Opinion
No. 3-148 / 02-1205
Filed October 15, 2003
Appeal from the Iowa District Court forCherokeeCounty, Edward A. Jacobson, Judge.
The defendant-appellant appeals the district court's order granting specific performance of a contract to dissolve a farm partnership. AFFIRMED.
Steven Hendricks of Kersten Brownlee Hendricks, L.L.P., Fort Dodge, for appellant.
Lance Ehmcke and Joel Vos of Heidman, Redmond, Fredregill, Patterson, Plaza, Dykstra Prahl, L.L.P., Sioux City, for appellee.
Heard by Sackett, C.J., and Huitink, Mahan, and Hecht, JJ., but decided by Sackett, C.J., and Mahan and Hecht, JJ. Huitink, J., takes no part.
Factual Background. Byron Felten and Alvern Felten formed a farm partnership by written agreement in 1986. The two brothers farmed together until April of 2000 when Byron served notice of his intent to withdraw from and dissolve the partnership. Both Byron and Alvern consulted counsel. Alvern presented to Byron a written proposal to accomplish the dissolution of the partnership. Byron subsequently prepared a written counter-proposal and delivered it to Alvern's farmstead on May 12, 2000. Byron's proposal called for (1) allocation of all partnership farm equipment, livestock, and inventory to Alvern; (2) allocation of 370 acres of farm real estate to Byron and 160 acres to Alvern; and (3) allocation of partnership liabilities between the brothers. The two brothers and their father, Alfred Felten, spent approximately three hours discussing Byron's written proposal. At the conclusion of the meeting on May 12, 2000, Alvern wrote "I will accept in principle the above," and placed his initials at the bottom of the first page of the document. Byron also placed his signature at the bottom of the first page of the document and the meeting concluded.
This document captioned "Agreement to Dissolve Partnership" consisting of three pages was subsequently marked Exhibit 3 and received in evidence at the trial of this case.
The partnership then owned both market livestock and dairy livestock.
The proposal called for Alvern to receive partnership assets with an estimated value of $1,298,800 and assume partnership liabilities in the amount of $373,000. The document proposed that Byron would receive partnership assets with an estimated value of $803,500 and assume partnership liabilities of $80,000. The partnership's primary creditor, Farm Credit Services of America, held mortgages against the real estate.
Byron promptly moved off the farmstead he had inhabited as a farm partner, and Alvern assumed sole management of the farm operation. Alvern thereafter did all those things connected with the operation of the grain and livestock operation which had previously been handled by the brothers, including the physical labor of planting and harvesting crops and tending livestock for the 2000 and 2001 crop years. He paid bills and collected income of the farm operation but made no accounting or distribution to Byron, who disassociated himself from the farm business. Byron did, however, continue to receive a $1089 monthly draw from the partnership.
The record is not clear as to how long he continued to receive the draw.
When Alvern subsequently refused to wind up the partnership affairs consistent with the terms of the May 12, 2000, writing, Byron commenced this action requesting specific performance of a contract to dissolve the partnership and an accounting. Alvern's answer denied the parties had formed a contract to dissolve the partnership and prayed for dismissal of Byron's petition.
In the alternative, Byron also sought contract damages.
After hearing the evidence, the district court concluded the parties formed a contract on May 12, 2000, and ordered Alvern to specifically perform it. The district court ordered that as of May 12, 2000, Alvern was to have ownership of and liability for all farm-related equipment, market and dairy livestock, and farm inventory. The district court's decision also divided the real estate consistent with the terms of Exhibit 3 and ordered the parties to execute and deliver within thirty days warranty deeds to effectuate the division of real estate. The district court found that the contract between the parties gave Alvern the first option to lease all of the land transferred to Byron for five years at the rate of $130 per acre. The court concluded rent for the 2000 and 2001 crop years and the first one-half of the 2002 rent was immediately payable by Alvern. The court further ordered that the second half of the 2002 rent would be due November 1 of that year; and in the years 2003 and 2004 one-half of the rent would be due on March 1 and the remainder on November 1. The court directed the parties to execute all necessary documents within thirty days of the district court's decision.
The district court concluded that the contract permitted Alvern to lease from Byron 348 tillable acres for the cash rent sum of $45,240 per year.
