Scheer Agri-Enterprises, Inc. v. Ledger Swine Farms, Inc.

IN THE COURT OF APPEALS OF IOWA

No. 19-1799
Filed December 16, 2020

SCHEER AGRI-ENTERPRISES, INC.,
Plaintiff-Appellant,

vs.

LEDGER SWINE FARMS, INC.,
Defendant-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Iowa County, Patrick R. Grady,

Judge.

Scheer Agri-Enterprises, Inc. appeals from the entry of summary judgment

in favor of Ledger Swine Farms, Inc. REVERSED AND REMANDED.

Benjamin G. Arato and Steven P. Wandro of Wandro & Associates, PC,

Des Moines, for appellant.

William H. Roemerman of Elderkin & Pirnie, P.L.C., Cedar Rapids, for

appellee.

Heard by Bower, C.J., and Vaitheswaran and Greer, JJ.
2

BOWER, Chief Judge.

Scheer Agri-Enterprises, Inc. (Scheer) sued Ledger Swine Farms, Inc.

(Ledger) related to the purchase of a group of pigs which were infected with a

highly contagious disease. The district court entered summary judgment for

Ledger based on the terms of a written contract. Scheer appeals, asserting the

court erred in concluding the parties did not have a valid and enforceable oral

contract and that Scheer could not recover under a theory of negligence.

Because genuine issues of material fact remain, the district court erred in

granting summary judgment to Ledger.

I. Undisputed Facts.

Porcine Reproductive and Respiratory Syndrome (PRRS) is a highly

contagious viral infection that can move through the air. PRRS can be detected

through laboratory tests of swine bodily fluids. The fluids typically tested are blood

and saliva. Blood samples are drawn by a veterinarian. Saliva can be collected

by veterinarians or barn operators. Saliva samples are collected by hanging a

short length of soft cotton rope in pig pens. The pigs naturally chew the rope and,

after a short time, a saliva sample can be squeezed from the rope. Local

veterinarians do not have the facilities to test fluid samples for PRRS. The samples

in this case were all tested at the Veterinary Diagnostic Laboratory at the Iowa

State University College of Veterinary Medicine.

Veterinarian access to confinement swine facilities is limited for biosecurity

purposes.1 Biosecurity practice provides that no one may enter a swine

1 Scheer testified biosecurity involves “[t]aking steps to prevent outside pathogens
f[rom] coming into your units.”
3

confinement facility if he or she has been inside another swine facility during the

two previous days. Despite this limited access, pigs to be transported must have

health papers signed by a veterinarian based on an inspection within the prior thirty

days. Because of this requirement, commercial swine facilities of the type here

are typically inspected every thirty days. These inspections are scheduled far in

advance so the veterinarian can coordinate visits and also maintain the two-day

separation between facilities. These thirty-day inspections include a physical

examination for PRRS symptoms (runny noses or coughs) and the extraction of

fluids for laboratory testing.

When swine breeding stock is moved from one facility to another, the

recommended biosecurity practice is that the animals are isolated and observed

for disease for thirty days before being mixed with other stock.

Scheer is a Missouri farming company that owns a swine “farrow-to-wean”

operation it calls the “High Gate facility.” This is an enclosed confined animal

facility in Missouri south of St. Louis.2 The interior of this facility is not divided by

walls so air moves freely to and among all the animals in the facility. Scheer’s High

Gate facility produces around 60,000 pigs per year. In 2017, Scheer was

interested in increasing the size of the herd.

2 Scheer described the facility’s biosecurity measures:
Our facility at High Gate would be a shower in, shower out facility,
traffic control. We are very isolated, so we maybe have less
susceptibility than a unit that was located in Iowa, for instance, for
traffic, be it trucks, what have you. In our particular unit we process
all the feed onsite, so the only trucks that enter the site really are our
trucks that haul bean meal or corn into the unit.
4

Ledger is an Iowa business that sells swine breeding stock. Topigs Norsvin

is the owner of a certain genetic strain of swine breeding stock. Ledger sold

animals containing the Topigs genetic material under a licensing agreement with

Topigs.

In the fall of 2017, Walter Scheer, president of Scheer, contacted Randy

Leete, a sales representative of Topigs, and asked about the purchase of gilts3 to

use as breeding stock. Terms of the sale were discussed. During the discussions

with Leete, Scheer conveyed he intended to introduce the gilts directly into the

High Gate facility without a thirty-day isolation. For that reason, he requested that

a PRRS test be conducted on the gilts before each shipment. Leete referred

Scheer to Ledger.

Scheer and Ledger agree on purchase of 1050 gilts.

