Opinion
No. 5-065 / 03-2044
Filed April 28, 2005
Appeal from the Iowa District Court for Audubon County, James S. Heckerman, Judge.
A plaintiff appeals from a district court ruling that held the plaintiff was precluded from recovering under an oral agreement with the defendant. AFFIRMED.
L.W. Rosebrook of Nyemaster, Goode, Voigts, West, Hansell O'Brien, P.C., Des Moines, for appellant.
Scott M. Brennan of Davis, Brown, Koehn, Shors Roberts, P.C., Des Moines, for appellee.
Considered by Huitink, P.J., and Mahan and Miller, JJ.
American Agri Services, Inc. d/b/a American Shelters (American Shelters), an Iowa corporation, appeals from a district court ruling that held American Shelters was precluded from recovering damages for an alleged breach of an oral agreement with Winkler Canvas Ltd. (Winkler), a Canadian company. We affirm the district court.
I. Background Facts and Proceedings.
In 1995 Dennis McCool as president and Scott Benton as vice president of American Shelters, and Gary Suderman as general manager of Winkler, entered into an oral agreement regarding the distribution and sale of Winkler's hoop shelter buildings and building components. Winkler agreed to build and supply products under the trade name "American Shelters," to be sold and distributed in the United States and Mexico exclusively by American Shelters. American Shelters in turn agreed to aggressively market and promote the distribution and sale of Winkler's products in the United States and Mexico. Winkler understood that, under the agreement, it was precluded from selling buildings or building components, either directly or indirectly, to any company doing business in the United States and Mexico other than American Shelters.
The companies operated under the oral agreement until 1999. That year American Shelter began to hear dealer complaints and rumors to the effect that a United States company, Silver Stream, as well as some Canadian companies, were selling Winkler hoop shelter buildings in the United States. McCool traveled to Canada to confront Winkler, and to gain assurances that he would remain the sole distributor in the United States. McCool brought with him a written agreement he had drafted, and Benton had already signed. The written agreement mirrored the oral agreement between American Shelters and Winkler, with the addition of two terms: an express termination provision that allowed either party to cancel the agreement with a thirty-day written notice, and a requirement that Winkler provide written proof of insurance upon request.
On November 3, 1999, McCool met with Suderman as well as David Dyck, Winkler's majority stockholder. Suderman admitted Winkler was producing hoop shelter buildings for Silver Stream under a "Silver Stream" label. Suderman agreed that Winkler would stop providing buildings for sale in the United States except for those sold to American Shelters, and Suderman, Dyck, and McCool all signed the written agreement.
Dyck later confirmed that Winkler had been selling hoop shelter buildings in the United States under a Silver Stream logo, and that he had voiced concerns to Suderman about this action in light of American Shelters' exclusive distributorship.
Winkler terminated the written agreement in July 2000 by giving more than thirty-days written notice "[p]ursuant to the terms of the distributorship contract dated Nov. 3rd, 1999. . . ." On January 5, 2001, American Shelters filed a petition that made a number of claims against Winkler, including breach of both the oral and written agreement. Winkler filed counterclaims based upon American Shelters's failure to pay Winkler sums due and owing for delivered and accepted goods.
The matter was tried to the court in October 2003. At the conclusion of trial, the judge requested and each party prepared a proposed ruling. In November 2003 the court adopted verbatim the proposed ruling submitted by Winkler. The court entered judgment in favor of Winkler in the amount of $122,527.37 — the amount due and owing from American Shelters for goods and services provided by Winkler — plus interest. It also dismissed all of American Shelters's claims. In particular, the court concluded American Shelters could not sustain a claim for breach of the oral agreement, as the oral agreement had merged into the written agreement. American Shelters appeals. The only issue presented to this court is whether the district court erred in dismissing American Shelters's claim for breach of the oral agreement.
II. Scope and Standards of Review.
We review the district court's ruling on the breach of contract claim for the correction of errors at law. See Iowa R. App. P. 6.4; Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000). We view the evidence in the light most favorable to the district court's judgment, and the court's fact findings are binding on appeal if supported by substantial evidence. Land O'Lakes, 610 N.W.2d at 522. "Evidence is substantial for purposes of sustaining a finding of fact when a reasonable mind would accept it as adequate to reach a conclusion." Falczynski v. Amoco Oil Co., 533 N.W.2d 226, 230 (Iowa 1995). Although the practice of adopting a party's proposed ruling verbatim is one disfavored by this court, such an adoption does not alter our standard of review. In re Marriage of Siglin, 555 N.W.2d 846, 849 (Iowa Ct.App. 1996).
