Henderson v. Millis

• Decision Date: 21 August 1985
• Docket Number: No. 84-849,84-849
• Citation: 373 N.W.2d 497
• Parties: H. Robert HENDERSON and Phyllis Henderson, Appellees, v. T.L. MILLIS, Appellant.
• Court: Iowa Supreme Court

Page 497

373 N.W.2d 497

H. Robert HENDERSON and Phyllis Henderson, Appellees, v. T.L. MILLIS, Appellant.

No. 84-849.

Supreme Court of Iowa.

Aug. 21, 1985.

William J. Lillis, Eugene E. Olson, and Peter S. Cannon of Connolly, O'Malley, Lillis, Hansen & Olson, Des Moines, for appellant.

Bruce H. Stoltze of Brick, Seckington, Bowers, Swartz & Gentry, Des Moines, for appellees.

Considered by REYNOLDSON, C.J., and UHLENHOPP, HARRIS, McGIVERIN, and SCHULTZ, JJ.

UHLENHOPP, Justice.

This appeal involves two instruments relating to restrictions and a preemptive right (right of "first refusal"). Although defendant-appellant presents a number of issues, we consider only those which he presented to the trial court: whether (1) the preemptive right was triggered by sheriff's sale of the property; (2) defendant was a bona fide purchaser for value; (3) plaintiffs-appellees are barred from relief by laches, estoppel, waiver, and consent; (4) the preemptive right violated the rule against perpetuities; and (5) plaintiffs slandered defendant's title.

In 1967 Carl A. and Dorothy Loest acquired a parcel of real property in West Des Moines, Iowa. In 1968 they subdivided it into three lots and recorded a plat entitled Loest Estates. See accompanying rough sketch. The Loests retained Lot 1, sold Lot 2 to another person not involved in this action, and sold Lot 3 to plaintiffs H. Robert and Phyllis Henderson.

When the Hendersons negotiated for the purchase of Lot 3 they discussed with the Loests their concern about privacy for the home they intended to build. The Loest home on Lot 1 was on the front of the lot near Twenty-eighth Street; the Loests gardened the rear of the lot. Lot 3 was quite secluded and the Hendersons desired that it so remain. The Loests had no objection except that they desired to be able to have their children also build on Lot 1, if the children wished to do so. As a result, on November 1, 1968, the Loests and Hendersons agreed upon restrictions and a preemptive right. The agreement was formalized and recorded as follows, so far as pertinent ("the first instrument"):

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

IT IS THEREFORE GRANTED, AGREED AND CONVENANTED as follows:

1. Single residence--exception. That until the provisions of paragraph 2 hereof have been complied with, Grantors' Property [the Loests' Lot 1] shall be only used for single family residence, with usual outbuildings and garages for the use of occupants of such residence, except that a son or daughter of Grantors may erect one additional residence on Grantors property, if, in good faith, such additional residence is erected to be occupied by such son or daughter for a period of not less than two (2) years after completion thereof, and in such event Grantors may sell such portion of said lot to be used free and clear of the right of first refusal provided in paragraph 2 hereof.

2. First refusal. In the event that Grantors elect to sell a portion of Grantors Property for the erection of an additional residence to any party not a son or daughter as hereinabove provided in paragraph 1, then, in that event, Grantors shall serve upon the Grantees a Notice in writing of the price and the exact terms of any bona fide offer and of the intention of the Grantors to accept the same, and, thereafter, Grantees shall have the right for thirty (30) days to purchase the portion of Grantors Property subject to said offer, for the purchase price and on the conditions specified in the Notice, but if the Grantees shall not within the said period of thirty (30) days give written notice to Grantors of the election to acquire the property being sold on the terms and conditions set forth in said Notice, the Grantors may then sell such property as provided in the offer upon the same terms and conditions and for the price set forth as included in said Notice.

3. Binding effect. The provisions hereof shall be binding upon the heirs, successors and assigns of Grantors and the rights granted, restrictions imposed, agreement and covenants shall run with the following described property located in Polk County, Iowa, to-wit:

Lot 1 Loest Estates, an Official Plat, now included in and forming a part of the City of West Des Moines, Iowa,

and shall inure to the benefit of the heirs, successors and assigns of Grantees, and the subsequent owners of the following described property located in Polk County, Iowa, to-wit:

Lot 3 Loest Estates, an Official Plat, now included in and forming a part of the City of West Des Moines, Iowa.

This instrument placed the onus on a grantor to give the thirty-day notice in case of an election to sell a portion of Lot 1 for the erection of an additional residence; it did not place the burden on the Hendersons or their heirs, successors, or assigns to search out such sales.

