Court Opinion

ID: 3205761
Source: CourtListenerOpinion
Date Created: 2016-05-23 15:02:13.135385+00
Date Added: 2024-06-11T07:39:21.464048
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 15-2235
                        ___________________________

                                     Gosiger, Inc.

                        lllllllllllllllllllll Plaintiff - Appellant

                                            v.

                                Elliott Aviation, Inc.

                       lllllllllllllllllllll Defendant - Appellee
                                      ____________

                     Appeal from United States District Court
                  for the Southern District of Iowa - Des Moines
                                  ____________

                            Submitted: January 13, 2016
                               Filed: May 23, 2016
                                 ____________

Before MURPHY, SMITH, and BENTON, Circuit Judges.
                           ____________

BENTON, Circuit Judge.

      Elliott Aviation, Inc. damaged Gosiger, Inc.’s aircraft. Gosiger seeks damages
for the diminished value of the aircraft. The district court1 granted summary

      1
       The Honorable John A. Jarvey, United States District Judge for the Southern
District of Iowa.
judgment to Elliott Aviation, ruling that the contract did not allow diminution-in-
value damages. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

                                          I.

      Gosiger, an Ohio corporation, owns a business aircraft BB1488, a King Air
B200. Elliott Aviation, an Iowa corporation, services aircraft. In October 2012, by
a “Specification for Gosiger Inc.,” Gosiger contracted with Elliott for maintenance
on the aircraft and installation of a new avionics suite.

      The “Responsibilities” section says:

      On Ground Responsibilities. Elliott Aviation is responsible for all
      claims, demands, suits, judgments, losses, damages, costs and expenses
      which arise on the ground out of Elliott Aviation’s negligence in
      performing Services on the Aircraft.

      In Flight Responsibilities. Customer agrees and understands that
      Customer is responsible for all claims, demands, suits, judgments,
      losses, damages, costs and expenses arising out of the in flight operation
      of the Aircraft, except to the extent that such claims, demands, suits,
      judgments, losses, damages, costs and expenses arise out of Elliott
      Aviation’s negligence in performing Services (as defined in the
      Proposal) on the Aircraft. . . . .

      Immediately after the “Responsibilities” section is a “Limitations of Liability”
section:

      IN NO EVENT SHALL COMPANY BE LIABLE FOR ANY LOSS OF
      USE OF THE AIRCRAFT OR LOSS OF PROFITS, DIMINUTION IN
      VALUE . . . DAMAGES OR LOSSES, . . . . In the event Elliott Aviation
      physically damages Customer’s property, Customer’s sole and exclusive
      remedy, and Elliott Aviation’s sole and exclusive liability, is limited to

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      the repair or replacement (at Elliott Aviation’s option) of the damaged
      portion of the property.

      While servicing Gosiger’s aircraft on the ground, Elliott Aviation cut the right
wing, main spar. Elliott repaired it in accordance with the aircraft manufacturer’s
recommendation. The parties began to negotiate about the damage to the aircraft.
Gosiger wanted compensation for diminution in value of the aircraft.

      In January 2013, Elliott Aviation offered Gosiger $9,000 for diminution in
value. The parties signed a “Return to Service Agreement,” which says:

      To allow Gosiger Inc. to accept delivery and utilize their aircraft while
      at the same time giving Gosiger, Inc. time to evaluate the $9,000.00
      diminution settlement offer for BB1488, Elliott Aviation is offering to
      allow Gosiger Inc. to pay their existing invoice down to an outstanding
      balance of $60,000.00 USD.

This Agreement continues:

      Should Gosiger agree to these terms, Gosiger Inc. would pay Elliott
      Aviation 438,843.21 USD upon delivery of the aircraft with the
      remaining 60,000.00 USD (less settlement amount) due to Elliott
      Aviation within 5 days of the mutually agreed upon settlement date;
      provided, however, that if we can’t come to an acceptable settlement of
      the matter by February 28, 2013, we will engage in mediation within
      thirty (30) days with a Mediator with experience in the nature of the
      dispute, i.e. diminution of the value of the aircraft.

       Gosiger paid the $438,843.21. Elliott returned the aircraft. Gosiger, however,
rejected the $9,000 settlement offer. Instead, Gosiger had the aircraft appraised to
determine the diminution in fair market value from the damaged wing spar.
According to the appraisal, the diminished value of the aircraft was $310,000.
Gosiger demanded $310,000; Elliott refused to pay. Elliott then obtained another

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appraisal, which set the diminished value at $41,908. Elliott offered $41,908;
Gosiger rejected the offer.

     After unsuccessful mediation, Gosiger sued. Elliott moved for summary
judgment. The district court granted the motion, finding that neither the Specification
Agreement nor the Return to Service Agreement authorized diminution damages.
Gosiger appeals.

                                          II.

       This court reviews de novo a grant of summary judgment. Torgerson v. City
of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). Summary judgment is
appropriate “if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
Both parties agree Iowa law applies.

        Gosiger argues that the Specification Agreement is ambiguous whether it
excludes diminution damages. Gosiger emphasizes the “Responsibilities” section of
the Specification Agreement: “Elliott Aviation is responsible for all claims, demands,
suits, judgments, losses, damages, costs and expenses which arise on the ground out
of Elliott Aviation’s negligence. . . .” (Emphasis added). Gosiger believes that this
language—especially the word “all”—directly conflicts with the “Limitations of
Liability” section’s express exclusion of diminution damages.

