text:
    HORSFIELD CONSTRUCTION, INC., Appellant, v. DUBUQUE COUNTY, IOWA, Appellees.
    No. 00-1965.
    Supreme Court of Iowa.
    Nov. 14, 2002.

      Todd J. Locher, of Locher & Locher, Farley, for appellant.
    Fred H. McCaw, Dubuque County Attorney, for appellee.
   LAVORATO, Chief Justice.

Horsfield Construction, Inc. (HCI) bid on a highway improvement project of Du-buque County, Iowa. The Dubuque County Board of Supervisors accepted the bid but later rescinded its acceptance and re-bid the project. HCI was not the successful bidder the second time around. HCI sued the County for breach of contract. In a bench trial, the district court ruled that there was no binding agreement because HCI and the County never executed a formal written contract and because HCI had not fulfilled several conditions. HCI appealed and we transferred the case to the court of appeals, which affirmed. On further review, we vacate the court of appeals decision, reverse the judgment of the district court and remand.

I. Background Facts and Proceedings.

On September 13, 1999, the Dubuque County Auditor issued a “Notice to Bidders” for a highway improvement project on East Worthington Road. The notice was published in three newspapers with general circulation in the county and furnished directly to contractors known to the county engineer as likely interested bidders. According to the notice, the bids were due in the auditor’s office by 1 p.m. on Monday, September 27, 1999. The notice included the following language: “Failure to execute a contract and file an acceptable bond and certificate of insurance within 15 days of the date of the approval for awarding of the contract, as herein provided, will be just and sufficient cause for the denial of the award and forfeiture of the proposal guarantee.”

HCI received a copy of the notice, the proposal form, and the plans and specifications from the county engineer.

The plans specified two alternatives. Alternative I called for repaving the road using asphalt only. Alternative II called for the use of concrete to pave the road and asphalt for the shoulders.

HCI decided to submit a bid on Alternative II only. The Thursday before the Monday deadline for submitting bids, HCI discovered a discrepancy in the quantity of asphalt required for Alternative II. Alternative II called for 1375 tons of asphalt when it should have called for 163 tons.

HCI informed the county engineer’s office of the error. The County could have issued an addendum or postponed the bid submission because of the error. However, the county engineer’s office told HCI, “it was too late in the process to send out an addendum, for fear that some people wouldn’t receive it. So we [HCI] would have to basically bid it as we saw appropriate.”

Mark Jobgen, the county engineer, learned of the error on the Friday before bids were due on Monday. Jobgen’s concern was that contractors from across the state would overnight their bids on Friday to arrive on Monday, and therefore would not be able to correct their bids to account for the discrepancy. He therefore decided to “leave it [the error] the way it [was] and hopefully ... everybody would bid their ... normal amount....”

HCI completed its bid and submitted its proposal form, along with a $40,000 proposal guarantee, before the 1 p.m. September 27, 1999, deadline. The proposal form contained the following information: the type and quantity of work to be done, the per unit price and total price for the work, the start date for the project, and the time for completion of the project.

To account for the error in the proposal, HCI placed a nominal dollar figure ($5) on the asphalt line item, and adjusted two other asphalt-related items higher to reflect HCI’s true cost of asphalt. One other bidder also placed a nominal dollar figure ($1) on the asphalt line item. The other bidders bid a “normal, reasonable market amount” for the asphalt line item.

On September 27, the Board opened and publicly announced the bids. The Board publicly announced HCI as the lowest bidder for the project (Alternative II), with a bid of $1,208,212.98. The Board then sent the bids to the county engineer’s office to review and to provide the Board with a recommendation.

In an October 1 memorandum to the Board, Jobgen explained the problem with the quantity of asphalt indicated in the proposal for Alternative II. He advised the Board that he did not learn of the problem “until it was too late for our office to issue an addendum to the bidders.” He explained the situation further:

We felt that when the bidders bid the item we could bring it to your attention because we thought it would only affect the decision whether you decided to go asphalt or concrete. The adjustment would lower the actual bid as submitted for Alternate II. What happened was that one of the bidders used $158 per ton for the item, ... and the low bidder, [HCI], used $5 per ton for this item. I don’t feel that the bidders were attempting to gouge the county in any way, they incorporated part of the asphalt cement into the unit prices of the asphalt cement concrete materials. To some this may have appeared as bid unbalancing. I have heard of bid unbalancing in other counties or State projects but had never experienced it myself.

Jobgen advised the Board to “discuss the bid status with [HCI] if you are considering going with concrete.”

The Board followed Jobgen’s advice and met with HCI representatives, who explained how HCI handled the discrepancy with the asphalt amount for Alternative II. HCI assured the Board that a change in the asphalt amount would not affect its bid because it had taken the asphalt into account in other asphalt-related line items. Apparently, the Board was satisfied with HCI’s explanation because it approved HCI’s bid for Alternative II, the concrete option. On October 7, the Board informed HCI in a letter that

[a]t a special meeting today, the Du-buque County Board of Supervisors approved your bid ... for the portland concrete pavement restoration option on the East Worthington Road at a price of $1,208,212.98.
We look forward to working with you and understand that you can begin some work on the project yet this fall.

After the Board’s approval, Jobgen recalculated the bids after correcting the asphalt discrepancy and discovered that HCI was no longer the low bidder. Instead, Flynn Company, Inc. was the low bidder by approximately $64,000. Several days later, Jobgen informed HCI that the Board was considering rejecting the bids and re-bidding the project.

After receiving this information, HCI informed the Board by letter that it had a valid and enforceable contract with the County when the Board approved HCI’s bid. HCI also informed the Board that it “stands ready, willing and able to perform the contract entered into with the county and further can begin the project yet this fall.”

The Board then requested the county attorney’s legal opinion on the matter. The county attorney advised the Board it could proceed in one of two ways: (1) deny the contract to HCI for submitting an unbalanced bid and award the contract to the remaining lowest, responsible bidder, taking into account a corrected calculation of the asphalt; or (2) reject all bids and rebid the project.

Later, the Board informed HCI by letter that it had voted to reject the September 27, 1999, bids and re-bid the project. The Board never prepared or tendered a formal contract to HCI. HCI never executed a contract within fifteen days of the date of the award of the contract as contemplated by the bid proposal form. HCI did not furnish a performance bond and a certificate of insurance. However, HCI continued to assure the Board it was ready, willing and able to perform, and would sign the contract as soon as it was prepared and tendered to HCI. HCI had arrangements in place to secure the performance bond and necessary certificates of insurance.

In re-bidding the project, the County dropped Alternative I (asphalt only) from the proposal. The County also dropped the “asphalt cement” item from the proposal, using essentially the same approach HCI had used in its first bid. The County used a revised proposal form, which added the following language: “Acceptance of a bid by the county is subject to confirmation and review and no contract enforceable by the bidder is created, until execution of a written contract by all parties.”

Following completion of the re-bidding process, the Board passed a formal resolution directing the county engineer’s office “to prepare the necessary documents for the [project] with Flynn Company, Inc.” The County and Flynn Company, Inc. executed a formal contract on February 28, 2000.

Approximately two months before the County and Flynn Company, Inc. executed this formal contract, HCI sued the County, alleging that the Board’s approval of HCI’s bid on October 7, 1999, created a contract between the County and HCI. Additionally, HCI alleged that the Board’s decision to re-bid the project constituted a breach of the contract by repudiation.

In a bifurcated trial on the question of liability only, the district court concluded that no contract had been created, thereby rejecting HCI’s breach of contract claim. HCI appealed and we transferred the case to the court of appeals which affirmed. We then granted HCI’s application for further review.

Additional facts will be presented as they relate to the issues discussed.

II. Applicable Statutory Law and Issue.

Iowa Code section 331.341 provides:
Contracts for improvements which may be paid for from the secondary road fund shall be awarded in accordance with sections 309.40 to 309.43, 310.14, 314.1, 314.2, and other applicable state law.

Iowa Code § 331.341(3) (1999). The project here was to be paid for from the secondary road fund. Iowa Code section 314.1 therefore applies. That provision in relevant part provides:

In the award of contracts for the construction, reconstruction, improvement, repair or maintenance of any highway, the agency having charge of awarding such contracts shall give due consideration not only to the prices bid but also to the mechanical or other equipment and the financial responsibility and experience in the performance of like or similar contracts. The agency may reject any or all bids, or may let by private contract or build by day labor, at a cost not in excess of the lowest bid received .... All contracts shall be in writing and shall be secured by a bond for the faithful performance thereof as provided by law.

Iowa Code § 314.1 (emphasis added).

The district court concluded that the Board’s October 7 approval of HCI’s bid fell short of establishing a binding agreement because section 314.1 required a formal written contract. The court also concluded that the Board’s October 7 approval was conditional for two reasons. First, HCI did not provide the performance bond and certificate of insurance within the time stated in the Notice to Bidders and HCI’s bid. Second, a book published by the Iowa Department of Transportation, entitled “English Standard Specifications for Highway and Bridge Construction” (commonly referred to as the Blue Book), contemplated the execution of a written contract. The court found that the Blue Book provisions relative to contract formation applied to the project. The court further found that because neither condition was fulfilled, there was no binding contract which in turn allowed the Board to reject all bids and re-bid. The issue we must decide boils down to whether the Board’s approval of HCI’s bid on October 7, 1999, created an enforceable contract.

