Pepcol Mfg. Co. v. Denver Union Corp.
| Decision Date | 17 September 1984 |
| Docket Number | No. 83SC160,83SC160 |
| Citation | 687 P.2d 1310 |
| Parties | PEPCOL MANUFACTURING CO., a Colorado corporation, Petitioner, v. DENVER UNION CORPORATION, a corporation, and Western Stock Center, Inc., a corporation, Respondents. |
| Court | Colorado Supreme Court |
Quiat, Bucholtz, Bull & Laff, P.C., Alan H. Bucholtz, Denver, for petitioner.
Tilly & Graves, P.C., Greg L. Perczak, Denver, for respondents.
We granted certiorari to review the decision of the court of appeals in Pepcol Manufacturing Co. v. Denver Union Corporation, 668 P.2d 971 (Colo.App.1983), relating to the construction of the term "at seller's cost" in a contract between Denver Union Corporation (Denver Union) and Pepcol Manufacturing Company (Pepcol) for the payment of water supplied by the Denver Water Board to Denver Union and ultimately used by Pepcol. Denver Union sought a judgment against Pepcol for $10,732.39, which represented the amount of surcharge allegedly owed by Pepcol for water used by it under its contract with Denver Union. The trial court construed the term "at seller's cost" to mean the per gallon rate charged to Denver Union by the Denver Water Board and, concluding that the surcharge was improper, entered judgment in favor of Pepcol on Denver Union's claim. In reversing the judgment and ordering the entry of judgment in favor of Denver Union, the court of appeals held that the term "at seller's cost" was unambiguous and meant the costs actually incurred by Denver Union in providing water to Pepcol. We reverse the judgment of the court of appeals.
The facts are not in dispute. Denver Union's claim against Pepcol for $10,732.39 was based on a surcharge for water furnished to Pepcol during the years 1973 through 1976. 1 This claim was based on a 1970 contract entered into by Denver Union and Herman Horwich, an agent and predecessor in interest of Pepcol. Denver Union, which owned much of the property in the stockyards area, operated a cooperative water service system for the use and benefit of tenants and landowners doing business in the stockyards. During the period of time in question Denver Union obtained water from the Denver Water Board and was billed on the basis of the meter reading on its master meter in the stockyards. In March 1970 Denver Union sold to Horwich a parcel of land which was later transferred to Pepcol. The contract of sale provided in pertinent part as follows:
Seller [Denver Union] agrees to sell and convey to Buyer [Horwich] and Buyer agrees to purchase from Seller the real property described particularly on Exhibit A hereto attached ... subject to utility easements and rights-of-way of record. Seller further agrees to grant and convey to Buyer for use in connection with the property the following:
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The right to connect for water usage to the existing water line owned by Seller located on the east side of the property without payment of a tap fee therefor to Seller (it is understood however that the hookup and meter installation charges shall be at Buyer's expense and that water usage by Buyer shall be metered and the charges of water so used shall be paid by Buyer, its successors or assigns or designee at Seller's cost) ....
Pepcol, which commenced operation of a rendering plant on its property in 1971, connected to Denver Union's main water line and installed a water meter at its plant location. The general manager of Pepcol testified that during 1971 and 1972 Denver Union billed Pepcol each month for the amount of water shown on Pepcol's plant meter. The cost of the water to Pepcol was billed at the same per gallon rate as the Denver Water Board charged Denver Union. The president of Denver Union corroborated this testimony. He testified that during the first two years of Pepcol's operation Denver Union would receive a bill from the Denver Water Board for water metered to Denver Union's master meter; a Denver Union employee would then read the meters of the various users connected to Denver Union's main line; and Denver Union would "bill the users for their prorata share of the water" at the same per gallon rate as the Denver Water Board charged Denver Union. This method was followed because, according to Denver Union's president, "[w]e had agreed not only with Pepcol but with all of the other users of the system to provide water at our cost, so we were being consistent here."
In mid-1973, however, Denver Union became aware that it was paying the Denver Water Board a 20-25 percent greater sum than it received from the businesses operating under its water service system in the stockyards. Although Denver Union was unable to determine where in the system its water loss was occurring, it decided to assess a surcharge against all businesses operating under its water service system to make up the discrepancy. The surcharge was calculated by itemizing the meter reading of each business and then charging an amount equal to the percentage of that business' use to the total charges assessed against Denver Union by the Denver Water Board. Pepcol, from the inception of the surcharge billing through 1976, refused to pay the surcharge on the ground that the 1970 contract limited its payment obligation to the usage shown at its plant meter at a price equal to the per gallon rate charged Denver Union by the Denver Water Board.
The trial court found in relevant part as follows: that the 1970 agreement contemplated installation of a water meter at Pepcol's plant to measure its water use; that the reference in the contract to "water meter was to the separate meter on [Pepcol's] property and did not refer to the main meter used as a basis for the Denver Water Board's billing to [Denver Union]"; that until mid-1973 Pepcol was billed on the basis of this internal metering at the same per gallon rate as Denver Union paid the Denver Water Board; and that Denver Union's discovery of a water loss within the system did not give it the right to surcharge Pepcol in order to recoup its loss. 2 The trial court accordingly entered judgment for Pepcol on Denver Union's claim. Denver Union appealed to the court of appeals which reversed the judgment. The court of appeals held that the term "at seller's cost" was unambiguous and construed it to mean the direct cost incurred by Denver Union in providing water to users such as Pepcol, even though this cost exceeded the cost of water used by Pepcol as measured by its plant meter and as calculated on the basis of the per gallon rate paid by Denver Union to the Denver Water Board. We granted certiorari to consider the court of appeals' construction of the term "at seller's cost" in the 1970 contract.
Pepcol argues that the term "at seller's cost" is ambiguous and that the extrinsic evidence of the course of conduct engaged in by the parties in performing their obligations under the contract supports the contractual construction adopted by the trial court. Basic and long-standing principles of contract law provide the framework for our resolution of the issue raised in this case.
A fundamental rule of contract law is that the court should strive to ascertain and give effect to the mutual intent of the parties. 4 S. Williston, A Treatise on the Law of Contracts § 601 (W. Jaeger ed. 1961). Interpretation of a written contract is generally a question of law for the court. E.g., Union Rural Elec. Ass'n v. P.U.C., 661 P.2d 247, 251 (Colo.1983); Radiology Professional Corp. v. Trinidad Area Health Ass'n, 195 Colo. 253, 256, 577 P.2d 748, 750 (1978). An integrated contract in the first instance is to be interpreted in its entirety with the end in view of seeking to harmonize and to give effect to all provisions so that none will be rendered meaningless. E...
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