Scheer and Ledger negotiated the sale of 1050 gilts to be delivered over

between December 2017 and February 2018. Ledger informed Scheer the sale of

the gilts would be subject to a “Genetic Supply Agreement.” Ledger agreed to

conduct a saliva test prior to each shipment unless the shipment occurred following

a scheduled monthly veterinarian visit. For the shipments following a veterinarian

visit, the parties would rely on the blood test conducted by the veterinarian.

A December 8, 2017 Topigs Norsvin Customer & Sales Order Form

completed by Ledger or his wife for Scheer’s purchase of Topigs gilts notes, in

part:

Will do an oral fluids test on gilts week of delivery.
Pricing
Pricing for Gilts: Gilts under 24 weeks deduct $5.00/hd/wk

3 Gilts are young female pigs that have not yet been bred.
5

Additional Comments: Will work out plan to shuttle gilts to Sheer
trailer. Will be minimal shuttle fee based on arrangement.
Check at time of gilt delivery/pickup. LSF will issue invoice prior to
delivery/pickup.

On December 11, in preparation for the first delivery, a saliva sample was

collected from the gilts Ledger was to deliver. The sample was tested and found

to be negative for the presence of the PRRS virus. Ledger personally delivered

the pigs, and while at High Gate, he retrieved the signed Genetic Supply

Agreement and purchase agreement, which had been left at the facility.

On December 15, 2017, the day before the first delivery of gilts, Ledger

emailed the Genetic Supply Agreement to Scheer. Scheer told Ledger he would

sign the Genetic Supply Agreement and leave it in a pickup at the High Gate facility

where the gilts were to be delivered. Scheer looked at the Genetic Supply

Agreement before signing it on December 16. As arranged, he left the agreement

in the pickup truck to be retrieved by Ledger.

On December 20, the Ledger facility had its monthly veterinarian visit. The

veterinarian drew blood samples and collected the saliva samples for PRRS

testing and forwarded the samples to the Iowa State lab.

On December 21, Scheer’s truck and driver were scheduled to be in Iowa

to deliver weaned pigs raised at the High Gate facility. Scheer proposed to Ledger

the second set of gilts could be loaded onto Scheer’s truck after that delivery was

complete. When Scheer’s truck arrived at the Ledger facility, the gilts were loaded

and the truck left for Scheer’s Missouri facility. Later that day, Ledger’s

veterinarian called Ledger and orally notified him that the December 20 sample

had been read by the laboratory as positive for the presence of PRRS. Ledger
6

called Scheer and told him the pigs had tested positive for PRRS. Scheer advised

Ledger the pigs had just been unloaded. The pigs were reloaded onto the truck

that same day and were hauled to an isolated area where they were left on the

trailer.4

The High Gate facility suffered a PRRS outbreak.

Written contract provisions.

On December 16, 2017, Walter Scheer in his capacity as president of

Scheer Agri-Enterprises Inc. signed two documents—the Genetic Supply

Agreement and a Ledger Customer & Sales Order Form. The Ledger Order Form

specifies the number of pigs to be sold, the price to be paid and some details of

the delivery. With regard to the transportation requirements, boxes in front of

“Shuttle” and “Back up to the Barn” were marked with an “X”—the box in front of

“Isolation” was not. The sales form also states, immediately above the signature

line, “I, the undersigned, wish to purchase these animals subject to the terms and

conditions of sale as has been presented to me by Ledger Swine Farms.”

The following provisions are included in the “Genetic Supply Agreement”:

V. CONDITIONS OF SALE: The Conditions of Sale, set out below,
govern all sales by LSF[5] to Customer and Customer’s use of
products purchased from LSF:

A. WARRANTIES OF LSF REGARDING THE SALE OF ANIMALS
1. Animals supplied under these Conditions of Sale have been
inspected and certified in accordance with applicable federal and
state animal health regulations.
....
B. WARRANTIES OF CUSTOMER: Customer warrants that
Customer will use the animals purchased under this Agreement only
in Customer’s own herds, and on Customer’s own animals.

4 Ledger picked up the trailer the next day and took the pigs for slaughter.
5 Ledger Swine Farms.
7

Customer will not use, sell or transfer the animals purchased under
this Agreement for the production of pigs to be used by Customer or
any other person or entity as breeding animals or for sale as breeding
animals. Customer will not use, sell or transfer the progeny of the
animals purchased under this Agreement except for slaughter. . . .