The district court ordered that Alvern's rent obligation for the year 2000 was reduced in the amount of $10,639 for loan principal and interest, real estate taxes and "partial rent" paid before trial. Similarly, the court ordered that Alvern's rent obligation for 2001 was reduced in the amount of $18,423 for loan principal and interest, real estate taxes and "partial rent."
On appeal, Alvern contends the district court erred in concluding that the parties formed a specifically enforceable contract to dissolve the partnership.
Scope and Standards of Review. We must first determine our scope of review. The pleadings, relief sought, and nature of the case ordinarily dictate whether an action is legal or equitable. See Nelson v. Agro Globe Eng'g, Inc., 578 N.W.2d 659, 661 (Iowa 1998); Ernst v. Johnson County, 522 N.W.2d 599, 602 (Iowa 1994).
Two factors suggest this case should be reviewed as an equitable action. First, it was filed in equity. Secondly, Byron sought specific performance, an equitable remedy. See Lange v. Lange, 520 N.W.2d 113, 117 (Iowa 1994); Tri-States Inv. Co. v. Henryson, 179 N.W.2d 362, 363 (Iowa 1970).
An important test in determining whether a case was tried in equity or law is whether the district court ruled on evidentiary objections. Nelson, 578 N.W.2d at 661. Although the district court ruled on all objections, this fact does not automatically transform what would otherwise be an equity case to one at law. See Sille v. Shaffer, 297 N.W.2d 379, 381 (Iowa 1980). Moreover, most of the objections were overruled and no argument is heard on appeal that evidence was improperly excluded. Consequently, the record is sufficient for de novo review. See Howard v. Schildberg Const. Co., Inc., 528 N.W.2d 550, 552-53 (Iowa 1995).
Following Howard, we treat this as a case in equity. In granting the relief requested, the district court exercised its equitable powers. The invocation of equity jurisdiction permits the court the necessary reach and flexibility in working out the equities among the parties. Moser v. Thorp Sales Corp., 256 N.W.2d 900, 907 (Iowa 1977).
Specific performance is a matter of equity resting within the court's sound discretion. Lange, 520 N.W.2d at 117; Tri-States Inv. Co., 179 N.W.2d at 363. We therefore review the district court's ruling for evidence of abuse of that standard. Lange, 520 N.W.2d at 117. We are not bound by the district court's findings; however, the district court's assessment of credibility of witnesses carries considerable weight. Graham v. Henry, 456 N.W.2d 364, 365 (Iowa 1990); Nepstad Custom Homes Co. v. Krull, 527 N.W.2d 402, 404-405 (Iowa Ct.App. 1994).
Analysis. Alvern advances several arguments in support of his contention that the parties did not form a contract. In summary, he asserts (1) the parties merely agreed to make a contract in the future, (2) no agreement was reached on essential terms, and (3) neither party took action in preparation for performance of the contract. Alvern generally posits that he had no intent on May 12, 2000, to bind himself to Byron's written proposal. Moreover, Alvern contends he initialed Exhibit 3 and noted his agreement in principle with its contents because he was anxious to get on with the planting of crops and to confirm his agreement "in principle to start splitting up the operation." In his trial testimony, Alvern denied that he ever read or reviewed the second and third pages of the document, claimed he never agreed to the asset values contained on the second and third pages of Exhibit 3, and specifically disputed Byron's contention that the contents of those pages were negotiated and agreed to during the May 12 meeting.
At another point in his testimony, Alvern explained the outcome of the meeting as follows: "I kind of gave into my dad's wishes and kind of agreed to this contract as a starting point."
The terms of a contract are sufficiently definite if the court can determine with reasonable certainty the duty of each party and the conditions relative to performance. Severson v. Elberon Elevator, Inc., 250 N.W.2d 417, 420 (Iowa 1977); Janssen v. North Iowa Conference Pensions, Inc., 166 N.W.2d 901, 907 (Iowa 1969). Our supreme court has noted its reluctance "to hold a contract is too uncertain to be enforceable." Audus v. Sabre Communications Corp., 554 N.W.2d 868, 872 (Iowa 1996). After a careful de novo review, we agree with the district court's determination that the parties did reach agreement on May 12, 2000, on the essential terms of a contract to dissolve their partnership.
