Shields Pork Plus, Inc. v. Swiss Valley Ag Service

Case Date: 04/16/2002
Court: 4th District Appellate
Docket No: 4-01-0239 Rel

NO. 4-01-0239

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT


SHIELDS PORK PLUS, INC., ) Appeal from
           Plaintiff-Appellant and  ) Circuit Court of
           Cross-Appellee, ) Champaign County
                         v. ) No. 98L386
SWISS VALLEY AG SERVICE, )
           Defendant-Appellee and ) Honorable
           Cross-Appellant. ) John R. DeLaMar,
) Judge Presiding.

 


JUSTICE COOK delivered the opinion of the court:

Plaintiff, Pork Shield Plus, Inc., and defendant, SwissValley Ag Service, entered into a contract for the sale of feederpigs. Under this contract, plaintiff was to provide high-qualityfeeder pigs "of a Newsham line" to defendant, who would thenresell the pigs to its customers. Plaintiff claimed the defendant breached the contract when it did not accept a portion of adelivery under the contract. Defendant counterclaimed, arguingthat plaintiff breached the contract when it abandoned allefforts to convert its pig herd to 100% Newsham genetics. Bothparties have appealed the trial court's judgment finding thatboth parties had repudiated the contract. We affirm in part,reverse in part, and remand.

I. BACKGROUND

In the latter part of 1997, plaintiff and defendantbegan negotiations regarding the purchase and sale of feederpigs--weaned pigs weighing between 35 and 60 pounds. At thattime, plaintiff's herd was made up of pigs from the Newsham,Liske, and Duroc genetic lines. Representatives of defendantexpressed an interest in purchasing 100% Newsham pigs. The vice-president of plaintiff, Phillip Shields (Shields), informeddefendant that he had a fairly young herd of sows, mostly Liske,so he did not need to buy any in the immediate future. Nevertheless, Shields informed defendant that when the Liske sows neededto be replaced, they would be replaced with Newsham gilts--nonpregnant female pigs--which would be bred with Newsham boarsor Newsham semen.

A representative of defendant acknowledged that thefull conversion to Newsham would likely take more than one year. Similarly, plaintiff was aware that defendant was not the finalpurchaser of the pigs, but would be reselling the pigs to itsfeed customers. Nevertheless, both parties entered into thesales contract in February 1998 and negotiated a price term basedupon the weight of the pigs and the price of a pig futurescontract the week of delivery. The term of the contract was 36months, with monthly shipments to be made according to an attached schedule. The record does not include such a schedulebut, rather, a computation of damages based upon the allegedschedule. However, the recitations of the contract indicate thatboth parties anticipated that each monthly shipment would numberapproximately 600 pigs.

The contract provided, in paragraph 2, that plaintiffwas to "put forth its best effort to provide healthy[,] high[-]

quality feeder pigs." Further, a pig was defined under thecontract as "merchantable" if it weighed between 35 and 65 poundsand was "progeny from a Newsham line then sold commercially inthe United States." Any change in the genetic makeup of the herdwas to be approved by the defendant.

Under the contract, defendant was responsible fortransporting the pigs from plaintiff's farm. The contract alsolisted several reasons why pigs could be rejected or discountedat the time of delivery. According to the contract, any pigcould be rejected if, upon delivery, it was ruptured, splay-legged, crippled, or sick, or if the pig's tail had not beendocked. Further, the contract permitted the seller to reject anypig that did not "meet the criteria set forth in [the sectiondefining merchantability and genetic makeup]."

On March 13, 1998, defendant took delivery of aninitial shipment of 600 pigs and accepted all of the pigs asconforming to the contract. The second delivery under thecontract, scheduled for April 24, 1998, was allegedly to be of680 pigs. However, at the time the plaintiff tendered the pigs,defendant only accepted 380 of the 680 pigs, stating that one ofits subsequent purchasers had no need for additional pigs. Arepresentative of defendant met with plaintiff to discuss the 300pigs that were not accepted. At that time, according to defendant, plaintiff indicated that the rejected pigs would be soldelsewhere. Plaintiff did not demand that defendant accept the300 pigs.

