Kolkman v. Roth

• Decision Date: 23 January 2003
• Docket Number: No. 01-0945.,01-0945.
• Citation: 656 N.W.2d 148
• Parties: Dean E. KOLKMAN, Appellee, v. Corrine ROTH, Appellant.
• Court: Iowa Supreme Court

656 N.W.2d 148

Dean E. KOLKMAN, Appellee, v. Corrine ROTH, Appellant.

No. 01-0945.

Supreme Court of Iowa.

January 23, 2003.

William R. Jahn, Jr. of Aspelmeier, Fisch, Power, Engberg & Helling, P.L.C., Burlington, for appellant.

Peter W. Hansen of Hildreth & Hansen, Burlington, and Patrick W. O'Bryan, Des Moines, for appellee.

CADY, Justice.

In this appeal, we must determine if the promissory estoppel exception to the statute of frauds applies to an action for breach of an oral lease in excess of one year. The district court determined the exception applied and entered judgment for the appellee following a jury trial. The court of appeals affirmed the judgment of the district court. On further review, we affirm the decision of the court of appeals and the judgment of the district court.

I. Background Facts and Proceedings.

Corrine Roth inherited 800 acres of farmland located in Des Moines County from her father following his death in December 1995. At the time, Dean Kolkman farmed the land pursuant to an oral crop-share lease. The lease term was year-to-year, with profits shared on a fifty-fifty basis between Kolkman and Roth's father. Roth also worked for her father on the farm over the years until approximately two years prior to his death. She was primarily involved in her father's livestock operation. Kolkman was also involved in the livestock operation, especially during the two years prior to the time Roth inherited the farm. During these two years, Kolkman ran the cattle operation under an arrangement similar to the grain operation.

In the spring of 1996, Roth asked Kolkman if he would continue to farm the ground and raise the cattle as he did for her father. Roth and Kolkman agreed that Kolkman would continue in the farming operation. They also agreed Kolkman and his wife would reside in one of the houses on the farm rent-free. Unfortunately, this agreement, and any additional terms, was not reduced to writing.

Kolkman and his wife moved to the farm in June 1996, and Kolkman successfully operated the farm, without incident, until 1999. During this time, Kolkman raised cattle, cultivated and harvested crops, and improved and cared for the land by fixing buildings and removing debris and manure. The farm was generally run down at the time it was inherited by Roth, and Kolkman improved its condition by performing work not typically done by a tenant farmer.

In 1999 Roth sought to charge Kolkman rent for the farmhouse in which he was residing in the amount of $550 a month.¹ Roth also proposed a written farm lease between them that would terminate in 2000. Kolkman refused to execute the written proposals, and Roth sought to terminate the tenancy.

Kolkman responded by filing an action against Roth for breach of contract. He claimed the 1996 oral agreement with Roth included a term permitting him to live in the house rent free and remain the tenant on a fifty-fifty basis until he "retired or couldn't work any more." Kolkman further claimed he relied on this promise in several ways, including selling his former residence and moving to the farm, purchasing various farm equipment, and improving the land by making repairs and removing debris.

Roth denied any term regarding the length of their lease, and sought summary judgment. She claimed the statute of frauds prevented Kolkman from establishing an oral contract between the parties. The district court denied summary judgment and the case proceeded to trial. At trial, the district court, after finding Kolkman established the elements of promissory estoppel, determined the statute of frauds did not bar oral evidence of a lease.

The jury then found the parties entered into a contract, supported by consideration, based on the terms asserted by Kolkman. It found Roth breached this contract and awarded Kolkman damages of $154,429.

Roth appealed and Kolkman cross-appealed. We transferred the case to the court of appeals. The court of appeals affirmed the judgment of the district court and Roth sought further review. The single issue presented on further review is whether the doctrine of promissory estoppel can be used to remove a claim based on an oral contract to lease land in excess of one year from the domain of the statute of frauds.

II. Scope of Review.

We review a decision by the district court to admit oral evidence of a contract under an exception to the statute of frauds for corrections of errors at law. Pollmann v. Belle Plaine Livestock Auction, Inc., 567 N.W.2d 405, 407 (Iowa 1997).

III. Statute of Frauds.

Under our statute of frauds, evidence of certain types of contracts is inadmissible, unless it is "in writing and signed by the party" sought to be charged. Iowa Code § 622.32 (1999). One type of contract included within the statute is a contract creating or transferring an interest in real estate other than leases for a term less than one year. Id. § 622.32(3). The statute "does not void such oral contracts," but "makes oral proof of them incompetent." Pollmann, 567 N.W.2d at 407.

