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10/20/94 J&B STEEL CONTRACTORS v. C. IBER & SONS

October 20, 1994

J&B STEEL CONTRACTORS, INC., D/B/A J&B STEEL REINFORCING AND ERECTION, APPELLEE,
v.
C. IBER & SONS, INC., ET AL., APPELLANTS.



Freeman

The opinion of the court was delivered by: Freeman

JUSTICE FREEMAN delivered the opinion of the court:

The issues raised in this case turn on whether evidence beyond a writing itself may be considered in determining its completeness for purposes of the parol evidence rule.

BACKGROUND

The question arises from a suit filed in the circuit court of Peoria County by J&B Steel Contractors, Inc. (J&B), a subcontracting firm, against C. Iber & Sons, Inc. (Iber), a general contractor. The suit sought foreclosure of a mechanics' lien as well as other relief in connection with the construction of a parking garage for Proctor Community Hospital in Peoria. In each of the four counts, J&B alleged that, through Iber's fault, J&B was precluded from completing its work on the date scheduled at the anticipated cost. J&B attached as an exhibit to the complaint a writing in the form of a numbered purchase order, dated December 7, 1989, executed by Iber, pertaining to the work to be done. The purchase order set forth the price of J&B's performance, $220,799, but did not specify a completion date.

J&B alleged, however, that the purchase order merely confirmed understandings reached by representatives of it and Iber in a telephone conversation three days earlier. In fact, the order directed that it be "entered" by J&B "in accordance with the terms and conditions of' the "telephone proposal on 12/4/89." Those terms and conditions, J&B alleged, included the understanding that, at the stated price, it was not obligated to perform work beyond July 31, 1990. The only reference to that date in the purchase order is one specifying it as the date through which J&B was to supply a foreman experienced in the nature of the subcontract.

Iber successfully moved to dismiss the suit pursuant to section 2-615 of the Code of Civil Procedure (see Ill. Rev. Stat. 1991, ch. 110, par. 2-615), but the appellate court reversed and remanded for further considerations (246 Ill. App. 3d 523).

The court reasoned that no finding had been made that the purchase order stated the entirety of the parties' understandings. (246 Ill. App. 3d at 529.) Were the purchase order such a complete statement, or total integration, the allegations relating to the telephone proposal would be rendered meaningless by the parolevidence rule. (246 Ill. App. 3d at 529.) That rule generally precludes evidence of understandings, not reflected in a writing, reached before or at the time of its execution which would vary or modify its terms.

The court directed the trial Judge on remand to look not only at, but beyond, the purchase order itself to answer the integration question. (246 Ill. App. 3d at 529.) It outlined a procedure for doing so, borrowing considerations attendant motions for summary judgment. (246 Ill. App. 3d at 529.) Remaining issues were answered conditioned on the trial Judge's finding that July 31, 1990, was the date after which J&B was not obligated to perform at the cost stated in the purchase order. 246 Ill. App. 3d at 529-31.

We allowed Iber's petition for leave to appeal. (134 Ill. 2d R. 315.) We agree with the appellate court's Conclusion that the complaint should not have been dismissed. But we must reject most of the analysis employed as well as the considerations the appellate court directed the trial Judge to follow on remand. We therefore affirm but do so for other reasons.

Discussion

Iber raises, as a threshold matter, the notion that the appellate court should not have addressed the question of integration because the parties neither briefed nor argued it Iber points to the rule, especially applicable where reversal of a trial court judgment is urged, limiting review to the issues actually raised. See Saldana v. Wirtz Cartage Co. (1978), 74 Ill. 2d 379, 386, 24 Ill. Dec. 523, 385 N.E.2d 664; Flynn v. Vancil (1968), 41 Ill. 2d 236, 242, 242 N.E.2d 237; Seifert v. Demaree (1942), 380 Ill. 283, 290, 43 N.E.2d 957.

The argument assumes that there is reason to honor the rule on de novo review of a section 2-615 dismissal. (But see Sparling v. Peabody Coal Co. (1974), 59 Ill. 2d 491, 495-96, 322 N.E.2d 5 (noting, generally, that no judgment based on an erroneous legal theory can be allowed to stand).) But whether the argument's premise is valid is of no immediate concern -- the argument fails for an even more fundamental reason.

