294 F. 2d 505 - Yoder v. Nutrena Mills Inc

A. C. Cahill, Iowa City, Iowa, for appellant. Messer & Cahill, Iowa City, Iowa, on the brief.

Charles A. Hastings, Cedar Rapids, Iowa, and Wayne C. Collins and Elliott, Shuttleworth & Ingersoll, Cedar Rapids, Iowa, on the brief, for appellee.

Before VOGEL and BLACKMUN, Circuit Judges, and BECK, District Judge.

BECK, District Judge.

This appeal, in a diversity suit with all jurisdictional requirements met, is from two judgments1 granted on a motion for a summary judgment in an action by the appellee, hereinafter referred to as Nutrena, based on written contracts and promissory notes executed and delivered pursuant thereto, covering the appellants' 1957 turkey raising operation, which within the credit limitations specified in the written contracts was to be financed by Nutrena.

The trial court's decision under the motion that the record presented "no genuine issue as to any material fact", is founded on a three-count complaint, the answer thereto and counterclaim, the reply and depositions taken by both sides which are referred to in the trial court's opinion as extensive.

That record, within the restrictions against short circuiting trials on material issues of fact referred to in Ford v. Luria Steel & Trading Corp., 8 Cir., 1951, 192 F.2d 880, Traylor v. Black, Sivalls & Bryson, Inc., 8 Cir., 1951, 189 F.2d 213 and United States v. Farmers Mut. Ins. Ass'n of Kiron, Iowa, 8 Cir., 1961, 288 F.2d 560, appears to us to have settled and established all questions of fact, to the point of leaving "no genuine issue as to any material fact". [192 F. 2d 882.]

On that point leaving generalities out and specifics in, we note: (1) the appellants' admission that the written contracts referred to in the two counts before us on this appeal are true and correct written contract commitments made by the appellants as they signed the one, November 8, 19562, and the other on December 13, the only difference between "A" copied in the margin and "B", aside from the dates of the contracts and the respective acceptance dates, being the credit limitations fixed at $7,125, number of turkeys 2,500, and J. Paul Yoder signing the partnership name of J. Paul Yoder and Son by J. Paul Yoder; (2) their further uncontroverted admission that Exhibits "B"3 and "D"4 show how the contemplated transactions were performed, the number of notes, the amount of each and dates, total interest accrued, total credits and final due date balance of $16,760.74 on the one and $1,964.56 on the other; and (3) uncontroverted and compelling evidence that there is no factual basis for the appellants' denial that it did not have "any information or knowledge as to the truth of the allegations contained in Par. 1" of the appellants' complaint:

"That plaintiff is a corporation organized and existing under the laws of the State of Kansas and is a citizen of the State of Kansas and is authorized to do business in the State of Iowa and maintains an office for that purpose in Cedar Rapids, Iowa."

Moreover, there is an implied admission by the appellants that there is no "genuine issue as to any material fact" as they predicate their only defense to each of the balances alleged to be due under the two contracts, under the averments in their answer:

"Defendants admit the allegations contained in Par. 45 of Plaintiff's petition but alleges that said agreement referred to as Exhibit `A' was delivered by the defendants to the Plaintiff, Nutrena Mills, Inc., upon stated and specific conditions, towit: That the Plaintiff, Nutrena Mills, Inc., would furnish sufficient feed to feed out all the turkeys purchased by the defendants or raised by them without regard to the maximum amount set forth in said Exhibit `A' and would provide the necessary financing to pay off the balance remaining due on the turkey operation from the preceding year which conditions were orally expressed and were understood between defendants and the agents and representative of the plaintiff and were relied upon by these defendants.

"Defendants admit that Plaintiff advanced certain sums of money in pursuance to the agreement, Exhibit `A', and defendants admit that they executed several promissory notes all as alleged by plaintiff, but defendants allege that each and all of said promissory notes were executed and delivered upon the same and identical conditions and in pursuance of said agreement and were each and all a part and parcel of the entire transaction all as is set forth in the preceding paragraph. Defendants admit that a portion of said notes and interest have not been paid but deny that they are indebted to the plaintiff for the reason that the plaintiff violated the terms of the agreement and condition upon which said agreement and notes were delivered in that plaintiff refused to carry out the terms thereof by refusing to deliver any additional feed to the defendants, or furnish additional financing, well knowing that such refusal would cause serious and irreparable damage to these defendants. That the damage caused to the defendants exceeds any amount claimed to be due or owing to the plaintiff as elsewhere herein set out and defendants deny that Exhibit `B' attached to Plaintiff's complaint shows the amount now due and owing, and defendants deny that they are indebted to the plaintiff in any amount as alleged by plaintiff."

