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IN THE SUPREME COURT OF IOWA No. 47 / 04-1584 Filed June 2, 2006 RPC LIQUIDATION, Appellee, vs. IOWA DEPARTMENT OF TRANSPORTATION, Appellant.

On review from the Iowa Court of Appeals.

Appeal from the Iowa District Court for Des Moines County, John G. Linn, Judge.

The Iowa Department of Transportation appeals from judgment entered following a bench trial that concluded a material supplier had thirdparty beneficiary status under a construction contract and that the Iowa Department of Transportation breached the contract. DECISION OF

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

Thomas J. Miller, Attorney General, Mark Hunacek, Assistant Attorney General, for appellant.

Robert W. Goodwin, Goodwin Law Office, P.C., Ames, for appellee.

2 LAVORATO, Chief Justice. In this breach-of-contract action, we must decide whether several contracts conferred third-party beneficiary status on a material supplier. Following a bench trial, the district court held that they did. Because, as a matter of law, we conclude otherwise, we vacate the court of appeals decision, reverse the district court judgment, and remand the case with directions. I. Background Facts and Proceedings. The Iowa Department of Transportation (IDOT) had a construction project on part of U.S. Highway 218 near Mount Pleasant, Iowa. As a result of that project, the IDOT entered into contracts for bridge construction with contractors for the work. At issue are contracts that identify Raider Precast Concrete, Inc., now known as RPC Liquidation, as a source of material. RPC was not a signatory to the contracts. RPC fabricated the beams that were used by the contractors in the bridge construction. W.W. Transport hauled a load of concrete aggregate from Missouri to RPC's fabrication plant in West Burlington, Iowa. Before this trip, W.W. Transport had hauled soybeans from Iowa to Missouri. When the concrete aggregate arrived at RPC's plant, an RPC inspector discovered soybeans in the aggregate, apparently because of W.W. Transport's previous shipment of soybeans. The inspector recommended that the aggregate not be used for the fabrication of the beams, a recommendation that RPC approved. RPC terminated its contract with W.W. Transport to haul coarse aggregate to RPC's plant. Several weeks later an IDOT inspector who was on RPC's premises discovered that eleven beams RPC had fabricated showed soybean contamination. Later the IDOT rejected ten of the eleven beams because of the contamination.

3 RPC and W.W. Transport sued the IDOT. Both plaintiffs alleged that they were third-party beneficiaries to the contracts between the IDOT and the contractors. RPC alleged that the IDOT's rejection of the ten beams was a violation of the contracts resulting in damages to RPC. W.W. Transport alleged that as a result of the IDOT's rejection of the beams, W.W. Transport lost its contract with RPC to haul coarse aggregate to RPC's plant resulting in damages to it. In its answer to the allegations of both plaintiffs, the IDOT alleged that the contracts specifically provided that there are no third-party beneficiaries and that neither party is a third-party beneficiary to the contracts referred to in the petition. The IDOT moved for summary judgment, contending that neither party was a third-party beneficiary of the contracts in question. The district court denied the motion as to RPC but granted it as to W.W. Transport. W.W. Transport has not appealed and is not involved in these proceedings. The case was tried to the court, following which, the court ruled that RPC was a third-party beneficiary to the contracts and that the IDOT had breached the contracts by rejecting the ten beams. The court awarded RPC damages in the amount of $103,589. The IDOT appealed, and we transferred the case to the court of appeals, which summarily affirmed the district court ruling. We granted the IDOT's application for further review. II. Issues. The issues are whether RPC was a third-party beneficiary under the contracts between the IDOT and the contractors and if so, whether the IDOT's rejection of the beams containing soybeans was a breach of the contracts. Because we conclude RPC was not a third-party beneficiary, we do not address the damages issue.

4 III. Scope of Review. This contract case was brought as a law action. Our review is

therefore for correction of errors at law. See Fausel v. JRJ Enters., Inc., 603 N.W.2d 612, 617 (Iowa 1999). The third-party beneficiary question is a legal issue, one for the court. Therefore we are not bound by the legal conclusions of the district court. Id. IV. Third-Party Beneficiary. A. Applicable law. In Midwest Dredging Co. v. McAninch Corp., we adopted Restatement (Second) of Contracts section 302 relating to thirdparty beneficiaries. provides: (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. Restatement (Second) of Contracts

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