Terrell v. Star Coal Co.

Citations: 327 N.W.2d 771; 1982 Iowa App. LEXIS 1458Docket: No. 2-66247

Court: Court of Appeals of Iowa; September 21, 1982; Iowa; State Appellate Court

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On June 25, 1977, William F. Terrell contracted with the defendants to provide information about coal and limestone deposits in specific Iowa counties for $5,000 and a royalty based on mined coal. Although Terrell received the initial payment, he claims no royalty was ever paid. He filed an equity action seeking specific performance and an accounting of the mined resources. The defendants denied the allegations and counterclaimed for fraud, seeking damages. After a bench trial, Terrell's petition was dismissed, and the court awarded the defendants $5,000 in actual damages and $25,000 in punitive damages. 

Terrell appealed, arguing the trial court improperly considered inadmissible parol evidence and erred in finding fraud. The defendants contended the trial court's decisions were correct and raised a procedural issue regarding Terrell's brief exceeding page limits, which was dismissed due to lack of proper motion. The review standard for the appeal is de novo for both the equity petition and the counterclaim. 

During the trial, a defendant testified about the expected quality of information from Terrell, claiming it was poorly prepared and lacking essential details. A map from a drilling company was also admitted, which was better prepared than Terrell’s. Terrell argued this violated the parol evidence rule, which prohibits the use of extrinsic evidence to alter a written contract. However, the rule allows extrinsic evidence to clarify contractual language. The key issue is whether the trial court correctly used this evidence to interpret the term "information" in the contract.

In Masline v. New York, N.H. H. R.R. Co., the plaintiff provided information regarding the locations of coal deposits, drawing on his extensive experience as a railway brakeman and baggage-master. The defendant railroad failed to compensate the plaintiff after he suggested selling advertising space and displaying ads on their property. The court ruled in favor of the defendants, finding that the contract lacked sufficient consideration, as the "information" must be new and valuable to the receiving party. The court clarified that information presented as contractual consideration should be new to the recipient. The plaintiff's knowledge of coal deposits, which was previously unknown to the defendants, met this criterion. The court emphasized the importance of the parties' intent, noting that they intended an exchange of valuable information, rather than specific technical knowledge. Furthermore, the court found that the plaintiff did fulfill his contractual obligations, as evidence indicated that his guidance led the defendants to discover coal deposits, which they had not previously realized were present. Thus, the plaintiff successfully demonstrated both the existence of the contract and his performance under it.

Defendants are required to provide an accounting of coal and limestone tonnage mined to determine the amount owed under the contract and assess their liability. The claim of fraud by the defendants is largely negated by the previous ruling on performance. Even if considered, the trial court's ruling in favor of the defendants was erroneous. To establish fraud, a claimant must prove a material misrepresentation made knowingly, with intent to induce reliance, justifiable reliance by the plaintiff, and resulting damages. The court found that the defendants failed to demonstrate that the plaintiff acted with the necessary intent or scienter, noting the defendants' experience in coal mining and their initiative in seeking the plaintiff's assistance. No evidence supported the claim that the plaintiff induced or misled the defendants, leading to the conclusion that the defendants were not entitled to actual or punitive damages on their counterclaim. The trial court’s judgment dismissing the plaintiff’s petition and awarding damages to the defendants is reversed, and the case is remanded for further proceedings consistent with this opinion.