Passehl Estate v. Passehl

• Decision Date: 14 April 2006
• Docket Number: No. 04-0874.,04-0874.
• Citation: 712 N.W.2d 408
• Parties: Doris N. PASSEHL ESTATE, David Passehl and Karen Zander, Co-Executors, Appellee, v. Jerry W. PASSEHL and Volnetta Passehl, Appellants.
• Court: Iowa Supreme Court

Page 408

712 N.W.2d 408

Doris N. PASSEHL ESTATE, David Passehl and Karen Zander, Co-Executors, Appellee, v. Jerry W. PASSEHL and Volnetta Passehl, Appellants.

No. 04-0874.

Supreme Court of Iowa.

April 14, 2006.

G.A. Cady III of Cady & Cady, Hampton, for appellants.

John J. Haney of Hinshaw, Danielson, Kloberdanz & Haney, P.C., Marshalltown, for appellee.

STREIT, Justice.

As the cynic Ambrose Bierce once said, "Death is not the end. There remains the litigation over the estate."¹ Jerry and Volnetta Passehl claim the district court erred by enforcing a penalty provision in their settlement agreement with the Doris N. Passehl Estate (hereinafter "the Estate"). They now seek further review of the court of appeals' decision affirming the district court's ruling. Because we find the terms of the penalty provision were not met, we vacate the decision of the court of appeals and reverse and remand to the district court with instructions.

I. Facts and Prior Proceedings

Jerry, Karen, and David are the children of Doris N. Passehl. Doris died in 1997. At the time of her death, Doris owned approximately 160 acres of farmland in Franklin County. Jerry Passehl and his wife, Volnetta (hereinafter "Passehls"), have, for the past fifteen years, occupied a five-acre portion of this land and operated an auto salvage business thereon. The portion of land occupied by Passehls was covered with vehicles and, for the most part, surrounded by a fence. The fence was erected in 1990 after the Franklin County Zoning Board of Adjustment approved the use of the land as a dismantling and recycling center on the condition that a six-foot-high enclosure fence surround the premises. Two grain bins were also located within the fenced area. The other 155 tillable acres were, and still are, leased to a third party. The lease provides that the third party can use the two grain bins located on the land occupied by Passehls.

Karen and David serve as co-executors of the Estate. After Doris's death, family disputes over Passehls' operation of the salvage business resulted in two separate lawsuits. In one lawsuit, the Estate filed suit against Passehls for breach of contract, conversion, and nonpayment of rent. In another lawsuit, the Estate filed an ejectment action to remove Passehls from the land. In an effort to resolve their differences, the parties agreed to settle these lawsuits through a written settlement agreement. The settlement agreement, signed October 17, 2002, provides:

2. [Passehls] agree to return to Karen Zander and David Passehl the motorized Shriner's car and the cornsheller.

. . . .

4. [The Estate] agrees to sell to [Passehls] and [Passehls] agree to buy from [the Estate] . . . [a]n approximate five acre tract . . . [t]he legal description [of such land] shall be established by survey which shall coincide with existing fence boundaries required by Franklin County Zoning Ordinances.

[Passehls] agree to deposit into the Brian D. Miller Trust Account[²] Twenty Thousand Dollars ($20,000.00) on or before October 18, 2002. The purchase price for the above described real estate shall be Fifty Thousand Dollars ($50,000.00). Closing shall be held on or before March 1, 2003. The parties agree that the $20,000.00 deposited into the Brian D. Miller Trust Account shall be applied toward the purchase price at time of closing.

In the event that [the Estate] provides marketable title to the subject real estate, but closing does not occur on or before March 1, 2003, as a result of nonperformance by [Passehls], then the parties agree that the $20,000.00 deposited into the Brian D. Miller Trust Account shall be forfeited to [the Estate].

. . . .

The parties agree that Karen Zander and David Passehl shall have an easement for access to the grain bins located on the Passehl property but owned by Karen Zander and David Passehl for the purpose of loading and unloading grain. The parties acknowledge that Karen Zander and David Passehl shall be entitled to any and all income from said bins. The [Estate] shall have the right to make repairs to the bins as necessary.

