IN THE SUPREME COURT OF IOWA No. 05 / 06–1002
Filed July 11, 2008
THE PILLSBURY COMPANY INC.,
Appellant,
vs.
WELLS DAIRY, INC.,
Appellee.
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WELLS DAIRY, INC., Third-Party Plaintiff,
AMERICAN INDUSTRIAL REFRIGERATION, INC. and REFRIGERATION VALVES and SYSTEMS CORPORATION, Third-Party Defendants.
Appeal from the Iowa District Court for Plymouth County, James
D. Scott, Judge.
Appellant appeals the district court’s granting of appellee’s motions
for summary judgment. REVERSED AND CASE REMANDED.
Mark McCormick and Margaret C. Callahan of Belin Lamson
McCormick Zumbach Flynn, P.C., Des Moines, William J. Cremer,
Edmund J. Siegert, and Bradley M. Burd of Cremer, Kopon,
Shaughnessy & Spina, LLC, Chicago, Illinois, and Daniel L. Hartnett and 2
Marci L. Iseminger of Crary, Huff, Inkster, Sheehan, Ringgenberg,
Hartnett & Storm, P.C., Sioux City, for appellant.
Juli Wilson Marshall, Mary Rose Alexander, Thomas J. Heiden,
André M. Geverola, and Matthew J. Johnson of Latham & Watkins, LLP,
Chicago, Illinois, Richard H. Moeller of Berenstein, Moore, Berenstein,
Heffernan & Moeller, L.L.P., Sioux City, and Bruce Johnson of Cutler Law Firm, P.C., West Des Moines, for appellee. 3
WIGGINS, Justice.
The Pillsbury Company, Inc. appeals a district court ruling
granting Wells Dairy Inc.’s motion for summary judgment dismissing
Pillsbury’s action on the grounds that Pillsbury was not the real party in
interest and the force-majeure clause in the parties’ production contract
relieved Wells of performance. On our review of the record, we find that
genuine issues of material fact exist as to whether Pillsbury is the real party in interest and that as a matter of law, under the production
contract a force-majeure event must be beyond the reasonable control of
Wells. Therefore, we reverse the district court judgment in favor of Wells
and remand the case for further proceedings.
I. Background Facts and Proceedings.
On or about January 28, 1999, Pillsbury entered into a production
contract with Wells for the production of Häagen-Dazs ice cream. On
March 27 there was an explosion at Wells’ south ice cream
manufacturing facility in Le Mars. On August 18 Pillsbury entered into a
Contribution and Assumption Agreement with Nestlé-USA Food Group,
Inc. to form a joint venture called Ice Cream Partners USA, LLC (ICP).
This agreement reflected the parties’ intention to combine Nestlé’s ice cream division assets and Pillsbury’s Häagen-Dazs division assets.
Pillsbury sent Wells a notice of assignment on October 20. In the notice,
Pillsbury informed Wells that
the assignment is not, nor shall it be deemed to be, a waiver, release, or renunciation by Pillsbury, or by any of its agents or assignees, of any claims, rights or remedies of Pillsbury relating in any way to the explosion that occurred at the Wells facility in Le Mars, Iowa in March 1999 and all subsequent events . . . .
On July 17, 2000, Pillsbury filed a two-count petition against Wells
in federal court under the name of its parent company, Diageo, PLC, 4
requesting damages resulting from the explosion on theories of breach of
contract and negligence. On August 30 Pillsbury filed an amended
petition substituting itself as the plaintiff.
Wells filed an action in state court against various entities involved
in the design and installation of its refrigeration system implicated in the
explosion. Pillsbury agreed to voluntarily dismiss its federal suit so it
could consolidate its action with Wells’ pending state court action against the manufacturers of Wells’ refrigeration system. On August 8, 2002,
Pillsbury filed its two-count petition against Wells in state court alleging
its breach of contract and negligence claims. On October 14 Wells
answered Pillsbury’s state court petition and raised the “force-majeure”
clause of the production contract as an affirmative defense.
In December 2001 Nestlé acquired the fifty percent interest in ICP
originally owned by Pillsbury and renamed the former joint venture
NICC. In an agreement between Nestlé and Dreyer’s Grand Ice Cream,
Dreyer’s acquired the assets relinquished by Pillsbury under the 1999
contribution agreement that formed ICP with Nestlé.
