CourtListener 2764386

IN THE COURT OF APPEALS OF IOWA

No. 13-1560
Filed December 24, 2014

TRUSTEES OF THE IOWA LABORERS DISTRICT COUNCIL HEALTH AND
WELFARE TRUST; TRUSTEES OF THE LABORERS NATIONAL PENSION
FUND; and TRUSTEES OF THE IOWA BUILDERS RETIREMENT FUND,
Plaintiffs,

vs.

ANKENY COMMUNITY SCHOOL DISTRICT, BETTS & BEER
CONSTRUCTION CO., INC., WESTERN SURETY COMPANY, GROVE
MASONRY, INC., TWIN CITY CONCRETE PRODUCTS COMPANY, SIOUX
CITY BRICK & TILE COMPANY, and OLDCASTLE APG., INC.,
Defendants.

OLDCASTLE APG WEST, INC. a/k/a RHINO MATERIALS
Defendant/Crossclaim Plaintiff-Appellant,

v.

GROVE MASONRY, INC.,
Crossclaim Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, Rebecca Goodgame

Ebinger, Judge.

Oldcastle APG West, Inc. (“Oldcastle”) appeals from the district court’s

denial of its crossclaim for an amount owed under an open account with Grove

Masonry, Inc. (“Grove Masonry”). It also appeals the district court’s award of

direct and consequential damages to Grove Masonry on its counterclaim against

Oldcastle. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Mark Weinhardt, Holly Logan, and Danielle Shelton of Weinhardt & Logan,

P.C., Des Moines, and Christopher Low of Abendroth & Russell, P.C.,

Urbandale, for appellant.

Matthew G. Sease of Kemp & Sease, Des Moines, for appellee.

Heard by Vogel, P.J., and Vaitheswaran and Potterfield, JJ.
2

POTTERFIELD, J.

Oldcastle APG West, Inc. (“Oldcastle”) appeals from the district court’s

denial of its crossclaim for an amount owed under an open account with Grove

Masonry, Inc. (“Grove Masonry”). It also appeals the district court’s award of

direct and consequential damages to Grove Masonry on its counterclaim against

Oldcastle for defective product. We affirm in part, reverse in part, and remand for

further proceedings.

I. Factual and Procedural Background

Oldcastle is the parent company of Rhino Materials, which manufactures

concrete masonry units (CMUs) used by masonry contractors like Grove

Masonry in construction projects. In 2009, Ankeny Community School District

began two building projects, a high school and a middle school. Grove Masonry

won the bid to be mason on the two projects. It contracted with Oldcastle to

provide the CMUs it would need to complete the work. The CMUs were to

comply with the industry standard ASTM C90 guideline.1

After work began, Grove Masonry started to notice some of the blocks

were defective. There were two types of defects it noticed. First, some of the

blocks were pitted and chipped on their surfaces. This was a patent defect.

These blocks are known as “shotgun blocks.” Second, some of the blocks had a

slight outward protrusion on their surfaces. This was a latent defect and was not

1
The ASTM C90 specification states, “Minor cracks, incidental to the usual method of
manufacture or minor chipping resulting from customary methods of handling in
shipment and delivery, are not grounds for rejection. . . . Five percent of a shipment
containing chips . . . or cracks . . . is permitted.”
3

noticeable until the blocks had been installed. These blocks are known as

“bubble blocks.”

Sometime between January and May of 2010, Grove Masonry first noticed

the defects. Shortly thereafter, it notified Oldcastle. Oldcastle came to the

construction site to look at the product and troubleshoot with Grove Masonry.

Some amount of both the shotgun block and the bubble block had been installed

prior to Oldcastle’s arrival on the scene.

Testimony at trial was inconsistent as to when precisely Grove Masonry

noticed the defects. It was equally unclear as to when Grove Masonry notified

Oldcastle of the defects. One of Grove Masonry’s witnesses thought they first

noticed the problem “probably around the first of the year, January,

February . . . .” Another of its witnesses said that Oldcastle was on site within a

few days of Grove Masonry noticing the defects, which “had to be in April, May,

sometime in there.” The problems with the defective blocks required very costly

corrective measures, a cost which Grove Masonry bore. During this time it

continued to receive and install multiple deliveries of additional CMUs from

Oldcastle but stopped paying for the product.

