author: TIMM, Circuit Judge SABERS, Acting Chief Justice

text:
    2002 SD 19
    Sharon BLAHA, As Guardian Ad Litem for the Person and Estate of Jessica Blaha, a minor, Plaintiff and Appellant, v. Gary STUARD and Anna Stuard, Defendants and Appellees.
    No. 21758.
    Supreme Court of South Dakota.
    Considered on Briefs Aug. 28, 2001.
    Decided Feb. 6, 2002.

      Timothy L. James of James & Associates, Yankton, South Dakota, Attorneys for plaintiff and appellant.
    Jack Theeler of Morgan, Theeler, Wheeler, Cogley & Petersen, Mitchell, South Dakota, Attorneys for defendant and appellee.
   TIMM, Circuit Judge

[¶ 1.] This is an appeal from an order granting Stuards’ motion for summary judgment. We affirm.

FACTS

[¶ 2.] On December 17, 1998 Chad and Dustin Blaha traveled to Gary and Anna Stuard’s home to inquire about a labrador dog advertised in the Rapid City Journal. The advertisement stated:

Beautiful male Yellow Labrador, good Retriever, 5 years old, $50 with AKC papers and pedigree or free without. Call.

[¶ 3.] At the Stuard home, Gary showed Chad and Dustin the dog’s retrieving skills and they discussed what Chad planned to do with the dog. Chad told Gary that he wanted the dog for a Christmas gift for his father and that the dog would be used for hunting.

[¶ 4.] The Blahas and Stuards discussed the characteristics of the dog and the type of environment the dog would be in under the Blaha’s care. Both Chad and Dustin Blaha stated that the Stuards told them the dog had jumped up on one of their children a long time ago and that the dog was protective of the porch area of the home.

[¶ 5.] At the end of the meeting, Chad purchased the dog from the Stuards for $50 and received the AKC papers. He and Dustin took the dog back to Rapid City before heading home to Wagner. During the time the dog was in Rapid City, the dog growled at Chad and Dustin’s ten- to twelve-year-old cousin.

[¶ 6.] While in Wagner, the dog was around the Blaha family and behaved very well. The dog had not exhibited any bad behavior prior to December 26 when it bit Jessica Blaha, Chad’s sister and the daughter of the dog’s ultimate owner. A personal injury lawsuit against the Stuards followed, alleging negligence, breach of warranties, negligent infliction of emotional distress, and strict liability.

[¶ 7.] Gary and Anna Stuard moved for summary judgment, which was granted by the trial court. Sharon Blaha, as Guardian Ad Litem for the Person and Estate of Jessica Blaha, appeals the trial court’s order.

STANDARD OF REVIEW

[¶ 8.] The standard of review for summary judgment is well established:

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis, which supports the ruling of the trial court, affirmance of summary judgment is proper.

Pettry v. Rapid City Area School Dist., 2001 SD 88, ¶ 7, 630 N.W.2d 705, 708 (quoting Milligan v. Waldo, 2001 SD 2, ¶ 8, 620 N.W.2d 377, 379). The party opposing summary judgment “may not rest on the mere allegations ... in his pleading. He must present evidentiary matter showing that there is a genuine issue of material fact that is worth bringing to trial.” Peterson v. Spink Elec. Co-op., Inc., 1998 SD 60, ¶ 10 n. 3, 578 N.W.2d 589, 591 n. 3.

ANALYSIS AND DECISION

[¶ 9.] It is common knowledge that horses buck, cattle roam, cats stray and dogs bite. It seems that when man and other animals interact, it is usually man that gets the short end of the stick. Perhaps the Illinois Appellate Court in Whitmer v. Schneble, 29 Ill.App.3d 659, 331 N.E.2d 115, 118 (1975), said it most precisely when it quoted Isaac Watts in his Divine Songs in a similar case:

‘Let dogs delight to bark and bite
For God hath made them so;
Let bears and lions growl and fight
For ‘tis their nature too.’

Or, as remarked by John B. Bogart and quoted by Frank O’Brien in the Story of the Sun: “when a dog bites a man, that is not news because it happens so often. But if a man bites a dog, that is news.”

[¶ 10.] In order to conduct the proper analysis, the legal relationship between these parties must be clear. Jessica is the daughter of the dog’s ultimate owner. Jessica’s father is the dog’s owner. See SDCL 43-2-1. The dog was given to Jessica’s father from the buyer of the dog, Chad Blaha. See SDCL 57A-2-103(a). The Stuards were the sellers of the dog. See SDCL 57A-2-103(d).

[¶ 11.] Finally, dogs are “goods” and not “products.” Courts that have considered this issue align themselves in two different positions either with the position of the New York courts, holding animals are products, or the Illinois courts, holding animals are goods. We adopt the holding of the courts of Illinois, Colorado, and Missouri which have all held that animals cannot be “products” under the Restatement of Torts.

[¶ 12.] The New York Supreme Court in Beyer v. Aquarium Supply Co., 94 Misc.2d 336, 404 N.Y.S.2d 778 (Sup.Ct.1977) held that a diseased hamster was a product within the meaning of the Restatement. The court stated that “there is no reason why a breeder, distributor or vendor who places a diseased animal in the stream of commerce should be less accountable for his actions than one who markets a defective manufactured product.” Id. at 779. Connecticut and Oregon also follow the position that animals should be considered “products” under the Restatement. See Worrell v. Sachs, 41 Conn.Supp. 179, 563 A.2d 1387 (1989); Sease v. Taylor’s Pets, Inc., 74 Or.App. 110, 700 P.2d 1054 (1985).

[¶ 13.] This Court adopts the Illinois position, which provides that:

living creatures ... are by their nature in a constant process of internal development and growth and they are also participants in a constant interaction with the environment around them as part of their development. Thus, living creatures have no fixed nature and cannot be products as a matter of law.

Latham v. Wal-Mart Stores, Inc., 818 S.W.2d 673, 676 (Mo.App.Ct.1991) (citing Anderson v. Farmers Hybrid Cos., Inc., 87 Ill.App.3d 493, 42 Ill.Dec. 485, 408 N.E.2d 1194 (1980)).

[¶ 14.] Under South Dakota law, a cause of action by someone injured by a domestic animal can arise under a theory of strict liability or negligence. Sybesma v. Sybesma, 534 N.W.2d 355, 357 (S.D.1995). We address the theory of strict liability first.

[¶ 15.] Blaha argues that the trial court erred when it failed to hold Stuards liable under a theory of strict liability. All parties classified as such, we hold, as the courts in Latham and Anderson held, that recovery under a strict liability theory is disallowed. South Dakota adopted the rule of strict liability in tort as expressed in Restatement (Second) Torts § 402A (1965) in Engberg v. Ford Motor Co., 87 S.D. 196, 205, 205 N.W.2d 104, 109 (1973). Peterson v. Safway Steel Scaffolds Co., 400 N.W.2d 909 (S.D.1987). This rule states that “[o]ne who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer.... ” Engberg, 205 N.W.2d at 109. However, these are product liability cases and because the dog in this case is not a “product,” according to the Restatement, no liability exists under a theory of strict liability.

[¶ 16.] The negligence and negligent infliction of emotional distress claims also fail. According to this Court’s opinion in Sybesma:

Liability in negligence for domestic animals is found in § 518 of the Restatement (Second). It provides:
Except for animal trespass, one who possesses or harbors a domestic animal that he does not know or have reason to know to be abnormally dangerous, is subject to liability for harm done by the animal, if, but only if ... (b) he is negligent in failing to pre-
vent the harm.

Sybesma, 534 N.W.2d at 357-58 (quoting Restatement (Second) of Torts § 518).

[¶ 17.] Blaha failed to allege facts sufficient to support the contention that this was an abnormally dangerous animal. The facts, viewed in light of the non-moving party, indicate that the dog showed none of the signs this Court has recognized as being sufficient to establish dangerous propensities, absent an actual attack. There is no evidence in the record to indicate that the dog “constantly barked, bared its teeth, and strained at its leash.” Gehrts v. Batteen, 2001 SD 10, ¶ 8, 620 N.W.2d 775, 778.

[¶ 18.] This theory holds the possessor liable if he is negligent in failing to prevent the harm. In order to establish liability under this Restatement section, this Court would have to put the seller in the shoes of the possessor of the dog. Blaha has cited nothing and this Court has found nothing to support the contention that possessor’s liability may be superimposed upon a seller. Blaha’s claim must fail under this theory because the dog was not “possessed,” as required by the language in the Restatement, by the Stuards.

[¶ 19.] This Court next addresses the issue of liability under a theory of negligent infliction of emotional distress. The first element in a claim for this cause of action is that the defendant engaged in the negligent conduct. SD Pattern Jury Instr. (Civil) 145-09. “Negligence is the breach of a legal duty imposed by statute or common law.” Stevens v. Wood Sawmill, Inc., 426 N.W.2d 13, 14 (S.D.1988) (citing Walz v. City of Hudson, 327 N.W.2d 120, 122 (S.D.1982)). “The three necessary elements of actionable negligence are: (1) A duty on the part of the defendant; (2) a failure to perform that duty; and (3) an injury to the plaintiff resulting from such a failure.” Id.