To that array of reasons, which "in" part, no doubt, prompted the trial court's action on the motion, we add all of Yoder's testimony as it is reproduced in appellants' brief since it is the only specific oral proof submitted on the pleaded "conditional delivery":

"A. And so Kalkbrenner brought his contract around and started filling it out, and he put the pressure on me. In other words, he was determined that I go ahead, and I said, `You know how I feel, I would like to have a chance for at least several weeks to do some shopping around.' I had already, and he said, `You know we have always taken care of you in the past, and we never had any troubles,' and he said, `I know that you didn't come out very well here, but that —' Well, we had a — just a good old conversation, and he had his contract filled out and he shoved it out to me to sign it, and Lockwood had — I had told you previously Lockwood and I had talked before Kalkbrenner brought his contract.

"Q. That was early in October?

A. No, it was the same date.

"Q. Oh, it was the same date. A. It was the same date, but when Lockwood got through he approached me and took me over to another table. That is where we talked in the office, and so I — I took the contract and I hesitated. I read it and I signed it, and I picked it up, and I told Kalkbrenner, I said, `I will give you this contract under one condition, that you will take care of me the way you did in the past, and that we will — and you will take us — your company will take me through this turkey year, stand back of me and furnish me the feed to go through, just as Lockwood and I had talked, and if you will, I will let you have this contract,' and he said, `We have in the past, and we are going to do it in the future. We will do it next year.' So I gave it to him."

Subsection (c) of Rule 56, F.R. C.P., 28 U.S.C.A., that: "The judgment sought shall be rendered forthwith if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law * * *", within the restrictions to which we have referred, vests power in the trial court, as such a motion is invoked, to summarily decide whether or not the requirements of that subsection have been met, its actions, in such cases, necessarily being co-extensive, with the powers it is called on to exercise, when it rules on admissibility of evidence in the course of regular trials. Judge Sanborn's comment in the Ford v. Luria Steel & Trading Corp. case, points in that direction:

"The controlling question in this case is whether evidence to establish the defendants' alleged oral profit-sharing agreement would be admissible upon a trial. Nothing is more futile than calling a jury to determine a fact the existence of which is not susceptible of proof." [192 F.2d 882.]

Here, as in that case and in view of the limited scope6 given by the appellants to this appeal, we are principally concerned with the application of one of the exceptions to the Iowa parol evidence rule referred to In re Simplot's Estate (Rooney v. Lenehan), 1933, 215 Iowa 578, 246 N.W. 396, 398:

"Parol evidence is admissible to prove that the delivery of a contract in a given case was conditional only and that compliance with the condition failed. Such parol evidence must be directed solely to the fact of delivery and to the conditions thereof. Such parol evidence does not operate to alter in any way the terms of the contract. If conditional delivery be proved, and that compliance with the condition failed, then the entire contract fails regardless of its terms. The entire contract is deemed not to have become effective."

More precise application of that exception can be had, however, as we view it in the light of the Iowa court's construction of that state's parol evidence rule and in the light of definitions by other authority. This phase of the case is summarized by the trial court in its opinion, Nutrena Mills, Inc. v. Yoder, D.C.N.D.Iowa 1960, 187 F.Supp. 415, 419:

"The instant case is principally concerned with an application of the Iowa parol evidence rule. This rule, rather than being a rule of evidence, is a rule of substantive law. Fidelity Savings Bank v. Wormhoudt Lumber Co., Iowa 1960, [251 Iowa 1121], 104 N.W.2d 462, 465; Williams v. Williams, Iowa 1959 [251 Iowa 260], 100 N.W.2d 185, 188; Martin v. Stewart Motor Sales, 1955, 247 Iowa 204, 73 N.W.2d 1, 4. See Loth and Jennings, The Parol Evidence Rule in Iowa, 20 Iowa L Rev. 713, 717 (1935). Since jurisdiction in this case is based upon diversity of citizenship, the doctrine of Erie R. R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, is applicable. Under the doctrine of that case the Iowa parol evidence rule governs. The Court of Appeals for this circuit has held that when the only evidence relied upon to create a factual dispute in opposition to a motion for summary judgment is an oral agreement which is inoperative because of the parol evidence rule, no genuine factual dispute may be said to exist and summary judgment should be granted. Booth v. Barber Transportation Co., 8 Cir., 1958, 256 F.2d 927, 929. See also Ford v. Luria Steel & Trading Corp. 8 Cir., 1951, 192 F.2d 880, 882. In the instant case the terms of the written contracts are clear and unambiguous. There is no dispute as to the amounts advanced under the contracts. Thus, there would be no genuine factual dispute if the condition upon which the defendants allege the contracts were delivered may not be established by parol evidence. This is true both in regard to plaintiff's claims and defendants' counterclaim.

"As defined in the Restatement of Contracts, Sec. 237 (1932), the parol evidence rule `makes inoperative to add to or vary * * * [an integrated written] agreement all contemporaneous oral agreements relating to the same subject matter; and also, unless the integration is void, or voidable and avoided, all prior oral or written agreements relating thereto.' The Restatement's definition has been approved by the Iowa Court in Weik v. Ace Rents, Inc., 1958, 249 Iowa 510, 87 N.W.2d 314, 318, and City of Des Moines v. City of West Des Moines, 1953, 244 Iowa 310, 56 N.W.2d 904, 906. The Iowa Supreme Court has consistently maintained that the general rule is that in the absence of fraud, accident, or mistake, parol evidence is not admissible to vary, add to, or contradict the express terms of a written contract. Williams v. Williams, Iowa 1959 [251 Iowa 260], 100 N.W.2d 185; Stebens v. Wilkinson, 1957, 249 Iowa 365, 87 N.W.2d 16, 71 A.L.R.2d 277; Furleigh v. Dawson, 1954, 245 Iowa 359, 62 N.W.2d 174; Northern Trust Co. v. Anderson, 1935, 222 Iowa 590, 262 N.W. 529, 271 N.W. 192. So, too, where the law makes an implication in the absence of an express provision, such implication becomes a part of the contract and parol evidence is not admissible to vary it. Thus, a blank indorsement to a negotiable instrument results in certain obligations which cannot be avoided by alleging a contemporaneous oral contract which would vary those obligations. Versteeg v. Hoeven, 1931, 214 Iowa 92, 239 N.W. 709, 714; First Nat. Bank of Hawkeye v. Raatz, 1929, 208 Iowa 1189, 225 N.W. 856, 857; Moore v. Altmyer, 1925, 199 Iowa 368, 202 N.W. 214, 215. Similarly, the legal effect of a written lease which does not place upon a landlord the duty to repair is to relieve him of such duty and a contemporaneous or prior parol contract may not be introduced to vary such legal effect. Jones v. Sargent, 1922, 193 Iowa 1256, 188 N.W. 818, 819; Banwart v. Shullenburg, 1920, 190 Iowa 418, 180 N.W. 190, 192. The reason for the rule has been said to be that because the parties have made the writing the memorial of their understanding, it constitutes the contract as a matter of law and nothing may be added to it or substituted in its stead. Martin v. Stewart Motor Sales, 1955, 247 Iowa 204, 73 N.W.2d 1, 4; City of Des Moines v. City of West Des Moines, 1953, 244 Iowa 310, 56 N.W. 2d 904, 906. But, as the Iowa Court has said In re Simplot's Estate, 1933, 215 Iowa 578, 246 N.W. 396, at pages 397-398:

"The parties agreed in the broad statement of the rule which forbids the acceptance of parol evidence to contradict or vary the terms of a written contract. Their disagreement arises over the application of the rule and over the so-called `exceptions' to the rule * * *." Again, as to the exception itself, we note Farmers' Savings Bank of Slater v. Weeks, 1929, 209 Iowa 26, 227 N.W. 508, 509 (defended on the ground that the mortgage was delivered on condition that it was not to be enforced against personal property):