III. Scope of Review.

Because the parties tried this case to the court at law, our review is limited to the correction of errors at law. Iowa R.App. P. 6.4; City of McGregor v. Janett, 546 N.W.2d 616, 617 (Iowa 1996). We view the evidence in the light most favorable to sustaining the court’s judgment. Id. Thus, the district court’s findings of fact are binding on this court if supported by substantial evidence. Frontier Properties Corp. v. Swanberg, 488 N.W.2d 146, 147 (Iowa 1992). Evidence is substantial if reasonable minds would find it adequate to reach the same conclusion, even if this court might draw a contrary inference. Id. However, we are not bound by the district court’s conclusions of law. Janett, 546 N.W.2d at 617.

IV. The Law Generally Regarding Public Bidding.

Ordinarily, a municipality’s advertisement for bids is a solicitation for offers, and does not itself constitute an offer. A bid generally constitutes an offer, and does not in itself constitute a contract. An acceptance by the city after the bids are made is therefore generally necessary; and it is always necessary where the city in its proposals reserves the right to reject any and all bids-Where the municipality reserves the right to reject any and all bids, a bidder cannot claim contractual rights until the municipality awards the bidder the contract.

64 C.J.S. Municipal Corporations § 926, at 127 (1999).

Once a municipality accepts a valid bid, such acceptance results in a binding contract, “even though there may have been defective compliance with certain legal formalities.” Id. Thus, the bidder has a right of action for breach of contract. See 64 Am.Jur.2d Public Works and Contracts § 78, at 713 (2001) (“The state has no greater right than individuals to refuse performance of its contract.”); 10 Eugene McQuillin, The Law of Municipal Corporations § 29.80, at 528 (3d ed. 1999) (“It is a contract theory on which an action for damages for refusing to execute a contract with the accepted bidder is usually based.”) [hereinafter McQuillin].

When a statute relating to a public contract has language expressly requiring the subsequent execution of a formal written contract or implying that such a contract be executed, the question arises whether the public body can rescind or revoke the award of a contract before the parties have executed the formal contract. See J.D. Emerich, Annotation, Revocation, Prior to Execution of Formal Written Contract, of Vote or Decision of Public Body Awarding Contract to Bidder, 3 A.L.R.3d 864, 868 (1965) [hereinafter Emerich],

There are two views on this issue. Some courts take the view that “under the statutory language involved and the particular facts appearing, the making of the award is merely a preliminary step, and that until the formal contract has been executed in accordance with the statutory requirements the agency which made the award has the power to revoke it.” Id.; see also McRae v. Farquhar & Albright Co., 168 Ark. 38, 269 S.W. 375, 377 (Ark. 1925) (statute required contracts to be prepared by attorney general and executed in triplicate and required bidder to execute bond to be approved by government agency); E.H. Oftedal & Sons, Inc. v. State ex rel. Montana Transp. Comm’n, 308 Mont. 50, 40 P.3d 349, 357 (Mont.2002) (specifications reserving right to cancel award prior to execution of contract and statute requiring formal contract following award of contract); Pfaff Constr. Co. v. Leonard, 40 Ohio App. 246, 178 N.E. 328, 329 (Ohio Ct.App.1931) (statute provided that “[I]f the bid is accepted, a contract will be entered into and the performance of it properly secured”); Wayne Crouse, Inc. v. School Dist., 341 Pa. 497, 19 A.2d 843, 844 (Pa.1941) (statute required formal execution of written contract; court held that the award was merely a “preliminary declaration of intention to enter into a formal contract, which ... did not in any way limit the [political subdivision’s] freedom of future action”); 1 Richard A. Lord, Williston on Contracts § 4:10, at 343-44 (4th ed. 1990) (“In the case of public contracts, certain additional formalities are often required by statute or by the request for bids under such statutes, such as the execution of a written contract, or the requirement that a satisfactory bond be furnished. In such cases, even after acceptance of the bid has occurred, no contract is formed until the requisite formality has been complied with.”); 64 Am.Jur.2d Public Works and Contracts § 78, at 711.

Other courts take the view that “at least under the statutory language involved and the particular facts appearing, a binding contract is created when the award is made and communicated to the successful bidder, and that no power remains in the awarding agency to revoke the award, even before a formal contract is executed according to the provisions of the controlling statute.” Emerich, at 871; see also United States v. Purcell Envelope Co., 249 U.S. 313, 319, 39 S.Ct. 300, 302, 63 L.Ed. 620, 624 (1919) (bidder executed written contract but government agency refused to sign and revoked its acceptance of the bidder’s bid; Court said: “It makes no difference that the contract was not formally signed or the bond formally approved, ... as [required by] the terms of the contract and by a statute of the United States.... Their formal execution, as we have seen, was not essential to the consummation of the contract.”); City of Susanville v. Lee C. Hess Co., 45 Cal.2d 684, 290 P.2d 520, 526 (Cal.1955) (statute required formal written contract be executed and appropriate bond furnished for faithful performance of the work); Johnson v. City of Jordan, 352 N.W.2d 500, 503 (Minn.Ct.App.1984) (ordinance provided that all contracts to which the city is a party must be signed by the mayor and the city administrator on behalf of the city, and shall be executed in the name of the city); 64 Am.Jur.2d Public Works and Contracts § 78, at 712.

A statutory requirement that municipal contracts be in writing “does not require a single integrated document; a series of documents, the totality of which contain all material terms of the agreement, will suffice.” 10 McQuillin § 29.22, at 346; see also Hubbell, Roth & Clark, Inc. v. Gallipolis, 660 F.2d 201, 207 (6th Cir.1981). In Hubbell, a city charter provision provided that expenditures in excess of five hundred dollars “shall first be authorized and directed by ordinance or resolution of the City Commission, and when so authorized and directed, the City Manager shall make a written contract with the lowest and best bidder.” Hubbell, 660 F.2d at 205-06.

The appellate court rejected the city’s contention that the absence of a formal, written contract signed by both sides was fatal to any recovery under the city charter. In doing so, the court reasoned:

The district court was dissuaded by the fact that there was no single, integrated, four-corners document entitled “contract” signed and executed by the parties. We find no such requirement in [the city charter]. The Charter does not speak as to the form of the contract. It has no requirement of signature, seal, structure or any other technical requirement. ... All material terms and specifications were in writing as were the various Ordinances and authorizations to proceed sent by the successive City managers to the [plaintiff-bidder].... We find that the several documents detailed above suffice to meet the Charter’s general requirement of a “written contract” and therefore the district court erred in ruling that this particular formal requirement was not met.

Id. at 207 (footnote omitted).

The same is true here. Section 314.1 does not speak as to the form of the contract and has no requirement of signature, seal, structure or other technical requirement. There was a written bid and a written approval of that bid. Therefore, the requirement in section 314.1 that “[a]ll contracts shall be in writing” is satisfied if the bid and the Board’s approval constitute an otherwise binding agreement. That brings us to the critical issue of whether the bid and the Board’s approval constituted a binding contract.

Y. Did the Bid and the Board’s Approval Constitute a Binding Contract?

This court has adopted Restatement (Second) of Contracts, section 27, which provides:

Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Restatement (Second) of Contracts § 27 (1981); Faught v. Budlong, 540 N.W.2d 33, 35 (Iowa 1995). Comments a and b to section 27 are critical to an understanding of this general rule. Comment a provides:

Parties who plan to make a final written instrument as the expression of their contract necessarily discuss the proposed terms of the contract before they enter into it and often, before the final writing is made, agree upon all the terms which they plan to incorporate therein. This they may do orally or by exchange of several unitings. It is possible thus to make a contract the terms of which include an obligation to execute subsequently a final writing which shall contain certain provisions. - If parties have definitely agreed that they will do so, and that the final writing shall contain these provisions and no others, they have then concluded the contract.

Restatement (Second) of Contracts § 27 cmt. a (emphasis added); Faught, 540 N.W.2d at 35.

Comment b provides:

On the other hand, if either party knows or has reason to know that the other party regards the agreement as incomplete and intends that no obligation shall exist until other terms are assented to or until the whole has been reduced to another written form, the preliminary negotiations and agreements do not constitute a contract.

Restatement (Second) of Contracts § 27 cmt. b; Faught, 540 N.W.2d at 35.

Factors that bear on whether a contract has been concluded include the following:

the extent to which express agreement has been reached on all the terms to be included, whether the contract is of a type usually put in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether the amount involved is large or small, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiations.

Restatement (Second) of Contracts § 27 cmt. c; Faught, 540 N.W.2d at 36.

It is undisputed in this case that HCI’s bid was an offer to do the work as outlined in the County’s plans and specifications. The bid was specific as to (1) the start date (two weeks after the award of contract), (2) the number of working days to complete the project (80), and (3) the consideration (the per unit price and total price for each bid item was set forth in the bid). Additionally, each bid item was cross-referenced in the County’s engineering plans and further referenced in the Blue Book. The record shows that the parties would not be agreeing to any new terms or conditions upon signing a formal contract.