The Ankeny schools project had been a pivotal one for Grove Masonry.

After the trouble with the CMUs on the Ankeny projects, Grove Masonry fell into

serious economic hardships, became unable to obtain bonding on its projects,

struggled to win contracts, and has been left out of calls for bids in its area.

Oldcastle and Grove Masonry were co-defendants in an action initiated as

a result of the expensive and troubled construction projects. Oldcastle filed a

crossclaim for payment from Grove Masonry for the deliveries of CMUs for which
4

Grove Masonry still refused to pay. It filed two counts, the first of which was

disposed of by summary judgment in Grove Masonry’s favor. The second

crossclaim alleged that Oldcastle held an open account in which Grove Masonry

owed the agreed-upon amount for the CMUs it accepted, which amounted to

$155,572.74. Before trial, Oldcastle moved to amend this second crossclaim to

broaden its theories of recovery, but the district court denied the motion. Grove

Masonry filed counterclaims against Oldcastle, alleging the CMUs delivered

violated an implied warranty of merchantability and an implied warranty of fitness

for a particular purpose.

The district court heard the case in equity in a bench trial. It found

Oldcastle’s relationship with Grove Masonry was not an open account and

denied Oldcastle’s claim for payment for the accepted CMUs. It also entered

judgment in favor of Grove Masonry on the count of violation of the implied

warranty of merchantability. The district court awarded Grove Masonry

$783,096.68 in direct economic damages and $1,005,961.00 in consequential

lost-profits damages. Oldcastle appeals.

II. Standard and Scope of Review

We review the district court’s rulings on contract matters for errors at law.

Iowa R. App. P. 6.907. When we review for errors at law, “[w]e are bound by the

trial court’s findings of fact if they are supported by substantial evidence.”

Harrington v. Univ. of N. Iowa, 726 N.W.2d 363, 365 (Iowa 2007).

“‘Substantial evidence’ means the quantity and quality of evidence that

would be deemed sufficient by a neutral, detached, and reasonable person, to

establish the fact at issue when the consequences resulting from the
5

establishment of that fact are understood to be serious and of great importance.”

Iowa Code § 17A.19(10)(f)(1) (2013).

“In assessing the evidence, we view the record in the light most favorable

to the prevailing party, indulging in all legitimate inferences that may fairly and

reasonably be deduced from the evidence.” Pollmann v. Belle Plaine Livestock

Auction, Inc., 567 N.W.2d 405, 409 (Iowa 1997).

The issues raised by Oldcastle on appeal concern Iowa’s adoption of the

Uniform Commercial Code (UCC), effective at the time of the transactions

between Oldcastle and Grove Masonry. Iowa Code ch. 554 (2009). “[W]hen

interpreting any provision of the Uniform Commercial Code, we bear in mind its

overriding purposes and objectives,” which include “the uniform application of

commercial law among the states and the presumption in favor of predictability

and finality of commercial transactions.” Husker News Co. v. Mahaska State

Bank, 460 N.W.2d 476, 477 (Iowa 1990). To achieve that goal, we may “look to

the interpretation given by other jurisdictions.” Van Ness v. First State Bank of

Ida Grove, 430 N.W.2d 109, 110 (Iowa 1988).

III. Notice of Breach in a Reasonable Time

“Where a tender has been accepted[,] the buyer must within a reasonable

time after the buyer discovers or should have discovered any breach notify the

seller of breach or be barred from any remedy[.]” Iowa Code § 554.2607(3)(a).

Based on the statutory language, Oldcastle asserts Grove Masonry is barred

from any remedy related to the defective CMUs. First, it argues Grove Masonry

failed to plead in its cross-complaint that it provided Oldcastle notice of the

defective CMUs. Second, it argues insofar as Grove Masonry did factually
6

provide notice, it was not provided within a reasonable time after it discovered or

should have discovered the defects.

A. Failure to Plead Notice

Oldcastle asserts a complainant must explicitly plead its notification of

non-conforming product to the opposing party because the notification is a

condition precedent to its basis for recovery. Grove Masonry claims Oldcastle’s

cited law has been outmoded by a 1976 amendment to the Iowa Rules of Civil

Procedure.

It is true that our supreme court has held in the past that “the giving of a

notice must be pleaded as a condition precedent to recovery.” Winter v.

