Montgomery Properties Corp. v. Economy Forms Corp.

• Decision Date: 13 May 1981
• Docket Number: No. 64771,64771
• Citation: 305 N.W.2d 470
• Parties: MONTGOMERY PROPERTIES CORPORATION, Appellee, v. ECONOMY FORMS CORPORATION, Appellant.
• Court: Iowa Supreme Court

Page 470

305 N.W.2d 470

MONTGOMERY PROPERTIES CORPORATION, Appellee, v. ECONOMY FORMS CORPORATION, Appellant.

No. 64771.

Supreme Court of Iowa.

May 13, 1981.

William J. Koehn and Jill S. Rolek of Davis, Hockenberg, Wine, Brown & Koehn, Des Moines, for appellant.

John R. Mackaman and F. Richard Lyford of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, for appellee.

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

REYNOLDSON, Chief Justice.

Defendant Economy Forms Corporation (EFCO) appeals from judgment entered on a jury verdict for plaintiff Montgomery Properties Corporation (MPC) in its slander of title action. MPC cross-appeals because the court, on an issue reserved to it by stipulation, refused to award MPC attorney fees as a part of its damages. We modify and affirm on condition and remand on the appeal, and affirm on the cross-appeal.

From the evidence the jury could have found the following facts. EFCO is a Des Moines-based manufacturer of steel concrete forms. This corporation owned and platted the fourteen-lot EFCO Industrial Park. Al Jennings, EFCO's executive vice president, was fully authorized by his corporation to represent it in the real estate transactions involved in this controversy.

MPC is a corporation organized for real estate development and owned by Charles Irvine and John Hart. David Frost was associated with them in a companion realty company, Montgomery Realty, which operated out of the same office. Ordinarily MPC would acquire land and build a structure for a customer that wanted to lease, not own, the premises.

MPC was negotiating to construct and lease a building to Onthank Company. Frost talked to Jennings about acquiring lots 1 and 2 in EFCO's industrial park for this purpose. Jennings testified he told Frost:

(W)e will not sell a piece of land unless we know what is going on the ground, how it is going to be used, consistent with the Industrial Park. We wanted to keep a very attractive area there. And we required ... more setback and we required a plan ....

EFCO refused to sell lot 1 and the parties settled on lot 2. EFCO wanted to use the tax-saving device of a three-party trade. Consummation of the transaction lagged and in September 1977, Irvine, anxious to begin construction, telephoned Jennings with a proposal to buy lot 2 for cash. Jennings refused because EFCO would lose the tax advantage of the three-party transaction. Irvine then proposed to buy lot 2 outright, and then trade lot 2 for lot 3. Jennings objected to this because EFCO "won't have any say then as to what goes on that lot (3)." MPC had disclosed the Onthank building plans to EFCO.

The result was that MPC acquired lot 2 by deed and lot 3 under a September 23, 1977, exchange agreement involving the third-party owners of a Washington state property. This typewritten agreement was drafted by EFCO's attorney and signed by Jennings for EFCO. In this instrument EFCO warranted it would, inter alia,

perform all steps reasonably required by the attorney for Montgomery to convey good and merchantable title to Montgomery to (lot 3), free and clear of all liens and encumbrances, reservations, exceptions or modifications except as in this Agreement otherwise expressly provided, none of which will prevent the use of the property as a warehouse ....

(Emphasis supplied.) Another provision provided that MPC "will receive an abstract and warranty deed to (lot 3) free and clear of all liens and encumbrances, reservations, exceptions or modifications except as in this Agreement otherwise expressly provided." The same language appeared again in another provision relating to a title opinion for MPC. It was further stipulated that this agreement "supersedes any contracts or Offers to Buy and Sell Real Estate which may previously have been executed."

As a result of this three-party exchange agreement, MPC obtained a warranty deed to lot 3 without any reservations or exceptions, and EFCO acquired $5000 paid by MPC in cash, and a mortgage on lot 3 for $78,225.

In the course of constructing the Onthank building on lot 2, MPC encountered difficulty in obtaining a county occupancy permit because of a drainage problem. MPC had several meetings with Jennings of EFCO relating to this situation. Ultimately, EFCO paid for the engineering and earthwork to resolve the drainage problem for a number of lots, and informed MPC its share was $8000 for the two lots. Irvine of MPC denied he ever agreed to pay $4000 per lot. However, Hart wrote a July 25, 1978, letter to Jennings in which he agreed, for MPC, to pay EFCO $4000 each for controlling water runoff on lots 2 and 3. The $4000 for lot 2 was to be paid when the occupancy permit for the Onthank warehouse was issued, and the $4000 for lot 3 was to be paid "at the time the land contract for Lot 3 has been fully performed." Irvine testified he was "hot" when he learned of this letter but "if (Hart) writes a letter saying we owe $4000, I guess I will pay it." The $8000 was never paid.

