2 is not entitled to an award of attorney fees or
costs because the $287,500 “was offered to include any claim for attorney fees and
6
should strike or nullify CSS2’s acceptance and proceed to trial because “there
has been no mutual assent to” the offer “by the parties.”
On September 12, 2014, the court quoted Iowa Code section 677.7,
authorizing the Coop to “serve upon” CSS2 an offer allowing “judgment to be
taken against the defendant for a specified sum with costs” and denied the
Coop’s motion. Regarding the Coop’s failure to mention costs in its offer, the
court clearly and concisely ruled:
It does not matter. “By law and operation of the statute,
costs are tendered in addition to the sum in the offer.” Brockhouse
v. State, 449 N.W.2d 380, 382-83 (Iowa 1989); Sheer Constr., Inc.
v. Hodgman & Sons, Inc., 326 N.W.2d 328, 333-34 (Iowa 1982).
“Costs” are generally considered to be the additional
amounts accrued as costs—typically filing fees, service fees,
witness fees, etc., assessed by the clerk of court. These costs are
additional to the specified sum confessed and are assessed
separately against the defendant if the offer is accepted.
Brockhouse, 449 N.W.2d at 383.
The issue of costs in this context becomes more complicated
when a specific statute authorizes [attorney fees] . . . . In less usual
situations, the code directs the court to tax attorney fees as a part
of costs . . . . In each of the counts of its (third) amended petition,
[CSS2] pled a cause of action referencing Iowa Code section
717A.3.4 This chapter provides that “[a] prevailing plaintiff in an
costs.” Finally, the Coop contended the court should not allow CSS2 to use section
677.7 “as a sword to gain attorney fees.”
We note the Coop did not contend CSS2 failed to assert a claim under Iowa
Code section 717A.
4
In a footnote, the court stated:
[T]he language used in each of the counts is more akin to the
common law causes of actions and . . . the counts themselves are titled in
the common law manner. There is also one count of negligence, which is
not comparable to the elements of section 717A.3. Nonetheless, there
are clear references [“Defendants’ conduct was in willful and wanton
disregard”] to and prayers for relief pursuant to section 717A.3 in each
count.
Thus, we are not faced with the question of what the Coop’s offer would include
by law if some of CSS2’s counts had relied on the statute and some had not. Here,
CSS2 pleaded a willful violation in all three counts of its petition.
7
action brought under this section5 shall be awarded court costs and
reasonable attorney fees, which shall be taxed as part of the costs
of the action.” Iowa Code § 717A.3(2)(b) (emphasis added). The
language is mandatory and not discretionary and clearly includes
attorney fees as costs. Because costs are to be assessed pursuant
to the accepted offer to confess, reasonable attorney fees should
be included in those costs under these circumstances, even though
the offer was silent on those fees. Brockhouse, 449 N.W.2d at 383
(“[E]ven where attorney fees are to be included in the costs, such
fees need not be specifically mentioned.”) (citing Tilton v. Iowa
Power & Light Co., 94 N.W.2d 782, 785 (Iowa 1959)).
The court entered judgment in favor of CSS2 for $287,500 and taxed court
costs “assessed by the clerk of court through September 3, 2014” against the
Coop. The court ordered a hearing on “the assessment of interest” and “the
remaining court costs, including reasonable attorney fees” at the “conclusion of
trial on the remaining counterclaim.” The Coop filed a motion to enlarge findings,
CSS2 filed a resistance, and on September 24, 2014, the court denied the
motion.
Thereafter, CSS2’s attorneys filed an affidavit of attorney fees and “motion
for interest on judgment and for taxation of costs (including attorney fees).”
CSS2 sought interest on the principal amount of the judgment from the April 25,
5
During appellate oral arguments, the Coop’s counsel asserted CSS2 did not assert a
claim under section 717A.3 but only asked for damages to include treble damages and
attorney fees. CSS2’s counsel responded the Coop failed to raise this argument in the
district court and error was not preserved. He also correctly noted the basis for the
Coop’s pre-answer motion to dismiss was its assertion CSS2 could not claim both a
statutory claim and an additional claim for punitive damages. During rebuttal, the Coop’s
counsel responded error was preserved in its appellate brief.
