Associated Grocers of Iowa Co-op., Inc. v. West, 63142

• Decision Date: 17 September 1980
• Docket Number: No. 63142,63142
• Citation: Associated Grocers of Iowa Co-op., Inc. v. West, 297 N.W.2d 103 (Iowa 1980)
• Court: Iowa Supreme Court
• Parties: ASSOCIATED GROCERS OF IOWA COOPERATIVE, INC., Appellee, v. George G. WEST, Appellant, and Lloyd G. Huffer, Defendant. George G. WEST, Third-Party Appellant, v. DES MOINES SAVINGS & LOAN ASSOCIATION and Metropolitan Financial Corp.,Third-Party Appellees.

Page 103

297 N.W.2d 103

ASSOCIATED GROCERS OF IOWA COOPERATIVE, INC., Appellee, v. George G. WEST, Appellant and Lloyd G. Huffer, Defendant George G. WEST, Third-Party Appellant, v. DES MOINES SAVINGS & LOAN ASSOCIATION and Metropolitan Financial Corp.,Third-Party Appellees.

No. 63142.

Supreme Court of Iowa.

Sept. 17, 1980.

Rehearing Denied Oct. 9, 1980.

Doyle D. Sanders of Peddicord, Simpson & Sutphin, P. C., Des Moines, for appellant.

Joseph Joyce of Adler, Brennan, Joyce & Steger, Des Moines, for Associated Grocers of Iowa Cooperative, Inc.

Robert Rydell of Tesdell, Rydell, Hall & Shinkle, Des Moines, for Des Moines Savings & Loan Association and Metropolitan Financial Corp.

Considered en banc.

LeGRAND, Justice.

This breach-of-contract action is the outgrowth of an unsuccessful venture by which George G. West and Lloyd G. Huffer hoped to profit from the development of real estate for industrial purposes. When their expectations were dashed, they were called upon to defend several suits arising out of that matter. This is one of them. Plaintiff obtained judgment against West and Huffer for $96,177.41. In addition, West's counterclaim against plaintiff was dismissed, and his cross-petition for indemnity against Des Moines Savings & Loan Association and Metropolitan Financial Corporation was also dismissed. This appeal followed, and we affirm.

First, it will be helpful to sort out the parties to this litigation. Lloyd G. Huffer did not resist plaintiff's claim. Judgment by default was entered against him. He is not a party to this appeal. Metropolitan Financial Corporation is a wholly owned subsidiary of Des Moines Savings & Loan Association. Their interests herein are identical. Our references throughout are to West as the sole remaining defendant and to Des Moines Savings & Loan Association for both itself and Metropolitan Financial Corporation on the third-party claim.

In September of 1971, West purchased the remaining lots in an area known as Ankeny Industrial Development Park. West intended to complete development of this area, a project which had already been started.

Part of West's plan was to secure a major purchaser for part of the area, expecting this would in turn attract other buyers and facilitate development of the property. The evidence is in dispute as to whether the commitment was conditional upon West securing a major purchaser. We do not believe this has any significance in the conclusion we reach.

In June of 1972, West entered into an option contract with Associated Grocers of Iowa Cooperative, Inc. (AGI) which is the subject of this litigation. The option ran for ninety days and gave AGI the right to purchase Lots 10, 11, and 12 in Ankeny Industrial Development Park for a price of $5,500 per acre. The terms were later amended to provide that AGI could postpone exercising its option as to Lot 10 for five years.

The real point at issue concerns the provisions in the option which obligated West to do certain construction work. As finally agreed upon, they were as follows:

3. Immediately following the closing of this sale the seller hereby agrees to install roads on the north border of Lots 10, 11, and 12 and extend said road east to Delaware Avenue and seller further agrees to install a road on the east border of Lot 10 to provide access south from the property which is the subject of this proposal.

4. Seller also agrees to construct at its expense two railroad spurs from the main line of the Chicago Northwestern Railway Company to the property line of Lot 12, the location of said spurs be determined by mutual agreement between buyer and seller.

Armed with the AGI option, West secured financing from Des Moines Savings in the amount of $339,000. All of the loan proceeds were paid to him except $60,000, which was reserved for street construction. This figure was apparently arrived at by withholding 75 per cent of the estimated cost of $78,000. The city of Ankeny was to pay the remaining 25 per cent.

Approximately sixty days after West had secured financing, AGI exercised its option to purchase Lots 11 and 12 and postponed exercising its option on Lot 10. West did not install the roads nor did he construct the railroad spurs as the option specified. AGI did not begin construction for four years after exercising its option, although it paid West the full purchase price for Lots 11 and 12.

