C-Thru Container Corp. v. Midland Mfg. Co.
| Decision Date | 21 June 1995 |
| Docket Number | No. 94-280,C-THRU,94-280 |
| Citation | 533 N.W.2d 542 |
| Parties | 27 UCC Rep.Serv.2d 72 CONTAINER CORPORATION, Appellant, v. MIDLAND MANUFACTURING COMPANY, Appellee. |
| Court | Iowa Supreme Court |
Herbert S. Selby of Selby, Updegraff & Smith, Newton, for appellant.
Terry Rickers of Matthias, Campbell, Tyler, Nuzum, Greta & Rickers, Newton, for appellee.
Considered by HARRIS, P.J., and CARTER, SNELL, ANDREASEN, and TERNUS, JJ.
This case requires us to interpret and apply the trade-usage exception to the parol evidence rule embodied in Iowa Code chapter 554, Iowa's Uniform Commercial Code (U.C.C.). The trial court held that parol evidence of trade usage was inadmissible and granted summary judgment to the defendant, Midland Manufacturing Company. We agree with the contrary decision of the court of appeals that the challenged evidence was admissible and generated a question of fact that prevented summary judgment. Therefore, we affirm the decision of the court of appeals and reverse the judgment of the district court.
C-Thru Container Corporation entered into a contract with Midland Manufacturing Company in March of 1989. In this contract, Midland agreed to purchase bottle-making equipment from C-Thru and to make commercially acceptable bottles for C-Thru. Midland was to pay for the equipment by giving C-Thru a credit against C-Thru's bottle purchases. The contract stated that C-Thru expected to order between 500,000 and 900,000 bottles in 1989. Finally, the contract also provided that if Midland failed to manufacture the bottles, C-Thru could require Midland to pay the entire purchase price plus interest within thirty days.
Midland picked up the equipment as agreed and later sent a notice to C-Thru that it was ready to begin production. C-Thru never ordered any bottles from Midland, but instead purchased its bottles from another supplier at a lower price. C-Thru claims that in numerous phone conversations between the parties Midland indicated that it was unable to produce commercially acceptable bottles for C-Thru.
In 1992, Midland gave C-Thru notice that it was rescinding the 1989 contract based on C-Thru's failure to order any bottles. C-Thru did not respond to this notice. Midland later sent C-Thru notice that it was claiming an artisan's lien for the expenses of moving, rebuilding and repairing the machinery. Midland eventually foreclosed the artisan's lien and sold the machinery.
Approximately one month later, C-Thru notified Midland that Midland had failed to comply with the terms of the contract and that the full purchase price plus interest was due and payable within thirty days. When Midland failed to pay C-Thru the amount requested, C-Thru filed a petition alleging that Midland had breached the contract by being incapable of producing the bottles as agreed to in the contract.
Midland filed a motion for summary judgment. It contended that the contract did not require that it demonstrate an ability to manufacture commercially acceptable bottles as a condition precedent to C-Thru's obligation to place an order. Midland asserted that the contract merely required that it manufacture commercially acceptable bottles in response to an order from C-Thru. Because C-Thru never placed an order, Midland argued that it had not breached the contract by failing to manufacture any bottles.
C-Thru resisted Midland's motion. It argued that a material issue of fact existed on whether Midland was unable to manufacture the bottles, thereby excusing C-Thru's failure to place an order. As proof that Midland could not manufacture the bottles, C-Thru pointed to Midland's failure to provide sample bottles. C-Thru relied on deposition testimony that the practice in the bottle-making industry was for the bottle manufacturer to provide sample bottles to verify that it could make commercially acceptable bottles before the purchaser placed any orders.
In ruling on Midland's motion for summary judgment, the trial court found no sample container requirement in the written contract. The court also held that the parol evidence rule precluded consideration of any evidence that the practice in the trade was to provide sample bottles before receiving an order. It concluded that no genuine issue of material fact existed and granted Midland summary judgment. The court of appeals reversed the district court's ruling, concluding that evidence regarding the trade practice should have been considered. We granted Midland's application for further review.
We uphold summary judgment when the moving party shows no genuine issue of material fact exists and it is entitled to judgment as a matter of law. Iowa R.Civ.P. 237(c); Shaw v. Soo Line R.R., 463 N.W.2d 51, 53 (Iowa 1990). To decide if the moving party has met this burden, we review the record in the light most favorable to the party opposing summary judgment. Hoffnagle v. McDonald's Corp., 522 N.W.2d 808, 811 (Iowa 1994).
Under the common law of Iowa, parol evidence is admissible to shed light on the parties' intentions but it may not be used to modify or add to the contract terms. Anderson v. Aspelmeier, Fisch, Power, Warner & Engberg, 461 N.W.2d 598, 600 (Iowa 1990); Associated Grocers of Iowa Coop., Inc. v. West, 297 N.W.2d 103, 109 (Iowa 1980). Nevertheless, sale-of-goods contracts, such as the agreement here, are governed by Iowa Code chapter 554, the Iowa Uniform Commercial Code. Section 554.2202 contains the applicable U.C.C. parol evidence rule and it states:
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
a. by course of dealing or usage of trade (section 554.1205) or by course of performance (section 554.2208); and
b. by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
Iowa Code § 554.2202 (1993) (emphasis added). Thus, unlike the common law, parol evidence may be used to supplement a fully integrated agreement governed by the U.C.C. if the evidence falls within the definition of usage of trade.
The Iowa U.C.C. includes the following definition of usage of trade:
2. A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts....
Id. § 554.1205(2). Section 554.1205 goes on to provide that any usage of trade of which the parties are or should be aware supplements their agreement. Id. § 554.1205(3).
Midland does not dispute that a trier of fact could...
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