Over the course of the proceedings, the district court ruled on
three motions for summary judgment. On May 29, 2003, Wells filed its first motion for summary judgment arguing the force-majeure clause
contained in the 1999 production contract between Wells and Pillsbury
excused Wells’ inability to perform. In ruling on this motion the court
held the force-majeure clause was susceptible to more than one
interpretation and ordered the discovery of extrinsic evidence on the
issue.
After the parties completed their discovery on the issue, Wells filed
a second motion for summary judgment. Again, Wells argued the force-
majeure clause excused Wells’ inability to perform. Finally, Wells filed a 5
third motion for summary judgment arguing Pillsbury had no standing to
assert its claims against Wells because it had assigned its interest in the
cause of action to ICP.
The court found the force-majeure clause relieved Wells from
performing under the production contract and sustained Wells’ second
motion for summary judgment on this ground. The district court
dropped Wells’ standing argument and treated it as an argument that Pillsbury was not the real party in interest to pursue the action against
Wells. The district court sustained Wells’ motion by holding Pillsbury
was not the real party in interest because it had assigned its interest in
the cause of action against Wells to ICP. Accordingly, the district court
gave Pillsbury two weeks to join or substitute the real party in interest or
the court would dismiss the lawsuit.
Pillsbury attempted to comply with the court’s order by
substituting Zurich, its insurer, as the plaintiff. Wells resisted the
attempt to allow Zurich to proceed with the action. The court sustained
Wells’ resistance, dismissed the action, and entered judgment in favor of
Wells.
Pillsbury appeals. We will set out additional facts as they relate to the issues.
II. Issues.
In this appeal, we must decide if the district court correctly
determined Pillsbury is not a proper party to the action and if the force-
majeure clause of the Wells/Pillsbury production contract relieved Wells
from performing under the contract.
III. Scope of Review.
We review a district court’s ruling on a motion for summary
judgment for correction of errors at law. Kragnes v. City of Des Moines, 6
714 N.W.2d 632, 637 (Iowa 2006). Summary judgment is appropriate
only if the record shows there is no genuine issue of material fact and the
moving party is entitled to a judgment as a matter of law. Iowa R. Civ. P.
1.981. The appellate court’s review is therefore limited to whether a
genuine issue of material fact exists and whether the district court
correctly applied the law. City of Cedar Rapids v. James Props., Inc., 701
N.W.2d 673, 675 (Iowa 2005). The burden of showing the nonexistence of a material fact is upon
the moving party. Clinkscales v. Nelson Sec. Inc., 697 N.W.2d 836, 841
(Iowa 2005). Every legitimate inference that can be reasonably deduced
from the evidence should be afforded to the nonmoving party, and a fact
question is generated if reasonable minds can differ on how the issue
should be resolved. Kragnes, 714 N.W.2d at 637.
IV. Proper Party.
A. Real Party in Interest Versus Standing. Wells’ motion for
summary judgment claimed Pillsbury had no standing to assert its
claims against Wells because it had assigned its interest in the cause of
action to ICP. The district court analyzed the issue as one of real party
in interest. A party who has standing and the real party in interest are not one in the same.
Our court has not commented on the difference between standing
and real party in interest, but several other courts have. For instance,
the Supreme Court of Alabama explained the difference as follows:
We use the term “real party in interest,” rather than “standing,” for a reason. Although both parties and the trial court have blurred the issue by referring to [the plaintiff’s] “standing,” the question whether a party has standing to sue is distinct from whether he or she is the real party in interest. While the real-party-in-interest principle directs attention to whether the plaintiff has a significant interest in the particular action he or she has instituted, standing requires 7 that the person demonstrate an injury to a legally protected right. Here, [the plaintiff] has standing to sue because [the defendant’s] alleged breach of contract injured her, not the bankruptcy trustee.
Ex Parte Sterilite Corp. of Alabama v. Sterilite Corp. of Alabama, 837
So. 2d 815, 818–19 (Ala. 2002) (internal citations omitted) (emphasis in
original). In Sterilite, the court never reached the issue of whether the
plaintiff was the real party in interest because the defendant failed to
object on those grounds. Id. at 819. However, in other cases, courts
have held that simply because a party has standing, does not mean he or
she is the real party in interest and vice versa. See, e.g., Hammes v.
Brumley, 659 N.E.2d 1021, 1029–30 (Ind. 1995).
