Court Opinion

ID: 4183921
Source: CourtListenerOpinion
Date Created: 2017-07-06 16:07:45.839934+00
Date Added: 2024-06-11T14:56:48.880578
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                  No. 16-0310
                               Filed July 6, 2017

JOHN DEPPE and DEPPE JJ, LLC f/k/a DOERSCHER-DEPPE, LLC,
     Plaintiffs-Appellants,

vs.

DOUGLAS H. DEPPE and KIM DOERSCHER-DEPPE,
     Defendants-Appellees.
________________________________________________________________

      Appeal from the Iowa District Court for Clinton County, Mark D. Cleve,

Judge.

      John Deppe and his business, Deppe JJ, LLC, appeal following jury

verdicts in favor of defendants Doug Deppe and Kim Doerscher-Deppe.

AFFIRMED.

      Kevin J. Visser and Abbe M. Stensland of Simmons Perrine Moyer

Bergman PLC, Cedar Rapids, for appellants.

      James D. Bruhn, PLC of Farwell & Bruhn, Clinton, for appellees.

      Considered by Potterfield, P.J., and Doyle and Tabor, JJ.
                                          2

DOYLE, Judge.

       John Deppe and his business, Deppe JJ, LLC, formerly known as

Doerscher-Deppe, LLC, appeal following jury verdicts in favor of defendants

Doug Deppe and Kim Doerscher-Deppe finding, among other things, that there

was no breach of the parties’ settlement agreement by the defendants. Plaintiffs

assert the district court erred in not giving their proposed jury instruction defining

the term “crop year” as used in the settlement agreement, arguing the term is

defined by statute, regulation, by the court, by industry usage, and by the parties.

Plaintiffs argue the district court compounded the error by instructing the jury that

“There is no established legal definition of ‘crop year’ in this case.” Upon our

review, we conclude, based upon the language of the parties’ settlement

agreement along with the extrinsic evidence presented, there was no reversible

instructional error.   Further, we conclude that, even if there was instructional

error, it did not result in prejudice because of Plaintiffs’ failure to materially

comply with the terms of the settlement agreement. Accordingly, we affirm the

jury’s verdicts.

       I. Background Facts and Proceedings.

       This appeal concerns the settlement agreement entered into by the former

members of Doerscher-Deppe, LLC (“LLC”)—John Deppe, his cousin Doug

Deppe, and Doug’s wife Kim Doerscher-Deppe. Doug, Kim, John, and John’s

wife, Joelle, have engaged in farming most of their lives. John, Doug, and Kim

each have experience leasing farm land; Doug and Kim leased their own land to

John, who owned his own equipment, to farm their land.
                                          3

       Kim’s father, owner and operator of Doerscher Ag, Ltd., passed away in

2006. His business owned land that was leased, but, by way of a trust in favor of

Kim’s mother, the trust was the lessor of some of that land and the rents

collected were assigned to Kim’s mother. Additionally, Kim’s father, through his

business and also individually, continually leased and farmed other farms. Upon

his death, Kim and her two siblings each inherited a third of their father’s

company’s shares.

       To maintain and farm the leases held by Kim’s father’s company, which

still had time remaining upon them, John, Doug, and Kim formed LLC in 2007.

John owned fifty percent, and Doug and Kim each owned twenty-five percent.

LLC borrowed money for initial expenses, including paying rent due on the

farmland leased and financing the crops. John custom farmed the land leased

by LLC with his own equipment, and Kim sold the crops. The LLC would then

pay John for his custom farming out of the proceeds of the sales. The money left

in LLC after the expenses were paid was used to pay down the loan and to

finance LLC’s operations for the next year. Kim and Doug took care of LLC’s

books, including writing the checks to pay their landlords, and they maintained

the relationships with their landlords, essentially acting as the face of LLC.

       By 2012, John, Doug, and Kim had disagreements concerning LLC’s

operation.   Kim’s mother terminated her trust’s lease with LLC, as did Kim’s

brother, on behalf of Doerscher Ag, Ltd. John eventually filed suit against Doug

and Kim.

