Opinion
No. 3-217 / 02-0889
Filed August 27, 2003
Appeal from the Iowa District Court for Dubuque County, Lawrence H. Fautsch, Judge.
Plaintiffs appeal the grant of partial summary judgment to the defendant on the plaintiffs' breach of contract and warranty action. AFFIRMED.
Michael Duffy and Edward Eshoo, Jr. of Childress Zdeb, Ltd., Chicago, Illinois, and Candy Pastrnak of Pasternak Law Firm, P.C., Davenport, for appellants.
Robert Sudmeier and Norman Wangberg of Fuerste, Carew, Coyle, Juergens Sudmeier, P.C., Dubuque, for appellee.
Considered by Vogel, P.J., and Miller and Eisenhauer, JJ.
The plaintiffs, Kenneth and Ellie Heitritter (the Heitritters), appeal the district court's grant of partial summary judgment to the defendant, Callahan Construction Co. (Callahan), on the Heitritters' breach of contract and warranty action. The Heitritters contend the district court's grant of partial summary judgment was improper because, as a matter of law, certain "General Conditions" were incorporated by reference into their agreement with Callahan. They argue in the alternative that an ambiguity exists concerning whether the parties intended to incorporate the disputed terms into the agreement. We affirm.
I. BACKGROUND FACTS AND PROCEEDINGS
The Heitritters entered into a contract with Callahan in August 1991, whereby Callahan was to provide various labor and materials for the construction of the Heitritters' new home. A construction management company, A1 Lundh Associates (Lundh) prepared the contract for the Heitritters. The Heitritters stipulated at oral argument on the motion for summary judgment that the contract was provided by them or their agent.
The contract used was a standard form devised by the American Institute of Architects (AIA) and is referred to as "AIA Document A101/CM." The title on the agreement is "Standard Form of Agreement Between Owner and Contractor where the basis for payment is a STIPULATED SUM" and states it is the "1980 EDITION." The title page of the agreement also states "THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS ENCOURGAGED," and that "This document is intended to be used in conjunction with AIA Documents A201/CM, 1980; B141/CM, 1980; and B801, 1980."
Article I of the parties' agreement appears to be an incorporation clause describing those documents that can constitute part of the contract. It provides as follows:
ARTICLE 1 THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, the Conditions of the Contract (General, Supplementary and other Conditions), the Drawings, the Specifications, all Addenda issued prior to and all Modifications Issued after execution of this Agreement. These form the Contract, and all are as fully a part of the Contract as if attached to this Agreement or repeated herein. An enumeration of the Contract Documents appears in Article 7.
Article 7 of the agreement, entitled "Miscellaneous Provisions," includes the enumeration clause referred to in Article 1. It directs the parties to list those documents that constitute the contract. It provides as follows:
7.1 Terms used in this Agreement which are defined in the Conditions of the Contract shall have the meanings designated in those Conditions.
7.2 The Contract Documents, which constitute the entire agreement between the Owner and the Contractor, are listed in Article 1 and, except for Modifications issued after execution of this Agreement, are enumerated as follows:
(List below the Agreement, the Conditions of the Contract [General, Supplementary and other Conditions], the Drawings, the Specifications, and any Addenda and accepted alternates, showing page or sheet numbers and dates where applicable.)
In this case the space below section 7.2 set aside for listing the contract documents was left blank by the parties. Nowhere in the agreement is there an express requirement that Callahan perform in a good and workmanlike manner. However, such express warranties are found in AIA Document A201/CM, 1980.
AIA Document A201/CM, 1980 is a twenty-one page document entitled "General Conditions of the Contract for Construction" (hereinafter A201/CM.) It contains, among numerous other things, specific contractor warranties. This document was not physically attached to the agreement when it was signed by the parties. The only documents attached to the agreement were a two-page document labeled "Proposal" and a one-page document entitled "CHANGE ORDER CONSTRUCTION MANAGEMENT EDITION AIA DOCUMENT G701/CM." It is undisputed that neither Callahan nor its agents were ever given or shown a copy of A201/CM or given a chance to review its contents. Furthermore, the parties never discussed the contents of A201/CM.
As the various contractors and subcontractors began work on the home the Heitritters complained of various defects and problems with the home. The complaints continued through October of 1994. The Heitritters eventually filed suit on December 29, 1999 against Callahan and five other individuals and entities which were involved in the construction of their home. The Heitritters claimed that Callahan (1) failed to follow the plans and specifications, (2) performed its services in a manner that resulted in defects and deficiencies, and (3) failed to use good workmanship in the performance of its services.
