Eric Ziel and Carol Ziel v. Energy Panel Structures, Inc. d/b/a EPS Buildings ( 2020 )

IN THE COURT OF APPEALS OF IOWA
No. 19-0508
Filed August 5, 2020
ERIC ZIEL and CAROL ZIEL,
Plaintiffs-Appellants,
vs.
ENGERY PANEL STRUCTURES, INC. d/b/a EPS BUILDINGS,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Boone County, Steven J. Oeth,
Judge.
Plaintiffs appeal from the district court’s grant of summary judgment in favor
of the defendant, a manufacturer-designer of a building on their land that collapsed
during a windstorm. AFFIRMED.
Sean M. O'Brien of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des
Moines, for appellant.
Brian P. Rickert and Thomas D. Story of Brown, Winick, Graves, Gross,
Baskerville & Schoenebaum, P.L.C., Des Moines, for appellee.
Heard by Bower, C.J., and Doyle and Schumacher, JJ. Greer, J., takes no
part.
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SCHUMACHER, Judge.
Boone County landowners, husband and wife, sought to construct a large
building for commercial and agricultural purposes. With the help of a construction
contractor, the landowners selected a “pre-engineered” building made of structural
insulated panels (SIPs). Having some building experience, the landowners
assisted in construction by grading the site and hiring third parties to complete
concrete and electrical work. As the construction contractor was nearing
completion of the structure, the landowners arranged separately with a Des Moines
company to install overhead doors, which had been excluded from the contract
with the construction contractor and for which there were no specifications in the
detailed drawings provided by the SIP manufacturer.
Approximately eleven months after completion, the largest of the building’s
overhead doors failed during a windstorm, precipitating the building’s collapse.
The wind speeds during the event measured less than the wind rating noted in the
manufacturer’s drawings but greater than the rating for the overhead door. The
landowner brought suit in contract and tort against the manufacturer, the
construction contractor, and the overhead door company. The landowners’ claims
against the manufacturer alleged that the manufacturer failed to warn of the need
for all overhead doors to be wind-rated to ninety miles per hour and that the
manufacturer was negligent in the design of the structure. This appeal arises from
the district court’s grant of summary judgment on both claims in favor of the
manufacturer, which the court based on three findings: (1) the manufacturer owed
no legal duty to the landowners, (2) the landowners’ tort claims against the
manufacturer were barred by the economic loss doctrine, and (3) a liability-limiting
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provision in the warranty signed by the parties precluded the landowners’ tort
claims. We affirm the district court’s determination that the manufacturer owed the
plaintiffs no legal duty, and we find the economic loss doctrine applicable on these
facts. We conclude the warranty was not an affirmative defense that the
manufacturer needed to raise in the pleadings stage, and we find that the warranty
would not have failed its essential purpose. We find to be unpreserved the
landowners’ argument that the manufacturer repudiated the warranty. We further
find the warranty was not unconscionable. We affirm the district court’s grant of
summary judgment.
Background Facts and Proceedings
Eric and Carol Ziel (the Ziels) sought to erect a building on their land located
near the grounds of the Farm Progress Show in Boone, Iowa. They selected a
building sold by Energy Panel Structures, Inc. (EPS). EPS is a manufacturer of
SIPs. EPS works through a network of third-party construction contractors that
market, sell, and construct EPS buildings. EPS provides engineering expertise
and drafts plans for the pre-engineered buildings that are then used by the
contractor in the construction of the buildings.
The Ziels contracted with Lasco Construction Services, Inc. (Lasco) for the
construction of the building. Lasco is an EPS dealer and served as the
intermediary between EPS and the Ziels. The Ziels selected a building measuring
80 feet by 192 feet and provided input on where the cutouts for windows, entry
doors, and large overhead doors would be. EPS played no part in the installation
of the windows and doors. The Ziels and Lasco entered into a contract, and Lasco
submitted a simple sketch of the building for EPS to review. EPS provided a pricing
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sheet and detailed drawings to Lasco. The drawings were drafted and reviewed
by two professional engineers at EPS.
EPS designed the building to withstand winds of up to ninety miles per hour
and noted this information on the drawings. Under the “design loads” section of
the drawings it was specified that the “wind load” was “90 mph.” The drawings
included rough openings for doors and windows in accordance with the Ziels’
desired dimensions and locations, however the drawings did not provide further
technical specifications for the doors or windows.
The drawings were completed in early June 2012. EPS forwarded the
drawings and sent a price sheet to Lasco. Lasco soon thereafter began
constructing the building, as the Ziels hoped to have the building ready for use
during the annual Farm Progress Show at the end of summer, which occurs on
neighboring land. Eric Ziel (Ziel) did grading work at the site and hired contractors
to pour the concrete slab and complete electrical work.
On July 25, 2012, the building collapsed during a wind event while it was
still under construction. The cause of this collapse was deemed to be insufficient
temporary bracing. Ziel and Lasco subsequently entered into a new contract for a
replacement building. Construction on a second building was undertaken.
