Molo Oil Co. v. River City Ford Truck Sales, Inc.

• Decision Date: 28 May 1998
• Docket Number: No. 96-857,96-857
• Citation: 578 N.W.2d 222
• Parties: MOLO OIL COMPANY, Appellant, v. RIVER CITY FORD TRUCK SALES, INC., Appellee.
• Court: Iowa Supreme Court

Page 222

578 N.W.2d 222

MOLO OIL COMPANY, Appellant, v. RIVER CITY FORD TRUCK SALES, INC., Appellee.

No. 96-857.

Supreme Court of Iowa.

May 28, 1998.

Rehearing Denied July 13, 1998.

Stuart R. Lefstein, Lori R. Lefstein, and Jonathan J. Heiple of Katz, McHard, Balch, Lefstein & Fieweger, P.C., Rock Island, IL, for appellant.

Thomas J. Shields of Lane & Waterman, Davenport, for appellee.

Thomas J. Miller, Attorney General, and William L. Brauch, Special Assistant Attorney General, for amicus curiae State.

W. Don Brittin, Jr., James B. West, and John B. Tuffnell of Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, P.C., Des Moines, for amicus curiae Iowa Auto Dealers Association.

Considered by HARRIS, P.J., and CARTER, NEUMAN, SNELL, and ANDREASEN, JJ.

HARRIS, Justice.

A number of complicated legal issues are implicated in this suit arising from a simple business transaction. The plaintiff appeals following judgment for the defendant. We affirm.

Plaintiff Molo Oil Co. (Molo) is a Dubuque, Iowa, distributor of petroleum products and an operator of convenience stores. Defendant River City Ford Truck Sales, Inc. (River City) of Davenport is a retail seller of motor vehicles. A part of River City's enterprise is to offer certain warranties for Caterpillar Company. In November 1993 Mark Molo, vice president of Molo, negotiated with River City to buy a 1989 Peterbilt semitruck for $31,500. River City, which had purchased the truck during the summer of 1993, stated the Peterbilt was in good condition, had received a complete engine overhaul, and had 186,000 miles on the odometer. (It later appeared that the truck had some 7000 miles more than this on the odometer.) There was also to be a two-year/200,000 mile Caterpillar warranty on the engine.

Prior to delivery River City advised Molo that the longest Caterpillar warranty on the engine was for one year and 100,000 miles. Molo agreed to the change and the final agreement was amended accordingly. The purchase agreement provided in part, "manufacturer's warranty on engine and clutch only." Except for the engine and clutch, the truck was sold "as is." Molo promptly sent a check to River City for full purchase price.

Molo's driver arrived to pick up the truck but found it initially would not start. Other repairs were required before the vehicle could be taken to Molo in Dubuque. During the trip the driver noted additional problems such as inoperable windshield wipers, lack of heat in the cab, and a lack of power in the engine.

Instead of notifying River City of the problems, Molo took the truck to a repair facility in Dubuque, where the mechanic observed problems with cylinders, blue smoke emanating from the truck, a radiator clogged with dirt, and fuel leaking on top of the cylinder heads. The mechanic also questioned whether the engine had a recent overhaul, and noted the odometer read 192,975 miles; approximately 6000 more than on the odometer statement from River City (and 7000 miles more than had been indicated on the original specification sheet). The mechanic reported this information to Mark Molo.

Molo returned the truck to River City but River City refused to refund Molo's money. Eventually, when Molo arranged to have the truck driven back to Dubuque, it broke down and had to be towed to a facility where it was repaired at a cost of $8917. Apparently, excessive carbon buildup had caused the engine to malfunction, resulting in bent rods and stuck valves. Molo claimed all this damage occurred while the truck was in the possession of River City. Because the damage to the engine did not appear to be the result of poor workmanship or faulty parts, the Caterpillar warranty did not cover the repairs. By the time the truck was repaired, it had been replaced. So Molo sold the truck, netting $18,860.

Molo brought this suit against River City on counts of: (1) breach of contract; (2) federal odometer violation; (3) negligent misrepresentation; (4) Iowa statutory consumer fraud; and (5) fraudulent misrepresentation. Molo asked $22,868.49 in actual damages and also sought punitive damages.

At the close of all the evidence, the district court dismissed the federal odometer claim. The court determined that vehicles over 16,000 pounds were exempted, under both federal and state odometer statutes, from the requirement that an odometer statement be provided upon transfer. The court also dismissed the statutory consumer fraud claim, finding that only the Iowa attorney general could file a claim pursuant to Iowa Code section 714.16(2)(a) (1995). The court dismissed the punitive damage claim.