The previously detailed pleadings, motions, and court rulings show the parties
and the court recognized CSS2’s amended petitions asserted statutory claims under
Iowa Code section 717A.3 in all three counts. In any event, assuming but not agreeing
this issue was raised in the Coop’s appellate brief, raising an issue for the first time on
appeal does not preserve error. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa
2002) (“It is a fundamental doctrine of appellate review that issues must ordinarily be
both raised and decided by the district court before we will decide them on appeal.”).
8
2013 filing of the petition and interest on the costs portion of the judgment from
the September 12, 2014 judgment date. After removing some attorney time,
CSS2 requested $59,197.34 in costs and attorney fees through September 12,
2014. Finally, CSS2 requested the court allow a future motion for fees incurred
after September 12, 2014.
The Coop filed a resistance, first contending CSS2’s claims for costs,
attorney fees, and interest should be denied based on “all arguments set forth in
[the Coop’s] Motion to Enforce Settlement and in the alternative, Motion to
Strike/nullify [CSS2’s] Acceptance of Offer to Confess.” Second, the Coop noted
CSS2 had a “modified contingency fee” contract and also noted “a potential
appeal involved with this lawsuit,” claiming the motion should be denied because
“the amount of attorney fees” is “vague, ambiguous, and subject to several
unknown factors.” Third, after noting it was not until the second-amended
petition that CSS2 “made a claim for attorney fees,” the Coop contended the
attorney-fees claim “should be limited to the time from when the claim for
attorney fees was first made and allowed by the court on 02/26/2014.” Fourth, as
to the cut-off point for CSS2’s fees and costs, the Coop argued:
Under the plaintiff’s analysis that their attorney fees should be
taxed as costs, these costs should be cut off upon the filing of the
Offer to Confess, which was filed with the Court on 09/03/2014. In
addition, no future attorney fees or costs should be entered against
[the Coop] after the 09/03/2014 Offer to Confess was filed by the
Defendants.
In sum, the Coop contended attorney fees and costs, if any, should only be
awarded from February 26, 2014, to September 3, 2014.
9
On September 24, 2014, the court noted the counterclaim had been
settled. After a hearing, the court’s November 4, 2014 supplemental order
entered supplemental judgment. As before, the court declined to expressly
address the Coop’s “mutual assent” claim. The court ruled “interest should
accrue from the filing of the third-amended petition.” The court ordered CSS2’s
attorney fees “should terminate as of the date the confession of judgment was
offered” and awarded $45,000 in attorney fees. Finally, the court concluded
court costs “incurred since September 3 shall also be assessed against” the
Coop.
In this appeal, the Coop is the appellant/cross-appellee and CSS2 is the
appellee/cross-appellant.6
II. Scope of Review
We review the district court’s interpretation of chapter 677 for legal error.
See Rick v. Sprague, 706 N.W.2d 717, 723 (Iowa 2005); Harris v. Olson, 558
N.W.2d 408, 409 (Iowa 1997) (rejecting a mechanical application of chapter 677).
We likewise apply an errors-at-law review to the calculation and award of
prejudgment interest. See Gosch v. Juelfs, 701 N.W.2d 90, 91 (Iowa 2005). “If
there is substantial evidence in the record to support the trial court's decision, we
are bound by its fact-findings.” Id. “We are not bound, however, by the trial
court's application of legal principles.” Id. We strictly construe “Iowa statutes
6
The Coop appealed the court’s September 12 and September 24, 2014 orders. CSS2
filed a cross-appeal and sought appellate attorney fees. This appeal is No. 14-1686.
Subsequently, CSS2 appealed the court’s November 4, 2014 order, and the Coop cross-
appealed. This appeal is No. 14-1909. The supreme court consolidated the two
appeals and ordered “all further filings shall be made under 14-1686 only.” The Coop
“shall be” appellant/cross-appellee and CSS2 “shall be” appellee/cross-appellant.
10
providing for recovery of costs.” Hughes v. Burlington N. R.R. Co., 545 N.W.2d
318, 321 (Iowa 1996).