Thereafter, until August 1998, both parties performedunder the contract. While the record is inconclusive as to thenumber of pigs to be delivered in each of these four months, theparties appear to agree that full performance was tendered byboth parties. Each month, plaintiff tendered approximately 600pigs, the majority of which were accepted by defendant. Defendant rejected 23 pigs in the June 1998 shipment of 675 pigs,which were replaced by plaintiff. Defendant further rejected 23pigs in one of two July 1998 shipments, which were also replacedby plaintiff.

According to defendant, in June 1998, one of defendant's ultimate purchasers of the pigs, David Catlett, adviseddefendant of performance problems with some of the pigs thatdefendant had purchased from plaintiff. Catlett told defendantthat he had met with a representative of plaintiff that month andhad been advised that plaintiff was not purchasing Newsham gilts,but was producing Newsham gilts himself. According to Catlett, a100% Newsham pig could not be produced through such a process.

Similarly, defendant's expert, Dr. Kevin Eggers, aveterinarian, testified that at the same meeting, Shields toldhim that plaintiff had stopped buying Newsham gilts because itcould not afford to financially. Dr. Eggers further testifiedthat a Newsham pig cannot be made from anything other thanNewsham parents.

On August 3, 1998, plaintiff delivered 600 pigs todefendant, which were accepted by defendant. However, shortlyafter the delivery, a representative of defendant contactedplaintiff and reported some problems with some of the pigs in theshipment. Plaintiff offered to replace the problem pigs, butdefendant refused. Further, defendant notified plaintiff that itwould no longer accept any pigs from plaintiff under the contract, citing the refusal of defendant's ultimate purchasers toaccept the pigs. Plaintiff responded by informing defendant itwould sell the remaining pigs on the open market.

On December 8, 1998, plaintiff filed a complaintagainst defendant for breach of contract, seeking damages fordefendant's rejection of the 300 pigs in April 1998, as well asfor all scheduled deliveries after August 3, 1998. On January 7,1999, defendant filed an answer and counterclaimed againstplaintiff for failure to provide merchantable pigs under thecontract.

After a bench trial, the trial court found that bothparties had repudiated the contract, and it denied both damageclaims on February 19, 2001. Both parties timely filed notice ofappeal in March 2001, but defendant has waived its cross-appeal.

II. ANALYSIS

A. The Parol Evidence Was Properly Considered

It is axiomatic that a court's principal goal inconstruing a contract is to ascertain and give effect to theparties' intent at the time they entered the contract. USG Corp.v. Sterling Plumbing Group, Inc., 247 Ill. App. 3d 316, 318, 617N.E.2d 69, 70 (1993). Thus, if the contract terms are unambiguous, the parties' intent must be ascertained exclusively from theexpress language of the contract (Farm Credit Bank of St. Louisv. Whitlock, 144 Ill. 2d 440, 447, 581 N.E.2d 664, 667 (1991)),giving the words used their common and generally accepted meaning. Clay v. Illinois District Council of the Assemblies of GodChurch, 275 Ill. App. 3d 971, 978, 657 N.E.2d 688, 692 (1995).

Therefore,"when the language used is susceptible tomore than one meaning [citation] or is obscure in meaning throughindefiniteness of expression [citation]," a contract is properlyconsidered ambiguous. Wald v. Chicago Shippers Ass'n, 175 Ill.App. 3d 607, 617, 529 N.E.2d 1138, 1145 (1988). This does notmean, however, that the parties' disagreement regarding how tointerpret the terms of a contract, in itself, renders the contract ambiguous. USG Corp., 247 Ill. App. 3d at 318, 617 N.E.2dat 71. The determination of whether a contract is ambiguous is aquestion of law for the court. Clay, 275 Ill. App. 3d at 977,657 N.E.2d at 692, citing Quake Construction, Inc. v. AmericanAirlines, Inc., 141 Ill. 2d 281, 288, 565 N.E.2d 990, 994 (1990). But once the court determines that the contract is ambiguous,parol evidence may be considered by the trier of fact in determining the parties' intent. Rybicki v. Anesthesia & AnalgesiaAssociates, Ltd., 246 Ill. App. 3d 290, 300-01, 615 N.E.2d 1236,1244 (1993).