Callahan moved for partial summary judgment on the basis that the second and third claims were warranty claims based upon an implied or oral provision and were thus barred by the five-year statute of limitations for unwritten contracts under Iowa Code section 614.1(4) (1999). Specifically, Callahan argued that its obligations to perform its work in a good and workmanlike manner, free of defects and deficiencies, were not express terms of the written contract with the Heitritters, but rather spring from the general, implied warranties that are a part of Iowa law and such implied warranties are subject to a five-year statute of limitation under section 614.1(4).
The Heitritters resisted Callahan's motion for partial summary judgment arguing A201/CM was incorporated by reference into the parties' agreement and their claims of breach of warranty were based on the express, written warranty set forth in Article 4.5.1 of A201/CM. Accordingly, they argued their second and third claims were not barred by the statute of limitations because the time period to bring a suit on a written contract is ten years under section 614.1(5).
Callahan later sought to amend its motion to seek summary judgment on the Heitritters' first claim as well, and thus seek complete summary judgment. The Heitritters resisted. The trial court apparently allowed the amendment. It stated in its ruling that the matter presented was Callahan's "amended motion for summary judgment" and it addressed all three claims of breach of contract and warranty.
The district court granted Callahan partial summary judgment, dismissing the Heitritters' second and third claims. It denied summary judgment as to the first claim, leaving for trial only the issue of Callahan's alleged breach of contract for failure to follow the plans and specifications. The court concluded that A201/CM, and the express warranty contained therein, was not a part of the parties' agreement and thus the Heitritters' second and third claims were barred by the five-year statute of limitations under section 614.1(4). The Heitritters' remaining claim proceeded to trial and the jury returned a verdict in favor of Callahan. On appeal the Heitritters challenge only the district court's grant of partial summary judgment to Callahan.
The Heitritters settled their claims with all of the defendants except Callahan prior to trial.
II. SCOPE AND STANDARDS OF REVIEW.
We review a district court's ruling on a motion for summary judgment for correction of errors at law. Iowa R.App.P. 6.4 ; Phillips v. Covenant Clinic, 625 N.W.2d 714, 717 (Iowa 2001).
A district court properly grants summary judgment when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. A factual issue is "material" only if "the dispute is over facts that might affect the outcome of the suit." The burden is on the party moving for summary judgment to prove the facts are undisputed.
In ruling on a summary judgment motion, the court must look at the facts in a light most favorable to the party resisting the motion. The court must also consider on behalf of the nonmoving party every legitimate inference that can be reasonably deduced from the record. An inference is legitimate if it is "rational, reasonable, and otherwise permissible under the governing substantive law." On the other hand, an inference is not legitimate if it is "based upon speculation or conjecture." If reasonable minds may differ on the resolution of an issue, a genuine issue of material fact exists.
Phillips, 625 N.W.2d at 717-18 (citations omitted).
The party resisting the motion, however, "may not rest upon the mere allegations or denials in the pleadings" but "must set forth specific facts showing that there is a genuine issue for trial." Iowa R.Civ.P. 1.981(5).
The resistance must set forth specific facts which constitute competent evidence showing a prima facie claim. By requiring the resister to go beyond generalities, the basic purpose of summary judgment procedure is achieved: to weed out "[p]aper cases and defenses" in order "to make way for litigation which does have something to it."
Thompson v. City of Des Moines, 564 N.W.2d 839, 841 (Iowa 1997) (quoting Fogel v. Trustees of Iowa College, 446 N.W.2d 451, 454 (Iowa 1989)).
III. MERITS.
On appeal the Heitritters contend the district court's grant of partial summary judgment to Callahan was improper because, as a matter of law, A201/CM was incorporated by reference into the parties' agreement and was thus a part of their agreement.
Under the doctrine of incorporation by reference, one document becomes part of another separate document simply by reference as if the former is fully set out in the latter. Hofmeyer v. Iowa Dist. Court, 640 N.W.2d 225, 228 (Iowa 2001). "Where a writing refers to another document, that other document, or so much of it as is referred to, is to be interpreted as part of the writing." Id. " [C]lear and specific reference is required to incorporate an extrinsic document by reference." Id. (emphasis added) ; Estate of Kokjohn v. Harrington, 531 N.W.2d 99, 101 (Iowa 1995). Whether material is incorporated by reference presents a question of law. Hofmeyer, 640 N.W.2d at 228.