Our decision is heavily influenced by the district court's explicit and implicit findings that Alvern's testimony was not credible. For example, the district court found incredible Alvern's denial that he read, reviewed, or considered pages two and three of Exhibit 3 on May 12, 2000. Like the district court, we find implausible Alvern's assertion that the parties discussed the partnership dissolution for three hours without exploring the contents of those pages. The district court also implicitly found Byron's testimony more credible than Alvern's on other important factual issues when it (1) credited Byron's testimony that the parties agreed Alvern would have the right to lease real estate received by Byron for a term of five years at the rate of $130 per acre and rejected Alvern's denial that he assented to such terms, and (2) credited Byron's testimony that the parties agreed to the valuation of assets itemized on pages two and three of Exhibit 3 and rejected Alvern's claim that he disputed the asset values itemized on the second and third pages of Exhibit 3. Our standards of review dictate that we give appropriate deference to the district court's credibility determinations, and we find ample evidence in the record to support our determination that the May 12, 2000 meeting resulted in the formation of a contract, not merely an agreement to continue negotiations for the formation of a future contract.
Our decision to affirm the district court is substantially influenced by the fact that the parties' conduct after May 12, 2000, was consistent with the formation of a contract to dissolve the partnership. Byron moved off the farm and disassociated himself from the farming enterprise. Alvern assumed sole management of the farming operation. He undertook sole use of the farm machinery and thereafter farmed all of the ground as contemplated in the writing signed by Byron and initialed by Alvern. Alvern liquidated the dairy herd, assumed a partnership lease of land owned by the Sump family, and marketed grain raised on the real estate owned by the partnership. Like the district court, we find the parties' conduct after May 12, 2000, consistent with the formation of the agreement alleged by Byron and found by the district court.
Alvern contends Exhibit 3 did not expressly include and the parties did not reach agreement on certain essential terms of the partnership dissolution and the district court erred in supplying them. In particular, Alvern emphasizes that Exhibit 3 did not sufficiently detail the terms of Alvern's "first option" for a period of five years to purchase Byron's farm real estate. The district court found that the handwritten words "will not sell 1st" on Exhibit 3 evidenced the parties' agreement that Alvern would have a right of first refusal for five years to match any offer to purchase Byron's farm real estate. We agree with the district court's determination that no further express terms were required to make this aspect of the contract binding. Because it was unknown when, if ever, Byron might receive an offer of purchase, the time of Alvern's exercise could not be identified on May 12, 2000. Likewise, the price to be paid by Alvern if the right of first refusal were to be exercised during the five year term could not be specified in the May 12, 2000, writing because the amount of a prospective offer was unknown. If the right of first refusal fails to specify a purchase price, "the natural interpretation is that the offeror's price must be paid upon exercise of the preemption." Trecker v. Langel, 298 N.W.2d 289, 292 (Iowa 1980). After a de novo review of the record, we agree with the district court's determination that the parties agreed Alvern would have the right for five years to match any offer to purchase the farm real estate received by Byron as a consequence of the dissolution of the partnership. No further detail was required in order to make the first right of refusal enforceable.
Alvern next asserts that Exhibit 3 lacks sufficient detail as to the lease payments he would make to rent the real estate Byron was to receive as a consequence of the dissolution. We agree with the district court's determination that Exhibit 3 amply supports a finding that the parties agreed on an annual cash rent of $130 per acre for 348 tillable acres for a period of five years. A factual basis for this finding appears in handwriting on Exhibit 3. Although it is true that Alvern denied in his trial testimony that he agreed to pay $130 per acre, we conclude the district court necessarily resolved this and other factual issues in part on credibility. The district court clearly found Byron's testimony more credible, and we find no reason in the record to disagree.
Alvern also challenges the district court's finding that the parties agreed Byron would be reimbursed for Conservation Reserve Program (CRP) payments received by Alvern in the years 2000 and thereafter for real estate allocated in the dissolution agreement to Byron. As noted above, the district court found the parties agreed to allocate a total of 370 acres to Byron, subject to Alvern's right to lease 348 of those acres for five years. The record establishes that the 22 acres not subject to the lease had been placed in the Conservation Reserve Program. Although Exhibit 3 makes no reference to CRP payments or their allocation, we affirm the district court's finding that the parties agreed the CRP payments should flow to the owner of the real estate for which the payments were received. Because the CRP payments were for untillable acres allocated to Byron and not subject to Alvern's lease, we conclude the district court's finding of an agreement on this issue consistent with both the express and implied aspects of the parties' agreement.