C. ISOLATION AND ACCLIMATIZATION OF ANIMALS
1. Customer will completely isolate all animals in a clean
facility, physically separate from other swine for at least thirty (30)
days, will follow the recommendations of a licensed veterinarian for
isolation and for release of animals after the isolation period, and will
not begin acclimatization procedures for thirty (30) days after
delivery. LSF encourages Customer to test animals, at Customer’s
expense, for pathogens or disease that are of concern to Customer
while animals are in isolation.
2. Customer will acclimatize animals in a separate facility
alongside existing stock for at least thirty (30) days after isolation,
and will follow the recommendations of a licensed veterinarian for the
release of animals from acclimatization.
Customer agrees and understands that LSF will have no duty
to audit Customer for animals due to the presence of infectious
agents unless Customer complies with the isolation and
acclimatization processes set forth herein.
....
E. LIMITATION OF LIABILITY. LSF’s liability for losses due to
economically significant infectious agents, whether transmitted by or
through semen or otherwise, or due to advice and information given
by LSF, whether oral or written, or due to LSF’s breach of any
warranty or due to any other cause in respect of Animals or Semen
will be limited to the credit procedure in the manner provided in
Section D (Credits and Procedure). LSF will not be liable for
incidental or consequential damages, including, without
limitation, veterinarian’s fees, lost profits, loss of anticipated
savings, or other incidental or consequential damages of any
nature.
....
H. DISEASE STATEMENT. Customer is experienced in swine
breeding, and knows that organisms which cause swine diseases
(called pathogens) are present in virtually every swine herd,
including LSF’s swine herds, and in semen. New or different
pathogens or diseases may arise at any time (See also LSF’s
Isolation and Acclimatization recommendations, which identify
pathogens for which LSF administers vaccines). The outbreak of
diseases however is caused by many factors in addition to the
presence of pathogens within an animal, a swine herd, or semen.
Although LSF attempts to minimize the presence of pathogens and
diseases in its her[d]s and in the swine breeding stock it sells, LSF
8

CANNOT AND DOES NOT WARRANT THE ABSENCE OF ANY
PATHOGENS OR DISEASE IN THE ANIMALS SOLD BY LSF.
PATHOGENS OR DISEASES MAY BE PRESENT AT TIME OF
SALE OR MAY APPEAR LATER.
I. DISCLAIMER OF OTHER WARRANTIES. This agreement
contains all of the warranties made by LSF to Customer. No other
warranties, expressed or implied are given. Except as otherwise set
out in this Agreement, all animals sold under this Agreement are sold
“AS IS”. LSF SPECIFICALLY GIVES NO WARRANTY TO
MERCHANTABILITY, HEALTH, OR FITNESS FOR A
PARTICULAR PURPOSE EXCEPT AS SPECIFICALLY STATED
IN THIS AGREEMENT.
LSF specifically disclaims any warranty of the genetic make-up of
animals, the performance of animals, or the characteristics or
performance of the progeny of animals, except as otherwise set out
in this Agreement. There are no warranties that extend beyond
this Agreement.
....
K EXCLUSIVE REMEDY. CUSTOMER’S REMEDY OF CREDIT
FOR THE INVOICED COST OF AN ANIMAL, LESS SLAUGHTER
VALUE, AS PROVIDED IN SECTION D, “CREDITS AND
PROCEDURES,” OF THIS AGREEMENT, IS THE EXCLUSIVE
REMEDY AGAINST LSF AND TOPIGS NORSVIN FOR ANY
CLAIM ARISING OUT OF THE PURCHASE OF ANIMALS FROM
LSF BY CUSTOMER. ALL OTHER REMEDIES, WHETHER
UNDER STATUTE, REGULATION, CONTRACT, TORT,
WARRANTY, NEGLIGENCE, OR ANY OTHER LEGAL THEORY
OF ANY NATURE, ARE EXPRESSLY WAIVED BY CUSTOMER.
CUSTOMER IS AWARE OF THE RISKS OF SWINE PRODUCTION
AND THEREFORE THIS WAIVER IS NEITHER UNREASONABLE
NOR UNCONSCIONABLE.
....
N. ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES
THE ENTIRE AGREEMENT OF THE PARTIES REGARDING THE
MATTERS CO[V]ERED BY THIS AGREEMENT, AND
SUPERSEDES ALL OTHER AGREEMENTS,
REPRESENTATIONS, OR NEGOTIATIONS BETWEEN OR BY
THE PARTIES HERETO, WHETHER ORAL OR WRITTEN,
REGARDING SUCH MATTERS. THIS AGREEMENT MAY NOT
BE AMENDED EXCEPT BY A WRITTEN DOCUMENT SIGNED BY
BOTH PARTIES. CUSTOMER ACKNOWLEDGES THAT
CUSTOMER HAS READ AND UNDERSTANDS THIS
AGREEMENT AND ANY SCHEDULES ATTACHED TO THIS
AGREEMENT, AND THAT CUSTOMER IS ENTERING INTO THIS
AGREEM[ENT] VOLUNTARILY AND NOT IN RELIANCE ON ANY
REPRESENTATION OF LSF EXCEPT AS HEREIN PROVIDED.
9

CUSTOMER AGREES, BY SIGNING BELOW, THAT LSF HAS
GIVEN CUSTOMER NO PROMISES, WARRANTIES,
GUARANTEES, OR REPRESENTATIONS EXCEPT AS
SPECIFICALLY STATE[D] IN THIS AGREEMENT. TOPIGS
NORSVIN PROVIDES NO WARRANTIES FOR ANY TOPIGS
NORSVIN GENETICS ACQUIRED BY CUSTOMER FROM LSF.

