Shell Oil Co. v. Kelinson

• Decision Date: 07 May 1968
• Docket Number: No. 52898,52898
• Court: Iowa Supreme Court
• Parties: SHELL OIL COMPANY, a corporation, Appellant, v. Norman J. KELINSON and Middle Road Shopping Center, Inc., a corporation, Appellees.

Page 724

158 N.W.2d 724

SHELL OIL COMPANY, a corporation, Appellant, v. Norman J. KELINSON and Middle Road Shopping Center, Inc., a corporation, Appellees.

No. 52898.

Supreme Court of Iowa.

May 7, 1968.

Doerr, Dower & Rehling, Davenport, for appellant.

Betty, Neuman, McMahon, Hellstrom & Bittner, Davenport, for appellees.

MOORE, Justice.

This is an equity action brought by plaintiff, Shell Oil Company, hereinafter designated Shell, against defendant, Middle Road Shopping Center, Inc., hereinafter designated Shopping Center, for specific performance of a written option agreement whereby Shell was offered the opportunity to purchase real estate within a specified period for $65,000. The trial court found Shell failed to establish an absolute acceptance of the option and that their conditional acceptance was not binding on the parties. The court also found the parties mutually waived any rights under the option by their respective acts and conduct and hence denied recovery. Plaintiff has appealed. We reverse and remand.

The subject matter of the option agreement is an irregular tract of land 180 feet 120 feet 80 feet 150 feet fronting on a service road and lying a few feet south of Middle Road, a thoroughfare in Bettendorf. Shell proposes to construct a service station on this parcel of land. At trial time Middle Road was two lane accommodating traffic from both east and west. The Iowa State Highway Commission, however, had acquired land in the vicinity and was planning construction of a divided four lane thoroughfare over Middle Road with the eastbound traffic utilizing the two lanes adjacent to Shell's tract. Naturally Shell was concerned about access to and from this parcel from the proposed road and expressed a desire to be provided both easterly and westerly approaches. On November 25, 1964 an option agreement drafted by Shell was presented by its representative, Richard W. Parlier, to Norman J. Kelinson, president of Shopping Center. Kelinson signed this on January 8, 1965 in his official capacity as president.

The agreement is set out verbatim in the record and to here include it would unduly lengthen this opinion. We now set out portions thereof we deem of primary importance and will refer infra to other portions.

'This is an agreement, dated November 25, 1964, between Middle Road Shopping Center, Inc., an Iowa Corporation with offices at 1228 Coffelt Avenue in Bettendorf, Iowa * * * and Shell Oil Company, a Delaware Corporation with offices at 212 South Central, Clayton, Missouri, * * *.

'1. Option. In consideration of ten and no/100 Dollars ($10.00) received by Seller, Seller hereby grants to Shell the option to purchase the following described land located on Middle Road in Bettendorf * * *.

'2. Price. The purchase price shall be Sixty Five Thousand and 00/100 Dollars ($65,000.00).

'3. Period. Shell may exercise this Option by giving Seller notice at any time during the primary period from the date hereof through March 1, 1965 * * *. h through March 1, 1965 * * *.' of the land and provided for sch contingencies as the construction of a service road, grading, sewer and water facilities, design of the service station, allocation of various expenses to the parties, and the manner in which required notice would be given. Also included was a twenty year restriction precluding Shopping Center from selling adjacent property which it owned to a third party for use as a service station.

Shell on March 1, 1965 sent this registered letter to Shopping Center: 'Middle Road Shopping Center, Inc. 1228 Coffelt Avenue, Bettendorf, Iowa--Gentlemen: Reference is made to the Option Agreement dated November 25, 1964, covering the premises at Middle Road and Duck Creek Plaza, Bettendorf, Iowa.

'This is to notify you that Shell Oil Company hereby exercises its option to purchase this property. In accordance with Article 4 of the Option Agreement, please submit evidence of ownership at your earliest convenience. Yours very truly, Shell Oil Company /s/ M.B.H. M. B. Holdgraf, Division Manager.'

Shopping Center's pleadings admit execution of the option agreement and receipt of this letter but deny it amounted to a binding exercise of the option.

Over timely objection by plaintiff's counsel another letter dated March 1, 1965 was introduced into evidence. It was a Shell inter-office communication from the regional real estate manager to Mr. Holdgraf. The final paragraph thereof read: 'Therefore, our approval is actually subject to a satisfactory arrangement and agreement with the Shopping Center developers from whom we are purchasing the property as to the maintenance of the service road after it is originally installed. Also as to the final, permanent location of the entrances to the Shopping Center as indicated on your plat.' The option agreement contained no provision pertaining to future maintenance of the service road. On March 1, 1965 there was uncertainty concerning the placement of the eastern access to Middle Road.