[¶ 20.] A seller has the duty to provide correct information. Anderson v. Heck, 554 So.2d 695, 705 (La.App.Ct.1989). According to the depositions of Chad and Dustin Blaha, the Stuards relayed to them their experience with the dog. Accordingly, they fulfilled, their duties as sellers. Thus, there was no breach of the duty owed and an action for negligent infliction of emotional distress may not be maintained.

[¶21.] Blaha next contends that the trial court erred in ruling that the Stuards did not breach the express and implied warranties. SDCL 57A-2-318 provides that:

[a] seller’s warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section.

[¶ 22.] It is disputed whether there was an express warranty made by the Stuards that this dog was good around family or people. An express warranty can be created when given in response to a specific question or when given in the context of a specific averment of fact. Schmaltz v. Nissen, 431 N.W.2d 657, 661 (S.D.1988).

[¶ 23.] Our standard of review for summary judgments requires that we view the facts most favorable to the non-moving party. Pettry, 2001 SD 88, ¶ 7, 630 N.W.2d at 708. According to Chad Blaha, the purchaser of the dog, he responded to the ad in the Rapid City paper advertising a “Beautiful male Yellow Labrador, good Retriever, 5 years old, $50 with AKC papers and pedigree or free without. Call.” Before meeting with the Stuards, Chad’s main concern was if the dog was really a good retriever. When Chad met personally with the Stuards, the dog’s retrieving skills were demonstrated. Chad also asked if the dog was good around people. Chad stated that Mrs. Stuard explained to him that the dog jumped up on one of their children a long time ago. Furthermore, Dustin Blaha stated that the dog was purchased as a Christmas gift for their father as a hunting dog. Dustin also stated that he recalled Mr. Stuard saying that the dog was protective of the porch area of the house. Dustin also explained that the dog was purchased because he was a very well trained dog. Furthermore, the ad in the newspaper stated that this dog was a good retriever. The facts indicate that nothing was ever stated that this was a dog that was good around people in general or family more specifically. When asked about the disposition of the dog, the Stuards relayed their experiences to Chad and Dustin.

[¶ 24.] The only warranty, express or implied, that results from these facts is that the dog was, at the time, a good retriever. We thus find that there was no warranty concerning the dog’s disposition around people. The Stuards were forthright concerning their dealings with the dog. This Court looks to the language of the Whitmer, supra, court to further explain the rationale of this finding. In that factually similar case, the Illinois Appellate court stated that:

even if there were an express warranty, it would not appear that there was a breach. Nowhere do the Schnebles allege that Hoyt stated that the dog would not bite. Even a docile dog is known and expected to bite under certain circumstances. (See Restatement of Torts, § 518, comment g and Restatement of Torts (Second), § 290, comment g.) And this court will not infer a warranty that the dog will never bite from the language which was used. ‘(T)he law will not lend itself to the creation of an implied warranty which patently runs counter to the experience of mankind or known forces of nature. It will not read into any sale or bailment a condition or proviso which is unreasonable, impossible or absurd.’ Meester v. Roose (1966), 259 Iowa 357, 144 N.W.2d 274, 276.

Whitmer, 331 N.E.2d at 118.

[¶ 25.] In addition, the statements complained of only describe the personality of the dog at the time it was sold. There is no warranty by the seller that the dog’s personality will not change in the future. Id.

[¶ 26.] Blaha has not alleged that the Stuards warranted that this dog would not bite. One simply cannot warrant that “this dog will never bite.” As we have noted previously in this opinion, animals are exposed to an ever-changing environment and may also change, themselves, accordingly. Latham, 818 S.W.2d at 676.

[¶ 27.] The Stuards were forthright with the Blahas. This was an unfortunate incident, however, this Court finds that the Stuards are not liable to Blaha under any of the legal theories alleged. The record supports the order granting summary judgment and we affirm.

[¶ 28.] AMUNDSON, KONENKAMP, and GILBERTSON, Justices, concur. MILLER, Retired Chief Justice, was a member of the Court at the time this action was submitted, but was disqualified and did not participate.

[¶ 29.] SABERS, Acting Chief Justice, concurs in result.

[¶ 30.] TIMM, Circuit Judge, for MILLER, Retired Chief Justice, disqualified.

SABERS, Acting Chief Justice

(concurring in result).

[¶ 31.] I concur in result, but write specially to point out that liability should attach to an owner (or former owner) of a dangerous animal if he is negligent in failing to prevent the harm. SDCL 20-9-1 provides:

Every person is responsible for injury to the person, property, or rights of another caused by his willful acts or caused by his want of ordinary care or skill, subject in the latter cases to the defense of contributory negligence.

[¶ 32.] In addition, since no dog could constantly bark, bare its teeth and strain at its leash, I would replace the ill-chosen word “constantly” in the cite from Gehrts, 2001 SD 10 at ¶ 8, 620 N.W.2d at 778, with the word “frequently.” See ¶ 17 of the majority opinion.


source: Caselaw Access Project

author: STREIT, Justice.

license: Public Domain

text:
    John W. HOFMEYER III, Plaintiff, v. IOWA DISTRICT COURT FOR FAYETTE COUNTY, Defendant.
    No. 99-1916.
    Supreme Court of Iowa.
    Oct. 10, 2001.
    Rehearing Denied Oct. 29, 2001.

      John W. Hofmeyer III, Oelwein, pro se, for plaintiff.
    Thomas G. Becker, State Public Defender, and Mark C. Smith, Assistant State Public Defender, Des Moines, for defendant.
   STREIT, Justice.

Attorney John Hofmeyer signed a contract agreeing to defend indigent clients in criminal cases. The State Public Defender denied Hofmeyer’s claims for compensation for travel time within Hofmeyer’s home county. Hofmeyer now argues a myriad of constitutional and contractual issues. We conclude Hofmeyer’s compensation is governed by the terms of his contract. Writ annulled.

I. Background and Facts

Attorney John Hofmeyer signed a contract with the State Public Defender to provide legal services to indigent clients as a court-appointed attorney in the State of Iowa. Attorney compensation under the contract included payment for services “to the extent specified by administrative rule adopted by the State Public Defender.” Hofmeyer submitted claims to the State Public Defender for compensation, including travel expenses within his home county. In particular, he sought payment for travel time from his office in Oelwein to the county seat in West Union. The State Public Defender denied those portions of the claim requesting compensation for travel within the county as not being compensable under the contract. Hofmeyer sought judicial review of the State Public Defender’s actions. Iowa Code § 13B.4(5) (Supp.1999). The district court upheld the action of the State Public Defender. Hofmeyer challenges the action of the district court.

II. Standard of Review

The purpose of a certiorari action is to determine whether the lower court exceeded its proper jurisdiction or otherwise acted illegally. Wyciskalla v. Iowa Dist Ct., 588 N.W.2d 403, 405 (Iowa 1998). We review the district court’s action for errors in interpreting the law. Iowa R.App. P. 4; see State v. West, 320 N.W.2d 570, 574 (Iowa 1982).

III. The Merits

In his writ of certiorari to the Iowa Supreme Court, Hofmeyer claims the following: (1) the court, rather than the legislature, has inherent authority to determine reasonable compensation for court-appointed attorneys; (2) 493 Iowa Administrative Code rule 493-11.1 (1999) is invalid because it conflicts with Iowa Code section 13B.4 to the extent it does not provide for reasonable and necessary compensation; and (3) the contract he signed was a contract of adhesion subject to the doctrine of reasonable expectations.

Hofmeyer also raised two constitutional challenges to the indigent defense contract. He implicitly seems to argue the indigent defense contract is a violation of his right to equal protection because it treats county seat attorneys differently than non-county seat attorneys. Hofmeyer also argues a violation of separation of powers as the judiciary, not the State Public Defender, has the ultimate authority to determine reasonable and necessary compensation for court-appointed attorneys. We do not reach these issues, however, because we conclude the constitutionality of neither Iowa Code section 13B.4, nor of Iowa Administrative Code rule 493-11.1 is at issue in this case.

The question presented is entirely one of contract interpretation. There are two issues we must consider. First, we must determine whether the district court erred in applying contract law to resolve this case. Second, we must determine whether the district court’s ruling was proper under rules of contract interpretation.

IV.Contract Law Applicability

The court shall determine compensation for attorneys other than public defenders or contract attorneys in accordance with Iowa Code section 815.7. Iowa Code § 815.10(2) (1999). Section 815.7 provides, “an attorney who has not entered into a contract ... shall be entitled to reasonable compensation.” Id. § 815.7. However, for attorneys who have entered into an indigent defense contract, the court will determine compensation in accordance with the terms of the contract. Id. § 815.10(3).

