Iowa Court of Appeals Rejects Homeowners’ Attempt to Treat Their Designer as a General Contractor
Paul and Therese Yakel hired Randy Wheeler to design a home improvement project and to help them find contractors to do the work. The Yakels hired Lightwine Construction to install new siding on the project. During the project, Lightwine sent its bills directly to Wheeler. In turn, Wheeler forwarded those bills to the Yakels who paid Lightwine directly. The Yakels also enlisted Wheeler’s help during the project to resolve issues that arose, including issues with Lightwine. After the project was completed, the Yakels noticed the siding was bowing and pulling away from the house. Ultimately, all the siding needed removed and replaced.
The Yakels sued Lightwine for the defective siding installation. During discovery in the case, the Yakels discovered information about Wheeler’s involvement in the project of which they were previously unaware. “Wheeler and Lightwine's employees inspected the Yakels’ property together, crafted a project timeline for Lightwine, and established he would be ‘orchestrating the job.’ Wheeler instructed Lightwine employees on nail placement, fastener color, the location and size of unique siding pieces, and ensuring joints were caulked with clear silicone. Lightwine stated they had to get confirmation on every decision from Wheeler and they communicated regularly. Lightwine thus places the blame for any defective installation with Wheeler rather than itself.” Based on this discovery, the Yakels amended their lawsuit to add Wheeler as a defendant and asserted claims against him for breach of contract, breach of implied warranty, and negligence.
Before trial, the district court dismissed the Yakels’ breach-of-contract and implied-warranty claims against Wheeler, primarily based on the conclusion that, because the Yakels’ claims were based on construction-related defects, they could not sue Wheeler because they had hired him as a designer and not as a general contractor. The district court emphasized that during the Yakels’ own deposition testimony, they both testified that they did not hire Wheeler as their general contractor. The district court also dismissed the negligence claim under the economic-loss doctrine.
The Iowa Court of Appeals affirmed the district court on appeal. Yakel v. Wheeler, 2024 WL 3290371 (Iowa Ct. App. 2024). On the breach-of-contract claim, the Court noted that it was “undisputed that Wheeler was hired to design the project and solicit bids for the necessary construction work. It is also undisputed that the Yakels chose to hire Lightwine and paid Lightwine directly. And to remove any remaining doubt, the Yakels both testified—twice each—that they did not hire Wheeler to be a general contractor, nor did they believe him to be their general contractor during the project. As Therese Yakel herself succinctly phrased it, ‘Randy [Wheeler] was not our general contractor.’” Because of these admissions by the Yakels, the Court invoked the rule, “‘If a party testifies deliberately to a concrete fact, not as a matter of opinion, estimate, appearance, inference, or uncertain memory, but as a considered circumstance of the case, his adversary is entitled to hold him to it as an informal judicial admission.’” The Court also rejected the Yakels’ reliance on Lightwine believing that Wheeler was the general contractor because “evidence of what other people believed the arrangement to be is not probative of what relationship the parties themselves intended to create.” Finally, the Court explained that a “general contractor is one ‘who contracts for the completion of an entire project, including purchasing all materials, hiring and paying subcontractors, and coordinating all the work,’” (quoting General Contractor, Black's Law Dictionary (11th ed. 2019)), and the evidence shows that “Wheeler did not enter into a contract with or pay Lightwine anything for this project. The Yakels selected Lightwine and paid Lightwine directly. They paid Wheeler only $800, which could not possibly be confused with payment for completion of the entire project.”
On the implied-warranty claim, the Court upheld its dismissal because “the undisputed facts show that the Yakels did not enter into a construction contract with Wheeler for him to serve as a general contractor. Their contract was only for design services and assistance in finding their contractors. Wheeler thus did not have ‘ultimate responsibility’ for completion of the siding.”
Finally, on the negligence claim, the Court agreed that the economic-loss doctrine barred the Yakels from suing Wheeler for the tort claim of negligence. It explained that the “Yakels are disappointed consumers—they paid for subpar siding replacement. Thus, the economic-loss doctrine prevents the Yakels from bringing their negligence claim against Wheeler over their ‘defeated expectations.’” The Court stated that the “sudden or dangerous occurrence” exception to the economic-loss doctrine was inapplicable because the “Yakels’ damages consist of the expenses they have incurred in repairing the siding to their home. This limits the present injury and recovery sought to the needed repairs, not a ‘sudden or dangerous occurrence.’” The Court also rejected the Yakels’ argument that they should be able to sue Wheeler in tort based on the Court’s ruling that there was not general-contractor contract with Wheeler because the “[economic-loss] doctrine applies no matter if there is contractual privity between the parties. Indeed, our supreme court has applied the ‘stranger economic loss rule’ to bar claims by plaintiffs with no contractual relationship to the defendant.”
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