The district court found Alvern received $2,020 in 2000 and $2,394 in 2001.
Having concluded the parties formed a contract on May 12, 2000, to dissolve their farm partnership, the question remains whether the district court erred in ordering specific performance. The plaintiff's burden in a suit for specific performance is to prove by clear, satisfactory, and convincing evidence the terms of the contract declared upon in his or her pleadings. H W Motor Express v. Christ, 516 N.W.2d 912, 913 (Iowa Ct.App. 1994). Specific performance of a contract is not a remedy which is available as a matter of right. Id. at 913-14. Rather, its availability rests in the sound discretion of the court. Id. at 914. Ordinarily specific performance should not be decreed unless contractual terms are so express that the court can reasonably determine the duty of each party and the conditions under which performance is due. Lange, 520 N.W.2d at 117; Tri-States Inv. Co., 179 N.W.2d at 363. If the duties of each party and the conditions under which performance is due may be reasonably ascertained from the agreement, the district court makes no mistake in enforcing it. Lange, 520 N.W.2d at 118. The fact that the contract in this case involves a transfer of farm real estate provides an independent, proper ground for ordering specific performance of a contract. Severson, 250 N.W.2d at 423.
While it is true that Exhibit 3 did not express a timeline for the division of the partnership property, we affirm the district court's implicit findings that (1) the parties intended to effectuate the partnership dissolution within a reasonable time and (2) thirty days was a reasonable period of time in which to execute the necessary documents and effectuate the transfers. "When a contract fails to specify time for performance, the parties must perform within a reasonable time." Fausel v. J.R.J. Enterprises, 603 N.W.2d 612, 619 (Iowa 1999).
The agreement between the parties could certainly have been more detailed. Prudent businessmen may indeed have insisted on additional and more precise terms. "However, our decision must be based on what the parties did in fact, not on whether they acted prudently." Severson, 250 N.W.2d at 420. We conclude the details that the parties did not reduce to writing in Exhibit 3 were not essential contract terms but were instead "matters of implementation" which do not preclude specific performance. Id. Byron met his burden to prove by a preponderance of clear, satisfactory and convincing evidence the contract to dissolve the partnership. We find no abuse of discretion in the district court's well-reasoned decision to specifically enforce the contract, and therefore affirm it.
AFFIRMED.
Mahan, J., concurs; Sackett, C.J., dissents.
I dissent. The district court ordered specific performance of an alleged contract to dissolve the Felten Brothers, a farming partnership, holding among other things, assets including many acres of valuable farm land, substantial farm machinery, and leases for wind farms, and liabilities including considerable secured and unsecured debt and obligations to the federal government on CRP land. The document the district court found to support its decree of specific performance is set forth below.
Alvern Felten appeals contending this cursory document that he initialed on the hood of a pickup on a corn planting day in May of 2000 was not a valid and binding contract but only a starting point for negotiations for dissolving the partnership. The majority has affirmed the order for specific performance. I cannot agree. Rather, I fail to find there ever was a final and binding agreement, and even if there were, it never was specific enough to support a finding it should be specifically performed. As the sole issue before us is whether there should be specific performance, I would reverse and remand for dismissal.
I do agree with the majority that the case was in equity and our review is de novo. I further agree that it is Byron's burden to prove by clear, satisfactory and convincing evidence the terms of the contract declared upon in his pleadings. H W Motor Exp. V. Christ, 518 N.W.2d 912, 913 (Iowa Ct.App. 1994).
The Felten Brothers partnership was formed in April of 1986 when Byron and Alvern, two of the three living children of long-time farmer Alfred Felten, signed an agreement forming a partnership to be called "Felten Brothers." The purpose of the partnership was to engage in a joint farming operation. Each partner was to contribute one half of the capital and receive one half of the profits. The agreement provided, "Any partner may withdraw from this partnership operation, by giving a sixty (60) day notice to the other party of his intention to do so."
