Court Opinion

ID: 4249707
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:20:35.688787+00
Date Added: 2024-06-11T13:53:52.956393
License: Public Domain

IN THE SUPREME COURT OF IOWA
                               No. 08–1100

                           Filed March 4, 2011

C & J VANTAGE LEASING CO.,
Assignor to Frontier Leasing Corp., Assignee,

      Appellee,

vs.

THOMAS WOLFE d/b/a LAKE MACBRIDE GOLF
COURSE and THOMAS WOLFE, Individually,

      Appellants.

      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Polk County, Don C.

Nickerson, Judge.

      Defendants seek further review from the court of appeals decision

affirming the district court‘s grant of summary judgment enforcing an

agreement. DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT REVERSED AND REMANDED.

      Billy J. Mallory and Allison M. Steuterman of Brick, Gentry,

Bowers, Swartz & Levis, P.C., West Des Moines, for appellants.

      Edward N. McConnell and Aaron Ginkens of Ginkens & McConnell,

P.L.C., Clive, for appellee Frontier Leasing Corporation.
                                     2

WIGGINS, Justice.

      Thomas Wolfe d/b/a Lake MacBride Golf Course and Thomas

Wolfe, individually (hereinafter collectively referred to as Lake MacBride),

seek a ruling reversing the district court‘s entry of summary judgment in

favor of C & J Vantage Leasing Company, assignor to Frontier Leasing

Corporation, assignee, and dismissal of Lake MacBride‘s counterclaims

and third-party claims. The court of appeals affirmed the district court‘s

rulings. On further review, we find there are genuine issues of material

fact with regard to some of Lake MacBride‘s affirmative defenses,
counterclaims, and third-party claims.       Accordingly, we vacate the

decision of the court of appeals, reverse the judgment of the district

court, and remand the case to the district court for further proceedings

consistent with this opinion.

      I. Background Facts and Proceedings.

      In 2003, a sales representative of Royal Links USA, Inc., an

advertising company, called Lake MacBride Golf Course and informed

Lake MacBride that it could receive a nonmotorized snack and beverage

cart at no cost in exchange for displaying advertising on the cart. The

sales representative also informed Lake MacBride that Royal Links would

make all the necessary arrangements, and Lake MacBride simply had to

execute a program agreement, a lease agreement, and several other

documents.

      Accordingly, in July, Tracy Hufford, Lake MacBride‘s general

manager, executed a credit application on behalf of Lake MacBride for

one beverage cart and sent the application to Royal Links. Royal Links

then transmitted the credit application to C & J, who approved the
application. Thereafter, the sales representative informed Lake MacBride

the credit application had been approved. Later in July, Royal Links sent
                                   3

Lake MacBride a program agreement, a lease agreement, and a personal

guaranty for the beverage cart, which Thomas Wolfe, Lake MacBride‘s

owner, and Hufford executed.

      The program agreement provided Lake MacBride would permit

Royal Links to display advertising on the beverage cart in exchange for

sixty monthly payments from Royal Links in the amount of $299 each

month. Upon the expiration of this initial term, Royal Links agreed to

continue to pay Lake MacBride $2000 a year for the next five years for

the right to continue displaying advertising on the beverage cart.   The
program agreement also provided, ―Upon expiration or termination of this

Agreement, Royal Links USA will have the option to purchase any or all

of the Beverage Caddy Express units from [Lake MacBride] for $1.00

each.‖

      The lease agreement identified C & J as the lessor, Lake MacBride

as the lessee, and Royal Links as the equipment supplier of the beverage

cart. The lease agreement stated, ―The Equipment Supplier Is Not An

Agent Of The Lessor.‖      Mirroring the program agreement, the lease

agreement purported to lease the beverage cart to Lake MacBride in

exchange for sixty monthly payments to C & J in the amount of $299

each month. Thus, from Lake MacBride‘s perspective, the result of this

transaction appeared to be that Lake MacBride would receive a beverage

cart at no cost because the monthly amount it was obligated to pay

C & J to lease the beverage cart was equal to the monthly amount it

would receive from Royal Links in exchange for allowing advertising to be

displayed on the beverage cart.

      The lease agreement stated in bold capital letters, ―THIS LEASE IS
NONCANCELABLE.‖       The lease agreement also provided, ―Lessee may

purchase equipment at the end of the lease for $1.00 provided the terms
                                         4

of the lease are met.‖ Finally, the lease agreement disclaimed any causes

of action based on express or implied warranties against C & J. Wolfe

also executed a personal guaranty in favor of C & J in relation to Lake

MacBride‘s obligations under the lease agreement.

        Thereafter, C & J purchased one beverage cart from Royal Links

for $12,500 and shipped it to Lake MacBride.               Upon receipt of the

beverage cart, Hufford signed a ―Delivery and Acceptance Certificate‖

addressed to C & J. By signing this document, Hufford acknowledged

Lake MacBride satisfactorily received the beverage cart and Royal Links
was not an employee or agent of C & J.

        In October 2004, Royal Links notified Lake MacBride that it would

no longer pay Lake MacBride the monthly advertising sums of $299

pursuant to the program agreement. C & J still expected Lake MacBride

to continue to make the monthly lease payments of $299 pursuant to the

lease   agreement.       Nevertheless,       Lake   MacBride   stopped    making

payments to C & J.

        In May 2005, C & J brought a breach of contract action against

Lake MacBride to recover the defaulted payments under the lease

agreement. In response, Lake MacBride asserted the affirmative defenses

of estoppel, unconscionability, mutual mistake, fraud in the inducement,

frustration of purpose, and negligent supervision, among others. Lake

MacBride also filed a counterclaim/third-party petition against C & J,

the President/CEO of C & J (hereinafter collectively referred to as C & J),

and Royal Links.1 The counterclaim/third-party petition raised claims of

        1On August 19, 2005, Royal Links filed a voluntary petition for Chapter 7
bankruptcy. The bankruptcy court automatically stayed Lake MacBride‘s third-party
petition against Royal Links and Lake MacBride‘s counterclaims/third-party-petition
claims moved forward as to the non-bankruptcy parties.
                                        5

fraudulent misrepresentation, equitable and constructive fraud, violation

of the business opportunity statute, and concert of action.             It also

attempted to pierce the corporate veil. Lake MacBride further alleged the

lease agreement was a disguised secured transaction that violated Iowa

law.     In responding to the counterclaim/third-party petition, C & J

disavowed any agency relationship with Royal Links and claimed Lake

MacBride was barred from raising any counterclaims/third-party claims

against C & J due to the presence of the hell-or-high-water clause in the

lease agreement.
       On November 1, 2006, C & J assigned the lease agreement and

personal guaranty to Frontier.         C & J then amended its petition to

substitute Frontier in the place of C & J as the real party in interest.