Ziel contracted with Overhead Door Company of Des Moines, Inc.
(Overhead) to supply overhead doors for the project, including a large overhead
door measuring sixteen feet by twenty-eight feet that was to be placed in the center
of the building’s west face. Ziel selected the doors without input from Lasco or
EPS, and Overhead installed the doors when the building was nearing completion.
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The large western overhead door selected by Ziel was rated for winds as high as
sixty-five miles per hour.
After Lasco completed the building, Lasco presented the Ziels with an EPS
warranty. Lasco’s president, EPS’s president, and Ziel all signed the warranty.
EPS warranted the building would be engineered “to meet the wind and snow loads
specified for the Building.” The warranty purported to limit EPS’s obligations to
repair or replacement: “EPS’s obligations with regard to a valid claim under this
warranty are limited to the repair or replacement (as determined by EPS) of the
defective part or product and shall not include any cost to remove, install, reinstall,
or ship the defective or replacement part or product.” Additionally, the document
purported to limit the Ziels’ remedies to just those enumerated, and it disclaimed
liability under a number of different theories:
4. THE WARRANTIES LISTED ABOVE THAT ARE
PROVIDED DIRECTLY BY EPS CONSTITUTE THE SOLE AND
EXCLUSIVE WARRANTIES FROM EPS TO OWNER AND THE
REMEDIES FOR BREACH THEREOF ARE THE ONLY REMEDIES
AVAILABLE UNDER SUCH WARRANTIES. EPS MAKES NO
OTHER EXPRESS OR IMPLIED WARRANTIES AS TO THE
PACKAGE OR THE BUILDING, INCLUDING WITHOUT
LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, AND NO PERSON,
INCLUDING EMPLOYEES, REPRESENTATIVES OR AGENTS OF
EPS, IS AUTHORIZED TO MAKE ANY REPRESENTATIONS OR
WARRANTIES CONCERNING THE PACKAGE OR THE BUILDING
ON BEHALF OF EPS. ALL OTHER WARRANTIES ARISING
UNDER LAW ARE EXPRESSLY DISCLAIMED.
5. IN NO EVENT SHALL EPS BE LIABLE UNDER ANY
THEORY OF RECOVERY, WHETHER BASED ON ANY THEORY
OF NEGLIGENCE, STRICT LIABILITY, CONTRACT OR TORT,
FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL
OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE
WHICH IN ANY WAY ARISE OUT OF THE PURCHASE OF THE
PACKAGE OR ANY USE OF THE BUILDING.
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Ziel signed the warranty on September 12, 2012, and the building was put
to use. Ziel installed a mezzanine and used the building without incident for almost
one year. Then, the building collapsed on July 22, 2013, during a windstorm. Wind
speeds during this storm were measured at approximately seventy-five miles per
hour and did not exceed ninety miles per hour.
The Ziels and their insurer hired professional engineer Stephen Sciortino to
investigate. Sciortino had prepared a report in response to the 2012 collapse, and
he prepared a new report and gave deposition testimony regarding the 2013
collapse. With respect to the 2013 collapse, Sciortino noted that the large
overhead door on the building’s west face blew into the building toward the eastern
wall. Sciortino believed “the collapse began when the western 16′x28′ door blew
inward into the building.”
EPS requested that professional engineer Duane Boice respond to the
findings in Sciortino’s report. Boice issued a letter disagreeing with many of
Sciortino’s findings, although he also found the collapse began when the large
overhead door blew inward. Boice described the cause of the collapse as follows:
The 16′x28′ door blew in which allowed the wind to pressurize the
building. This internal pressure combined with the uplift forces pulled
the trusses up off the top sill plate enough to allow the east wall to tip
out. (The wall design requires restraint at the top sill plates.) Once
the wall blew out; the east end of the trusses fell to the ground while
the west end remained on the (now tilted) west wall.
The Ziels filed suit on September 2, 2016, against EPS, Lasco, and
Overhead. In December 2018 and January 2019, the three defendants filed
separate motions for summary judgment. On February 11, 2019, the district court
held a hearing on the pending motions, and the parties agreed to proceed without
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making a formal record. The court issued an order on March 1, 2019. In that
order, the court denied Overhead’s motion as moot due to a settlement. Lasco’s
motion was granted in part and denied in part, although the Ziels later dismissed
their claims against Lasco. The court granted EPS’s motion in full.
In granting EPS’s motion, the court rested its decision on three grounds.
First, the court found the Ziels’ claims barred by the economic loss doctrine.
Second, the court found as a matter of law with respect to both the negligent-
design and failure-to-warn claims that EPS owed no legal duty to the Ziels. Third,
the court found that the Ziels’ claims against EPS were barred by the liability-
limiting provisions in the warranty.
The Ziels filed a motion pursuant to Iowa Rule of Civil Procedure 1.904(2)
asking the court to reconsider its grant of EPS’s motion for summary judgment.
