Opinion ID: 1616952
Heading Depth: 1
Heading Rank: 2

Heading: The Trial Court's Consideration of Extrinsic Evidence.

Text: The buyer contends that the trial court erred in considering extrinsic evidence, arguing that the phrase current assets over current liabilities was clear, precise and susceptible to only one reasonable interpretation as to what taxes were owed by each party to the transaction. We disagree. Established principles of contract interpretation and the circumstances of this case support the trial court's consideration of the extrinsic evidence offered by the parties to determine what their contractual language meant. We need not repeat the extensive discussion in several Iowa cases which explain when extrinsic evidence may properly be used. Contract interpretation involves ascertaining the meaning of contractual words, and extrinsic evidence is admissible as an aid to interpretation when it sheds light on the situation of the parties, antecedent negotiations, the attendant circumstances, and the objects they were striving to attain. Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp., 266 N.W.2d 22, 25 (Iowa 1978); Hamilton v. Wosepka, 261 Iowa 299, 306-13, 154 N.W.2d 164, 168-72 (1967) (cataloguing cases and statements of commentators as to when parol evidence may be used to interpret and explain contracts). Here, the contract itself made no mention of property taxes and did not include sufficient financial data, incorporated by reference or otherwise, to enable the parties to insert exact numbers into the assets-liabilities formula. Even the buyer was required to offer its accountant's testimony to establish the exact price it intended to pay. The buyer's reliance on the parol evidence rule is misplaced. When applicable, the parol evidence rule excludes extrinsic evidence which is solely offered for the purpose of varying, adding to, or subtracting from a written agreement. Montgomery Properties Corporation v. Economy Forms Corporation, 305 N.W.2d 470, 476 (Iowa 1981); Pappas v. Hauser, 197 N.W.2d 607, 611 (Iowa 1972). Among the exceptions to the parol evidence rule, however, is the principle that extrinsic evidence may be admitted to show that a writing is not an integrated agreement, not completely clear and unambiguous as to the subject in dispute, or ambiguous with respect to the subject of the lawsuit. In re Eickman Estate, 291 N.W.2d 308, 312 (Iowa 1980); Fashion Fabrics of Iowa, Inc., v. Retail Investors Corp., 266 N.W.2d at 25. Here, the language chosen by the parties for their written agreement simply did not unequivocally fix the rights and obligations of the parties with respect to general taxes on the motel property. The buyer itself has not shown that the court could have decided upon a specific agreed price without resorting to documentary evidence furnished by the buyer's accountants. Neither the sellers' evidence nor that introduced by the buyer was offered to change or vary the words of the contract; that evidence was offered to explain how the parties intended their assets-liabilities formula to apply to the financial accounts of the motel corporation. Proof of the circumstances may make a meaning plain and clear when in absence of such proof some other meaning may also have seemed plain and clear. Hamilton v. Wosepka, 261 Iowa at 312, 154 N.W.2d at 171. The buyer also contends that the trial court improperly considered the fact that the buyer made monthly payments of interest to the sellers for nearly two years after the sale based upon the sellers' interpretation of what the purchase price should be. Again, we conclude that the trial court properly could consider that evidence in deciding what the parties meant by what their contract said. A document will be read in the light of surrounding circumstances and given such practical construction as they themselves have placed upon it. Lovlie v. Plumb, 250 N.W.2d 56, 59 (Iowa 1977); see also Village Supply Co. v. Iowa Fund, Inc., 312 N.W.2d 551, 555 (Iowa 1981) (The practical construction placed on an agreement by the parties will be given effect.).