Subsequently, Frontier and Lake MacBride filed competing motions for

summary judgment.

       The court determined the lease agreement constituted a finance

lease that contained an enforceable hell-or-high-water clause prohibiting

Lake MacBride from asserting any counterclaims against Frontier. The

court also held no agency relationship existed between C & J and Royal

Links.     In addition, the court rejected Lake MacBride‘s affirmative

defenses and counterclaims/third-party claims of unconscionability,

mutual mistake, violation of the business opportunity statute, and

failure to mitigate damages. Further, the court rejected the claim raised

in Lake MacBride‘s resistance that the lease agreement was void because

it failed to disclose an interest rate.     Finally, the court held the lease

agreement‘s integration clause and the parol-evidence rule barred

extrinsic evidence of the lease agreement.          Thus, the district court
granted    Frontier‘s   motion   for    summary    judgment,   denied     Lake
                                       6

MacBride‘s motion for partial summary judgment, and entered judgment

in favor of Frontier for $14,431.50.

      Following the entry of judgment, both Frontier and Lake MacBride

filed motions to enlarge, amend, or modify the district court‘s ruling and

judgment. The parties sought clarification as to whether or not the court

had dismissed Lake MacBride‘s counterclaims and third-party-petition

claims.     Accordingly, the district court modified its judgment and

dismissed Lake MacBride‘s counterclaims and third-party claims with

prejudice. In addition, the district court awarded Frontier $13,088.91 in
attorney fees.

      Lake MacBride filed a notice of appeal, and we transferred the case

to the court of appeals. The court of appeals affirmed the district court‘s

judgment.     Thereafter, Lake MacBride filed an application for further

review, which we granted.

      II. Issues.

      In this appeal, we must consider six issues. First, we must decide

whether the lease agreement constitutes a finance lease or a sale with a

security interest. Second, we must determine the enforceability of the

agreement‘s hell-or-high-water clause. Third, we must consider if there

are genuine issues of material fact regarding whether Royal Links was

acting as an agent for C & J. Fourth, we must decide whether there are

genuine issues of material fact supporting Lake MacBride‘s affirmative

defenses, counterclaims, and third-party claims. Fifth, we must resolve

whether the lease agreement‘s integration clause and the parol-evidence

rule prohibit the admission of extrinsic evidence of the agreement.

Finally, we must consider the issue of attorney fees.
                                     7

      III. Scope of Review.

      We review a district court decision granting or denying a motion for

summary judgment for correction of errors at law. Hills Bank & Trust Co.

v. Converse, 772 N.W.2d 764, 771 (Iowa 2009). If the moving party has

met his or her burden of showing the nonexistence of a material fact,

summary judgment is appropriate. Bank of the W. v. Kline, 782 N.W.2d
453, 456 (Iowa 2010). We afford the nonmoving party every legitimate

inference that can be reasonably deduced from the evidence. Pillsbury

Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 434 (Iowa 2008).         Where
reasonable minds can differ on how an issue should be resolved, a fact

question has been generated, and summary judgment should not be

granted.    Id.   Accordingly, our review is limited to whether a genuine

issue of material fact exists and whether the district court applied the

correct law. Bank of the W., 782 N.W.2d at 457.

      In addition, we review issues of statutory construction for

correction of errors at law. Martinek v. Belmond-Klemme Cmty. Sch. Dist.,

760 N.W.2d 454, 456 (Iowa 2009). We review a challenge to a district

court‘s award of attorney fees for an abuse of discretion. NevadaCare,

Inc. v. Dep’t of Human Servs., 783 N.W.2d 459, 469 (Iowa 2010). This

means we will only reverse an attorney-fee award if the court‘s ruling

rests on grounds that are clearly unreasonable or untenable. Id.

      IV. Finance Lease or Disguised Sale with a Security Interest.

      First, we must decide whether the lease agreement entered into

between the parties is properly considered a finance lease, as urged by

Frontier, or a disguised sale with a security interest, as argued by Lake

MacBride.
      Iowa‘s version of the Uniform Commercial Code (UCC) is codified as

Iowa Code chapter 554 (IUCC). Article 1 of the IUCC contains general
                                       8

provisions, including the definition of a security interest. Article 13 of

the IUCC governs leases, including finance leases. Article 9 of the IUCC

addresses secured transactions.

        A lease is defined as a ―transfer of the right to possession and use

of goods for a term in return for consideration, but a sale . . . or retention

or creation of a security interest is not a lease.‖               Iowa Code

§ 554.13103(1)(j) (2003) (emphasis added). A finance lease is a lease that

meets      several   additional    statutory   requirements.        See    id.

§ 554.13103(1)(g).     We recently described a typical finance lease as
follows:
        ―A ‗finance lease‘ involves three parties—the lessee/business,
        the finance lessor, and the equipment supplier.           The
        lessee/business selects the equipment and negotiates
        particularized modifications with the equipment supplier.
        Instead of purchasing the equipment from the supplier, the
        lessee/business has a finance lessor purchase the selected
        equipment, and then leases the equipment from the finance
        lessor.‖

C & J Vantage Leasing Co. v. Outlook Farm Golf Club, LLC, 784 N.W.2d
753, 756–57 (Iowa 2010) (quoting Colonial Pac. Leasing Corp. v. McNatt,

486 S.E.2d 804, 807 (Ga. 1997)).
        A transaction must first qualify as a lease before it can qualify as a

finance lease. U.C.C. § 2A-103, cmt. (g) (amended 2003), 1C U.L.A. 829

(2004); see also Iowa Code § 554.13103(1)(g) (stating, ― ‗Finance lease‘

means a lease‖); Outlook Farm Golf Club, LLC, 784 N.W.2d at 757. The

definition of a lease specifically excludes a transaction that retains or

creates a security interest.      Iowa Code § 554.13103(1)(j).      Thus, to

determine whether the lease agreement is properly considered a finance

lease or a secured transaction, we must first consider whether the
agreement retained or created a security interest.        Outlook Farm Golf

Club, LLC, 784 N.W.2d at 757. If so, the agreement cannot qualify as a
                                       9

lease or a finance lease because an agreement retaining or creating a

security interest is specifically excluded from the definition of a lease.

Iowa Code § 554.13103(1)(j).

        The facts of each transaction determine whether the transaction is

a lease or a sale with a security interest.       Id. § 554.1201(37)(b).    A

security interest is defined as ―an interest in personal property or fixtures

which    secures   payment     or   performance   of   an   obligation.‖   Id.