The Board’s October 7 letter was unconditional. It approved HCI’s bid with no mention that its approval was subject to a written contract to be entered into later. See Jameson v. Joint Drainage Dist., 191 Iowa 920, 922 183 N.W. 512, 513 (1921) (“acceptance of a bid or proposal to enter into a contract, to be binding upon the parties, must be absolute and unconditional”). Significantly, in re-bidding the project the County revised its proposal form to include the following language: “Acceptance of a bid by the county is subject to confirmation and review and no contract enforceable by the bidder is created until execution of a written contract by all parties.” See Delta Democrat Publ’g Co. v. Bd. of Public Contracts, 224 Miss. 848, 81 So.2d 715, 716-17 (Miss.1955) (acceptance of low bid was expressly made subject to bidder executing contract; held that bidder’s refusal to enter contract as written allowed governing body to reject bid).

In short, the “contract” document that was to follow was a mere formality and redundant to HCI’s bid and the Board’s October 7 approval. Moreover, before the Board’s unconditional approval, there was no evidence indicating that either party considered something further had to be done to make the contract complete. In its October 7 approval, the Board left no doubt that it believed an agreement had been reached when it commented: “We look forward to working with you and understand that you can begin some work on the project yet this fall.”

In reliance on the Board’s acceptance of its bid, HCI purchased a portable cement mix plant with accessories for $203,000. It also purchased a John Deere rubber tire end loader for approximately $95,000. Additionally, HCI contacted providers of materials and other subcontractors. There was testimony from HCI representatives that the company would not have taken these steps without the approval of its bid by the Board.

All of these facts are undisputed and lead us to conclude as a matter of law that the parties intended to be bound when the Board accepted HCI’s bid and that the written contract called for by the statute was intended only as a memorial of their agreement. See Pennington v. Town of Sumner, 222 Iowa 1005, 1021-22, 270 N.W. 629, 638 (1936) (holding that where construction company submitted bid for construction of municipality’s electric plant on municipality’s form of proposal and stated in accompanying letter that proposal was to do all work in accordance with specifications, municipality’s acceptance of bid constituted binding agreement which could be enforced even if no formal contract was thereafter entered into); see also Power Serv. Corp. v. Joslin, 175 F.2d 698, 702 (9th Cir.1949) (holding that “though parties contemplate the ultimate execution of a more formal writing, the acceptance of a bid or offer results in a binding contract when none of the material terms remain unsettled or require future determination”).

The following language in the County’s notice to bidders provides further support for our conclusion that the parties reached a binding contract when the Board approved HCI’s bid: “Failure to execute a contract and file an acceptable bond and certificate of insurance within 15 days of the date of the approval for awarding the contract, as herein provided, will be just and sufficient cause for the denial of the award and forfeiture of the proposal guarantee.” HCI enclosed a certified check ($40,000) with its bid as a guarantee to execute the formal contract and agreed in the bid that such sum could be kept by the County as a forfeiture in the event HCI did not execute the contract if the bid was accepted.

In Lynch v. City of New York, 37 N.Y.S. 798 (N.Y.App.Div.1896), a bidding statute provided for a similar guarantee and forfeiture. The court viewed this provision as evidence that the intention of the statute was to bind both the lowest bidder and the city to sign the formal contract, stating:

[W]hen that award is made, it seems to be clearly the intention of the statute to bind both the lowest bidder and the city to sign the contract. The penalty for a violation of that obligation by the lowest bidder is fixed by the statute, namely, a forfeiting of the amount of money that the bidder was required to deposit at the time of the submission of his bid; and as no penalty is affixed for a refusal of the city to perform its part of the contract, namely, to execute the contract that had been settled by the corporation counsel as an act of preliminary specification to the bid, we think it follows that the city was liable for the damages sustained by the lowest bidder for the refusal to execute the contract.

Id. at 801, 73 N.Y.St.Rep. 479. To allow the Board to re-bid under the facts before us would “sanction arbitrary rejection and hence have the effect of opening the door to the possibility of favoritism in future public bidding.” Northeast Miss. Cmty. Coll. Dist. v. Vanderheyden Constr. Co., 800 F.Supp. 1400, 1403 (N.D.Miss.1992).

We conclude the district court erroneously interpreted Iowa Code section 314.1 to the extent it found there was no binding contract when the Board approved HCI’s bid because the parties did not subsequently enter into a formal written contract. That leaves for our consideration the district court’s conclusion that the Board’s October 7 approval was conditional, the final issue we address.

VI. Was the Board’s October 7 Approval Conditional?

The district court concluded the following language in the Notice to Bidders made the Board’s October 7 approval conditional: “Failure to execute a contract and file an acceptable bond and certificate of insurance within 15 days of the date of the approval for awarding of the contract, as herein provided, will be just and sufficient cause for the denial of the award and forfeiture of the proposed guaranty.”

We first note that the district court found that HCI was ready, willing, and able to perform and stood ready to sign the contract as soon as it was prepared and tendered to HCI. The court also found that HCI assured the Board that it was ready to furnish the performance bond and certificate of insurance, but it needed the contract in order to secure these documents. There was undisputed evidence that HCI easily could have obtained the bond and certificate of insurance, a finding the district court expressly made. The evidence is also undisputed that the Board rescinded its acceptance of HCI’s bid because of an error in the stated quantity in the proposal form and not because HCI could not secure the bond and certificate of insurance. Therefore, there was no basis to support a finding that the Board rescinded because of any failure on the part of HCI to perform the alleged conditions. The Board’s unilateral mistake did not release the County from its obligation under the contract. State ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 150 (Iowa 2001). Moreover, the County waived any issue of mistake by failing to raise it before the district court and on appeal.

Additionally, when the Board rescinded its acceptance of HCI’s bid, it in effect breached the County’s agreement with HCI by anticipatory breach. See Glass v. Minnesota Protective Life Ins. Co., 314 N.W.2d 393, 396 (Iowa 1982). Such a breach excuses performance on the part of the non-breaching party, in this case HCI. Berryhill v. Hatt, 428 N.W.2d 647, 655 (Iowa 1988). In these circumstances, the non-breaching party may consider the contract breached and sue immediately, as HCI did in this case. Id.

Finally, we conclude that the district court erred in determining that the Blue Book made the bid conditional. The only reference to the Blue Book in the materials the County furnished to HCI and the other bidders restricted the use of the Blue Book to “construction work.” There was no mention that the provisions of the Blue Book relating to contract formation applied. Such provisions were therefore inapplicable on the issue of contract formation relative to HCI’s bid and the Board’s approval of the bid.

VII. Disposition.

Because we conclude there was a binding contract when the Board approved HCI’s bid on October 7, 1999, we vacate the court of appeals decision and reverse the district court judgment to the contrary. We remand for entry of judgment that such a contract existed and that the County breached it. On remand the district court shall proceed to the damages phase of the case.

DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT REVERSED AND REMANDED WITH DIRECTIONS.


source: Caselaw Access Project

author: LARSON, Justice.

license: Public Domain

text:
    STATE of Iowa, Appellee, v. Tifany Ann MYERS, Appellant.
    No. 01-0071.
    Supreme Court of Iowa.
    Nov. 14, 2002.

      Linda Del Gallo, State Appellate Defender, and Dennis Hendrickson, Assistant State Appellate Defender, for appellant.
    Thomas J. Miller, Attorney General, Mary E. Tabor, Assistant Attorney General, John P. Sarcone, County Attorney, and Nan Horvat and Teresa Vens, Assistant County Attorneys, for appellee..
   LARSON, Justice.

Tifany Myers pled guilty to second-degree murder in violation of Iowa Code sections 707.1 and 707.3 (1999). She filed a motion in arrest of judgment, which was denied. The court sentenced her to a prison term not to exceed fifty years and ordered her to pay restitution to the victim’s estate. Myers appealed, and the court of appeals reversed and remanded. We vacate the decision of the court of appeals and affirm the judgment of the district court.

I. Facts and Prior Proceedings.

The Polk County attorney charged that, on January 20, 2000, Myers, who was baby-sitting for twenty-one-month-old Joel Vasquez, shook him and slammed him to the floor, causing his death. Myers was charged with first-degree murder. She filed a notice of diminished responsibility, alleging that an abortion she had had a few days before the incident exacerbated her preexisting depression. As a result, her mental state was “greatly compromised.”

Myers’ trial began on October 18, 2000. On October 23 she pled guilty to second-degree murder pursuant to a plea agreement. On November 29 she filed a motion in arrest of judgment, which was denied. She was sentenced and ordered to pay restitution to the victim’s estate. Myers appealed, alleging ineffective assistance of counsel in that her attorney failed to (1) object to the district court’s failure to advise her of her constitutional right to compulsory process; (2) challenge the factual basis for the plea; (3) challenge the court’s order for restitution, on constitutional grounds; and (4) argue that Iowa Code section 910.3(B)(1), which precludes her from discharging the restitution debt in bankruptcy, was a violation of the Supremacy Clause of the United States Constitution.

