6305 SW 9th Street, L.L.C. v. Sons of Geil, L.L.C., No. 7-330/06-1381 (Iowa App. 11/15/2007), 7-330/06-1381
| Decision Date | 15 November 2007 |
| Docket Number | No. 7-330/06-1381,7-330/06-1381 |
| Parties | 6305 SW 9TH STREET, L.L.C., Plaintiff-Appellant/Cross-Appellee, v. SONS OF GEIL, L.L.C., Defendant-Appellee/Cross-Appellant, CLEAR CHANNEL OUTDOOR, INC. Defendant-Appellee. CLEAR CHANNEL OUTDOOR, INC., Cross-Claim Plaintiff, v. SONS OF GEIL, L.L.C., Cross-Claim Defendant. |
| Court | Iowa Court of Appeals |
Appeal from the Iowa District Court for Polk County, Scott Rosenberg, Judge.
6305 SW 9th Street, L.L.C. appeals from the trial court's ruling granting Sons of Geil, L.L.C. a new trial on damages in a breach of contract case. Sons of Geil, L.L.C. cross-appeals from the trial court's ruling admitting a written purchase agreement over Sons of Geil, L.L.C.'s foundation, authenticity, and hearsay objections and basing the damages awarded on the price recited in that agreement. Sons of Geil, L.L.C. also claims the damage award is not supported by the evidence. REVERSED AND REMANDED ON APPEAL; AFFIRMED ON CROSS-APPEAL.
Hugh J. Cain of Hopkins & Huebner, P.C., Des Moines, and Timothy C. Hogan of Hogan Law Office, Des Moines, for appellant.
Jeffrey L. Goodman and Marcy A. O'Brien of Goodman and Associations, P.C., West Des Moines, for appellee Sons of Geil, L.L.C.
Scott L. Long and Rebecca A. Brommel of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C., Des Moines, for appellee Clear Channel Outdoor, Inc.
Heard by Huitink, P.J., and Vogel and Baker, JJ.
6305 SW 9th Street, L.L.C. (6305) appeals from the trial court's ruling granting Sons of Geil, L.L.C. (Geil) a new trial on damages in a breach of contract case. Geil cross-appeals from the trial court's ruling admitting a written purchase agreement over Geil's foundation, authenticity, and hearsay objections and basing the damages awarded on the price recited in that agreement. Geil also claims the damage award is not supported by the evidence. We reverse and remand on appeal and affirm on cross-appeal.
At all times material to this case, 6305 and Geil owned adjacent commercial properties in Des Moines. Clear Channel Outdoor, Inc. (Clear Channel) owned a leasehold interest in the Geil property pursuant to a series of billboard leases. One or more of Clear Channel's leases granted Clear Channel a right of first refusal to purchase the Geil property.
In September 2003 Richard Hurd, on behalf of 6305, and William Geil, on behalf of Geil, signed a purchase agreement for the sale of the Geil property to 6305 for $243,000. 6305 subsequently received a written offer from Bucks, Inc. to purchase both properties for $1,025,000. In June 2004 Clear Channel notified Geil of Clear Channel's intent to exercise its right of first refusal to purchase the Geil property.
As a result, 6305 sued Geil for breach of contract and specific performance of the September 2003 purchase agreement. 6305 also named Clear Channel as a defendant and requested the trial court declare 6305's rights under the September 2003 purchase agreement superior to Clear Channel's right of first refusal to purchase the Geil property. Clear Channel cross-claimed against Geil for breach of contract and specific performance of Clear Channel's right of first refusal to purchase the same property.
The trial court tried the parties' equitable claims for specific performance and declaratory relief before the breach of contract claims. The trial court's September 7, 2005 "Findings of Fact and Conclusions of Law on Equitable Claims" states:
1. The contractual right of first refusal in the lease to purchase the Property preempts any offer from 6305 or any acceptance by Geil and such right is paramount and superior to 6305's Offer to Purchase.
2. Clear Channel's right of first refusal in the lease to purchase the Property entitles Clear Channel to the Property.
3. Geil shall specifically perform under the right of first refusal contained in the 2000 Lease by selling the Property to Clear Channel and Clear Channel shall purchase the Property from Geil pursuant to the terms of the Offer to Purchase, including a purchase price of $246,000.00, in conformity with Exhibit P.
The trial court also ordered the sale proceeds be deposited with the clerk of court pending resolution of the parties' remaining claims. Geil specifically performed under its contract with Clear Channel as ordered. 6305 subsequently sold its property to a third party for $625,000.
