Levien Leasing Co. v. Dickey Co., 84-1850

• Decision Date: 26 November 1985
• Docket Number: No. 84-1850,84-1850
• Citation: 380 N.W.2d 748
• Parties: LEVIEN LEASING CO., Plaintiff-Appellant, v. DICKEY COMPANY, Defendant-Appellee.
• Court: Iowa Court of Appeals

Page 748

380 N.W.2d 748

LEVIEN LEASING CO., Plaintiff-Appellant, v. DICKEY COMPANY, Defendant-Appellee.

No. 84-1850.

Court of Appeals of Iowa.

Nov. 26, 1985.

William S. Gibb and James L. Kramer, of Johnson, Erb, Latham, Gibb & Carlson, P.C., Fort Dodge, for plaintiff-appellant.

Ned A. Stockdale, Estherville, for defendant-appellee.

Heard by OXBERGER, C.J., and DONIELSON and SACKETT, JJ.

DONIELSON, Judge.

Plaintiff appeals from judgment for defendant in a replevin action, asserting: (1) that the trial court improperly considered parol evidence; (2) that the evidence was insufficient to support a finding that an offer was made granting defendant a purchase option upon expiration of the term of a lease; and (3) that evidence concerning any purchase option agreement was barred by the statute of frauds.

In March of 1978, Steve Powers, who was an employee of Levien Chevrolet, a separately incorporated truck dealership, entered into negotiations with a representative of Dickey concerning the purchase of certain trucks. When it became apparent that Dickey was interested in leasing, Powers directed Dickey to Levien Leasing. Powers sent the original sales proposal which was typed on Levien Chevrolet stationery to Levien Leasing. A copy of this sales proposal was made and it is unclear whether Powers retained the copy in his files or whether he forwarded the copy, along with the original, to Levien Leasing. In any event, the sales proposal contained truck specifications and a purchase price for the truck at issue. Powers had no authority to negotiate leases unless expressly authorized to do so. He would refer leasing inquiries to Levien Leasing and denied that he had received such authorization in this instance.

The business was structured such that customers often had the option of buying a vehicle from Levien Chevrolet or leasing it, with or without a purchase option, from Levien Leasing. Levien Leasing would purchase the vehicle from Levien Chevrolet if the customer chose the leasing option. The cooperative relationship ended after Levien Leasing was sold to its new owners.

On May 15, 1978, defendant Dickey leased a truck from plaintiff Levien Leasing for four years under a written agreement stating that it was the complete agreement of the parties. No option to purchase at the expiration of the lease term was provided in this standard motor vehicle lease.

The original sales proposal which was subsequently sent to Dickey by Levien Leasing contained a typewritten provision towards the bottom of the page which stated:

Lease price:

48 months at $915.55 per month

49th month purchase price at $100.00

This original document was introduced into evidence by plaintiff. A copy of the sales proposal which was submitted by the plaintiffs, however, did not contain the purchase option provision and no other company records or Levien Chevrolet records indicated that a purchase option had been offered. Expert testimony indicated that the provision typed on Dickey's copy was typed on the same typewriter used for other correspondence of Levien Leasing. It was also shown that Levien Leasing would often enter into separate purchase option agreements even though the lease agreement contained an integration clause which purported to be the exclusive agreement of the parties. Both the sales employee of Levien Chevrolet who drafted the sales proposal, Steve Power, and the manager of Levien Leasing during 1978, Lloyd Mum, denied having any knowledge of discussing orally or authorizing a written purchase option agreement.

Levien Leasing commenced a replevin action following rejection of a tender by Dickey purporting to exercise an option to buy the truck after the 48-month lease period ended. Relying in part on parol evidence, the trial court entered judgment for defendant, finding the evidence sufficient to establish the existence of a purchase option agreement separate from the lease agreement. The statute of frauds was found to be inapplicable due to both plaintiff's failure to object to evidence of the purchase option agreement and partial performance under the agreement by defendant.

This case presents an interesting factual issue because neither party clearly demonstrated how the terms:

Lease price:

48 months at $915.55 per month

49th month purchase price at $100.00

appeared on Dickey's original sales proposal, but not on the copy of the sales proposal retained by Levien Leasing.

While preserving the resolution of this factual issue until later, the first legal issue we address is whether the trial court erred in admitting parol evidence when the lease agreement between Levien Leasing and Dickey contained an integration clause.

I.