The court of appeals agreed that counsel was ineffective in failing to object to the district court’s failure to comply with Iowa Rule of Criminal Procedure 2.8(2)(&) by advising her she had the right to compulsory process. Because the court of appeals resolved the case on the basis of that issue, it did not address Myers’ other issues. The State petitioned for further review, asserting that the court of appeals erred in applying rule 2.8(2){b) and our existing case law, including State v. Moore, 638 N.W.2d 735 (Iowa 2002), and State v. Hook, 623 N.W.2d 865 (Iowa 2001), which require “literal” compliance with the guilty-plea requirements of Iowa Rule of Criminal Procedure 2.8(2)(6).

II. Legal Principles on Review.

Ineffective-assistance-of-counsel claims are reviewed de novo. Kane v. State, 436 N.W.2d 624, 626 (Iowa 1989). In order to succeed on an ineffective-assistance claim, the defendant ordinarily must show (1) her counsel failed to perform an essential duty and (2) because of counsel’s error, the defendant was prejudiced. State v. Brooks, 555 N.W.2d 446, 448 (Iowa 1996). The court of appeals concluded that defense counsel’s failure to object to the omission of the compulsory-process information in the guilty plea excused her from preserving error on the issue and that, but for that error, the plea would have been set aside. The court of appeals concluded she was prejudiced as a result of her lawyer’s omission.

Iowa Rule of Criminal Procedure 2.8(2)(b) provides the blueprint for guilty pleas:

Pleas of guilty. The court may refuse to accept a plea of guilty, and shall not accept a plea of guilty without first determining that the plea is made voluntarily and intelligently and has a factual basis. Before accepting a plea of guilty, the court must address the defendant personally in open court and inform the defendant of, and determine that the defendant understands, the following:
(4) That the defendant has the right to be tried by a jury, and that at trial has the right to assistance of counsel, the right to confront and cross-examine witnesses against the defendant, the right not to be compelled to incriminate oneself, and the right to present witnesses in the defendant’s own behalf and to have compulsory process in securing their attendance.

(Emphasis added.)

We held in State v. Kirchoff, 452 N.W.2d 801, 804 (Iowa 1990), that substantial compliance with this rule is all that is required, and the State relies on that principle here. The district court advised Myers with respect to her right to secure the attendance of witnesses in this language:

THE COURT: You are also waiving the following rights: The right to have your attorney present at the time of trial; the right to have a jury of 12 people to decide whether or not you’ve committed this offense. You have the right through your attorney to cross-exam the State’s witness and you would have the right to present any witnesses in your o%m defense ....

(Emphasis added.) The State argues that this information substantially complied with the requirements of the rule with respect to the right to compulsory process, citing Kirchoff.

After the district court accepted this plea, we decided the cases of Hook, 623 N.W.2d at 870, and Moore, 638 N.W.2d at 738-39, concerning the required level of compliance with then-rule of criminal procedure 8(2)(b) (previous number assigned to present rule 2.8(2)(h)). The specific issue raised in both cases was whether the in-person colloquy required by the rule may be supplanted to any extent by written pleas of guilty that track the language of the rule. We held it could not; substantial compliance with this requirement would not suffice in felony cases. Moore, 638 N.W.2d at 738-39; Hook, 623 N.W.2d at 870. We said in Moore that “a court ... must literally, not just substantially, comply with rule 8(2)(b).” Moore, 638 N.W.2d at 738. Not surprisingly, Myers relies on Hook and Moore to support her contention that substantial compliance with rule 2.8(2)(5) is no longer enough.

We think our decisions in Hook and Moore are distinguishable from the present case. The issue in those cases was whether substantial compliance with the requirement for an in-person colloquy was sufficient in felony cases. In contrast, here the issue is whether there is adequate compliance with the requirement that the defendant be informed of certain rights before the guilty plea is accepted by the court. With respect to the latter requirement, we have consistently held that substantial compliance is all that is required, even in felony cases. See State v. Kress, 636 N.W.2d 12, 21 (Iowa 2001).

In Kress, a felony guilty-plea case, we considered whether the defendant had been accurately informed with respect to the consequences of his guilty plea. 636 N.W.2d at 21. Citing Kirchoff, we stated, “Substantial—not strict—compliance with the rule is all that is required.” Id. Similarly, in the present case, where the defect in the plea proceeding concerns the content of the information conveyed to Myers, not whether it was imparted in person, only substantial compliance with rule 2.8(2)(5) is required.

Under the substantial-compliance standard, a trial court is not required to advise a defendant of his rights using the precise language of the rule; it is sufficient that the defendant be informed of his rights in such a way that he is made aware of them. See State v. Smothers, 309 N.W.2d 506, 508 (Iowa 1981). Here, the trial court did not convey the idea that the defendant could force the attendance of witnesses, as required by rule 2.8(2)(6 )(4). Because the court failed to inform Myers of her right to compulsory process, her guilty plea did not substantially conform to the requirements of the rule. The failure of Myers’ attorney to raise this deficiency establishes the first prong of the test for ineffective assistance of counsel, breach of a duty. See Strickland v. Washington, 466 U.S. 668, 688, 104 S.Ct. 2052, 2065, 80 L.Ed.2d 674, 694 (1984).

The second prong of the Strickland test, prejudice, is more problematic for this defendant. In Hill v. Lockhart, 474 U.S. 52, 106 S.Ct. 366, 88 L.Ed.2d 203 (1985), the Supreme Court discussed the Strickland test in the context of a guilty plea. In Hill the petitioner sought habeas corpus relief, claiming his counsel was ineffective in failing to accurately inform him as to his parole eligibility by telling him that, if he pled guilty, he would be eligible for parole after serving one-third of his sentence. In fact, because Hill had a prior felony conviction, he was required to serve half of his sentence. Hill, 474 U.S. at 54-55, 106 S.Ct. at 368, 88 L.Ed.2d at 207. Hill contended that, because of this error,

his plea was “involuntary” as a result of ineffective assistance of counsel because his attorney supplied him with information about parole eligibility that was erroneous.

Id. at 56, 106 S.Ct. at 369, 88 L.Ed.2d at 208. The Court held

that the two-part Strickland v. WasA-ington test applies to challenges to guilty pleas based on ineffective assistance of counsel. In the context of guilty pleas, the first half of the Strickland ... test is nothing more than a restatement of the standard of attorney competence already set forth in [prior cases]. The second, or “prejudice,” requirement, on the other hand, focuses on whether counsel’s constitutionally ineffective performance affected the outcome of the plea process. In other words, in order to satisfy the “prejudice” requirement, the defendant must show that there is a reasonable probability that, but for counsel’s errors, he would not have pleaded guilty and would have insisted on going to trial.

Id. at 58-59, 106 S.Ct. at 370, 88 L.Ed.2d at 210 (emphasis added) (footnote omitted).

We conclude Myers failed to prove, or even assert, that there is a reasonable probability that, “but for counsel’s error[ ], [s]he would not have pleaded guilty and would have insisted on going to trial.” Her right of compulsory process cannot be claimed in a vacuum. She does not claim there were any witnesses whose testimony was denied her because she did not know she could force them to testify. She therefore has not established any prejudice. Her conclusory claim of prejudice, that she “was ready to insist on going to trial,” is not a sufficient assertion of prejudice. She must show a reasonable probability that, but for counsel’s error, she would not have entered the plea of guilty. Hill, 474 U.S. at 59, 106 S.Ct. at 370, 88 L.Ed.2d at 210; see also Moore, 638 N.W.2d at 739 (no prejudice shown under Hill test).

We vacate the decision of the court of appeals with respect to this issue and affirm the judgment of the district court.

III. The Factual Basis Claim.

Iowa Rule of Criminal Procedure 2.8(2)(6) provides that a court “shall not accept a plea of guilty without first determining that the plea is made voluntarily and intelligently and has a factual basis.” Myers contends that the court failed to establish a factual basis for her plea, and her counsel was ineffective in failing to raise the issue. She claims the remedy is to vacate the sentence and remand for a determination of a factual basis.

Establishing ineffective assistance of counsel on the basis a guilty plea lacks a factual basis does not require a separate showing of prejudice. See State v. Schminkey, 597 N.W.2d 785 (Iowa 1999).

Where a factual basis for a charge does not exist, and trial counsel allows the defendant to plead guilty anyway, counsel has failed to perform an essential duty. Prejudice in such a case is inher'ent. Therefore, our first and only inquiry is whether the record shows a factual basis for Schminke/s guilty plea to the charge of theft of a motor vehicle.

Id. at 788 (citations omitted). Accordingly, we look only to the question of whether a factual basis was established for the plea without regard to the prejudice element of the traditional test for ineffective assistance of counsel. *

The defendant contends the record failed to show a factual basis for the element of malice aforethought, which is required for both first- and second-degree murder. See Iowa Code § 707.1 (1999) (“A person who kills another with malice aforethought either express or implied commits murder.”); State v. Reeves, 636 N.W.2d 22, 25 (Iowa 2001) (malice aforethought required for both first-and second-degree murder). Malice aforethought is a fixed purpose or design to do physical harm to another that exists before the act is committed. It does not have to exist for any particular length of time. State v. Lee, 494 N.W.2d 706, 707 (Iowa 1993).

The record on which we assess a showing of a factual basis may include statements by the defendant, minutes of testimony, facts related by the prosecutor, and any presentence investigation report. Schminkey, 597 N.W.2d at 788.