§ 554.1201(37)(a). Iowa Code section 554.1201(37)(b) contains a bright-

line test for determining whether an agreement creates a security
interest. It provides that a transaction creates a security interest if

        the consideration the lessee is to pay the lessor for the right
        to possession and use of the goods is an obligation for the
        term of the lease not subject to termination by the lessee,
        and

              (1)   the original term of the lease is equal to or
        greater than the remaining economic life of the goods,

              (2)   the lessee is bound to renew the lease for the
        remaining economic life of the goods or is bound to become
        the owner of the goods,

              (3)   the lessee has an option to renew the lease for
        the remaining economic life of the goods for no additional
        consideration or nominal additional consideration upon
        compliance with the lease agreement, or

              (4)   the lessee has an option to become the owner of
        the goods for no additional consideration or nominal
        additional consideration upon compliance with the lease
        agreement.

Id. § 554.1201(37)(b) (emphasis added). The first part of the bright-line

test is found in the unnumbered paragraph of section 554.1201(37)(b).

The second part of the bright-line test contains the four criteria listed in
sections 554.1201(37)(b)(1)–(4).     Each of the four criteria listed in the

second part of the bright-line test are objectively based on economics,
                                    10

not the intent of the parties. U.C.C. § 1-201, cmt. 37 (amended 1999), 1

U.L.A. 168 (2004); PSINet, Inc. v. Cisco Sys. Capital Corp. (In re PSINet,

Inc.), 271 B.R. 1, 44 (Bankr. S.D.N.Y. 2001).

      In other words, under the bright-line test, the lease agreement in

this case creates a security interest, and cannot be characterized as a

lease or a finance lease, if it:      (1) prohibits Lake MacBride from

terminating the obligation to pay Frontier for the right to possess and

use the beverage cart, and (2) meets one of the four independent criteria

listed in section 544.1201(37)(b). Iowa Code § 554.1201(37)(b)(1)–(4); see
also PSINet, Inc., 271 B.R. at 43–45 (recognizing the presence of any one

of the four criteria indicates the lessor did not retain a residual interest

in the property and therefore, the lease is not a true lease); Outlook Farm

Golf Club, LLC, 784 N.W.2d at 757–58.

      Applying the first part of the bright-line test, we find the lease

agreement prohibited Lake MacBride from terminating its obligation to

pay Frontier for the right to possess and use the beverage cart.        The

agreement    states   in   bold   capital    letters,   ―THIS   LEASE    IS

NONCANCELABLE.‖ The parties treat this statement as a hell-or-high-

water clause, which is defined as ―[a] clause in a personal-property lease

requiring the lessee to continue to make full rent payments to the lessor

even if the thing leased is unsuitable, defective, or destroyed.‖ Black’s

Law Dictionary 742 (8th ed. 2004).          Additionally, if Lake MacBride

defaulted by refusing to tender payment to Frontier, under section

fourteen of the lease agreement it would simultaneously incur an

immediate obligation for all of the agreement‘s remaining payments.

Hunter v. Snap-On Credit Corp. (In re Fox), 229 B.R. 160, 165 (Bankr.
N.D. Ohio 1998) (recognizing the first part of the bright-line test is met

when the lessee cannot cancel the agreement without simultaneously
                                      11

incurring an immediate obligation for the total cost of the equipment).

Finally, section fifteen of the agreement states, ―All obligations of Lessee

hereunder shall continue until full performance has been rendered and

shall not be released by termination of this Lease.‖ Thus, we conclude

the lease agreement meets the first part of the bright-line test.

         Applying the second part of the bright-line test, we note the lease

agreement provides, ―Lessee may purchase equipment at the end of the

lease for $1.00 provided the terms of the lease are met.‖           If the only

economically sensible decision is for the lessee to exercise the purchase
option, the additional consideration is considered nominal. PSINet, Inc.,
271 B.R. at 45. The law is well established that a purchase-option price

of $1 amounts to nominal additional consideration, leaving no need to

further analyze the economic sensibility of purchasing the equipment for

that price. Id.; accord In re Macklin, 236 B.R. 403, 407 (Bankr. E.D. Ark.

1999) (construing agreement as a secured transaction because lessee

was provided the option to become owner of the equipment at the end of

the lease term for the nominal sum of $1); In re Eagle Enters., Inc., 223
B.R. 290, 299 (Bankr. E.D. Pa. 1998) (same), aff’d 237 B.R. 269 (E.D. Pa.

1999); All Am. Mfg. Corp. v. Quality Textile Screen Prints, Inc. (In re All Am.

Mfg. Corp.), 172 B.R. 394, 398 (Bankr. S.D. Fla. 1994) (same); C & J

Leasing II Ltd. P’ship v. Swanson, 439 N.W.2d 210, 211 (Iowa 1989)

(same). Therefore, we find the lease agreement provides Lake MacBride

with the option to become the owner of the beverage cart for nominal

additional consideration upon compliance with the lease agreement.

Thus, the second part of the bright-line test under Iowa Code section

554.1201(37)(b)(4) has been satisfied.      Accordingly, we hold the lease
agreement is a sale with a security interest and not a lease or a finance

lease.
                                          12

       Frontier argues the parties intended the lease agreement to be a

finance lease and drafted the agreement to reflect this intent.                    The

agreement states,

       This agreement is, and is intended to be a Lease and Lessee
       does not acquire hereby any right, title or interest
       whatsoever, legal or equitable, in or to any of the equipment,
       or to the proceeds of the sale of any equipment, except its
       interest as Lessee hereunder.

In further support of this argument, Frontier cites the UCC‘s official

comment to the definition of a finance lease, which provides, ―[i]f a

transaction does not qualify as a finance lease, the parties may achieve

the same result by agreement; no negative implications are to be drawn if

the transaction does not qualify.‖2            U.C.C. Code § 2A-103, cmt. (g)

(amended 2003), 1C U.L.A. at 830.

       Frontier‘s argument, however, fails to consider the full context of

the official UCC comment from which it cites. The comment begins with

the recognition that before a transaction can qualify as a finance lease, it

must first qualify as a lease. Id. at 829. The comment then describes a

typical finance lease and explains the requirements necessary for a lease

to qualify as a finance lease. Id. at 829–30. Finally, the comment states

that if the transaction does not meet the statutory requirements
necessary for a lease to qualify as a finance lease, the parties may

nevertheless agree to treat it as having qualified as a finance lease. Id. at

830. Thus, while Lake MacBride and Frontier could have agreed to treat

a lease as a finance lease, they could not agree to treat a sale with a

       2Frontier  also argues the agreement constitutes a finance lease with an attached
security interest. However, in C & J Vantage Leasing Co. v. Outlook Farm Golf Club,
LLC, 784 N.W.2d 753, 756 n.3 (Iowa 2010), we recognized that due to the large body of
law dedicated to differentiating between a lease and a security interest, an agreement
cannot be both. Thus, we reject this argument.
                                     13

security interest as a lease. Before a transaction can qualify as a finance

lease, it must qualify as a lease.