The case was submitted to a jury on the issues of breach of contract, negligent misrepresentation, and fraudulent misrepresentation. The jury returned verdicts in favor of River City on all issues. Molo's posttrial motions were denied and judgment was entered on all claims in favor of River City. The matter is before us on Molo's appeal.

I. We review a denial of a motion for directed verdict on error. Iowa R.App. P. 4; Mensink v. American Grain, 564 N.W.2d 376, 379 (Iowa 1997). A judgment notwithstanding the verdict must stand or fall on the grounds stated in the motion for a directed verdict. Konicek v. Loomis Bros., Inc., 457 N.W.2d 614, 617 (Iowa 1990). Our review on appeal is limited to those grounds. Id. We simply ask whether there was sufficient evidence to justify submitting the question to a jury. Morgan v. American Family Mut. Ins. Co., 534 N.W.2d 92, 96 (Iowa 1995). When reviewing the denial of a motion for directed verdict or judgment notwithstanding the verdict, we view the evidence in the light most favorable to the nonmoving party. Id.

II. In a breach-of-contract claim, the complaining party must prove: (1) the existence of a contract; (2) the terms and conditions of the contract; (3) that it has performed all the terms and conditions required under the contract; (4) the defendant's breach of the contract in some particular way; and (5) that plaintiff has suffered damages as a result of the breach. Iowa-Illinois Gas & Elec. Co. v. Black & Veatch, 497 N.W.2d 821, 825 (Iowa 1993). A party breaches a contract when, without legal excuse, it fails to perform any promise which forms a whole or a part of the contract. Magnusson Agency v. Public Entity Nat'l Co., 560 N.W.2d 20, 27 (Iowa 1997).

The legal effect of a contract is always a matter for court determination. Iowa-Illinois Gas & Elec. Co., 497 N.W.2d at 825. Interpretation, the meaning of contractual words, is also an issue for the court unless it is dependent upon extrinsic evidence or upon a choice among reasonable inferences from the extrinsic evidence. Id. Extrinsic evidence is admissible as an aid to interpretation when it throws light on the parties' situation, antecedent negotiations, the attendant circumstances, and the objectives the parties were trying to attain. Id. Questions of performance or breach are generally for the jury. Id.

It is in no way surprising that the parties present competing versions concerning the details of the sale agreement. According to River City's version, which we assume the jury accepted, the agreement was a straightforward "as is" sale of a used truck, complicated only by an engine-clutch guarantee for what was finally settled at one year/100,000 miles. According to River City's version this reduced warranty was never implicated because, though the point is hotly disputed, the engine broke down because of misuse, that is, by being improperly allowed to idle.

Molo contends the agreement provided it with a two-year/200,000 mile OPT (overhaul protection for trucks) Caterpillar warranty, and argues that, after the modification to a one-year/100,000 mile warranty, it was still entitled to an OPT warranty. Although a Caterpillar OPT warranty is not mentioned in the written agreement, was not asked for, offered or bargained for, Molo claims it was contemplated because at the time Caterpillar company's only two-year/200,000 mile warranty was an OPT warranty. The OPT warranty became important to Molo's breach-of-contract claim because an OPT warranty, at least for this truck at the time, could be issued only after extensive overhaul of the engine and replacement of parts. In Molo's view, the engine breakdown would not have occurred if such an overhaul had actually taken place.

The flaw in Molo's position is the existence of two competing explanations of why the engine broke down, only one of which was Molo's version. River City countered Molo's showing on the point with evidence that the engine broke down because it was allowed to idle improperly. The jury could have found, and we must assume did find, Molo did not establish that River City breached its agreement. The burden of proof on the breach was on Molo. In view of the conflicting evidence we cannot say that Molo established its version as a matter of law.

Molo thinks it would be entitled to recover for breach of contract even if the breakdown occurred as a result of improper idling because it was entitled to an OPT warranty. We need not explore what Molo would be entitled to under an OPT warranty because the jury verdict assumed there was no such warranty. Again, Molo certainly did not establish the point as a matter of law.

III. Molo alleges River City fraudulently furnished an inaccurate odometer statement in violation of 15 U.S.C. § 1988 (1994) (now 49 U.S.C. § 32705) ¹ when it sold the semitruck. At trial Molo presented evidence that the truck had 6000 more miles than represented on the disclosure statement. The trial court granted the defendant's motion to dismiss, relying on a regulation promulgated by the national highway traffic safety administration (NHTSA), which purports to exempt vehicles that weigh more than 16,000 pounds (such as the semitruck in this case) from the act's odometer disclosure requirements. 49 C.F.R. § 580.6(a)(1) (1994). We think the ruling cannot be supported by the...