During the plea proceedings, the defendant acknowledged she had reviewed the minutes of testimony with her attorney, and this colloquy followed:

THE COURT: Is there anything in the amended trial information or minutes of testimony you do not agree with as it relates to this charge of murder in the second degree?
MS. TIFANY MYERS: No.

The minutes attached to the trial information summarized the autopsy findings by Dr. Francis Garrity, a Polk County medical examiner:

He will testify to a reasonable degree of medical certainty as to the cause and manner of Joel Diego Vasquez’s death.
That it is his opinion to a reasonable degree medical certainty that Joel died as a result of anoxic encephalopathy due to cerebral edema as a consequence of acute subdural and subroachnoid hemorrhages approximatély 26 hours following a cranio cerebral trauma. That a contributing factor was a hemoperitoneum due to blunt force intra abdominal trauma.
In particular, Dr. Garrity will testify that this child was shaken, slammed and that the manner of death is homicide.

According to other minutes of testimony,

[t]he defendant looked at Sgt. Arnold and Officer Rowley and said “I didn’t want to baby-sit for him no more, I shook him, I pushed him, he fell to the floor.”.... The defendant further stated that she might have grabbed him in the stomach area, she wasn’t really sure. The defendant stated, “He hit the floor really hard. I’ve never touched a kid like that before.”
Sgt. Arnold then asked her on a scale of one to ten, with one being the least amount of force and ten being the most amount of force, how hard did you toss him onto the floor. The defendant responded, “I tossed him with a number 9 force under your scale.”

The court questioned the defendant about the factual basis for the plea:

THE COURT: In order to prove you guilty of murder in the second degree, the State would be required to prove the following beyond a reasonable doubt: That on or about January 20th or 21st of this year, ... you shook, pushed, or slammed Joel Vasquez.
The State would also have to prove that Joel Vasquez died as a result of being shaken, pushed, or slammed. The State would also have to prove that you acted with malice aforethought.
I’m going to ask you some specific questions about these elements to make sure that I understand and am confident that you are in fact guilty of this offense.
THE COURT: And can you tell me in your own words what you did.
[THE DEFENDANT]: Yes. When Joel was crying, I just remember shaking him and slamming him down to the floor, and I was very angry at the time when it happened.
THE COURT: Would you say that when you acted on Mr. Vasquez, that you did so intending to do some physical harm to him?
[THE DEFENDANT]: I don’t know.
THE COURT: Were you holding him when you decided to slam him to the floor?
[THE DEFENDANT]: I remember him crying, and I went up to him and I shook him and slammed him down.
THE COURT: All right. When you slammed him down, did you slam him down on the floor?
[THE DEFENDANT]: Yes.
THE COURT: And would it be fair to say that you knew when you were slamming him down that some injury would occur to him?
[THE DEFENDANT]: Yes.
THE COURT: Would it be fair to say that you knew that some physical harm would occur to him?
[THE DEFENDANT]: Yes.

Based on the minutes of testimony and the in-court colloquy, we believe a sufficient factual basis for the plea was established, and we therefore reject the defendant’s argument on this issue.

IV. Denial of the Motion in Arrest of Judgment.

Myers’ motion in arrest of judgment raised general issues regarding the adequacy of the guilty-plea proceeding and her alleged diminished capacity. She argues that the court erred in denying the motion. We review a denial of a motion in arrest of judgment for abuse of discretion and will reverse only if the ruling was based on reasons that are clearly unreasonable or untenable. State v. Speed, 573 N.W.2d 594, 598 (Iowa 1998). No such showing is made here.

We have already rejected Myers’ factual-basis claim and her claim that the court erred in failing to advise her of her right to compulsory process. The defendant’s motion in arrest of judgment also asserted that she “did not fully understand or appreciate the legal consequences of her guilty plea.” This assertion is based largely on her claim that she suffered from diminished capacity because she had been incarcerated for approximately ten months and was suffering from depression. She testified that to her depression “mean[t] [she was] not happy, not smiling — just ... feeling bad,” based on her recent abortion. The guilty-plea colloquy set out above, however, supports the State’s claim that she, in fact, did understand what she was doing, and the defendant and her counsel both made it clear at the plea hearing that she waived any defense of diminished responsibility.

The motion in arrest of judgment also raises issues regarding the court’s alleged failure to advise her that she would be required to pay $150,000 in restitution under Iowa Code section 910.3B. However, this issue was expressly covered in the court’s colloquy, and her claim that such a provision is unconstitutional has previously been rejected by this court. See State v. Izzolena, 609 N.W.2d 541, 552-53 (Iowa 2000) (procedural-due-process argument rejected); State v. Klawonn, 609 N.W.2d 515, 519-20 (Iowa 2000) (substantive-due-process argument rejected). Myers has failed to show that the court’s ruling denying her motion in arrest of judgment was based on reasons clearly erroneous or untenable.

V. The Supremacy Clause Argument.

Myers raises an argument based on the Supremacy Clause of the United States Constitution. She challenges the portion of our victim-restitution statute that provides restitution awards are not dischargeable in bankruptcy. This is an argument that has been rejected by federal courts. See, e.g., Barnette v. Evans, 673 F.2d 1250, 1251 (11th Cir.1982); United States v. Carson, 669 F.2d 216, 217 (5th Cir.1982). In addition, because this issue is raised under the claim of ineffective assistance of counsel, the argument must fail because she has not shown that, but for her counsel’s failure to raise the issue, she would not have pled guilty. See Hill, 474 U.S. at 59, 106 S.Ct. at 370, 88 L.Ed.2d at 210. We reject the Supremacy Clause argument.

We find no basis on which to reverse the defendant’s conviction. We therefore vacate the decision of the court of appeals and affirm the judgment of the district court.

DECISION OF COURT OF APPEALS VACATED; JUDGMENT OF DISTRICT COURT AFFIRMED.


author: NEUMAN, Justice. CADY, Justice

text:
    Jake RUNYON, Appellee, v. KUBOTA TRACTOR CORPORATION, Appellant.
    No. 01-0711.
    Supreme Court of Iowa.
    Nov. 14, 2002.

      Frank B. Harty, Mary E. Funk, and Thomas W. Foley of Nyemaster, Goode, Voigts, West, Hansell & O’Brien, P.C., Des Moines, for appellant.
    Paige Fiedler of Fiedler & Townsend, P.L.C., Johnston, for appellee.
   NEUMAN, Justice.

This dispute is over a $3979 deduction taken from an employee’s bonus check. The question is whether Iowa Code chapter 91A (1999), our wage payment collection law, governs the controversy and, if so, whether the deduction violated section 91A.5(2)(c), which prohibits deductions for “[ljosses due to ... default of customer credit.”

The district court determined, as a matter of law, that chapter 91A applies to this dispute. So the factual debate over the nature and purpose of the deduction was submitted to the jury. But, relying on this court’s holding in Dallenbach v. Mapco Gas Products, Inc., 459 N.W.2d 483 (Iowa 1990), the court decided that in no event were liquidated damages recoverable by the employee.

The employer now appeals the judgment entered on the jury’s verdict for the employee, and the employee cross-appeals on the liquidated damages issue. Finding no error warranting reversal, we affirm on both appeals and remand for an award of appellate attorney fees.

I. Background Facts and Proceedings.

The pertinent facts are largely undisputed but the inferences to be drawn from them are hotly contested. Because this case was tried at law, “we view the evidence in the light most favorable to the party in whose favor the verdict was rendered.” Condon Auto Sales & Serv., Inc. v. Crick, 604 N.W.2d 587, 593 (Iowa 1999). We are not bound, of course, by the district court’s legal rulings. With these principles in mind, we turn to the record before us.

In 1977 the plaintiff, Jake Runyon, was hired by the defendant, Kubota Tractor Corporation, as a regional sales manager. Kubota, a California corporation, manufactures high-quality compact tractors.

Runyon, who resided in Des Moines when he was hired, was assigned to a territory covering Iowa, Nebraska, and northern Missouri. He moved to Missouri in 1982 but has retained responsibility for the performance of nine dealerships in Iowa. He regularly visits the dealerships, keeps in contact by telephone, and attends trade shows here.

Runyon’s compensation package with Kubota includes a fixed annual salary, a guaranteed commission based on sales, and a discretionary “Management by Objective” (MBO) bonus. Roughly seventy percent of Runyon’s commissions are based on sales in Missouri, with the remaining thirty percent resulting from sales to Nebraska and Iowa dealers. As a Missouri resident, Runyon files and pays his income taxes there.

Kubota’s financial relationship with its dealers is pertinent to the parties’ dispute over Runyon’s bonus for 1999. Essentially, Kubota extends credit to its dealers to finance the cost of all tractors and inventory on hand at the dealerships. The dealer “owns” the products but is not required to advance the cost to Kubota until a customer makes a purchase. Once the dealer receives payment, it must pay Kubota the dealer cost. When a tractor is sold but the dealer either cannot or will not pay Kubo-ta, the product is considered “sold out of trust” (SOT). Kubota regards SOTs as a serious threat to asset management and thus considers them when calculating bonuses due under its MBO compensation plan.