III. Statutory Scheme—Offer to Confess Judgment
The operative statutes are contained in Iowa Code chapter 677, a chapter
“intended to encourage settlements and to reduce costs.” Brockhouse, 449
N.W.2d at 382; Weaver Constr. Co. v. Heitland, 348 N.W.2d 230, 232 (Iowa
1984) (stating chapter 677 is designed to “discourage unnecessary and costly
litigation”). “The principle that these statutes must be liberally construed is one of
long standing.” Brockhouse, 449 N.W.2d at 382.
Iowa Code section 677.7 allows the “defendant in an action for the
recovery of money only” (the Coop) to serve upon the plaintiff before trial “an
offer in writing to allow judgment to be taken against [the defendant Coop] for a
specified sum with costs.” Section 677.8 details the actions CSS2 must take to
accept the offer and states after acceptance, either party can file documents
informing the court of the offer and acceptance so that “a minute of the offer and
acceptance shall be entered upon the judge’s calendar, and the judgment shall
be rendered by the court accordingly.”
Because both parties contend their respective arguments support the
goals of chapter 677, we also set out the processes to be used when a plaintiff
rejects the defendant’s offer. In that event, “the offer shall be treated as
withdrawn, and shall not be given in evidence or mentioned on the trial.” Iowa
Code § 677.9. After the trial, if “the plaintiff fails to obtain judgment for more than
11
was offered . . . the plaintiff cannot recover costs, but shall pay the defendant’s
costs from the time of the offer.” Id. § 677.10.
IV. The Coop’s Appeal
A. Mutual Assent. On appeal, the Coop first claims the district court
erred in failing to consider its lack-of-mutual-assent challenge. The record shows
the Coop raised this issue on three occasions: (1) as the ground for alternative
relief in its September 10, 2014 motion, (2) as the sole basis for its subsequent
“motion to enlarge findings on order entering judgment,” and (3) as the first claim
in its resistance to CSS2’s motion for supplemental judgment.
The court’s September 12, 2014 order stated the court “held an
emergency telephone conference . . . in regard to the defendants’ motion to
enforce settlement agreement and in the alternative motion to strike plaintiff’s
acceptance of offer to confess judgment.” Further: “As a part of that acceptance,
the plaintiffs asserted that by operation of law the judgment should include costs,
including attorney fees. Defendants disagree with this position and seek relief
from the entry of such a judgment.” Therefore, the district court explicitly
recognized the “mutual assent” challenge. Additionally, the court impliedly
rejected the Coop’s alternative motion seeking a trial by quoting Brockhouse and
ruling: “[The Coop] did not mention costs. It does not matter. By law and
operation of the statute, ‘costs are tendered in addition to the sum in the offer.’”
449 N.W.2d at 382-83. In Brockhouse, the defendant offered to confess
judgment for $10,000 “with costs to the time of this offer.” The court ruled “the
term ‘with costs’ as contained in Iowa Code section 677.7 means that costs are
12
tendered in addition to the sum in the offer, and that this term was incorporated
into the [defendant’s] offer.” Id. (emphasis added).
Similarly, the district court ruled the statutory term “with costs” was
incorporated into the Coop’s offer and the Coop, by law, offered costs in addition
to the lump sum it tendered. See Manning v. Irish, 47 Iowa 650, 652 (1878)
(ruling lump sum offer without mention of costs is not insufficient because “costs
already accrued would follow”).
After the district court entered judgment, the Coop responded by filing a
“motion to enlarge findings on order entering judgment,” raising one issue—the
court’s alleged failure to address the Coop’s mutual-assent challenge—and
requesting one type of relief—the court issue a “specific order concerning the
mutual-assent issue.” On September 24, 2014, the court summarily denied the
motion. Undeterred, the Coop again raised the “mutual assent” challenge as the
first argument in its resistance to CSS2’s motion for supplemental judgment;
however, the court entered supplemental judgment.
Under these circumstances, the district court was well aware of the Coop’s
“mutual assent” claim, and on three separate occasions the court considered and
rejected this challenge. See Edgerly v. Sherman, 107 N.W.2d 72, 75 (Iowa
1961) (“Whatever the attorneys . . . may say, pro and con, in pleadings and
argument, we have the right to, and do, assume that the trial court carefully
considered the question in the instant case before [denying] the motion.”).
