Craig Williams v. Pocahontas Ford-Lincoln, Inc. ( 2020 )

IN THE COURT OF APPEALS OF IOWA
No. 19-0639
Filed November 30, 2020
CRAIG WILLIAMS,
Plaintiff-Appellant,
vs.
POCAHONTAS FORD-LINCOLN, INC.,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Pocahontas County, Kurt J. Stoebe,
Judge.
Plaintiff appeals the district court’s ruling that denied his claims of breach of
an employment contract and failure to pay wages. AFFIRMED AND REMANDED.
Charles Gribble and Christopher Stewart of Gribble, Boles, Stewart &
Witkosky Law, Des Moines, for appellant.
Mitchell R. Kunert of Nyemaster Goode, P.C., Des Moines, for appellee.
Considered by Bower, C.J., and Doyle and Schumacher, JJ.
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SCHUMACHER, Judge.
Craig Williams appeals the district court’s ruling that denied his claims of
breach of an employment contract and failure to pay wages under Iowa Code
chapter 91A (2017). We affirm the district court’s decision finding the employer
did not breach the parties’ employment agreement and that Williams is not owed
any unpaid wages. We remand for a calculation of the reasonable trial and
appellate attorney fees incurred by the employer.
I. Background Facts & Proceedings
Pocahontas Ford Lincoln, Inc. (PFL) is a car dealership in Pocahontas,
Iowa. The company has 1800 shares, which were valued at $550 per share, for a
total value of $990,000. Gustave Holzmueller is the majority shareholder, owning
900 shares.1 Holzmueller worked at PFL, as did his wife, Beverly Holzmueller
(Beverly).
In 2013, Holzmueller and Beverly were interested in selling PFL and retiring.
Williams is the son-in-law of Beverly’s sister. He contacted Holzmueller to express
an interest in buying PFL, although he had no experience as a car dealer and did
not have the finances to purchase the company. Holzmueller stated Williams
would be able to get a low-interest loan and could gradually purchase shares. In
June 2013, Williams, his wife, and his daughter moved from Las Vegas, Nevada,
to Pocahontas. Williams began working as a salesman at PFL in order to learn
about the business.
1 The other shareholders were Bernie Rost, Del Rost, and Colleen Kaiser.
3
Williams and PFL entered into an employment agreement for a term of five
years beginning January 1, 2014. The contract gave Williams five vacation days
each year and no sick leave. It gave Williams the right to purchase stock in PFL
but did not require him to do so.
The employment agreement provided:
3. Term and Termination.
(a) ....
(b) The Company and Employee may terminate this
Agreement at any time upon at least ninety (90) days prior advance
notice given to the other Party.
(c) The Company may terminate this agreement at any
time . . . upon either (A) the occurrence of a material breach of
Employee’s duties under this Agreement, or (B) for Cause (as such
term is defined below).
For purposes of this Agreement, “Cause” shall mean that any
one or more of the following has occurred and, with the exception of
clause (i) and (iv) below (which shall not be subject to a cure period),
is continuing to occur following receipt of notice by Employee from
the Company of its occurrence for fifteen (15) days with respect to
clause (ii) below, and thirty (30) days with respect to clause (iii)
below:
(i) Employee shall have been convicted by a court of
competent jurisdiction of, or pleaded guilty or nolo contendere
to, either (A) any felony, or (B) any crime involving fraud,
embezzlement or misappropriation . . . ; or
(ii) Employee shall lose or have revoked (A) any license
required for Employee to conduct business for the Company,
or (B) Ford’s approval of Employee as an approved Ford
dealer and/or an owner with managerial authority, as such
terms are defined by Ford; or
(iii) Employee shall have engaged in either (A) willful or
material misconduct relating to the duties incident to his
employment with the Company, or (B) willful or material failure
to perform, or chronic neglect of, the duties incident to his
employment with the Company; or
(iv) Employee’s death or disability.
The employment agreement stated Williams’s employment was “pursuant
to the terms and conditions of this Agreement and any employee handbook.” The
employee handbook lists minor and major offenses that could cause disciplinary
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action. Major offenses included “Abusive treatment of others (physical and/or
verbal)”; “Physical violence”; and “Possession of an illegal weapon,” among other
offenses. The handbook stated that for major offenses, a person would receive a
written warning for a first offense and would be terminated for a second offense.
The handbook also states, “The management reserves the right to bypass any
step in the procedure when s/he considers that the seriousness of the offense
warrants it.”
At the same time Williams and PFL entered into the employment
agreement, they entered into a stock purchase agreement that gave Williams the
right to purchase shares in PFL. He purchased twenty-four shares of stock in
2014.