"Nor can the contention be sustained as supporting the plea of conditional delivery. Concededly the mortgage was then and there delivered to the payees, and was intended to go into effect so far as the real estate was concerned. The condition contended for was not to be precedent to delivery, but had relation to the enforcement of the instrument after delivery. A condition to delivery suspends for the time being the contract as a whole. It can have no effect to qualify or modify the terms of the contract as written. The performance of the condition must be precedent to the delivery. The case presented by the defendants is not one of conditional delivery at all. The gist of their contention is that the provisions of the mortgage were to be waived and qualified after delivery. * * * The district court properly rejected the evidence, so far as it sought to qualify the terms of the mortgage.",

in Klemm v. Weil, 1922, 194 Iowa 1073, 190 N.W. 388, 390:

"The line of demarcation between the rule which forbids the admission of contemporaneous parol evidence to vary a writing and the rule of the statute which permits parol evidence to show the conditions upon which or the purpose for which an instrument was delivered is a very fine one, and in order to be guarded at all must be guarded diligently.",

in Hills Savings Bank v. Hirt, 1927, 204 Iowa 940, 216 N.W. 281, 283:

"There is a vast distinction between conditional delivery and an agreement that there should be liability only in a certain event. `Parol evidence is admissible to show conditions relating to the delivery or taking effect of the instrument, as that it shall only become effective upon certain conditions or contingencies, for this is not an oral contradiction or variation of the written instrument but goes to the very existence of the contract, and tends to show that no valid and effective contract ever existed; but evidence is not admissible which, conceding the existence and delivery of the contract or obligation, and that it was at one time effective, seeks to nullify, modify, or change the character of the obligation itself by showing that it is to cease to be effective, or is to have an effect different from that stated therein, upon certain conditions or contingencies, for this does vary or contradict the terms of the writing.",

and finally in Travers-Newton Chautauqua System v. Naab, 1923, 196 Iowa 1313, 196 N.W. 36, 37, 32 A.L.R. 780, where a written contract providing for purchase by the defendant of a number of season tickets to the entertainments produced by the plaintiff with the further provision that it was not to become valid until signed by at least nine other purchasers, was later defended on the ground that a contemporaneous oral agreement provided that the written one was not to become binding unless signed by ten or more persons who were financially responsible, including three designated persons. The Supreme Court rejected that defense as it said:

"We have repeatedly held that parol evidence to establish a condition precedent to the delivery of a written contract does not violate the rule by seeking to change, vary, or alter the terms of an existing contract. The terms of the contract itself remained unchanged. It is necessary, in order to establish the validity of any contract, to prove two things: One is its due execution, and the other is is full legal delivery. Mere manual delivery or the change of custody of a written instrument is not necessarily sufficient to constitute in all cases a legal delivery of the instrument. The manual possession or custody may be given to one for some special purpose, without there being such legal delivery of the instrument as to give it validity. Delivery is largely a matter of intention. Where there is a condition precedent to the full legal delivery of a written instrument, the writing does not become effective until such condition has been complied with, and it may generally be proven by parol evidence that there was such a condition precedent to the full legal delivery of the instrument and to its becoming effective. This rule is of necessity applied in cases where the written instrument itself is silent on the subject-matter of the condition precedent, which it is sought to establish by parol. But, where the written instrument speaks on the very subject-matter of the condition precedent which it is sought to establish by parol, then a different rule must obtain. In such an instance, the writing itself is sought to be obviated or modified by proof of a contemporaneous parol agreement, and this cannot be done. * * *"

"Were the contract entirely silent on this subject-matter, it might well be said that a condition precedent of this character might be established, without doing violence to the parol evidence rule. In the instant case, however, the parties have bound themselves by providing in the contract in regard to the very subject-matter of a condition precedent to its validity. Let it be remembered at this point that there is no claim of any fraud or misrepresentation whatsoever. The parties were all capable of making a contract. They bound themselves by apt terms, as they had a right to do. This action is not in equity to reform the instrument, but the appellant seek by parol to modify and change the provisions thereof, so that, instead of reading `not valid until signed by 10 or more persons,' it should read `not valid until signed by 10 or more financially responsible persons, including A. F. Miller, E. A. Landis, and Dr. C. W. Tyler.'"