In Hammes, the Indiana Supreme Court explained the difference
between standing and real party in interest as follows:
Standing refers to the question of whether a party has an actual demonstrable injury for purposes of a lawsuit. . . .
“In order to invoke a court’s jurisdiction, a plaintiff must demonstrate a personal stake in the outcome of the lawsuit and must show that he or she has sustained or was in immediate danger of sustaining, some direct injury as a result of the conduct at issue.”
A real party in interest, on the other hand, is the person who is the true owner of the right sought to be enforced.
Id. (quoting Higgins v. Hale, 476 N.E.2d 95, 101 (Ind. 1985). The court
went on to hold that the bankrupt parties were not the real parties in
interest, rather the trustees of their respective bankruptcy estates were.
Id. at 1030. However, even though the parties were not the real parties
in interest, they still had standing to sue because they suffered a
demonstrable injury allegedly caused by the parties they were suing. Id.
Because the parties had standing to sue, but were not the real parties in
interest, the court found the bankrupt parties should be allowed to 8
amend their petition to include the bankruptcy trustees, who were the
real parties in interest, and the amended petition should relate back to
the original filing date. Id.
When there is an effective assignment, “the assignee assumes the
rights, remedies, and benefits of the assignor,” Red Giant Oil Co. v.
Lawlor, 528 N.W.2d 524, 533 (Iowa 1995), and the assignment transfers
the “entire rights under a contract from the assignor to the assignee so that the assignee assumes not only the benefits of the contract, but also
the rights and remedies,” Ross v. First Savings Bank of Arlington, 675
N.W.2d 812, 817 (Iowa 2004) (emphasis added). Our rules require
“[e]very action must be prosecuted in the name of the real party in
interest.” Iowa R. Civ. P. 1.201. Therefore, the district court was correct
to analyze the motion as a real party in interest question rather than a
standing question because Wells claims Pillsbury assigned this cause of
action to ICP and no longer owned it.
B. Choice of Law. The parties cite only Iowa law on the issue of
whether Pillsbury was the proper party to maintain this action. We will
not disagree with the parties that Iowa law applies in this case to
determine who may and must be the proper party to bring the claim. See Restatement (Second) of Conflicts § 125 (1971) (stating “[t]he local
law of the forum determines who may and who must be parties to a
proceeding unless the substantial rights and duties of the parties would
be affected by the determination of this issue”).
Wells argues Pillsbury is not a proper party because it assigned its
rights to this cause of action to ICP in the Contribution and Assumption
Agreement. Thus, the determination as to whether Pillsbury was a
proper party requires us to interpret the Contribution and Assumption
Agreement. The choice of law provision in the Contribution and 9
Assumption Agreement provides the laws of the state of New York shall
govern the interpretation of the agreement. However, neither party has
pled or proved New York law on this issue. Accordingly, we will assume
New York law is the same as Iowa law, and we will apply Iowa law to the
interpretation of the Contribution and Assumption Agreement. EFCO
Corp. v. Norman Highway Constructors, Inc., 606 N.W.2d 297, 300 (Iowa
2000). C. Contract Interpretation—Iowa Law. In deciding the issues
before us, we are required to apply the principles of contract
interpretation, rather than contract construction. Interpretation is the
process for determining the meaning of the words used by the parties in
a contract. Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp., 266
N.W.2d 22, 25 (Iowa 1978). Interpretation of a contract is a legal issue
unless the interpretation of the contract depends on extrinsic evidence.
Id. On the other hand, construction of a contract is the process a court
uses to determine the legal effect of the words used. Id. We always
review the construction of a contract as a legal issue. Id.
The cardinal rule of contract interpretation is to determine what
the intent of the parties was at the time they entered into the contract. Walsh v. Nelson, 622 N.W.2d 499, 503 (Iowa 2001). “Words and other
conduct are interpreted in the light of all the circumstances, and if the
principal purpose of the parties is ascertainable it is given great weight.”
Fausel v. JRJ Enters., Inc., 603 N.W.2d 612, 618 (Iowa 1999) (quoting
Restatement (Second) of Contracts § 202(1) (1979)). Another relevant
rule of contract interpretation requires that “[w]herever reasonable, the
manifestations of intention of the parties to a promise or agreement
are interpreted as consistent with each other and with any relevant 10
course of performance, course of dealing, or usage of trade.”
Restatement (Second) of Contracts § 202(5) (1979).
