Recker v. Gustafson
| Decision Date | 30 May 1979 |
| Docket Number | No. 63047,63047 |
| Citation | 279 N.W.2d 744 |
| Parties | Loran RECKER and Mary Recker, Appellees, v. Alvin GUSTAFSON and Irene Gustafson, Appellants. |
| Court | Iowa Supreme Court |
John H. Ehrhart and William D. Martin of Fisher, Yarowsky, Martin, Ehrhart & Redmond, Cedar Rapids, for appellants.
R. L. Donohue of Donohue Law Office, West Union, for appellees.
Considered by LeGRAND, P. J., and REES, UHLENHOPP, McCORMICK and McGIVERIN, JJ.
This appeal involves several issues arising from an oral land contract dispute. Trial court ordered specific performance in favor of the plaintiff vendees. We modify and affirm.
We dismissed as premature a prior appeal by defendants. Recker v. Gustafson, 271 N.W.2d 738 (Iowa 1978). After district court judgment on September 23, 1977, plaintiffs filed a motion to enlarge pursuant to Iowa R.Civ.P. 179(b). Subsequent to the motion, but prior to ruling thereon, defendants filed notice of appeal. Id. at 738-39. The case was returned to district court which ruled on plaintiffs' post trial motion under Iowa R.Civ.P. 179(b). Defendants again appeal and plaintiffs cross-appeal.
I. Background facts and proceedings. Defendants Alvin and Irene Gustafson, husband and wife, are owners as tenants in common of a 160 acre farm in Fayette County, Iowa, where they have lived for several years. Plaintiffs Loran and Mary Recker, also husband and wife, have been interested in purchasing the farm. Alvin was age 72 and Loran was age 23 at time of trial. Alvin had been a licensed real estate broker for 20 years but has not actively practiced for the past ten years.
A. The first agreement. After some preliminary negotiations, the parties met on August 30, 1976 in the office of Gustafsons' attorney, John W. D. Hofmeyer, in Fayette to discuss the sale of the farm. Reckers were not represented by an attorney in the negotiations. The 160 acre farm includes a five acre tract upon which various buildings, including the Gustafsons' home, are located.
As supported by the testimony of both Loran Recker and attorney Hofmeyer, the parties reached an oral agreement on various specific terms of sale: a 155 acre tract, not including the five acre site on which the buildings were located, was to be sold for $290,000 with a $40,000 down payment on date of possession, which was to be March 1, 1977; annual payments were to be $28,000, including principal and interest, based on a ten-year contract with one final balloon payment at the end of the contract by March 1, 1987; interest was to be 7 1/2% Per annum on the unpaid balance; and there was to be no deficiency in the event of forfeiture of the contract. In addition, Gustafsons were to pay the 1977 realty taxes with Reckers assuming taxes after possession on March 1, 1977.
Settlement was to be made at the Oelwein State Bank. It was agreed that the contract would be drafted for execution on an Iowa State Bar Association form which called for a warranty deed and certified abstract of title showing merchantable title in the sellers. Reckers were to receive clear title to the land as tenants in common.
Relative to the five acre building site, the parties agreed Gustafsons were to continue to own the tract until they provided a notice of sale to Reckers, who then would have 45 days to exercise a right to buy the five acres for $30,000 plus compensation for any subsequent improvements. Other details concerning the five acres also were agreed upon.
Alvin and Loran agreed to measure the five acre tract and turn the figures over to attorney Hofmeyer so he could draft a sufficient description of the real estate. After the August 30 meeting, Loran went to Gustafsons' farm. Alvin had already marked the corners of the five acre tract that Gustafsons were going to retain out of the 160 acres. Alvin showed Loran the point of beginning in his yard which was related to a legal known point in a nearby road. From this beginning point Alvin showed his measurements and boundaries on the five acres to Loran, who agreed after checking the measurements. Thereafter, Alvin delivered a sketch or diagram showing the measurements of the retained five acres to Hofmeyer's office to enable Hofmeyer to include a legal description of the building site in the written contract.
The diagram, referred to as Exhibit E, was produced from attorney Hofmeyer's file when he testified at trial. Defendants objected to introduction of the diagram on ground of attorney-client privilege; plaintiffs claimed the privilege had been waived. Although the case was tried in equity, the court observed defendants' objection was well taken. 1
At the close of the August 30 meeting, Loran, in the presence of Irene, tendered to Alvin a check for $5,000 bearing the notation "ernest (sic) money for farm." Alvin accepted the check and deposited it in a joint bank account to which both he and Irene had access.