Honeggers & Co., Inc., 215 N.W.2d 316, 327 (Iowa 1974); see Henschel v.

Hawkeye-Security Ins. Co., 178 N.W.2d 409, 417 (Iowa 1970) (“For pleading

purposes, at least, a condition precedent is one whose performance or

occurrence plaintiff must prove in order to recover.”).

However, in 1976, the Iowa Rules of Civil Procedure were amended to

substantially lower the burden on plaintiffs to manage arcane technical

requirements in pleading.

Under [the new] rule, the principal function of pleadings is to give
the adverse party fair notice of the claim asserted in the form of a
generalized summary sufficient to allow that party to make an
adequate response. . . . It will no longer be necessary to determine
whether the rigid requirements of a “cause of action” have been
pleaded. Distinctions under the former rule between “ultimate
facts” which were required to be pleaded and “evidence” and
“conclusions of law” which were prohibited in pleadings are
abolished.
7

Iowa R. Civ. P. 69 cmt. (1976).2 Since the amendment, our supreme court has

noted when necessary that former pleading rules no longer apply. See Am. Nat.

Bank v. Sivers, 387 N.W.2d 138, 139–40 n.1 (Iowa 1986) (holding relevant

portion of 1931 Iowa Supreme Court case “has no applicability under our present

rules of notice pleading”). Our supreme court regularly considers factual

satisfaction of conditions precedent, but has not revisited its requirement to plead

conditions precedent since the amendment of the rule.

In the absence of such a ruling from our supreme court, Oldcastle relies

upon two cases from this court and one from the federal district court in Iowa’s

northern district.3 We agree with the district court’s analyses of these cases. In

Mosebach v. Blythe, 282 N.W.2d 755, 759 (Iowa Ct. App. 1979), this court

denied relief when a plaintiff failed to address a condition precedent in his

pleadings. In Mosebach, we relied on Henschel, a pre-amendment case.

Henschel, 178 N.W.2d at 420. Additionally, we did not address the effect or lack

of effect of the amendment and held alternatively the plaintiff could not recover

due to factual non-satisfaction of the condition. Mosebach, 282 N.W.2d at 759.

This case alone is not sufficient to establish the pleading requirement remains in

effect.

In Randa v. U.S. Homes, Inc., 325 N.W.2d 905, 909–10 (Iowa Ct. App.

1982), this court suggested in dicta—but did not hold—that Winter’s pre-

2
The rule is now found at Iowa R. Civ. P. 1.402.
3
Oldcastle additionally cites one Iowa Supreme Court case. See Hartford-Carlyle Sav.
Bank v. Shivers, 566 N.W.2d 877, 881 (Iowa 1987). However, Hartford does not support
Oldcastle’s position. It acknowledges in dicta the requirement existed pre-amendment
but does not endorse, rely upon, or renew it. Id.
8

amendment pleading requirement may still be in effect. We went on, however, to

decide the case on other grounds, and our language addressing the pleading

requirement4 was not conclusive and is not now controlling.

In Wright v. Brooke Group Ltd., 114 F. Supp. 2d 797, 829–30 (N.D. Iowa

2000), the federal district court noted in dicta that the pre-amendment pleading

requirement is still effective, relying on Randa. The court failed to address or

consider the effect of the amended rule of civil procedure on the pleading

requirement. Further, under the court’s interpretation of the pre-amendment law,

the plaintiff’s filing of a suit itself satisfies the condition by providing notice.

Wright, 114 F. Supp. 2d at 830. Wright does not support Oldcastle’s position on

the pleading issue.

Oldcastle has identified a gap in our notice pleading jurisprudence, but it

has not persuaded us that a pre-amendment formalistic pleading requirement

survived Iowa’s adoption of its current notice pleading system, in which “[o]nly a

general statement of the claim is required.” Christensen v. Shelby Cnty., 287

N.W.2d 560, 563 (Iowa 1980). Grove Masonry’s pleadings do not preclude it

from recovering even though the record shows “it is undisputed that [it] failed to

plead notice.”

B. Failure to Give Timely Notice

Oldcastle’s second argument regarding the requirement to provide timely

notice of the defect is that Grove Masonry’s notice was categorically not timely

relative to the shotgun blocks because Grove Masonry installed the blocks before

4
“It has been held that []the giving of a notice must be pleaded as a condition precedent
to recovery.” Randa, 325 N.W.2d at 909.
9

giving notice.5 Oldcastle argues the installation renders notice untimely as a

matter of law. Grove Masonry argues the timeliness determination is one of fact

and this court must defer to the district court’s finding of timeliness unless it is not

supported by substantial evidence.