      Our interpretation of UCC § 2A-103 comment g is supported by

other comments throughout the UCC. For example, the UCC comment

describing the bright-line test for determining whether an agreement

creates a security interest explains that all references to ―the intent of the

parties to create a lease or a security interest‖ were deleted from the

bright-line test because such references led to ―unfortunate results.‖

U.C.C. § 1-201, cmt. 37 (amended 1999), 1 U.L.A. 168.           Instead, the
bright-line test focuses objectively on the economic reality of the

transaction. Id. Moreover, the comment describing the definition of a

security agreement explains:

            Whether an agreement creates a security interest
      depends not on whether the parties intend that the law
      characterize the transaction as a security interest but rather
      on whether the transaction falls within the definition of
      ―security interest‖ in Section 1-201 [Iowa Code section
      554.1201(37)(b)].    Thus, an agreement that the parties
      characterize as a ―lease‖ of goods may be a ―security
      agreement,‖ notwithstanding the parties‘ stated intention
      that the law treat the transaction as a lease and not as a
      secured transaction.

U.C.C. § 9-102, cmt. 3(b), 3 U.L.A. 64–65 (2010). Accordingly, the fact

the parties intended to treat the lease agreement as a lease or a finance

lease is immaterial so long as the agreement substantively qualifies as a

sale with a security interest under section 554.1201(37)(b).

      V. Enforceability of the Hell-or-High-Water Clause.

      Next, we must decide what consequences stem from finding the

lease agreement is a sale with a security interest. Lake MacBride claims

the lease agreement‘s hell-or-high-water clause is unenforceable if we
construe the agreement as a sale with a security interest, rather than a

finance   lease.    Frontier   claims   the   hell-or-high-water   clause   is
                                          14

enforceable regardless of whether we deem the transaction a sale with a

security interest or a finance lease.

       A hell-or-high-water clause is a contractual provision that requires

the lessee to absolutely and unconditionally fulfill its obligations under

the lease in all events (i.e., come hell or high water).3 Citicorp of N. Am.,

Inc. v. Lifestyle Commc’ns Corp., 836 F. Supp. 644, 656 (S.D. Iowa 1993);

Excel Auto & Truck Leasing, L.L.P. v. Alief Indep. Sch. Dist., 249 S.W.3d
46, 51 (Tex. App. 2007). As explained by one court, a hell-or-high-water

provision is
       a specialized clause peculiar to a three-party transaction,
       which insures that the payments owed by the lessee to a
       lessor who does not manufacture or supply the leased goods
       are independent of the state of the goods and irrevocable, so
       that the lessee looks to the manufacturer or supplier of
       goods for warranties and remedies for defects in the goods,
       not to the lessor.

Excel Auto & Truck Leasing, L.L.P., 249 S.W.3d at 64 (Keyes, J.,

concurring in part and dissenting in part).              Courts have consistently

enforced such clauses in the financial leasing context. See, e.g., Citicorp

of N. Am., Inc., 836 F. Supp. at 656 (citing federal courts that have

upheld the general validity of hell-or-high-water clauses); W. Va. Dep’t of
Fin. & Admin. v. Hassett (In re O.P.M. Leasing Servs., Inc.), 21 B.R. 993,

1006–07 (Bankr. S.D.N.Y. 1982) (citing numerous cases strictly enforcing

hell-or-high-water provisions as a matter of law).                  Our task is to

determine the enforceability of such a provision in the context of a

secured transaction.

       3Both parties treat the clause in the lease agreement that states, ―THIS LEASE

IS NONCANCELABLE,‖ as a properly formulated hell-or-high-water clause.
Accordingly, for the purposes of this opinion, we will assume without deciding that this
clause constitutes a hell-or-high-water clause.
                                     15

      The cardinal rule of contract interpretation is the determination of

the intent of the parties at the time they entered into the contract.

NevadaCare, Inc., 783 N.W.2d at 466. We strive to give effect to all the

language of a contract, which is the most important evidence of the

contracting parties‘ intentions. Id.; Fashion Fabrics of Iowa, Inc. v. Retail

Investors Corp., 266 N.W.2d 22, 26 (Iowa 1978).

      Because an agreement is to be interpreted as a whole, it is
      assumed in the first instance that no part of it is
      superfluous; 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.

Fashion Fabrics of Iowa, Inc., 266 N.W.2d at 26.        Contracting parties

have wide latitude to fashion their own remedies for a breach of contract

and to deny full effect to such express contractual provisions is

ordinarily impermissible because it would ―effectively reconstruct the

contract contrary to the intent of the parties.‖      In re O.P.M. Leasing

Servs., Inc., 21 B.R. at 1006; accord Nat’l Westminster Bancorp N.J. v. ICS

Cybernetics, Inc. (In re ICS Cybernetics, Inc.), 123 B.R. 467, 477 (Bankr.

N.D.N.Y. 1989), aff’d 123 B.R. 480 (N.D.N.Y. 1990).           Thus, courts

generally enforce contractual limitations upon remedies unless such

limitations are unconscionable. In re O.P.M. Leasing Servs., Inc., 21 B.R.

at 1006.

      If an agreement qualifies as a finance lease under the UCC, an

express hell-or-high-water clause is unnecessary because such a

provision automatically attaches to a finance lease by statute.          See

U.C.C. § 2A-407 (amended 2003), 1C U.L.A. 994 (2004); Iowa Code

§ 554.13407. With regard to security interests, no such statute exists in
article 9 of the UCC or article 9 of the IUCC. See 1 Ian Shrank & Arnold

G. Gough, Equipment Leasing-Leveraged Leasing § 3:1.10, at 3–26 (4th
                                      16

ed. 2010) [hereinafter Equipment Leasing-Leveraged Leasing] (recognizing

UCC article 9 does not create an automatic hell-or-high-water clause for

a secured lender, although secured lenders play a similar role as finance

lessors because both are suppliers of money).         Instead, for a secured

lender to receive the protection of a hell-or-high-water clause, the

secured lender must expressly assert such a provision within the

contract‘s language.      Id.   Accordingly, when a secured transaction

contains an express hell-or-high-water clause, courts must grant the

provision full effect. See, e.g., Key Equip. Fin. Inc. v. Pioneer Transp., Ltd.,
472 F. Supp. 2d 1131, 1140–41 (W.D. Wis. 2007) (holding express hell-

or-high-water clause was fully enforceable in a disguised sale creating a

security interest); Excel Auto & Truck Leasing, L.L.P., 249 S.W.3d at 63,

65 (Keyes, J., concurring in part and dissenting in part) (recognizing a

hell-or-high-water clause can appear in any kind of agreement).

