Akkerman v. Gersema

• Decision Date: 04 April 1967
• Docket Number: No. 52485,52485
• Citation: 260 Iowa 432,149 N.W.2d 856
• Parties: Wayne E. AKKERMAN, Appellant, v. Donald GERSEMA and Mervin W. Hoke, Appellees.
• Court: Iowa Supreme Court

Page 856

149 N.W.2d 856

260 Iowa 432

Wayne E. AKKERMAN, Appellant, v. Donald GERSEMA and Mervin W. Hoke, Appellees.

No. 52485.

Supreme Court of Iowa.

April 4, 1967.

Carroll Wood, Webster City, for appellant.

Hemingway, Hemingway & Myers, Webster City, for appellees.

LARSON, Justice.

Plaintiff Wayne E. Akkerman, in a declaratory judgment proceeding brought May 12, 1965, sought to construe a written lease entered into between himself and the defendants, Donald Gersema and Mervin W. Hoke, and to recover from defendants the sum of $1,600 as unpaid rent for the months of April and May, 1965, on premises in Webster City, Iowa, used for a bowling and restaurant business. Defendants' resistance admitted the execution of the lease, but alleged it was entered into by mutual mistake or by the mistake of defendants and the fraud of plaintiff in concealing knowledge thereof. By amendment to answer filed at the close of all evidence, defendants requested that the lease be reformed to provide a lower rental for the month of June, as intended by the original agreement between the parties. The trial court dismissed plaintiff's petition and reformed the lease agreement to provide the lower rental for June of each year. Plaintiff appeals. We affirm.

A brief statement of the case seems necessary at the outset in order to understand the issues and the contentions of the parties. It appears early in 1963 defendants desired to purchase a bowling alley business and were shown several, including the one involved herein, by William Reece, a real estate broker residing in Iowa Falls, Iowa. Mr. Reece represented the plaintiff in all these negotiations, which commenced on or about March 1, 1963.

Plaintiff was asking a rental of $800 per month for the premises throughout the year, which was not acceptable to the defendants. Mr. Reece then presented to defendants an instrument entitled an 'Offer' which he had prepared, the first three pages of which became Exhibit 'A' in this suit. In this offer the monthly rental was listed at $800, but included therein was a provision which stated plaintiff would put 10% Of the yearly rental back into the building and grounds as repairs and upkeep. Defendants refused to sign this offer, asserting (1) the $800 per month rental was too much and (2) the upkeep provisions would give rise to disputes and arguments as to its expenditure.

During the negotiations there were discussions regarding the lowering of rent for the months of June, July and August, because they were the lean months for this type of business. Thereafter Mr. Reece had his attorney prepare an amendment, which was attached to the 'Offer' and appears as page 4 of Exhibit 'A'. This amendment changed (1) the date of possession and provided the first rental payment was to be July 1, 1963, and (2) the monthly rental of $800 was to be reduced to $300 per month during the months of June, July and August, of each year of the ten-year lease. This amended offer, dated March 19, 1963, having already been signed by plaintiff, was then signed by defendants. At that time they delivered their $5,000 check to plaintiff's agent, Mr. Reece, to bind the deal. Mr. Reece testified, on the basis of Exhibit 'A' plaintiff paid him his commission, although this was prior to the execution of the lease which is the subject of this controversy.

Although plaintiff contends there were further negotiations between the parties before the lease was executed, defendants denied it. Mr. Reece testified that to the best of his knowledge 'there were no other negotiations between the parties between the signing of this Offer as amended, and the signing of the final Lease, dated April 29. That prior to this, all negotiations had been going through him.' In any event plaintiff's scrivener prepared the lease, Exhibit '1' herein, which was signed by both parties on April 29, 1963. Although defendants and their attorney looked over the lease before defendants signed, they failed to notice that the reduced rent period included only the months of July and August. It appears plaintiff's signature was acknowledged in Webster City, Hamilton County, and the lease was then rushed to Greene, Butler County, by Mr. Reece for defendants' signatures and acknowledgment.