In January 2000, Kubota issued Runyon a check for his 1999 MBO bonus of $19,895. The record reveals that Runyon would have been entitled to a bonus of $26,526 but for two deductions, only one of which is at issue here. Not in controversy is a reduction of $2653 for Runyon’s low market share in the sale of small-horsepower tractors. At issue is a $3979 deduction for four SOTs occurring at dealerships in Iowa and Missouri. The sum represents a fifteen percent reduction in the bonus to which Runyon would have otherwise been entitled.

Runyon sued Kubota for breach of contract and violation of the Iowa Wage Payment Collection Law, Iowa Code chapter 91A. Following discovery, he dismissed his breach of contract claim. By motion for summary judgment, and again at trial, Ku-bota asserted that it was not an “employer” and Runyon was not an “employee” as those terms are defined in section 91A.2. The district court rejected the argument, holding the statute applied to the issue in controversy. The court further held, over Kubota’s objection, that a jury question existed as to whether its deduction for SOTs in Runyon’s territory stemmed from “[ljosses due to ... default of customer credit,” a deduction prohibited by section 91A.5(2)(e). The jury found in Runyon’s favor on this point and the court rendered judgment against Kubota for $3979 plus attorney fees and costs totaling $30,004.64. This appeal by Kubota, and cross-appeal by Runyon followed.

Further facts will be detailed as they pertain to the issues on appeal.

II. Issues on Appeal.

A. Constitutional claim. At the outset Kubota claims the court committed an error of constitutional magnitude when it applied chapter 91A to “non-Iowa employers, such as Kubota, and non-Iowa employees, such as Plaintiff.” Kubota fails to mention, however, how or where this constitutional claim was raised in the trial court. See Iowa R.App. P. 6.14(l)(f) (requiring reference in the brief to “how the issue was preserved for review ... [and] places in the record where the issue was raised and decided”). Although Kubota’s and Runyon’s, status as persons governed by chapter 91A is an important statutory issue on appeal, the record convinces us that Kubota’s constitutional challenge has not been preserved for our review. We deem the issue waived and, accordingly, give it no further consideration. See Martin v. Raytheon Co., 497 N.W.2d 818, 820 (Iowa 1993) (constitutional arguments waived if not urged in trial court).

B. Applicability of Iowa’s Wage Payment Collection Law. The real question is whether Runyon is entitled to the protection and enforcement of Iowa Code chapter 91A. Kubota asserts that “[p]lain-tiff is not a statutory ‘employee’ and Kubo-ta is not a statutory ‘employer’ under the Wage Payment Collection [Law].” Its argument rests on the straightforward assertion that “[s]urely the legislature did not intend for the Act to apply to employees when the employer is not located in Iowa, the employee does not reside in Iowa, and the employee is not paid in Iowa.” Runyon counters that the governing statute, section 91A.2, renders irrelevant the criteria cited by Kubota. He frames the question this way: “Did the Iowa Legislature intend for employees who were hired in Iowa and required by their employers to work in Iowa on a regular, ongoing, and substantial basis to be unprotected by the Wage Payment Collection Law?”

Like the district court, we are convinced that Runyon has the better argument. We have observed that the purpose of chapter 91A is to “facilitate collection of wages by employees.” Condon Auto Sales, 604 N.W.2d at 596. A bonus meets the statutory definition of “wages.” Dallenbach, 459 N.W.2d at 488. The statute defines “employee” as “a natural person who is employed in this state for wages by an employer.” Iowa Code § 91A.2(3). An “employer” under the statute means a person or entity “who in this state employs for wages a natural person.” Id. § 91A.2(4).

Kubota contends that the phrase “in this state” in the foregoing definitions narrows the persons to whom the statute applies. We agree that the legislature evidently intended not to extend the statute’s reach to persons not employed in the state of Iowa. See Henriksen v. Younglove Constr., 540 N.W.2d 254, 260 (Iowa 1995) (intent must be discerned from legislative words). But it seems equally clear to us that the phrase “in this state” modifies the term “employed,” not, as Kubota suggests, the words “employee” and “employer.” In other words, the statute’s focus is not on an individual employee’s state of residence or an employer’s home office but whether the employee is “employed in this state for wages by an employer.” Iowa Code § 91A.2(3); see also id. § 91A.2(4) (employer is one who “in this state employs for wages a natural person”).

The word “employ” is not defined in chapter 91A. So in discerning legislative intent we give the word its ordinary meaning. State ex rel. Miller v. Midwest Pork, L.C., 625 N.W.2d 694, 699 (Iowa 2001). “Employ” is commonly defined as follows:

To engage in one’s service; to hire; to, use as an agent or substitute in transacting business; to commission and intrust with the performance of certain acts or functions or with the management of one’s affairs; ... the term is equivalent to hiring, which implies a request and a contract for a compensation. To make use of, to keep at work, to entrust with some duty.

Black’s Law Dictionary 362 (abridged 6th ed.1991). See also Muller v. Hotsy Corp., 917 F.Supp. 1389, 1422 (N.D.Iowa 1996) (applying “plain language” of section 91A.2(3), court held plaintiff was not an “employee” for purposes of compelling access to his personnel file under chapter 91B because he was no longer “employed in this state by an employer”).

As the common definition of “employ” reveals, neither the residence of the employee nor the location of the employer controls. Neither does chapter 91A condition its application on such criteria. The statutory term implies only the actual engagement of services in the transaction of business. Here, while Runyon did work out of his home in Missouri, the record reveals he transacted substantial business and routinely performed services on behalf of Kubota within Iowa’s borders. Because Runyon’s dispute with Kubota involved employment-related services rendered in Iowa for wages, the district court committed no error in applying the Iowa Wage Payment Collection Law.

C. Sufficiency of the evidence. Kubota next argues the evidence was insufficient to support Runyon’s claim that the company violated chapter 91A by failing to pay his bonus when it was “due.” See Iowa Code § 91A.3(1) (“employer shall pay all wages due its employees”). Kubo-ta insists it timely paid Runyon the bonus to which he was “due” under the MBO compensation plan. Runyon counters that Kubota has missed the point of his claim. While conceding his bonus check was timely delivered, he claims it included an unlawful deduction. Therefore, he argues, he did not receive all he was “due” and is entitled to recover the difference in accordance with section 91A.8. Again, Runyon has the more persuasive argument.

Kubota rightly notes that in Dallenbach we suggested that a bonus cannot be “due” — as that term is used in section 91A.3(1)— until it can be accurately estimated in accordance with the parties’ agreement. Dallenbach, 459 N.W.2d at 489. We have likewise held that a bonus is not “due” if an employee fails to meet the eligibility requirements for the pay out. Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 202 (Iowa 1997). Here, however, the issue is quite different. Runyon claims his bonus “due” included the $3979 deducted for SOTs. That brings us to the governing statute in the case and the parties’ factual dispute over its application.

Iowa Code section 91A.5, captioned “Deductions from wages,” states that the following “shall not be deducted from an employee’s wages”:

Losses due to breakage, damage to property, default of customer credit, or nonpayment for goods or services rendered so long as such losses are not attributable to the employee’s willful or intentional disregard of the employer’s interests.

Iowa Code § 91A.5(2)(c) (emphasis added).

Kubota argued forcefully at trial, and urges on appeal, that the deduction taken from Runyon’s bonus was not based on “losses” sustained by Kubota but on Runyon’s failure to conduct required audits of his dealers’ accounts, a failure that permitted the SOTs to occur. Runyon countered this testimony with proof that SOTs stem, in fact, from “default in customer credit” which, in this case, led to losses sustained by Kubota. The factual dispute centered on whether the sum deducted from Runyon’s bonus, although not directly tied to a specific loss, was nevertheless intended by Kubota to penalize Runyon for SOTs occurring in Iowa dealerships during 1999.

Given this record, the district court determined that a jury question was engendered concerning Kubota’s alleged violation of section 91A.5(2)(c). We find no error in this determination. The case is analogous to Salter v. Freight Sales Co., 357 N.W.2d 38 (Iowa Ct.App.1984). In Salter, an employer reduced the commission paid the manager of its furniture store following a burglary that occurred at the store. After some months, the former commission rate was restored. Salter, 357 N.W.2d at 40. In the suit for unpaid wages that followed, the employer argued the reduced commission “was a valid modification of [the] contract which [the manager] chose to accept by continuing in defendant’s employ.” Id. at 41. A skeptical district court rejected the argument, a decision affirmed on appeal. Reasoning the trial court was right to “disregard the name given to the transaction and look at its substance,” our court of appeals upheld the district court’s finding that substantial evidence supported the employee’s claim that his wages had been effectively reduced by the amount of the burglary loss in violation of section 91A.5(2)(e). Id. at 41-42.

Just as in Salter, the trial court here looked beyond mere semantics to determine that section 91A.5(2)(c) was implicated and left it to the jury to sort out the conflict in the evidence. Moreover we reject Kubota’s contention that the jury instructions, as given, necessarily directed a verdict in Runyon’s favor. The court began by summarizing the law this way:

The Iowa Wage Payment Collection Law provides an employer shall pay wages to an employee. A bonus is a wage. Employers shall not deduct from an employee’s wages losses due to default of customer credit or nonpayment for goods or services.

