Opinion
No. 5-211 / 04-0517
Filed April 28, 2005
Appeal from the Iowa District Court for Marion County, Darrell J. Goodhue, Judge.
Engineered Plastic Components, Inc. appeals from a district court judgment in favor of Pella Plastics, Inc. in the amount of $144,489. AFFIRMED.
Timothy J. Eckley and R. Mathieson Duncan of Duncan, Green, Brown Langeness, Des Moines, for appellant.
Christopher P. Jannes of Davis, Brown, Koehn, Shors Roberts, P.C., Des Moines, for appellee.
Heard by Mahan, P.J., Zimmer, J., and Beeghly, S.J.
Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2005).
Engineered Plastic Components, Inc. (EPC) appeals from a district court judgment in favor of Pella Plastics, Inc. in the amount of $144,489. We affirm.
I. Background Facts Proceedings.
On November 6, 2002, Pella Plastics entered into a contract that provided for the sale of its plastic manufacturing equipment to EPC. The parties' written agreement set forth in detail the assets EPC was to acquire. Specifically, the agreement included the following assets:
At the time of the sale, Pella Plastics owned two manufacturing plants, one located in Pella, Iowa, and the other in New Hope, Tennessee. Although the purchase agreement encompassed the assets at both of these locations, only the sale of the Pella assets is involved on this appeal.
Machinery and Equipment: Other Tangible Assets. All of Pella Plastics' [sic] fixtures, machinery, equipment, support equipment, tools, supplies, parts, furniture, stores, computer hardware and software (to the extent assignable by Pella Plastics), and other similar miscellaneous tangible assets, including, but not limited to, injection molding and auxiliary equipment as listed on Schedule B ("Equipment").
The purchase agreement expressly excluded all of Pella Plastics's "other assets and properties which are known as its real estate. . . ." The term "real estate" was defined in the agreement as "an identified parcel or tract of land, including improvements, if any."
Pursuant to the purchase agreement, EPC was allotted nine months from the date of closing to remove the acquired assets from the Pella manufacturing facility. Accordingly, on January 15, 2003, the parties executed a rent-free lease of the premises for the nine-month period. In September of 2003 EPC requested an extension of the lease. This request prompted Pella Plastics to conduct an inspection of the premises. During the inspection, Pella Plastics discovered EPC was removing electrical components from the property, including breakers, switch gear, and transformers. Pella Plastics believed these items were not included in the sale of its assets to EPC because the items were properly characterized as real property. Following the completion of the inspection, Pella Plastics provided EPC with written notice demanding replacement of the removed items within ten days. EPC failed to comply with the conditions set forth in the written notice.
Consequently, on October 2, 2003, Pella Plastics filed an action asserting breach of contract and conversion claims against EPC. Pella Plastics further requested injunctive relief and a landlord's lien. Pella Plastics maintained they retained title to the electrical components because real property was specifically excluded from the agreement with EPC. EPC asserted the removed fixtures were expressly included in the parties' purchase agreement. A separate hearing was held with respect to Pella Plastics's request for a temporary injunction. The district court denied the request, finding that Pella Plastics had an adequate remedy at law for any damages sustained. A trial commenced with respect to Pella Plastics's remaining claims. On February 9, 2004, the district court entered judgment in favor of Pella Plastics on the breach of contract/conversion claims. The district court concluded the removed items were not included in the assets sold to EPC because they were fixtures and had become part of the real estate. The court awarded Pella Plastics $144,489 in damages. Pella Plastics's remaining claims for injunctive relief and a landlord's lien were denied. EPC filed a motion to enlarge or amend findings and conclusions asserting the assets for which Pella Plastics received judgment were included in the asset purchase agreement because the items were either fixtures or trade fixtures. The district court denied the relief requested in EPC's motion on March 2, 2004. EPC appeals.