       Ultimately, LLC’s members entered into a settlement agreement in

January 2013, setting forth numerous terms to which the parties assented.
                                         4

Among many things, the agreement provided that Kim and Doug would transfer

their membership interest in LLC to John in exchange for a cash settlement.

Additionally, the parties agreed to the following paragraphs at issue here:

             3. [LLC] will be entitled to farm [several farms that LLC had
      leased, including the Wegener farm, the Curtis farm, the Merle
      Doerscher farm, the Kelly farm, and the Carter/Conklin farm]. . . .
             4. Kim and Doug will be entitled to farm the [farmland leased
      by Doerscher Ag, Ltd. and the trust]. . . .
             5. At the end of the 2013 crop year, all leases are open for
      negotiation, to any party.
             ....
             14. Upon completion of the settlement, [LLC] shall notify its
      landlords that Kim and Doug are no longer members of [LLC]. The
      Notice shall inform the landlords that [LLC] will honor the 2013
      leases and [John] will be sole owner and operator of [LLC] for 2013.

      After entering into the agreement, LLC paid Doug and Kim their settlement

funds, and Doug and Kim transferred their ownership interest in LLC to John.

Though John farmed the land leased to LLC as agreed, when John’s wife sent

out rent checks to LLC’s landlords in February 2013 on behalf of LLC, she

included a handwritten note letting the landlords know she was LLC’s new

bookkeeper and for them to let John know if they needed anything. The letter

also stated that John wanted “to meet with you the next time you’re in Davenport

to see if there is anything you need (any improvements) done on your farm

ground for 2013.” While there was no specific statement that Doug and Kim

were no longer members of LLC and that John was now its sole owner, John

testified the purpose of the letter was to satisfy paragraph fourteen of the

settlement agreement.

      In June 2013, while John was at the Wegener farm, he talked to landlord

Lois Wegener’s son, Dirk Wegener. Dirk did not know who John was because
                                        5

he had never dealt with him concerning his mother’s farm. Dirk testified John

asked him what his mother was “going to do with the farm the following year.”

Dirk contacted his mother, who was out of state, and told her about his

conversation with John and his confusion of the situation “because we had

always dealt with Doug.” Doug, Kim, Dirk, and Dirk’s mother had dinner at the

farm in July 2013, and they discussed Doug and Kim’s leaving of the LLC. Doug

and Kim then expressed their desire to rent Lois’s farmland for 2014, after her

lease with LLC ended.

      Lois met with her attorney shortly thereafter to draft a new lease, and she

brought with her a copy of the existing lease with LLC. The attorney asked her

who the lessee would be, and Lois told him Doug and Kim. When the attorney

pointed out the existing lease was with LLC, Lois told the attorney to contact

Doug. Lois’s attorney was able to reach Doug after Lois left his office, and Doug

told him LLC had been dissolved. The attorney drafted the new lease as directed

with Doug and Kim as tenants, which they signed, but because Lois had left

town, she told her attorney she would sign the lease when she returned to town

in a few weeks.    The attorney sent to LLC, including John, a termination of

tenancy notice for the Wegener farm.

      After receiving the notice, John contacted his attorney, who then

contacted Lois’s attorney.     Lois’s attorney learned about the settlement

agreement between John, Doug, and Kim regarding LLC, and John met with

Lois’s attorney and offered to rent her farm in 2014 for a higher amount. Lois’s

attorney relayed the offer to Lois, and Lois told him she was going to think about

it and speak with her children. Lois talked to Doug and told him about John’s
                                         6

higher offer, and he offered to match John’s. Lois talked to Dirk and asked for

his input, and Dirk stated he was not happy with the way the farmland had been

taken care of 2013. Lois ultimately leased the farmland to Doug and Kim.

       After John received the termination notice from Lois in July 2013, he

contacted another of his landlords, Eldon Curtis, about leasing the Curtis farm in

2014. Doug likewise contacted Eldon about him and Kim leasing the Curtis farm.

LLC received a termination-of-tenancy notice concerning the Curtis farm lease,

and ultimately the Curtis farm was leased to Doug and Kim on March 1, 2014.