The agreement also provided the following:
7. In the event of a dissolution of the partnership, a proper accounting of the capital and income of the partnership and the net loss or net profit of the partnership from the date of the last accounting to the date of dissolution. [sic] A complete accounting shall be had between the partners as to their indebtness [sic] incurred in this partnership, and a settlement made by the partners of any outstanding obligations and the balance of the income or assets shall be distributed individually to the partners thereafter. Upon the distribution of the assets and the payment of any partnership obligations outstanding the partnership business hereunder shall cease and the partnership shall stop and the partnership shall cease to exist. (emphasis supplied)
On April 20, 2000 Byron sent to Alvern and his attorney the following notice: "I, Byron Felten, do hereby notify Attorney John D. Loughlin and Alvern Felten, I do withdraw and intend to dissolve our farm partnership." Alvern's attorney, now deceased, prepared a dissolution agreement which Alvern signed and sent to Byron. Neither this agreement nor its terms are a part of the record. At that time the partnership held assets of over $1.6 million as well as substantial debt.
On May 12, 2000 Byron and his father, Alfred, met and talked about a division of partnership assets. Byron then typed the cursory one-page document, hereinafter referred to as Exhibit 3, that the district court enforced as the agreement to dissolve. Taking Exhibit 3, Byron and Alfred went to where Alvern was preparing to plant corn. At the time both brothers were represented by separate attorneys and had consulted them about the division of the partnership assets. The brothers had sought and used legal counsel throughout the years of the partnership and use them in this litigation. Yet no attorney examined Exhibit 3 after Byron typed it or before Byron affixed his signature to it and Alvern affixed his initials. The fact that neither party, contrary to past and future conduct, had an attorney look at the document is a strong indication to me that neither intended it to be a final agreement as to the dissolution of the partnership.
Alfred died on June 6, 2002, before the case came to trial. At the time Exhibit 3 was signed, he was upset about his sons' disagreement and the effect it would have on the several generational farming operation. He appeared to exercise influence over both sons.
Alvern admits that after several hours of discussion he wrote on Exhibit 3, "I will accept in principle the above," and then affixed his initials. Byron signed his name to Exhibit 3 as well. Byron testified that in addition to Exhibit 3, he added two additional pages, without prior consultation, by taking numbers from a spreadsheet on his computer and putting them on two additional pages which assigned value to the farm inventory and showed the value of assets and liabilities he allocated to each brother. Neither of the last two pages admitted into evidence at trial was signed, initialed or numbered, nor was either page referenced in Exhibit 3. Alvern admits Exhibit 3 was discussed, but testified there was no discussion of the other two pages, and he was unsure if they were presented to him. Byron claims the pages were presented to and discussed by Alvern, and the district court accepted Byron's testimony on this issue as the more credible.
After Alvern initialed Exhibit 3, he went back to doing what he had done most of his life, farming. He and his father immediately went to the field and planted corn. Byron took no further responsibility for the farm; rather, he moved his place of residence from a farm owned by his father to town, where he went to work in the construction business. Alvern did all those things connected with the operation of the grain and livestock operation which had previously been handled by the two brothers, including the physical labor of planting crops and tending livestock for the 2000 crop year. He paid bills and collected income but made no accounting or distribution to Byron, who disassociated himself from the farm work after May 12, 2000, though Byron, as he later testified, did continue to receive a $1089 monthly draw from the partnership.
The record is not clear as to how long he continued to receive the draw.
Alvern paid no rent to Byron, and no real estate was transferred from the partnership to Byron or Alvern. No bill of sale was given by the partnership to Alvern for the livestock and machinery. No tender or formal demand was made for the transfer of any land or assets from the partnership to the partners until November 7, 2000, when Byron filed the suit which led to this appeal. In the suit Byron asked for specific performance, claimed a breach of contract and demanded a partnership accounting. Alvern filed a general denial to the petition.
The district court did not address the issues of breach of contract and partnership accounting. Byron did not raise either issue in his cross-appeal. Consequently they are not before us on appeal.
Alvern also conducted the business for the 2001 crop year and made no accounting or distribution to Byron. Byron collected payment for allowing windmills to be operated on property titled in the name of the partnership and made no accounting of the money or payment to Alvern.
In March of 2002 the matter went to trial. On May 24, 2002, the district court, found there was an agreement and that it was enforceable and ordered the agreement to be specifically performed. In fashioning the terms, the court considered, among other things, Exhibit 3 and the other two sheets Byron typed and contended he presented to Alvern on May 12, 2000, the testimony of the parties, and the partnership agreement. The district court supplied dates of performance and items for division not specified in testimony or in documents entered as exhibits.