13
As to the merits, the Coop notes our courts look to contract principles
when interpreting offers to confess judgment, points to extrinsic evidence,7 and
claims it intended “to make the $287,500 Offer . . . to include any claims for
costs, attorney fees, and interest.” Emphasizing no mutual assent existed, the
Coop contends the district court “should have stricken or nullified CSS2’s
acceptance” and “proceeded with a trial on the merits.” See Rick, 706 N.W.2d at
723-24 (holding where only one plaintiff attempted to accept the offer to confess
judgment in a way that did not conform to the offer’s language encompassing
both plaintiffs, there was no valid acceptance and no mutual assent).8
The Coop’s argument is based on its unstated intent to include all costs,
attorney fees, and interest within the lump sum offered and its subsequent
conclusion there was no mutual assent because CSS2 did not agree to the
Coop’s unstated intent. Iowa case law from 1878 shows the Coop had to clearly
state this intent in order to void CSS2’s acceptance because our courts will not
allow a party to evade its responsibilities under the statutory scheme where an
7
For example, the Coop’s September motion included an affidavit from its attorney
stating:
I caused to be filed an Offer to Confess with the court in the amount of
$287,500. In making this Offer to Confess, I, on behalf of [the Coop]
intended this Offer to Confess to include all claims for damages including
court costs, their claim for attorney fees and interest as a compromise of
all matters in this case and to essentially mirror the same offers made
prior to this Offer to Confess.
8
The Coop made its offer under Iowa Code section 677.7, as did the defendant in Rick,
706 N.W.2d at 720, where the offer stated:
1. In the amount of Five Thousand and no/100 Dollars ($5000.00)
including pre-judgment interest and court costs to the date of filing this
offer to confess judgment on plaintiffs’ claim.
2. The amount offered above is the total sum that is being offered
to the plaintiffs. Prejudgment interest and court costs are a part of the
amount offered.
14
offer for a sum fails to mention costs. See Manning, 47 Iowa at 652. In Manning,
as here, the defendant offered to confess judgment for a sum certain without any
mention of costs.9 See id. at 650-51. The Manning court rejected the argument
the defendant’s failure to mention costs rendered the offer “insufficient”:
This objection is without merit. The offer was to confess a
judgment in favor of plaintiff for a certain amount. The costs
already accrued would follow this judgment as an incident. The
court would have had full authority to enter up a judgment against
the defendant for the amount offered to be confessed, and for all
costs incurred before the offer was made.
Id. at 652.
Under Manning, an offer to confess judgment for a sum certain
unambiguously includes, as a matter of law, costs in addition to the sum certain.
See id. Accordingly, as a matter of law the Coop’s offer is not ambiguous, and
upon CSS2’s acceptance, the “costs follow.” See id.; see also Brockhouse, 449
N.W.2d at 383; Sheer, 326 N.W.2d at 333 (doubting whether omitting costs
would void an offer to confess because chapter 677’s statutory scheme “controls
how the costs are to be allocated”). Under longstanding Iowa case law, CSS2’s
acceptance of the Coop’s unambiguous offer of a sum certain is not void under
the doctrine of mutual assent. See id.B. Judgment for Court Costs, Interest, and Attorney Fees. The Coop
also claims the district court erred in failing to enforce the offer without CSS2’s
caveat that stated interest, costs, and attorney fees should be entered as a part
of the judgment. Specifically, the Coop claims because chapter 677 “does not
9
The offer in Manning stated: “The defendant offers to confess judgment against
himself, and in favor of plaintiff, for the sum of two hundred and sixteen dollars.” 47 Iowa
at 650-51.
15
allow for a conditional acceptance” of an offer to confess, CSS2 “should have
been held to accepting” its offer “without the caveat.”
As discussed above, the “caveat” merely sets out the processes
established in Iowa case law interpreting chapter 677 as to costs, and attorney
fees when taxed as part of costs. See Manning, 47 Iowa at 652; see also
Brockhouse, 449 N.W.2d at 383 (stating in Tilton, 94 N.W.2d at 785, the court
held, “even when attorney fees are to be included in the costs, such fees need
not be specifically mentioned”); Sheer, 326 N.W.2d at 333. Further, interest
“shall be allowed on all money due on judgments . . . of courts at a rate
calculated according to section 668.13.” Iowa Code § 535.3 (emphasis added).
