Hunter Inv., Inc. v. Divine Engineering, Inc., 49156

• Decision Date: 26 June 1957
• Docket Number: No. 49156,49156
• Citation: 248 Iowa 1109,83 N.W.2d 921
• Parties: HUNTER INVESTMENT, Inc., Appellee, v. DIVINE ENGINEERING, Inc., Appellant.
• Court: Iowa Supreme Court

Page 921

83 N.W.2d 921

248 Iowa 1109

HUNTER INVESTMENT, Inc., Appellee, v. DIVINE ENGINEERING, Inc., Appellant.

No. 49156.

Supreme Court of Iowa.

June 26, 1957.

John D. Randall, Cedar Rapids, for appellant.

W. W. Crissman, Cedar Rapids, for appellee.

WENNERSTRUM, Justice.

Plaintiff corporation seeks to quiet title in it to certain real estate in Cedar Rapids, Iowa. A question has arisen whether the defendant corporation had exercised an option which had been incorporated in a lease covering the property. The defendant filed a cross-petition wherein it sought specific performance of the option agreement. The trial court found for the plaintiff and quieted the title in it. The defendant has appealed.

The lease had been entered into by Wathan-Hunter, Inc., the plaintiff's predecessor in interest, and the Divine Engineering, Inc. for a period of sixty months from and after May 1, 1952. The lease provided for rent of $375 per month for the first 12 months and $475 per month thereafter. Incorporated in the lease agreement is the following: 'The party of the second part is hereby granted the option to purchase at any time during the first twenty-four (24) months of this lease the above described property for the sum of $46,000.00 plus interest at four per cent per annum from May 1, 1952, also, insurance and taxes from May 1, 1952. If the option is exercised, all rentals paid to the date of the exercise of the option are to be applied on the purchase price.' There is also incorporated in this lease agreement a statement which has some bearing on some of the facts, which will be later discussed, as follows: 'Party of the first part is to take care of the roof and all the exterior repairs. Party of the second part is to take care of all interior repairs. Sale subject to lease with option to remove from premises in case of sale.' In the light of our later reference to certain testimony it should be kept in mind the option had to be exercised prior to May 1, 1954.

The defendant, pursuant to the lease agreement, has remained in possession of the premises from May 1, 1952 and has made the monthly payments as provided for in the lease up to and including the time this cause was submitted to the trial court.

Undoubtedly the main reason for this litigation is the fact the plaintiff on June 22, 1955 entered into an agreement with the City of Cedar Rapids for the sale to that municipality of the property here involved and some additional property at a price of $80,000. The record does not disclose whether there was an increase in the valuation of the property leased and claimed under the option agreement. Apparently the representatives of the city had some information of a possible claim on the part of the defendant company inasmuch as there was incorporated in the purchase and sales agreement between the plaintiff and the City of Cedar Rapids the following provision: 'The seller agrees to furnish to the City written proof from Divine Engineering, Inc. and the Seller, to the effect that Divine Engineering, Inc. is in possession of the leased premises solely under the terms of the lease referred to above, dated April 7, 1952, and that Divine Engineering, Inc. claims no rights or equities other than those set forth in said lease, and further that no option to purchase said leased premises has been exercised by Divine Engineering, Inc. or by any other person, firm or corporation, nor is any option to purchase in existence at this time.'

There is a complete lack of agreement in the testimony concerning the action taken by the respective parties relative to the exercising of the claimed option. By reason of this fact we are setting forth in as limited detail as possible the testimony of the important witnesses inasmuch as their statements are of vital import in our determination of this appeal.

