David Wegner and Kelly Wegner v. Bert Schauer and Diana Schauer

IN THE COURT OF APPEALS OF IOWA
No. 17-0583
Filed October 25, 2017
DAVID WEGNER and KELLY WEGNER,
Plaintiffs-Appellants,
vs.
BERT SCHAUER and DIANA SCHAUER,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Monona County, Edward A.
Jacobson, Judge.
Plaintiffs appeal from an adverse judgment in a claim for breach of
contract. AFFIRMED.
Peter J. Leo of Norelius Nelson Law Firm, Denison, for appellants.
Angie J. Schneiderman of Moore, Heffernan, Moeller, Johnson & Meis,
L.L.P., Sioux City, for appellees.
Considered by Danilson, C.J., and Tabor and McDonald, JJ.
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MCDONALD, Judge.
David and Kelly Wegner brought this suit for breach of a residential real
estate contract against Bert and Diana Schauer after the Schauers failed to close
on the parties’ purported agreement. The Schauers asserted several affirmative
defenses and made counterclaims for fraudulent misrepresentation, breach of
contract, and intentional interference with a business relationship against the
Wegners. In their breach-of-contract claim, the Schauers sought the return of
their earnest money deposit in the amount of $5000. The case was tried to the
district court. The district court found the parties had not entered into a final,
enforceable contract. The district court also found and concluded the Schauers
were entitled to the return of their earnest money. The Wegners timely filed this
appeal.
I.
The Wegners owned and resided in two residential properties locally
known as 955 and 965 East Lake Shore Drive in Lake View, Iowa. The property
at 965 was the main home. The property at 955 was a smaller guest house,
which David referred to as the “man cave.” In 2014, the Wegners decided to sell
the properties. The Wegners listed the property, but the listing generated little
interest. The Wegners allowed the listing to expire in March 2015.
Approximately one month later, Bert approached David about purchasing
both properties. The Wegners showed the Schauers the properties. After the
viewing, David and Bert commenced negotiations on the sale of the homes.
They communicated via phone calls, text messages, and personal conversations.
The negotiations carried on for several months and involved extensive back and
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forth, primarily on the structure of the transaction. David and Bert were both
experienced in the business of buying, selling, and renting residential real estate.
At the same time the parties were negotiating the sale of the properties,
they were both involved in other residential real estate transactions. The
Wegners were purchasing a home in Carroll, contingent on the sale of the
properties at issue. The Schauers were selling their home to their niece.
On July 8, 2015, David, Bert, and Diana met to sign a purchase
agreement.1 The Wegners were in need of a written purchase agreement to
move forward with the purchase and finance of the Carroll home, and the parties
agreed to meet to sign a purchase agreement for that purpose. The Wegners’
attorney drafted the purchase agreement. The purchase agreement was not
shown to the Schauers until they arrived for the signing. The agreement, signed
by both parties, provides:
The purchase price shall be $387,500, payable at Sac County,
Iowa, as follows: $5000.00 down and credit at closing. Payment
and closing on or before 8/7/2015. $162,000.00. Remainder paid
on contract: $225,500.00 at 4% over 30 years; payments of
$1076.57 on the 15th of each.
The agreement includes a handwritten notation, added by David, which reads
“Balloon PMT to be 8/17/2017.” At the time of signing, the Schauers provided a
$5000 earnest money deposit.
The scheduled closing did not occur. The Schauers’ niece decided not to
purchase the Schauers’ home. On July 24, 2015, Bert told David the Schauers
1
There is some dispute about the actual date. The dated signature lines contain
two different dates: 7/7/2015 and 7/5/2015. The district court determined based
on the witness testimony and exhibits the date was 7/8/2015.
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would not be going forward with the purchase of the properties. In March 2016,
the Wegners sold the 965 and 955 properties to another buyer for $375,000.
After failed settlement negotiations, the Wegners filed suit for breach of
the purchase agreement. After a bench trial, the district court found, “[I]t is clear
to the Court that there was never a meeting of the minds sufficient to support a
theory of mutual assent to the terms of the contract.” The district court noted,
“[I]n no text message, from either party, do the two seem to stick to anything they
agreed upon. There is much separation in time in quite a few of the responses
from both parties and very little consistency.” “[P]rior to the meeting on July 8,
David and Bert had agreed that any ‘tweaks’ necessary could be made on the
contract itself. To the Court, this message is especially indicative of the lack of
finality in the signed agreement.” The court also found the Wegners’ failure to
provide a disclosure statement made “the agreement unenforceable and void
irrespective of any outside factors.” Finally, the district court concluded the
Schauers’ fraudulent misrepresentation counterclaims were without merit but
concluded the Schauers were entitled to the return of their earnest money.
II.