Therefore, CSS2’s written acceptance of the Coop’s offer to confess judgment
did not attempt to accept the offer in a manner that did not conform to the offer.
Instead, CSS2’s acceptance was in conformance with long-established Iowa
case law interpreting offers that only set out a lump sum. See Manning, 47 Iowa
at 652. Accordingly, we find no merit to the Coop’s claim “the district court
should have enforced the offer to confess for $287,500 with no court costs,
interest, or attorney fees owed to CSS2.”
C. Interest on the Principal Amount of Judgment. Having noted that
interest is to be allowed “on judgments” and thus rejected the Coop’s contention
the district court erred in awarding any interest at all, we must next determine
whether the court erred in awarding a portion of the interest it awarded, the
prejudgment interest. In its November 4, 2014 supplemental order, the district
court ruled:
16
Iowa Code section 535.3 provides that “[i]nterest shall be allowed
on all money due on judgments and decrees of courts at a rate
calculated according to section 668.13” . . . . (Italics added.) The
assessment of interest is therefore mandatory. “Interest, except
interest awarded for future damages, shall accrue from the date of
the commencement of the action.” [Iowa Code section 668.13(1)]
No future damages are at issue in this matter. The action
commenced by petition on April 25, 2013. However, the judgment
necessarily includes section 717A treble damages. Liability for
those damages was not implicated until the plaintiff’s third amended
petition, which was filed on March 11, 2014. The court concludes
that interest should accrue from the filing of the third amended
petition.
As noted above, Iowa Code section 535.3 states interest “shall be allowed
on all money due on judgments . . . of courts at a rate calculated according to
section 668.13.” Iowa Code section 668.13(1) states: “Interest, except interest
awarded for future damages, shall accrue from the date of the commencement of
the action.”10 Our analysis must, however, take into account the fact that here
the judgment entered by the district court was entered on an accepted offer to
confess judgment and not on a judicial determination.
A similar situation was addressed in Hughes, cited by both parties in the
present case, in which the court resolved the tort plaintiffs’ “entitlement” to
“prejudgment interest on a judgment entered pursuant to an accepted offer to
confess judgment.” 545 N.W.2d at 320 (stating plaintiff-motorist was injured in a
collision with a train). The court first reviewed “the nature of an offer to confess
10
We note chapter 668, “Liability in Tort—Comparative Fault,” defines “fault” to include
“one or more acts or omissions in any measure negligent or reckless toward the . . .
property of . . . others.” Iowa Code § 668.1 (emphasis added). Accordingly, tort claims
for injury to a corn crop fall within the statutory definition of “fault.” See Waterloo Sav.
Bank v. Austin, 494 N.W.2d 715, 717 (Iowa 1993) (recognizing the act establishes
comparative fault as the basis for liability in relation to damages arising from “harm to
property”).
17
judgment” under chapter 677, noting courts “often equate” offers to confess
judgment to “offers of settlement.” Id. The court also reviewed the nature of
chapter 668, stating interest on future damages is an exception to prejudgment
interest. Id. at 321 (citing Iowa Code § 668.17(1), (4)). The Hughes court
concluded the plaintiffs, who had accepted an offer that was silent on
prejudgment interest,11 were not entitled to prejudgment interest:
Although the court entered a judgment on the offer to
confess judgment, such a judgment is a product of a voluntary
agreement, not of a judicial determination. As such the parties
could agree to settlement figures that include interest, or that
provide for prejudgment statutory or other interest, or that provided
interest at a stated rate commencing at a stated time. If there is no
agreement as to prejudgment interest, the judgment amount would
draw statutory interest from the date of the judgment only.
Where the offer is silent as to prejudgment interest and its
rate, the court will not impose terms. To apply the prejudgment
interest provisions of Iowa Code section 668.13 would in effect
change the terms of the voluntary settlement made by the parties
through the offer and acceptance of a confessed judgment.
Because the type of the damages were not agreed upon, the
amount of prejudgment interest under section 668.13 would be
indeterminable even if it were agreed that the statutory interest
provisions were applicable.
Id. at 322 (emphasis added).