About 8:30 a.m., March 9, 1965 a meeting was held at the Blackhawk Hotel Coffee Shop in Bettendorf. In attendance were Mr. Parlier, Mr. Kelinson, Mr. Sam Comess, a business partner of Kelinson in the transaction, and Mr. Dean Fry, a general contractor who sometime in the summer or fall of 1965 entered into a profit sharing arrangement with Shopping Center on some property he owned on Middle Road. Mr. Fry testified he left the meeting after only a few minutes.

The details discussed pertained to grading the site and surfacing the service road. Also touched upon was which party was responsible for future maintenance of the service road as the option agreement did not cover this specifically. The parties were unable to agree on this point. The discussion then turned to the problem of access to Middle Road. Kelinson stated he would have no problem procuring the one to the west but as to the eastern access he was presently unable to do so. This result obtained because when the option was entered into in November 1964 Kelinson then had the land over which the eastern access was to pass under a three year option from the owner, Mr. VenHorst. Subsequently his option expired and allegedly VenHorst would not renew it as of March 9, 1965. However, Kelinson assured Parlier he could again obtain the option from VenHorst and would do so.

Upon learning Shopping Center might not be able to acquire the desired eastern access, Parlier expressed doubt as to whether Shell would close on the agreement. At this point he produced the inter-office communication addressed to Mr. Holdgraf and showed it to Kelinson and Comess. Kelinson testified Parlier then said 'that if we couldn't deliver what was in the option that we didn't have a deal, and also that Shell couldn't make all the deals. Something to that effect. He lost some before.' Comess testified Parlier said, 'that this is not the first time that Shell has lost a deal or words to that effect.'

Both Kelinson and Comess testified that immediately after this meeting adjourned they discussed the desirability of locating other purchasers since they doubted Shell was going to fulfill the contractual obligations. They in fact contacted four other major oil companies, two motel chains and a supermarket.

Regardless of this alleged doubtful state of mind the record is undisputed that certain tasks were undertaken pursuant to fulfilling the contractual obligations arising under the option. The afternoon of March 9 Comess hired a registered surveyor to complete a boundary survey of the tract which was being sold to Shell. Kelinson and Comess were continually assuring Parlier they would be able to obtain the land necessary for the eastern access to Middle Road. Kelinson requested Parlier to advance him funds on the contract in order to start grading the site in conformance with the agreement. On May 23 or 24, 1965 Kelinson sent Parlier to his attorney's office to obtain the abstract of title. Delivery was not actually made.

On May 23 or 24, 1965 Parlier learned Mobile Socony Oil Company was seeking to purchase the land to the east over which Shell's proposed eastern access was to pass. On June 7, 1965, Parlier received a letter from Shopping Center's attorney stating they did not intend to proceed with completion of the purchase option. In December 1965 Mobile Socony obtained title to a tract of land to the east over which Shell's access was to have gone. The tract was sold to Mobile Socony by Dean Fry who had himself succeeded in purchasing it from VenHorst. The irregular tract of land which is the subject of this litigation has not been sold and is owned by Shopping Center.

I. Shopping Center contends Shell's letter of March 1, 1965 was a mere conditional acceptance and not a binding acceptance of the option. The trial court's ruling was partially premised on this contention.

The rule is well settled that in a contract by offer and acceptance, the acceptance must conform strictly to the offer in all its conditions, without any deviation or condition whatever. If there is any qualification attached which calls for further understanding or correspondence in order to determine the final meeting of the minds of the parties, the acceptance falls short of closing the contract. O'Brien v. Fitzhugh, 204 Iowa 787, 790, 215 N.W. 944, 946; National Produce Co. v. Dye Yaus Co., 199 Iowa 286, 288, 201 N.W. 572, 574; Foshier v. Fetzer, 154 Iowa 147, 165, 134 N.W. 556, 564; 17 Am.Jur.2d, Contracts, section 62; 17 C.J.S. Contracts § 42; 1 Corbin on Contracts, section 82; Restatement, Contracts, sections 59, 60.

Shell clearly, unequvocally, and without any expressed reservations accepted Shopping Center's offer on March 1, 1965. More unequivocal terminology can hardly be imagined than that found in Shell's letter of March 1. Shopping Center seeks to circumvent its contractual obligations by asserting as a defense the Shell inter-office communication called to its attention...