Williams attempted to get financing from a bank to purchase the company
but was unable to obtain a loan in a sufficient amount. Williams and his family
expressed an interest in returning to Las Vegas. Although Williams did not
purchase any additional shares in PFL, he continued to work there as a salesman.
Williams initially did well and received bonuses for his work.
At the end of 2016 and the beginning of 2017, Williams missed some
periods of work because he was suffering from diverticulitis.2 Williams had surgery
in April 2017 and returned to work on May 1. Holzmueller informed Williams that
sales had slowed in 2017 and the company was not doing well financially. Williams
was scheduled to go on vacation from June 6 to 15. According to Williams, he
2 Williams testified he became depressed due to the pain from diverticulitis and
his inability to find employment in Las Vegas. He did not obtain a medical
diagnosis of depression and did not seek treatment for the condition. Holzmueller
and Beverly testified Williams discussed committing suicide.
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asked Holzmueller if he should still take his vacation and Holzmueller told him to
go. However, Holzmueller stated he asked Williams not to go on vacation due to
the dealership’s financial situation and the decrease in sales.
On June 5, the day before he was to leave, Williams told Holzmueller that
unless he got a real vacation, he was going to go to a water tower and start
shooting. Williams stated he said this as a joke and such was in reference to an
ongoing joke between himself and Holzmueller. Holzmueller testified Williams
stated he would start shooting people from the top of a grain elevator, which was
next to the car dealership. Holzmueller denied there was an ongoing joke on the
matter.3 He became concerned and contacted the sheriff’s department. Williams
left on his planned vacation on June 6.
On June 12, while Williams was away, Holzmueller held a meeting with the
other shareholders. The record in this case included an audio recording of the
meeting. Beverly was not a shareholder but acted as the secretary for the meeting.
Holzmueller discussed Williams’s statement about shooting from a tower and
noted Williams owned several guns. The shareholders decided to terminate
Williams’s employment based on the failure to purchase additional shares in the
company, poor job performance, and absenteeism. The written minutes state,
“‘Craig A. Williams[’s] employment contract will be terminated for Cause; i.e. the
occurrence of a material breach of Employee’s duties under the Agreement.’
(3.c.).” The written minutes do not include any statements about Williams’s threat
to start shooting, but the audio recording reflects discussion of the threat.
3Holzmueller also testified he was aware that Williams owned semi-automatic
weapons.
6
Holzmueller further relayed to the other shareholders that arrangements had been
made with the sheriff to be present at the time of termination. Concerns were
expressed by more than one shareholder about Williams returning with a gun.
Beverly testified she did not include the discussion in the written minutes because
she did not want to cause Williams difficulty in obtaining a new job.
Williams returned to work on June 16. He was fired by Holzmueller that
day. Williams was not told a reason for his termination at that time. Beverly
testified that she mailed Williams a copy of the written minutes, but Williams stated
he never received it. Williams did not perform any work after June 16, but he was
paid for an additional two weeks. He also received a bonus of $5000 for the quarter
ending on June 30. PFL purchased the twenty-four shares of stock held by
Williams. Williams and his family moved back to Las Vegas, and he resumed
working for his former employer.
On August 27, 2017, Williams filed an action against PFL, claiming breach
of his employment contract and failure to pay wages under Iowa Code chapter
91A. After a bench trial, the district court entered a ruling on April 18, 2019.4 The
4 Williams argues that our court should scrutinize the record more carefully
because of the use of the proposed findings of fact and conclusions of law by the
district court and the almost verbatim adoption of PFL’s filing. Our supreme court
has recognized the crucial role district courts play in making credibility
determinations. See Rubes v. Mega Life & Health Ins. Co., 642 N.W.2d 263, 266
(Iowa 2002). It has also found that “our ability to apply the usual deferential
standard is undermined by the court’s verbatim adoption of [a party’s] proposed
factual findings and legal conclusions” and has cautioned district “courts about the
perils of such practice.” Id. “[T]he customary deference accorded [district] courts
cannot fairly be applied when the decision on review reflects the findings of the
prevailing litigant rather than the court’s own scrutiny of the evidence and
articulation of controlling legal principles.” Id. (citing Phoenix Engineering & Supply
Inc. v. Universal Electric Co., 104 F.3d 1137, 1140 (9th Cir. 1997), for the
proposition that where a district court adopts one party’s proposed findings, close
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district court found Holzmueller and Beverly were credible witnesses. The court
determined Williams’s statement about shooting people from the grain elevator
“triggered the meeting and the termination of Williams’s employment.” The court
concluded Williams was terminated for a material breach of his employment duties
and so was not entitled to notice, and therefore there was no breach of the
employment contract by PFL. The court also found PFL did not owe Williams any
unpaid wages. The court found PFL was entitled to attorney fees. Williams
appealed the district court’s decision.