       A court “generally review[s] the construction and interpretation of a contract
as a matter of law. . . . The question whether an ambiguity exists is also one of law.”
Hartig Drug Co. v. Hartig, 602 N.W.2d 794, 797 (Iowa 1999). “It is a fundamental
and well-settled rule that when a contract is not ambiguous, [the court] must simply
interpret it as written.” Smidt v. Porter, 695 N.W.2d 9, 21 (Iowa 2005). A contract
“is not ambiguous merely because the parties disagree over its meaning,” rather “an

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ambiguity occurs in a contract when a genuine uncertainty exists concerning which
of two reasonable interpretations is proper.” Hartig Drug Co., 602 N.W.2d at 797.
A “contract is to be interpreted as a whole . . . an interpretation which gives a
reasonable, lawful, and effective meaning to all terms is preferred to an interpretation
which 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).

       The provisions of the Specification Agreement, interpreted as a whole, do not
conflict. The “Responsibilities” section does describe the parties’ responsibilities.
But, the “Limitations of Liability” section immediately limits the remedies available,
specifically limiting Elliott’s liability to “repair or replacement” and expressly
disallowing “DIMINUTION IN VALUE” damages or losses. See Johnson Controls,
Inc. v. City of Cedar Rapids, 713 F.2d 370, 374 (8th Cir. 1983) (stating that “if two
clauses of a contract appear to be in conflict, the preferred interpretation is the one
that gives a ‘harmonious interpretation’ to the clauses in order to avoid rendering
either one nugatory.”). This case is not like Gosiger’s main case, where a “series of
contradictory statements creates what appears to be an ambiguity which should have
survived a Rule 12(b)(6) motion to dismiss.” Denton Constr. Co. v. Missouri
Portland Cement Co., 659 F.2d 873, 875 (8th Cir. 1981). Here—at the summary
judgment stage—the contract has no contradictory statements and no ambiguity.

       Gosiger next asserts that Elliott waived the “Limitations of Liability” provision
by its conduct: by purchasing insurance that may cover diminution damages, and by
offering to settle Gosiger’s diminution claims. Iowa law defines waiver as “the
intentional relinquishment of a known right . . . . It is consensual in its nature; the
intention may be inferred from conduct, and the knowledge may be actual or
constructive, but both knowledge and intent are essential elements.” United Forest
Prods. Co. v. Baxter, 452 F.2d 11, 16 (8th Cir. 1971) (applying Iowa law).

      First, potential insurance coverage of diminution damages does not waive an
express section in the Specification Agreement. The “words of an integrated
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agreement remain the most important evidence of intention.” Walsh v. Nelson, 622
N.W.2d 499, 503 (Iowa 2001), quoting Restatement (Second) of Contracts § 212
cmt. b (1981). Potential insurance coverage is not an “intentional relinquishment of
a known right.” Second, Elliott’s offers are not waivers. Under Iowa law, an offer
to compromise a claim is not the “foundation of a waiver” unless it has a statement
that indicates waiver. Houdeck v. Merchants & Bankers Ins. Co., 71 N.W. 354, 355
(Iowa 1897). Elliott’s offers had no statement of waiver. And, the Specification
Agreement has a “Non-Waiver of Rights and Remedies” clause.

      Gosiger last contends that the Return to Service Agreement obliges Elliott to
pay diminution in value. An “original contract generally remains in force except as
modified or superseded by the new agreement.” Recker v. Gustafson, 279 N.W.2d
744, 754 (Iowa 1979). “Settlement agreements are essentially contracts” and courts
“look to contract principles when interpreting settlement agreements.” Rick v.
Sprague, 706 N.W.2d 717, 723 (Iowa 2005). “To be bound, the contracting parties
must manifest a mutual assent to the terms of the contract.” Id. at 724. Mutual assent
is usually “given through the offer and acceptance” and “the acceptance must
conform strictly to the offer in all its conditions, without any deviation or condition
whatever.” Id. Interpreting contracts, courts may look to extrinsic evidence,
including “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.” Peak v. Adams, 799 N.W.2d 535, 544
(Iowa 2011). Yet, the “most important evidence of the parties’ intentions at the time
of contracting is the words of the contract.” Id.

      The Return to Service Agreement says:

      To allow Gosiger Inc. to accept delivery and utilize their aircraft while
      at the same time giving Gosiger, Inc. time to evaluate the $9,000.00
      diminution settlement offer for BB1488, Elliott Aviation is offering to

                                         -6-
      allow Gosiger Inc. to pay their existing invoice down to an outstanding
      balance of $60,000.00 USD.

Gosiger urges that this amended the Specification Agreement to allow for diminution
damages. To the contrary, the reference to “diminution” is conditioned on “time to
evaluate” it. The Return to Service Agreement requires payment of the “remaining
60,000.00 USD (less settlement amount)” only if the parties “come to an acceptable
settlement.” Because the Return to Service Agreement is clear, the negotiations are
irrelevant. See Peak, 799 N.W.2d at 544 (holding “extrinsic evidence cannot alter the
legal effect of the unambiguous contract language”). Gosiger and Elliott never
mutually agreed to modify the Specification Agreement to allow for diminution-in-
value damages.

                                    *******

      The judgment is affirmed.
                     ______________________________

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