Consequently, we hold an express hell-or-high-water clause contained

within a disguised sale with a security interest is fully enforceable

because to do otherwise would be to improperly reconstruct the contract

contrary to the parties‘ intent.

      Lake MacBride further argues Frontier cannot enforce the hell-or-

high-water clause because it does not qualify as a holder in due course.

Iowa Code section 554.9403(2) requires that an assignee must qualify as

a holder in due course in order to enforce a waiver-of-defenses clause.

See Black’s Law Dictionary at 1612 (defining a waiver-of-defenses clause

as ―[t]he intentional relinquishment by a maker, drawer, or other obligor

under a contract of the right to assert against the assignee any claims or

defenses the obligor has against the assignor‖).          However, the lease
agreement does not contain a waiver-of-defenses clause; instead, it only

contains a hell-or-high-water clause.
                                   17

      One line of authority suggests that an assignee in a commercial

(non-consumer) context need not qualify as a holder in due course to

enforce a hell-or-high-water clause.       Equipment Leasing-Leveraged

Leasing § 3:2.2, at 3–33 to 3–34 (recognizing hell-or-high-water

provisions are not subject to UCC § 9-403(b)); accord Benedictine Coll.,

Inc. v. Century Office Prods., Inc., 853 F. Supp. 1315, 1325 (D. Kan.

1994) (recognizing assignee could enforce hell-or-high-water provision

irrespective of holder in due course status); In re O.P.M. Leasing Servs.,

Inc., 21 B.R. at 1008 (same). Other courts, however, have treated hell-or-
high-water clauses and waiver-of-defenses clauses as indistinguishable

and required holder-in-due-course status before an assignee may enforce

either clause. See, e.g., Union Mut. Life Ins. Co. v. Chrysler Corp., 793
F.2d 1, 12–13 (1st Cir. 1986) (failing to distinguish between the two

clauses).

      We believe the position that an assignee may enforce a hell-or-

high-water clause irrespective of its holder-in-due-course status is more

persuasive and adopt it as the law in Iowa.       These two clauses are

distinguishable—a hell-or-high-water clause protects the lessor whereas

a waiver-of-defenses clause protects an assignee of the lessor. Compare

Black’s Law Dictionary at 742 (defining hell-or-high-water clause), with

Black’s Law Dictionary at 1612 (defining waiver-of-defenses clause).

Accordingly, we reject Lake MacBride‘s holder in due course argument.

      Even though the hell-or-high-water clause is enforceable, Lake

MacBride is not completely barred from raising its claims and defenses

against Frontier. Lake MacBride may still raise claims and defenses that

relate to contract formation, i.e., fraud in the inducement, fraudulent
misrepresentation, equitable and constructive fraud, mutual mistake,

estoppel, and unconscionability. See, e.g., Outlook Farm Golf Club, LLC,
                                    18
784 N.W.2d at 758 (recognizing party may still raise defenses to contract

formation despite presence of hell-or-high-water clause).      In addition,

Lake MacBride may still assert any statutory claims and defenses it has

against Frontier, i.e., failure to disclose an interest rate in violation of

Iowa Code chapter 535 and violation of chapter 551A, Iowa‘s business-

opportunity-promotions statute.

      VI. Agency.

      Lake MacBride next claims genuine issues of material fact exist as

to whether Royal Links was acting as an agent of C & J, which would
allow Lake MacBride to pursue its affirmative defenses of mutual

mistake, fraud in the inducement, estoppel, and negligent supervision,

as well as its counterclaims of fraudulent misrepresentation and

equitable and constructive fraud against Frontier.       These affirmative

defenses and counterclaims center on Lake MacBride‘s allegation that

the Royal Links sales representative misrepresented the nature of the

transaction to Lake MacBride, thereby fraudulently inducing it to enter

into the lease agreement.     However, because the sales representative

made all the alleged misrepresentations, in order to raise these

affirmative defenses and counterclaims Lake MacBride must prove by a

preponderance of the evidence that an agency relationship existed

between the sales representative and C & J. Frontier Leasing Corp. v.

Links Eng’g, LLC, 781 N.W.2d 772, 776 (Iowa 2010); see also Hendricks

v. Great Plains Supply Co., 609 N.W.2d 486, 493 (Iowa 2000) (recognizing

a principal is bound by whatever an agent does within the agent‘s scope

of actual or apparent authority).

      An agency relationship exists where an agent has actual (express
or implied) authority or apparent authority to act on behalf of a principal.

Links Eng’g, LLC, 781 N.W.2d at 776. On further review, Lake MacBride
                                    19

only presents an apparent-authority argument. ―Apparent authority is

authority the principal has knowingly permitted or held the agent out as

possessing.‖ Id. When determining if a principal vested an agent with

apparent authority, the court must focus on the principal‘s actions and

communications to the third party.       Id.   Thus, we must determine

whether apparent authority exists based on C & J‘s conduct, rather than

any conduct on the part of the Royal Links sales representative.

      Frontier argues the lease agreement and the delivery and

acceptance certificate explicitly stated that Royal Links was not an agent
of C & J.      Nevertheless, we have recognized that such express

contractual statements are not conclusive as to whether an agency

relationship exists. Outlook Farm Golf Club, LLC, 784 N.W.2d at 760.

      The record reveals the beverage-cart program was ―vendor-based,‖

meaning C & J relied on vendors, such as Royal Links, to bring lessees,

such as Lake MacBride, to C & J for financing. This may explain why

Lake MacBride exclusively dealt with the Royal Links sales representative

throughout the transaction, save for one delivery-verification telephone

call from C & J.      The credit application Lake MacBride executed

contained Royal Links name at the top and restricted the release of the

information contained in the application to ―Royal Links USA and any of

its affiliates and/or assigns.‖   Royal Links then forwarded this credit

application on to C & J for approval.      Finally, Frontier has failed to

explain how the monthly payments Lake MacBride was obligated to pay

C & J to lease the beverage cart were miraculously identical to the

monthly amounts Lake MacBride received from Royal Links in exchange

for allowing advertising to be displayed on the beverage cart. These facts
led Lake MacBride‘s general manager to state, ―the sales representative
                                  20

was authorized to act on behalf of and for the benefit of the leasing

company.‖

      Drawing all reasonable inferences in favor of Lake MacBride, the

abovementioned facts constitute sufficient circumstantial evidence to

generate a genuine issue of material fact that C & J knowingly permitted

and/or held out Royal Links as possessing the authority to negotiate the

terms of the lease agreement as well as prepare the paperwork used to

execute the agreement.   See id. at 759–60 (finding a genuine issue of

material fact on the issue of agency under similar circumstances, where
circumstantial evidence supported a finding that the principal may have

allowed the alleged agent to negotiate the terms of the lease agreement

and prepare the accompanying paperwork). Accordingly, while the finder

of fact may ultimately conclude C & J did not permit or hold out Royal

Links as its agent, we hold Lake MacBride has generated a genuine issue

of material fact on this issue, allowing the question to go to the fact

finder.