This court has previously held “sufficiency and reasonableness are fact

questions” in the context of the notice provision in Iowa Code section

554.2607(3)(a). Tyrrell Cos., L.C. v. Tegeler Design Ctr., Inc., No. 03-0258, 2003

WL 23219948, at *1 (Iowa Ct. App. Nov. 26, 2003). However, Oldcastle notes

that Tyrrell does not indicate whether timeliness is to be determined as a matter

of law and cites to cases in other jurisdictions either explicitly or implicitly holding

notice untimely as a matter of law when construction materials are installed.6

Regardless, we find the district court’s determination that the notice was

provided within a reasonable time is not supported by substantial evidence. The

district court’s findings of fact and the record as a whole lack necessary

specificity.

The district court wrote that Grove Masonry discovered the defects and

notified Oldcastle of them “in the same time frame: in the springtime, March into

April.” In reviewing the record, we note the testimony that the district court

deemed credible actually reflects a fluctuating time frame in which the defects

were discovered and Oldcastle was notified. Though the district court described

5
Oldcastle does not contest that notice was timely provided relative to the bubble block.
6
See Wilke Metal Products, Inc. v. David Architectural Metals, Inc., 236 N.E.2d 303,
305–06 (Ill. App. Ct. 1968); P & F Constr. Corp. v. Friend Lumber Corp. of Medford, 575
N.E.2d 61, 63–64 (Mass. App. Ct. 1991); Archstone v. Tocci Bldg. Corp. of New Jersey,
Inc., 101 A.D.3d 1057, 1058–59 (App. Div. N.Y. 2012).
10

the time frame as March and April of 2010, the testimony reflects the discovery

and notification periods were in fact anywhere between January and May.

The findings of the district court also fail to account for the testimony

indicating that defective CMUs were continually installed even after the defects

were initially discovered or reasonably should have been discovered.7 These

facts extend the reasonable-time calculus beyond simply the number of days

between discovery and notification.

Between the imprecise evidence concerning the dates of discovery and

notification and the continued installation of CMUs in spite of defects, we cannot

say the evidence is sufficient for a neutral, detached person to conclude

notification was reasonably timely, especially because the consequences are of

considerable importance due to the amount of damages sought.

We reverse the district court’s finding of timely notice of defective shotgun

block and remand to the district court for determination of what portion, if any, of

the damages arose from Grove Masonry’s installation of shotgun block it knew or

should have known was defective and remove that portion of liability from

judgment entered against Oldcastle.

IV. Consequential Damages

Oldcastle next appeals the district court’s award of approximately

$1 million in consequential damages to Grove Masonry for profits lost as a result

7
Because Iowa Code section 554.2607(3)(a) requires notice when a buyer should have
discovered the defect and the defective “shotgun block” was patently defective, Grove
Masonry was under a duty to notify Oldcastle of the defect when it should have
inspected the block without regard to whether it in fact discovered the defect before or
after installing the CMUs.
11

of Oldcastle’s breach of the implied warranty of merchantability. A buyer may

recover consequential damages from a breaching seller pursuant to Iowa Code

section 554.2715.8 Recoverable consequential economic losses “include[] loss

of profits resulting from failure of the goods to function as warranted, loss of

goodwill, . . . loss of business reputation, and other loss proximately resulting

from a defective product beyond direct economic loss.” Beyond the Garden

Gate, Inc. v. Northstar Freeze-Dry Mfg., Inc., 526 N.W.2d 305, 309 (Iowa 1995)

(citation omitted).

“[T]he buyer who has accepted goods and then discovers their defects

must show that the seller had reason to know at the time of contracting of the

buyer’s possible losses caused by a breach to recover consequential damages.”