CSS2 attempts to distinguish Hughes, contending the court’s holding is
limited to tort claims involving “future damages.” We disagree. Only the last
sentence addressing the “type of damages” deals with future damages. The last
sentence clearly stated an alternative ground (“even if”) for denying prejudgment
interest, i.e., “even if it were agreed that the statutory interest provisions were
11
The offer stated, “[J]udgment to be taken against this defendant for the specified sum
of Fifty Thousand Dollars ($50,000) together with costs accrued to the date of this offer.”
Hughes, 545 N.W.2d at 319.
18
applicable [to a judgment entered upon an accepted offer to confess judgment].”
See id.Because “there is no agreement as to prejudgment interest” between the
Coop and CSS2, we “will not impose terms,” and the parties’ agreed-to judgment
amount draws “statutory interest from the date of the judgment only.” See id.We reverse the district court’s award of prejudgment interest and remand for
entry of supplemental judgment in accordance with this opinion.
V. CSS2’s Cross-Appeal
A. CSS2’s Attorney Fees after the Date of the Offer. The court ruled
CSS2’s attorney fees “should terminate as of the date the confession of judgment
was offered. To find otherwise would introduce an element of speculation that
would discourage such offers.”
On appeal, CSS2 claims the district court erred in holding Iowa Code
chapter 677 precludes an accepting offeree from recovering the costs, including
attorney fees where applicable, incurred after the date of the offer because this
reasoning only applies when the plaintiff rejects an offer and later obtains a lower
judgment. See Iowa Code § 677.10 (“If the plaintiff fails to obtain judgment for
more than was offered by the defendant, the plaintiff cannot recover costs, but
shall pay the defendant’s costs from the time of the offer.”); Weaver, 348 N.W.2d
at 232 (“Because plaintiff’s judgment did not exceed the defendant’s offer,
section 677.10 became controlling on the issue of what costs each party could
recover.”).
19
Iowa cases confirm that where a plaintiff rejects an offer and later obtains
judgment for less than the amount offered, “even though a plaintiff fails to recover
more than the amount of the offer to confess,” the plaintiff recovers “costs up to
the time of the offer, but must pay the defendant’s costs thereafter accruing.”
Weaver, 348 N.W.2d at 232. However, CSS2 accepted the Coop’s offer.
Therefore, the present controversy is distinguishable from cases involving a
“rejecting plaintiff,” and the parameters of cost-shifting set out in Iowa Code
section 677.10 are inapplicable herein.
Section 677.8 applies where the plaintiff accepts the offer; however, this
section is silent as to cost-shifting or cost-limiting:
If the plaintiff accepts the offer, and gives notice thereof to the
defendant . . . within five days after the offer is made, the offer, and
an affidavit . . . may be filed by the plaintiff, or the defendant may
file the acceptance with a copy of the offer, verified by affidavit; and
in either case a minute of the offer and acceptance shall be entered
upon the judge's calendar, and judgment shall be rendered by the
court accordingly.
Iowa Code § 677.8. Similarly, Iowa Code section 677.7, the provision under
which the Coop made its offer to confess judgment, is silent as to cost-shifting or
cost-limiting:
The defendant in an action for the recovery of money only may, at
any time after service of notice and before the trial, serve upon the
plaintiff or the plaintiff’s attorney an offer in writing to allow
judgment to be taken against the defendant for a specified sum with
costs.
Because section 677.8 provides the court “shall” enter judgment upon
offer and acceptance, because neither section 677.8 nor section 677.7 shifts or
limits the costs, and because section 677.7 provides for “judgment to be taken
20
against the defendant for a specified sum with costs,” we respectfully disagree
with the district court’s conclusion attorney fees “should terminate as of the date
the confession of judgment was offered.” No such limitation is included in the
statutes applicable to an accepted offer to confess judgment, and we decline to
read this limitation into chapter 677. See Kucera v. Baldazo, 745 N.W.2d 481,
487 (Iowa 2008) (“When interpreting laws, we are guided by the rule of expressio
unius est exclusio alterious. ‘This rule recognizes that legislative intent is
expressed by omission as well as by inclusion, and the express mention of one
thing [cost-limiting in section 677.10] implies the exclusion of others not so
mentioned [no cost-limiting in sections 677.7 and 677.8].’” (quoting Meinders v.