      VII.   Other Affirmative Defenses, Counterclaims, and Third-

Party Claims.

      A. Fraud in the Inducement and Equitable Estoppel.           Lake

MacBride claims the Royal Links sales representative fraudulently

induced it into entering the lease agreement based on misrepresentations

that the beverage cart was free and Frontier should be equitably

estopped from claiming the sales representative was not acting as its

agent. See Paveglio v. Firestone Tire & Rubber Co., 167 N.W.2d 636, 638

(Iowa 1969) (stating the elements necessary to establish equitable

estoppel). In response to these affirmative defenses, Frontier has only
argued that the sales representative was not acting as C & J‘s agent and

therefore, it is not bound by any of the alleged misrepresentations.
                                        21

However, we have found a genuine issue of material fact exists as to

whether C & J knowingly permitted and/or held out the sales

representative as possessing the authority to negotiate the terms of the

lease agreement and prepare the paperwork used to execute the

agreement. Accordingly, Lake MacBride has established a genuine issue

of material fact as to its affirmative defenses of fraud in the inducement

and equitable estoppel.

      B. Unconscionability. Lake MacBride argues it has established a

genuine issue of material fact regarding its affirmative defense of
unconscionability.      Specifically,   Lake   MacBride   claims   the   lease

agreement is unconscionable because C & J used the misrepresentations

of its agent to secure Lake MacBride‘s execution of the contract,

concealed the agreement‘s interest rate, concealed the true value of the

beverage cart, and used a credit application that claimed it would only

disclose the credit information to Royal Links‘ affiliates and/or assigns.

      A contract is unconscionable where no person in his or her right

senses would make it on the one hand, and no honest and fair person

would accept it on the other hand. Smith v. Harrison, 325 N.W.2d 92, 94

(Iowa 1982).     In considering such claims, we consider the factors of

―assent, unfair surprise, notice, disparity of bargaining power, and

substantive unfairness.‖ C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227
N.W.2d 169,    181     (Iowa   1975).       However,   the   doctrine     of

unconscionability does not exist to rescue parties from bad bargains.

Smith, 325 N.W.2d at 94.

      This doctrine encompasses both procedural abuses arising from

the contract‘s formation and substantive abuses related to the contract‘s
terms. In re Marriage of Shanks, 758 N.W.2d 506, 515 (Iowa 2008); 17

C.J.S. Contracts § 4, at 417 (1999).           Procedural unconscionability
                                          22

involves an advantaged party‘s exploitation of a disadvantaged party‘s

lack of understanding, unequal bargaining power between the parties, as

well as the use of fine print and convoluted language.                  Shanks, 758
N.W.2d at 515, 517. Substantive unconscionability involves whether or

not the substantive terms of the agreement are so harsh or oppressive

that no person in his or her right senses would make it. Id. at 515–16.

Finally, whether an agreement is unconscionable must be determined at

the time it was entered. Casey v. Lupkes, 286 N.W.2d 204, 208 (Iowa

1979).
       The record reveals Lake MacBride was an intelligent business

entity that had the opportunity to read the entire lease agreement and

calculate the amount it would owe C & J for the beverage cart. There is

no evidence of unequal bargaining power between the parties or a lack of

understanding on the part of Lake MacBride. There is also no evidence

the substantive terms of the agreement were so oppressive that no

person in his or her right senses would enter into it.                 Although the

agreement ultimately amounted to a bad bargain for Lake MacBride, for

over a year, Lake MacBride did receive the benefits of the beverage cart at

no cost. Thus, we find there is no genuine issue of material fact that the

lease agreement is procedurally or substantively unconscionable.4

Consequently, the district court was correct when it found the lease

agreement was not unconscionable.

        4In In re Marriage of Shanks, 758 N.W.2d 506, 517–18 (Iowa 2008), we stated

that ―the use of fraudulent or deceptive practices to procure the disadvantaged party‘s
assent to the agreement,‖ is one of the factors we consider when determining whether
an agreement is procedurally unconscionable. This factor amounts to a claim of fraud
in the inducement. Because this is the only factor that may militate towards a finding
of procedural unconscionability and we are remanding the case for a trial on this issue,
this factor alone is not sufficient to generate a genuine issue of material fact as to
whether the lease agreement is procedurally unconscionable.
                                    23

      C. Mutual Mistake of the Parties. Lake MacBride asserts there

were two mutual mistakes in the formation of the parties‘ agreement—

the belief Lake MacBride would receive the beverage cart at no cost and

that the Royal Links sales representative was acting as an agent of

C & J.

      A mutual mistake in the formation of a contract occurs when the

parties reach and correctly express the contract, yet enter into the

contract based on a false underlying assumption. State ex rel. Palmer v.

Unisys Corp., 637 N.W.2d 142, 151 (Iowa 2001). The proper remedy for a
mutual mistake in the formation of a contract is avoidance. Nichols v.

City of Evansdale, 687 N.W.2d 562, 571 (Iowa 2004). For a mistake to be

mutual, it must exist at the time the parties formed the contract and be

common to both parties.     Krieger v. Iowa Dep’t of Human Servs., 439
N.W.2d 200, 203 (Iowa 1989).

      The record is devoid of evidence to support the inference that the

other parties shared the mutual mistakes claimed by Lake MacBride at

the time they entered into the lease agreement. Thus, the district court

was correct when it found no genuine issue of material fact that the

mistakes were mutual to all the parties at the time the parties entered

into the lease agreement.

      D. Failure to Disclose an Interest Rate Under Iowa Code

Chapter 535. Lake MacBride complains the lease agreement contains a

usurious interest rate that C & J did not disclose in violation of Iowa

Code sections 535.2(1) and 535.17(1). The Iowa Code provides:

      The following persons may agree in writing to pay any rate of
      interest, and a person so agreeing in writing shall not plead
      or interpose the claim or defense of usury in any action or
      proceeding, and the person agreeing to receive the interest is
      not subject to any penalty or forfeiture for agreeing to receive
      or for receiving the interest:
                                    24
               ....

            (5) A person borrowing money or obtaining credit for
      business or agricultural purposes, or a person borrowing
      money or obtaining credit in an amount which exceeds
      twenty-five thousand dollars for personal, family, or
      household purposes.