Our review is for the correction of legal error. See Iowa Mortg. Ctr., L.L.C.
v. Baccam, 841 N.W.2d 107, 110 (Iowa 2013). The district court’s findings of fact
“shall have the effect of a special verdict.” Iowa R. App. P. 6.907. The district
court’s findings of fact are binding if supported by substantial evidence. See
Land O’Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000); Van Oort Constr.
Co. v. Nuckoll’s Concrete Serv., Inc., 599 N.W.2d 684, 689 (Iowa 1999).
Evidence is substantial “when a reasonable mind would accept it as adequate to
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reach a conclusion.” Falczynski v. Amoco Oil Co., 533 N.W.2d 226, 230 (Iowa
1995). “In determining whether substantial evidence exists, we view the
evidence in the light most favorable to the district court’s judgment.” Chrysler
Fin. Co. v. Bergstrom, 703 N.W.2d 415, 418 (Iowa 2005). “[W]e construe the
evidence broadly to uphold, rather than defeat, the trial court’s judgment.” Grall
v. Meyer, 173 N.W.2d 61, 63 (Iowa 1969).
III.
The Wegners contend the district court erred in finding the parties had not
mutually assented to the terms of the contract.
For a contract to be valid, the parties must express mutual assent
to the terms of the contract.” Schaer v. Webster County, 644
N.W.2d 327, 338 (Iowa 2002). Mutual assent is present when it is
clear from the objective evidence that there has been a meeting of
the minds. Id. To meet this standard, the contract terms must be
sufficiently definite for the court to determine the duty of each party
and the conditions of performance. Seastrom v. Farm Bureau Life
Ins. Co., 601 N.W.2d 339, 346 (Iowa 1999).
Royal Indem. Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839, 846 (Iowa 2010).
Mutual assent is based on objective evidence and not hidden subjective intent.
Schaer, 644 N.W.2d at 338. Assent is typically given through an offer and
acceptance. Rick v. Sprague, 706 N.W.2d 717, 724 (Iowa 2005). “[A]cceptance
must conform strictly to the offer in all its conditions, without any deviation or
condition whatever. Otherwise there is no mutual assent and therefore no
contract.” First Am. Bank v. Urbandale Laser Wash, LLC, 874 N.W.2d 650, 656
(Iowa Ct. App. 2015). A written real estate contract can constitute all the
objective evidence needed to determine mutual assent. See Ziskovsky v.
Ziskovsky, No. 13-0360, 2014 WL 69620, at *3 (Iowa Ct. App. Jan. 9, 2014)
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(noting when the written contract features the signatures of all parties, the terms
are sufficiency definite, and the parties’ duties and conditions of performance are
ascertainable, a real estate contract alone can be the objective evidence of
mutual assent).
Although the parties signed a written purchase agreement, there was a
dispute as to whether the agreement was final or whether the Schauers merely
agreed to sign a document to allow the Wegners to move forward with the
purchase of the home in Carroll on the mutual understanding the agreement
would be finalized later.
The Schauers contend the signed agreement was not a final agreement.
They contend they clearly told David Wegner they would not accept a term
calling for a balloon payment. They also testified they required a contingency for
the sale of their home. They testified they did not agree to the handwritten note
on the contract regarding the balloon payment. They testified David agreed and
told them he would have a new contract drawn up by his attorney. Bert testified
that he and his wife signed the contract and provided the earnest money
because they trusted David Wegner and he told them he needed the written
agreement signed that night to secure financing for the purchase of the new
home in Carroll the next morning. A text from July 3, 2015 seems to corroborate
this:
Hi Bert. If this is going to work for you we need to answer to them if
we could a 5000 earnest we could hard write something and sign it
until contracts are done I have something to show bank mine are
sold so I can get letter of financing[.]
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David agreed he told Bert he needed something in writing for the bank about the
“situation” they were entering into. Bert testified after the signing, he stopped by
the Wegner house to follow up on the new contract and David Wegner told him
“[our attorney] is working on it. She’ll get it. As soon as I get it, I’ll get it to you.”
He also testified he followed up with David on this new contract between three to
five times but David never provided a new document.
The Wegners argue the Shauers wanted the balloon payment term in the
contract, as shown by a text message from June 23, 2015. The text message
from that date reads:
Dave, here is my situation. I have enough to pay the main house
and put down $25,000 on other house. This is after we close on
our house and another house we have sold. That should all be
done by July 31 or sooner. The next thing is if we can set up the
balance of $125,000 to be pay [sic] at $650.00 a month for 23
months with balloon or the balance on the 24th month. The only
reason I ask for 24 months is because I need to sell a couple
things. I’m hoping only 6 to 12 months but as you know things
sometimes don’t go as planned. Also working on some other things
that may come sooner. Please let me know how this works for you.
Thank you for your patience. Bert.
David replied on June 25, 2015, “[W]orking on a few things I think it will work we
will talk.” David contends a telephone call solidified the agreement on the
balloon payment. Continued negotiations on the transaction structure occurred.