Iber did not assert in the appellate court that the purchase order stood as the complete agreement of the parties. Iber did, however, argue for application of the parol evidence rule. Again, the rule would render inconsequential the crucial allegations as to the telephone proposal. Any assessment of the rule's application would hinge on a preliminary determination that the purchase order was a complete integration. (See, e.g., Oldenburg v. Hagemann (1991), 207 Ill. App. 3d 315, 326, 152 Ill. Dec. 339, 565 N.E.2d 1021.) In short, Iber's argument was the very reason for the appellate court's analysis.

Integration

The appellate court premised its analysis on what it determined was "a split of authority" in this State as to the question of integration. (246 Ill. App. 3d at 528.) Our appellate court has, indeed, reached different Conclusions as to whether integration is a factual or legal question and whether it is to be answered against only the subject writing. (246 Ill. App. 3d at 528 (citing Pecora v. Szabo (1981), 94 Ill. App. 3d 57, 63, 49 Ill. Dec. 577, 418 N.E.2d 431, and Storybook Homes, Inc. v. Carlson (1974), 19 Ill. App. 3d 579, 582, 312 N.E.2d 27 (considering the question a legal one to be determined from the writing alone)); Geoquest Productions, Ltd. v. Embassy Home Entertainment (1992), 229 Ill. App. 3d 41, 45, 170 Ill. Dec. 838, 593 N.E.2d 727 (agreeing that the question is a legal one but holding evidence beyond the writing permissible); Maas v. Board of Trustees of Community College District No. 529 (1981), 94 Ill. App. 3d 562, 581 (agreeing that evidence beyond the writing is permissible but deeming the question a factual one); see also Lewis v. Loyola University (1986), 149 Ill. App. 3d 88, 93, 102 Ill. Dec. 425, 500 N.E.2d 47 (citing Maas v. Board of Trustees of Community College District No. 529 for the rule that extrinsic evidence is permissible butindicating nothing as to the nature of the question as factual or legal).) But, in fact, no "split of authority" exists.

The rule in cases not governed by the Uniform Commercial Code (UCC) is that only the subject writing may be considered to determine the integration question. That has been the rule since this court last considered the issue in 1921 in Armstrong Paint & Varnish Works v. Continental Can Co. (1921), 301 Ill. 102, 106, 133 N.E. 711. It remains the standard this State's trial and appellate courts are bound to apply in cases where the UCC does not operate. See also Telluride Power Transmission Co. v. Crane Co. (1904), 208 Ill. 218, 226, 70 N.E. 319; Orr v. Ward (1874), 73 Ill. 318.

Armstrong followed the "better view" recognized in Burr W. Jones' treatise on evidence. ( Armstrong, 301 Ill. at 106, citing 3 Jones' Commentaries on Evidence §§ 434, 453 (1913); see 3 Jones' Commentaries on Evidence § 440, at 182-83 (1913) (stating that "according to the better view the only criterion of the completeness of the written contract as a full expression of the agreement of the parties is the writing itself").) It overruled, sub silentio, cases such as Fuchs & Lang Manufacturing Co. v. R.J. Kittredge & Co. (1909), 242 Ill. 88, 89 N.E. 723, and Ruff v. Jarrett (1880), 94 Ill. 475, which indicated it was permissible to consider circumstances beyond the subject writing. See also 3 Jones' Commentaries on Evidence § 440, at 184-85 (1913), citing Wheaton Roller-Mill Co. v. John T. Noye Manufacturing Co. (1896), 66 Minn. 156, 156, 68 N.W. 854, 855 (allowing extrinsic evidence to show "the circumstances under which and the purposes for which [a] writing was executed").

The question raised by the parties here is whether the rule of Armstrong should remain viable. The more modern approach favors liberalizing the admission of evidence to determine the integration question. (See J. Calamari & J. Perillo, Contracts § 3-3, at 111 (2d ed. 1977).) Such is the approach of the Restatement of Contracts as well as the UCC. See Restatement (Second) of Contracts § 214 (1979); see also Restatement (Second) of Contracts § 214, Comment, at 133 ...


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