Moser v. Thorp Sales Corp.

• Decision Date: 29 July 1977
• Docket Number: No. 2-58974,2-58974
• Citation: 256 N.W.2d 900
• Parties: Clifton G. MOSER and Carlys C. Moser, Plaintiffs-Appellants, v. THORP SALES CORPORATION, Thorp Credit, Inc., Hoth and Willman Real Estate and Auction, Col. Chuck Hoth, Col. Lorenz Willman, Col. Gay Oelke, Richard Schmitt and Marguerite Schmitt, Thorp Finance Corporation of Wisconsin, and ITT Thorp Corporation, Defendants-Appellees. Charles F. HOTH, Plaintiff-Appellee, v. Richard SCHMITT et al., Defendants-Appellees. Richard SCHMITT et al., Plaintiffs-Appellees, v. THORP SALES CORPORATION and Lorenz Willman, Defendants-Appellees. THORP FINANCE CORPORATION, Plaintiffs-Appellees, v. Richard SCHMITT et al., Defendants-Appellees.
• Court: Iowa Supreme Court

Page 900

256 N.W.2d 900

Clifton G. MOSER and Carlys C. Moser, Plaintiffs-Appellants, v. THORP SALES CORPORATION, Thorp Credit, Inc., Hoth and Willman Real Estate and Auction, Col. Chuck Hoth, Col. Lorenz Willman, Col. Gay Oelke, Richard Schmitt and Marguerite Schmitt, Thorp Finance Corporation of Wisconsin, and ITT Thorp Corporation, Defendants-Appellees.

Charles F. HOTH, Plaintiff-Appellee, v. Richard SCHMITT et al., Defendants-Appellees.

Richard SCHMITT et al., Plaintiffs-Appellees, v. THORP SALES CORPORATION and Lorenz Willman, Defendants-Appellees.

THORP FINANCE CORPORATION, Plaintiffs-Appellees, v. Richard SCHMITT et al., Defendants-Appellees.

No. 2-58974.

Supreme Court of Iowa.

July 29, 1977.

Rehearing Denied Aug. 29, 1977.

Kevin C. Neylan and Kathleen Neylan, Elkader, for appellants.

Richard L. Donohue of Donohue Law Office, P. C., West Union, for appellees Schmitts.

Donald H. Gloe of Miller, Pearson, Gloe & Burns, Decorah, for appellees other than the Schmitts.

Heard by MOORE, C. J., and RAWLINGS, LeGRAND, REYNOLDSON, and McCORMICK, JJ.

REYNOLDSON, Justice.

Plaintiffs, contract purchasers of a 285-acre farm, brought this action in three divisions for specific performance, for decree quieting title, and in the alternative, for damages. Although trial court held the contract was valid and plaintiffs at all times were able to perform their obligations under it, the only relief granted was a judgment requiring defendants to return plaintiffs' down payment, without interest. Plaintiffs appeal. We reverse and remand.

October, 1971, defendants Richard and Marguerite Schmitt, husband and wife, were in possession of this Clayton County farm under a contract of purchase. Foreclosure had been decreed and their right of redemption was about to expire. Apparently Schmitts had listed the property for sale with defendant Willman. In a zero-hour move, Willman put them in touch with defendant Oelke, an employee of defendant Thorp Sales Corporation.

An arrangement was then made for Schmitts to be refinanced by defendant Thorp Finance Corporation of Wisconsin (hereinafter, "Thorp Finance"). A condition of this arrangement was that Schmitts contract with Thorp Sales Corporation to auction the farm and all of their livestock, crops and machinery. Such a contract was executed October 22, 1971. In this instrument the parties selected defendants Willman, Hoth and Oelke to auction off Schmitts' real and personal property. Thorp Sales was to receive a seven percent commission on proceeds from sale of personal property; a real estate commission was also to be paid.

Thorp Finance took Schmitts' promissory note dated October 27, 1971, due January 15, 1972. It evidenced a loan in the amount of $39,239.18, a service fee of $392.39, predetermined interest in the sum of $1,200.84, making the total note obligation $40,832.41. The annual percentage rate was 18.16 percent. The related security agreement itemized 45 cattle, grain, hay, and a full line of farm machinery. A real estate mortgage encumbering the farm was also executed and delivered by Schmitts.

The auction was set for December 1, 1971. A "Real Estate Auction and Farm Auction" sale bill was captioned in large print "Another Thorp Auction." Several lines below, in print one-fourth the size, Schmitts were listed as owners. This sale bill erroneously listed "Thorp Credit Inc." as clerk, which accounted for that corporation being named defendant in this litigation. There is nothing in this record which discloses Thorp Credit Inc. had any part in the relevant events. The farm was legally described in the bill. The terms were indicated as "20% down on auction date balance upon merchantable title and closing. Closing and possession on or before January 15, 1972."