Since the finding of ambiguity by the trial court is amatter of law, we may review the trial court's finding independently, in the manner of a de novo review. Yamnitz v. William J.Diestelhorst Co., 251 Ill. App. 3d 244, 251, 621 N.E.2d 1046,1051 (1993). Thus, we are presented with plaintiff's assertionthat the trial court (a) improperly assumed that the contract wasambiguous, and (b) admitted parol evidence to explain the ambiguity. We will first address the question of ambiguity.

At the very heart of the parties' dispute is thesection of the contract which requires all pigs under the contract to be "progeny from a Newsham line." Defendant suggeststhat this implies a requirement that both the boar and the sow be100% Newsham. Plaintiff counters that while the phrase "Newshamprogeny" may be susceptible to more than one interpretation, thephrase "progeny from a Newsham line" (emphasis added) is not. According to plaintiff, since there are two blood lines, that is,a male and female, producing any "progeny," the use of the word"a" implies that just one of the lines must be Newsham.

While we are mindful that the parties' mere disagreement as to the definition of a contract term is not, of itself,reason to find ambiguity in a contract (USG Corp., 247 Ill. App.3d at 318, 617 N.E.2d at 71), we cannot agree that the phrase"progeny from a Newsham line" was sufficiently clear to avoid thefinding of ambiguity. "Progeny" can be variously defined as"descendants; children; offspring of animals or plants" (Merriam-Webster's Collegiate Dictionary 929 (10th ed. 2000)) or "[t]heoffspring (of a father or mother, or of both)" (Emphasis added) (12 Oxford English Dictionary 585 (2d ed. 1989)). It remainsunclear from the face of the contract what is intended by theword "progeny." Must the pigs be the result of breeding aNewsham male, a Newsham female, or both? As to this question,the contract elucidates very little.

But the term "progeny" is not the only source of thecontract language's ambiguity; the phrase "Newsham line" isambiguous as well. The fact that the word "Newsham" is a commercial description, a shortened form of Newsham Hybrids International, particularly persuades us in this regard. As a referenceto the name of a company that markets and sells genetic materialfor animal husbandry, "Newsham" might simply be descriptive ofthe company's products or of the animals that result from theiruse. Thus, by using the phrase "Newsham line," did the partiesintend that the animals to be bred must be Newsham or, rather,that the material used to breed be from the Newsham company?

In the light of these many uncertainties, we concludethat the trial court did not err in finding the contract ambiguous. This was confirmed at trial by the differing opinions ofthe parties' expert witnesses, all of whom the trial court foundto be credible. Dr. Shipley, a veterinarian witness for theplaintiff, testified that, as worded, the contract would requireonly that the boar be Newsham, while another witness for theplaintiff opined that either the boar or the sow could satisfythe contract's requirements. Then, defendant's expert witness,Dr. Eggers, stated that both the sow and the boar must be Newshamto make a Newsham pig. This testimony only further convinces usof the soundness of the trial court's decision that the contractwas ambiguous.

Plaintiff has suggested that, had the parties desired100% Newsham pigs, such a term easily could have been included. We recognize, at plaintiff's suggestion, that a presumptionexists in Illinois "against provisions that easily could havebeen included in the contract but were not" and that "[a] courtwill not add another term about which an agreement is silent." Klemp v. Hergott Group, Inc., 267 Ill. App. 3d 574, 581, 641N.E.2d 957, 962 (1994). But this is not a case where an uncertainty exists as to the existence of a contract term. Rather,the uncertainty in the case at bar exists within the meaning ofcontract terms that were used. The parties did include a termpurporting to describe the genetic makeup of the pigs to be sold:"progeny from a Newsham line." The fact that this particularphrase is ill-defined does not, and cannot, mean that the partiesintended the contract to be silent as to that term. For thatreason, and those outlined above, we hold that the trial courtproperly found the contract ambiguous.

Having found that the trial court properly determinedthe contract's ambiguity, it follows that the parol evidenceregarding the intent of the parties was not admitted in error. Rybicki, 246 Ill. App. 3d at 300-01, 615 N.E.2d at 1244. As westated in Rybicki, "'[i]f the previous negotiations make itmanifest in what sense [the parties] understood and used [thecontract's] terms, they furnish the best definition to be appliedin the construction of the contract itself.'" Rybicki, 246 Ill.App. 3d at 299-300, 615 N.E.2d at 1243, quoting 17A Am. Jur. 2dContracts