Nachazel v. Miraco Mfg., 432 N.W.2d 158, 160 (Iowa 1988). The losses must be

foreseeable, and losses are foreseeable “if they follow in the ordinary course of

events, but also as a result of special circumstances.” Id. Iowa courts focus on

whether the type of damages was foreseeable rather than whether the specific

injury itself was foreseeable. Kuehl v. Freeman Bros. Agency, Inc., 521 N.W.2d

714, 718–19 (Iowa 1994).9

8
Iowa Code section 554.2715 provides:
Consequential damages resulting from the seller’s breach include
a. any loss resulting from general or particular requirements and
needs of which the seller at the time of contracting had reason to know
and which could not reasonably be prevented by cover or otherwise; and
b. injury to person or property proximately resulting from any
breach of warranty.
9
Oldcastle notes the cases espousing this principle do not apply Iowa Code chapter
554. The cases are nevertheless still applicable to demonstrate how Iowa courts
interpret the chapter’s reasonable foreseeability requirement.
12

At trial, Grove Masonry requested three categories of consequential

damages: damages arising from a loss of goodwill, damages arising from a loss

of business reputation, and damages arising from loss of profits. The district

court held Grove Masonry could not recover on the first two categories because

any calculation to determine the economic value of such a loss would be purely

speculative. However, the court found that Grove Masonry’s loss of profits was

measurable, foreseeable, and proximately caused by Oldcastle’s breach.

Oldcastle argues the district court’s award is improper because the

damages are speculative in their entirety or were largely unforeseeable. We first

address Oldcastle’s claim that the damages were speculative. Oldcastle claims

the district court contradicted itself when it refused to award Grove Masonry

consequential damages as a result of loss of goodwill or business reputation

because the measure of those injuries would be speculative. At the same time, it

awarded damages to account for profits lost as a result of a loss of goodwill and

business reputation.

The district court’s holding was not contradictory. The district court did not

hold that the injury to Grove Masonry’s goodwill or business reputation itself was

speculative. It held any dollar amount assigned to those injuries would be

speculative. However, the measure of lost profits was not guesswork—it was

supported by trial testimony and calculations asserted by both parties. The

measurable injury of lost profits resulted from the immeasurable injuries to Grove

Masonry’s goodwill and business reputation. But it does not follow that the lost

profits are therefore speculative themselves.
13

We next consider whether the lost profits were foreseeable. Oldcastle

argues they were not foreseeable because the actual cause of the $1 million in

lost profits was Grove Masonry’s inability to obtain performance bonds after

falling on economic hardships.10

However, the district court found it was “reasonably foreseeable at the

time of contracting that a breach of warranty of merchantability would result in

lost profits.” In ruling on Oldcastle’s post-trial motion, it further noted, “[T]he

evidence presented . . . warranted the lost profits damages, notwithstanding the

loss of bonding capacity.”11 The foreseeability question on appeal, therefore, is

whether there is substantial evidence to support the district court’s finding that

lost profits—vis a vis lost customers—was a reasonably foreseeable

consequence of Oldcastle’s breach at the time of contracting.

The record demonstrates that the Ankeny projects were of such a size and

profile that Grove Masonry’s performance on those jobs could foreseeably have

affected its future business prospects. It was reasonably foreseeable at the time

of contracting that Grove Masonry’s future contracts with other customers,

10
A contractor’s loss of bonding ability has been held unforeseeable in transactions
similar to the one at hand in other jurisdictions. Oldcastle cites cases considering this
issue from several states. See Lewis Jorge Const. Mgmt., Inc. v. Pomona Unified Sch.
Dist., 102 P.3d 257 (Cal. 2004); MLK, Inc. v. Univ. of Kansas, 940 P.2d 1158 (Kan.
1997), Daniel E. Terreri & Sons, Inc. v. Mahoning Cnty. Bd. of Commrs., 786 N.E.2d 921
(Ohio Ct. App. 2003); and NAJLA Assocs., Inc. v. William L. Griffith & Co., 480 S.E.2d
492 (Va. 1997). These cases demonstrate that the loss of bonding capacity may not be
reasonably foreseeable depending on the particular factual circumstances of each case,
but they do not persuade us that the loss of bonding capacity should be unforeseeable
as a matter of law in Iowa as Oldcastle asserts. Instead, we review the district court’s
findings of fact for substantial evidence that supports them.
11
Contrary to Oldcastle’s refrain, the district court neither “ignored [n]or evaded” the
issue of foreseeability of Grove Masonry’s loss of bonding capacity. The court simply
found Grove Masonry had proved its claim for damages for lost profits.
14