Dunkerton Cmty. Sch. Dist., 645 N.W.2d 632, 637 (Iowa 2002))). Accordingly,
we reverse that portion of the district court’s judgment that limited attorney fees
to those incurred up to the date of the offer to confess judgment and remand for
the entry of supplemental judgment in accordance with this opinion.
B. Date to Commence Interest on Judgment Amount. CSS2 contends
the district court erred in starting the accrual of interest on the principal amount of
the judgment from the date of the third amended petition rather than from the
date of the commencement of the case. In its November 4, 2014 supplemental
order the court had “conclude[d] that interest should accrue from the filing of the
third amended petition.”
In the Coop’s appeal we have concluded that under the facts in this case
and the holding in Hughes, 545 N.W.2d 322, the district court’s award of any
21
prejudgment interest must be reversed. We therefore conclude this issue raised
by CSS2 is moot.
C. The Amount of CSS2’s Attorney Fees. CSS2 also challenges the
amount of attorney fees awarded by the district court, claiming the court
considered an improper factor.
CSS2 is entitled to reasonable attorney fees under Iowa Code section
717A.3.12 While the award of attorney fees to CSS2 is mandatory (“shall”), “the
amount is vested in the district court’s broad, but not unlimited, discretion.” See
Baumhoefener Nursery, Inc. v. A & D P’ship, II, 618 N.W.2d 363, 368 (Iowa
2000); see also Schaffer v. Frank Moyer Constr., Inc., 628 N.W.2d 11, 22 (Iowa
2001) (“Only when the district court bases its decision on the amount of the
award on clearly unreasonable or untenable grounds will this court reverse.”);
Gabelmann v. NFO, Inc., 606 N.W.2d 339, 344 (Iowa 2000) (holding the court’s
“misapplication of the statute constitutes an abuse of discretion”).
The district court’s November 4 order noted CSS2’s “counsel billed
$53,732 through September 2, 2014, for attorney and legal assistant hourly work,
plus $5124 in related costs” and stated:
12
Iowa Code section 717A.3 provides:
(2)(a) A person suffering damages resulting from an act . . . in
violation of this section may bring an action in the district court against the
person causing the damage to recover all of the following:
(1) . . . [A]n amount equaling three times all actual and
consequential losses.
....
(b) A prevailing plaintiff in an action brought under this section
shall be awarded court costs and reasonable attorney fees, which shall
be taxed as part of the costs of this action.
22
But there are some factors that militate against an award of
the full amount claimed. [CSS2’s] counsel’s hourly billing rates—
although they do not exceed the bounds of propriety—are high for
the Wright County area. Some of the billing by the various
attorneys [is] duplicative. The overall claim rings high for what is
essentially a property damage case that did not go to trial. The
court is also cognizant of the fact that [the Coop] did not have
reason to know that [it] would be subject to an assessment of
attorney fees until the section 717A claim was asserted as part of
the third amended petition on March 11, 2014.[13] Based on
[CSS2’s] billings and the circumstances as a whole, the court
determines that an attorney fee award of 45,000 is reasonable and
justified.
(Emphasis added.) In a footnote to the italicized sentence, the court explained:
“My recognition of this factor, does not discount the entirety of attorney fees
incurred before March 11, 2014. Investigation, discovery and other pretrial work
were obviously necessary to frame and support the statutory claim.” (Emphasis
added.)
CSS2 seeks a remand, claiming the court abused its discretion by relying
on an impermissible factor—the date when CSS2 first formally requested
attorney fees in a pleading. See Schaffer, 628 N.W.2d at 24 (listing the
appropriate factors—the amount involved, time necessarily spent, the nature and
extent of the service, the standing and experience of the attorney, the difficulty of
handling and importance of the issues, the responsibility assumed and results
obtained, and the customary charges for similar service).
The Coop acknowledges that “the timing of bringing a claim for attorney
fees during the course of litigation is not a specifically mentioned factor normally
13
The record shows CSS2’s second-amended petition, allowed by the court on February
26, 2014, was the first time CSS2 pled Iowa Code section 717A.3, not March 11 as
found by the district court.
