Title: Atlantic Veneer Corporation v. Sears
Citation: 232 N.W.2d 499
Docket Number: 56991
State: Iowa
Issuer: Iowa Supreme Court
Date: August 29, 1975

232 N.W.2d 499 (1975) ATLANTIC VENEER CORPORATION, Appellee, v. Carroll SEARS and Lois M. Sears, Appellants. No. 56991. Supreme Court of Iowa. August 29, 1975. *501 Charles L. Elson, Leon, for appellants. Elton A. Johnston, of Johnston &amp; Miles, Corydon, for appellee. Heard by MOORE, C. J., and MASON, RAWLINGS, LeGRAND and McCORMICK, JJ. RAWLINGS, Justice. Action by plaintiff, Atlantic Veneer Corporation, resulted in judgment on promissory note against defendant, Carroll Sears, and he appeals. We affirm. Plaintiff Atlantic is a North Carolina corporation engaged in manufacture of wood products. Defendant Sears was at all times here concerned in the log-buying business. March 6, 1965, these parties entered into a written agreement whereby plaintiff agreed to make available to defendant a revolving fund of working capital by which the latter could effect log purchases. As a part of this agreement Atlantic was permitted to repurchase logs from Sears at a price favorable to both. This 1965 contract specifically required each party to render, at least once every 30 business days, a strict accounting of debits and credits. Throughout the following years the parties engaged in some buy and sell dealings not contemplated by their contract. More specifically, in some instances, "cost plus" transactions were consummated under which defendant would be reimbursed the purchase price of logs secured for plaintiff and additionally receive a commission plus expenses. November 3, 1970, defendant executed and delivered to plaintiff a promissory note for $54,299.06, payable on demand. Sometime thereafter there were further log buying ventures which, in effect, reduced defendant's indebtedness to $47,743.76. July 7, 1971, plaintiff commenced the instant action for recovery of the last above stated balance owing on the note. In answer to plaintiff's petition defendant alleged the note was procured by fraud and that there was no consideration for same because plaintiff had not regularly accounted to defendant in accord with the March 1965 contract. By counterclaim defendant also requested an accounting as to transactions between the parties and judgment for any balance resultantly found due to defendant. By answer thereto plaintiff alleged it had made timely accountings and settlement between the parties had been effected by virtue of the aforesaid note. Additionally, during trial, with leave of court granted, plaintiff amended its answer to defendant's counterclaim thereby alleging the November note had been executed by defendant and delivered to plaintiff in full settlement of all accounts between the parties and defendant was estopped to have benefit of an accounting. Evidence in accord with defendant's request for an accounting was introduced in full. After introduction of all testimony trial court granted plaintiff judgment against defendant for $47,743.76. In so doing the court found defendant had failed to prove plaintiff had either (1) fraudulently induced him to execute the note or (2) failed to periodically supply a debit and credit accounting in accord with the original agreement. In support of a reversal defendant asserts five issues. Reduced to bare essentials he thereby contends trial court erred in (1) holding plaintiff did not fraudulently induce *502 defendant to give the November 3, 1970 note; (2) allowing plaintiff's in-course-of-trial amendment of its answer to defendant's counterclaim thereby alleging final settlement and estoppel; (3) holding the note was a final settlement of all preexisting obligations between the parties. I. Before entertaining defendant's contentions we first consider our scope of review. Generally, an action on contract is treated as one at law. See Brammer v. Allied Mutual Insurance Company, 182 N.W.2d 169, 172 (Iowa 1970). Conversely, accounting issues are usually deemed to stand in equity. See Engel v. Vernon, 215 N.W.2d 506, 512 (Iowa 1974); 1 Am.Jur.2d, Accounts and Accounting, § 44; 1 C.J.S. Accounting § 14. As above stated, plaintiff commenced an action at law for recovery on the November 1970 note. By counterclaim, however, defendant sought an accounting. Apparently trial court proceeded on the premise this issue was determinable in equity, albeit validity of the contract must be resolved at law. See generally 27 Iowa L.Rev. 451 (1942). All issues, legal and equitable, were tried to the court. Further in this