Opinion
No. 0-438 / 00-0024.
Filed August 30, 2000.
Appeal from the Iowa District Court for Dubuque County, K. D. Briner, Judge.
Pleasin' People, Inc. appeals from an adverse judgment in favor of Iowa Oil Co. for unpaid balance of a promissory note. AFFIRMED.
Timothy D. Ament of Gartelos, Wagner Ament, Waterloo, for appellants.
Douglas M. Henry and Norman J. Wangberg of Fuerste, Carew, Coyle, Juergens Sudmeier, P.C., Dubuque, for appellee.
Considered by Huitink, P.J., and Mahan and Zimmer, JJ.
I. Background Facts and Proceedings .
Iowa Oil Company (IOCO) sued Pleasin' People, Inc. (PPI) to recover the balance due on a $32,400 promissory note. PPI's note was part of an agreement under which PPI agreed to sell Citgo brand products purchased from IOCO and display Citgo signs at PPI's Waterloo convenience store. The terms of the promissory note provided:
For value received the undersigned agrees to pay to the order of IOWA OIL COMPANY at its offices located at 100 EAST FIRST ST. in DUBUQUE, IA. any imaging monies and canopy costs if the participant debrands the CITGO/IOCO image within (5) five years from the date of this agreement. Participant will be billed back CITGO image incentive credits earned and/or funding provided according to the following formula:
LESS THAN 1 YEAR 100%
MORE THAN 1 YEAR BUT LESS THAN 2 YEARS 80%
MORE THAN 1 YEAR BUT LESS THAN 3 YEARS 60%
MORE THAN 1 YEAR BUT LESS THAN 4 YEARS 40%
MORE THAN 1 YEAR BUT LESS THAN 5 YEARS 20%
MORE THAN 5 YEARS 0%
The parties agree that PPI's obligation to sell Citgo products and display Citgo signs commenced on February 1, 1996.
The dispute resulting in this litigation arose after PPI removed Citgo signs from its store premises in September 1997 and discontinued sale of Citgo products in April 1998. Under IOCO's interpretation of the terms of the note, PPI was obligated to repay eighty percent of the note because PPI "debranded" the Citgo image more than one year but less than two years after February 1, 1996. PPI initially denied any liability but later conceded its obligation to pay twenty percent because it "debranded" more than one year but less than five years from February 1, 1996.
The district court rejected PPI's interpretation of the note's repayment terms, stating:
The clear meaning of this agreement is that for each year during which the PPI station in Waterloo displays Citgo signs and uses Citgo products, 20 percent of the advance funds will be forgiven. PPI argues that since according to either determination date its period of Citgo/ILLOCO branding was more than one year but less than five years, it should only have to repay 20 percent of the advanced funds. The argument is ingenious but attempts to make of an unfortunately worded promissory note a position which would be both unfair and contrary to reason.
The court also found that the effective date of PPI's "debranding" was September 1997. Based on these findings the district court entered judgment in favor of IOCO for eighty percent of the $32,400 advanced to PPI as required by the repayment formula recited in PPI's promissory note.
On appeal PPI contends the district court's judgment is premised on an erroneous interpretation of the repayment provisions of the promissory note. PPI argues that literal application of the note's repayment formula limits its obligation to no more than twenty percent of the amounts advanced by IOCO. PPI alternatively claims that it "debranded" in April 1998, and according to the court's interpretation of the repayment formula, it only owes IOCO sixty percent of the funds advanced.
II. Scope of Review .
We generally review the construction and interpretation of a contract as a matter of law. We are not bound by the construction or interpretation made by the trial court. Krause v. Krause, 589 N.W.2d 721, 724 (Iowa 1999). However, if the interpretation was predicated upon extrinsic evidence, the findings of the trial court are binding on appeal if supported by substantial evidence. See Connie's Constr. Co. v. Fireman's Fund Ins. Co., 227 N.W.2d 207, 210 (Iowa 1975). In the absence of relevant extrinsic evidence, the resolution of any ambiguity in a written contract is a matter of law for the court. See 17A Am. Jur. 2d Contracts § 339 at 346 (1991). The predicate question, whether an ambiguity exists, is also one of law. Id.