Our supreme court has been repeatedly critical of such wholesale adoption by a district court. See Rubes v. Mega Life Health Ins. Co., Inc., 642 N.W.2d 263, 266 (Iowa 2002). The concerns inherent in such a practice are eased, but not erased, by requesting proposed rulings from each party. Any verbatim adoption raises concerns that "the trial court delegate[d] to counsel its own responsibility to scrutinize the record, select apt principles of law, and fully articulate the bases for a sound, fair decision." Kroblin v. RDR Motels, Inc., 347 N.W.2d 430, 435 (Iowa 1984). Such concerns remain in this case, where the factual findings in the adopted ruling are rather patently skewed in the drafting party's favor, even on non-material points. That is why appellate courts have frequently noted it is the better practice, if "counsel must be asked to assist in the preparation of findings and conclusions," that the court take the proposed ruling of each party and "pick and choose and temper and select those portions which better fit its own concept of the case." Id.; see also Siglin, 555 N.W.2d at 849. However, we cannot assume the district court failed to exercise independent judicial judgment simply because it adopted a proposed ruling. Siglin, 555 N.W.2d at 849.
III. Discussion.
In rejecting American Shelter's claim based on a breach of the oral agreement, the district court concluded the oral agreement had terminated and merged into the written agreement on November 3, 1999, the day the written agreement was executed, and that any damages resulting from a breach of the oral agreement were waived. The court relied on a finding that, at the time the written agreement was signed, the only remedy for breach of the oral agreement sought by American Shelters "was to bind Winkler Canvas in a new written agreement containing, among other new provisions, a cancellation provision. . . ." American Shelters contends the district court erred in its ruling, as the necessary prerequisites for merger were not met in this case.
It is the general rule that, when an oral agreement precedes a written agreement, the oral agreement will be found to have merged into the written. Commercial Trust Sav. Bank of Storm Lake v. Toy Nat. Bank of Sioux City, 373 N.W.2d 521, 523 (Iowa Ct. App. 1985). However, the key question in such cases is the intent of the parties. Id. Thus, "[t]here must be an indication of intent that the second agreement replaces the first." Id. Intent may be evidenced by the fact that the terms of the second agreement are inconsistent with, and not simply supplementary to, the first agreement. See id.; South Texas Land Co. v. Sorensen, 199 Iowa 699, 703, 202 N.W. 552, 553 (1925).
American Shelters presents merger as a two-part test, comprised of both intent and inconsistency of terms. While the inconsistency of terms, or lack thereof, is relevant to the question of merger, the mere fact that terms are consistent or supplementary does not preclude a finding of intent.
Implicit in the district court's ruling in this matter is a finding that American Shelters, by its actions, intended the written agreement to substitute for the oral agreement. This finding is binding on appeal if supported by substantial evidence in the record. Land O'Lakes, 610 N.W.2d at 522. In assessing this issue, we do not look to see whether the evidence would have supported a different finding; we look to see whether substantial evidence supported the finding actually made. Van Oort Constr. Co. v. Nuckoll's Concrete Serv., Inc., 599 N.W.2d 684, 691 (Iowa 1999). In this regard, "[o]ur task is not to weigh the evidence or the credibility of the witnesses. Rather, our task is to determine whether substantial evidence supports the district court's findings according to those witnesses whom the court believed." Tim O'Neill Chevrolet, Inc. v. Forristall, 551 N.W.2d 611, 614 (Iowa 1996) (citation omitted).
Winkler asserts that intent is shown by the testimony of McCool given in response to a question from his own attorney:
Q. Did you make any requests or demands of them as to the future if you were requesting to have a relationship going forward?
A. I indicated to them this was unacceptable and that all sales would have to cease and desist in the U.S. and Mexico, and that it was evidenced by this document that I was preparing for them.
Winkler contends that when this testimony is viewed in conjunction with the fact that American Shelter did not demand any damages from Winkler at the time the written agreement was executed, that the written agreement contained terms in addition to those under the oral agreement, and that both parties adhered to the conditions of the written cancellation provision, there is substantial evidence of American Shelters's intent to merge the oral agreement into the written agreement, and waive any right to damages under the oral agreement, in exchange for the additional contract provisions. This appears to be the same position adopted by the district court in its ruling.
Although we might not view the foregoing evidence as proof of intent by American Shelters, we must agree with Winkler that a reasonable fact finder, who is the one charged with weighing evidence and making credibility findings, could conclude American Shelters intended to substitute the written agreement for the oral, and waive any rights under the oral agreement. See Tim O'Neill Chevrolet, 551 N.W.2d at 614; Falczynski, 533 N.W.2d at 230. Given the standard of review in this matter, our conclusion does not change simply because the new terms were largely consistent with, or supplementary to, the oral agreement. See Commercial Trust, 373 N.W.2d at 523.
IV. Conclusion.
The district court's finding that American Shelters intended the oral agreement to merge into the written agreement is supported by substantial evidence. Accordingly, we affirm the court's conclusion that the oral agreement merged into the written, and its resulting dismissal of American Shelters's claim for breach of the oral agreement.