The court denied the motion, and the Ziels appealed.
Standard of Review
On a grant of summary judgment, our review is as follows:
In reviewing the grant of summary judgment . . . the question is
whether the moving party demonstrated the absence of any genuine
issue of material fact and showed entitlement to judgment on the
merits as a matter of law. An issue of fact is ‘material’ only when the
dispute is over facts that might affect the outcome of the suit, given
the applicable governing law. The requirement of a ‘genuine’ issue
of fact means that the evidence is such that a reasonable jury could
return a verdict for the nonmoving party. Our task on appeal is to
determine only whether a genuine issue of material fact exists and
whether the law was correctly applied. We examine the record in a
light most favorable to the party opposing the motion for summary
judgment to determine if movant met his or her burden.
Bill Grunder’s Sons Constr., Inc. v. Ganzer, 686 N.W.2d 193, 196 (Iowa 2004)
(citations omitted).
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Discussion
We affirm the district court’s grant of summary judgment in favor of EPS.
First, we agree with the district court’s determination that EPS’s contacts with the
Ziels were insufficient to give rise to a legal duty. Second, we conclude that the
economic loss doctrine applies to preclude the Ziels from bringing their claims in
tort. Third, we find the warranty bars the Ziels’ claims. We determine the warranty
was not an affirmative defense that needed to be pled at the pleadings stage and
the warranty would not fail its essential purpose. We find the Ziels’ repudiation
argument unpreserved, and we determine the warranty terms are not
unconscionable.
A. Legal Duty
The Ziels brought claims against EPS for both negligent design and failure
to warn, and we agree with the district court’s determination that EPS had no legal
duty to the Ziels as to either claim.
It is hornbook law that in any tort case the threshold question
is whether the defendant owed a legal duty to the plaintiff. Burton v.
Des Moines Metro. Transit Auth., 530 N.W.2d 696, 699 (Iowa 1995).
A legal duty “is defined by the relationship between individuals; it is
a legal obligation imposed upon one individual for the benefit of
another person or particularized class of persons.” Sankey v.
Richenberger, 456 N.W.2d 206, 209 (Iowa 1990). “Whether, under
a given set of facts, such a duty exists is a question of law.” Leonard
v. State, 491 N.W.2d 508, 509 (Iowa 1992).
In deciding that question, three factors govern our analysis:
(1) the relationship between the parties, (2) reasonable foreseeability
of harm to the person who is injured, and (3) public policy
considerations. Id. at 509–12. We use these factors under a
balancing approach and not as three distinct and necessary
elements. Id. at 512. In the end, whether a duty exists is a policy
decision based upon all relevant considerations that guide us to
conclude a particular person is entitled to be protected from a
particular type of harm. Larsen v. United Fed. Sav. & Loan
Ass’n, 300 N.W.2d 281, 285 (Iowa 1981).
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J.A.H. ex rel. R.M.H. v. Wadle & Assocs., P.C., 589 N.W.2d 256, 258 (Iowa 1999).
Although the three-factor test laid out in J.A.H. is a balancing test, we find the
relationship between the parties, which was very limited, to be sufficiently tenuous
so as to be dispositive here. Nonetheless, we consider all three factors.
On appeal, EPS points out that it had very limited contact with the Ziels.
Construction of the Ziels’ building commenced without a written contract between
EPS and the Ziels. The EPS warranty was the only written agreement of any form
between the parties, and it was presented to the Ziels by Lasco, a supplier of EPS
products. The building’s doors and windows were excluded from EPS’s designs
and Lasco’s contract with the Ziels. Ziel himself contracted with Overhead for the
purchase and installation of the door that failed. Although they disagreed as to the
extent of the role played by the door failure, the parties’ experts were in agreement
that the failure of the large western overhead door was the event that precipitated
the building’s collapse. The experts both agreed the structural integrity of the
building was compromised by the door’s failure. Ziel’s selection of the large
overhead door occurred without any input from EPS. EPS’s minimal input in the
overall construction of the building is bolstered by the fact that Ziel contracted for
others to install the concrete slab, wiring, and mezzanine. The on-site use of EPS’s
materials was undertaken by Lasco. On the whole, the relationship of EPS and
the Ziels does not militate toward a finding that a duty was owed.
We next consider the reasonable foreseeability of harm. The harm here
was not reasonably foreseeable to EPS, who merely provided a rough sketch of
the building’s skeleton, with no specifications for doors or windows. EPS is not a
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supplier or installer of overhead doors and cannot be imputed to have knowledge
of the manner in which such will fail. Given that the Ziels did not seek EPS’s input
on the appropriate door to install, EPS could not reasonably have foreseen the
harm of a failed door, the selection of which was completely attributable to Ziel.