In this case, Hofmeyer signed an indigent defense contract. We have held the amount of compensation due a contract attorney shall be determined in accordance with the terms of the contract. See State Pub. Defender v. Iowa Dist. Ct., 594 N.W.2d 34, 37 (Iowa 1999); Iowa Code § 815.10(3). Under the statute, it is not the role of the district court to establish or determine reasonable compensation for a contract attorney. The district court properly found this case to be a matter of contract law.

Y. Interpretation of the Contract

It is a cardinal principle of contract law the parties’ intention at the time they executed the contract controls. State Pub. Defender, 594 N.W.2d at 37. Absent ambiguity, intent is determined by the written words of the contract itself. Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 862 (Iowa 1991). This is not to say, however, ambiguity is required before we may consult extrinsic evidence.

The rule of contract interpretation which provides words and other conduct are interpreted in light of all the circumstances is not limited to cases when ambiguity exists. Fausel v. JRJ Enters., Inc., 603 N.W.2d 612, 618 (Iowa 1999). From the words of the agreement, we must determine “what meanings are reasonably possible.” Walsh v. Nelson, 622 N.W.2d 499, 503 (Iowa 2001). We must also determine whether a disputed term is ambiguous. Id. A term is not ambiguous simply because two parties disagree about its meaning. Id. Any determination of meaning or ambiguity must be made in light of all the circumstances, including the relations of the parties, subject matter of the transaction, preliminary negotiations, usages of trade and the course of dealing. Id. But, after the agreement “has been shown in all its length and breadth, the words of an integrated agreement remain the most important evidence of intention.” Fausel, 603 N.W.2d at 618. When determining the meaning of a contract, we look both to the terms of the contract as well as to any documents included by reference.

Hofmeyer argues he should not be bound to the terms of the indigent defense contract that were incorporated by reference. He also claims the contract is adhesive and should only be enforced according to the reasonable expectations of the parties.

A. Incorporation by Reference

Under the doctrine of incorporation, one document becomes part of another separate document simply by reference as if the former is fully set out in the latter. 4 Richard A. Lord, Williston on Contracts § 628 (3d ed.1961). Where a writing refers to another document, that other document, or so much of it as is referred to, is to be interpreted as part of the writing. Id. Whether material is incorporated by reference presents a question of law. 11 Richard A. Lord, Williston on Contracts § 30:25 (4th ed.1999). We have held clear and specific reference is required to incorporate an extrinsic document by reference. Estate of Kokjohn v. Harrington, 531 N.W.2d 99, 101 (Iowa 1995).

Hofmeyer signed a contract with the State Public Defender. The contract included the following statement: “I hereby accept the terms and conditions of Master Contract Version 493-99.... ” The contract provided compensation “for reasonable and necessary legal services.” In addition to this compensation, travel expenses “will be paid to the extent specified by administrative rule adopted by the State Public Defender.” On its face, the contract clearly refers to the Iowa Administrative Rules as the document delineating the scope of compensation for travel expenses. Hofmeyer never found the applicable regulations, though he contends he made diligent search for them. The Iowa Administrative Rules referred to in the contract were published in the Iowa Administrative Bulletin forty-five days before Hofmeyer signed the agreement. They were printed in the Bulletin and made available upon inspection and request pursuant to Iowa Code section 17A.3(l)(d). This span of forty-five days was surely adequate to alert anyone who would sign the contract to the travel expense limitations. Hofmeyer had a duty of inquiry to discover the document incorporated by reference, but he failed to do so. As the contract clearly refers to the Iowa Administrative Rules, Hofmeyer had the opportunity to gain actual knowledge of the material facts before he signed the contract.

B. Terms of the Contract

We now turn to the content of the Iowa administrative rule and Iowa Code at issue. Iowa Code section 13B.4(5) provides in part, “if any portion of the claim is not payable under the attorney’s appointment, the state public defender shall deny those portions of the claim that are not payable and approve the remainder of the claim.” Iowa Administrative Code rule 493-11.1 defines travel times as follows:

Travel time means the reasonable and necessary time spent by the attorney in automobile travel under one of the following circumstances:
1. To and from the scene of the crime;
2. To and from the location of a trial, if the venue has been changed from the county in which the crime occurred;
3. To and from the place of incarceration of a client in a postconviction relief case, criminal appeal, or post-conviction relief appeal;
4. To and from the location of the placement of a child in a juvenile case, if required by statute and court order to visit the placement and the placement is outside the county in which the case is pending; or
5. Other travel for which prior authorization is obtained from the state public defender.

Indusio unius est exclusio alterius, the expression that “one is the exclusion of the others,” has force in this case. Under this principle, any other types of travel time not outlined in Iowa Administrative Code chapter 11 are not payable. The only exception to this rule is the fifth provision allowing compensation for travel expenses if the State Public Defender gives prior authorization. The type of travel expenses claimed by Hofmeyer does not fall within the four categories above and Hofmeyer did not receive prior authorization to include in-county travel as compensable travel. The terms referenced in the Iowa Administrative Code are consistent with the purpose of the contract as they only serve to define the limits of compensation expressly stated in the main document. In view of the clear language of the contract and Administrative Code, we cannot expand the meaning of the contract to include the expenses claimed by Hofmeyer because to do so would be to obliterate the parties’ freedom of contract.

C. Contract of Adhesion and Reasonable Expectations

Alternatively, Hofmeyer attempts to void the contract arguing it is a contract of adhesion and is subject to the reasonable expectations doctrine. In general, the concept of contracts of adhesion has been addressed primarily within the context of insurance contracts.

The determination of whether a contract is a contract of adhesion involves the issue of unconscionability. Home Fed. Sav. & Loan Ass’n v. Campney, 357 N.W.2d 613, 619 (Iowa 1984). “Standardized contracts ... drafted by powerful commercial units and put before individuals on the ‘accept this or get nothing’ basis, are carefully scrutinized by the courts for the pro-pose of avoiding enforcement of ‘unconscionable’ clauses.” C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169, 180 (Iowa 1975) (quoting 6 A. Corbin, Corbin on Contracts § 1376, at 21 (1963)). However, the contract Hofmeyer signed does not have any of the characteristics of a contract of adhesion. Nothing requires a lawyer to sign this contract. The district court may appoint non-contract attorneys in certain situations. Iowa Code § 13B.9(5). Unlike most insurance contracts, we do not have before us a contract offered on a “take it or leave it basis” between two parties of unequal bargaining power. The contract was not adhesive.

Even if Hofmeyer could successfully argue the contract is adhesive, the reasonable expectations doctrine would not save him. “Courts in construing and applying a standardized contract seek to effectuate the reasonable expectations of the average member of the public who accepts it.” Restatement (Second) of Contracts § 211 cmt. e (1979). The doctrine of reasonable expectations will assist Hofmeyer only if the terms of the referenced document are (1) bizarre or oppressive; (2) eviscerate terms explicitly agreed to; or (3) eliminate the dominant purpose of the transaction. Campney, 357 N.W.2d at 620.

There is nothing in this contracting circumstance remotely bizarre or oppressive. The travel limitations do not eviscerate terms explicitly agreed to by the parties. Nor does this term eliminate the dominant purpose of the transaction. Hofmeyer desired to be a contract attorney to do court-appointed indigent defense work for the State of Iowa. The dominant purpose of the contract was to provide legal services to people accused of crimes and to pay attorneys for providing those services. The disputed terms of the Iowa Administrative Code only operate to the extent they define the limits of compensation. Hofmeyer may still function as a court-appointed attorney and receive compensation for his services. As such, the terms incorporated by reference do not eviscerate the dominant purpose of the contract.

In trying to effectuate the reasonable expectations of a contracting party we will seek to determine if a reasonable person would accept the same contract attorney Hofmeyer signed. The reasonable person presumably understands the consequence of signing a contract and the import of the terms being assenting to. See Cronbaugh v. Farmland Mut. Ins. Co., 475 N.W.2d 652, 654 (Iowa Ct.App.1991) (“[w]here a party to a written contract is able to and has had the opportunity to read the contract, he or she cannot claim later in an attempt to defeat the contract that he or she did not understand the contract terms or conditions”); see also Wilmotte & Co. v. Rosenman Bros., 258 N.W.2d 317, 323 (Iowa 1977). Hofmeyer contracted with knowledge of there being terms incorporated by reference. Neither Hofmeyer, nor any reasonable person reading this contract could understand the document to not include the terms of the Iowa Administrative Code as they were clearly reflected within the four corners of the contract. Hofmeyer had no reasonable expectation that would justify the nullification of the terms incorporated by reference.

WRIT ANNULLED.

      1. Hofmeyer appealed the State Public Defender’s denial of three claims for travel expenses. He was denied a total amount of $55.00 for in-county travel time. As to the three claims, the State Public Defender did approve a total of $578.24 as compensable under the terms of the contract.

      2. The State Public Defender has authority to contract with attorneys for legal services for indigents accused of crimes. Iowa Code § 13B.4(3)(1999).


author: CADY, Justice.

text:
    CONRAD BROTHERS, Appellee, v. JOHN DEERE INSURANCE COMPANY, Appellant.
    No. 00-0694.
    Supreme Court of Iowa.
    Dec. 19, 2001.