As set forth above, nowhere in the Standard Form Agreement signed by the parties are there any express, written contractor warranties requiring Callahan to perform in a good and workmanlike manner. These written warranties are found only in A201/CM, which was not attached to the agreement, shown to Callahan, or discussed by the parties. The issue here is whether a genuine issue of material fact exists concerning whether the General Conditions set forth in AIA Document A201/CM, 1980, are incorporated by reference into the agreement between the Heitritters and Callahan.
The only place any reference to A201/CM appears in AIA Document A101/CM is on its first, title page. A101/CM there states, "This document is intended to be used in conjunction with AIA Documents A201/CM, 1980; B141/CM, 1980; and B801, 1980 ." The Heitritters rely on this language, arguing it incorporates A201/CM into the parties' agreement by reference. The district court found this phrase did not act to incorporate A201/CM into the agreement and make it part of the contract. The court found,
The document in question [A101/CM] is a form designed to be used by many different people. The sentence under consideration is simply a reminder to users that there are potential documents that should be considered for use in addition to a 101/CM [sic] in light of circumstances of various situations.
In concluding that the agreement executed by the parties did not include the express warranties at issue, the district court further found
It would be inherently unfair to burden [Callahan] with compliance with a 21-page form contract it had never seen, considered or been told about. Article 7, when executed properly, serves to make it clear what other documents the parties are intending to include as a part of the formal agreement. Failure to list AIA Document 201/CM means it isn't part of the contract.
For the reasons that follow we agree with the district court's resolution of this issue.
AIA Document A101/CM is a form agreement, apparently designed to be used by many different persons in many different circumstances. The language relied upon by the Heitritters is merely introductory and instructional. It "informs the user that the American Institute of Architects has created a document that can be used in conjunction with A101/CM to provide general conditions." Atlantic Mut. Ins. Co. v. Metron Eng'g and Constr. Co., 83 F.3d 897, 899 (7th Cir. 1996) (emphasis added).
The language relied upon by the Heitritters appears in a block of language of the first page of A101/CM, a block which sets forth the title of the document, contains language noting the document has legal consequences, and is separated from the rest of the document by horizontal lines. The following, remaining portion of the document is then identified as and thus constitutes the parties "AGREEMENT."
Preliminary recitals of an agreement do not become binding obligations unless so referred to in the operative portion of the instrument as to show a design they should form a part of it. Illinois Housing Dev. Auth. v. M-Z Constr. Corp., 441 N.E.2d 1179, 1189 (Ill. 1982). Similarly, the introductory, instructional language appearing on the first page of the document utilized by the parties in this case does not become part of their "AGREEMENT" which follows unless so referred to in the operative portion as to show an intent it should form a part thereof. No language in the operative portion of A101/CM as executed by the parties incorporates A201/CM by reference, or indicates that either of the parties in fact intended to do so.
Parties using A101/CM are not required to use A201/CM as the parties' general conditions. See Metron, 83 F.3d at 900. Under Article 7 the parties in this case were directed to enumerate any general or other conditions they intended to incorporate into their agreement and they did not list A201/CM or any general, supplementary, or other conditions whatsoever.
"Further, to treat the introductory language as incorporating A201/CM would produce a bizarre result." Id. at 899. The introductory language similarly refers to AIA Documents B141/CM and B801 and, just as with A201/CM, instructs the parties that A101/CM is intended to be used with them. Thus, were we to accept the Heitritters' argument that this introductory language incorporates A201/CM by reference, the same language would of necessity by reference incorporate these other documents into the parties' agreement. However, neither party suggests such an intent or result in this case, nor is there any substantial evidence in the record that would support such an intent or result. We should not read the contract in such a strained manner as to require a result the parties did not and do not intend.
We agree with the district court's conclusion that the language in the parties' agreement does not incorporate by reference A201/CM and its provisions into the parties' agreement because it does not contain a clear and specific reference doing so. We therefore need not and do not address the Heitritters' alternative argument, concerning ambiguity.
IV. CONCLUSION.
Under the authorities cited above the question of incorporation by reference presents a question of law, and a clear and specific reference is required to incorporate one document into another by reference. We agree with the district court that the parties' agreement, A101/CM, does not contain a clear and specific reference incorporating A201/CM. We conclude the district court did not err in determining the Heitritters' warranty claims must be based on implied warranties and are thus barred by the five-year statute of limitations in Iowa Code section 614.1(4). Accordingly, the district court did not err in granting partial summary judgment.