Berryhill v. Hatt

• Decision Date: 17 August 1988
• Docket Number: 87-199,Nos. 87-432,s. 87-432
• Citation: 428 N.W.2d 647
• Parties: Patrick M. BERRYHILL, Thomas A. Popa and North American Motorsports Corporation, Appellees, v. John A. HATT, Appellant. Patrick M. BERRYHILL and Thomas A. Popa, Appellants, v. John A. HATT and Dorris V. Hatt, Appellees.
• Court: Iowa Supreme Court

Page 647

428 N.W.2d 647

Patrick M. BERRYHILL, Thomas A. Popa and North American Motorsports Corporation, Appellees, v. John A. HATT, Appellant.

Patrick M. BERRYHILL and Thomas A. Popa, Appellants, v. John A. HATT and Dorris V. Hatt, Appellees.

Nos. 87-432, 87-199.

Supreme Court of Iowa.

Aug. 17, 1988.

Keith Stapleton, Cedar Rapids, for appellees defendants.

John L. Riccolo and Diane B. Gould of Wenzel, Piersall, Riccolo & Harms, P.C., and Iris E. Muchmore of Simmons, Perrine, Albright & Ellwood, Cedar Rapids, for appellants plaintiffs.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, CARTER and ANDREASEN, JJ.

McGIVERIN, Chief Justice.

The contractual relationship underlying this dispute involves a real estate lease and sale contract between defendant John A. Hatt, as lessor-seller, and plaintiffs Patrick Berryhill and Thomas Popa, as lessee-buyers.

In a law action plaintiffs asserted that defendant Hatt breached the contract and was subsequently liable for abuse of process in trying to get them to leave the leased premises. The trial court jury agreed and assessed compensatory and punitive damages against Hatt on both the abuse of process and breach of contract claims. Judgment was entered on the verdict. The court of appeals reversed the judgment on both issues. On plaintiffs' application for further review, we agree with the court of appeals on the issue of abuse of process, but disagree with the decision on the contract issue. In considering the issues raised upon further review, we conclude Hatt breached the contract by anticipatory repudiation, justifying an award of compensatory damages but not punitive damages for plaintiffs. The court of appeals decision is vacated and the case is remanded for entry of judgment in accordance with this opinion.

In plaintiffs' separate action for specific performance of the contract against defendants John A. Hatt and Dorris V. Hatt, the trial court denied recovery and the court of appeals agreed. We also vacate that court of appeals decision, and reverse the trial court judgment and remand for further proceedings.

I. Background facts and proceedings. The parties executed two documents relevant to this case. The first, executed on December 7, 1982, and the second, superseding the first, on August 1, 1983. The trial court dispute involved the second document.

The first document was drafted on a preprinted form entitled "Uniform Purchase Agreement" with the help of a realtor. The second contract, however, was rather artlessly drafted on an identical form by the parties themselves without the assistance of a realtor or an attorney. Where the form left blanks to be filled in by the parties, Berryhill, Popa and Hatt, sitting together in an office, mutually agreed upon the language to be used and Popa typed the agreed language into the contract form. Some typed language in the second purchase agreement was copied from the first without change and made little sense in the context of the second agreement. Neither of the two agreements were signed by Hatt's wife, Dorris V. Hatt.

The property to be sold consisted of the rear portion of a lot in Cedar Rapids owned by Hatt, and included a warehouse building on the premises. The sale price was to be $47,000.00, and the August 1, 1983, contract stated:

Buyer shall pay seller $13,500.00 at time of settlement. Balance of $33,500 to be executed by Uniform Sales Contract at 11% interest.... This offer subject to seller splitting property into two parcels with 15' [foot] easement across front parcel to rear parcel, and buyer buying adjacent property to provide rear parcel with legal street frontage.

According to Popa's testimony, this provision was added because applicable Cedar Rapids zoning regulations mandated that the lot have access to existing streets.

Another pertinent provision of the contract contained in the preprinted language stated in part:

ABSTRACT AND MERCHANTABLE TITLE. SELLER shall, immediately upon request, have the Abstract of Title extended to date and submit it to BUYER for examination by his attorney. Such Abstract of Title shall show merchantable title in the SELLER, subject only to encumbrances and liens herein assumed and such other encumbrances and liens as shall be paid from the proceeds of this sale. If this sale is on the deferred installment plan, such other encumbrances shall not exceed the unpaid balance of purchase price hereunder.... Upon full payment of purchase price SELLER shall deliver to BUYER a general warranty deed to said property accompanied by such abstract of title.