Importantly, there were frequent discussions involving different financing
structures, including a twenty-year loan, between June 25, 2015, and July 8,
2015, via text message, telephone, and in person communication. One day
before the signing of the agreement, Bert texted David the following:
Dave can we do the plan we had of 162000.00 down and contract
the rest but I need payments as low as you can to the 650.00 a
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month for the two years. We will bring over $5000.00 deposit this
evening you get contract done today or tomorrow. Let me know.
David texted back that the terms were fine and he would get a contract. David
testified that he only spoke to Bert about different terms after the signing of the
agreement one time. He stated Bert wanted to put more down at closing to get
immediate title to only the 965 property. The Wegners chose not to accept the
Schauers’ offer.
Although we may have found differently were we deciding the issue anew,
we are not deciding the issue anew. Evidence is not insubstantial “merely
because [the court] may draw different conclusions from it; the ultimate question
is whether it supports the finding actually made, not whether the evidence would
support a different finding.” Raper v. State, 688 N.W.2d 29, 36 (Iowa 2004); see
Portzen Constr., Inc. v. Cal-Co Insulation, Inc., No. 13-0758, 2014 WL 2347821,
at *4 (Iowa Ct. App. May 29, 2014) (“Our role as the reviewing court is not,
however, to dissect the record anew to reach our own factual findings.”). While
there was a signed writing, there is a dispute regarding whether the writing
evidences the parties’ final agreement. The evidence is in conflict regarding
whether the signed agreement was intended as a final agreement or whether it
was a document the parties signed merely to facilitate the Wegners’ purchase of
the home in Carroll. In resolving the conflicting evidence, the district court made
implicit credibility determinations. “We are obliged to view the evidence in the
light most favorable to sustaining the court’s judgment.” City of McGregor v.
Janett, 546 N.W.2d 616, 617 (Iowa 1996). When the record is reviewed in the
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light most favorable to sustaining the district court’s judgment, the findings are
supported by substantial evidence.
The Wegners contend the district court erred in relying on extrinsic
evidence to interpret the meaning of the integrated agreement. The Schauers
contend the issue was not properly preserved for appellate review.
“It is a fundamental doctrine of appellate review that issues must ordinarily
be both raised and decided by the district court before we will decide them on
appeal.” Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). “Although the
parol evidence rule is a substantive rule of law, standard error preservation rules
regarding the admission of evidence apply to parol evidence issues.” Peck v.
Four Aces Farms, Inc., No. 14-1482, 2015 WL 4642386, at *5 (Iowa Ct. App.
Aug. 5, 2015) (citing Top of Iowa Coop. v. Sime Farms, Inc., 608 N.W.2d 454,
470 (Iowa 2000)). The Wegners never made any objection at trial to the
admission of arguably extrinsic evidence. The district court never mentioned
parol evidence or an integrated agreement in its written findings. The district
court considering the terms of the negotiations was essential to the mutual-
assent analysis and is not an implied integration finding as the Wegners claim.
Further, as in Peck, “without the benefit of objections at trial . . . this court cannot
be sure which pieces of evidence were contested” nor which evidence the
Wegners believe the district court erroneously relied upon. See id. Error was not
properly preserved.
Even bypassing the error-preservation problem, the argument is
unavailing. The parol evidence rule generally provides “[a]lthough extrinsic
evidence may be admissible to explain the real meaning of the parties by the
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language used in a contract, the parol evidence rule forbids the use of extrinsic
evidence to vary, add to, or subtract from a written agreement.” Montgomery
Props. Corp. v. Econ. Forms Corp., 305 N.W.2d 470, 475–76 (Iowa 1981). An
integrated agreement is one in which the parties adopt writing(s) as the final and
complete expression of an agreement. Id. at 476. “[P]arol evidence is
admissible to show a writing is not an integrated agreement.” Id.
The Wegners mischaracterize the analysis of the district court. The
district court was not interpreting the terms of the contract, but instead
determining whether a contract even existed. The extrinsic evidence went to
whether a contract was formed, whether mutual assent existed, and whether the
written sale agreement was an integrated document. Under such circumstances,
especially when the purported contract lacks an integration clause, the district
court does not err in considering extrinsic evidence. See id.; In re Eickman
Estate, 291 N.W.2d 308, 312 (Iowa 1980); Fashion Fabrics of Iowa, Inc. v. Retail
Inv’rs Corp., 266 N.W.2d 22, 25 (Iowa 1978).
Because we find that the district court properly considered extrinsic
evidence and substantial evidence supports the district court’s finding that no
contract was formed, we need not decide the condition-precedent or fraudulent-
misrepresentation issues.
IV.
For the foregoing reasons, we affirm the judgment of the district court.
AFFIRMED.