Following a bench trial on the parties' remaining claims, the trial court determined Geil breached its contract with 6305 and 6305 was entitled to both general and consequential damages totaling $278,073. The trial court's June 26, 2006 "Findings of Fact, Conclusions of Law and Judgment" included the following:
In regard to the general damages, sufficient evidence has been presented by the Plaintiff at trial to show and establish a reasonable basis for this Court to infer an amount of damages in this matter. Specifically, the Plaintiff presented substantial evidence to permit the computation of the general damages by subtracting Plaintiff's costs to acquire the Geil property and the adjacent property from the fair market value of the assemblage of the two properties. The fair market value of the Geil property when combined with the adjacent property was $1,025,000. Such value was established by the admission of the Bucks' purchase agreement which represented an offer to purchase the combined properties made by a third party in an arm's length transaction. This value was further established and supported by the opinions expressed by Richard Hurd based upon his ownership interest, personal involvement and expertise.
The Plaintiff purchased the adjacent property in August of 2003 for $450,927. Had Geil performed as required under the Offer to Purchase Agreement, the Plaintiff would have purchased the Geil property for $246,000. Thus, the total acquisition cost would have been $696,927. Accordingly, after deducting $50,000 for sales commission, the Plaintiff suffered general damages equal to $278,073 as a result of the breach. The Bucks' Purchase Agreement is important in that it is a benchmark for establishing the fair market of the assembled properties in an arm's length transaction. Mr. Hurd further testified as to the fair market value of the assembled properties based upon his ownership interest, personal involvement and expertise. Mr. Hurd testified that he has been a commercial real estate developer for more than 30 years and that during that time he has bought, sold and developed numerous properties with similar characteristics to the properties involved in this litigation. He discussed several substantially similar developments in and around Des Moines which he actually paid $1,000,000 or more for similar property. Mr. Hurd testified that, in his opinion, the fair market value of the Geil property, when combined with the adjacent property, was fairly represented by the Bucks' Purchase Agreement or approximately $1,025,000.
Mr. Hurd also had extensive personal and professional knowledge of the property in question in that he first became aware of the Geil property approximately 20 years ago when he purchased the shopping center located on the adjacent property. He eventually sold and then repurchased that property once again owning and managing the property directly adjacent and next door to the Geil property. Mr. Hurd was also the majority owner of the entity that entered into a purchase agreement for the Geil property in 1999 in a sale that did not consummate. Mr. Hurd was also the principal architect of the purchase agreement in this matter and negotiated the purchase agreement on behalf of the Plaintiff. He remained personally involved in the sale following the execution of the Offer to Purchase agreement.
In addition, the Plaintiff offered the testimony of Chris Thomason in support of the value established by the Bucks' Purchase Agreement. Mr. Thomason had previously placed the Geil property under contract in 1999 for $325,000. He testified that although the sale was not finalized, Geil was informed that the purchaser was interested in the Geil property for the purpose of constructing a Walgreen's store on an assemblage of the Geil property and the adjacent property. Mr. Thomason further stated that because the Geil property standing alone was not large enough for such a development, the purchaser had also entered into a contract with the then owner of the adjacent property for $800,000. Accordingly, Mr. Thomason testified that the purchaser had both properties under contract for more than $1,100,000. This testimony further confirms the value established by the Bucks' Purchase Agreement.
. . . .
A party may not recover damages for breach of a real estate contract unless the harm was reasonably foreseeable. The evidence as presented in this case establishes that at the time of the execution of the Offer to Purchase agreement, Geil was fully aware of the Plaintiff's plans for development and knew that the failure to convey the property would result in a substantial loss to the Plaintiff. William Geil admitted at trial that at the time of the contract he knew that the Plaintiff was a commercial real estate investor, that the Plaintiff owned the adjacent property, and that the Plaintiff intended to raze the then existing structures and resell or redevelop the assembled properties. The purchase agreement also expressly informed Geil that Richard Hurd was a licensed real estate agent "acquiring the [Geil property] for investment purposes." In addition, the real estate appraisal prepared by Mr. Bill Carlson on behalf of Geil several months before the parties entered into the Offer to Purchase Agreement informed Geil that due to the "limited depth" of the Geil property, the "highest and best use" of the Geil property was "for assemblage with the property to the north."
Geil moved for a new trial, citing the trial court's admission of the Bucks'...
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