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IN THE COURT OF APPEALS OF IOWA No. 1-873 / 11-0782 Filed January 19, 2012

CITY OF FOREST CITY, Plaintiff-Appellee, vs. HOLLAND CONTRACTING CORPORATION and EMPLOYERS MUTUAL CASUALTY COMPANY, Defendants-Appellants. ---------------------------------------------------HOLLAND CONTRACTING CORPORATION, Third-Party Plaintiff-Appellant, vs. JOHN FALLIS and WHKS & COMPANY, Third Party Defendants-Appellees. ________________________________________________________________

Appeal from the Iowa District Court for Winnebago County, Bryan H. McKinley, Judge.

Defendants appeal the district court's ruling in favor of the plaintiff and third-party defendants, contending the district court erred in numerous respects, including finding Holland Contracting Corporation's work was defective in breach of contract. AFFIRMED.

2 Jeffrey D. Stone of Whitfield & Eddy, P.L.C., West Des Moines, for appellants. David Swinton of the Belin McCormick, P.C., Des Moines, for appellee City of Forest City. Jason M. Steffens of Simmons Perrine Moyer Bergman P.L.C., Cedar Rapids, for appellees John Fallis and WHKS & Company.

Heard by Vogel, P.J., and Potterfield and Doyle, JJ.

3 DOYLE, J. Defendants Holland Contracting Corporation and its surety, Employers Mutual Casualty Company, appeal the district court's ruling in favor of the City of Forest City and third-party defendants WHKS & Company and its employee, John Fallis, and against the defendants. Defendants contend the district court erred in numerous respects, including finding Holland Contracting Corporation's work was defective in breach of its contract with the City of Forest City. Upon our review, we affirm the ruling and judgment of the district court. I. Background Facts and Proceedings. The following facts are undisputed: In 2003, Gaylord Wooge sought to develop a residential subdivision, known as the Prairie View Subdivision project, on property he owned. To that end, Wooge contracted with WHKS & Company, a civil engineering firm, to provide its professional services on the project, including surveying and master planning; platting; and street and utility design on the subdivision project. The contract was later amended to add that WHKS

would prepare a grading plan for the subdivision and establish "grades and elevations on the street" for the subdivision "for use in preparing the grading plan." John Fallis, a licensed professional engineer employed by WHKS,

designed the plans and specifications for the project. Wooge also entered into a contract with Holland Contracting Corporation in 2003, which stated Wooge intended to have grading, paving, and utility improvements in the Prairie View Subdivision constructed, referred to in the contract as "the Project," "in accordance with the Drawings, Specifications, Addenda, and other Contract Documents prepared by WHKS . . . ." Under the

4 contract, Holland agreed "to furnish all the necessary labor, materials, equipment, tools and services necessary to perform and complete in a workmanlike manner all work required for the construction of the Project, in strict compliance with the Contract Documents." Holland obtained performance and maintenance bonds from Employers Mutual Casualty Company (EMC) for the project, guaranteeing Holland's work against defects in workmanship and materials during the construction and for a period of four years following acceptance of the work, with Wooge and the City of Forest City (the City) as obligees. In 2004, Wooge sold the property and subdivision project to John and Mary Farus. The Faruses acquired and were assigned all of the existing

contracts Wooge had executed for work regarding the Prairie View Subdivision. Grading was performed on the project, and the pavement was later completed in the fall of 2004. Holland performed all of the agreed-upon work itself, with the exception of paving work that was subcontracted out to a third party not part of this case. In early 2005, the pavement showed evidence of cracking, along with rising manhole boxouts. The City requested Holland complete repairs, including replacing the manhole boxouts and some concrete panels, which Holland completed. In December 2005, the City accepted the project. Thereafter,

additional cracking appeared in the pavement, along with additional problems with rising manholes. On January 29, 2010, the City filed its petition against Holland and EMC asserting "defects in the workmanship and/or materials encompassed by t he

5 [b]ond became apparent," and Holland had failed to remedy the defects. The City sought a judgment against Holland and EMC on the bond in an amount to compensate the City for the cost of rectifying the defects in Holland's work. Holland subsequently filed its answer denying the defects in its workmanship and/or materials, and it filed a counterclaim against the City alleging the City had breached an oral, an implied-in-fact, or an implied-at-law contract. Additionally, Holland filed a cross-petition against WHKS and Fallis, asserting the cause of the cracking and displacement of the manholes was the defective design and engineering services provided by WHKS and Fallis. Thereafter, the City amended its petition to assert claims against WHKS in the event Holland's allegations against WHKS were accepted by the trier-of-fact. A bench trial was held March 2, 2011. The trial, a classic battle of the experts, centered on the conflicting opinions of various experts. The City's

expert and WHKS's expert, along with Fallis, opined the cracking of the pavement and problems with the manhole boxouts were the result of inadequate soil compaction by Holland. Holland's expert opined the problems occurred due to an inadequate design by WHKS and Fallis. After hearing the evidence and reviewing the exhibits, including depositions, the court on April 21, 2011, entered its ruling in favor of the City, specifically finding the City had proved by a preponderance of the evidence Holland "failed to adequately compact the soil in the utility trench dug by Holland, which subsequently caused the concrete poured on top of the trench to crack as a result of inadequate compaction." against WHKS and Fallis. The court dismissed the City's claims

6 The court found Holland failed to prove that WHKS and Fallis breached the standard of care applicable to their services, specifically disagreeing with Holland's expert's opinion that WHKS's and Fallis's surface and subsurface drainage design were the primary causes for the poor performance of the pavement in the subdivision. The court thus dismissed Holland's third-party

claims against WHKS and Fallis. The court dismissed Holland's cross-claims against the City. The court found no separate oral, implied-in-fact, or implied-at-law contract for the repair work. The court entered judgment in favor of the City and against Holland in the amount of $95,252. The court's ruling stated: "In the event [Holland] fails to satisfy this judgment in favor of the City within [thirty] days, then in that event judgment will be entered in favor of the [City] against the surety, [EMC]." Holland and EMC now appeal. II. Discussion. On appeal, Holland challenges the district court's findings that (1) Holland's work was defective as to compaction, (2) WHKS and Fallis did not breach the applicable standard of care, and (3) the City did not breach its contract with Holland, asserting these three findings were not supported by substantial evidence. Additionally, EMC contends the district court erred in

finding it "liable on its performance bond until such time as judgment is entered against Holland." We address their arguments in turn.

7 A. Cause of Pavement Cracking and Manhole Issues. Holland first asserts the district court's findings concerning the cause of the pavement cracking and manhole issues were not supported by substantial evidence, essentially arguing its expert's opinion was the correct one. However, we do not review the evidence de novo. Rather: Our review is for correction of errors at law. The district court's findings of fact are binding on us if supported by substantial evidence. When a party argues the district court's ruling is not supported by substantial evidence, we view the evidence in the light most favorable to the judgment. When a reasonable mind would accept the evidence as adequate to reach a conclusion, the evidence is substantial. Evidence is not insubstantial merely because we may draw different conclusions from it; the ultimate question is whether it supports the finding actually made, not whether the evidence would support a different finding. Fischer v. City of Sioux City, 695 N.W.2d 31, 33

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