Finally, we consider public policy considerations. We do not think public
policy requires a finding that EPS had a duty to the Ziels under these
circumstances. Parties are free to contract to limit their responsibilities to merely
a portion of a building’s construction. Ziel approached the construction of this
building in a piecemeal fashion, doing some of the work himself and hiring an
assortment of contractors to complete different portions of the remaining tasks.
We conclude that, from a public policy standpoint, it would be inappropriate to hold
that EPS had a duty to ensure the integrity of the construction as a whole when its
contribution was merely supplying a pre-engineered building.
Given our analysis of the three J.A.H. factors, we conclude EPS had no
legal duty to the Ziels. We affirm the district court on this issue.
B. Economic Loss Doctrine
The Ziels argue the economic loss doctrine should not apply here because
the collapse of the building constituted a sudden or dangerous occurrence
resulting from a general hazard in the nature of the building’s construction. They
further assert that the doctrine should not apply because the building damaged the
Ziels’ other property and because the doctrine does not apply to claims for
professional negligence. Even if the collapse were attributable to EPS, we
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disagree with the Ziels’ contention that an exception to the economic loss doctrine
applies or that the doctrine is inapplicable here.
Under the economic loss doctrine, “plaintiffs cannot recover in tort when
they have suffered only economic harm.” Richards v. Midland Brick Sales Co.,
551 N.W.2d 649, 650 (Iowa Ct. App. 1996). “The well-established general rule is
that a plaintiff who has suffered only economic loss due to another’s negligence
has not been injured in a manner which is legally cognizable or compensable.”
Neb. Innkeepers, Inc. v. Pittsburgh-Des Moines Corp., 345 N.W.2d 124, 126 (Iowa
1984). The purpose of the rule is to “prevent litigants with contract claims from
litigating them inappropriately as tort claims.” Van Sickle Constr. Co. v. Wachovia
Comm. Mortg., Inc., 783 N.W.2d 684, 693 (Iowa 2010).
The Ziels assert that the hazardous condition created by the building
collapse suffices to allow a tort action against EPS under the doctrine established
in American Fire & Casualty Co. v. Ford Motor Co., 588 N.W.2d 437, 438–39 (Iowa
1999) (finding an exception to the economic loss doctrine where an automobile
spontaneously and unforeseeably caught fire). We disagree that the doctrine of
American Fire is applicable on these facts. Instead, we find Determan v. Johnson,
613 N.W.2d 259 (Iowa 2000), to be persuasive. In that case, the defendant home-
seller limited its liability via contractual waivers. Determan, 613 N.W.2d at 260.
The court applied the economic loss rule because there was no link between the
defendants and a hazardous collapse, similar to the case at hand. Id. at 263.
Although the home’s sagging roof was in danger of collapsing, the plaintiff’s
recovery was “limited to repair of the defective construction,” and recovery in tort
was not permitted. Id. at 263–64. The court noted the plaintiff’s claim was “based
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on her unfulfilled expectations with respect to the quality of the home she
purchased,” and therefore held that recovery could only sound in contract. Id.The facts of Determan differ slightly from the instant case, in that the
sagging roof of the house in Determan had not fully collapsed, as the Ziels’ building
did here. See id. However, another court applied Determan on facts where roof
collapse had in fact occurred. See S. Ins. Co. v. CJG Enters., Inc., No. 3:15–cv–
00131–RGE–SBJ, 2017 WL 3449610, at *3–4 (S.D. Iowa May 12, 2017). In
Southern Insurance, an insurer brought a subrogation action against a construction
contractor and a manufacturer of pre-engineered buildings after four hog-
confinement barns constructed at the request of insured farmers suffered damage
during a windstorm. Id. at *1–2. The damage included the collapse of roofs. Id.
at *4. Although significant damage was realized during the storm, the court noted
that the farmers “contracted for the buildings to withstand Iowa’s mercurial
weather.” Id. The court observed, “Farmers expect barns to be structurally sound.”
Id. Because the insurer’s claim arose from “unfilled expectations with respect to
the bargained-for quality of the barns,” the court declined to hold the economic loss
doctrine inapplicable. Id. at *4–5. While Southern Insurance is not binding on this
court, we agree with its reasoning, and we hold the collapse of the Ziels’ building
does not expand their contract claim into one of tort. As in Southern Insurance,
the collapse of the Ziels’ building reflected their “unfulfilled expectations with
respect to the bargained-for quality of the [building].” See id. We decline to find
the economic loss doctrine inapplicable on the theory that the hazardous nature of
the collapse brought the Ziels’ claims within an exception to the doctrine.
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Next, the Ziels assert that Iowa has adopted the “other property” exception
to the economic loss rule. For this proposition, they quote our decision in Richards
v. Midland Brick Sales Co., 551 N.W.2d 649, 651 (Iowa Ct. App. 1996):
[L]osses in product liability cases are generally limited to physical
harm to the plaintiff or physical harm to the property other than the
product itself. Economic losses to the product itself are excluded.