The transaction between AGI and West was completed on October 16, 1972, by delivery of a warranty deed conveying Lots 11 and 12 and reserving the option to purchase Lot 10. AGI started construction of its warehouse on Lots 11 and 12 in 1976 and completed it in 1977. The option to purchase Lot 10 was not exercised until 1977.

Eventually the city of Ankeny paved the streets described in the option and assessed AGI for its portion of the cost. AGI installed the railroad spurs at its own cost. West refused to assume any obligation for either of these expenditures for a variety of reasons which we discuss later. West was unable to sell the remaining lots in the addition. He blames this on AGI's failure to build its warehouse as an attraction to other potential buyers. In 1974 Des Moines Savings started foreclosure on the West mortgage, which was in default. A decree of foreclosure was entered, subject to AGI's option to purchase Lot 10.

Lot 10 was assessed for paving in the amount of $15,075.11. Lot 11 was assessed for $5,906.51. This was for the paving of Hulsizer Street. Lot 10 was also assessed in the amount of $8,657.26 for the paving of Iowa Street. The actual assessments were considerably less than the estimate upon which the $60,000 was withheld. The property was sold at sheriff's sale to Des Moines Savings for the amount remaining due on the indebtedness. After the expiration of the period of redemption, AGI made demand on West for reimbursement, claiming the option obligated West to pay both the paving assessment and the cost of the railroad spur lines.

The case was tried to the court and judgment went against West on all issues. He was ordered to reimburse AGI for the cost of the street paving and the railroad spurs in the total amount of $96,177.41. His counterclaim against AGI was dismissed. His third-party petition against Des Moines Savings for indemnity was dismissed. He appealed from all these adverse results.

West lists seventeen separate statements of error. Some of them are repetitive, and some state alleged errors which, even if established, would not entitled West to any relief. Six of the claimed errors, for instance, assert there was sufficient evidence to justify a finding in his favor on certain issues. If we concede this is true, it would still afford no basis for reversal. This is a law action tried to the court, whose findings, if supported by substantial evidence, are binding upon us. In other words, if there is substantial evidence to support the finding made, it is immaterial that the evidence would also have supported a contrary result. Iowa Power & Light Co. v. Board of Waterworks Trustees, 281 N.W.2d 827, 830 (Iowa Ct.App.1979); Keith v. Community School District, 262 N.W.2d 249, 255 (Iowa 1978); Rule 14(f)(1), R.App.P.

The appeal presents these issues: 1) Was the obligation to pave the streets and install railroad spurs personal or was it a covenant running with the land? 2) Was performance excused because of impossibility or impracticability? 3) Did AGI lose its right to assert this claim by its failure to file a counterclaim in the earlier foreclosure action brought by Des Moines Savings against West? 4) Does the result amount to unjust enrichment for Des Moines Savings? 5) Should AGI be barred from recovering because of collusive bargaining with Des Moines Savings to fix liability on West? 6) Did the trial court commit reversible error in ruling on certain evidentiary matters?

I. WAS THE OBLIGATION ASSUMED BY WEST PERSONAL OR ONE RUNNING WITH THE LAND?

This is perhaps the most important single issue. It runs all through the case. Our resolution of this question against West goes far toward deciding the ultimate result which we reach.

Both parties cite extensively from Sexauer v. Wilson, 136 Iowa 357, 362-63, 113 N.W. 941, 943 (1907) on this issue. Sexauer sets out the conditions to be met in determining when a covenant runs with the land. We quote from that case:

In determining whether a covenant will run with the land, the material inquiries always are (1) whether the parties meant to charge the land; and (2) whether the burden is one that can be imposed consistently with policy and principle. ...

Covenants intended to charge the land may be shown by the employment of the word "assigns," and also may be quite as strongly indicated by other language contained in the deed, and generally the intention of the parties is to be ascertained from the tenor of the instrument, the nature of the thing to be done, its relation to the property, the period of its continuance, and the like. ...

We think the real question must be, the covenant being one which may be annexed to the estate and run with the land, whether such was the intention of the parties, as expressed in the deed.

In Sexauer the grantee agreed to perpetually maintain a tight fence "sufficient to stop hogs and all other livestock." Later the grantee disposed of his interest in the land and refused to perform the condition of maintaining the fence. We held his obligation to do so ceased when he divested himself of all interest in the real estate because that was the intention of the parties.

We quote further from Sexauer :

(I)t will be observed that Wilson as grantee of plaintiff agreed (1) to maintain a division fence of a particular character; and (2) to do so perpetually. The thing to be done and continued inhered in the land was such as might be annexed to the freehold as a covenant running with the land; and from the promise that the maintenance should be perpetual, to continue...