Shields Pork Plus v. Swiss Valley Ag Serv.

• Decision Date: 16 April 2002
• Docket Number: No. 4-01-0239.,4-01-0239.
• Parties: SHIELDS PORK PLUS, INC., Plaintiff-Appellant and Cross-Appellee, v. SWISS VALLEY AG SERVICE, Defendant-Appellee and Cross-Appellant.
• Court: United States Appellate Court of Illinois

767 N.E.2d 945

329 Ill. App.3d 305

263 Ill.Dec. 219

SHIELDS PORK PLUS, INC., Plaintiff-Appellant and Cross-Appellee, v. SWISS VALLEY AG SERVICE, Defendant-Appellee and Cross-Appellant.

No. 4-01-0239.

Appellate Court of Illinois, Fourth District.

April 16, 2002.

Rehearing Denied May 17, 2002.

Anne M. Martinkus (argued) and James A. Martinkus, both of Erwin, Martinkus & Cole, Ltd., of Champaign, for appellant.

Brett A. Kepley (argued), of Rawles, O'Byrne, Stanko & Kepley, P.C., of Champaign, for appellee.

Justice COOK delivered the opinion of the court:

Plaintiff, Pork Shield Plus, Inc., and defendant, Swiss Valley Ag Service, entered into a contract for the sale of feeder pigs. Under this contract, plaintiff was to provide high-quality feeder pigs "of a Newsham line" to defendant, who would then resell the pigs to its customers. Plaintiff claimed the defendant breached the contract when it did not accept a portion of a delivery under the contract. Defendant counterclaimed, arguing that plaintiff breached the contract when it abandoned all efforts to convert its pig herd to 100% Newsham genetics. Both parties have appealed the trial court's judgment finding that both parties had repudiated the contract. We affirm in part, reverse in part, and remand.

I. BACKGROUND

In the latter part of 1997, plaintiff and defendant began negotiations regarding the purchase and sale of feeder pigs— weaned pigs weighing between 35 and 60 pounds. At that time, plaintiffs herd was made up of pigs from the Newsham, Liske, and Duroc genetic lines. Representatives of defendant expressed an interest in purchasing 100% Newsham pigs. The vicepresident of plaintiff, Phillip Shields (Shields), informed defendant that he had a fairly young herd of sows, mostly Liske, so he did not need to buy any in the immediate future. Nevertheless, Shields informed defendant that when the Liske sows needed to be replaced, they would be replaced with Newsham gilts—nonpregnant female pigs—which would be bred with Newsham boars or Newsham semen.

A representative of defendant acknowledged that the full conversion to Newsham would likely take more than one year. Similarly, plaintiff was aware that defendant was not the final purchaser of the pigs, but would be reselling the pigs to its feed customers. Nevertheless, both parties entered into the sales contract in February 1998 and negotiated a price term based upon the weight of the pigs and the price of a pig futures contract the week of delivery. The term of the contract was 36 months, with monthly shipments to be made according to an attached schedule. The record does not include such a schedule but, rather, a computation of damages based upon the alleged schedule. However, the recitations of the contract indicate that both parties anticipated that each monthly shipment would number approximately 600 pigs.

The contract provided, in paragraph 2, that plaintiff was to "put forth its best effort to provide healthyf,] high[-] quality feeder pigs." Further, a pig was defined under the contract as "merchantable" if it weighed between 35 and 65 pounds and was "progeny from a Newsham line then sold commercially in the United States." Any change in the genetic makeup of the herd was to be approved by the defendant.

Under the contract, defendant was responsible for transporting the pigs from plaintiffs farm. The contract also listed several reasons why pigs could be rejected or discounted at the time of delivery. According to the contract, any pig could be rejected if, upon delivery, it was ruptured, splay-legged, crippled, or sick, or if the pig's tail had not been docked. Further, the contract permitted the seller to reject any pig that did not "meet the criteria set forth in [the section defining merchantability and genetic makeup]."

On March 13, 1998, defendant took delivery of an initial shipment of 600 pigs and accepted all of the pigs as conforming to the contract. The second delivery under the contract, scheduled for April 24, 1998, was allegedly to be of 680 pigs. However, at the time the plaintiff tendered the pigs, defendant only accepted 380 of the 680 pigs, stating that one of its subsequent purchasers had no need for additional pigs. A representative of defendant met with plaintiff to discuss the 300 pigs that were not accepted. At that time, according to defendant, plaintiff indicated that the rejected pigs would be sold elsewhere. Plaintiff did not demand that defendant accept the 300 pigs.

Thereafter, until August 1998, both parties performed under the contract. While the record is inconclusive as to the number of pigs to be delivered in each of these four months, the parties appear to agree that full performance was tendered by both parties. Each month, plaintiff tendered approximately 600 pigs, the majority of which were accepted by defendant. Defendant rejected 23 pigs in the June 1998 shipment of 675 pigs, which were replaced by plaintiff. Defendant further rejected 23 pigs in one of two July 1998 shipments, which were also replaced by plaintiff.