(Citation omitted.) This statement from Richards does not explicitly adopt the rule
that where a product fails and causes damage to other property, the damage to
the other property may be recoverable in tort as opposed to as consequential
damages in a contract action, and the Ziels cite to no Iowa case adopting such
rule. In this case, we think the presence of property is relevant only to characterize
the type of loss, not the type of action. Here, the damage was to the building itself
and some of its contents. This distinguishes the case from the Minnesota case
upon which the Ziels rely for the establishment of the “other property” exception,
and the remaining case cited is an admiralty case not dealing with real property.
See Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 884–85 (1997)
(admiralty); Lloyd F. Smith Co. v. Den-Tal-Ez, Inc., 491 N.W.2d 11, 13–15 (Minn.
1992) (allowing recovery for property damage to a building after a defective dental
chair started a fire, and relying on the example that “if a defective coffee pot starts
a fire which burns down a building, the coffee pot purchaser could sue in tort as
well as in breach of warranty for damages to the building”).
Southern Insurance is again instructive; in that case, the court rejected the
argument that a remedy in tort should be available to plaintiffs because there was
“damage to a nearby feed silo, the gas lines, lighting and ceilings in the barns.”
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2017 WL 3449610, at *4. In refusing to find the economic loss doctrine
inapplicable, the court said,
[T]he damage to the . . . barns and the nearby property was a
foreseeable result of the barns’ alleged failure to perform properly
during a windstorm. The damage to the barns’ structure, as well as
to property placed inside the barns, was a foreseeable consequence
of the structural failure, and it was equally foreseeable that the
structural deficiencies could damage other nearby structures,
especially in the event of an Iowa windstorm.
Id. at *6. As in Southern Insurance, the damage to “property placed inside” the
Ziels’ building was a foreseeable consequence of the structural failure, which was
contemplated in the agreement to erect the structure.
Finally, the Ziels claim that the economic loss doctrine is inapplicable
because their claim is one of professional negligence. However, while the Ziels
characterize their claim as professional negligence at the appellate level, they did
not plead it as such at the trial level. Moreover, no case has exempted engineering
negligence from the economic loss rule. See Van Sickle Constr., 783 N.W.2d at692 n.5 (noting economic losses are recoverable in professional negligence
actions “against attorneys and accountants”). We therefore reject the argument.
C. Applicability of Written Warranty
The district court found the Ziels’ claims to be barred by the language of
EPS’s warranty, which was signed by the Ziels, Lasco, and EPS. The Ziels argue
that EPS waived enforcement of the warranty by failing to plead the warranty
limitation as an affirmative defense. The Ziels also argue the limitation provision
is unconscionable and not broad enough to cover their claims, that EPS repudiated
the warranty, and that the provision fails its essential purpose because it gives no
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remedy for the design and specifications. EPS counters that the Ziels’ repudiation
argument was not properly preserved.
1. Affirmative Defense
We first consider whether the warranty is an affirmative defense, and we
conclude the warranty did not need to be raised as an affirmative defense.
“An affirmative defense is one which rests on facts not necessary to support
the plaintiff’s case. Thus, any defense which would avoid liability although
admitting the allegations of the petition is an affirmative defense.” Erickson v.
Wright Welding Supply, Inc., 485 N.W.2d 82, 86 (Iowa 1992) (citations omitted);
see also Iowa R. Civ. P. 1.419.
The Ziels cite two cases for the proposition that a defense premised on a
limitation-of-liability clause is an affirmative defense. See Fire Ass’n of
Philadelphia v. Allis Chalmers Mfg. Co., 129 F. Supp. 335, 337 (N.D. Iowa 1955);
Smith v. All Stor Fort Knox, LLC, No. 17-1537, 2018 WL 3913419, at *1 (Iowa Ct.
App. Aug. 15, 2018). In both Fire Association and Smith, the defendant raised a
limitation provision as an affirmative defense. 129 F. Supp. at 337; 2018 WL
3913419, at *1. The question of whether a liability-limitation provision must be
raised as an affirmative defense was not raised. See Fire Ass’n, 129 F. Supp. at
337; Smith, 2018 WL 3913419, at *1. Similarly, a signed release of liability was
raised as an affirmative defense in Peak v. Adams, 799 N.W.2d 535, 542 (Iowa
2011). We do not think these cases are dispositive, as these defendants’ choices
to raise liability-limiting provisions as an affirmative defense constitute a trend, not
a rule.