      Gregg Geerdes, Iowa City, for appellant.
    Mark McCormick of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, for appellee.
   CADY, Justice.

In this appeal, we must decide if the rights of an insured to the replacement costs of damaged property covered under a casualty insurance policy were properly assigned by the insured to a mortgagee, and whether an assignee is required to make the repairs or replace the property before the insurer is obligated to pay replacement costs. The district court and court of appeals found the assignment was valid and that the intent to rebuild by the assignee triggered the insurer’s obligation to pay. We agree that the assignment was valid and conclude the assignee was relieved of the condition precedent to repair or replace the property based upon a repudiation of the insurance contract by the insurer. We affirm the decision of the court of appeals and the judgment of the district court.

I. Background Facts and Proceedings.

R.L. Schott Implements, Inc. (Schott) operated a John Deere implement dealership in Sigourney, Iowa. The dealership was operated on land owned by Schott. There were two buildings on the premises' — a storage and maintenance building, and an office building which housed the retail portion of the business.

On August 26, 1997, Schott executed a mortgage on the property to Conrad Brothers Partnership (Conrad Bros.) to secure a $300,000 promissory note. Pursuant to the mortgage, Schott was required to maintain insurance which provided replacement cost coverage on the buildings to protect against windstorm loss and other commercially reasonable hazards.

The mortgage agreement additionally delineated the parties’ rights in the event of a default on the note by Schott. Upon default, Conrad Bros, was permitted to immediately record a deed in lieu of foreclosure. The deed constituted complete satisfaction of Schott’s obligations under the mortgage. Furthermore, the mortgage provided that the deed would result in the assignment of Schott’s rights to any insurance proceeds.

Schott obtained a casualty insurance policy from John Deere Insurance Company (John Deere) in March 1998. The policy insured the two buildings against windstorm loss. It permitted the insured to make a claim for the actual cash value of the property, as well as an additional claim for the replacement costs. However, the policy posed several conditions on a claim for replacement costs. First, the insured was required to replace or repair the damaged property within a reasonable time after the loss or damage. If the insured rebuilt on a different premises, it was entitled to no more than the cost to replace the building on the same premises using similar material as the original building. In addition, the insured was required to notify the insurer within 180 days of loss of the insured’s intent to seek replacement costs.

John Deere included a standard loss payable provision in the insurance policy. It provided for the payment of damages to a mortgagee named in the policy. Conrad Bros, was not named as a loss payee or a mortgage holder. Moreover, the policy prohibited the assignment of rights and duties under the policy without John Deere’s written consent. Schott did not request John Deere’s approval of the assignment clause contained in its mortgage agreement with Conrad Bros. Prior to the incidents giving rise to this action, John Deere was unaware of Conrad Bros.’s interest in the insured property.

After losing its dealership license in May 1998, Schott terminated its business operations. On June 29, 1998, a windstorm extensively damaged the office building and completely destroyed the storage and maintenance building. Schott promptly filed a proof of loss with John Deere. Conrad Bros, then informed John Deere of its mortgage interest. Not long after the windstorm loss, Schott defaulted on the mortgage. Conrad Bros, elected to file the deed in lieu of foreclosure on July 14, 1998.

The full cost to replace the buildings totaled $120,075. The actual cash value of the loss equaled $60,037.50. John Deere issued a joint check to Schott and Conrad Bros, for the actual cash value, minus the deductible. Schott subsequently endorsed the check to Conrad Bros.

Conrad Bros, then made a claim for the replacement costs from John Deere. John Deere informed Conrad Bros, it was not covered by the policy because it was not listed as a mortgage holder. Thus, it informed Conrad Bros, that any claim under Schott’s insurance policy would be denied.

Conrad Bros, filed a petition at law requesting replacement cost damages of $60,037.50, plus interest. John Deere responded by claiming Conrad Bros, extinguished its insurable interest when it filed the deed in complete satisfaction of the mortgage, and further contested the validity of the assignment. Alternatively, John Deere pled the affirmative defense of lack of compliance with the condition precedent requiring actual replacement before an insured is entitled to replacement costs.

Conrad Bros, moved for summary judgment. It claimed it held a valid assignment and John Deere’s refusal to acknowledge any responsibility for coverage excused the performance of any condition precedent under the insurance agreement to rebuild. It further claimed it was ready and able to rebuild but wanted assurance from John Deere that it would pay the replacement costs before rebuilding.

The district court granted summary judgment for Conrad Bros. It found the assignment was valid and Conrad Bros, was entitled to receive the replacement costs under the policy without first repairing or replacing the buildings. The court found it would be unreasonable to require Conrad Bros, to comply with the condition when John Deere was disputing the coverage.

The court later held a trial to determine whether Conrad Bros, was entitled to a damage award. Following the evidence, the district court found Conrad Bros, had complied with the provision requiring notice of intent to seek replacement costs within 180 days of the loss and it was reasonable for it not to perform the condition requiring the repairs to be made because John Deere had denied any coverage. The district court entered judgment for Conrad Bros, in the amount of $60,037.50.

John Deere appealed. We transferred the case to the court of appeals. It affirmed the district court’s conclusions regarding the validity of the assignment and Conrad Bros.’s right to replacement cost coverage. It determined Conrad Bros, complied with the policy provision requiring actual replacement before the insured is entitled to replacement costs under the circumstances based on its intent to replace the property.

John Deere petitioned for further review. It claims the deed in lieu of foreclosure filed by Conrad Bros, extinguished the debt and eliminated any insurable interest. Alternatively, John Deere claims that its denial of coverage did not excuse the condition precedent requiring the buildings to be rebuilt before it was obligated to pay replacement costs.

II. Standard of Review.

Initially, we must determine our standard of review. John Deere contends our review is limited to the summary judgment ruling. Conversely, Conrad Bros, counters we must also review the post-trial ruling, as the district court’s conclusions further supported the summary judgment decision. In either case, our standard of review is the same. We review for errors at law. See Pierce v. Farm Bureau Mut. Ins. Co., 548 N.W.2d 551, 553 (Iowa 1996). Instead, the question presented goes to the scope of our review. This case proceeded to final judgment and the issues presented at the summary judgment hearing were revisited at trial. Accordingly, we review the entire record and are bound by the findings of the district court if supported by substantial evidence. Id.

III. Insurable Interest.

It is a well-established rule of insurance law that a person must possess an insurable interest in the insured property in order to recover under a policy of insurance. See 44 C.J.S. Insurance § 219, at 419 (1993). John Deere advances two reasons in support of its argument that Conrad Bros, had no insurable interest in the two damaged buildings insured by Schott. First, John Deere contends the purported assignment was invalid because the insurance policy expressly prohibited assignments and, alternatively, because the assignment was executed before the loss had been incurred. Second, John Deere claims the filing of the deed extinguished Conrad Bros.’s equitable lien on the insurance proceeds because the deed was accepted as full satisfaction for Schott’s debt.

A. Assignment.

At common law, an insured was prohibited from assigning its insurance policy and underlying rights. 43 Am.Jur.2d Insurance § 789, at 851 (1982). However, the law now generally favors the assignability of choses in action, and courts have permitted the assignment of insurance policies under statutes providing- for the assignment of contracts in exchange for a money payment. Id. Iowa Code section 539.1 is such a statute. See Iowa Code § 539.1 (1997) (assignment of nonnegqtiable instruments).

Notwithstanding,, insurers may impose conditions in the terms of the policy on an insured’s ability to assign its rights under the insurance policy. 43 Am. Jur.2d Insurance § 790, at 852. One common condition imposed on insureds is the requirement to obtain the insurers’ consent before granting an assignment. Id. § 810, at 865. Generally, insurance policies, particularly those regarded as personal contracts, such as fire insurance and liability policies, are not assignable prior to loss without the insurer’s consent. Id. § 789, at 852; see Antal’s Restaurant, Inc. v. Lumbermen’s Mut. Cas. Co., 680 A.2d 1386, 1388 (D.C.1996). In fact, we have previously invalidated the assignment of an insurance policy and its underlying claims prior to the occurrence of the condition triggering liability under the policy. See Neiman v. Hawkeye Sec. Fire Ins. Co., 205 Iowa 119, 125, 217 N.W. 258, 261 (1927); Davis v. Bremer County Farmers’ Mut. Fire Ins. Ass’n, 154 Iowa 326, 329, 134 N.W. 860, 862 (1912); see also Welch v. Taylor, 218 Iowa 209. 212, 254 N.W. 299, 301 (1934) (may assign interest to any claim under the insurance policy after the loss occurs).

