Wilden Clinic, Inc. v. City of Des Moines

• Decision Date: 21 May 1975
• Docket Number: No. 56098,56098
• Citation: 229 N.W.2d 286
• Parties: WILDEN CLINIC, INC., a/k/a Lyon Street Corp., Appellant, v. CITY OF DES MOINES, Iowa, et al., Appellees.
• Court: Iowa Supreme Court

Page 286

229 N.W.2d 286

WILDEN CLINIC, INC., a/k/a Lyon Street Corp., Appellant, v. CITY OF DES MOINES, Iowa, et al., Appellees.

No. 56098.

Supreme Court of Iowa.

May 21, 1975.

Harry W. Haskins of Hansen, Wheatcraft & McClintock, Des Moines, for appellant.

Philip T. Riley, Corp. Counsel, M. A. Iverson, Des Moines, for appellees.

Heard before MOORE, C.J., and MASON, LeGRAND, REES and McCORMICK, JJ.

MASON, Justice.

Wilden Clinic, Inc. appeals from the trial court's decree dismissing its petition and assessing costs following trial of an equitable action brought as a result of plaintiff's purchase of a tract of land at $1.55 per square foot from defendant, City of Des Moines, described in the record as the east one half of parcel C--Z which is a portion of the River Hills Urban Renewal Project.

Plaintiffs seeks relief in division 1 of its petition on the theory of a mutual mistake of a material fact, alleging the city council at the time it adopted the fair market value of parcel C--Z at $1.55 per square foot mistakenly based such price upon an appraisal for a nonexistent use of the parcel as a transient housing facility. Plaintiff prayed the contract and deed for the purchase of the parcel be reformed to reflect the true intent of the parties and for money damages.

In division 2, as amended, plaintiff alleged defendant and its urban renewal board and department fraudulently misrepresented the fact the parcel involved could be used as a transient housing facility or in the alternative fraudulently concealed the fact the parcel could not be used for such purpose and plaintiff was required to bid against other developers at a price consistent with a transient housing facility use.

Under both alternatives plaintiff asked damages of $58,856.06, the difference between $1.00 per square foot and $1.55 per square foot.

The basic controversy centers upon whether the City should have notified Wilden that two other parties interested in this parcel of land were not going to offer bids since the particular land uses proposed by these parties had not been consented to by the neighboring landowners.

The events culminating in this lawsuit were initiated when the state of Iowa informed Wilden in 1965 that its land was needed for State House grounds expansion. As a result of this plaintiff began searching for a new site for its osteopathic hospital. Mr. Charles McLaughlin, business manager for Wilden, had virtually complete charge of the search for the new site. In early 1965 McLaughlin contacted Mr. Vern McKinley, real estate officer of the Urban Renewal Department, concerning purchase of land from the department. McLaughlin explained at trial the hospital administration wished to maintain its operation in eastern Des Moines as that was the area it traditionally had served.

In June-July 1965, Wilden offered $.50 per square foot and in August of the same year, $1.00 was offered. Both propositions were rejected.

In the early 1960's, parcel C--Z had been appraised at $2.00 per square foot. Due to Wilden's interest in purchasing this land, Walter J. Potts, Jr., of the Iowa Appraisal and Research Corporation was hired to reappraise parcel C--Z in connection with various land uses. He submitted a report August 4, 1965, which concluded: (1) the land would be worth $1.00 per square foot or $214,022.00 total if used by Wilden as a hospital site; (2) if 75,000 square feet were used as a transient housing (hotel-motel) site, the land value would be $1.55 per square foot, or $116,250 total; and (3) if the City were to retain the land for three years, it could be subdivided into retail sites valued at $1.45 per square foot, or $310,331.90 total.

It appears of record Hyatt Corporation and Sinclair Oil Company became interested in purchasing parcel C--Z in conjunction with the construction of a motor inn-service station site. In fact, McLaughlin was shown a drawing of a 'chalet' type motel complex and was asked how he would like it for a neighbor. In any event, it was necessary to acquire the consent of the other developers in River Hills before such a complex could be constructed. However, such consent was never obtained.

January 25, 1966, McLaughlin appeared before the Urban Renewal Board and offered $1.55 per square foot. The board advised him this was premature, that it would not be prudent for Wilden to submit its bid at that time as the other interested parties would then know Wilden's bid. At this meeting it was decided February 22 would be the deadline for submitting bids.