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EPS notes that, while no case directly controls, the Iowa Practice Series
does not include “limitation of liability” in a list of affirmative defenses. See 11
Barry A. Lindahl, Iowa Practice Series, Civil & Appellate Procedure § 16:126 (May
2020 Update) (titled, “Other affirmative defenses”).
Although it is not directly controlling, we find Erickson to be instructive. 485
N.W.2d 82. In Erickson, the court found that a statutory limitation-of-liability
provision was not an affirmative defense that needed to be raised at the pleadings
stage. Id. at 86. The court noted that the statute modified the elements to be
proved in the plaintiff’s case. Id. While the instant case has a contractual
limitation-of-liability provision, not a statutory one, we think the reasoning of
Erickson is applicable here. The Ziels sought to enforce the warranty prior to
initiating suit. They were aware when filing suit they had agreed to a contractual
limitation-of-liability clause, and it was incumbent upon them to prove its
inapplicability after seeking to apply its beneficial repair-or-replace provision. As
EPS points out, it should not come as a surprise to the Ziels that EPS would seek
to use the warranty’s provisions as a shield against the Ziels’ tort claims.
We conclude under these facts that the contractual provision waiving liability
for negligence and limiting an injured party’s remedies is not an affirmative
defense, and therefore EPS was not required to assert the waiver in its answer.
Because we find the waiver need not have been raised as an affirmative defense,
we do not reach EPS’s contention that the waiver was tried by consent.
2. Warranty Repudiation and Essential Purpose
EPS argues the Ziels failed to preserve the argument that EPS repudiated
the warranty. Under our error preservation rules “we will not consider a substantive
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or procedural issue for the first time on appeal.” DeVoss v. State, 648 N.W.2d 56,
60 (Iowa 2002); see also Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002)
(requiring that issues be raised before the district court “before we will decide them
on appeal”). We note that the parties agreed at the hearing on the motions for
summary judgment to proceed without making a formal record, so we have no
transcript of any proceedings below. From our review of the record it appears the
Ziels did not allege that EPS repudiated the warranty until they filed a brief in this
appeal, and we therefore find the argument unpreserved.
We further find that the warranty would meet its essential purpose. The
Ziels note in their brief that they “do not allege EPS supplied a damaged or
defective component that requires repair or replacement.” They instead allege
they contracted for “a building engineered to meet the wind loads specified for the
building.” However, the building did meet the wind specifications; it was the door
selected by Ziel that caused the failure. A replacement of the building would have
put the Ziels in the same place they had been before Ziel installed a defective door.
While the Ziels allege it was a design flaw that caused the collapse—namely, that
EPS bears responsibility for not warning Ziel of the need for the door to be wind-
rated—if the building were replaced, the Ziels would have knowledge of that flaw
sufficient to correct the error in a rebuild. In other words, because the flaw
precipitating the collapse was the result of a selection of door by the Ziels and the
alleged lack of knowledge of the flaw was cured by the investigations following the
collapse, a repair or replacement of the building would make the Ziels whole. For
this reason, we hold the remedy provided would meet its essential purpose.
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3. Unconscionability
The Ziels argue the warranty provisions are unconscionable. “[C]ourts
generally enforce contractual limitations upon remedies unless such limitations are
unconscionable.” C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65, 77 (Iowa
2011).
A contract is unconscionable where no person in his or her
right senses would make it on the one hand, and no honest and fair
person would accept it on the other hand. In considering such
claims, we consider the factors of “assent, unfair surprise, notice,
disparity of bargaining power, and substantive unfairness.”
However, the doctrine of unconscionability does not exist to rescue
parties from bad bargains.
This doctrine encompasses both procedural abuses arising
from the contract’s formation and substantive abuses related to the
contract’s terms. Procedural unconscionability involves an
advantaged party’s exploitation of a disadvantaged party’s lack of
understanding, unequal bargaining power between the parties, as
well as the use of fine print and convoluted language. Substantive
unconscionability involves whether or not the substantive terms of
the agreement are so harsh or oppressive that no person in his or
her right senses would make it. Finally, whether an agreement is
unconscionable must be determined at the time it was entered.
Id. at 80–81 (citations omitted). We do not think the contract here at issue is
unconscionable. First, we do not find the agreement procedurally unconscionable.
Although the warranty was not presented until after the building was constructed,
there is no indication in the record that the Ziels were forced to sign the document.
The Ziels note that “EPS presented the warranty on a take it or leave it basis,” but
there is little evidence in the record that the Ziels were coerced into accepting the
warranty. The Iowa Supreme Court rejected a similar argument in Bartlett Grain
Co., LP v. Sheeder, 829 N.W.2d 18, 27 (Iowa 2013), where it held an allegation
that “no negotiation was allowed” to be insufficient to give rise to a finding of
unconscionability. Each word of the clauses limiting EPS’s liability was printed in
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all capital letters. Ziel testified to being “just a farmer,” but he was not
inexperienced in business matters; he hired contractors to do the electrical work,
pour the concrete slab, and install the overhead doors on the very building in
question. The Ziels have not alleged they were under unreasonable pressure to
sign the contract. We therefore conclude the contract is not procedurally
unconscionable. Second, we do not find the agreement substantively
unconscionable. The Ziels received the benefit of a right to repair or replacement
in exchange for a release of contractual and tort remedies. As EPS notes, similar
remedy limitations have been upheld. See, e.g., Badgett Const. & Dev. Co. v.