These rules of interpretation are general in character and only
serve as guides in the process of interpretation. Restatement (Second) of
Contracts § 202 cmt. a (1979). The rules do not depend on a
determination that there is an ambiguity, but we use them to determine
“what meanings are reasonably possible as well as in choosing among possible meanings.” Fausel, 603 N.W.2d at 618 (quoting Restatement
(Second) of Contracts § 202 cmt. a (1979)).
Long ago we abandoned the rule that extrinsic evidence cannot
change the plain meaning of a contract. Hamilton v. Wosepka, 261 Iowa
299, 313, 154 N.W.2d 164, 171–72 (1967). We now recognize the rule in
the Restatement (Second) of Contracts that states the meaning of a
contract “can almost never be plain except in a context.” Id.;
Restatement (Second) of Contracts § 212 cmt. b (1979). Accordingly,
“[a]ny determination of meaning or ambiguity should only be made in the light of relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties. But after the transaction has been shown in all its length and breadth, the words of an integrated agreement remain the most important evidence of intention.”
Fausel, 603 N.W.2d at 618 (quoting Restatement (Second) of Contracts
§ 212 cmt. b (1979)) (emphasis in original).
In other words, although we allow extrinsic evidence to aid in the
process of interpretation, the words of the agreement are still the most
important evidence of the party’s intentions at the time they entered into
the contract. When the interpretation of a contract depends on the
credibility of extrinsic evidence or on a choice among reasonable 11
inferences that can be drawn from the extrinsic evidence, the question of
interpretation is determined by the finder of fact.
D. Analysis. We must analyze the relevant portions of the
Contribution and Assumption Agreement that formed ICP to determine
whether Wells properly asserts Pillsbury is not a proper party because
Pillsbury assigned its interest in this action to ICP. Applying the
principles of interpretation to the relevant provisions of the contract, we are convinced a genuine issue of material fact exists as to whether
Pillsbury assigned its interest in this action and therefore, whether it is
the real party in interest. The language used by the parties to the
Contribution and Assumption Agreement is unclear as to whether the
cause of action relating to the explosion at Wells was assigned; thus, a
reasonable juror could find the intent of the agreement was not to assign
the present cause of action to ICP.
Paragraph 2.01(b) of the agreement purports to transfer the assets
of Pillsbury’s Häagen-Dazs business to ICP by providing:
(b) Pillsbury shall convey, transfer, assign and deliver to the Joint Venture on the Closing Date, and the Joint Venture shall accept from Pillsbury, free and clear of all Liens, other than Permitted Liens, all of Pillsbury’s (or, if applicable, its Affiliates’) right, title and interest in the assets used or reserved for use in the operation of the Häagen-Dazs Business, except to the extent included in the Excluded Pillsbury Assets (collectively, the “Häagen-Dazs Assets” and, together with the Nestlé Ice Cream Division Assets, the “Contributed Assets”), including, without limitation, all of Pillsbury’s (or, if applicable, its Affiliates’) right, title and interest in the following assets that are used or reserved for use in the Häagen-Dazs Business.
Three separate paragraphs purport to assign the Häagen-Dazs contracts,
the causes of action relating to insurance coverage, and the causes of
action relating to the Häagen-Dazs business. Paragraph 2.01(b)(2)
purports to assign the Häagen-Dazs contracts to ICP. 12
Paragraph 2.01(b)(8) purports to assign the causes of action
against third parties relating to insurance coverage involving the Häagen-
Dazs business by providing:
(8) All of Pillsbury’s rights, claims, credits, causes of action or rights of setoff against third parties relating to insurance coverage covering the Häagen-Dazs Business with respect to events occurring or claims arising prior to the Closing Date, but only to the extent such coverage and any proceeds therefrom covers (i) any of the Assumed Liabilities, (ii) any pre-Closing liabilities or obligations of the Häagen-Dazs Business to which the Joint Venture becomes subject notwithstanding the provisions of this Agreement, and (iii) subject to Section 9.07, lost profits claimed (which claim shall not duplicate or be inconsistent with the insurance claim made by Pillsbury prior to the date hereof relating to the Wells Facility Disruption (which, as of the date hereof, seeks recovery for increased costs and lost profits for pre-Closing periods and future marketing and promotional expenses in lieu of amounts that could be available as recovery for lost profits with respect to post-Closing periods)) after the Closing Date relating to any period beginning after the Closing in connection with the Wells’ Facility Disruption.