The court then gave the following mar-shalling instruction:

In order to recover, Plaintiff Jake Runyon must prove both of the following elements:
1. In January 2000, the defendant made a deduction from Plaintiffs 1999 MBO bonus; and
2. The deduction was for losses due to default of customer credit or nonpayment for goods and services. If the Plaintiff has proved both of these propositions, he is entitled to recover wages in the amount of $3979.00. If the Plaintiff has failed to prove both of these propositions, he is not entitled to recover.

Although Kubota claims the court’s instructions erroneously omitted the necessary element of “wages due” highlighted in Phipps and Dallenbach, we have already explained that this case is distinguishable from those two cases. The question to be determined was whether the deduction made by Kubota was allowable under section 91A.5(2)(c). Kubota cannot escape the application of the law by asserting that, no matter what the calculation, it paid the bonus when it was due and thus abided by chapter 91A. The assignment of error is without merit.

D. Liquidated damages. Runyon asserts on cross-appeal that the district court erred when it refused to direct a verdict, or submit a jury instruction, on the question of his entitlement to liquidated damages. The governing statute is Iowa Code section 91A.8. It provides:

When it has been shown that an employer has intentionally failed to pay an employee wages or reimburse expenses pursuant to section 91A.3, whether as the result of a wage dispute or otherwise, the employer shall be liable to the employee for any wages or expenses that are so intentionally failed to be paid or reimbursed, plus liquidated damages, court costs and any attorney’s fees incurred in recovering the unpaid wages and determined to have been usual and necessary. In other instances the employer shall be hable only for unpaid wages or expenses, court costs and usual and necessary attorney’s fees incurred in recovering the unpaid wages or expenses.

Iowa Code § 91A.8. Because Kubota’s deduction from Runyon’s bonus was plainly intentional, not mistaken, Runyon argues the court erred when it refused to award the liquidated damages authorized by section 91A.8. In support of the district court’s ruling, Kubota contends the decision is controlled by the Dallenbach case. We agree.

In Dallenbach this court held that a wage dispute involving a bonus comes within the “other instances” category of section 91A.8, thus entitling the employee to recover the unpaid bonus and attorney fees but not liquidated damages. Dallenbach, 459 N.W.2d at 489. We reasoned that section 91A.8 limits the recovery of liquidated damages to unpaid wages as defined by section 91A.3, that is, “wages due ... in monthly, semimonthly, or biweekly installments on regular paydays.” Id. A bonus, we concluded, does not commonly fit that definition. Id. As already noted, however, Dallenbach held a bonus does fit the section 91A.2 definition of “wages” so as to entitle the employee to recover not only the unpaid bonus but the costs and reasonable attorney fees expended to secure it. Id. at 488; Iowa Code § 91A.2(7) (“wages” means compensation owed by an employer for labor or service rendered by an employee).

The district court properly applied the statutes here consistent with our holding in Dallenbach. We are not inclined, as Runyon urges, to reverse Dallenbach because the parties’ dispute over the bonus here alleged an unlawful deduction. Based on the language in the pertinent statutes, we still believe the legislature intended to reserve the liquidated damages provision of section 91A.8 for situations involving the intentional withholding of regular paychecks and commissions, rather than for disputes over the calculation of discretionary bonuses payable at year-end.

III. Conclusion.

We affirm the judgment entered upon the jury’s verdict in favor of Runyon and against Kubota for $8979 plus $30,004.64 in related attorney fees and litigation expense plus interest. We likewise affirm the district court’s denial of Runyon’s claim for liquidated damages.

Under Iowa Code section 91A.8, Runyon is entitled to a further award of “usual and necessary” attorney fees and costs expended in defending this appeal. Salter, 357 N.W.2d at 43. We therefore remand to the district court for a hearing on that matter.

Court costs on this appeal shall be taxed equally to the parties.

AFFIRMED ON APPEAL AND CROSS APPEAL AND REMANDED.

All justices concur except CARTER, TERNUS, and CADY, JJ., who concur specially.

CADY, Justice

(concurring specially).

I concur in the result, but write separately to address two issues not raised by the parties that could be important in properly confining the application and scope of the Iowa Wage Payment Collection Law.

First, this is not the type of case in which Iowa courts traditionally use its law to resolve. The plaintiff is a nonresident. The defendant is a' nonresident. The dispute involved wages payable in another state. Under such circumstances, the choice of law doctrine would generally temper our enthusiasm to apply our law and direct us to consider the law of the state in which the parties reside.

Second, the wage dispute in this case was lumped into a single claim, but actually involved four separate employment activities. The majority of these activities occurred in Missouri, and only one occurred in Iowa. Although our legislature may have a strong interest to enact a wage dispute law to protect nonresidents when they cross our border to perform work in Iowa, it would have no interest in protecting nonresidents in those instances where they perform work outside of Iowa. See Killian v. McCulloch, 873 F.Supp. 938, 942 (E.D.Pa.1995) (“The legislature has a strong interest in enacting legislation to protect those who work in the Commonwealth, but has almost no interest in extending that protection to those who work outside Pennsylvania.”). Consequently, I would hold that a wage claim involving out-of-state parties should be limited to those specific disputes that involve work performed in Iowa, and exclude those disputes involving work performed outside Iowa. We have no business extending the protections of our law in favor of one nonresident against another nonresident involving disputes occurring outside Iowa. Moreover, the fact that one of the individual disputes in this case involved wages earned in Iowa would not transform the other disputes involving wages earned in Missouri into an Iowa dispute.

CARTER, and TERNUS, JJ., join this special concurrence.


author: TERNUS, Justice.

text:
    In re the MARRIAGE OF Lorraine JONES and Thomas M. Jones, Jr. Upon the Petition of Lorraine Jones, Appellant, and Concerning Thomas M. Jones, Jr., Appellee.
    No. 01-0815.
    Supreme Court of Iowa.
    Nov. 14, 2002.

      J. Bryan Schulte of Schulte, Hahn & Swanson, Burlington, for appellant.
    Thomas T. Skewes of Johnson & Skewes, Fort Madison, for appellee.
   TERNUS, Justice.

The appellee, Thomas Jones, Jr., was granted a twenty-five percent credit against his child support obligation under our child support guidelines based on the fact that his court-ordered visitation exceeded 127 days per year. The appellant, Lorraine Jones, appealed the dissolution decree to challenge the credit, claiming the court-ordered visitation actually totaled less than 128 days and alleging Thomas had not actually exercised his visitation rights.

The court of appeals affirmed. Upon further review, we agree that the district court judgment should be affirmed, but we disagree with the court of appeals with respect to the basis for affirmance. Therefore, we vacate the decision of the court of appeals and affirm the district court judgment.

I. Background, Facts and Proceedings.

Lorraine Jones sought dissolution of her marriage to Thomas Jones. Custody of their two children, as well as child support and visitation, were in dispute. On the day of trial, November 13, 2000, the parties engaged in extensive negotiations. Eventually, they dictated the terms of an agreement into the record “for the court’s approval.” In relevant part, the parties agreed that they would share joint legal custody of the children and Lorraine would be granted their physical care. Thomas was to be allowed liberal visitation, but in the event “the parties cannot agree as to what constitutes liberal access,” then Thomas was to “be guaranteed a minimum” amount of visitation. A complex rotation of physical care and visitation was then dictated into the record. Thomas’s attorney stated that “with the amount of visitation that [Thomas] is entitled to, he will be receiving a credit under the new set of child support guidelines.” She stated they believed it would “at least” be in “the 25 percent category,” but the parties would “have to sit down and calculate how many overnights [Thomas] has.”

The court then heard testimony from Lorraine to prove the elements required for a dissolution. In response to questioning, she acknowledged her understanding “that because [she had] agreed to provide extensive visitation privileges to [her] husband that there [would] be some credit against child support.” Upon completion of the hearing, the court approved the settlement dictated into the record “as the terms of the divorce” and directed counsel “to prepare a dissolution decree in accordance with the record created here today.”

For reasons that are not apparent, the parties’ attorneys failed to prepare the decree. Instead, on April 6, 2001, Lorraine filed a pleading entitled “Application for Order Scheduling Hearing and Entry of Decree of Dissolution of Marriage.” She asserted that upon calculation of the overnight visits Thomas would be entitled to under the visitation provisions of the stipulation, she had determined he did not qualify for the twenty-five percent child support credit. She further asserted that since the November hearing, Thomas had advised her that he would no longer be exercising visitation.

The same judge who had presided over the dissolution hearing heard Lorraine’s application. At that hearing the parties disagreed as to whether they had actually stipulated to the child .support credit. They also disagreed on the number of overnights Thomas would have under the backup schedule that had been read into the record at the prior hearing. In addition, Lorraine testified that since the November hearing Thomas had visited his children only twice and had had no visitation with the children since December. The parties disagreed on the' reasons Thomas had not exercised his visitation.

In ruling on the application, the court observed that the issue was what the decree provided, so events occurring since the November hearing. — when the court announced its ruling — were not relevant. Specifically, the court stated that Thomas’s “lack of visitation since November 13 may constitute a ground for modification as recognized by the child support guidelines order, but that issue is not before the court at present.” The court also found that it was clear a twenty-five percent credit was anticipated and agreed to by the parties at the earlier hearing. The court again ordered the attorneys to prepare a decree consistent with the court’s oral pronouncements. A decree was subsequently entered that provided in relevant part:

The parties shall be awarded the joint legal custody of the minor children of the parties ... with the Petitioner being awarded the physical care of said minor children and the Respondent being awarded liberal access to the children, and, if the parties cannot agree what constitutes liberal access, then the Respondent shall be guaranteed a minimum of the following....