II. Standard of Review.
Pella Plastics and EPC differ on whether this matter was tried at law or equity and thus dispute our standard of review. See Kroes v. American Family Ins., 499 N.W.2d 309, 310-11 (Iowa Ct.App. 1993) (noting appellate review is governed by how the case was tried in district court). Pella Plastics initially filed its petition in equity, due to the request for temporary and permanent injunctive relief. The district court held a separate hearing on the issue of temporary injunctive relief but ultimately denied such relief because Pella Plastics "had an adequate at law remedy for any damages it might sustain." (emphasis added). After its request for injunctive relief was denied, a trial was held on Pella Plastics's remaining claims. Accordingly, we conclude this case was tried at law. This conclusion is bolstered by the fact the district court ruled on several evidentiary objections, the "hallmark" of a law trial. Sille v. Shaffer, 297 N.W.2d 379, 381 (Iowa 1980). Consequently, our standard of review is for the correction of errors at law. Iowa R. App. P. 6.4. The district court's findings of fact have the same effect as a jury verdict; they are binding upon this court so long as they are supported by substantial evidence. Grinnell Mut. Reins. Co. v. Voeltz, 431 N.W.2d 783, 785 (Iowa 1988). Evidence is substantial when a reasonable mind would accept it as adequate to reach the same findings. Id. Evidence is not insubstantial merely because it would have supported contrary inferences. Id. III. The Merits.
We acknowledge the district court again denied both temporary and permanent injunctive relief in its post-trial findings of fact and conclusions of law. However, the court merely pointed out that the issue had become moot since EPC had vacated the premises prior to the start of trial. Further, although the district court also denied Pella Plastics' request for a landlord's lien, the court noted in its ruling that "[c]hapter 570 [of the Iowa Code] provides a landlord lien for rent only and damages not rent is the basis for the damage claim in the instant case." (emphasis added). The recovery of damages is generally a legal remedy. See Berry Seed Co. v. Hutchings, 247 Iowa 417, 422, 74 N.W.2d 233, 237 (Iowa 1956) (noting cases in which the remedy is the mere recovery of money based on breach of contract are usually actions at law); see also Mosebach v. Blythe, 282 N.W.2d 755, 758 (Iowa Ct.App. 1979) ("Where the primary right of the plaintiff arises from the nonperformance of a contract, where the remedy is monetary in nature, and where monetary damages are full and certain, remedies are usually provided by actions at law and equity has no jurisdiction.").
The district court determined the electrical components were wrongfully removed by EPC. The court found the removed items were fixtures and excluded from the terms of the contract as real property. On appeal, EPC asserts the district court erred because the components were expressly included in the contract.
EPC alternatively asserts the items constituted trade fixtures and were thus removable because they related to the manufacture and sale of plastic products. We note that EPC's attempt to apply the concept of trade fixtures to the case at bar is without merit. "The doctrine of trade fixtures is limited in its application to situations in which a landlord and tenant relationship exists, and is not applicable in cases in which the owner of land attaches fixture to realty." 35A Am. Jur. 2d. Fixtures § 34, at 867 (2001). Different rules apply to fixtures when the underlying relationship of the parties is one of landlord-tenant. See, e.g., Hyman v. Wellman Enters., Inc., 522 S.E.2d 150, 152 (S.C.Ct.App. 1999). Here, the owner of the realty, Pella Plastics, installed the fixtures in question. The relationship between EPC and Pella Plastics is one of vendor-vendee. Accordingly, the rules governing trade fixtures are wholly inapplicable to the case at hand, and we will not convolute the issue by further addressing this argument.
We must first address whether there was substantial evidence to support the district court's conclusion that the electrical components constituted fixtures. "A fixture is, by definition, real property because it is incorporated in or attached to the realty." 35A Am. Jur. 2d Fixtures § 3, at 840 (2001). Personal property becomes a fixture when
(1) it is actually annexed to the realty, or to something appurtenant thereto;
(2)it is put to the same use as the realty with which it is connected;
(3) the party making the annexation intends to make permanent accession to the freehold.
Young v. Iowa Dep't of Transp., 490 N.W.2d 554, 556 (Iowa 1992). In determining whether personal property has become a fixture, the paramount factor is the intention of the party annexing the personalty to the realty. The evidence presented at trial established the electrical components at issue were annexed to the real estate and essential to its dedicated use as a functioning manufacturing facility. Mr. Jim Lockwood, the maintenance manager at Pella Plastics, testified that various buildings were deprived of the power necessary to run essential operations due to EPC's removal of the electrical components. Additionally, Mr. Lockwood's testimony established the components were designed and placed in such a manner so as to permit flexibility and alternate usage of the facility, indicating Pella Plastics's intent to make a permanent accession. Thus, we conclude substantial evidence supported the district court's conclusion the removed electrical components were fixtures. See, e.g., K L Distribs., Inc. v. Kelly Elec., Inc., 908 P.2d 429, 432 (Alaska 1995) (finding industrial lighting and circuit breakers were fixtures because the components were essential to the building's function as a processing facility); 230 Park Ave. Assocs. v. Penn Cent. Corp., 577 N.Y.S.2d 46, 47 (App.Div. 1991) (determining transformers that were an integral part of a facility's electrical system were fixtures).