II. Breach of Contract
Williams contends PFL breached the employment contract by terminating
him without giving him notice and the opportunity to correct his behavior, which he
asserts was required by the terms of the contract.
In order to prevail on a claim of breach of an employment contract, a plaintiff
must prove:
(1) the existence of a contract; (2) the terms and conditions of the
contract; (3) that [he] has performed all the terms and conditions
required under the contract; (4) the defendant’s breach of the
contract in some particular way; and (5) that plaintiff has suffered
damages as a result of the breach.
Kern v. Palmer Coll. of Chiropractic, 757 N.W.2d 651, 657–58 (Iowa 2008)
(alteration in original) (quoting Molo Oil Co. v. River City Ford Truck Sales, Inc.,
scrutiny of the record is required). Although our supreme court has refused to
adopt a higher standard of review in such cases, it has instructed that “we must
scrutinize the record more carefully when conducting our appellate review.”
NevadaCare, Inc. v. Dep’t of Human Servs., 783 N.W.2d 459, 465 (Iowa 2010);
see also Soults Farms, Inc. v. Schafer, 797 N.W.2d 92, 97 (Iowa 2011). We apply
the supreme court’s mandate in review of this record.
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578 N.W.2d 222, 224 (Iowa 1998)). “The question of whether the plaintiff has
proved a breach of contract is for the judicial fact-finder.” Id. at 658.
For breach-of-contract actions, our review is for correction of errors at law.
Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 2013). We are
bound by the district court’s factual findings if they are supported by substantial
evidence in the record. Id.Williams states the shareholders voted to discharge him for cause, citing (1)
failure to purchase additional shares of the company, (2) poor job performance,
and (3) absenteeism. Williams states that these items do not meet the definition
of “cause” in the employment contract. He also states that to the extent the items
could be considered “willful or material misconduct relating to the duties incident
to his employment” or “willful or material failure to perform, or chronic neglect of,
the duties incident to his employment” under section 3(c)(iii) of the contract, he
should have been given notice and then could only be discharged if the conduct
continued for thirty days.
The written minutes from the meeting state, “Craig A. Williams[’s]
employment contract will be terminated for Cause; i.e. the occurrence of a material
breach of Employee’s duties under the Agreement.” Holzmueller and Beverly
testified they did not use the term “cause” as it was defined in the employment
agreement but used it to mean the reason for Williams’s discharge.5 The district
court found this explanation credible. “As the finder of fact, weighing the proffered
5 The term “cause” may mean “the reason or motive for some human action.”
Cause, https://www.dictionary.com/browse/cause (last visited Nov. 18, 2020).
9
testimony and determining its credibility was the district court’s duty.” Hutchison
v. Shull, 878 N.W.2d 221, 230 (Iowa 2016).
Additionally, the language of the written minutes makes sense if the term
“cause” means reason, so the minutes state in effect that the reason for Williams’s
termination is the occurrence of a material breach of his duties under the contract.
Using the definition of “cause” in the contract, the statement that Williams was
terminated for cause, which was the occurrence of a material breach, does not
make sense as “the occurrence of a material breach of Employee’s duties under
this Agreement,” and “Cause” are two different things and a material breach is not
a “cause” listed in the contract. See Alta Vista Props., LLC v. Mauer Vision Ctr.,
PC, 855 N.W.2d 722, 727 (Iowa 2014) (“[A]n interpretation which gives a
reasonable, lawful, and effective meaning to all terms is preferred to an
interpretation which leaves a part unreasonable, unlawful, or of no effect.”
(alteration in original) (quoting Fashion Fabrics of Iowa, Inc. v. Retail Investors
Corp., 266 N.W.2d 22, 26 (Iowa 1978)).
Furthermore, Holzmueller and Beverly testified Williams was discharged
from his employment at PFL based on his statement that if he did not get a real
vacation, he would go to the top of a water tower or grain elevator and start
shooting people. Williams made the statement to Holzmueller, who became very
concerned and called the sheriff. Taken in the context of the discussions between
Williams and Holzmueller about whether Williams should take his vacation
scheduled for the next day, the statement can be interpreted as a threat of physical
violence if Holzmueller prohibited Williams from leaving. According to the
employee handbook, the regular multi-step disciplinary process could be bypassed
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based on the seriousness of an offense. The threat of physical violence is in line
with other actions considered major offenses, and based on the seriousness of the
threat, PFL could bypass giving Williams a written warning prior to terminating his
employment.
Under the contract, there is no provision for notice prior to discharge when
an employee is discharged based on the occurrence of a material breach of the
employee’s duties. We find no error in the district court’s conclusion that Williams’s
threat of physical violence was a material breach of his employment duties.