       In April 2014, John and LLC (hereinafter collectively “Plaintiffs”) filed suit

against Doug and Kim for breach of contract, among other things, which was

later amended.       Specifically, Plaintiffs claimed “crop year” as used in the

settlement agreement had “a clear, unambiguous meaning. Crop Year has been

defined by the Iowa Code Chapter 562 [(2013)] and long standing Iowa Case law

as March 1 through March 1” and “[n]egotiation, discussions, or any conduct

relating to the farm leases should not have started until March 1, 2014.” Plaintiffs

asserted Doug and Kim began negotiating leases before March 1, 2014, and,

therefore, materially breached the settlement agreement. In Doug and Kim’s

answer to the petition, they affirmatively defended that Plaintiffs “themselves

contacted landlords prior to March 1, 2014, in an effort to negotiate leases

commencing March 1, 2014, and have acted in a manner contrary to their

interpretation of paragraph 5 of the Agreement” and “are therefore barred by the

doctrine of equitable estoppel and/or judicial estoppel from asserting a contrary

position in this action.”
                                          7

       Prior to trial, Plaintiffs filed a motion in limine seeking, among other things,

that the court take judicial notice of the meaning of “crop year,” because the court

had previously ruled, in denying in part Plaintiffs’ motion to compel production of

other leases by Doug and Kim, the “argument the leases would develop the term

‘crop year’ is without merit. That term is a legal phrase with an established

meaning under Iowa law.”

       Additionally, both sides submitted proposed jury instructions to the court

before trial. Plaintiffs proposed that the jury be instructed that “[a] crop year is

defined as beginning on the first day of March and ending on the last day of the

following February.” Doug and Kim’s proposed instructions did not discuss the

term “crop year” at all. In objecting to Doug and Kim’s proposed instructions

regarding interpretation of contracts, Plaintiffs argued the settlement agreement

was unambiguous and the term “crop year” had an unambiguous, statutorily

defined meaning.

       A jury trial commenced January 19, 2016. Prior to hearing evidence, the

court took up Plaintiffs’ motion in limine, including whether the court would take

judicial notice of the definition of “crop year.” Plaintiffs asserted the meaning was

defined by law, which a different judge had previously found in a prior ruling, and

requested judicial notice be taken. Doug and Kim resisted, explaining:

               [Plaintiffs’] request is tantamount to adjudication of law
       points or even it goes so far as a . . . partial motion for summary
       judgment. This has been an issue that was addressed in—in the
       summary judgment ruling. It doesn’t meet . . . the criteria of the rule
       we set out in our brief for taking judicial notice. It is not like taking
       judicial notice of what day of the week was January 6th of last year.
       Crop year can have all different meanings and can have all different
       meanings depending on what context it was used in, and it goes to
       the heart of the issue at hand. It isn’t a term as used in the
                                          8

       agreement, and the agreement itself did not adopt any definitions
       and they—it is a distortion to say crop year is defined in Chapter
       562, because it is not defined in Chapter 562. So there is no law
       defining crop year to take judicial notice of; no established law
       particularly as what it was intended in the context of the sentence
       that is at issue in this case.

The court declined Plaintiffs’ request to take judicial notice of the statutory

definition of “crop year.”

       Prior to submitting the matter to the jury, the court gave the parties its

proposed jury instructions and heard the parties’ exceptions and objections.

Plaintiffs objected to the court’s proposed instruction number fourteen, which

stated “[t]here is no established legal definition of ‘crop year’ in this case. You

are to determine the meaning of all of the words used by the parties in the

Settlement Agreement.” Plaintiffs argued the instruction was

       not a proper statement of the law. We believe that the phrase “crop
       year” does have a clear unambiguous and statutorily defined
       meaning; that crop year runs from March 1st to the last day of
       February, according to Iowa Code section 562. Also previously in
       this case, [a different judge] indicated in his ruling on June 8, 2015,
       in Plaintiffs’ Motion to Compel—in that order he said “crop year” is a
       legal phrase with an established meaning under Iowa law. And so
       Your Honor, we would object to Instruction Number 14.