Paragraph 2.01(b)(9) of the agreement purports to assign all causes
of action relating to the Häagen-Dazs business except those that related
to the excluded Pillsbury assets or the excluded Pillsbury liabilities by
providing:
(9) All of Pillsbury’s rights, claims, credits, causes of action or rights of setoff against third parties relating to the Häagen-Dazs Business, whether liquidated or unliquidated, fixed or contingent, including claims pursuant to all warranties, representations and guaranties made by suppliers, manufacturers, contractors and other third parties in connection with products or services purchased by or furnished to Pillsbury in connection with the Häagen-Dazs Business and affecting any of the Häagen-Dazs Assets, but excluding any such rights, claims, credits, causes of action or rights of setoff to the extent they relate to the Excluded Pillsbury Assets or the Pillsbury Excluded Liabilities. 13
The excluded assets mentioned in paragraph 2.01(b)(9) that are
relevant to this appeal are found in paragraph 2.02(b) of the agreement.
That paragraph provides:
Pillsbury and its Affiliates shall not contribute any of its right, title or interest in . . . (xiv) all of Pillsbury’s rights, claims, credits, causes of action or rights of setoff against third parties relating to insurance coverage covering the Häagen-Dazs Business with respect to events occurring or claims arising prior to the Closing Date (including, without limitation, the Wells Facility Disruption and the insurance receivables relating thereto), except to the extent included in the Häagen-Dazs Assets pursuant to Section 2.01(b)(8). . . .
Paragraph 2.02(b)(xiv) excluded all of Pillsbury’s causes of action
against third parties relating to insurance coverage of the Häagen-Dazs
business with respect to the events occurring or claims arising prior to
the closing date. This paragraph explicitly states: “including, without
limitation, the Wells Facility Disruption and the insurance receivables
relating thereto.” A reasonable jury could find this limitation was
intended to exclude two separate items—the claim against Wells for the
facility disruption and the insurance receivables related to the facility
disruptions.
Further evidence contained in the Contribution and Assumption Agreement that would allow a jury to find the agreement treated the
cause of action relating to the Wells facility disruption separately from
the Häagen-Dazs contracts assigned in paragraph 2.01(b)(2) can be
found in the notes to the financial statement attached to the agreement.
The financial statement purports to list the value of the assets and
liabilities contributed by Pillsbury to ICP. Note seven of the statement
provides: 14 (7) Miscellaneous Income
Miscellaneous income includes . . . accrued insurance refund for lost sales through June 30, 1999, resulting from the Wells Facility Disruption as described in the Agreements. In accordance with the Agreements, the Statement of Current Assets and Current Liabilities excludes all current assets and current liabilities related to the Wells’ Facility Disruption.
A jury could interpret note seven to mean the Wells facility disruption
claim is to be treated differently than any other asset being assigned to
ICP. Thus, the language contained in the Contribution and Assumption
Agreement is not clear as to whether Pillsbury intended to assign its
cause of action against Wells to ICP.
Finally, the course of dealings of the parties to the Contribution
and Assumption Agreement could also allow a reasonable jury to find
Pillsbury did not intend to assign the present cause of action to ICP.
Shortly after Pillsbury entered into the Contribution and Assumption
Agreement it gave notice to Wells that it assigned all its interest in the
production contract between them to ICP. Pillsbury also gave this notice
to Nestlé, the other party to the agreement, and to ICP, the entity created
by the agreement. In that notice Pillsbury stated it was not assigning
“any claims, rights or remedies of Pillsbury relating in any way to the
explosion that occurred at the Wells facility in Le Mars, Iowa in March
1999.” See Miller v. Geerlings, 256 Iowa 569, 579, 128 N.W.2d 207, 213
(1964) (holding the court will adopt the practical construction placed
upon a contract by the parties); see also Restatement (Second) of
Contracts § 212 cmt. b. (1979) (stating relevant evidence includes the
course of dealings between the parties).
Therefore, when viewing the evidence in a light most favorable to
the nonmoving party, we find a genuine issue of material fact exists as to
whether Pillsbury assigned its interest in the present action to ICP. 15
V. Force Majeure.
A. Choice of Law. The production contract between Wells and
Pillsbury states, “[t]his Agreement and all actions relating hereto will be
governed by the laws of the State of Minnesota.” The parties agree that
Minnesota law applies to the interpretation of the force-majeure clause in
the production contract. They argued this issue as though they pled and
proved Minnesota law. The district court in its ruling cited Minnesota law to decide this issue. On appeal, the parties argue this issue by
relying on Minnesota law. Therefore, we will apply Minnesota law to the
interpretation of the force-majeure clause contained in the production
contract.