On July 2, 2018, Scheer sued Ledger, alleging breach of oral contract for

failure to abide by the testing requirements the parties agreed upon. In an

amended petition, Scheer also brought a claim for negligence, contending Ledger

had violated industry standards by releasing the gilts prior to receiving the test

results.

Ledger filed a motion for summary judgment on the following bases:

(a) The breeding stock was sold pursuant to a valid written
contract that sets forth upon its face that there are no agreements
between the parties other than those set out in the writing. As a
matter of law, the parol evidence rule renders it impossible for the
plaintiff to prove or enforce an oral contract.
(b) The parties’ written contract explicitly disclaims all implied
warranties. The disclaimer of implied warranties is in writing,
conspicuously displayed, and in the form specified by Iowa Code
[section] 554.2316(2). As a matter of law there were no implied
warranties to breach.
(c) This case arises from the sale of goods as defined by the
Iowa Uniform Commercial Code. This is a case of “disappointed
expectations.” The Plaintiff expected to receive breeding goods to
use as efficient producers of baby pigs. Instead the Plaintiff received
pigs infected with a pathogen which made them a less efficient
means of production. When the loss arises from the failure of the
goods to perform as expected, the buyers remedy is solely in
contract. As a matter of law, tort remedies are not available.
(d) The Plaintiff claims only consequential damages. The
parties’ contract explicitly bars recovery of consequential damages.
The disclaimer of warranties conforms to the requirements of the
Iowa Uniform Commercial Code [section] 554.2316(2).

Scheer resisted, asserting the parol evidence rule does not bar the oral

contract of the parties, the oral agreement of the parties related to services, not

goods, and thus the UCC provisions cited were inapplicable, and based on the
10

unique facts of the case a negligence case should be permitted. Scheer submitted

the written report of its expert Dr. Paul Armbreacht which stated in part:

Producer agreed to take breeding stock from supplier and
supplier agreed to provide animals according to accepted standards
in the swine industry and the requirements for Interstate delivery of
said animals.
....
The supplier had known that the producer did not have an
isolation facility to segregate the incoming shipment from the main
herd.
It is my opinion that the supplier failed to prevent the
introduction of PRRS virus to producer’s herd in [two] points:
(1) shipment of animals was done prior to laboratory results being
provided, and, (2) knowing that the producer did not have isolation,
failed to use increased caution to prevent the transmission of PRRS
to producer.
Based on my [forty-six] years of experience in the veterinary
business with an emphasis on swine production, it is also my opinion
that in a situation such as this—where a supplier is awaiting test
results prior to shipment—it is the normal and expected practice in
the swine industry that no movement of the animals occurs until, the
test results are received.

No arguments were heard by the court, which may have outlined the issues

further. Rather, the district court determined there was no consideration for an oral

agreement; rejected Scheer’s assertion the oral contract was for services; and held

the written agreement was fully integrated, a negligence claim was not available

under the written contract, and Ledger was entitled to judgment as a matter of law.

Scheer appeals.

II. Scope and Standard of Review.

“We review the district court’s grant of summary judgment for correction of

errors at law.” Hedlund v. State, 930 N.W.2d 707, 715 (Iowa 2019). Summary

judgment is appropriate only when the record shows no genuine issues of material

fact and the moving party is entitled to judgment as a matter of law. Iowa R. Civ.
11

P. 1.981(3). “We view the summary judgment record in a light most favorable to

the nonmoving party.” Hedlund, 903 N.W.2d at 715. “The court must also consider

on behalf of the nonmoving party every legitimate inference that can be reasonably

deduced from the record. Even if the facts are undisputed, summary judgment is

not proper if reasonable minds could draw different inferences from them and

thereby reach different conclusions.” Id. (citations omitted).

III. Discussion.

A. Lack of consideration for oral agreement. On appeal, Scheer first objects

to the district court raising the issue of consideration for an oral contract of its own

accord. Scheer maintains it had no notice that lack of consideration was at issue

and no opportunity to address the court’s concern. Scheer notes that failure of

consideration is an affirmative defense which must be pled. Because Ledger never

asserted such an affirmative defense, Scheer contends it was improper for the

district court to reject the existence of an oral contract on this basis.6

The existence of an oral contract, its terms, and whether it was breached

are ordinarily questions for the trier of fact. Dallenbach v. MAPCO Gas Prods.,

Inc., 459 N.W.2d 483, 486 (Iowa 1990).