The casualty insurance policy issued to Schott in this case contained what is considered to be standard policy language prohibiting an insured from assigning its interests without the insurance company’s consent. The anti-assignment provision did not specify whether it applied to assignments executed before or after the loss. However, general stipulations prohibiting assignments absent an insurer’s consent have been held to apply only to pre-loss assignments. 43 Am.Jur.2d Insurance § 792, at 854. The great weight of authority supports the rule that an anti-assignment clause does not apply to the assignment of claims arising after the loss. See Straz v. Kansas Bankers Sur. Co., 986 F.Supp. 563, 569 (E.D.Wis.1997); Viola v. Fireman’s Fund Ins. Co., 965 F.Supp. 654, 658 (E.D.Pa.1997); Action Auto Stores, Inc. v. United Capitol Ins. Co., 845 F.Supp. 417, 422-23 (W.D.Mich.1993); McLaren v. Imperial Cas. & Indem. Co., 767 F.Supp. 1364, 1377 (N.D.Tex.1991); United States v. Lititz Mut. Ins. Co., 694 F.Supp. 159, 162 (M.D.N.C.1988); Int’l Rediscount Corp. v. Hartford Accident & Indem. Co., 425 F.Supp. 669, 673 (D.C.Del.1977); Southwestern Bell Tel. Co. v. Ocean Accident & Guarantee Corp., 22 F.Supp. 686, 687 (D.C.Mo.1938); St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co., 25 Ariz.App. 309, 543 P.2d 147, 149 (1975); Antal’s Restaurant, Inc., 680 A.2d at 1388; Lexington Ins. Co. v. Simkins Indus., Inc., 704 So.2d 1384, 1386 n. 3 (Fla.1998); Gisela Invs., N.V. v. Liberty Mut. Ins. Co., 452 So.2d 1056, 1057 (Fla.Dist.Ct.App.1984); A.J. Maggio Co. v. Willis, 316 Ill.App.3d 1043, 250 Ill.Dec. 376, 738 N.E.2d 592, 597 (2000); Goldstein v. Scott, 108 Ill.App.3d 867, 64 Ill.Dec. 374, 439 N.E.2d 1039, 1043 (1982); Elat, Inc. v. Aetna Cas. & Sur. Co., 280 N.J.Super. 62, 654 A.2d 503, 505 (1995); Pub. Util. Dist. No. 1 v. Int’l Ins. Co., 124 Wash.2d 789, 881 P.2d 1020, 1027 (1994); Smith v. Buege, 182 W.Va. 204, 387 S.E.2d 109, 116 (1989); see also 43 Am. Jur.2d Insurance § 810, at 866 (“in the absence of an express provision to the contrary, provisions relating to the consent of an insurer to an assignment do not relate to assignments after loss”). Moreover, even if the provision had specifically prohibited post-loss assignments, it would most likely be in contravention of public policy and the general purpose of indemnity contracts. See Straz, 986 F.Supp. at 569; Southwestern Bell Tel. Co., 22 F.Supp. at 687; 43 Am.Jur.2d Insurance § 792, at 854.

The policy underlying these well-settled rules explains the rationale for distinguishing between assignments before and after loss. The primary reason for the prohibition of assignments prior to loss absent an insurer’s consent is to protect the insurer against increased risks of loss resulting from an assignment of coverage to a new insured. See Viola, 965 F.Supp. at 659; St. Paul Fire & Marine Ins. Co., 543 P.2d at 149; Pub. Util. Dist. No. 1, 881 P.2d at 1027. The assignee may present a greater risk of loss to the insurer than the original insured. However, the need to protect the insurer no longer exists after the insured sustains the loss because the liability of the insurer is essentially fixed. See Viola, 965 F.Supp. at 659; Buege, 387 S.E.2d at 116. This is particularly true in the case of windstorm damage, where the personal character of the insured can no longer affect the insurer’s liability. See Southwestern Bell Tel. Co., 22 F.Supp. at 687-88; Antal’s Restaurant, Inc., 680 A.2d at 1388; Davis, 154 Iowa at 329-30, 134 N.W. at 863. Furthermore, once the loss has triggered the Lability provisions of the insurance policy, an assignment is no longer regarded as a transfer of the actual policy. See Kintzel v. Wheatland Mut. Ins. Ass’n, 203 N.W.2d 799, 804-05 (Iowa 1973); Buege, 387 S.E.2d at 116. Instead, it is a transfer of a chose in action under the policy. See St. Paul Fire & Marine Ins. Co., 543 P.2d at 149; Kintzel, 203 N.W.2d at 805. At this point, the insurer-insured relationship is more analogous to that of a debtor and creditor, with the policy serving as evidence of the amount of debt owed. Antal’s Restaurant, Inc., 680 A.2d at 1389; Elat, Inc., 654 A.2d at 505; see Straz, 986 F.Supp. at 569. Moreover, if we permitted an insurer to avoid its contractual obligations by prohibiting all post-loss assignments, we could be granting the insurer a windfall. See Int'l Rediscount Corp., 425 F.Supp. at 673; St. Paul Fire & Marine Ins. Co., 543 P.2d at 149-50; Parrish Chiropractic Ctrs., P.C. v. Progressive Cas. Ins. Co., 857 P.2d 540, 541 (Colo.Ct.App.1993); Elat, Inc., 654 A.2d at 506.

We must next consider whether the assignment in this case occurred before or after the windstorm damaged Schott’s buildings. John Deere claims this was a prohibited pre-loss assignment because the assignment was effective upon the execution of the mortgage agreement. To the contrary, the mortgage agreement provided for assignment of the insurance policy rights upon the filing of the deed in lieu of foreclosure. Although the assignment clause in the mortgage existed before the loss, it was merely an agreement to assign and did not become an actual assignment until the filing of the deed. See Buege, 387 S.E.2d at 117. The deed was not filed until after the windstorm damage. Consequently, the assignment did not take effect until after the loss. Thus, Schott validly assigned Conrad Bros, its right to seek replacement cost proceeds from John Deere for the damage to the two buildings.

As assignee, Conrad Bros, stepped into Schott’s shoes. Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d 637, 641 (Iowa 2000); 43 Am.Jur.2d Insurance § 791, at 854. The assignment vested in Conrad Bros, all of Schott’s rights to insurance proceeds. Krohn v. Gardner, 248 Neb. 210, 533 N.W.2d 95, 98 (1995). At the same time, it made Conrad Bros, responsible for proving compliance with the policy terms. Kelly, 620 N.W.2d at 641. Additionally, it limited any recovery by Conrad Bros, to no more than what Schott could have recovered under the policy. 6 Am.Jur.2d Assignments § 144, at 239 (1999). Furthermore, Conrad Bros.’s right to recovery is subject to any defense John Deere can assert against Schott. Kelly, 620 N.W.2d at 641; 43 Am.Jur.2d Insurance § 791, at 854. Thus, Conrad Bros, must prove it has satisfied all of the condition precedents, or demonstrate a viable legal excuse for any failure to comply. Kelly, 620 N.W.2d at 641.

B. Filing of Deed in Lieu of Foreclosure.

In addition to obtaining an insurable interest by assignment, Conrad Bros, had an insurable interest in the buildings to the extent secured by the mortgage. 44 C.J.S. Insurance § 228(b), at 430. Even though Schott failed to name Conrad Bros, as a loss payee or mortgage holder, the mortgage covenant requiring Schott to maintain insurance gave Conrad Bros, an interest in the insurance policy. 5A John A. Appleman & Jean Appleman, Insurance Law and Practice § 3381, at 243 (rev. ed.1970) [hereinafter Appleman]; see Winneshiek Mut. Ins. Ass’n v. Roach, 257 Iowa 354, 362, 132 N.W.2d 436, 441 (1965) (mortgagee has no interest in mortgagor’s insurance policy unless provided for in mortgage agreement); Johnson v. N. Minn. Land & Investment Co., 168 Iowa 340, 344, 150 N.W. 596, 598 (1915) (same). Moreover, an insurance policy should be treated as if it named the mortgage holder when a mortgagor fails to uphold its promise to do so. See 5A Ap-pleman § 3381, at 245 n. 23. Accordingly, we have consistently held a mortgagee has an equitable lien on the proceeds of an insurance policy procured by the mortgagor for the mortgagee’s benefit despite the failure to expressly include the mortgagee in the insurance policy. Kintzel, 203 N.W.2d at 804; Winneshiek, 257 Iowa at 363, 132 N.W.2d at 441; Johnson, 168 Iowa at 344, 150 N.W. at 598; Mahoney v. State Ins. Co., 133 Iowa 570, 580, 110 N.W. 1041, 1044 (1907).

A mortgagee’s interest in an insurance policy obtained on its behalf continues until the mortgagee extinguishes the mortgage debt. 44 C.J.S. Insurance § 228(b), at 431. John Deere contends Conrad Bros.’s interest in insurance proceeds extinguished when it filed the deed in lieu of foreclosure in complete satisfaction of the mortgage and its underlying obligations. John Deere correctly notes that the filing of the deed released Schott from further liability. Lititz Mut. Ins. Co., 694 F.Supp. at 162. However, it did not release John Deere from liability. Id. On the contrary, the mortgage agreement specifically provided that Conrad Bros, would receive the title to the buildings and the right to insurance proceeds in satisfaction of the mortgage debt. See id.; Bartlett v. Iowa State Ins. Co., 77 Iowa 86, 87-88, 41 N.W. 579, 579 (1889). As assignee of Schott’s unpaid insurance claim, Conrad Bros, possessed an absolute right to receive insurance proceeds up to the amount necessary to satisfy the outstanding debt. Lititz Mut. Ins. Co., 694 F.Supp. at 162.