The case at bar varies from Naab, only in the respect as pointed out in an observation by the trial court with which we agree:

"* * * that the written contract in the Naab case dealt specifically with the subject matter of the alleged condition as a condition precedent, while the written contract in the instant case deals with the subject matter of the alleged condition in terms of it being part of the consideration given by one of the parties thereto. It is the view of the Court that the principles are the same and when the subject matter of an alleged condition precedent is dealt with in the written instrument, in any form, the condition may not be shown by parol evidence to be different from the manner in which it is expressed in the writing. [Farmers' Savings Bank of Slater v. Weeks and Versteeg v. Hoeven, supra.]" [187 F.Supp. 425.]

In Clayman v. Bibler, 1930, 210 Iowa 497, 231 N.W. 334, 336, referred to and relied on by the trial court, it is said:

"The rule that where the consideration expressed in the contract is in itself a promise, and therefore contractual, it cannot generally be varied by parol, is of practical universal application. Gelpcke Winslow & Co. v. Blake, 19 Iowa 263; Rynear v. Neilin, 3 G.Greene 310; Lewis v. Day, 53 Iowa 575, 5 N.W. 753; McGee v. Allison, 94 Iowa 527, 63 N.W. 322; McEnery v. McEnery, 110 Iowa [718], 719, 80 N.W. 1071; Schrimper v. Railway Co., 115 Iowa 35, 82 N.W. 916, 87 N.W. 731; Lane v. Richards, 119 Iowa 24, 91 N.W. 786; Slump v. Blain, 177 Iowa 239, 158 N.W. 491; Banwart v. Shullenburg, 190 Iowa 418, 180 N.W. 190; Chantland v. Sherman, 148 Iowa 352, 125 N.W. 871; Kay v. Spencer, 29 Wyo. 382, 213 P. 571, 27 A.L.R. 1122; McCourt v. Peppard, 126 Wis. 326, 105 N.W. 809; Blough v. Parry, 144 Ind. 463, 40 N.E. 70, 43 N.E. 560."

The broad aspects of the transaction covered by the two written contracts, call for financing by Nutrena within a specified monetary and time limit period of the appellants' 1957 turkey raising and selling operation, in consideration, on their part, to purchase all of the needed feed from Nutrena. Those contracts are in evidence and are as they appear in the marginal parts of the opinion. None of their terms are in dispute. An important one, in view of the appellants' defense is the provision found in the two that they "contain all of the agreements between the parties hereto" and that neither can be "varied orally" (emphasis supplied). Here, we note, too, the admission in the answer that the contracts were signed and accepted as alleged in the complaint and in the uncontroverted proof that the appellants signed, executed and delivered and to the extent of $39,140.85, paid the twenty-four notes pursuant to the one contract and $8,039.63 on the seven notes executed and delivered under the other.

Even more compelling against the defense of conditional delivery, is the counterclaim, grounded in part on the written contracts which under the theory of that defense could not have had valid legal existence.

From Yoder's testimony, which on the motion we accept as true and to which we apply a construction most favorable to the appellants, we find: (1) that the discussion referred to in the testimony was had before the November contract was signed; (2) that the condition mentioned is the basis for the alleged defense of conditional delivery and (3) that full financing for the contemplated turkey operation was the consideration for the written contracts.

But even with such extensiveness given to that testimony and its import under the motion, we find it in conflict with the Iowa parol evidence rule and the exception the appellants have invoked and therefore not competent, under the authorities to which we have referred. The contracting parties made their writings the "memorials" of their understanding. Those are their contracts "as a matter of law and nothing may be added to them or substituted in their stead". (Emphasis supplied.) See Martin v. Stewart Motor Sales, City of Des Moines v. City of West Des Moines, and In re Simplot's Estate, supra.

Not by-passed, is the appellants' integrated contention, that the respective promissory notes are within the conditional delivery exception to the Iowa parol evidence rule, and that as to them Yoder's oral testimony can not be excluded. Suffice it to answer that those notes were but incidents to the transaction as a whole, a part of the financing performance contemplated and therefore subject to the written terms of the contract. Moreover, this action is on the written contracts and not on the notes. See State Bank v. Central Flour & Feed Company, 1939, 227 Iowa 596, 266 N.W. 614.

Numerous cases and authorities, not referred to in this opinion, are cited by the appellants. We find them either not consistent with the views here expressed, not in point under the facts or the law, misleading to a point because of statement of general rules without accompanying qualifications, and in at least one instance, a use of an out of a context statement which is inconsistent with and does not reflect the reasons prompting the trial court's ruling on the motion.

Affirmed.