Iowa Code § 535.2(2)(a)(5) (emphasis added).         ― ‗[B]usiness purpose‘

includes but is not limited to a commercial, service, or industrial

enterprise carried on for profit and an investment activity.‖ Id.

      Lake MacBride agreed in writing to make sixty monthly payments

of $299 to C & J in exchange for one beverage cart, which it used to sell
refreshments to customers at its golf course. The beverage carts were

used in connection with the golf course operation and its use came

within the goals of the business-purpose exception contained in section

535.2(2)(a)(5). Chapman’s Golf Ctr. v. Chapman, 524 N.W.2d 422, 426–

27 (Iowa 1994). Therefore, we find Lake MacBride could agree to pay any

rate of interest and cannot now assert a usury defense because the lease

agreement was for a ―business purpose.‖

      Lake MacBride also claims a genuine issue of material fact exists

regarding its claim the lease agreement failed to disclose an interest rate

in violation of Iowa Code section 535.17(1). Section 535.17(1) states, ―A

credit agreement is not enforceable . . . unless a writing exists which

contains all of the material terms of the agreement and is signed by the

party against whom enforcement is sought.‖        Iowa Code § 535.17(1).

This section acts as a statute of frauds for credit agreements by ensuring

that actions and defenses on credit agreements ―are supported by clear

and certain written proof of the terms of such agreements.‖             Id.

§ 535.17(6).
      Assuming, without deciding, C & J qualifies as a ―lender‖ and the

lease agreement qualifies as a ―credit agreement,‖ Lake MacBride has
                                          25

failed to show the agreement is unenforceable because it fails to contain

―all of the material terms of the agreement,‖ by not explicitly listing an

interest rate. The agreement laid out the subject matter, price, payment

terms, and duration. Although the agreement did not expressly list an

interest rate, it did provide Lake MacBride was to make sixty monthly

payments of $299 to C & J. Section 535.17(1) contains no requirement

that the interest rate must be listed separate from the total payment

required under the agreement. Compare Iowa Code § 535.17(1), with 15

U.S.C. § 1632 (2006) (requiring, among other things, disclosure of
interest rates in the agreement). Accordingly, we find the express terms

contained within the lease agreement were sufficient to satisfy the

requirements of section 535.17(1).

       E. Violation       of     Iowa’s     Business-Opportunity-Promotions

Statute. Lake MacBride claims the transaction qualifies as a ―business

opportunity,‖ and consequently violates Iowa‘s business-opportunity-

promotions statute by failing to make the mandatory disclosures

required by Iowa Code section 523B.2, thereby entitling it to rescission

and damages.5 It is undisputed that C & J failed to make the disclosures

mandated by the statute.          Accordingly, the only issue is whether the

transaction qualifies as a ―business opportunity‖ to which the statute

applies.

       Iowa Code section 523B.2(8)(a) provides it is unlawful for a ―seller‖

to sell a ―business opportunity‖ unless certain disclosures are made to

        5Both Lake MacBride and Frontier cite Iowa Code chapter 551A with regard to

the business-opportunity-promotions statute. Prior to 2004, this statute was contained
in Iowa Code chapter 523B. See Iowa Code §§ 523B.1–.13 (2003). In 2004 the
legislature amended chapter 523B and directed the code editor to transfer the statute to
chapter 551A. See 2004 Iowa Acts ch. 1104, §§ 5–31. Accordingly, because the cause
of action at issue in this case arose in 2003, prior to these changes, we will consider
Lake MacBride‘s business-opportunity-promotions counterclaim by referencing the
statute as it existed in 2003. See Iowa Code §§ 523B.1–.13 (2003).
                                      26

the ―purchaser‖ at least ten days before the agreement is executed.

Under the statute, a ―business opportunity‖ is defined as:

      [A] contract or agreement, between a seller and purchaser,
      express or implied, orally or in writing, at an initial
      investment exceeding five hundred dollars, where the parties
      agree that the seller or a person recommended by the seller
      is to provide to the purchaser any products, equipment,
      supplies, materials, or services for the purpose of enabling
      the purchaser to start a business, and the seller represents,
      directly or indirectly, orally or in writing, any of the following:
            ....

           (4) The purchaser will derive income from                 the
      business which exceeds the price paid to the seller.

Iowa Code § 523B.1(3)(a)(4) (emphasis added). The statute also makes

several exclusions from the definition of ―business opportunity.‖ See id.

§ 523B.1(3)(b). One such exclusion states:

      ―Business opportunity‖ does not include . . . [a]n offer or sale
      of a business opportunity to an ongoing business where the
      seller will provide products, equipment, supplies, or services
      which are substantially similar to the products, equipment,
      supplies, or services sold by the purchaser in connection
      with the purchaser‘s ongoing business.

Id. § 523B.1(3)(b)(2) (emphasis added).        Finally, the statute further

defines ―ongoing business,‖ as

      an existing business that for at least six months prior to the
      offer, has been operated from a specific location, has been
      open for business to the general public, and has
      substantially all of the equipment and supplies necessary for
      operating the business.

Id. § 523B.1(8).

      The lease agreement allowed Lake MacBride to purchase the

beverage cart from C & J for $1 at the end of the lease term. However,

the program agreement between Royal Links and Lake MacBride stated
upon expiration of the agreement, Royal Links had the option to

purchase the beverage cart from Lake MacBride for $1.             Accordingly,
                                        27

Lake   MacBride       argues   the   transaction        qualifies    as   a   ―business

opportunity‖ under Iowa Code chapter 523B because it merely provided

Lake MacBride with the ability to generate a revenue stream from ―on

course concession sales and advertising revenue‖ through use of the

beverage cart. We disagree.

       The transaction fails to meet the requirements of the definition of

―business opportunity‖ because C & J did not provide the beverage cart

to Lake MacBride to enable Lake MacBride to start a business. See id.

§ 523B.1(3)(a) (recognizing, for an agreement to qualify as a business
opportunity, the seller must provide the product to the purchaser ―for the

purpose of enabling the purchaser to start a business‖). At the time of

the transaction, Lake MacBride qualified as an ―ongoing business‖ under

the statute. See id. § 523B.1(8). For twenty-six years, Lake MacBride

had successfully operated its golf course in Solon, Iowa, and presumably

possessed all the equipment and supplies necessary for operating a golf

course.

       In addition, the transaction satisfies one of the explicit exclusions

from the definition of a ―business opportunity.‖ See id. § 523B.1(3)(b)(2).

Because this transaction involved the sale of a product—the beverage

cart—that was substantially similar to the products and services sold by

Lake MacBride in connection to its ongoing business—the sale of

beverages and other concessions to its golfers—the transaction is

explicitly excluded from the definition of a ―business opportunity.‖                Id.

Accordingly, the district court rightly dismissed Lake MacBride‘s

business-opportunity-promotions counterclaim.