Ledger did not move for summary judgment on grounds that there was no

consideration for the asserted oral contract. Because the court granted summary

judgment on a ground not raised—and of which Scheer was given no notice—it

erred. See Zech v. Klemme, No. 10-1969, 2011 WL 2556080, at *5 (Iowa Ct. App.

June 29, 2011) (“[E]ven if we wanted to recognize a district court’s ability to enter

6Ledger responds this principle is only applicable in the case of written contracts.
We need not address Ledger’s assertion.
12

summary judgments sua sponte on issues not raised by the parties, we could not

do so here because the district court did not notify [non-moving party] of its intent

to rule on the causation issue.”).7

B. Parol evidence rule. Ledger asserted it was entitled to summary

judgment because “[a]s a matter of law, the parol evidence rule renders it

impossible for the plaintiff to prove or enforce an oral contract.”

A general rule of contract is, “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.” C & J Vantage Leasing Co. v. Wolfe, 795

N.W.2d 65, 85 (Iowa 2011). “When the parties adopt a writing or writings as the

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

integrated.” Id. “Determining whether an agreement is fully integrated is a

question of fact, to be determined from the totality of the evidence.” Id.

Here, the district court concluded, “[E]ven if there had been an oral contract,

it was superseded upon Scheer’s signing of the [Genetic Supply] Agreement.”

Scheer contends the district court erred in concluding the Genetic Supply

Agreement was a fully integrated agreement, referring to Ledger’s actions.

“The presence of an integration clause is one factor we take into account in

determining whether an agreement is fully integrated.” Wolfe, 795 N.W.2d at 85.

“[E]xtrinsic evidence may be admitted to show that a writing is not an integrated

agreement, not completely clear and unambiguous as to the subject in dispute, or

7The burden is on the party moving for summary judgment to show absence of
any genuine issue of a material fact. Iowa R. Civ. P. 1.981(3). In Zech, this court
noted the moving party did not address the causation and thus “did not carry this
burden.” 2011 WL 2556080, at *5.
13

ambiguous with respect to the subject of the lawsuit.”8 Kroblin v. RDR Motels, Inc.,

347 N.W.2d 430, 433 (Iowa 1984).

“The parol evidence rule should not be invoked to prevent a litigant the

chance to prove a writing does not, in fact, represent what the parties understood

to be their agreement.” First Interstate Equip. Leasing of Iowa, Inc. v. Fielder, 449

N.W.2d 100, 103 (Iowa Ct. App. 1989).

8 Similarly, the Uniform Commercial Code provides:
Terms with respect to which the confirmatory memoranda of the
parties agree or which are otherwise set forth in a writing intended
by the parties as a final expression of their agreement with respect
to such terms as are included therein may not be contradicted by
evidence of any prior agreement or of a contemporaneous oral
agreement but may be explained or supplemented
(1) by course of performance, course of dealing, or usage of
trade (section 554.1303); and
(2) by evidence of consistent additional terms unless the court
finds the writing to have been intended also as a complete and
exclusive statement of the terms of the agreement.
Iowa Code § 554.2202 (2017).
Comments to the statutory provision explain further:
Paragraph [1] makes admissible evidence of course of dealing,
usage of trade and course of performance to explain or supplement
the terms of any writing stating the agreement of the parties in order
that the true understanding of the parties as to the agreement may
be reached. Such writings are to be read on the assumption that the
course of prior dealings between the parties and the usages of trade
were taken for granted when the document was phrased. Unless
carefully negated they have become an element of the meaning of
the words used. Similarly, the course of actual performance by the
parties is considered the best indication of what they intended the
writing to mean.
Under paragraph [2] consistent additional terms, not reduced
to writing, may be proved unless the court finds that the writing was
intended by both parties as a complete and exclusive statement of
all the terms.
Id.
14

The summary judgment record establishes Ledger typically only tested his

herd for diseases once a month. Yet, he agreed to additional testing here. Gary

Ledger testified at deposition:

So at that time we discussed—we normally have the veterinarian
inspection once a month, and then we do oral fluids testing, which
we take, and then also do serology of all of our locations, every room
of pigs get sampled every month with a total vet inspection.··So I
then offered—we discussed the possibility of doing oral fluids testing
of the weeks that we were going to ship gilts to Mr. Scheer if it was
opposite of where we were not having the vet bleed. So we agreed
to that, we agreed that that would be the protocol we would use, and
that’s what we did.