Kan-Build, Inc., 102 F. Supp.2d 1098, 1104–05 (S.D. Iowa 2000).
4. Scope of remedy-limiting provision
The Ziels argue the remedy-limiting provisions in the warranty are
insufficiently broad in scope to cover the allegations here. We construe claims
under contract provisions limiting liability for negligence strictly against the party
seeking their enforcement. See Sears, Roebuck & Co. v. Poling, 81 N.W.2d 462,
465 (Iowa 1957). However, even construing the warranty provisions strictly
against EPS, we cannot say their scope is insufficiently broad to cover the Ziels’
claims. The relevant provision seeks to disclaim liability for claims arising from the
“purchase of the package” or the “use of the building.” We think the Ziels’ claims
arise as a result of the purchase of the package. We therefore reject the Ziels’
textual argument.
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Conclusion
We hold the economic loss doctrine applicable on these facts. We affirm
the district court’s holding that EPS did not owe the Ziels a legal duty sufficient to
sustain claims in tort.
We find that the contractual limitation-of-liability provision here at issue need
not have been raised during the pleading stage. We reject the Ziels’ claim that the
warranty would fail its essential purpose, and we find their repudiation argument
unpreserved. The warranties terms are not unconscionable and are broad enough
in scope to cover the facts of this case. For the foregoing reasons, we affirm the
district court’s grant of summary judgment in favor of EPS.
AFFIRMED.
Bower, C.J., concurs; Doyle, J., partially dissents.
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DOYLE, Judge (concurring in part and dissenting in part)
I concur with the majority’s affirmance of the district court’s grant of
summary judgment for Energy Panel Structures, Inc. (EPS), but I dissent from the
majority’s conclusion that EPS had no legal duty to the Ziels.
When confronting a case like this, the first question to be answered is:
“What would have prevented this disaster?” The answer is simple: installation of
a ninety miles per hour (mph) wind-rated overhead door. To that end, I believe
EPS had a legal duty to warn that installation of a ninety mph wind-rated door was
necessary for the building to maintain its warranted ninety mph wind rating.
EPS sold a product—a pre-engineered building rated to withstand winds up
to ninety mph. The warranty EPS furnished to the Ziels states: “EPS warrants the
building constructed from the Package (‘Building’) will be engineered to meet the
wind and snow loads specified for the Building.” EPS’s price sheet furnished to
Lasco Construction Services, Inc. (Lasco) states: “The wind load design is for 90
mph wind (Exposure B).” The drawings EPS furnished to Lasco specify: “Wind
Load 90 mph.” Although the drawings exclude doors and windows, there is no
doubt the warranted wind rating was for a closed building—one with doors and
windows installed. EPS was not contracted to engineer or supply the doors or
windows because they were to be supplied by others. EPS did not provide or
require minimum specifications for the doors and windows. Nor did it advise ninety
mph wind-rated overhead doors were needed to maintain the building’s warranted
ninety mph wind rating. Eric Ziel contracted with Overhead Door Company to
supply and install the overhead doors in the building. Ziel selected doors rated for
up to sixty-five-mph winds. The building collapsed in a storm after one of the
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overhead doors blew in and compromised the building’s structural integrity. The
winds in the storm exceeded sixty-five mph but were less than ninety mph.
Had EPS included minimum wind-rating specifications for the overhead
doors to be installed in the building (and we note EPS included specifications for
many of the building’s other components it did not furnish), or given some
notification or warning that to maintain the building’s warranted ninety mph wind
rating the large overhead doors would have to be similarly rated, it is likely Lasco
would have informed Ziel. He would have either purchased the proper door—thus
thwarting the disaster—or acted at his own peril in not doing so. But did EPS have
a duty to warn of the need to install properly rated doors? The majority says no, I
say yes.
“Our law has long recognized a duty to warn of the presence of defects or
dangers. This duty is predicated upon superior knowledge, and arises when one
may reasonably foresee danger of injury or damage to another less knowledgeable
unless warned of the danger.” Lovick v. Wil-Rich, 588 N.W.2d 688, 693 (Iowa
1999) (internal citation omitted). The duty to warn applies to manufacturers. Id.Under a balancing approach, we use three factors in deciding whether EPS had a
duty to warn: “(1) the relationship between the parties, (2) reasonable
foreseeability of harm to the person who is injured, and (3) public policy
considerations.” J.A.H. ex rel. R.M.H. v. Wadle & Assocs., P.C., 589 N.W.2d 256,
258 (Iowa 1999). To be sure, there was little, if any, contact between the Ziels and
EPS as Lasco was the dealer with direct contact with EPS. I agree with the
majority that this would militate towards a finding no duty was owed. But the harm
was reasonably foreseeable to EPS. It was EPS that engineered, designed, and
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warranted the building to withstand wind loads of ninety mph. Although doors and
windows were excluded from the drawings, the building’s wind-load rating
contemplated installation of adequate doors and windows. As designer and
engineer of the building, EPS had superior knowledge as to what it would take to
maintain the building’s integrity in a wind storm. EPS could have reasonably
foreseen that failure of an inadequate large overhead door in a wind storm would
create a situation much like having no door at all, thus severely compromising the
building’s structural integrity. The building’s structural integrity is only as good as
its weakest link. To warrant this building with a ninety mph wind rating, it follows
that the large overhead door would also have to be wind-rated at ninety mph.