retention of existing customers, and acquisition of new customers could depend

upon the quality of its work product, i.e., the quality of the CMUs it purchased

from Oldcastle. There is substantial evidence to support the district court’s

finding that the type of profits ultimately lost—future contracts with other

customers—was reasonably foreseeable to the parties at the time of

contracting.12

Oldcastle raises one further question: whether, if lost profits were in fact

reasonably foreseeable, they were foreseeable to the extent to which they have

been awarded—i.e., whether the consequential damages awarded must be of a

foreseeable extent in addition to a foreseeable type. Our jurisprudence does not

directly address the issue,13 but Iowa law does not require that the lost-profits

damages be per se proportionate to the value of the original contract. Nor is

there any indication in the record that the damages awarded in this case are

disproportionate under the circumstances.

We find nothing in the record to indicate the extent of the damage shown

in this case was not as foreseeable as its type given the value of Grove

Masonry’s typical project. Despite Oldcastle’s assertion, the bare value of the

12
Our holding on this matter does not mean that there is a lack of substantial evidence
that suggests Grove Masonry’s loss of bonding capacity is the actual cause, in whole or
in part, of the loss of profits. Rather, that question is simply not within the scope of our
review. Oldcastle’s preoccupation with Grove Masonry’s bonding capacity has caused it
to misapprehend the issue. We are not searching for alternative causes of the lost
profits; we are searching for evidence supporting the district court’s conclusion as to the
cause.
13
Oldcastle’s only citation for its claim is to a case from a federal district court in
Tennessee. Great Am. Music Mach., Inc. v. Mid-S. Record Pressing Co., 393 F. Supp.
877, 885 (M.D. Tenn. 1975). While this case expresses its reasoning for a general
proportionality requirement, it is not a statement of controlling law in Iowa and is not
persuasive given the current state of the law in Iowa.
15

CMUs in this case does not arbitrarily limit the extent of foreseeable lost-profit

damages.

We therefore affirm the district court’s conclusion that Grove Masonry

suffered $1,005,961 in foreseeable consequential damages, and it may therefore

recover from Oldcastle.

V. Payment for Goods

Oldcastle lastly appeals the district court’s denial of its claim it pleaded as

an amount owed on an open account between itself and Grove Masonry. Grove

Masonry denies the existence of an open account, and the district court found

there was none. The questions before this court on appeal therefore are whether

the parties maintained an open account in which there currently rests a balance

owed to Oldcastle and whether the court properly limited Oldcastle’s claim under

our notice pleading rules discussed earlier in the context of Grove Masonry’s

failure to plead notice of breach in its counterclaim.14

At trial, Oldcastle proved Grove Masonry continued to accept delivery of

product, it did not pay for that product, and the amount owed for the product it

accepted. The district court denied the claim for the amount owed because

Oldcastle’s pleadings described that amount owed as an open account, and the

14
Oldcastle’s appeal is largely predicated on the principle of Iowa Code section
554.2709, which provides, “When the buyer fails to pay the price as it becomes due the
seller may recover . . . the price . . . of goods accepted . . . .” This provision allows a
seller to recover the contract price of the goods accepted by the buyer regardless of any
other breach of contract actions taken by the buyer against the seller. Grove Masonry
correctly notes that Oldcastle made no claim under section 554.2709 at trial and no such
claim is preserved for our review. Rather, Oldcastle asks this court to reverse the district
court on its denial of the open account claim in order to effectuate the policy goal of
section 554.2709. The actual effect of section 554.2709 on the facts of this case,
however, is not an issue before us.
16

district court decided those transactions fell outside the technical definition of an

open account. The district court’s reliance on a pleading technicality to deny its

claim frustrated Oldcastle’s ability to recover payments to which it was entitled.

However, even under its open account claim, Oldcastle is entitled to

recover. The controversy arises in the parties’ competing interpretations of our

supreme court’s decision in Roger’s Backhoe Serv., Inc. v. Nichols, 681 N.W.2d

647, 650 (Iowa 2004). In Roger’s Backhoe, the court held:

[I]n a general sense, [an account] encompasses any claim or
demand based on a transaction creating a debtor-creditor
relationship. . . . [W]hen the evidence fails to establish the
elements of an account stated, the creditor may nevertheless
recover by proving a contractual obligation for the individual terms
in the account and the fair and reasonable value of the amounts
claimed.