Daniel Hunter, Sr., an officer of the plaintiff corporation, testified that prior to January 1, 1954 he had a telephone conversation with either Mr. Howard E. Divine or Mr. Walter F. Heaton of the Divine Engineering, Inc. and states he may have talked with both of them. He further testified he asked them if they were going to exercise their option, and, if so, how long a time before the termination of it they would do so; that the men connected with the engineering company informed him they were just a young company, they had not built up a reserve, they would have to borrow the money and wanted to know if he knew of any one who would lend them the money; that prior to May 1, 1954 he had another conversation with either Mr. Divine or Mr. Heaton which was in person or by telephone, and in this second conversation he was informed they would not have the money to finance or pay the whole amount and wanted to know if the Hunter Investment Company would lend them the money they could not raise. Mr. Hunter also stated that after this second conference and before May 1, 1954 he did not remember talking with them regarding the option provision of the lease; he did not visit with them again concerning the option agreement until after he had sold the building here involved to the city; at that time he asked them to sign a paper and left it inasmuch as Mr. Heaton remarked Mr. Divine would have to sign the instrument and he was not in Cedar Rapids; that later, and in July of 1955, Hunter called and talked with Mr. Divine and was informed he (Divine) would like to have his attorney see the paper which the city solicitor desired to have signed. It is also testified to by Mr. Hunter that prior to May 1, 1954 no inquiry was made of him by either Mr. Divine or Mr. Heaton with respect to the abstract of title to the premises and since that time neither Mr. Divine nor Mr. Heaton had made any request for an opportunity to have it examined; since May 1, 1954 the taxes had been paid by the Hunter Investment Company and after that date it had paid for the fire and extended coverage insurance on the premises involved in this controversy.

On cross examination Mr. Hunter testified the lease and option agreement were prepared by a representative of a real estate agency in Cedar Rapids and during the later talks with Mr. Heaton and Mr. Divine they did not say they were going to exercise the option but they did say they were working on the financing of a possible purchase.

C. W. Garberson, a witness for the plaintiff, testified he is the City Solicitor of the City of Cedar Rapids and in connection with the purchase of the property here involved by the city he sought to obtain a written statement from the Divine Engineering, Inc. to the effect it did not claim any interest in the property by reason of the option; and that he and other representatives of the city called at the office of the engineering company and there had a conversation with Mr. Heaton. His testimony is, in part, as follows: '* * * I asked him (Mr. Heaton) then if Divine Engineering, Inc. claimed to have exercised the option appearing in the lease agreement. Mr. Heaton informed me unequivocally that they had not exercised the option agreement and that statement by Mr. Heaton in the course of our conversation was repeated at least two more times, and Mr. Heaton went on to explain that the quarters were not large enough for their operation, * * *. I believe Mr. Heaton--I know Mr. Heaton added that they were seeking larger quarters for their growing operation. * * *'

Stuart Shank, Commissioner of Finance for the City of Cedar Rapids, and George Lee, Superintendent of the City Water Department, gave testimony which was substantially the same as that given by Mr. Garberson.

Howard E. Divine, president and secretary of the defendant corporation, testified he and Walter Heaton had a conversation with Daniel Hunter, Sr. in the engineering company office in February 1954. The record concerning this conversation is as follows:

'Q. And will you now tell the court what was said and what was done at that time, Mr. Divine? A. Walter Heaton said to Mr. Hunter, 'Mr. Hunter, we are going to exercise the option and we want to go into with you the amount that we have paid, that is out of the rent that we have already paid towards the purchase of the building.'

'Q. And what did Mr. Hunter say? A. He said, 'Well, I would be crazy to do that,' and he walked out.'

Mr. Divine further testified he did not personally talk with Mr. Hunter again up to May 1, 1954; that later he did have a telephone conversation with him and was told he (Hunter) had brought a paper to the office and he (Divine) asked, 'What is it about?' and Mr. Hunter said, 'It is a paper to show that you have no interest in these premises except the lease.' The witness testified he then said, 'Dan I am not signing anything without going over it with our lawyer, or anything else.' On cross-examination the witness stated that Mr. Dan Hunter came to the engineering company office in February of 1954 and he had not talked with him before relative to the option provisions in the lease. He also testified: '* * * We never asked Dan Hunter to loan us one cent of money and we would never seek a loan from Dan Hunter. We did not ask Mr. Hunter in substance if he would be willing to carry the Divine Engineering for any balance of the purchase price that the Divine Engineering could not finance. In substance, all that either Mr. Heaton or I said to Dan Hunter on that occasion was that 'we are going to exercise the option and we want to go over with you the amount we have already paid on the building.' We knew what we had already paid on the building. We knew that we had not paid any more than the rent at that time. We wanted to go over the difference between what we had paid and the insurance and the other items which would be deductible and the balance would be paid toward the purchase of the building. We told Mr. Hunter that. I mentioned about the taxes and insurance in direct examination. I believe I said in direct examination that in the contract...