Bridgman v. Curry

• Decision Date: 15 October 1986
• Docket Number: No. 85-1730,85-1730
• Citation: 398 N.W.2d 167
• Parties: Thomas J. BRIDGMAN and Ann L. Bridgman, Husband and Wife, Appellants, v. John W. CURRY and Edna T. Curry, Husband and Wife, Defendants, Dan D. Stevens and Marjorie A. Stevens, Husband and Wife, Donald E. Fike and Marie T. Fike, Husband and Wife, Richard A. Greene and Dale Greene, Husband and Wife; Michael Bibo and Patricia Bibo, Husband and Wife, Appellees, and First National Bank, Burlington, Iowa, Big Three Farm Bureau Service Co., and Kaiser Agricultural Chemicals, Defendants.
• Court: Iowa Supreme Court

Page 167

398 N.W.2d 167

Thomas J. BRIDGMAN and Ann L. Bridgman, Husband and Wife, Appellants, v. John W. CURRY and Edna T. Curry, Husband and Wife, Defendants Dan D. Stevens and Marjorie A. Stevens, Husband and Wife, Donald E. Fike and Marie T. Fike, Husband and Wife, Richard A. Greene and Dale Greene, Husband and Wife; Michael Bibo and Patricia Bibo, Husband and Wife, Appellees and First National Bank, Burlington, Iowa, Big Three Farm Bureau Service Co., and Kaiser Agricultural Chemicals, Defendants.

No. 85-1730.

Supreme Court of Iowa.

Oct. 15, 1986.

Rehearing Denied Dec. 15, 1986.

D.W. Harris, Bloomfield, and Emil Trott, Jr. of Barrett & Trott, Des Moines, for appellants.

Stephen A. Richardson and Vern M. Ball, Bloomfield, for appellees Stevens, Fike, Greene and Bibo.

Considered by REYNOLDSON, C.J., and McGIVERIN, LARSON, SCHULTZ and WOLLE, JJ.

WOLLE, Justice.

The plaintiffs Thomas and Ann Bridgman challenge the post-trial dismissal of their petition for foreclosure of a real estate contract. Because we find that the evidence and applicable law fully warranted entry of a decree of foreclosure, not dismissal of the plaintiffs' action, we reverse the decision of the trial court and remand the case with directions.

We review de novo this foreclosure proceeding which was filed and tried in equity. Bair v. Estate of Biggins, 356 N.W.2d 551, 556 (Iowa 1984); Iowa Code § 624.4 (1985); Iowa R.App.P. 14(f)(7).

In 1981 plaintiffs sold their Davis County farm on contract to defendants John W. and Edna Curry (collectively referred to as Currys). The contract obligated Currys to make payments to the plaintiffs on March 1 of each year and provided for forfeiture or foreclosure in the event they did not. Currys, in March of 1982, entered into a written "joint venture contract" assigning four undivided one-sixth interests in the Bridgman-Curry real estate contract to defendants Dan Stevens (Stevens), Donald Fike (Fike), Michael Bibo (Bibo), and Richard Greene (Greene). (Those four defendants will be collectively referred to as the assignee defendants.) Currys retained the other two undivided one-sixth interests. The joint venture contract stated that the assignee defendants agreed "to be bound by the terms of the Bridgman contract." The assignee defendants also executed an acceptance of assignment providing:

The undersigned Assignees herewith accept the foregoing Assignment, and agree to be bound by the terms and conditions of [the Bridgman] Real Estate Contract including the payment of principal, interest and Real Estate Taxes.

The joint venture contract contained other explicit provisions pertinent to the issue in this appeal. The property would be managed "under John W. Curry's sole direction." The parties would make additional capital contributions in accordance with their respective interests, having their interest increased or reduced to the extent any joint venturer did not provide such capital. Profits and losses would be allocated on the basis of the parties' respective percentage interests. Persons wishing to dispose of their joint venture interest were required first to offer it to the remaining parties on a pro-rata basis.

As early as February of 1983, the plaintiffs were made aware of the assignee defendants' interest in the real estate contract when a payment due then under the contract was paid with a check drawn on a bank account entitled "Curry-Stevens-Fike-Greene-Bibo." In April of 1984 the plaintiffs allowed Curry and the other investors additional time to pay amounts due under the contract, accepting Curry's statement, "We'll get you the money." No further payments were made.

On November 16, 1984 the plaintiffs commenced this foreclosure action rather than undertaking to serve notice of forfeiture of the installment contract, another option the contract gave the plaintiffs. The assignee defendants all denied pertinent allegations of the foreclosure petition, and defendants Stevens, Fike and Greene affirmatively alleged that they had earlier reconveyed their interests to Curry by quitclaim deed.