At trial, attorney Hofmeyer testified that, in his opinion, an agreement had been reached and the "farm was sold."
Upon conclusion of the August 30 meeting the parties agreed to reduce the terms to writing, which was to be signed at a later date. Hofmeyer had begun to work on the written contract when he received a call from Irene Gustafson instructing him not to complete the contract. No written contract was ever completed or signed.
B. The second "agreement." At Hofmeyer's request, on September 20 another meeting was held in Hofmeyer's office with all parties present. Terms of the August 30 oral agreement were varied in two respects. First Reckers agreed to pay an additional $10,000 for the 155 acres. Second Reckers agreed to the right of first refusal at whatever price Gustafsons desired to set in the event Gustafsons decided to sell the five acre building site. Reckers no longer would have the right to buy the five acres for $30,000 plus cost of improvements.
Prior to agreeing to these less favorable terms, Reckers were told by Hofmeyer that Gustafsons were willing to go to court to get out of the August 30 agreement and that litigation was expensive. Hofmeyer also stated that, if Reckers agreed to the changes, Gustafsons would go through with this second agreement.
Other terms of the sale remained unchanged. The initial payment of $5,000 continued to be computed as part of the $40,000 down payment.
Hofmeyer, again, was instructed to prepare a written contract.
C. Later developments. In a letter dated September 28 Reckers were notified by attorney Hofmeyer that Gustafsons had "decided not to sell the farm." Enclosed was a cashier's check for $5,000.
On October 21 Reckers filed an equity petition seeking specific performance of the August 30 oral agreement and "such other equitable relief as may be proper."
In answer, Gustafsons alleged: that they had not entered into any contract with Reckers; that Reckers abandoned the August 30 agreement and entered into a new agreement on September 20; that the realty was defendants' homestead and there was no written instrument pursuant to section 561.13, The Code, and therefore, the alleged contract to convey was invalid; and that evidence of the purported agreement to convey was incompetent under section 622.32, The Code.
Irene Gustafson, separately, denied receipt of $5,000 from Reckers.
After trial, the court's decree concluded the August 30 contract was modified by the September 20 agreement. The court ordered that Reckers were entitled to specific performance of the modified contract for the purchase of the 155 acres:
at a total price of $300,000.00, of which $40,000.00 is to be paid down, the balance to be paid over a ten-year period, in equal yearly payments of $28,000.00, including principal and interest, with interest at 7 1/2% Per annum. The possession is to be transferred effective as of March 1, 1977, which would mean that defendants will have to account to the plaintiffs for the rentals during the cropyear of 1977. The defendants are to pay for the taxes for the use of the property in 1976, and to pay all taxes during the calendar year of 1977. The defendants are to furnish the plaintiffs an abstract of title, showing merchantable title in and to the above-described real estate; that the real estate is to be purchased by the plaintiffs as tenants in common; that the evidence shows by a preponderance of clear, satisfactory and convincing evidence that the terms of the contract, made on August 30, 1976, were modified by the subsequent agreement held in the latter part of September 1976, and that the sale only includes the 155 acres, and does not include the 5-acre building site.
Gustafsons appealed, claiming no enforceable contract was formed. Reckers cross-appealed, contending the court should have ordered specific performance for sale of 155 acres, excluding the homestead, pursuant to the August 30 agreement.
II. The issues. Although the parties state them in other ways, we believe the following issues are presented for our review in arriving at disposition of the case:
(1) Whether the August 30 oral agreement between Gustafsons and Reckers falls within the statute of frauds, section 622.32, The Code;
(2) Whether the August 30 agreement is taken out of the statute of frauds because Loran Recker paid Alvin Gustafson $5,000 of the purchase money which Alvin deposited in a joint checking account to which his wife had access;
(3) Whether an enforceable oral contract was formed between the Gustafsons and Reckers on August 30;
(4) Whether specific performance of the oral contract is prohibited in whole or in part by section 561.13, The Code, where the land includes the home and farm buildings of Gustafsons;
(5) Whether the September 20 agreement is enforceable and effective to alter the August 30 agreement; and
(6) Whether specific performance is an appropriate remedy here.
The scope of our review is de novo. Iowa R.App.P. 4; Severson v. Elberon Elevator, Inc., 250 N.W.2d 417, 420 (Iowa 1977).
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