(Emphasis added.) Ledger picked up the signed Genetic Supply Agreement when

he delivered the first load of gilts. The next week, Ledger continued to abide by

his oral promise to test the gilts the week of delivery. Ledger testified:

Q. Okay. That’s what I’m getting at. You’ve got your protocol, but
how do you—It sounds like in this instance you are saying you were
aware you didn’t have test results back when the shipment went out?
A. The difference is here this was specific to this particular situation.
On a routine basis, the monthly serum and the monthly oral fluids
that we get every month, we would not ship until those were in, but
these were in addition to that. We were going beyond that, and so
that’s why we weren’t as concerned—I mean, that’s why on a normal
routine monthly basis we would not, would not ship. But the fact is
that we were sampling every week now, and we just had negative
samples. We had a full vet inspection the day before, there was no
indications—because these were way beyond normal protocols, and
that’s just not my protocols, that’s industry protocols . . . .

(Emphasis added.) We agree with Scheer that there remain genuine issues of

material fact as to the existence of an oral agreement and whether Ledger

breached that agreement.

C. Contradictory terms. The district court also ruled an oral contract could

not be established because “the alleged oral contract is so completely

contradictory to the risk assignment that was a key part of the written contract.”
15

The court also found “Ledger could not warrant the absence of PRRS in any event.”

Scheer did not allege Ledger agreed to warrant the absence of PRRS; rather it

asserts there was an oral agreement to test the gilts for PRRS and not deliver the

swine until results are received.

Ledger argues this is an attempt to “alter the allocation of risk set forth in

the parties’ written contract.” Unlike the district court, we are not persuaded the

trial court decisions cited by Ledger support summary judgment here.9 Scheer

acknowledges the written contract provides Ledger “cannot and does not warrant

the absence of any pathogens or disease in the animals sold” and objects to

Ledger’s characterization that Scheer expected to purchase “PRRS free” gilts.

Rather, Scheer observes the parties had an oral agreement that Ledger

would test for PRRS the week before delivery, which would make Scheer’s inability

to isolate the swine less of a concern:

If the results are negative, but PRRS is later discovered in the gilts
after delivery, the written contract dictates that Scheer bears the risk.
Alternatively, if the test results are wrong or inaccurate, Ledger still
wouldn’t bear the burden of guaranteeing the accuracy of the test
under the written contract. The only requirement was that he make
the perfectly reasonable effort of testing the pigs and obtaining the
results prior to shipment. This does not shift the risk to Ledger, who
can continue to assert that he does not warrant the absence of
pathogens or disease in the gilts, despite testing.
The district court erred in finding that the terms of the oral
contract did not harmonize and in fact conflicted with the terms of the
written contract. Particularly when Scheer is to be given every

9 Rayle Tech, Inc. v. DeKalb Swine Breeders, Inc., 897 F. Supp. 1472, 1477 (S.D.
Ga. 1995) (applying Georgia law and dismissing fraud claim and concluding
reliance on an alleged statement that the swine were “PRRS free” was unjustified
in light of the written contract terms under which buyer “acknowledged and
assumed the risk that the swine it purchased from DEKALB might carry certain
pathogens such as PRRS”); see also Brunsman v. DeKalb Swine Breeders, Inc.,
952 F. Supp. 628, 630–35 (N.D. Iowa 1996) (rejecting various breach of warranty
claims by buyer of boars found to have a congenital tremors condition).
16

legitimate inference, the district court should have found that there
was no conflict between the obligation of Ledger to test the gilts and
Ledger’s disclaimer of warranty for the accuracy of the test results.

In its reply brief, Scheer adds:

Scheer’s “bet” as Ledger describes it, wasn’t that he thought he could
get away without quarantining the gilts. Rather, Scheer’s “bet” was
that he could trust Ledger to do as he promised and test the gilts prior
to delivery. If Ledger did that, Scheer wagered, the risk of an
outbreak would be lowered to an acceptable level.

We conclude Scheer has the better argument. We stress that we are not

making any determination on the merits of Scheer’s claims, only that the district

court prematurely rejected all Scheer’s claims and erred in granting summary

judgment at this juncture.

Because the district court improperly concluded there could be no showing

of an enforceable oral agreement, we reverse and remand for further proceedings.

REVERSED AND REMANDED.

Vaitheswaran, J., concurs; Greer, J., concurs in part and dissents in part.
17

GREER, Judge (concurring in part and dissenting in part).