Lorraine appealed, challenging the child support credit. Her appeal was transferred to the court of appeals, where that court found dispositive the stipulation that preceded the dissolution decree:

We conclude that Lorraine and Thomas reached a binding stipulation regarding visitation and the child support credit. Lorraine had no legal right to repudiate this stipulation.

Accordingly, the court of appeals affirmed the district court judgment. Although we think the court of appeals’ affirmance of the district court was appropriate, we disagree with the basis for its ruling. Therefore, we vacate the court of appeals’ decision and affirm the district court judgment for the reasons that follow.

II. Scope of Review.

Our review of dissolution-of-marriage cases is de novo. In re Marriage of Geil, 509 N.W.2d 738, 740 (Iowa 1993). We examine the entire record and adjudicate anew the rights of the parties on issues that are properly preserved: In re Marriage of Smith, 573 N.W.2d 924, 926 (Iowa 1998). Although we are not bound by the trial court’s findings of fact, we give weight to them, especially when considering credibility of witnesses. Iowa R.App. P. 6.14(6)(p).

III. Issues on Appeal.

Lorraine contends the court of appeals’ conclusion that she had no legal right to repudiate the stipulation resulted in an abdication of the court’s responsibility to consider whether the stipulation was in the best interests of the children. She argues the stipulation was contrary to law because it provided Thomas with a reduction in child support without court-ordered extraordinary visitation and without a showing of any other circumstances permitting a deviation from the amount required by the child support guidelines. In addition, she continues to assert the district court should have considered Thomas’s failure to exercise visitation and whether, based upon this fact, the stipulation was fair, equitable, and in the best interests of the children. Finally, she requests attorney fees.

IV. Discussion.

A. Child support guidelines. The Iowa Supreme Court has adopted uniform child support guidelines and criteria. Iowa Ct. R. 9.1. “The purpose of the guidelines is to provide for the best interests of the children by recognizing the duty of both parents to provide adequate support for their children in proportion to their respective incomes.” Id. 9.3.

In ordering child support, the court must look to the amount specified in these guidelines. Id. 9.4. There is a re-buttable presumption that child support determined by application of the guidelines is correct. In re Marriage of Gehl, 486 N.W.2d 284, 286 (Iowa 1992); Iowa Code § 598.21(4)(a) (1999); Iowa Ct. R. 9.4. The amount suggested in the guidelines may, however, “be adjusted upward or downward if the court finds an adjustment necessary to provide for the needs of the children and do justice between the parties under the special circumstances of the case.” State ex rel. Reaves v. Kappmeyer, 514 N.W.2d 101, 104 (Iowa 1994). Deviation from the uniform application of the child support guidelines is, however, discouraged. In re Marriage of Thede, 568 N.W.2d 59, 62 (Iowa Ct.App.1997).

Effective August 1, 2000, the Supreme Court amended the guidelines to provide, for the first time, a credit to a noncustodial parent’s child support obligation when that parent’s court-ordered visitation exceeds certain parameters. In pertinent part, the amended guidelines provide:

If the noncustodial parent’s court-ordered visitation exceeds 127 days per year, the noncustodial parent shall receive a credit to the guidelines amount of child support in accordance with the following table:
Days Credit
128-147 25%
148-166 30%
167 or more 35%

For the purposes of this credit, “days” means overnights spent caring for the child. Failure to exercise court-ordered visitation may be a basis for modification. Iowa'Ct. R. 9.7(2). The adjustment permitted by this provision recognizes the increased expense to a noncustodial parent who exercises extraordinary visitation. Guillot v. Munn, 756 So.2d 290, 299 (La.2000). In addition, the incentive of a reduction in child support may have the effect of promoting the involvement of both parents in the upbringing of their children, a generally desirable circumstance. See generally In re Marriage of Ruden, 509 N.W.2d 494, 496 (Iowa Ct.App.1993) (“A child should be assured the opportunity for the maximum continuing physical and emotional contact with both parents.”).

B. Effect of stipulation. Because there appears to be some confusion with respect to the effect of the parties’ stipulation in this case, we briefly discuss the role of a stipulation in a dissolution proceeding. A stipulation and settlement in a dissolution proceeding is a contract between the parties. In re Marriage of Lawson, 409 N.W.2d 181, 182 (Iowa 1987). Therefore, it is enforceable like any other contract, and a party may not withdraw or repudiate the stipulation prior to entry of judgment by the court. In re Marriage of Ask, 551 N.W.2d 643, 646 (Iowa 1996).

Nonetheless, the parties’ stipulation is not binding on the court, as the court has the responsibility to determine “‘whether the provisions upon which the parties have agreed constitute an appropriate and legally approved method of disposing of the contested issues.’ ” Id. (citation omitted). Accordingly, if the stipulation is unfair or contrary to law, the court has the authority to reject the stipulation. Id. Moreover, a stipulation will not be incorporated in the decree unless the court “determines the settlement will not adversely affect the best interests of the parties’ children.” In re Marriage of Udelhoffen, 538 N.W.2d 308, 310 (Iowa Ct.App.1995). Thus, we agree with Lorraine that the court of appeals erred in concluding that the decree should be affirmed merely because she had agreed to the stipulation providing the basis for the trial court’s decision.

In fact, once the court enters a decree, the stipulation, as a practical matter, has no further effect. See Bowman v. Bennett, 250 N.W.2d 47, 50 (Iowa 1977). The decree, not the stipulation, determines what rights the parties have. Id.; In re Marriage of Von Gian, 525 N.W.2d 427, 430 (Iowa Ct.App.1994). Therefore, in ascertaining the rights of the parties after final judgment, it is the intent of the district court that is relevant, not the intent of the parties. In re Marriage of Knott, 331 N.W.2d 135, 137 (Iowa 1983).

C. Application of law to facts. As noted above, Lorraine contends the stipulation was contrary to law because it provided Thomas with a reduction in child support without court-ordered extraordinary visitation. Based on the fact that the district court approved the parties’ stipulation at the November hearing and adopted it as the basis for the court’s dissolution decree, the fairness of the stipulation itself is no longer of any importance. What we must focus on is whether the decree, as announced in November and reduced to writing in April, is contrary to law because it allowed a reduction in child support without a corresponding order of extraordinary visitation. The court made it clear at the second hearing that it understood the parties to have agreed to a twenty-five percent reduction in child support based on liberal visitation granted to Thomas. The court indicated it was quite aware at the time it made its ruling that the exact number of days of visitation in any given year might vary, but nonetheless concluded that it reasonably expected Thomas to have 128 days of visitation, if not more, each year. While it may have been less ambiguous for the court to have specifically decreed that Thomas was to receive at least 128 overnight visits with his children, the court certainly left no doubts at the second hearing that this was the court’s intent.

Lorraine contends the guidelines establish a bright-line rule that requires a court to specify a schedule that awards at least 128 days of visitation each year rather than to rely on a speculative schedule or a schedule that does not award the noncustodial parent extraordinary visitation annually. While we agree that a child support credit cannot be allowed in the absence of a court order entitling the noncustodial parent to at least 128 days of overnight visitation, we disagree that the decree at issue here did not satisfy that requirement. The district court is at liberty to leave the precise timing of the visitation to the parties, as the court did in this case. The fact that the backup schedule might not always result in 128 or more days of visitation does not violate the child support guidelines, where, as here, the court has ordered “liberal access” with the clear understanding that such access will result in at least 128 overnight visits each year. Thus, we reject Lorraine’s argument that the trial court erred in granting the credit.

We also reject Lorraine’s argument that the court-ordered visitation and child support were not in the best interests of the children because Thomas failed to exercise visitation. Thomas’s failure to exercise visitation occurred after the trial court made its decision. Therefore, the district court correctly ruled that Lorraine’s remedy lies in an application to modify the decree. See Iowa Ct. R. 9.7(2) (“Failure to exercise court-ordered visitation may be a basis for modification.”).

V. Summary and Disposition.

We affirm the district court’s award of a twenty-five percent credit against Thomas’s child support obligation. Our ruling is without prejudice to Lorraine’s ability to seek a modification of the court’s order based on Thomas’s failure to exercise visitation exceeding 127 days annually. We deny Lorraine’s request for attorney fees. See In re Marriage of O’Brien, 565 N.W.2d 619, 623 (Iowa 1997) (discussing factors supporting an award of appellate attorney fees).

COURT OF APPEALS DECISION VACATED; DISTRICT COURT JUDGMENT AFFIRMED.

      . Thomas's visitation under the backup schedule is subject to many variables, including whether the parent having physical care takes the children on an extended out-of-town vacation during the summer, whether Thomas has Marine Corps Reserve commitments during a scheduled visitation, and whether Lorraine travels out of town and leaves the children with Thomas during her absence, as she was required by the decree to do. Given the many variables inherent in the backup schedule, it is impossible to calculate with any degree of precision the exact number of overnight visits Thomas would have with his children in any particular year if the only visitation exercised was that set forth in the schedule.