Doug and Kim argued the instruction was a “proper statement of law in this

case,” because “there is no definition of ‘crop year’ under Chapter 562” and the

settlement agreement “did not set forth any definitions and it is—it is an

inappropriate instruction to clearly instruct the jury on the law as it applies to this

particular fact of this case.” The court ruled “that the instructions as proposed

and submitted by the court are supported by existing Iowa law and are drafted

such that they apply to the various issues and fact matters that have been put

into controversy by the parties.”
                                          9

         After hearing all of the evidence and various motions were made, the

matter was submitted to the jury. Ultimately, the jury returned verdicts in favor of

Doug and Kim. The jury specifically answered “NO” to the question of whether

Doug and Kim “breached the Agreement with Plaintiffs.”

         Plaintiffs now appeal, arguing the district court erred in not defining crop

year in the jury instructions as they proposed. They argue the term is defined by

statute, regulation, by the court, by industry usage, and by the parties,

necessitating the court to give their proposed instruction defining crop year.

They further argue the crop year instruction given by the court compounded the

error.

         II. Standard of Review.

         In Iowa, courts must submit “a requested jury instruction if it correctly

states the applicable law and is not embodied in other instructions.” Alcala v.

Marriott Int’l, Inc., 880 N.W.2d 699, 707 (Iowa 2016) (citation omitted); see also

Le v. Vaknin, 722 N.W.2d 412, 414 (Iowa 2006) (“We review the district court’s

rulings on jury instructions to determine if they are a correct statement of the

applicable law based on the evidence presented.”).         Consequently, a court’s

refusal to give a requested jury instruction is reviewed on appeal for correction of

errors at law. See Alcala, 880 N.W.2d at 707-08. “Nonetheless, error in giving or

refusing to give an instruction does not require reversal unless the error is

prejudicial.” Stover v. Lakeland Square Owners Ass’n, 434 N.W.2d 866, 868

(Iowa 1989). “Prejudicial error occurs when the district court ‘materially misstates

the law,’” and if the instructions, considered together in their entirety, misled the

jury, reversal is warranted. Deboom v. Raining Rose, Inc., 772 N.W.2d 1, 5
                                          10

(Iowa 2009) (citation omitted).        “‘When the error is not of constitutional

magnitude, the test of prejudice is whether it sufficiently appears that the rights of

the complaining party have been injuriously affected or that the party has

suffered a miscarriage of justice.’”     Asher v. OB-Gyn Specialists, P.C., 846

N.W.2d 492, 496 (Iowa 2014) (citation omitted), overruled on other grounds by

Alcala, 880 N.W.2d at 707.

       III. Discussion.

       Plaintiffs argue the trial court erred in failing to give their proposed

instruction defining “crop year” and then compounded the error by giving

instruction fourteen which stated, “[t]here is no established legal definition of

‘crop year’ in this case. You are to determine the meaning of all of the words

used by the parties in the Settlement Agreement.” Doug and Kim counter that

the giving of instruction fourteen was appropriate under the circumstances, but in

any event, was not prejudicial to the Plaintiffs.

       We find no error in the district court’s refusal to submit Plaintiffs’ proposed

instruction defining “crop year.” There is no dispute that the term “crop year” was

not defined in the settlement agreement nor was there any express reference to

an external definition of the term.         Plaintiffs essentially maintain that all

professionals in the farming industry define “crop year” as beginning on March 1

and ending at the end of February the following year, meaning the use of term

“crop year” was unambiguous and required defining the term for the jury as they

proposed.

       Settlement agreements are contractual in nature, and legal principles

concerning contracts generally apply. Waechter v. Aluminum Co. of Am., 454
                                         11

N.W.2d 565, 568 (Iowa 1990).        “In reviewing a contract, we may engage in

interpretation or construction of the contractual terms.” Payton v. DiGiacomo,

874 N.W.2d 673, 677 (Iowa Ct. App. 2015).           “Interpretation is a process for

determining the meaning of words in a contract,” whereas construction “is a

process of determining the legal effect of such words.” Fausel v. JRJ Enters.,

Inc., 603 N.W.2d 612, 618 (Iowa 1999).             The cardinal principle of both

interpretation and construction of written contracts is that the intent of the parties

at the time they entered into the contract must control. See Iowa R. Civ. P.