regard, we have repeatedly held a cause is reviewed as tried below. See In re Estate of Dallman, 228 N.W.2d 187, 189 (Iowa 1975); Davis v. Hansen, 224 N.W.2d 4, 5 (Iowa 1974). Therefore, our review on the question as to validity of the contract is governed by this well established rule in the case of In re Estate of Dallman, supra: On the other hand, as to trial court's disposition of the accounting issue, our review is de novo. See Engel v. Vernon, cited above. And as this court said in Ontjes v. McNider, 224 Iowa 115, 120, 275 N.W. 328, 331 (1937): II. As heretofore noted, it is initially contended trial court erroneously found defendant was not fraudulently induced to execute the above mentioned note. This claim is apparently premised upon certain entries in plaintiff corporation's books. Defendant's Exhibit A is a copy of a ledger account maintained by plaintiff. Debit and credit entries therein reflect transactions between the parties commencing January 31, 1965. As of June 30, 1969, defendant owed plaintiff a balance of $52,311.21. A subsequent entry, again dated June 30, 1969, discloses defendant's account was credited by a $26,111.21 write-off. This facially reduced to $26,200 defendant's stated balance. Further additions and subtractions by way of debit and credit entries to defendant's June 30, 1969 account of $26,200 resulted in a balance of $31,187.85. Plaintiff later redebited defendant's account in the amount of the previous June 30, 1969, $26,111.21 write-off. This redebit, when added to defendant's previously noted balance of $31,187.85, made a total of $57,299.06 owing to plaintiff. As stated, defendant executed a note payable to plaintiff for such sum, being the balance then shown on plaintiff's ledger. In an attempt to defeat recovery thereon, defendant contends plaintiff was obligated to inform him of the June 30, 1969 write-off before he signed the November note and failure to do so resulted in fraudulently inducing him to execute the instrument for a greater sum than was owing. *503 The essential elements of fraud are set forth in Phoenix v. Stevens, 256 Iowa 432, 436, 127 N.W.2d 640 (1964), and need not be here repeated. Moreover, the burden was upon defendant to establish every element of such defense asserted by him. See Phoenix v. Stevens, supra; Lamasters v. Springer, 251 Iowa 69, 73, 99 N.W.2d 300 (1959). There is no need to dwell at length on defendant's instant assignment. Our examination of the record fails to disclose defendant was in any manner deceived or injured by the aforesaid write-off and redebit. In fact, this book transaction was merely an intercorporate entry effected entirely for tax purposes. Illustratively, trial court stated: In brief, trial court correctly found defendant had failed to carry his burden of proof on the asserted defense of fraud in connection with the giving of said November 1970 note. Defendant's first contention in support of a reversal is devoid of substance. III. We next entertain defendant's claim to the effect trial court abused its discretion in allowing the in-course-of-trial amendment of plaintiff's answer to defendant's counterclaim. Leave to file same was granted over defense counsel's objection during examination of defendant's first witness. Relevant here is Iowa R.Civ.P. 88 which provides: Allowance of an amendment to a pleading is the rule and denial the exception, although an amendment is not permissible which will substantially change the issue. Additionally, a trial court has considerable discretion as to whether an appropriate request for leave to amend should be granted or denied and we will reverse only where a clear abuse of discretion is shown. See Mora v. Savereid, 222 N.W.2d 417, 422 (Iowa 1974); Galbraith v. George, 217 N.W.2d 598, 601 (Iowa 1974); Madison Silos, Div. of Martin Marietta Corp. v. Wassom, 215 N.W.2d 494, 497 (Iowa 1974). Looking now to the pleadings, paragraph 2, count III of plaintiff's original answer to defendant's counterclaim contains this relevant allegation: Plaintiff's subsequent amendment stated, in part: At the outset it is apparent this amendment neither asserted a new defense to defendant's counterclaim for accounting nor materially changed plaintiff's original defense. It further appears, despite the fact that plaintiff did not specifically use the word "estopped" or "estoppel" in its original responsive pleading, such was, in essence, pled by facts giving rise thereto. *504 See Janssen v. North Iowa Conf. Pen., Inc. of Meth. Ch., 166 N.W.2d 901, 907 (Iowa 1969). Furthermore, settlement