February 22 Wilden submitted its final bid for $1.55. Mr. McLaughlin testified the $1.00 bid was raised due to the fact Wilden was in competition to acquire the land and was also aware $1.55 was the firm set price. As of this date, however, Wilden was in competition with no one for the purchase of the tract since consent for the motel-service station use had not been obtained. It is undisputed the hospital did not become aware of this until late 1967. McLaughlin testified had he known consent had not been obtained, Wilden would not have offered the $1.55 price.

March 14, 1966, the Des Moines city council set the official price of the parcel at $1.55 per square foot and accepted plaintiff's bid. Wilden took title the following January and moved into its new building in the latter part of that year.

It was in dispute whether the city council was aware consent had not been obtained, but the Urban Renewal Board did have such knowledge, when, on February 7, 1966, it submitted its resolution to the council. There was testimony to the effect the council acted more or less as a 'rubber stamp' as to these board resolutions.

The trial transcript indicates this urban renewal plan was filed March 23, 1966 with the Polk County recorder. Later the other landowners in River Hills agreed to the service station use, within was filed September 19. Furthermore, defendant contends all plan changes were conducted in open council meetings which became part of the public records of the Des Moines City Clerk.

The trial court found the Urban Renewal Board at all times knew the status of parcel C--Z, which knowledge was imputable to the City. Since plaintiff failed to sustain its burden of providing the city council did not have knowledge of the failure to obtain consent for the additional land uses, there was no mutual mistake between the parties (justifying reformation of the contract).

The court further found no active misrepresentation or any existence of a duty on the part of defendant 'to seek out interested persons, plaintiff or others, and spontaneously communicate any and all facts that might interest a prospective purchaser.' The court reasoned this was an arms-length transaction where mere silence as to material facts discoverable by the other party did not constitute actionable fraud. There was neither a refusal to give information nor concealment of facts.

Finally, the trial court opined plaintiff could never have acquired the real estate for $1.00 per square foot due to the city council's prior refusal of that offer.

Plaintiff states its appeal presents two issues for review: (1) whether the trial court erred in failing to find a mutual mistake of a material fact between the parties; and (2) whether the trial court erred in failing to find a fraudulent misrepresentation or concealment of a material fact by defendant.

In equity matters, such as this, where our review is de novo, rule 334, Rules of Civil Procedure, it is our responsibility to review the facts as well as the law and determine from the credible evidence rights anew on those propositions properly presented, provided issue has been raised and error, if any, preserved in the trial proceedings. While weight will be given to findings of the trial court, this court will not abdicate its function as triers de novo on appeal. Mulford v. City of Iowa Falls, 221 N.W.2d 261, 267 (Iowa 1974).

I. Plaintiff seeks reformation of the land sale contract--not rescission--on the theory there was mutual mistake of the parties as to the consent issue.

This court has recognized that the proper relief for a mutual mistake of a material fact in a written instrument is reformation of the instrument to reflect the true intent of the contracting parties. However, one who contends a writing does not express the real agreement between the parties or who seeks reformation of a contract has the burden of establishing his contentions by clear, satisfactory and convincing proof. Akkerman v. Gersema, 260 Iowa 432, 438--439, 149 N.W.2d 856, 859--860.

Mistake is defined in Restatement, Contracts, section 500, to mean 'a state of mind that is not in accord with the facts.'

The author of 13 Williston on Contracts, (Third Ed. Jaeger), section 1535, tells us:

'Mistake, as the word is used in contract law, is a mental attitude which when coupled with an act having legal significance, such as the execution of a contract, itself acquires legal consequences.

'* * *

'But where the mistake is of so fundamental a character, that the minds of the parties have never, in fact, met; or where an unconscionable advantage has been gained, by mere mistake or misapprehension; and there was no Gross negligence on the part of the plaintiff, either in falling into error, or in not sooner claiming redress; and no intervening rights have accrued; and the parties may still be placed In statu quo; equity will interfere, in its discretion, in order to prevent intolerable injustice. * * *

'* * *

'A mutual mistake, in equity, is one that is common to all the parties to the written instrument. * * * the court exercises the power of reformation where the mistake is common to both parties an by reason of it each has done what neither intended.' (Emphasis in the original).

Thus, under the doctrine of mutual mistake, the mistake must be both 'mutual' and 'material.' In other words, if the mistake is as to a collateral matter or is unilateral,...