On February 6, 1985, Currys filed a voluntary petition for reorganization under chapter 11 of the United States Code (1982) in the United States Bankruptcy Court for the Central District of Illinois. The filing of that petition operated as an automatic stay of the plaintiffs' foreclosure proceedings. See 11 U.S.C. § 362(a) (1982). Plaintiffs then applied for and, with the Currys' concurrence, received an order of the bankruptcy court entered March 21, 1985 lifting the stay upon condition that "[p]laintiffs waive all claims against [Currys] for any deficiency arising from plaintiffs' proposed forfeiture of the real estate contract and/or the receivership now pending in the Iowa state court or for any other reason." An additional key provision of that March 21, 1985 order unequivocally stated:

Nothing herein shall be deemed to affect the rights of the plaintiffs, if any, against third parties.

Ultimately, the bankruptcy court confirmed, subject to specific exceptions, an amended plan of reorganization submitted by Currys. One of the exceptions, an amendment to the plan initially proposed by Currys, provided:

The class S6 claim of Thomas and Ann Bridgman is governed by the order entered March 21, 1985.

This exception incorporated by reference the plaintiffs' reservation of rights against third parties. Plaintiffs here contend that amendment to the plan left them free to proceed with the foreclosure action and obtain deficiency judgments against the assignee defendants. Neither the plaintiffs nor the assignee defendants thereafter filed objections to the amended reorganization plan which the bankruptcy court approved.

At the commencement of trial of the foreclosure action in the Iowa district court defaults were entered against the lienholder defendants First National Bank of Burlington, Kaiser Agricultural Chemicals, and Big Three Farm Bureau Service, Co. Near the close of trial Currys tendered to the plaintiffs and offered in evidence over the plaintiffs' objection a quitclaim deed to the farm. Currys believed this tender was required by the plan of reorganization under which they had quitclaimed to other secured parties other properties governed by the reorganization plan. Plaintiffs contend they did not accept the deed and nothing in the record suggests they did.

The trial court then entered its findings of fact and conclusions of law through which it dismissed the foreclosure action on several theories which the assignee defendants as appellees attempt to uphold in this appeal. The trial court held that the plaintiffs were not intended beneficiaries of the joint venture contract and therefore could not obtain judgment against the assignee defendants on a third party beneficiary theory. The trial court also decided that when the bankruptcy court approved the Curry reorganization plan "plaintiffs became incapable of maintaining this suit in foreclosure." The court explained that the plaintiffs had failed to object to the proposed reorganization plan, and thereafter "the bankruptcy court preempted plaintiffs' ability to exercise [a foreclosure] option." The trial court did not mention in its written decision the above-quoted language of the bankruptcy court's orders expressly reserving the plaintiffs' rights "against third parties." The trial court instead treated the plaintiffs' farm like the approximately thirty-nine other farms affected by the reorganization and wrote:

[T]he bankruptcy court ordered that plaintiffs get their farm returned, free of Currys' interest and free of any of Currys' junior lienholders, "in lieu of" plaintiffs' rights of foreclosure.

The assignee defendants were treated as junior lienholders whose rights were cut off when Currys during trial delivered to the plaintiffs a quitclaim deed to the farm. The trial court also determined it would be inequitable to allow the plaintiffs to foreclose the contract against the assignee defendants when the plaintiffs already had regained the farm while the defendants "had lost their down payment and contract payments."

The plaintiffs challenge each of the trial court's conclusions. They urge us to hold they are entitled to an in rem foreclosure decree and also a personal judgment against the assignee defendants for the amounts they owe as a result of their acceptance of the obligations under the Bridgman-Curry contract. The assignee defendants respond: (1) the plaintiffs have no right to recover as third party beneficiaries of the joint venture contract and assignment; (2) the bankruptcy plan of reorganization preempted the plaintiffs' rights to proceed with foreclosure; (3) defendants Stevens, Fike and Greene reconveyed their interests to Currys and thereby extinguished their obligations to plaintiffs under the assignments; and (4) the trial court properly dismissed the foreclosure action based on its finding that a balancing of the equities clearly favored the assignee defendants. We address in turn each of those four issues.

I. Plaintiffs' Rights As Third Party Beneficiaries.

From the inception of this foreclosure action the plaintiffs have contended that they are third party beneficiaries of the joint venture contract and acceptance agreement under which the assignee defendants Stevens, Fike, Greene, and Bibo agreed to be bound by the terms and conditions of the plaintiffs' contract with Currys. The assignee defendants responded, and the trial court found, that the assignments "were not entered into for plaintiffs' benefit." The trial court held that the plaintiffs were "gratuitous beneficiaries of such assignments" who had no right to enforce the assignee defendants' promises to perform the Bridgman-Curry contract. We disagree.

The decisive factor in determining whether a party may bring an action to enforce a contract between other parties is the intent of the contracting parties themselves. We recently emphasized...