The district court held that as of May 12, 2000, Alvern was to have ownership of and liability for all farm-related equipment, market livestock and dairy livestock, and farm inventory. The court also divided the real estate. The court additionally provided specifically that (1) each brother should provide to the other warranty deeds to real estate each was to receive; and (2) Alvern should have the first option to lease all of the land transferred to Byron for the crop years 2001, 2003 and 2004 at $130 an acre, due one half June 1 and one half November 1 of the year of the lease. The court said rental was based on 348 tillable acres for a total of $45,240 annually. The court apparently considered the rent for the prior years to be accrued and ordered it then paid. The rent for 2003 and 2004 was to be in the same amount, but the term was changed to have the first half due in March rather than June. Alvern was ordered to notify the respective groups to divide patronage dividends evenly. All documents were to be executed within thirty days of the district court's decision.
Though the court denied Byron's request for an accounting, the following orders were made as to other obligations of the brothers to each other. The parties had agreed that Alvern had made certain payments of principal, interest and real estate taxes that he was entitled to deduct from rent he owed Byron totaling $10,639 for 2000, and $18,423 for 2001. The court also found that according to the parties' agreement, Alvern owed Byron $4317 to balance partnership accounts. Alvern was also ordered to reimburse Byron for certain CRP payments collected, and he was to continue to reimburse Byron as long as he received those payments. The court further ordered Byron to assume notes due on the eighty-acre tract and the ninety-acre tract and ordered Alvern to assume all other notes. The court allowed principal payments Alvern made on the eighty- and ninety-acre tracts to be credited against the rentals he owed Byron under the court's decree.
Analysis. The first question is whether, as Byron contends, there actually was a contract or agreement to dissolve, or if Exhibit 3 and the other two pages only represented the starting point for negotiations, as Alvern contends.
The plaintiff's burden in a suit for specific performance is to prove by clear, satisfactory, and convincing evidence the terms of the contract declared upon in his or her pleadings. H W Motor Exp. v. Christ, 516 N.W.2d 912, 913 (Iowa Ct.App. 1994). Specific performance of a contract is not a remedy which is available as a matter of right. Id. at 913-14. Rather, its availability rests in the sound discretion of the court. Id. at 914. When the terms of an agreement are definitely fixed so that nothing remains except to reduce them to writing, an oral contract will be upheld unless the parties intended not to be bound until the agreement was reduced to writing. Id. See also Severson v. Elberon Elevator, Inc., 250 N.W.2d 417, 420 (Iowa 1977). In order to be binding, the agreement must be complete in itself and certain. H W Motor Exp., 516 N.W.2d at 914; Linn County v. Kindred, 373 N.W.2d 147, 150 (Iowa Ct.App. 1985). An agreement to agree at some point in the future is not binding. H W Motor Exp. 516 N.W.2d at 914. Whether preliminary negotiations actually ripened into an oral contract depends on the intention of the parties as gleaned from the facts of the case. Id. See also Severson, 250 N.W.2d at 421. The terms of a contract are sufficiently definite if the court can determine with reasonable certainty the duty of each party and the conditions relative to performance. Severson, 250 N.W.2d at 420; Janssen v. North Iowa Conference Pensions, Inc., 166 N.W.2d 901, 907 (Iowa 1969).
Ordinarily specific performance should not be decreed unless contractual terms are so express that the court can reasonably determine the duty of each party and the conditions under which performance is due. Lange v. Lange, 520 N.W.2d 113, 117 (Iowa 1994); Tri-States Inv. Co. v. Henryson, 179 N.W.2d 362, 363 (Iowa 1970). If the duties of each party and the conditions under which performance is due may be reasonably ascertained from the agreement, the district court makes no mistake in enforcing it. Lange, 520 N.W.2d at 118.
Factors to be considered in seeking to ascertain whether the parties intended to be bound prior to execution of a written document include whether the contract is of a class usually found to be in writing, whether it is of a type needing a formal writing for its full expression, whether it has few or many details, whether the amount is large or small, whether the contract is common or unusual, whether all details have been agreed upon or some remain unresolved, and whether the negotiations show a writing was discussed or contemplated. Severson, 250 N.W.2d at 421; see also Emmons v. Ingebretson, 279 F. Supp. 558, 572 (N.D.Iowa 1968). With these principles in mind I address Alvern's claims. In doing so I first note that dissolution of a partnership with over a million dollars in assets is in the class where one usually finds a formal writing with full expression and many details.