Any claim that Conrad Bros, will be unjustly enriched by this holding is unfounded. In fact, John Deere would be the unjustly enriched party if we ruled otherwise, as it would successfully avoid paying proceeds altogether. Id. This is not a case where the mortgagor has obtained a judgment for the full amount secured by the mortgage. See Farmers & Merchants Sav. Bank v. Farm Bureau Mut. Ins. Co., 405 N.W.2d 834, 837 (Iowa 1987); Border State Bank v. Farmers Home Group, 620 N.W.2d 721, 724-25 (Minn.Ct.App.2000); see also Union Cent. Life Ins. Co. v. Bracewell, 209 Iowa 802, 807, 229 N.W. 185, 187 (1930); Tott v. Johnson, 51 Iowa 192, 196, 1 N.W. 498, 500 (1879). Likewise, this is not a case where the mortgagee had the opportunity to outbid and cut off lower bidders at a foreclosure sale. See Farmers & Merchants Sav. Bank, 405 N.W.2d at 837. On the contrary, Conrad Bros, has yet to obtain what it bargained for in the mortgage agreement. See Union Cent. Life Ins. Co., 209 Iowa at 809, 229 N.W. at 188; Bartlett, 77 Iowa at 87-88, 41 N.W. at 579-80. The right to Schott’s insurance loss claims was a part of the consideration in the execution of the mortgage. See Union Cent. Life Ins. Co., 209 Iowa at 809, 229 N.W. at 188 (discussing facts in Bartlett).

IY. Replacement Cost Coverage.

Under the applicable provisions of the insurance policy, Schott was required to replace the damaged buildings in order to qualify for replacement cost coverage. The parties agree that this provision operates as a condition precedent to recovery of replacement costs. See Kolls v. Aetna Cas. & Sur. Co., 503 F.2d 569, 571 (8th Cir.1974); Snellen v. State Farm Fire & Cas. Co., 675 F.Supp. 1064, 1067 (W.D.Ky.1987); Pierce, 548 N.W.2d at 554; Bosch v. Garcia, 286 N.W.2d 26, 28 (Iowa 1979); Higgins v. Ins. Co. of N. Am., 256 Or. 151, 469 P.2d 766, 772 (1970); Hess v. N. Pac. Ins. Co., 122 Wash.2d 180, 859 P.2d 586, 589-90 (1993); see generally Randy R. Koenders, Annotation, Construction and Effect of Property Insurance Provision Permitting Recovery of Replacement Cost of Property, 1 A.L.R.5th 817, 848-52 (1992) [hereinafter Koenders]. The reason insurers place this provision in insurance policies is to prevent an insured from making a profit from a loss. See Pierce, 548 N.W.2d at 554; see also Johnny Parker, Replacement Cost Coverage: A Legal Primer, 34 Wake Forest L.Rev. 295, 298-99 (1999) [hereinafter Parker]; Koenders, 1 A.L.R.5th at 829. When a policy distinguishes between coverage for actual loss, which considers depreciation as a component to value, and the cost of rebuilding, which does not consider depreciation, an insured can profit by receiving replacement costs which are not then used to replace property which depreciated in value prior to the loss. However, Conrad Bros, contends John Deere’s conduct in denying responsibility for coverage to Conrad Bros, excused its failure to comply with the condition precedent.

It is widely recognized that “a party may not rely on a condition precedent when by its own conduct it has made compliance with that condition impossible.” State Farm Fire & Cas. Ins. Co. v. Miceli, 164 Ill.App.3d 874, 115 Ill.Dec. 832, 518 N.E.2d 357, 362 (1987). This rule has been frequently applied to insurance contracts. Id. In fact, several courts have excused performance by the insured when the insurer’s conduct actually prevented the insured from rebuilding the damaged property. See, e.g., Maine Mut. Fire Ins. Co. v. Watson, 532 A.2d 686, 689 (Me.1987); Bailey v. Farmers Union Co-op. Ins. Co., 1 Neb.App. 408, 498 N.W.2d 591, 598-99 (1992); see Parker, 34 Wake Forest L.Rev. at 314, 323. Courts often hinge their findings of excuse on the insurer’s bad faith or deceitful conduct towards the insured during the claims process. Dickler v. CIGNA Prop. & Cas. Co., 957 F.2d 1088, 1096 (3d Cir.1992) (insurer prevented insured from learning of its right to replacement costs); Maine Mut. Fire Ins. Co., 532 A.2d at 689 (blatant misrepresentation of critical policy language by insurance adjuster); Parker, 34 Wake Forest L.Rev. at 323; see O-So Detroit, Inc. v. Home Ins. Co., 973 F.2d 498, 503 (6th Cir.1992) (condition precedent of actual replacement excused only if nonperformance due to insurer’s bad faith actions). Yet, in finding an excuse, courts have universally based their determination on the theory of impossibility or frustration of performance. Ward v. Merrimack Mut. Fire Ins. Co., 332 N.J.Super. 515, 753 A.2d 1214, 1218 (2000) (even if the insured asserts or the court mentions estoppel, the courts generally resolve the issue on the impossibility theory); see Parker, 34 Wake Forest L.Rev. at 321-25; Koenders, 1 A.L.R.5th at 855-59.

The district court and the court of appeals relied upon this approach to excuse the performance of the condition to rebuild the property under the insurance agreement. See Mel Frank Tool & Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802, 806 (Iowa 1998); Nova Springs Co-op. Co. v. Brandau, 247 N.W.2d 744, 747 (Iowa 1976). However, when nonperformance is only temporary, the duty to perform is merely suspended during the period the performance is not possible. Nova Springs Co-op. Co., 247 N.W.2d at 747. Thus, while a coverage dispute may excuse performance by the insured of certain conditions that could no longer be performed even after the coverage dispute is resolved, it would not be necessary to excuse the performance of a condition precedent that would still be capable of performance following the resolution of the coverage question, at least in the absence of bad faith by the insurer. See Tamco Corp. v. Fed. Ins. Co., 216 F.Supp. 767, 775 (D.C.Ill.1963).

In this case, Conrad Bros, would be capable of performing the condition once coverage was determined. Nevertheless, the district court and court of appeals excused performance of the condition to rebuild based upon a finding that it would be a useless and unreasonable act without assurance of coverage. While this reasoning is sound, another doctrine exists that properly considers this rationale, and enables Conrad Bros, to obtain a judgment for the replacement costs without first replacing the buildings.

Where one party to a contract repudiates the contract before the time for performance has arrived, the other party is relieved from its performance. See Restatement (Second) of Contracts § 253(2) (1981); 13 Richard A. Lord, Williston on Contracts § 39:37, at 663 (4th ed.2000) [hereinafter Williston ]. Additionally, once a party repudiates a contractual duty before performance is due, the other party may enforce the obligation by filing a claim for damages without fulfilling any conditions precedent. Restatement (Second) of Contracts § 253 cmt. b; 13 Williston § 39:37, at 666, 668. A repudiation of a contract is accorded the same effect as a breach by nonperformance. Restatement (Second) of Contracts § 255 cmt. a. The rationale for the repudiation doctrine is explained as follows:

The rationale behind the rule that a repudiation of a contract by one party will excuse the other party from the duty to perform contractual obligations and conditions, is the prevention of economic waste, in the sense that, following a clear repudiation, the other party should not be required to perform the formal, economically wasteful, and useless act of further performing. “It would seem to be reasonable and just, upon the repudiation of the contract by one party, that the other be held justified in ceasing performance, stopping expenditure, and thus curtailing the damages which the other party would be ultimately liable to pay.” To further comply with the contract requirements where the other party has repudiated the contract would be a useless act, and the law does not require the doing of a useless act.

13 Williston § 39:37, at 666-67 (footnotes omitted); see Restatement (Second) of Contracts § 255 cmt. a (“No one should be required to do a useless act.... ”).

Normally, “repudiation consists of a statement that the repudiating party cannot or will not perform.” II E. Allan Farnsworth, Farnsworth on Contracts § 8.21, at 535 (2d ed.1998) [hereinafter Famsivorth ]. “The statement must be sufficiently positive to be reasonably understood ... that the breach will actually occur.” Id.; see Lane v. Crescent Beach Lodge & Resort, Inc., 199 N.W.2d 78, 82 (Iowa 1972) (“[a]nticipatory breach requires a definite and unequivocal repudiation”); Waterman v. Bryson, 178 Iowa 35, 40, 158 N.W. 466, 467 (1916) (“positive notice of an intended breach”). Thus, we must consider whether there was substantial evidence of repudiation.