It further appears defendants took possession of the premises on July 1, 1963, and paid $300 per month rent for July and August and $800 per month thereafter until June 1, 1964, when a check of $300 for June rent was objected to by plaintiff. Defendants then paid an additional $500 under protest and deducted $250 per month from the rent for the months of April and May, 1965. This suit followed.

As the trial court found, the sole question involved in this appeal is whether the lease, Exhibit '1', should be enforced pursuant to its terms or be reformed pursuant to the terms of Exhibit 'A', in particular to the monthly rental for June of each year. Although it did not specifically rule upon defendants' Motion for Leave to Amend the Answer filed March 15, 1966, at the close of all evidence, it is clear that leave was granted.

In its conclusions of law the trial court correctly recognized that contracts may be obligatory on both parties even though all parties intend that the same shall be put into another form (Scott v J. C. Ferguson Realty Co., 206 Iowa 1158, 1163, 221 N.W. 785); that that equity will reform a written contract in the absence of doubt or ambiguity where mistake is alleged and shown (Hausbrandt v. Hofler, 117 Iowa 103, 90 N.W. 494); that equity may reform a contract when the same does not accurately contain the terms of the agreement between the parties (Milligan Co. v. Lott, 220 Iowa 1043, 1045, 1046, 263 N.W. 262, 263); that if a clause is inserted (or omitted) in a formal agreement by mistake on the part of the seller or the scrivener, then the same is a mutual mistake because it is contrary to the real agreement of the parties; that if inserted (or omitted) by design, it would be without consideration and fraudulent (Betz v. Swanson, 200 Iowa 824, 827, 205 N.W. 507). As to defendants' failure to carefully read the lease before they signed it, the trial court referred to Betz v. Swanson, supra, at page 828 of 200 Iowa, at page 510 of 205 N.W., and Snyder v. Ives, 42 Iowa 157, 162, where it is said: 'The law requires only reasonable diligence, and requires this to the end that culpable negligence may not be encouraged.' This statement was recognized and reaffirmed in Wallace v. Spray, 248 Iowa 100, 107, 78 N.W.2d 406. The court further held, in cases such as this where even though there was a full opportunity to examine the contract in question, the defendants had a right to rely upon the agreement, Exhibit 'A', as to what the terms of that final draft would be. It then reformed the lease, Exhibit '1', by striking from paragraph 2 thereof the words '$300.00 per month for the months of July and August of each year and $800.00 per month for September through June of each year', and inserting in lieu thereof, '$300.00 per month for the months of June, July, and August of each year and $800.00 per month for September through May of each year.'

Appellant contends (1) that the evidence does not show there was a mutual mistake as to the terms and conditions of the lease agreement, (2) that it does show a mutual mistake as to the terms of the Offer and Amendment to Offer, (3) that the written lease embodied and combined the terms of a prior writing and oral discussion, was the entire agreement, and became conclusive as to the rights of the parties, (4) that the court could not properly grant relief on an amendment to answer, filed after all evidence was in, which changes the issues, defense and cause of action before it, and (5) that a person who enters into a written contract cannot avoid its terms by failure to read the instrument before signing it. We do not agree as to (1), (2), (3) and (5), and although as a proposition No. (4) is correct, the evidence here does not show the amendment to answer substantially changed the issues or the relief asked.

I. The legal principles governing a declaration of rights under a written instrument and as to reformation of such instruments are not in dispute in this suit. One who contends a writing does not express the real agreement between the parties or who seeks reformation of a contract has the burden of establishing his contention by clear, satisfactory and convincing proof. Wallace v. Spray, supra, 248 Iowa 100, 103, 78 N.W.2d 406, and citations. We pointed out therein that this requirement is a safeguard, to prevent the courts from making contracts for the parties rather than making the written instrument, which is the subject of the controversy, speak the true contract, and that this and only this is the equitable relief afforded by a reformation.

In Betz v. Swanson, 200 Iowa 824, 826, 205 N.W. 507, 509, this court said equity will reform a written instrument upon the ground of mistake occurring at the time the instrument was prepared, only when such mistake is mutual, and pointed out the necessity of mutual mistake arises out of the inability of the court to make a contract for the parties. Thus, if a...