III. The Merits .
The gist of PPI's argument is that the district court's reference to the "unfortunately worded promissory note" was an implicit finding of ambiguity where none existed. As a result, PPI claims the district court resorted to extrinsic evidence of intent rather than established rules of interpretation requiring the court to enforce the repayment formula as written. Spilman v. Board of Directors, 253 N.W.2d 593, 596 (Iowa 1977) (if contract is unambiguous, it will be enforced as written). We disagree.
A cardinal rule of contract construction or interpretation is the intent of the parties must control. Iowa R. App. P. 14(f)(14). The important time frame for determining this intent is the time the contract was executed. Davenport Osteopathic Hosp. Ass'n v. Hospital Serv., Inc., 261 Iowa 247, 260, 154 N.W.2d 153, 161 (1967). If the contract is ambiguous and uncertain, extrinsic evidence can be considered to help determine the intent. However, a contract is not ambiguous merely because the parties disagree over its meaning. Tom Riley Law Firm, P.C. v. Tang, 521 N.W.2d 758, 759 (Iowa App. 1994). Instead, ambiguity occurs in a contract when a genuine uncertainty exists concerning which of two reasonable interpretations is proper. Berryhill v. Hatt, 428 N.W.2d 647, 654 (Iowa 1988).
The existence of an ambiguity, however, can be determined only after all pertinent rules of interpretation have been considered. Id. Rules of interpretation pertinent here include the following:
A contract is interpreted as a whole. Fashion Fabrics of Iowa v. Retail Investors Corp., 266 N.W.2d 22, 27 (Iowa 1978). An interpretation that gives a reasonable, lawful, and effective meaning to all of the contract's terms is preferred to an interpretation that leaves a part unreasonable, unlawful, or of no effect. Iowa Fuel Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859 863 (Iowa 1991). Doubtful language will be construed against the party who selected it. Id.
Application of the foregoing rules of interpretation leaves no uncertainty concerning the parties' intent expressed in the promissory note's repayment formula. When the terms of this provision are considered in their entirety, it is clear the repayment formula provided for an annual twenty-percent declining principal balance over a five-year period. To conclude otherwise requires the term upon which PPI relies to be read to the exclusion of the remaining terms of the repayment formula. We, like the district court, reject PPI's interpretation of the repayment formula limiting its liability to twenty percent of IOCO's $32,400 cash advance.
Resolution of PPI's alternative claim turned on the district court's interpretation of the word "debrands" as used in the context of the parties' agreement. The district court's determination that PPI "debranded" in September 1997 was based on the implicit finding that "debrands" meant removal of Citgo signs from its premises. PPI contends this interpretation is erroneous because it fails to accommodate PPI's continued sale of Citgo products until April 1998.
There is no indication in the record or elsewhere that the term "debrands" has an ordinary meaning outside of the context of PPI's promissory note. In the absence of an ordinary meaning "debrands" is a technical term that should be given its technical meaning within the context of its use. See Schneider Leasing, Inc. v. U.S. Aviation Underwriters, 555 N.W.2d 838, 841 (Iowa 1996). In determining the technical meaning of a contract term, "it is appropriate to consider extrinsic evidence of its meaning within the context it is used." Id. Both parties offered testimony of this term's meaning in the fuel industry. The district court resolved conflicts in the evidence relevant to this determination against PPI. We are bound by these factual findings if they are supported by substantial evidence. Id.
Our review of the record discloses substantial evidence supporting the district court's findings of fact. This evidence includes PPI's removal of Citgo signs in September 1997, management's expressed intention to "debrand" in September 1997, and testimony concerning the meaning of "debrands" in the fuel business. We accordingly affirm on this issue.
AFFIRMED.