23
considered.” Nevertheless, it claims the timing falls within the admonition, “the
district court must look at the ‘whole picture’ when entering an attorney fee
award.” See id. Pointing to the court’s footnote, the Coop contends the court
“obviously considered other factors that occurred prior to CSS2’s claim for
attorney fees in making its award.”14
We first note neither party cites to an Iowa appellate case identifying the
date when the plaintiff formally requested attorney fees in a pleading as a
relevant factor to consider in determining the amount of fees. See Schaffer, 628
N.W.2d at 24 (listing factors to be considered). Second, we examine the “whole
picture” language in context: “Additionally, ‘[t]he district court must look at the
whole picture and, using independent judgment with the benefit of hindsight,
decide on a total fee appropriate for handling the complete case.’” Id. (quoting
Landals v. George A. Rolfes Co., 454 N.W.2d 891, 898 (Iowa 1990)). Thus, “the
complete case” language, as used in Schaeffer and Landals, does not support
the Coop’s position. Rather, the “whole picture” admonition means the court
must consider all factors identified in Iowa case law without unduly emphasizing
or ignoring one or more of the identified factors. In fact, the language “a total fee
appropriate for handling the complete case” cuts strongly against considering
when a claim for attorney fees is first made as a factor in determining the amount
of fees to be awarded.
14
We do not find persuasive the Coop’s comparison of its alleged hours from inception
to September 12 to the larger amount of total hours spent by CSS2 during that time. We
find no merit to the Coop’s claim, without citation to authority, an award of attorney fees
“in advance of a specific claim for them is patently unfair.”
24
We conclude the district court abused its discretion in relying on an
impermissible factor, the timing of CSS2’s claim for attorney fees during the
course of litigation. We reverse the award for attorney fees and remand for a
determination of CSS2’s “total fee appropriate for handling the complete case”
using the factors identified in Schaffer, 628 N.W.2d at 24.
VI. CSS2’s Request for Appellate Attorney Fees
CSS2 seeks appellate attorney fees under Iowa Code section
717A.3(2)(b) (stating a “prevailing plaintiff . . . shall be awarded . . . reasonable
attorney fees”). In a similar situation involving a mechanic’s lien statute where an
award of attorney fees for a “successful plaintiff” is mandatory but the amount is
within the court’s discretion, the supreme court ruled: “Having prevailed on
appeal, [the plaintiff] is entitled to an award of appellate attorney fees. We
therefore remand to the district court for entry of an additional judgment to
compensate [the] plaintiff for the reasonable expense of these appellate
proceedings.” Baumhoefener, 618 N.W.2d at 363, 369 (Iowa 2000); see
Landals, 454 N.W.2d at 898 (“To the extent [the plaintiff] was entitled to an award
of attorney fees for his litigation expense before the district court, he is likewise
entitled to an award of fees necessitated by this appeal.”). We likewise remand
to the district court for entry of supplemental judgment to compensate CSS2 for
reasonable attorney fees for these appellate proceedings.
VII. Conclusion
On the Coop’s appeal we affirm the district court’s ruling that CSS2’s
acceptance of the Coop’s unambiguous offer of a lump sum obligated the court
25
to enter judgment for $287,500. We likewise affirm the court’s ruling that, under
longstanding case law and applicable statutes, CSS2 is entitled to a judgment for
court costs, interest, and attorney fees. However, we reverse the court’s award
of prejudgment interest and remand for supplemental judgment in accordance
with this opinion.
As to CSS2’s cross-appeal concerning the district court’s award of
attorney fees to CSS2, we reverse the court’s ruling on the allowable time period
for attorney fees that found the fees “terminate as of the date the confession of
judgment was offered.” We decline to read this limitation into chapter 677. We
likewise reverse the court’s ruling on the amount of CSS2’s attorney fees,
concluding the court relied on an improper factor in making this determination.
Accordingly, we reverse the award of attorney fees to CSS2 and remand for the
court to determine CSS2’s “total fee appropriate for handling the complete case”
using the appropriate time period and allowable factors.
Finally, on remand the district court shall assess and award CSS2 its
reasonable attorney fees for these appellate proceedings.
Costs on appeal are taxed one-half to the Coop and one-half to CSS2.
AFFIRMED IN PART AND REVERSED IN PART ON APPEAL;
AFFIRMED IN PART AND REVERSED IN PART ON CROSS-APPEAL;
REMANDED.