A contract with an integration clause typically represents the complete agreement of the parties and any extrinsic evidence which varies, adds, or subtracts from its terms is barred by the parol evidence rule. ¹ See Kroblin v. RDR Motels, 347 N.W.2d 430, 433 (Iowa 1984). The rule does not come into play until by interpretation the meaning of the writing is ascertained, and, as an aid to interpretation, extrinsic evidence is admissible which sheds light on the situation of the parties, antecedent negotiations, attendant circumstances, and the objects the parties were striving to attain.

I.G.L. Racquet Club v. Midstates Builders Inc., 323 N.W.2d 214, 216 (Iowa 1982); Egan v. Egan, 212 N.W.2d 461, 464-65 (Iowa 1973); Hamilton v. Wosepka, 261 Iowa 299, 306, 154 N.W.2d 164, 168 (1967); Central Transport v. Fruehauf Corp., 139 Mich.App. 536, 362 N.W.2d 823, 827 (1984) ("Prerequisite to application of the parol evidence rule is a finding that the parties intended the writing to be a complete expression of their agreement. Extrinsic evidence of prior or contemporaneous agreements or negotiations is admissible as it bears on this threshold question.")

The lease at issue contained an integration clause. Levien Leasing contends this represents the complete agreement of the parties; Dickey claims otherwise. Iowa law provides:

An integrated agreement is one in which the parties adopt a writing or writings as the final and complete expression of the agreement. Kitchen v. Stockman National Life Insurance Co., 192 N.W.2d 796, 800 (Iowa 1971). Some courts have held an integration clause like the one before us reinforces application of the parol evidence rule to prevent proof of an alleged prior contract. (Authorities). Other cases indicate an integration clause should not be controlling on the issue of whether the written contract is the whole integrated agreement, so as to exclude parol evidence on the issue. (Authorities). We hold in these circumstances where the handcrafted contract contains an integration clause, where the parties were sophisticated business persons represented by counsel and of equal bargaining strength, and where terms of the alleged oral agreement reasonably would be expected to be included in the exchange agreement, trial court did not err in sustaining a parol evidence rule objection, thus excluding evidence to vary its terms.

Montgomery Properties Corp. v. Economy Forms Corp., 305 N.W.2d 470, 476 (Iowa 1981). The court in Montgomery Properties applied the parol evidence rule to exclude extrinsic evidence; however, this situation is readily distinguishable. Montgomery Properties had a handcrafted contract, whereas this case offers a boilerplate motor vehicle lease. Moreover, Montgomery Properties had an oral agreement which could reasonably be expected to be included in the contract; whereas the terms contained in the sales proposal document could not be expected to be in the lease because of the company's and industry's trade practice of placing purchase options in a separate document.

Dickey persuasively demonstrated that Levien Leasing routinely enters into leases with an integration clause and will nonetheless provide for a purchase option in a separate document. Such a course of dealing also was shown to be the custom and practice of the industry generally, apparently due in part to the tax implications. Thus, we find that even though an integration clause existed in the lease, the parol evidence rule would not bar extrinsic evidence of a purchase option in this case. We are not convinced that the parties intended the lease to be the complete expression of their agreement. We choose not to follow the authority cited by Levien Leasing, e.g.--Central Transport, and Transamerican Leasing Co. v. Three Bears, Inc. Fruehauf Trans., 586 S.W.2d 472 (Tex.1979), because the parties seeking to admit parol evidence in those cases relied on oral extrinsic evidence and the trial courts held the writings were consistent with the intent of the parties. In this case, Dickey introduced written extrinsic evidence which was consistent with company and industry practice and the trial court admitted such evidence.

II.

The next issue we address is whether substantial evidence existed to support the trial court's finding that Levien Leasing offered a purchase option to Dickey upon expiration of the lease. This is a very complicated issue due to the factual setting of this case.

Plaintiff Levien Leasing pled the lease was the only agreement between the parties. ² Defendant Dickey pled as an affirmative defense that a purchase option existed. Therefore, Dickey, not Levien Leasing, bore the burden of proof to establish its affirmative defense. Dickey had to prove by a preponderance of the evidence that Levien Leasing made an offer to Dickey to have a 49th-month purchase option. See Martin v. Jaekel, 188 N.W.2d 331, 333 (Iowa 1971); Sherwood v. Nissen, 179 N.W.2d 336, 338-39 (Iowa 1970); Mayrath Company v. Helgeson, 258 Iowa 543, 139 N.W.2d 303, 305 (1966). Dickey introduced its document which contained the purchase option language, but Levien Leasing submitted testimony by Powers and Mum who adamantly contended no oral or written purchase option was ever offered.

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