Next, we must determine whether the district court correctly interpreted the parties' agreement. In its ruling on EPC's motion to enlarge or amend, the district court determined the contract contained an ambiguity and therefore considered extrinsic evidence in order to ascertain the intention of the parties. After weighing the evidence, the district court concluded the parties did not intend to include the electrical components at issue in the purchase agreement. EPC asserts the district court's interpretation was in error because the express language of the contract evidenced the parties' intent to include fixtures in the sale.
In interpreting a contract, we give effect to the language of the entire contract in accordance with its commonly accepted and ordinary meaning. Lange v. Lange, 520 N.W.2d 113, 119 (Iowa 1994). The object of a court in interpreting an agreement is to ascertain the meaning and intention of the parties as expressed in the language used. United Warehousing Corp. v. Interstate Acres Ltd. P'ship, 458 N.W.2d 14, 15 (Iowa Ct.App. 1990). The parties' intent is determined by the language in the contract, unless it is ambiguous. Id. An ambiguity exists when a genuine uncertainty exists over two or more meanings of the terms of the contract. Tom Riley Law Firm, P.C. v. Tang, 521 N.W.2d 758, 759 (Iowa Ct.App. 1994). The test for ambiguity is an objective one: "Is the language fairly susceptible to two interpretations?" Iowa Fuel Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 863 (Iowa 1991). If the language of a contract is found to be ambiguous, extrinsic evidence is admissible as an aid to interpretation of the contract. Dental Prosthetic Servs., Inc. v. Hurst, 463 N.W.2d 36, 39 (Iowa 1990).
Applying these principles to the case before us, we are convinced, as was the district court, that an ambiguity exists within the parties' purchase agreement. The purchase agreement expressly includes the term "fixtures." However, in a separate section, the contract specifically excludes real estate, which is defined as a parcel or tract of land, including improvements. A fixture, by virtue of its definition, is an improvement to real property that no longer retains its identity as personalty and becomes part of the realty. 35A Am. Jur. 2d Fixtures § 2, at 840. Thus, the contract both includes and excludes fixtures from the assets acquired by EPC. Because the contract is susceptible to two reasonable interpretations, an ambiguity exists and the district court was correct in ascertaining the parties' intent by consideration of extrinsic evidence. See Iowa Fuel Minerals, Inc., 471 N.W.2d at 863; see also Fausel v. JRJ Enters., Inc., 603 N.W.2d 612, 618 (Iowa 1999).
Consequently, we must next consider whether the district court's conclusion that the parties did not intend to include the electrical components in the sale of assets was supported by substantial evidence. We conclude that it was. As the district court noted in its order, there are several factors that indicate the parties did not intend to include the electrical components as part of the sale. First, the components were recent additions to the facility and were designed to allow for flexibility and alternate uses of the facility. Secondly, these components were essential to the building's function. Without them, the building lacked adequate power to perform essential functions. Additionally, goods and assets were primarily the subject of the acquisition, not realty. This fact is evidenced by EPC's letter of intent, which specifically excluded real property from the basic transaction.
Our conclusion is further bolstered by the doctrine of ejusdem generis. This well-established rule of contract construction provides that when a contract contains both general and specific provisions on a particular issue, the specific provisions are controlling. Maxim Techs., Inc. v. City of Dubuque, 690 N.W.2d 896, 902 (Iowa 2005). Here, the parties' agreement generally included fixtures, machinery, equipment, support equipment, tools, supplies, parts, furniture, stores, computer hardware and software, and other similar miscellaneous tangible assets. These general terms were followed by an exhaustive list of the equipment EPC was acquiring in the sale. This comprehensive listing was over one-inch thick, but failed to list any of the electrical power distribution equipment involved in this appeal. Pursuant to the rules of contract construction, these specific terms of the contract are controlling. For these reasons, we conclude substantial evidence supported the district court's interpretation of the contract. Accordingly, we affirm the decision of the district court.