MPC eventually contracted to sell lot 3 to Sturm Freightways, Inc., for $116,515. When one of the realtors called Jennings regarding the mortgage balance, she told him the lot was to be used as a truck terminal. Jennings became angry and told the realtor that he would not let a truck terminal go in, "that they had some restrictions on the property and ... they just weren't going to allow it." He stated he was going to do everything within his legal rights to make sure that the property was not developed without him "having the rights to approve what went on there." Jennings told another realtor he would not release the mortgage; that there was a "prior agreement."

In a subsequent conversation with Frost of MPC, Jennings stated several times he would never permit a truck terminal on lot 3 and would appeal the case to the supreme court if he had to. He said he would "screw Fisher but good as far as Lot 1 was concerned." Fisher was an Onthank employee who hoped to acquire an interest in the development of lot 3. Jennings later told Hart he would "get (them) all individually"; that he would "see (them) in hell before he released that mortgage."

September 29, 1978, MPC unsuccessfully tendered $81,388.29 to EFCO in satisfaction of its mortgage on lot 3. After MPC notified Sturm it could not complete the sale due to EFCO's refusal to release the mortgage, Sturm rescinded the purchase contract because, inter alia, "(r)estrictions on the property are substantially at variance with the original representations made," in that "(p)revious owners ... have restricted the use of the property so as to prohibit (its use) as a truck terminal facility."

MPC paid Sturm damages of $3500 and also paid a realtor $3495 as lost commission. October 27, 1978, lot 3 was sold to Des Moines Cold Storage for $105,862 and the buyer assumed the EFCO mortgage. In connection with the closing of this transaction, EFCO's mortgage statement showed an additional lien of $8000 pursuant to a "Water run off Agreement Lots 2 & 3 Secured as open end advance." The buyer then insisted that $8000 of the purchase money be placed in escrow.

Count I of MPC's petition alleged its ownership of lot 3, its sales contract to Sturm, EFCO's assertions to Sturm and the realtors of "restrictions, reservations, and servitudes outside of the record," its refusal to release the mortgage lien, and the resulting rescission of the sale. MPC claimed $50,000 in actual damages and $50,000 in punitive damages. Count II was based on EFCO's claim, in its balance due statement submitted with respect to the sale to Des Moines Cold Storage, that its mortgage secured the additional $8000. MPC claimed $25,000 actual and $25,000 punitive damages on this count.

EFCO's answer affirmatively alleged it had "reserved the right to approve any building," and that MPC had so agreed and should be estopped to deny its oral agreement. The answer requested that the exchange agreement be reformed to incorporate the oral agreement. Finally, EFCO counterclaimed for $8000 under the oral water runoff agreement and prayed that this additional amount be declared secured by its mortgage.

MPC filed a pretrial "Motion for Advance Ruling on Evidence." This motion alleged the exchange agreement was an integrated writing prepared by EFCO's lawyer that stated it superseded previous contracts, and requested that EFCO's lawyer be admonished not to inquire of witnesses as to any agreements other than those reflected in the exchange agreement and deed because any such testimony would be barred by the parol evidence rule. Trial court granted this motion.

The jury returned a verdict for $35,000 compensatory and $10,000 punitive damages on count I, and $1000 compensatory and $1000 punitive damages on count II. EFCO was awarded $8000 on its counterclaim. EFCO filed several posttrial motions. Trial court granted a remittitur motion as to count I only, granting a new trial unless MPC filed a remittitur of the count I actual damage award over and above the sum of $17,644. MPC filed the remittitur. Nonetheless, EFCO appealed and MPC cross-appealed. The issues raised by these parties are discussed below.

I. Did trial court err in excluding, on the basis of the parol evidence rule, defendant's evidence of an oral agreement concerning lot 3?

EFCO argues evidence of the alleged prior oral agreement that it was to have control over use of lot 3 should have been admitted to rebut malice in MPC's tort and punitive damage claims, and for proof on its counterclaim for reformation of the exchange agreement.

We first dispose of the reformation contention. This was an equity issue reserved to the court. See First National Bank v. Curran, 206 N.W.2d 317, 320 (Iowa 1973). The parties now agree trial court's pretrial ruling excluding evidence of the alleged oral agreement effectively disposed of the reformation claim.

It is true that ordinarily parol evidence is...