According to defendant, in June 1998, one of defendant's ultimate purchasers of the pigs, David Catlett, advised defendant of performance problems with some of the pigs that defendant had purchased from plaintiff. Catlett told defendant that he had met with a representative of plaintiff that month and had been advised that plaintiff was not purchasing Newsham gilts, but was producing Newsham gilts himself. According to Catlett, a 100% Newsham pig could not be produced through such a process.

Similarly, defendant's expert, Dr. Kevin Eggers, a veterinarian, testified that at the same meeting, Shields told him that plaintiff had stopped buying Newsham gilts because it could not afford to financially. Dr. Eggers further testified that a Newsham pig cannot be made from anything other than Newsham parents.

On August 3, 1998, plaintiff delivered 600 pigs to defendant, which were accepted by defendant. However, shortly after the delivery, a representative of defendant contacted plaintiff and reported some problems with some of the pigs in the shipment. Plaintiff offered to replace the problem pigs, but defendant refused. Further, defendant notified plaintiff that it would no longer accept any pigs from plaintiff under the contract, citing the refusal of defendant's ultimate purchasers to accept the pigs. Plaintiff responded by informing defendant it would sell the remaining pigs on the open market.

On December 8, 1998, plaintiff filed a complaint against defendant for breach of contract, seeking damages for defendant's rejection of the 300 pigs in April 1998, as well as for all scheduled deliveries after August 3, 1998. On January 7, 1999, defendant filed an answer and counterclaimed against plaintiff for failure to provide merchantable pigs under the contract.

After a bench trial, the trial court found that both parties had repudiated the contract, and it denied both damage claims on February 19, 2001. Both parties timely filed notice of appeal in March 2001, but defendant has waived its cross-appeal.

II. ANALYSIS

A. The Parol Evidence Was Properly Considered

It is axiomatic that a court's principal goal in construing a contract is to ascertain and give effect to the parties' intent at the time they entered the contract. USG Corp. v. Sterling Plumbing Group, Inc., 247 Ill.App.3d 316, 318, 186 Ill.Dec. 830, 617 N.E.2d 69, 70 (1993). Thus, if the contract terms are unambiguous, the parties' intent must be ascertained exclusively from the express language of the contract (Farm Credit Bank of St. Louis v. Whitlock, 144 Ill.2d 440, 447, 163 Ill.Dec. 510, 581 N.E.2d 664, 667 (1991)), giving the words used their common and generally accepted meaning. Clay v. Illinois District Council of the Assemblies of God Church, 275 Ill.App.3d 971, 978, 212 Ill.Dec. 487, 657 N.E.2d 688, 692 (1995).

Therefore, "when the language used is susceptible to more than one meaning [citation] or is obscure in meaning through indefiniteness of expression [citation]," a contract is properly considered ambiguous. Wold v. Chicago Shippers Ass'n, 175 Ill.App.3d 607, 617, 125 Ill.Dec. 62, 529 N.E.2d 1138, 1145 (1988). This does not mean, however, that the parties' disagreement regarding how to interpret the terms of a contract, in itself, renders the contract ambiguous. USG Corp., 247 Ill.App.3d at 318, 186 Ill.Dec. 830, 617 N.E.2d at 71. The determination of whether a contract is ambiguous is a question of law for the court. Clay, 275 Ill. App.3d at 977, 212 Ill.Dec. 487, 657 N.E.2d at 692, citing Quake Construction, Inc. v. American Airlines, Inc., 141 Ill.2d 281, 288, 152 Ill.Dec. 308, 565 N.E.2d 990, 994 (1990). But once the court determines that the contract is ambiguous, parol evidence may be considered by the trier of fact in determining the parties' intent. Rybicki v. Anesthesia & Analgesia Associates, Ltd., 246 Ill.App.3d 290, 300-01, 186 Ill.Dec. 179, 615 N.E.2d 1236, 1244 (1993).

Since the finding of ambiguity by the trial court is a matter of law, we may review the trial court's finding independently, in the manner of a de novo review. Yamnitz v. William J. Diestelhorst Co., 251 Ill.App.3d 244, 251, 190 Ill.Dec. 593, 621 N.E.2d 1046, 1051 (1993). Thus, we are presented with plaintiffs assertion that the trial court (a) improperly assumed that the contract was ambiguous, and (b) admitted parol evidence to explain the ambiguity. We will first address the question of ambiguity.

At the very heart of the parties' dispute is the section of the contract which requires all pigs under the contract to be "progeny from a Newsham line." Defendant suggests that this implies a requirement that both the boar and the sow be 100% Newsham. Plaintiff counters that while the phrase "Newsham progeny" may be susceptible to more than one interpretation, the phrase "progeny from a Newsham line" (emphasis added) is not. According to plaintiff, since there are two blood lines, that...