(Emphasis added.) The district court approved the settlement agreement. Both lawsuits, along with an unrelated pending appeal by Passehls, were dismissed with prejudice. On the same day, the parties signed an Iowa State Bar Association real estate contract form for the land described in the settlement agreement. At the time the agreement and contract were drafted, neither party had a precise legal description of this land. In both the settlement agreement and the real estate contract, the land was described as the following:

The acreage locally known as 513 160th St., Latimer, Iowa and described as: An approximate five acre tract located in the Northwest Quarter (NW1/4) of section 26, Township 92 North, Range 22 West of the 5th P.M., Franklin County, Iowa. The legal description shall be determined by survey, which shall coincede [sic] with existing fence boundaries required by Franklin County Zoning.

The real estate contract also stated the purchase price for the real estate:

1. PRICE. The total purchase price for the Real Estate is . . . ($50,000.00) of which . . . ($20,000) has been paid. Buyers shall pay the balance to Sellers at Hampton, Iowa or as directed by Sellers, as follows: Said down payment of $20,000.00 shall be deposited in the Brian D. Miller Trust account before October, 18, 2002. Closing shall be on or before March 1, 2003. In the event the [Estate] provide[s] marketable title to the subject real estate, but as a result of nonperformance by [Passehls], the sale does not close then the parties agree that the $20,000.00 deposited in the Brian D. Miller Trust Account shall be forfeited to the [Estate].

The real estate contract set March 1, 2003, as the closing date.³

A subsequent survey determined the fence did not "line-up" with the boundaries set forth by the zoning ordinance. The land zoned for the salvage business was approximately 22,457 square feet less than the land demarcated by the fence. The boundary line described in the zoning ordinance cut through an existing garage, horse barn, and driveway, while the fence boundary did not.⁴ After the survey, a disagreement developed between Passehls and the Estate as to whether the fence or the zoning ordinance boundary controlled the property to be conveyed.

On March 19, 2003, the Estate's attorney sent Passehls a letter with the following requirements for the real estate closing:

1. The motorized Shriner's car and corn sheller needs to be delivered by Jerry and Volnetta to Karen's residence, prior to the real estate closing.

2. Karen reports that the east bin cannot be accessed because of junk and junk vehicles stored around it. The junk and junk vehicles need to be cleared from the bins.

3. The horse pasture fence needs to be removed. Karen and David would like to know if Jerry and Volnetta plan to remove the fence and if so, the date by which they can expect the fence to be removed.

4. The junk vehicles located outside the fence and on the tillable farm ground need to be removed. Karen and David would like to know if Jerry and Volnetta plan to move these junk vehicles and if so, the date by which they can expect them to be moved.

5. As we have already mentioned by letter, the junkyard fence is not properly located per the Franklin County Zoning Variance. Karen and David want to know if Jerry and Volnetta plan to move the fence to the legal description consistent with the County Zoning Variances and if so, when that work will be completed by.

On March 24, 2003, the parties met to close the sale. Passehls brought a check for $30,000, but the Shriner's car and cornsheller had not yet been delivered to Karen and David.⁵ The attorney for the Estate brought a deed, but the deed only conveyed the lesser amount of land defined by the zoning ordinance. An argument erupted between the parties. Karen, as co-executor of the Estate, stated Passehls had not performed because the Shriner's car and cornsheller had not been delivered, there were still vehicles surrounding one of the grain bins, and there were still vehicles outside of the fenced area. Jerry also objected because the property described in the deed did not match the property the parties had agreed upon. The discussions deteriorated, and the parties did not close the transaction.

On March 26, the Estate sent a letter to Passehls assigning April 1 as the new closing date. The letter declared "this will be the last time this real estate closing will be rescheduled . . . Karen and David are not willing to extend this matter further." The letter also reiterated the "five specific items that Jerry and Volnetta needed to take care of prior to the closing." The letter also stated the following:

if the real estate closing cannot take place on April 1st, at the scheduled time, as a result of their non-compliance with the settlement agreement, my letter dated March 19, 2003, and this letter, the $20,000.00 currently being held in my Trust Account [will be] forfeited by Jerry and Volnetta.

On April 1, Passehls' attorney came to the closing with a check for $30,000. The Shriner's car and cornsheller had already been delivered to Karen and David; however, vehicles still surrounded one of the grain bins, and some junk vehicles still remained outside of the fenced-in area. The Estate came to the closing with a deed that did not conform to the existing fence boundaries. As before, Karen contended the terms of the contract were not fulfilled, and Jerry disputed the correct legal description of the property. Once again, the closing did not occur.

Days later, the Estate's attorney took the $20,000 out of his client trust account and paid it to Karen and David.

Passehls filed a motion to enforce the terms of the settlement agreement. The Estate filed a cross motion to enforce the settlement agreement. The Estate's requested relief included all of the following:...