B. Contract Interpretation—Minnesota Law. Interpreting a
contract under Minnesota law requires the court to determine and
enforce the intent of the parties. Motorsports Racing Plus, Inc., v. Arctic
Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003). When interpreting a
written contract, the court determines the intent of the parties from the
plain language of the instrument itself. Metro. Sports Facilities Comm’n v.
General Mills Inc., 470 N.W.2d 118, 123 (Minn. 1991). When a
contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction. Telex Corp.
v. Data Prods. Corp., 135 N.W.2d 681, 686–87 (Minn. 1965); Anderson v.
Twin City Rapid Transit Co., 84 N.W.2d 593, 601 (Minn. 1957); Grimes v.
Toensing, 277 N.W. 236, 238 (Minn. 1938).
Whether a contract is ambiguous is a question of law to be
determined by the court. Noreen v. Park Constr. Co., 96 N.W.2d 33, 36
(Minn. 1959). A contract that is reasonably susceptible to more than one
interpretation is ambiguous. Employers Liab. Assurance Corp. v. Morse,
111 N.W.2d 620, 624 (Minn. 1961). If the court finds that no ambiguity 16
exists, contract interpretation and its legal effect are questions of law for
the court. Bell Lumber Co. v. Seaman, 161 N.W. 383, 384–85 (Minn.
1917). However, where the language is ambiguous, extrinsic evidence
may be used to aid in the interpretation of the contract. Blattner v.
Forster, 322 N.W.2d 319, 321 (Minn. 1982). In doing so, the court looks
to the circumstances surrounding the making of the contract and to the
parties’ own subsequent interpretation of the agreement. Fredrich v. Indep. Sch. Dist. No. 720, 465 N.W.2d 692, 695 (Minn. Ct. App. 1991).
This extrinsic evidence can be gleaned from the parties’ course of
dealings to aid in the interpretation of the contract. Anoka-Hennepin
Educ. Ass’n v. Anoka-Hennepin Indep. Sch. Dist. No. 11, 305 N.W.2d 326,
330 (Minn. 1981). If extrinsic evidence is used, the interpretation of the
contract is a question of fact for the jury unless such evidence is
conclusive. Donnay v. Boulware, 144 N.W.2d 711, 716 (Minn. 1966).
C. The Force-Majeure Clause. The production contract between
Wells and Pillsbury contained a force-majeure clause. The language of
the clause relevant to this appeal states:
FORCE MAJEURE: Neither party will be liable for delays or suspension of performance (other than the obligation to pay for services and goods sold and delivered) caused by acts of God or governmental authority, strikes, accidents, explosions, floods, fires or the total loss of manufacturing facilities or any other cause that is beyond the reasonable control of that party (“Force Majeure”) so long as that party has used its best efforts to perform despite such Force Majeure.
D. Analysis. The district court found that the force-majeure
clause is ambiguous because it is reasonably susceptible to more than
one interpretation. It concluded the placement of the phrase “that is
beyond the reasonable control of that party” creates the ambiguity. The
district court held one reasonable interpretation of the force-majeure 17
clause is that this phrase modifies “acts of God or governmental
authority, strikes, accidents, explosions, floods, fires or the total loss of
manufacturing facilities or any other cause.” Under this interpretation,
the explosion and fire at the south ice cream manufacturing facility
would not excuse Wells’ nonperformance under the contract if the
explosion and fire were not beyond the reasonable control of Wells.
The district court found another reasonable interpretation of the force-majeure clause is that this phrase only applies to “any other
cause.” Under this interpretation, the explosion and fire at the south ice
cream manufacturing facility excuse Wells’ performance under the
contract even if the explosion and fire were within the reasonable control
of Wells.
The determination of whether the language of a contract is
ambiguous is ordinarily one of law for the court. Noreen, 96 N.W.2d at
36. We understand how the district court came to the conclusion that
the placement of the phrase “that is beyond the reasonable control of
that party,” can make the force-majeure clause reasonably susceptible to
two meanings, if the district court examined the force-majeure clause out
of context with the entire agreement. However, when a court is required to make a determination of whether a clause is ambiguous, the words
and phrases of sentences cannot be read in isolation. Metro Office Parks
Co. v. Control Data Corp., 205 N.W.2d 121, 124 (Minn. 1973). The
determination of whether “an agreement is ambiguous must be reached
through a process of synthesis in which words, phrases, and sentences
are assigned a meaning in accordance with the apparent purpose of the
agreement as a whole.” Id.