Public policy is clear. Manufacturers of products have a duty to warn of the
presence of dangers in their products. Lovick, 588 N.W.2d at 693. EPS had a
duty to warn or inform its buyers that the overhead doors needed to be wind-rated
at ninety mph. It failed to do so.
Application of the economic loss doctrine is more problematic. “As a
general proposition, the economic loss rule bars recovery in negligence when the
plaintiff has suffered only economic loss.” Annett Holdings, Inc. v. Kum & Go, L.C.,
801 N.W.2d 499, 503 (Iowa 2011). Failure-to-warn claims are negligence claims.
See Olson v. Prosoco, Inc., 522 N.W.2d 284, 289 (Iowa 1994). The Ziels argue
their claim is excepted from the economic loss doctrine because their damage
resulted from a sudden or dangerous occurrence resulting from a genuine hazard
in the nature of a product defect and that they suffered damages to other property.
I am unaware of a parallel to this case in our reported case law. The general
contours of the doctrine were examined in Annett, 801 N.W.2d at 502–04, and
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again in Des Moines Flying Service, Inc. v. Aerial Services Inc., 880 N.W.2d 212,
218–20 (Iowa 2016). No attempt was made to delineate the precise contours of
the rule. See Annett, 801 N.W.2d at 504. With no case on point and no precise
guiding contours, I, like many judges, lawyers, and legal scholars, struggled to
track the doctrine’s meaning, application, and scope. See Jeffrey L. Goodman,
Daniel R. Peacock, & Kevin J. Rutan, A Guide To Understanding The Economic
Loss Doctrine, 67 Drake L. Rev. 1 (2019).
While the doctrine may be easy to state, it is difficult to apply. Indeed,
it has been described as a “confusing morass,” and has been
compared to the “ever-expanding, all-consuming alien life form
portrayed in the 1958 B-movie classic The Blob” that could “consume
much of tort law if left unchecked.”
Lesiak v. Cent. Valley Ag Coop., Inc., 808 N.W.2d 67, 80 (Neb. 2012) (footnotes
omitted). And after reading the case law and trying to apply the economic loss
doctrine to the facts of this case, I agree that the doctrine, like many civil doctrines, 1
is a “confusing morass.”
The facts of Determan v. Johnson, 613 N.W.2d 259 (Iowa 2000), are close
to the facts here but not on point. There, the plaintiffs’ house suffered from
significant structural defects manifesting themselves in the form of a sagging roof,
among other things. Determan, 613 N.W.2d at 263. The roof was in danger of
collapsing but had not yet done so. Id. In denying the plaintiffs’ claims, the court
applied the economic loss doctrine reasoning “any harm caused by the defects in
the house was to the house itself, and not to any persons or other property. In
1See Hill v. Damm, 804 N.W.2d 95, 103 (Iowa Ct. App. 2011) (stating that the
Restatement (Third) of Torts: Liability for Physical Harm provisions “seem as clear
as mud”).
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addition . . . there has been no ‘sudden or accidental occurrence.’” Id. at 264. In
the case before us, the building did collapse in a sudden occurrence, and property
other than the building was damaged.
In American Fire & Casualty Co. v Ford Motor Co., 588 N.W.2d 437, 438
(Iowa 1999), the court allowed plaintiff to proceed with its products liability claim
for the loss of a truck after it caught fire causing property damage to the truck and
its contents. In examining the economic loss doctrine, the court noted, “The
common thread running through our cases rejecting recovery is the lack of danger
created by the defective product.” Am. Fire & Cas., 588 N.W.2d at 439. The court
distinguished these cases concluding, “A truck starting itself on fire would certainly
qualify more as a danger than as a disappointment.” Id. at 439–40. I would think
a sudden building collapse would qualify as a danger. But, as always, there is
more. For even if damage from a defective product results from a sudden and
dangerous occurrence and extends to surrounding property, the economic loss
doctrine may bar tort recovery if the damage “was a foreseeable consequence
from the failure of the product to work properly.” See id. at 439. It was foreseeable
that damage to the building’s structure, as well as to property inside the building,
would occur if the building collapsed during a windstorm. Although a razor-thin
call, I concur with the majority that the economic loss doctrine bars the Ziels’
negligence claims. So even had the majority concluded that EPS had a duty to
warn, it would make no difference in the result here as that claim is barred by
application of the economic loss doctrine. I therefore concur with the majority’s
affirmance of the district court’s grant of summary judgment for EPS.