(Emphasis added.)

Although this agreement was entered on August 1, 1983, other typed language indicated that "settlement" was to be made "by August 1, 1983 or within two weeks of plat approval whichever occurs first." This language was also on the document dated December 7, 1982. Because there had been no plat approval by August 1, 1983, the first document was terminated and the second document was drafted on that date. Popa copied this settlement language into the second contract directly from the first contract without change.

The lease portion of the agreement, also typed, stated, "Buyer to rent property for $320.00 per month commencing August 1, 1983 until closing or August 1, 1988, whichever comes first." The plaintiffs had been renting the lot and building since the previous December under a similar rental provision in the first agreement. While renting the building, plaintiffs undertook substantial remodeling of the warehouse to accommodate work space for their race car assembly business and to add offices, restrooms and a shower facility.

Pursuant to the agreement, Hatt sought a variance from the Cedar Rapids Zoning Board of Adjustment (board). The board granted the variance splitting his lot on March 12, 1984, contingent upon Hatt filing an easement and paving a large parking area to the north of the building on plaintiffs' proposed lot. The paving was needed because the board believed zoning regulations required a sufficient number of parking spaces adjacent to the business structures. This paving requirement added a substantial and unexpected expense to the sale of the lot, and Hatt informed plaintiffs that they would have to pay for the paving. Plaintiffs objected, first, because they would be sharing the parking area with the other business on the existing lot, and, second, because they believed they were not obligated to pay any costs associated with splitting the lot.

At the same time, Popa, who had served on the zoning board in the past, noticed that the board had been mistaken about the use of plaintiffs' building. Subsequently, on April 25, 1984, plaintiffs petitioned the board to reduce the parking requirement.

On April 27, Hatt filed the easement required by the board. Additionally, he filed an easement over the entire parking area for his own benefit. When plaintiffs learned of this easement, they also discovered that due to an error in the legal description, the easement filed by Hatt overlapped with the back wall of their building. A meeting was held between the parties to come to some resolution concerning the paving costs and the easement problem. Hatt was adamant that he was not required to pay for the paving because nothing in the contract expressly assigned that duty to him. No agreement was reached at this meeting.

Shortly thereafter, Hatt demanded that the plaintiffs close on the transaction and pay the down payment of $13,500. Plaintiffs responded that they would not close until the issues concerning the easement and pavement were resolved and they were provided an abstract of title to the real estate for examination.

Noting that the buyers failed to close, Hatt commenced forfeiture proceedings under Iowa Code chapter 656 and delivered a notice of forfeiture of the real estate contract to plaintiffs' attorney, who refused to accept service. Instead, the attorney was anticipating receipt of an abstract of title on the property. Upon learning that buyers' attorney had refused service, Hatt placed the notice of forfeiture with the county sheriff on May 16, 1984, for service upon plaintiffs. The next day, May 17, an abstract of title to the property was delivered to the attorneys for the plaintiffs. A subsequent title opinion rendered by the plaintiffs' attorneys noted approximately $180,000 in liens against the property.

Despite plaintiffs' protests, Hatt by this time insisted the contract was "null and void," and continued to press forfeiture proceedings. Plaintiffs filed an action and were granted an injunction by the court on June 27 restraining Hatt from proceeding with the forfeiture. Meanwhile, plaintiffs' continued efforts to resolve the parking pavement problem were successful. On July 9, the board removed the requirement for the extensive parking area behind plaintiffs' building. Following this change, plaintiffs informed Hatt that they were ready to close as soon as Hatt produced evidence that the liens on the property were cleared or would be cleared by closing. Hatt advised plaintiffs unequivocally that he considered the contract rescinded by their refusal to close upon his prior demand.

Relations between the parties at this point were strained. Hatt refused to accept any further rent, and at one point the water line which ran to the plaintiffs' building through Hatt's building was turned off. On September 15, 1984, Hatt caused to be served upon plaintiffs a notice to terminate tenancy, later followed by a three day notice to quit. Plaintiffs in response obtained a temporary injunction enjoining the termination action and an order to force defendant to restore water service to their building.

Plaintiffs filed a petition at law, as amended, asserting breach of contract and abuse of process against John A. Hatt, and later filed an action in equity against Hatt and his wife, Dorris V. Hatt, for specific performance of the real estate contract. The two cases were...