Like most other rules, exceptions have been created to the statute of frauds. Iowa Code section 622.33 creates one such exception for contracts that fall within the real estate category. Iowa Code § 622.33. This section removes such oral agreements from the domain of the statute under two circumstances. Pollmann, 567 N.W.2d at 407. The first circumstance is where the vendor of a real estate contract has received "the purchase money, or any portion thereof, ... or when the vendee, with the actual or implied consent of the vendor, has taken and held possession of the premises under and by virtue of the contract." Iowa Code § 622.33. This language codifies the ancient doctrine of part performance, and permits the statute of frauds to be avoided where a party has rendered the type of part performance described in the statute. See Gardner v. Gardner, 454 N.W.2d 361, 363 (Iowa 1990)

; 10 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 28.2, at 268 (4th ed.1999) [hereinafter Williston] (doctrine of part performance originated prior to "doctrine of estoppel by conduct"); 73 Am. Jur.2d Statute of Frauds § 312, at 13 (2001) (doctrine of part performance antedated statute of frauds). The rationale for the part performance exception actually lies in the principles of estoppel and fraud. Miller v. Lawlor, 245 Iowa 1144, 1152, 66 N.W.2d 267, 272 (Iowa 1954); 10 Williston § 28.2, at 268. The part performance exception exists to prevent the type of fraud that would occur "if the defendant were permitted to escape performance of his or her part of the oral agreement after permitting the plaintiff to perform in reliance upon the agreement." 73 Am.Jur.2d Statute of Frauds § 313, at 13 (footnote omitted); see also Miller, 245 Iowa at 1152,

66 N.W.2d at 272 (part performance actually describes those acts done pursuant to and in reliance upon a contract). Accordingly, part performance is not a substitute for evidence of a written contract, but is grounded in the theory that the defendant is estopped to assert the statute of frauds as a defense. See 73 Am.Jur.2d Statute of Frauds § 314, at 14.

The second circumstance that will remove an oral real estate contract from the statute of frauds is derived from the concluding language of section 622.33, which makes the statute inapplicable under "any other circumstance which, by the law heretofore in force, would have taken the case out of the statute of frauds." Iowa Code § 622.33. We have interpreted this language to mean that the doctrine of promissory estoppel is available to remove an oral real estate contract from the statute of frauds. See Miller, 245 Iowa at 1149-53,

66 N.W.2d at 271-73. We first recognized promissory estoppel as a "circumstance" to avoid the statute of frauds in our landmark case of Miller, and have confirmed it on numerous occasions since that time. See Pollmann, 567 N.W.2d at 407; Meylor v. Brown, 281 N.W.2d 632, 635 (Iowa 1979) (promissory estoppel applies to the statute of frauds); Warder & Lee Elevator, Inc. v. Britten, 274 N.W.2d 339, 342-43 (Iowa 1979).

Promissory estoppel developed as a doctrine in the law in response to the strict traditional requirements for the formation of a contract, especially the requirement that all enforceable contracts be supported by consideration. See Jay M. Feinman, Promissory Estoppel and Judicial Method, 97 Harvard L.Rev. 678, 679-80 (1984); 4 Williston § 8.4, at 11. Thus, the theory behind promissory estoppel was to make parties "liable for their promises despite [the] absence of" consideration required under contract law. Schoff v. Combined Ins. Co. of Am., 604 N.W.2d 43, 48 (Iowa 1999). For this reason, we have viewed the effect of promissory estoppel to imply a contract in law based on detrimental reliance. Id. However, other principles of contract law can conflict with the doctrine of promissory estoppel, such as the requirement of a writing for some types of contracts under the statute of frauds, and Miller opened the door to expand the promissory estoppel doctrine beyond its role as a substitute for consideration. Thus, promissory estoppel is not only a substitute for consideration, but is also recognized as an exception to the statute of frauds even in cases where the promise may be supported by consideration. See Warder & Lee Elevator, Inc.,274 N.W.2d at 343; see also Restatement (Second) of Contracts § 139 cmt. b, at 355 (1981) (recognizing circumstances that justify enforcement of a promise unenforceable under the statute of frauds). Like part performance, it focuses on reliance.

Roth acknowledges both exceptions to the statute of frauds, but argues they must not be expanded so far as to apply to leases claimed to be in excess of one year. Roth points out we have refused to apply the part performance exception to oral leases for a term of more than one year, and, as a compatible doctrine, should similarly restrict promissory...