It can be particularly difficult to determine if a statement amounts to a repudiation when it results from an honest but mistaken misunderstanding of the rights of the parties under the contract. II Farnsworth § 8.21, at 536-37. Generally, a good faith dispute by a party will not prevent a statement from becoming a repudiation. Id. at 537. Thus, a party typically “acts at its peril if that party, insisting on what it mistakenly believes to be its rights, refuses to perform its duty.” Id. However, when two parties differ as to the interpretation of a contract, the mere demand by one party that the contract be performed according to its interpretation does not in and of itself constitute repudiation. 4 Arthur Linton Corbin, Corbin on Contracts § 973, at 911 (1951). Instead, a demand must be accompanied by a clear expression of intent not to perform under any other interpretation. See id.; P & L Contractors, Inc. v. Am. Norit Co., 5 F.3d 133, 139 (5th Cir.1993). Thus, a demand for performance on terms that go beyond the contract does not constitute repudiation, unless coupled with an intent not to perform if those terms are not accepted. II Farnsworth § 8.21, at 537-38.

In this case, John Deere denied any coverage on the claim by Conrad Bros. This denial of coverage, even though based upon a mistaken interpretation, was a clear intent not to perform. Thus, John Deere repudiated the contract. This conclusion is consistent with the general view that an insured is excused under the doctrine of repudiation from compliance with preliminary conditions of an insurance policy when “an insurance company indicates that it will not pay an insurance loss in any event.” 13 Williston § 39:39, at 678; see Larsen & Son v. Retail Merchants Mut. Ins. Co., 212 Iowa 943, 946, 237 N.W. 468, 470 (1931) (insurance company waives proof of loss when it denies liability despite knowledge of property destruction from fire).

The result in this case may seem somewhat harsh considering there was no evidence that John Deere denied coverage in bad faith. However, there are three factors which mitigate any harshness of the result. First, insurers may resolve coverage disputes without repudiating the insurance contract by utilizing such procedural devices as declaratory judgments. See Restatement (Second) of Contracts § 250 cmt. d. Second, even though an insurer denies coverage in good faith, the result to the insured, or an assignee of the insured’s claim, is the same. The insured or assignee will not obtain coverage by performing the condition precedent. Third, the insured is unable to use the insurer’s repudiation as a windfall, because the insured must prove the repudiation materially contributed to its nonperformance. See Restatement (Second) of Contracts §. 255.

Under the applicable governing principles, Conrad Bros, was entitled to rely on John Deere’s statements that it would not pay a replacement cost loss to an assignee. As a result, we conclude John Deere repudiated its obligation under the contract. The only remaining issue to determine is whether that repudiation also contributed materially to the occurrence of Conrad Bros.’s failure to repair or that such failure to repair would have occurred in any event. See id. & cmt. a. The district court made the following finding of fact on this point:

Conrad showed through the testimony of Gail Conrad and John Conrad and through its exhibits, including Plaintiffs Exhibit 3, that it had incurred or was ready, willing, and able to incur amounts in excess of $60,037.50 by way of acquisition of a replacement building to the building destroyed on the R.L. Schott premises on June 28,1998.

There is substantial evidence from which the court could have concluded Conrad Bros, would have repaired but for John Deere’s repudiation. Consequently, that condition is excused, and Conrad Bros, is entitled to damages based on the full replacement costs. We affirm the judgment of the district court.

DECISION OF COURT OF APPEALS AND JUDGMENT OF DISTRICT COURT AFFIRMED.

All justices concur except STREIT, J., who takes no part.

      . The anti-assignment clause specifically provided:
      Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.

      All other terms and provisions of the policy remain unchanged.


author: RUSSELL A. ANDERSON, Justice.

text:
    Charles H. FERN, Respondent, v. RIVERHOUSE CORPORATION and Argonaut Great Central Insurance, Relators, and Riverhouse Corporation and American States Insurance Company, Respondents.
    No. C4-01-2056.
    Supreme Court of Minnesota.
    March 4, 2002.
    Larry J. Peterson, Larry J. Peterson & Associates, St. Paul, MN, for Relators Riv-erhouse Corporation and Argonaut Great Central Insurance.
    Steven E. Sullivan, Fitch, Johnson, Larson, Walsh & Held, P.A., South Minneapolis, MN, for Respondents Riverhouse Corporation and American States Insurance.
    Charles H. Fern, Luck, WI, pro se.
   ORDER

RUSSELL A. ANDERSON, Justice.

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that the decision of the Workers’ Compensation Court of Appeals filed October 29, 2001, be, and the same is, affirmed without opinion. See Minn. R. CivApp. P. 136.01, subd. 1(b).


author: Paul H. Anderson Associate Justice

text:
    In re Petition for DISCIPLINARY ACTION AGAINST Charles W. DuFRESNE, an Attorney at Law of the State of Minnesota.
    No. CX-01-1977.
    Supreme Court of Minnesota.
    March 5, 2002.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for disciplinary action alleging that respondent Charles W. DuFresne committed professional misconduct warranting public discipline, namely, engaging in the practice of law while suspended for nonpayment of his attorney registration fee, neglecting multiple client matters and making misrepresentations to those clients about the status of their matters, in violation of Minn. R. Prof. Conduct 1.3, 1.4(a), 4.1, 5.5(a), and 8.4(c). Respondent has provided to the Director evidence of a psychological condition which caused or was a significant contributing factor to respondent’s misconduct.

The parties have entered into a stipulation in which respondent admits his conduct violated the Rules of Professional Conduct, waives his rights under Rule 14, Rules on Lawyers Professional Responsibility (RLPR), and agrees with the Director to jointly recommend that the appropriate discipline is a public reprimand, payment of $900 in costs and disbursements under Rule 24, RLPR, and supervised probation subject to the following conditions:

a. Respondent shall cooperate fully with the Director’s Office in its efforts to monitor compliance with this probation and promptly respond to the Director’s correspondence by the due date. Respondent shall cooperate with the Director’s investigation of any allegations of unprofessional conduct that may come to the Director’s attention. Upon the Director’s request, respondent shall provide authorization for release of information and documentation to verify compliance with the terms of this probation.
b. Respondent shall abide by the Minnesota Rules of Professional Conduct.
e.Respondent has stated that he has not practiced law since before February 1, 2001, and that he does not intend to resume the active practice of law until the pending disciplinary proceeding is resolved and until he has made sufficient progress regarding his psychological issues.
d. Respondent will not engage in the practice of law during this probation except as provided in subparagraphs (f) through (m) below.
e. This probation shall end two years after respondent resumes the practice of law pursuant to subparagraph (f) below.
f. If respondent decides to practice law at any time during the period of this probation, respondent shall provide (1) written notice to the Director at least 30 days prior to beginning the practice of law or the representation of any client, and (2) a written opinion from a licensed psychiatrist or other medical doctor acceptable to the Director certifying that respondent suffers from no mental health problems which would prevent him from competently practicing law in compliance with the Minnesota Rules of Professional Conduct, and this probation shall become supervised and subject to the conditions listed in subparagraphs (a) and (b) above, and (g) through (m) below.
g. Respondent shall be supervised by a licensed Minnesota attorney, appointed by the Director to monitor compliance with the terms of this probation. Respondent shall provide to the Director the names of four attorneys who have agreed to be nominated as respondent’s supervisor not less than two weeks before respondent begins to practice law. If, after diligent effort, respondent is unable to locate a supervisor acceptable to the Director, the Director will seek to appoint a supervisor. Until a supervisor has signed a consent to supervise, the respondent shall on the first day of each month provide the Director with an inventory of active client files described in paragraph (h) below. Respondent shall make active client files available to the Director upon request.
h. Respondent shall cooperate fully with the supervisor in his/her efforts to monitor compliance with this probation. Respondent shall contact the supervisor and schedule a minimum of one in-person meeting per calendar quarter. Respondent shall submit to the supervisor an inventory of all active client files by the first day of each month during the probation. With respect to each active file, the inventory shall disclose the client name, type of representation, date opened, most recent activity, next anticipated action, and anticipated closing date. Respondent’s supervisor shall file written reports with the Director at least quarterly, or at such more frequent intervals as may reasonably be requested by the Director.
i. Before respondent begins to practice law, respondent shall initiate office procedures which ensure that there are prompt responses to correspondence, telephone calls, and other important communications from Clients, courts and other persons interested in matters which respondent is handling, and which will ensure that respondent regularly reviews each and every file and completes legal matters on a timely basis. Respondent shall maintain these procedures throughout the period of probation.
j. Before respondent begins to practice law, respondent shall provide to the Director and to the probation supervisor, if any, a written plan outlining office procedures designed to ensure that respondent is in compliance with probation requirements. Respondent shall provide progress reports as requested.
k. Respondent shall continue medical, therapy, or other treatment from a mental health professional and/or medical professional approved by the Director and abide by the courses of treatments recommended. Respondent shall execute any authorizations requested by the Director for release of medical information to ensure that information regarding respondent’s mental health status is shared with the Director on a regular basis.
l. By the tenth day of each month, respondent shall provide to the Director a written report from respondent’s mental health or medical professional which states whether respondent has abided by all courses of recommended treatments and sets forth respondent’s progress since the date of the prior report.
m. Failure to abide by these conditions of probation will result in more severe sanctions, including the possibility of an immediate temporary suspension pending a full evidentiary hearing on any alleged violations of probation or other violations of the Rules of Professional Conduct.