Applying these principals to the force-majeure clause, we disagree
with the district court and find the force-majeure clause is not 18
ambiguous. “Force majeure” is “an event that can be neither anticipated
nor controlled.” Black’s Law Dictionary 657 (7th ed. 1999). A “force-
majeure clause” is a clause “allocating the risk if performance becomes
impossible or impracticable as a result of an event or effect that the
parties could not have anticipated or controlled.” Id. A force-majeure
clause is not intended to shield a party from the normal risks associated
with an agreement. 30 Richard A. Lord, Williston on Contracts § 77:6, at 299 (4th ed. 2004).
Wells claims the parties to the contract did not intend the force-
majeure clause to have its common meaning; thus, Wells is relieved from
performing even if a strike, accident, explosion, flood, fire or the total loss
of the manufacturing facilities was caused by an event within its control.
Had the parties meant to change the common meaning of the force-
majeure clause, the parties should have had a discussion or negotiations
regarding the definition of a force-majeure event. See, e.g.,
Commonwealth Edison Co. v. Allied-Gen. Nuclear Servs., 731 F. Supp.
850, 855−56 (N.D. Ill. 1990) (finding that because the parties “deal[t]
with the question of regulatory force majeure with considerable
specificity . . . it is the contract, rather than a body of judicial doctrine, [the court] must interpret”). The record is clear that when the parties
entered into the 1999 production contract they did not negotiate what
would constitute a force-majeure event. The only discussion between the
parties involved what would be the obligations of the parties if a force-
majeure event occurred. Therefore, in light of the lack of discussion
between the parties concerning the meaning of the force majeure clause,
Wells’ claim that the common-law meaning of the force majeure clause
does not apply is an unreasonable interpretation of the contract. See,
e.g., Watson Labs., Inc. v. Rhône-Poulenc Rorer, Inc., 178 F. Supp. 2d 19
1099, 1110 (C.D. Cal. 2001) (stating if there is no evidence that the force
majeure events were specifically negotiated by the parties, the common
law meaning of force majeure is read into the contract).
In addition, Wells’ interpretation of the force-majeure clause is not
reasonable in light of the purpose of the contract. The purpose of the
contract was for Wells to provide Pillsbury with a specific amount of
product in a defined period of time. When the contract is read in its entirety, the obligations of each party are described in detail. There is
nothing in the language used by the parties, which describes each
party’s various obligations, that indicates a party’s negligence would
excuse nonperformance of a specific obligation. Moreover, an agreement
excusing a party’s performance due to that party’s negligence defeats the
purpose of having an agreement requiring specific performance within a
specified period of time.
Wells’ interpretation of the force majeure clause is inconsistent
with the absence of any discussions between the parties indicating the
common understanding of a force-majeure clause was not intended by
the parties and with the purpose of a production contract that requires
specific performance to be completed in a specified period. Therefore, the contract is not reasonably susceptible to more than one interpretation.
Accordingly, as a matter of law we find the phrase “that is beyond
the reasonable control of that party” modifies all the events enumerated
by the parties in the force-majeure clause. Consequently, we find that
Wells is not entitled to summary judgment based on the force-majeure
clause, and we reverse the district court’s ruling on this issue.
Although our ruling on the force-majeure clause is the law of the
case, we will not consider whether Pillsbury is entitled to judgment on
this issue because it did not move for summary judgment. See United 20
Fire & Cas. Co. v. Iowa Dist. Ct., 612 N.W.2d 101, 103 (Iowa 2000)
(holding “an appellate decision becomes the law of the case and is
controlling on both the trial court and on any further appeals in the
same case”); see also In re Estate of Campbell, 253 N.W.2d 906, 908
(Iowa 1977) (holding summary judgment may only be entered “for one
who has filed a motion asking that relief and only after notice and
hearing on that motion”). VI. Disposition.
We remand the case to the district court for further proceedings
because we find the district court improperly granted Wells’ motions for
summary judgment.
REVERSED AND CASE REMANDED.
All justices concur except Hecht and Baker, JJ., who take no part.