Alvern claims there was no agreement because it was lacking in many particulars. He contends, among other things, the following: (1) there was no date of performance; (2) an option that both brothers agree was discussed giving Alvern the right to buy Byron's land was not spelled out; (3) the terms under which Alvern was to lease Byron's farmland were confusing and not clearly spelled out; (4) the method for conveying land was unresolved in that neither party was required to execute deeds or bills of sale, and the type of conveyances to be exchanged was not specified; (5) many other details generally found in a dissolution agreement for a partnership holding more than $1 million in assets were missing.
Date of performance. Alvern argues there was no enforceable contract for the sale of real estate because Exhibit 3 lacked both a specific time and date. The district court rejected Alvern's argument, reasoning Exhibit 3 was not for a sale but rather for a division of the partnership assets. The district court found the real estate was adequately described. The district court then determined the performance date by reasoning that the partnership agreement provided there would be a division of assets within sixty days from the date of the notice of dissolution and that the dissolution would be on sixty days' notice. The district court found this provision was sufficient to conclude the brothers' intended date of performance for the dissolution was to be sixty days from Byron's notice of his intent to withdraw on April 20, 2000.
I disagree. In spite of the district court's conclusions, the partnership agreement noticeably does not provide that the partnership shall dissolve sixty days from the giving of a notice; rather, it provides the partnership shall dissolve upon the distribution of the assets and the payment of any partnership obligations. Furthermore, withdrawal of a partner does not automatically terminate the business of a partnership. That a partnership remains intact despite a withdrawal is consistent with the general rule of partnership law that dissolution may connote a change in the partnership but does not necessarily cause its termination, and further, that the dissolution of a partnership and termination of business operations are entirely separate and distinct concepts. See Anderson v. Aspelmeier, Fisch, Power, Warner Engberg, 461 N.W.2d 598, 602 (Iowa 1990); see also Medd v. Medd, 291 N.W.2d 29, 33 (Iowa 1980). Consequently, I conclude the district court was in error to hold that there was an agreement for the division of the partnership assets to take place on May 12, 2002.
Option to purchase. Alvern further argues the absence of a well-defined option to purchase spelling out the date and price indicates there was no final agreement. While both brothers testified that there was to be an option, and words on Exhibit 3 would indicate there was such a discussion, neither brother testified to any specifics as to how it was to be exercised or its duration. The district court dismissed Alvern's argument that the absence of a date and price indicated there was no agreement. The district court interpreted the testimony of the parties to be that Alvern would have the opportunity to match any offer received by Byron for a five-year period and reasoned that under the circumstances the words "will not sell 1st" meant the parties understood that Alvern would have the first opportunity to purchase the land if it were sold. The court rejected Alvern's contention he was negotiating for an option. Even if I were to accept the district court's conclusion that there was evidence supporting a finding Alvern had a five-year right of first refusal, which I do not, there was no evidence of any time and manner for exercising the right.
Terms of lease. Further, Alvern similarly claims that the agreement lacked specificity as to the terms of any lease. The district court rejected Alvern's claim, finding that the terms of the lease were sufficiently spelled out in Exhibit 3. The district court found the figures on the side showed that Alvern was to lease the tillable 348 acres for five years at $130 an acre. Though not referenced in Exhibit 3 or the two additional pages, the district court found from the testimony of the parties that Alvern was to reimburse Byron for CRP payments. The district court also concluded that, although not part of the three pages and not clear from the testimony, the parties understood the rent was to be paid one half on June 1 and one half on November 1. Also, the figure "110" appears at the top of Exhibit 3, and Alvern testified he offered only to pay $110 in rent. Contrary to the district court, I conclude that the two conflicting figures on Exhibit 3, coupled with the absence of any evidence of the specific terms of the lease, including the absence of any reference to the allocation of the CRP payment or the responsibility for meeting the government requirement for land put into the CRP, indicate that the parties had not agreed on the specific terms of a lease.
Method of conveyance. In addition, the issue of how the land would be exchanged is absent from Exhibit 3 and is not provided by the testimony of the brothers. While the district court said the transfer should be made by warranty deed, there is no evidence this was what the parties agreed to or intended. Furthermore, one tract considered partnership land, which Byron contends was to be transferred to Alvern, was held by the brothers as tenants in common. Byron's wife's signature would have been necessary to release her dower interest in the land, but she did not sign Exhibit 3. Additionally, there was no provision as to apportionment of real estate taxes or for title examinations.