This court has independently reviewed the file and approves the jointly recommended disposition.

IT IS HEREBY ORDERED that respondent Charles W. DuFresne be publicly reprimanded and placed on probation subject to the conditions set forth above. Respondent shall pay $900 in costs and disbursements under Rule 24, RLPR.

BY THE COURT:

Paul H. Anderson Associate Justice


text:
    In re PANEL CASE NO. 15590.
    No. CX-01-1798.
    Supreme Court of Minnesota.
    March 5, 2002.
   ORDER

The respondent lawyer in the above-entitled lawyer discipline matter has sent to the court numerous motions and letters requesting various forms of relief related to the above-entitled proceeding, which has been assigned to a court-appointed referee for a probable cause hearing. Among the relief requested is appointment of counsel for respondent, sealing of the file, appointment of an independent prosecutor outside the Office of Lawyers Professional Responsibility (OLPR), and leave to take pre-hearing depositions. Many, if not all, of respondent’s requests for relief are premised on her allegations of improper conduct by members of the OLPR in pursuing the charges against respondent. The probable cause hearing will provide an assessment by an independent arbiter, the referee, on the validity and seriousness of those charges. This court will not prematurely interject itself into that assessment. For this reason, respondent’s request for appointment of a special prosecutor will be denied.

In response to respondent’s assertion that she was unable to assist in her defense based on a disability and her motion for an independent medical examination, by order filed January 9, 2002, this court stayed the probable cause hearing that was scheduled for January 11, 2002, placed respondent on disability inactive status and ordered that she be examined by a licensed mental health professional appointed by the referee within 45 days. Based on respondent’s subsequent correspondence with this court, it appears that the examination did not take place, and respondent now asserts that her inability to assist in her defense is due not to disability but to lack of legal representation. Accordingly, respondent will be removed from disability inactive status. Respondent’s request for appointment of counsel will be denied, both because there is no basis in the Rules on Lawyers Professional Responsibility for appointment of counsel except based on inability to assist due to disability and because respondent has not satisfactorily demonstrated that she is unable to retain counsel without an appointment by this court.

Other motions for relief relating to the conduct of the probable cause proceeding should be directed to the referee, not to this court.

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that respondent’s motions for appointment of counsel and for appointment of a special prosecutor be, and the same are, denied.

IT IS FURTHER ORDERED that respondent is removed from disability inactive status, and the remaining relief requested from this court by respondent in the above-referenced matter is denied, subject to renewal of respondent’s requests before the referee, subject to the condition that such requests should not further delay the probable cause hearing unless the referee determines such delay is warranted and appropriate.

BY THE COURT:

Paul H. Anderson Associate Justice


text:
    In re Petition for DISCIPLINARY ACTION AGAINST David E. ALBRIGHT, an Attorney at Law of the State of Minnesota.
    No. C3-02-101.
    Supreme Court of Minnesota.
    March 6, 2002.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for disciplinary action alleging that respondent David E. Albright has committed professional misconduct warranting public discipline, namely, failure to timely file state and federal income tax returns, failure to cooperate in the Director’s investigations, improper use of trust funds, failure to promptly return client documents and improperly disclosing a witness statement in a criminal matter, in violation of Minn. R. Prof. Conduct 1.8(a), 1.15,1.16(d), 3.4(c), 8.1(a)(1), 8.4(c) and 8.4(d).

Respondent admits the violations and the parties agree that as mitigation respondent suffered from both untreated depression and undiagnosed and untreated attention deficit disorder that contributed to respondent’s tax violations. In addition, respondent self-reported his initial failure to file tax returns and his improper use of the trust account funds.

Respondent has waived his rights under Rule 14, Rules on Lawyers Professional Responsibility (RLPR), and has entered into a stipulation with the Director in which they jointly recommend that the appropriate discipline is a 90-day suspension from the practice of law, successful completion of the professional responsibility bar examination within one year of the date of this court’s order, compliance with Rule 26, RLPR, and payment of $900 in costs under Rule 24, RLPR. The parties recommend that the reinstatement hearing provided for under Rule 18(a)-(d), RLPR be waived and that respondent be reinstated following the expiration of the suspension provided that at least 15 days before the expiration of the suspension period, respondent files an affidavit with the Clerk of Appellate Courts and the Director’s Office establishing that respondent is current with Continuing Legal Education, has fully complied with Rules 24 and 26, RLPR, and has provided proof of filing of all tax returns which are due and proof of payment agreements with the tax authorities for all taxes due and owing.

The parties further recommend that upon reinstatement respondent be placed on supervised probation for two years subject to the following conditions:

a.Respondent shall cooperate fully with the Director’s Office in its efforts to monitor compliance with this probation and promptly respond to the Director’s correspondence by the due date. Respondent shall cooperate with the Director’s investigation of any allegations of unprofessional conduct which may come to the Director’s attention. Upon the Director’s request, respondent shall provide authorization for release of information and documentation to verify compliance with the terms of this probation.
b. Respondent shall abide by the Minnesota Rules of Professional Conduct.
c. Respondent shall be supervised by a licensed Minnesota attorney appointed by the Director to monitor compliance with the terms of this probation. Respondent shall provide to the Director the names of four attorneys who have agreed to be nominated as respondent’s supervisor within two weeks from the date [the] stipulation is executed. If, after diligent effort, respondent is unable to locate a supervisor acceptable to the Director, the Director will seek to appoint a supervisor. Until a supervisor has signed a consent to supervise, the respondent shall on the first day of each month provide the Director with an inventory of active client files. Respondent shall make active client files available to the Director upon request.
d. Respondent shall cooperate fully with the supervisor in his/her efforts to monitor compliance with this probation. Respondent shall contact the supervisor and schedule a minimum of one in-person meeting per calendar quarter. Respondent shall submit to the supervisor an inventory of all active client files by the first day of each month during the probation. With respect to each active file, the inventory shall disclose the client name, type of representation, date opened, most recent activity, next anticipated action, and anticipated closing date. Respondent’s supervisor shall file written reports with the Director at least quarterly, or at such more frequent intervals as may reasonably be requested by the Director.
e. Respondent shall initiate or continue current treatment by a licensed consulting psychologist or other mental health professional acceptable to the Director, and shall complete all therapy programs recommended by the therapist.
f. Respondent shall maintain law office and trust account books and records in compliance with Rule 1.15, MRPC, and LPRB Amended Opinion No. '9. These books and records include the following: client subsidiary ledger, checkbook register, monthly trial balances, monthly trust account reconciliation, bank statements, canceled checks, duplicate deposit slips and bank reports of interest, service charges and interest payments to the Lawyer Trust Account Board. Such books and records shall be made available to the Director within 30 days of the approval of [the] stipulation and thereafter shall be made available to the Director at such intervals as he deems necessary to determine compliance.
g. Respondent shall timely file all required state and federal tax returns, including individual and employer withholding returns, and timely pay the taxes due thereon. Respondent shall affirmatively report to the Director, on or before the due date of the required returns, his compliance with filing and payment requirements. Such reports shall include copies of the required returns. On or before the filing deadline, respondent shall provide the Director with copies of all applications for filing extension and proof of approval of such applications. Respondent shall provide all of the documents and information required herein without specific reminder or request.
h. Within 60 days from the execution of [the] stipulation, respondent shall enter into agreements satisfactory to the Internal Revenue (IRS) and the Minnesota Department of Revenue (DOR) for the payment of all unpaid taxes. Respondent shall provide the Director with copies of the payment agreements and proof of currency on payments required by the agreements.’ If after 60 days, agreement with the IRS and/or DOR has not been reached despite diligent effort by respondent, respondent shall report monthly to the Director concerning his progress in reaching agreement. Such reports shall continue until written agreements have been signed by both the IRS and DOR.
i.Respondent shall employ a qualified tax preparer to assist him in preparing and filing required quarterly and annual tax returns. Respondent shall make timely quarterly estimated payments to the state and federal tax authorities. On or before the filing deadline, respondent shall provide proof of such filing and payment to the Director without specific reminder or request.

This court has independently reviewed the file and approves the jointly recommended disposition.

IT IS HEREBY ORDERED that respondent David E. Albright is suspended from the practice of law for 90 days. Respondent shall successfully complete the professional responsibility bar examination within one year of this order and shall comply with Rule 26, RLPR. Respondent may petition for reinstatement by affidavit under Rule 18(f), RLPR, as provided in the stipulation and set forth above. Upon reinstatement, respondent shall be placed on supervised probation for two years subject to the agreed-upon conditions set forth above. Respondent shall pay $900 in costs under Rule 24, RLPR.

BY THE COURT:

Paul H. Anderson Associate Justice