I agree with the majority’s conclusion that it was premature to grant

summary judgment on the oral contract claim raised by Scheer Agri-Enterprises,

Inc. (Scheer). Out of the mouth of Ledger Swing Farms, Inc. (Ledger), words might

have established an oral promise by Ledger to test the hogs for Porcine

Reproductive Respiratory Syndrome (PRRS) before delivery to Scheer. But where

I stray from the majority’s well-written opinion is that I would find that the terms of

the subsequent written Genetic Supply Agreement (GSA), signed by businessmen

sophisticated in the agricultural arena, defines the remedies and damages sought

by Scheer. To avoid a summary ruling, Scheer offered no material facts, including

any oral negotiations, which operate to avoid applying the written contract terms

involving limitations of liability.

In his petition, Scheer alleged breach of an oral agreement by Ledger

because of Ledger’s failure to timely test and report the test results. There are

good reasons to allow Scheer to develop the oral contract claim to see if it survives.

Scheer tackled the oral contract issue from several fronts. First, Scheer argued

the GSA should be reformed to conform to the parties’ intentions. See Kufer v.

Carson, 230 N.W.2d 500, 504 (Iowa 1975) (“The writing will be reformed only if the

party seeking reformation clearly and convincingly establishes the writing does not

express the true agreement of the parties because of fraud, duress, mutual

mistake of fact, mistake of law, mistake of one party, and fraud or inequitable

conduct on the part of the other.”). Next, Scheer contends that “following the

signing of the contract, Ledger continued to perform testing, which under the

written terms he had no obligation to do,” shows the pair had “subsequent
18

negotiations” modifying the GSA. See Gordon v. Witthauer, 138 N.W.2d 918, 921

(Iowa 1966) (providing that an oral agreement accepted and acted upon by parties

may alter or modify written contract). Finally, he suggested the oral agreement

was a contract “separate and distinct from the written agreement.” See Garland v.

Brandstad, 648 N.W.2d 65, 69 (Iowa 2002) (noting parol evidence may be

admissible to prove the existence of an independent oral contract). Now in his

appellate brief, to avoid the lack-of-consideration argument, Scheer suggests the

oral agreement to test was an inducement required for him to sign the GSA. See

I.G.L. Racquet Club v. Midstates Builders, Inc., 323 N.W.2d 214, 216 (Iowa 1982)

(“The rule should not be employed to preclude a party from attempting to show the

writing was induced in part by an oral agreement.”). With these confusing and

somewhat contradictory positions of Scheer, Ledger maintained that the parol

evidence rule barred evidence of any claimed oral contract—however Scheer

frames it.

Under this record we have to reconcile Ledger’s description of what he

offered Scheer before the written contract was signed. Ledger clarified:

The discussion we had at that point in time was what was our normal
blood testing protocol. We discussed that, and so the discussion
was—and really what it really centered around was this whole
situation of concern with no isolation became a concern, and so at
that point then we discussed, okay, what could we do to help that
feel like—you know, that situation be comfortable, even though, you
know, I didn’t agree with it, that that was our protocol, is isolation,
that’s just part of the protocol. So at that time we discussed—we
normally have the veterinarian inspection once a month, and then we
do oral fluids testing, which we take, and then also do serology of all
of our locations, every room of pigs get sampled every month with a
total vet inspection. So I then offered—we discussed the possibility
of doing oral fluids testing of the weeks that we were going to ship
gilts to Mr. Scheer if it was opposite of where we were not having the
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vet bleed. So we agreed to that, we agreed that that would be the
protocol we would use, and that’s what we did.

(Emphasis added.) So given this testimony of Ledger, the oral contract question

remains unanswered at this early stage of the case.

Still, Scheer did sign a written contract following the claimed oral testing

protocol agreement. The terms of the GSA contained an integration clause. An

agreement is fully integrated when the parties involved adopt a writing or writings

as the final and complete expression of the agreement. Montgomery Props. Corp.

v. Economy Forms Corp., 305 N.W.2d 470, 476 (Iowa 1981). “When applicable,

the parol evidence rule excludes extrinsic evidence which is solely offered for the

purpose of varying, adding to, or subtracting from a written agreement.” Kroblin v.

RDR Motels, Inc., 347 N.W.2d 430, 433 (Iowa 1984) (emphasis added); see also

Restatement (Second) of Contracts § 215 (Am. Law. Inst. 1981) (“[W]here there is

a binding agreement, either completely or partially integrated, evidence of prior or

contemporaneous agreements or negotiations is not admissible in evidence to

contradict a term of the writing.”). The goal of the parol evidence rule is “to prevent

fraud and prevent contracting parties from being charged with agreements not in

fact made.” Gordon, 138 N.W.2d at 920.