On sale date the defendant auctioneers auctioned off the farm. Plaintiffs Mosers, father and son, lived in the immediate neighborhood and were interested in the property. After the elder Moser tendered bids, the sale was recessed while he went home for his son. The record indicates the Mosers wanted no trouble with the Schmitts, and may have had some fear of Mr. Schmitt. They testified the auctioneers "guaranteed possession" and inferred the Schmitts were "out of it" and had nothing to say about the matter. The elder Moser thought "Thorp" had the mortgage and "it was a foreclosure."

At some point defendant Oelke, Thorp Sales' employee, had a conversation with the elder Moser. Because it helps place in perspective the later conduct of the parties, Oelke's recollection of this incident, found in his direct examination by his attorney at trial, assumes importance:

"Q. Prior to the time that Exhibit B, which has been introduced into evidence here, which is the written agreement signed by Mr. Schmitt and Mr. Moser, prior to it being signed, did you hear anybody announce at the auction sale that Schmitt didn't have anything to do with this? A. Well, its kind of a gray line along that line. I would imagine I know that either myself or Willman never announced publicly to anybody that we, you know, that we made no definite statement or guaranteeing.

"Q. Did you hear anybody announce at the sale or tell Mr. Moser that Thorp owned this property? A. Well, I might have implied to Mr. Moser that he certainly shouldn't have any problems with any of this real estate transferring because if he (Schmitt) didn't go through with it, he would be faced with another foreclosure and he just got bailed out of one of them, so I couldn't see anybody not completing the whole deal.

"Q. Did you tell him that Thorp owned the property? A. No, I didn't tell him that Thorp owned the property, but I am sure that Thorp did have a first mortgage and we shouldn't have any problems with it, and this is where he probably interpreted that maybe I had a personal guarantee of some kind, but "

The two Mosers thereafter made the high bid of $148 per acre, generating a total sale price of $42,180. After the property was struck off to them, defendant Hoth filled in an "offer to buy" which was signed by the Mosers and Schmitts. It contained the sale bill terms and additionally provided sellers were to pay taxes due and payable in 1972. Purchase funds were to be "handled under supervision of Hoth and Willman Real Estate agent." The sellers were to "pay said agents the customary commission." Mosers paid the down payment of $8430.

A settlement scheduled for January 15, 1972, was cancelled because Schmitts were not in position to make good title. Deeds from Schmitts' vendors had not been received. The settlement was rescheduled for February 11, 1972. Mosers were present, ready to perform. The realtors and Oelke were there. Schmitts did not appear.

Willman, Hoth and Oelke went to the farm and talked to Schmitt. Oelke and Schmitt got into an argument. According to Willman, they "pushed each other around for a while." At one point in his testimony Schmitt testified he would have "settled" if Thorp Finance and Thorp Sales had delivered "papers" to him. The inference is these were the promissory note and mortgage releases relating to Schmitts' indebtedness to Thorp Finance. Schmitt also testified he was prejudiced because the failure to consummate the transaction on January 15 prevented him from contracting for another farm he had selected. He apparently blamed his failure to make good title at that time on Thorp Sales.

Oelke recalled Schmitt said Thorp Sales and the realty firm had "violated the contract" because "we didn't close it on the 15th day of January." Schmitt refused to "settle."

At some later point, however, Schmitt went to the Moser farm to discuss renting the buildings on the farm in controversy. But he subsequently failed to vacate and continued to farm the property.

Mosers initially took the position, based on representations made to them at the sale, that "Thorp" had the obligation to remove Schmitts, or at least pay the expense of a specific performance action.

Although Oelke claimed to be employed only by Thorp Sales (a subsidiary of Thorp Finance), the record indicates he had authority to act for the latter corporation. Referring to Schmitts' title he testified, "(W)e had the abstract of title brought up to date 30 or 45 days prior to this matter in order to secure our mortgage * * *." He assured Schmitts there would be no penalty if Thorp Finance had to "wait for their money." About "three days after closing date" he engaged the law firm which represented the Thorp corporations and the realtors throughout this litigation.

On May 1 or 2, 1972, Oelke took the elder Moser to this law office. Oelke testified, "We discussed what we were going to do and the only answer that came out, that if they were going through a foreclosure, this would take a year after that to get, that he (Schmitt) would have the right to redeem it." He recalled Moser was told he had a right to bring a specific performance action.

February 23, 1972, the same law firm filed an action for Thorp Finance against Schmitts. The petition prayed for the court to enter judgment for the balance on the note in the sum of $37,156.16, together with interest and statutory attorney fees, to foreclose plaintiff's lien on the personal property described in the security agreement, and to foreclose the real estate mortgage on the farm. Mosers were not made defendants.

Schmitts counterclaimed, asserting, inter alia, the instruments sued on were signed under duress, it was not necessary to sell all of their property to pay the Thorp Finance indebtedness, the sale was improperly advertised resulting in poor sales results and defendants were "practically put * * * out of business in farming," for which defendants prayed for $12,000 in actual and $25,000 in punitive damages.

June 25, 1973, Thorp Finance and Schmitts stipulated the real estate mortgage could be foreclosed, the foreclosure of the personal property was dismissed with prejudice, application for receiver would be held in...