       F. Remaining Claims and Affirmative Defenses. Lake MacBride
argues the district court erred in granting summary judgment in favor of

Frontier   on   its    affirmative   defenses      of     set-off,   sole     proximate
                                      28

cause/negligent supervision, no meeting of the minds, and frustration of

purpose because Frontier failed to address these defenses in its motion

for summary judgment. In its motion for summary judgment, Frontier

gave cursory attention to these defenses by merely stating the defenses

―have no legal merit based on the undisputed facts and law of Iowa.‖ The

district court granted summary judgment in Frontier‘s favor without

discussing these defenses.

        Such a perfunctory statement by Frontier, as the moving party, is

insufficient to satisfy the burden it carries of establishing no genuine
issue of material fact existed. Sherwood v. Nissen, 179 N.W.2d 336, 339

(Iowa 1970) (recognizing, if the moving party has not met his or her

burden, he or she is not entitled to summary judgment). Accordingly, we

find the district court erred in granting summary judgment in favor of

Frontier on these affirmative defenses and upon remand, the district

court must rule on the defenses at the appropriate time.          See, e.g.,

Huffey v. Lea, 491 N.W.2d 518, 523 (Iowa 1992) (holding, upon remand,

district court must rule on party‘s affirmative defense that it earlier had

failed to rule on when dismissing the action).

        In its amended answer, Lake MacBride also asserted              the

counterclaims/third-party    claims    of   fraudulent   misrepresentation,

equitable fraud, constructive fraud, concert of action, and attempted to

pierce the corporate veil. The district court enlarged its ruling to dismiss

these counterclaims/third-party claims.          Lake MacBride claims the

district court erred in dismissing these counterclaims/third-party claims

because Frontier never directed a motion for summary judgment at

them.
        As to the fraudulent misrepresentation, equitable fraud, and

constructive fraud claims, Frontier addressed these claims generally in
                                     29

its motion for summary judgment under the heading ―fraud and

misrepresentations.‖    Frontier argued because there was no agency

relationship between it and Royal Links, ―there was no fraud or

misrepresentation that is attributable to C and J.‖      The district court

found no agency relationship existed and enlarged its ruling to dismiss

these claims.   However, we have held a genuine issue of material fact

exists as to whether Royal Links was acting as an agent of C & J.

Accordingly, we find Lake MacBride has generated a genuine issue of

material fact as to its counterclaims/third-party claims of fraudulent
misrepresentation, equitable fraud, and constructive fraud.

      As to Lake MacBride‘s counterclaim/third-party claim of concert of

action and its attempt to pierce the corporate veil, Frontier failed to move

for summary judgment on these claims. Thus, the district court erred by

enlarging its ruling to dismiss these claims in favor of Frontier. See, e.g.,

In re Estate of Campbell, 253 N.W.2d 906, 907–08 (Iowa 1977) (refusing

to grant summary judgment to one who has not requested it).

Accordingly, upon remand, the district court must rule on Lake

MacBride‘s concert of action claim and its attempt to pierce the corporate

veil at an appropriate time.

      VIII. The Integration Clause and the Parol-Evidence Rule.

      Lake MacBride asserts there are facts in dispute that could lead a

reasonable finder of fact to believe the lease agreement was not fully

integrated and that the parol-evidence rule does not bar the introduction

of extrinsic evidence of the agreement. Specifically, Lake MacBride seeks

to introduce the program agreement it executed with Royal Links and the

statements made by the Royal Links sales representative to show the
parties intended Lake MacBride to receive the beverage cart at no cost.
                                           30

      When an agreement is fully integrated, the parol-evidence rule

forbids the use of extrinsic evidence introduced solely to vary, add to, or

subtract from the agreement. Whalen v. Connelly, 545 N.W.2d 284, 290

(Iowa 1996); Kroblin v. RDR Motels, Inc., 347 N.W.2d 430, 433 (Iowa

1984); Montgomery Props. Corp. v. Econ. Forms Corp., 305 N.W.2d 470,

475–76 (Iowa 1981). When the parties adopt a writing or writings as the

final and complete expression of their agreement, the agreement is fully

integrated.        Whalen, 545 N.W.2d at 290.           Determining whether an

agreement is fully integrated is a question of fact, to be determined from
the totality of the evidence. Id. The presence of an integration clause is

one factor we take into account in determining whether an agreement is

fully integrated. Nevertheless, the parol-evidence rule does not prohibit

the introduction of extrinsic evidence to show ―the situation of the

parties, . . . attendant circumstances, and the objects they were striving

to attain.‖        Kroblin, 347 N.W.2d at 433.       The parol-evidence rule also

does not prohibit the admission of extrinsic evidence to prove fraud in

the inducement. Int’l Milling Co. v. Gisch, 258 Iowa 63, 71, 137 N.W.2d
625, 630 (1965).

      Although the lease agreement contained an integration clause, the

parol-evidence rule does not prohibit Lake MacBride from introducing

evidence      of    the   Royal   Links‘   program    agreement   and   the   sale

representative‘s alleged misrepresentations.             Lake MacBride is not

seeking to offer this extrinsic evidence to change or vary the meaning of

the lease agreement.         See, e.g., Kroblin, 347 N.W.2d at 433 (holding

parol-evidence rule did not bar admission of extrinsic evidence, where

evidence was not introduced to change or vary the words of the contract).
Instead, Lake MacBride apparently seeks to offer this extrinsic evidence

to support its claim that it was fraudulently induced into entering into
                                    31

the lease agreement based on its belief that, under the totality of the

transaction, it would receive the beverage cart at no cost. Accordingly,

the parol-evidence rule does not bar the admission of this evidence for

this purpose because Lake MacBride seeks to introduce this extrinsic

evidence to help prove fraud in the inducement and its expectations from

participating in the transaction.

      IX. Attorney Fee Award.

      The district court awarded attorney fees to Frontier based upon its

entry of judgment in Frontier‘s favor. On further review, we are vacating
the decision of the court of appeals, reversing the judgment of the district

court, and remanding the case to the district court for further

proceedings consistent with this opinion. Accordingly, we must vacate

the court‘s attorney-fee award because Frontier has not yet recovered a

favorable judgment upon the lease agreement. See Iowa Code § 625.22

(permitting the court to award reasonable attorney fees when judgment is

recovered upon a written contract containing an agreement to pay

attorney fees).

      X. Disposition.

      Because we have found genuine issues of material fact with regard

to some of Lake MacBride‘s affirmative defenses, counterclaims, and

third-party claims, we vacate the decision of the court of appeals, reverse

the judgment of the district court, and remand the case to the district

court for further proceedings consistent with this opinion.

      DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT REVERSED AND REMANDED.