The Loest children did not build on Lot 1. In 1973 Mr. Loest died. Thereafter Mrs. Loest sold Lot 1 to Mr. and Mrs. Lyman J. Clark, who moved into the Loest home. In 1976 the Clarks granted a mortgage on Lot 1 to First Federal State Bank.

In 1977 the Clarks obtained a variance from the city for a driveway along the north side of the front portion of Lot 1, which would open up the rear portion of the lot. They did not however erect a home on the rear portion.

In 1978 the Clarks conveyed to Mr. and Mrs. Lawrence Woods the front (west) portion of Lot 1 with the Loest home on it. The Woods occupied that home, and later sold this part of Lot 1 to Lynn N. Husband who currently owns it and occupies the home. No one gave the Hendersons notice of these transactions.

In 1978 the Clarks quit-claimed the rear (east) portion of Lot 1 to First Federal. They did not give the thirty-day notice to the Hendersons, and the Hendersons were unaware of this transaction until the present litigation. First Federal did not erect a home.

Later in 1978 Laurence R. and Susan Saub became interested in the rear portion of Lot 1, but the Hendersons' preemptive right was involved, as acknowledged by both First Federal and the Saubs. The Saubs negotiated with the Hendersons about the house they desired to build and persuaded the Hendersons to modify the first instrument to permit them to build a home on the rear portion of Lot 1. The Hendersons as first parties entered into the following written agreement with the Saubs, second parties ("the second instrument"):

NOW, THEREFORE, IT IS HEREBY GRANTED, AGREED AND CONVENANTED as follows:

1. Second parties' Right to Build--Limitation. In the event that the Second Parties shall erect a single family residence for their personal use, with the usual out buildings and garages for the use of the occupants of such residence, which residence shall be erected on the property being acquired by Second Parties, in such manner that the main structure thereof does not extend east of a north-south line located 322 feet east of the west boundary line (28th Street) of said property as above described, then in such event First Parties do by execution hereof acknowledge that the Grant of Right of First Refusal as recorded in Book 3993 at Page 137 in the office of the Recorder, Polk County, Iowa, shall be deemed null and void and no longer of any force and effect.

2. First Refusal. In the event that the Second Parties should neglect or fail to build the residence for the purpose and in the manner as provided for in the previous paragraph, then the Right of First Refusal granted to the First Parties in the instrument recorded in Book 3993 at Page 137 shall be in full force and effect and accordingly the First Parties shall be entitled to notice and Right of First Refusal, all as provided in said instrument.

3. Binding Effect. The provisions hereof shall be binding upon the heirs, successors and assigns of Second Parties and the rights granted, restrictions imposed, agreements and covenants shall run with the following-described property located in Polk County, Iowa, to-wit:

Lot 1 (except the South 115 feet of the West 215 feet thereof) LOEST ESTATES, an Official Plat, now included in and forming a part of the City of West Des Moines, Iowa.

First Federal then conveyed the rear portion of Lot 1 to the Saubs.

In 1980 the Saubs granted a mortgage to First Federal covering the rear portion of Lot 1. They did not build a home, however, and in 1981 they conveyed the rear portion of the lot to James H. and Carma J. Hinkel; this deed recited a consideration of less than $500. The Hendersons were again unaware of transfer until the present litigation; the Saubs did not give them a thirty-day notice. The Hinkels did not build on the property.

Subsequently First Federal commenced a mortgage foreclosure action against the Saubs and Hinkels and other parties who claimed liens on the rear portion of Lot 1. The Hendersons were not parties to the action and were not notified of it; First Federal's attorney was of the opinion that a foreclosure sale would not trigger the Hendersons' preemptive right.

Still later in 1981 a court entered a foreclosure decree directing the sale of the rear portion of Lot 1. The sheriff sold the property on January 22, 1982. At the sale, defendant T.L. Millis, who desired to acquire the property for the construction of a home, was the successful bidder at $21,500 plus costs.

The Hendersons did not learn of the foreclosure and sale until the sheriff's certificate had issued. They commenced this action against Millis seeking various forms of relief including judgment quieting title and declaring the parties' rights. They claim their preemptive right was activated by the foreclosure sale to Millis. In response, Millis denied that the Hendersons have a right to buy the property and counterclaimed for slander of title.

The trial court found for the Hendersons and ordered that Millis transfer title to the property to the Hendersons upon their paying him $21,500. The court denied Millis' counterclaim for slander of title.

Millis...