Therefore, the employment contract did not require notice to Williams before he
was discharged from his employment. PFL did not breach the employment
agreement when it terminated Williams’s employment.
Further, even if PFL needed to comply with notice under paragraph 3(c),
PFL could bypass that notice if Williams’s actions went to the “essence or
fundamental purpose” of the contract. We find, based on the record, that
Williams’s statements threatening to climb to the grain elevator and start shooting
went to the essence or fundamental purpose of the contract. The district court
relied on this alternate theory, set forth by the supreme court in Larken, Inc. v.
Larken Iowa City Limited Partnership, 589 N.W.2d 700, 702–04 (Iowa 1998). We
agree with the district court’s findings that it would be reckless to require PFL to
give Williams an opportunity to cure, allowing him to remain in the workplace.
III. Chapter 91A
Williams claims PFL owes him wages under chapter 91A, the Iowa Wage
Payment Collection Law. See Iowa Code § 91A.1. He asserts PFL improperly
terminated his employment under the terms of the employment agreement and he
11
is owed wages, bonuses, and benefits for the remainder of the five-year term of
the contract. We review claims under chapter 91A for the correction of errors of
law. See Gabelmann v. NFO, Inc., 571 N.W.2d 476, 483 (Iowa 1997).
Chapter 91A “imposes liability only when the employer fails to pay the
amount of wages actually due to the employee.” Condon Auto Sales & Serv., Inc.
v. Crick, 604 N.W.2d 587, 596 (Iowa 1999). An employee has no claim for
nonpayment under chapter 91A unless wages are actually owed to the employee.
See Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 202 (Iowa 1997) (citing
Iowa Code § 91A.8).
Williams has not shown any wages are due to him that PFL failed to pay.
For this reason, the wage collection provisions of chapter 91A do not apply. PFL
properly terminated Williams’s employment on June 16, 2017, and Williams was
paid for all of his services prior to that date. Williams has not shown any additional
wages are owed to him.
IV. Damages
Although the district court found Williams was not entitled to any damages,
the court discussed Williams’s claims concerning the amount of damages he
asserted should be awarded. We find Williams was not successful on his claims
regarding breach of contract or unpaid wages under chapter 91A. We do not
further analyze his various arguments concerning the amount of damages he
believes should have been awarded.
V. Attorney Fees
Lastly, Williams argues even if he was not entitled to notice prior to
discharge, the district court erred in awarding attorney fees to PFL. The district
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court determined PFL should be awarded reasonable attorney fees and costs.6
Williams contends the employment agreement did not provide for the award of
attorney fees under the circumstances in this case.
The employment agreement states:
Indemnification. Employee shall defend, indemnify and hold the
Company and its respective shareholders, directors, officers,
employees and agents harmless from and against any suit, action,
proceeding, demand, claim, counterclaim, loss, liability, damage,
cost or expense, including court costs and attorneys’ fees, in any way
arising in connection with or resulting from any breach or non-
fulfillment of, or default under, any term or condition of this
Agreement by Employee. The Company shall recover from
Employee its reasonable attorneys’ fees and costs incurred to
enforce or remedy any breach of this Agreement by Employee,
including, but not limited to, a breach of Section 4 or Section 5.
The employment agreement provided that PFL could recover from Williams
the reasonable attorney fees and costs the company incurred “to enforce or
remedy any breach” of the employment agreement by Williams. Williams
breached the employment agreement by making a threat to shoot people, which
was a material breach of his duties under the agreement. Under the terms of the
employment agreement, PFL could then recover its attorney fees and costs from
Williams.
“When a contract contains a clear and express provision regarding attorney
fees, the court’s award must be for reasonable attorney fees.” NevadaCare, 783
6 The amount of attorney fees and costs has not yet been determined. PFL was
ordered to submit an itemization of fees and costs within thirty days. Before PFL
submitted an itemization of its fees and costs, however, Williams filed a notice of
appeal. The issue on appeal concerns whether attorney fees could be awarded,
not the amount of an attorney fee award. We conclude the issue raised on appeal
is not interlocutory in nature. See Virginia Manor, Inc. v. City of Sioux City, 261
N.W.2d 510, 513 (Iowa 1978) (finding a ruling that merely preserved the right to
bring a claim for attorney fees in the future was a final appealable decision).
13
N.W.2d at 470. We determine the district court may properly award PFL
reasonable attorney fees under the terms of the employment agreement. We
remand for a calculation of PFL’s reasonable trial and appellate attorney fees and
costs.
We affirm the district court’s decisions finding PFL did not breach the
parties’ employment agreement and that Williams is not owed any unpaid wages.
We remand for a calculation of the reasonable trial and appellate attorney fees
incurred by PFL.
AFFIRMED AND REMANDED.