6.904(3)(n); Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008).

       To determine the obligations of the parties, we look to the language

contained within the four corners of the contract. See Clinton Physical Therapy

Servs., P.C. v. John Deere Health Care, Inc., 714 N.W.2d 603, 615 (Iowa 2006);

Berryhill v. Hatt, 428 N.W.2d 647, 654 (Iowa 1988). “We strive to give effect to

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

contracting parties’ intentions.” C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d

65, 77 (Iowa 2011). “If the principal purpose of the parties is ascertainable from

the words and other conduct of the parties in light of all the circumstances, we

give those words and conduct great weight when interpreting the contract.”

NevadaCare, Inc. v. Dep’t of Human Servs., 783 N.W.2d 459, 466 (Iowa 2010).

Yet, “[c]ontractual obligations may arise from implication as well as from the

express writing of the parties” because “[a] contract includes not only what is

expressly stated but also what is necessarily to be implied from the language

used; and terms which may clearly be implied from a consideration of the entire

contract are as much a part thereof as though plainly written on its face.”
                                        12

Fashion Fabrics of Iowa, Inc. v. Retail Inv’rs Corp., 266 N.W.2d 22, 27 (Iowa

1978) (citation omitted). Additionally, “while words are to be given their ordinary

meaning, particular words and phrases in a contract are not to be interpreted in

isolation.” Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d

859, 863 (Iowa 1991). But if a genuine uncertainty exists concerning which of

two reasonable constructions is proper after application of pertinent rules of

interpretation to the face of the instrument, an ambiguity exists. See Berryhill,

428 N.W.2d at 654.       Generally speaking, “caution should be exercised in

applying statutory definitions to situations in which the particular statutory

scheme may not be involved.” Le, 722 N.W.2d at 415. Nevertheless, even if

there is no ambiguity, we can also consider 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, when determining the meaning of a

contract and the parties’ intent.   See NevadaCare, Inc., 783 N.W.2d at 466;

Pillsbury Co., 752 N.W.2d at 436; see also C-Thru Container Corp. v. Midland

Mfg. Co., 533 N.W.2d 542, 545 (Iowa 1995) (“We also hold that even a

‘complete’ contract may be explained or supplemented by parol evidence of trade

usages.”). “When the interpretation of a contract depends on the credibility of

extrinsic evidence or on a choice among reasonable inferences that can be

drawn from the extrinsic evidence, the question of interpretation is determined by

the finder of fact”, Pillsbury Co., 752 N.W.2d at 436, except where “the evidence

is so clear that no reasonable person would determine the issue in any way but

one.” Fausel, 603 N.W.2d at 618.
                                          13

       Here, the settlement agreement did not expressly define “crop year,” and,

although there was testimony that leases of farmland tend to commence March

first, the evidence was not so clear that no reasonable person would determine

“crop year” could only mean the period of time running from March first to the end

of February of the following year. Plaintiffs state the term is “defined by the Iowa

Code Chapter 562,” but there is no express definition of the term in chapter 562.

Plaintiffs refer to section 562.6, which states, in relevant part, that

       a farm tenancy shall continue beyond the agreed term for the
       following crop year and otherwise upon the same terms and
       conditions as the original lease unless written notice for termination
       is served upon either party or a successor of the party in the
       manner provided in section 562.7, whereupon the farm tenancy
       shall terminate March 1 following. However, the tenancy shall not
       continue because of an absence of notice if there is default in the
       performance of the existing rental agreement.

       Clearly Plaintiffs’ definition of “crop year” is a reasonable inference that

can be drawn from the use of the term in section 562.6, but there is more to take

into consideration. Iowa Code section 562.7 requires notice of termination to be

given on or before September 1 in order to terminate a farm tenancy the March 1

following. So, for example, if notice of termination is not given by September 1,