The GSA terms are not ambiguous. This two-page written agreement

contained strict language regarding limitations of liability, warranties, remedies,

and, as noted, an integration clause. The parties to the written agreement were

knowledgeable about the hog industry and risks associated with disease. Scheer

testified he read the written contract, understood it, and signed it. Although the

GSA terms limited his rights, Scheer confirmed:
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Q. All right. You agree you had a chance to read it? A. Uh-
huh. Yes.
Q. All right. Since this dispute has come up, have you read
it? A. Yes. It hasn’t changed.
Q. No, I understand that. I was going to ask you, when you
read it at any time, was there any part of it that you read it and said I
don’t know what that means? A. No.
Q. You feel like you understood it? A. Yeah, I understood it.
It was standard. It was standard industry warble.
Q. When you say warble, did you understand you were
agreeing to the terms of that when you took delivery of those pigs?
A. Yes.
Q. Just above your signature it says, quote, I, the
undersigned, wish to purchase these animals subject to the terms
and conditions of sale as has been presented to me by Ledger Swine
Farms. Did you understand that the genetic supply agreement was
part of the terms? A. Yes.

(Emphasis added.) Despite the “standard industry warble,” Scheer signed the

GSA, admitting he had to before Ledger would give him pigs. See Montgomery

Props., 305 N.W.2d at 475–76 (holding where the handcrafted contract contains

an integration clause, when the parties were sophisticated business persons

represented by counsel and of equal bargaining strength, and where terms of the

alleged oral agreement reasonably would be expected to be included in the

exchange agreement, there was no error when court sustained parol evidence rule

objection and excluded evidence to vary its terms). The GSA restricted Ledger’s

liability, and there is no evidence any expansion of that liability was ever discussed,

modified, or reformed by prior or later negotiations between Ledger and Scheer.

All we have before us is a written agreement signed by a sophisticated hog man

with limitations of liability that, according to Scheer, are standard in the industry.

Under the heading “The terms of the oral contract do not alter the allocation

of risk between the parties,” Scheer argues in his appellate brief that “[a] contract

should be construed so as to give effect to all the contract’s provisions . . . if two
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clauses of a contract appear to be in conflict, the preferred interpretation is the one

that gives a harmonious interpretation to the clauses in order to avoid rendering

either one nugatory.” McLeodUSA Telecomms. Servs., Inc. v. Iowa Utils. Bd., 550

F. Supp. 2d 1006, 1028 (S.D. Iowa 2008) (quoting Johnson Controls, Inc. v. City

of Cedar Rapids, 713 F.2d 370, 374 (8th Cir. 1983)). I agree with this premise.

But Scheer’s problem is that he can only point to a conflict between an oral

agreement to test and the GSA terms indicating Ledger had no responsibility to

test. Scheer offers no conflicting language to rebut the GSA’s other written terms.

While there may be ambiguity about the testing terms, there is no ambiguity about

other terms in the contract. “Because a contract is to be interpreted as a whole, it

is assumed in the first instance that no part of it is superfluous.” Iowa Fuel &

Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 863 (Iowa 1991).

“The interpretation that gives a reasonable, lawful, and effective meaning to all

terms is preferred to an interpretation that leaves a portion of the agreement of no

effect.” Smith Barney, Inc. v. Keeney, 570 N.W.2d 75, 78 (Iowa 1997) (citing Iowa

Fuel, 471 N.W.2d at 863).

After agreeing to the terms about the testing and reporting, viewing the facts

in the light most favorable to Scheer, he then signed the GSA agreeing that he

understood the terms of the GSA. “In order to successfully resist a motion for

summary judgment, the resisting party must set forth specific evidentiary facts

showing the existence of a genuine issue of material fact. The party may not rest

on mere allegations . . . .” Liska v. First Nat’l Bank, 310 N.W.2d 531, 534 (Iowa

Ct. App.1981) (citations omitted). Specifically, paragraph E of the GSA clarified

the undisputed limitation of liability as follows:
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[Ledger’s] liability for losses due to economically significant
infectious agents, whether transmitted by or through semen or
otherwise or due to advice and information given by [Ledger],
whether oral or written due to [Ledger’s] breach of any warranty or
due to any other cause in respect of animals or semen will be limited
to the credit procedure in the manner provided in section D (“Credits
and Procedure”). [Ledger] will not be liable for incidental or
consequential damages, including without limitation, veterinarian’s
fees, lost profits, loss of anticipated savings, or other incidental or
consequential damages of any nature.”

(Emphasis added.) So I would find that the ruling as to warranties, limitations of

liability, exclusive remedies, and presumably the other paragraphs referencing

subjects unrelated to the testing requirement would still apply. We strive to give

effect to all the language of a contract, the most important evidence of the

contracting parties’ intentions. See Fashion Fabrics of Iowa, Inc. v. Retail

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

I would reverse the district court summary judgment ruling on the oral

contract claim. Because the GSA trumps all other claims asserted by Scheer, I

would grant summary judgment on all of the other claims and find Scheer bound

by the contract he signed in all other respects.