and estoppel constitute an appropriate defense to an action for accounting. See 1 Am.Jur.2d, Accounts and Accounting, § 61; 1 C.J.S. Accounting § 29. We find no abuse of discretion by trial court in permitting the controverted amendment. Defendant's second assigned error is without merit. IV. As aforesaid, defendant finally maintains trial court erred in holding the subject note given by him to plaintiff constituted a settlement of all preexisting accounts between them. In this regard trial court, relying on § 3-307 of the Uniform Commercial Code (The Code 1971, Section 554.3307) apparently placed upon defendant the burden to show a final settlement of then existing accounts had been not effected by his giving of the November 1970 promissory note. Demonstrably, trial court found: Thereupon the court apparently concluded defendant did not carry his burden of proof in that he failed to overcome the presumption of settlement attendant upon execution and delivery of the aforesaid note. But in this jurisdiction the burden of proof as to settlement is upon the party alleging same and such burden never shifts. See Stevens v. Gear, 240 Iowa 1348, 1356-1357, 39 N.W.2d 408 (1949); Gartin's Grocery v. Lucas Co. Ass'n, 231 Iowa 204, 213, 1 N.W.2d 275 (1941); Mudra v. Brown, 222 Iowa 709, 711, 269 N.W. 753 (1936); Stuart v. Beans, 221 Iowa 307, 311, 263 N.W. 816 (1935); Marron v. Lynch, 215 Iowa 341, 342, 245 N.W. 346 (1932); 15 Am.Jur.2d, Compromise and Settlement, § 42; 15A C.J.S. Compromise and Settlement § 51. In light of the fact plaintiff pled settlement, it was required to prove same. See Iowa R.Civ.P. 344(f)(5). Although a presumption as to recoverability on the note was helpful to plaintiff, such did not serve to transfer the initial burden of proof to defendant regarding settlement. See Riggs v. Gish, 201 Iowa 148, 153, 205 N.W. 833 (1925); 15A C.J.S. Compromise and Settlement § 51a. See generally 9 Wigmore on Evidence, § 2490 (3d ed. 1940); 44 Iowa L.Rev. 147 (1958). Noticeably, we are not aided in this case by specific findings of fact, conclusions of law or adjudication by trial court upon the alleged settlement issue. As hereafter disclosed, however, the court below did inferentially resolve the matter of settlement adverse to defendant. And, as stated in Dairyland, Inc. v. Jenison, 207 N.W.2d 753, 754 (Iowa 1973), quoting from Whittier v. Whittier, 237 Iowa 655, 663, 23 N.W.2d 435 (1946): "The determinative factor is the intention of the court as gathered from all parts of the judgment. Effect must be given to that which is clearly implied as well as to that which is expressed.'" See also Wolf v. Murrane, 199 N.W.2d 90, 95 (Iowa 1972). V. The question now posed is whether error as to burden of proof, noted above, necessitates a reversal. *505 If trial court's aforesaid error was not prejudicial, or defendant was not entitled to a decision favorable to him despite such error, or the judgment is supported by the facts notwithstanding an error of law in arriving at such adjudication a reversal is not mandated. See generally Burgardt v. Lincoln National Life Ins. Co., 260 Iowa 667, 677, 149 N.W.2d 292 (1967); In re Estate of Lawrence, 251 Iowa 305, 314, 100 N.W.2d 645 (1960); 5B C.J.S. Appeal and Error § 1789. Trial court did find, inter alia: Even more significantly, the "Judgment Entry" in this case provides in part: Each party was permitted to fully present all evidence touching upon issues raised by the pleadings. And, on the case as made, it is evident the note given by defendant to plaintiff November 3, 1970, did as a matter of law constitute a settlement of mutual accounts as of said date. In other words, placing the aforesaid burden of proof on plaintiff produces the same result as was reached by trial court. Consequently, said error by trial court was not prejudicial. See Dye Produce Co. v. Davis, 202 Iowa 1008, 1017, 209 N.W. 744 (1925); Miller v. Kramer, 154 Iowa 523, 527, 134 N.W. 538 (1912); Texas Real Estate Commission v. Sandefur, 279 S.W.2d 954, 955 (Fort Worth, Tex.Civ.App.1955); cf. Yeager v. Firestone Tire &amp; Rubber Co., 253 Iowa 369, 377-378, 112 N.W.2d 299 (1961); Comparet v. Metz Co., 222 Iowa 1328, 1330-1331, 271 N.W. 847 (1937); Foley v. Mathias, 211 Iowa 160, 163-164, 233 N.W. 106 (1930). Upon an examination of the record before us we are satisfied the judgment appealed from is right. Moreover, since the result reached is evidentially proper, a reversal would (1) cause a needless waste of judicial effort and (2) possibly invite another fruitless appeal. Affirmed.