2013, a one-year farm lease commencing March 1, 2013, will automatically be

extended beginning the first day of March 2014 and ending the last day of

February 2015. The settlement agreement was made in January 2013. If the

landlords decided they wanted to change tenants after learning Doug and Kim

were no longer members of LLC, they had to give LLC notice of the tenancy’s

termination by September 1, 2013, under section 562.7.             Applying Plaintiffs’

definition of “crop year” to the settlement agreement, lease negotiations could not
                                          14

open until March 2014—well beyond the September 1, 2013 section 562.7

deadline, effectively denying anyone from making lease negotiations for the 2014

crop year. Under the facts presented, this makes no sense. Consequently, we

find it was also reasonable to interpret the agreement’s provision that, “[a]t the

end of the 2013 crop year, all leases are open for negotiation, to any party,”

simply meant the leases were open for negotiation by any party concerning the

2014 crop year. Additionally, paragraph fourteen of the settlement agreement

supports this conclusion as it specifically locks in LLC as the tenant for the 2013

leases only, but makes no similar provision for subsequent lease years. The

court left the interpretation up to the jury, and Plaintiffs were able to present

extrinsic evidence as to why their definition was the correct one.          Given the

circumstances, we conclude the district court committed no reversible

instructional error.

       But even had there been instructional error, it was not prejudicial to the

Plaintiffs. Doug and Kim assert Plaintiffs materially breached the contract by

failing to comply with the terms and provisions of paragraph fourteen of the

settlement agreement regarding notice to landlords of the change in ownership,

honoring leases and name change of LLC.1             Put another way, they argue

Plaintiffs failed to establish they performed all of the material terms of the

settlement agreement, and having failed to prove a requisite element of their

1
  Paragraph fourteen of the settlement agreement provides: “Upon completion of the
settlement, [LLC] shall notify its landlords that Kim and Doug are no longer members of
[LLC]. The Notice shall inform the landlords that [LLC] will honor the 2013 leases and
[John] will be sole owner and operator of [LLC] for 2013.”
                                            15

claim, their claim fails and the definition of “crop year” becomes immaterial. We

agree.

         Jury instruction number seven set out the elements Plaintiffs were

required to prove in order to prove their breach of contract claim:

               1. The consideration.
               2. The terms of the contract.
               3. [P]laintiffs have performed all of the material terms of the
         contract.
               4. [Doug and Kim] have breached the contract.
               5. The amount of any damages [Doug and Kim] have
         caused.

See also Iowa Arboretum, Inc. v. Iowa 4-H Found., 886 N.W.2d 695, 706 (Iowa

2016) (setting out the elements of a breach-of-contract claim). Plaintiffs were

required to prove all the elements, and if they failed to prove any one, their claim

fails. The jury was not asked if Plaintiffs proved each element. The special

verdict form just asked the jury if Doug and Kim “breach[ed] the Agreement with

Plaintiffs,” to which the jury answered, “NO.”

         In this case, it is clear that the letter sent out by John’s wife on Plaintiffs’

behalf did not comply with paragraph fourteen of the settlement agreement, as it

did not inform the landlords of Doug and Kim’s exit from LLC as expressly

required by the settlement agreement, and no other formal notice was given to

the landlords by Plaintiffs.     This is critical, because the undisputed evidence

shows that Lois Wegener was confused by Plaintiffs’ letter, and she reached out

to Doug and Kim for an explanation based upon her relationship with the two of

them.      Had Plaintiffs complied with paragraph fourteen of the settlement

agreement, Wegener arguably would not have had a reason to contact Doug and

Kim about the lease. Under the facts of this case, it does not appear Plaintiffs’
                                          16

rights were injuriously affected or that they suffered a miscarriage of justice by

the court’s ruling declining to define “crop year” as proposed, because Plaintiffs

did not comply with the agreement themselves, leading to the alleged breach by

Doug and Kim. See Passehl Estate v. Passehl, 712 N.W.2d 408, 418 (Iowa

2006) (“If both parties fail to perform their mutual and simultaneous obligations

under a contract, then neither is in default.”). A reasonable jury could have found

Plaintiffs failed to prove that they performed all of the material terms of the

contract by breaching paragraph fourteen of settlement agreement. Simply put,

the failure to give the instruction, even if error, did not result in prejudice because

of Plaintiffs’ own failure to comply with the terms of the settlement agreement.

See id.

       Accordingly, we affirm the jury’s verdicts.

       AFFIRMED.