Much of the land was encumbered and even the district court's decision does not address whether the encumbrances were to be exceptions to the warranty.
Other missing details. Alvern also argues that the absence of other specifics that generally appear in a partnership dissolution agreement demands that it not be specifically performed. There was no provision in Exhibit 3 for an accounting or rectifying of the partners' accounts as required by the partnership agreement. The district court concluded such a provision was not necessary, even though it was stipulated that Byron had received $8634 more than Alvern for the period January 1, 2000 through April 20, 2000.
The district court presumed that the partnership's accountant or bookkeeper had determined the partners' capital accounts on an annual basis, and Exhibit 3 did not need to make separate provision for adjusting the partners' capital accounts. However, the partnership agreement specifically stated in paragraph seven that in the event of a dissolution of the partnership, "A complete accounting shall be had between the partners as to their [indebtedness] incurred in the partnership from the date of the last accounting to the date of dissolution." Further, in spite of its presumption, the court nevertheless indicated it did not intend to limit Alvern's ability to litigate capital account issues from the inception of the partnership to 1999.
The district court put strong emphasis in enforcing the agreement on the fact that Alvern had accepted nearly 100 percent of the benefit without being willing to undertake the obligations that he agreed to undertake. The court noted that he continued to receive income from dairy and market livestock, inventory and CRP payments; that he bought and sold machines and equipment and assumed the benefits of a lease; that he farmed the land which otherwise would have been one half his brother's; and that he paid notes and borrowed money. I have difficulty with this reasoning, as it appears to make Alvern the "bad guy." It must be remembered it was Byron who wanted out of the partnership. Alvern's lawyer had sent him a partnership dissolution agreement. Yet Byron chose to demand that matters of dissolution be addressed on a day when he should have been helping his brother plant corn. Despite Byron's immediate desire to dissolve the partnership, he made no effort to have documents prepared to transfer title to property. He continued to accept a draw from the partnership, though he was not doing any of the work. I refuse to hold against Alvern his efforts to plant the crops and keep the partnership and farm running. It was necessary to carry on the business of the partnership whether Byron had withdrawn or not. See Anderson v. Aspelmeier, Fisch, Power, Warner Engberg, 461 N.W.2d 598, 603 (Iowa 1990).
Although I recognize that the issue of a partnership accounting has not been raised on appeal, I do note that Alvern has a duty to report to Byron on the business of the partnership and supply him with an accounting of business he has transacted for the partnership, as does Byron have a duty to account to Alvern for rent he collected for the wind farm. A fiduciary relationship exists between partners. Kurtz v. Trepp, 375 N.W.2d 280, 283 (Iowa Ct.App. 1985). The burden to show an accounting is on the partner closer to the facts. Clinton Land Co. v. M/S Assoc., Inc., 340 N.W.2d 232, 235 (Iowa 1983). As there has been no accounting in this case, I cannot determine whether or not Alvern and or Byron breached a fiduciary duty, nor can I determine whether there was any profit that should have been or should be distributed by Alvern to Byron or by Byron to Alvern.
In enforcing a dissolution agreement, the district court found, and the evidence supports the finding, that at the time of trial neither brother had performed all the obligations the district court found they had agreed to under the terms of what the district court found to be the dissolution agreement. Byron left Alvern to tend the farm while he took employment in town. Alvern kept the business going and provided all the manpower. While Byron argues that no effort was made by Alvern to deliver title to property, it should also be noted that there was never any tender made by Byron in the months between his allegations that he made an agreement and was seeking to enforce it. Alvern's actions were not inconsistent with his position that the partnership dissolution agreement was still under negotiation.
Substantial assets and liabilities were being divided. Though both brothers had attorneys at the time, neither was involved.
I would find Byron has failed to prove by clear and convincing evidence the agreement he seeks to enforce. Terms in the alleged agreement were not adequately defined so a court could reasonably determine the duties of each party and the conditions of performance. The assets and liabilities to be divided are substantial, and the division is of the type needing a formal writing for its full expression. The cursory writing lacks substantial and necessary details. The writing left the manner of its execution unresolved.
I would reverse the order for specific performance and remand for a dismissal.