Id. (citations omitted). Oldcastle asserts the multiple contracts for sale between

itself and Grove Masonry are transactions creating a debtor-creditor relationship

in which Oldcastle credits Grove Masonry the value of the goods upon delivery

for future payment on that debt.

The district court and Grove Masonry rely upon a 1931 case in which our

supreme court held, “A series of independent express contracts for services to be

performed for an agreed compensation does not constitute an open continuous

current account.” Sammon v. Roach, 235 N.W. 78, 79 (Iowa 1931). We find

Sammon, to the extent it remains good law in light of our more recent

jurisprudence, is distinguishable. The quoted language in context does not

categorically foreclose Oldcastle’s claim. Sammon dealt with a quantum meruit
17

claim15 in which the individual contracts had been paid in full as they became

due. The Sammon court’s statement about open accounts related only to the

quantum meruit claim before it, as the language of the decision as a whole

makes clear.16

Additionally, Sammon did not outright define an open account, but relied

on other cases, such as Tucker v. Quimby, 37 Iowa 17, 19 (1873), which stated,

“a ‘continuous, open, current, account,’ is an account which is not interrupted or

broken, not closed by settlement or otherwise, and is a running, connected series

of transactions.” The Tucker language aptly describes the relationship between

Oldcastle and Grove Masonry as the former continued to supply the latter with

goods without receiving payment for previous deliveries.

We agree with Oldcastle that the district court’s interpretation of our

supreme court’s dictates in Roger’s Backhoe is improperly constrained by its

reading of Sammon. The transactions at issue in this case span multiple

overlapping, unbroken contractual obligations creating an account that was never

settled. The amount Oldcastle asserts it is owed is not derived from a single

15
Quantum meruit “denote[s] a particular subclass of implied-in-fact contracts.” Iowa
Waste Sys., Inc. v. Buchanan Cnty., 617 N.W.2d 23, 29 (Iowa Ct. App. 2000).
Sammon’s holding involved a quantum meruit assertion that a previously agreed-upon
and paid amount was not an equitable payment for services rendered. Such a
consideration is naturally distinguishable from the case at hand, in which Oldcastle has
established an ongoing series of contracts in which it continued to deliver goods while
prior contracts remained unpaid.
16
[Our conclusion] would seem to be clear upon reason and without the
necessity of authority to support it. The rule is well settled in this state
that, where a cause of action is based solely upon quantum meruit,
recovery cannot be had if the proof offered in support thereof establishes
an express contract. It is equally true that, if the cause of action is based
upon contract, recovery may not be had upon the theory of quantum
meruit.
Sammon, 235 N.W. at 79.
18

“contract for a lump sum.” McIntire v. Muller, 522 N.W.2d 329 (Iowa Ct. App.

1994). Oldcastle proved Grove Masonry had not paid for CMUs it accepted, and

should have prevailed on this claim.

We reverse the district court’s judgment against Oldcastle in its count II

styled as an open account claim. Grove Masonry must pay for the $155,572.74

in goods it accepted. That amount may be used to offset damages awarded to

Grove Masonry. We remand for further proceedings consistent with this opinion.

VI. Conclusion

As to Oldcastle’s claim that Grove Masonry was entirely precluded from

recovery because it failed to plead the condition precedent that it gave timely

notice of the defect, we affirm the district court. Grove Masonry’s pleadings gave

Oldcastle fair notice of the claim sufficient to allow it to make an adequate

response and were therefore sufficient to permit recovery.

As to Oldcastle’s claim that Grove Masonry was partially precluded from

recovery because it failed in fact to provide timely notice of the patently defective

shotgun block, we reverse the judgment entered and remand for recalculation of

damages.

As to Oldcastle’s claim that the district court’s consequential damages

award was improper because it was not foreseeable, we affirm the district court.

Substantial evidence exists in the record that Grove Masonry’s loss of future

contracting partners was reasonably foreseeable at the time of contracting.

As to Oldcastle’s claim that the district court’s consequential damages

award was improper because it was speculative, we affirm the district court. The
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damages were the result of evidence properly before the court and thorough

calculations based on that evidence.

As to Oldcastle’s open account claim, we reverse the district court’s entry

of judgment in Grove Masonry’s favor and remand for further proceedings.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.