Opinion
No. 3-398 / 02-1417
Filed July 10, 2003
Appeal from the Iowa District Court for Jones County, Amanda Potterfield, Judge.
Petitioner-appellant appeals the judgment by the district court finding respondents-appellees/cross-appellants had an option to buy certain farmland at the price of $951 per acre. AFFIRMED.
Stuart Werling of Werling Law Office, Tipton, for appellants.
Todd Forsythe, Cedar Rapids, for appellees.
Considered by Sackett, C.J., and Huitink and Vogel, JJ.
Petitioner-appellant Estate of Ervin Siebels (petitioner) appeals the judgment by the district court finding respondents-appellees/cross-appellants (respondents) James and Lela Walker had an option to buy Ervin Siebels's farm at the price of $951 per acre. On appeal petitioner claims the district court erred in interpreting the rental contract between Ervin Siebels and his late wife, Violet, and respondents to include an option to purchase and determining this option extended to the entire farm. On cross-appeal respondents argue the district court should have credited rent paid in kind as well as costs for improvements toward their purchase of the farm.
I. BACKGROUND FACTS AND PROCEEDINGS
Ervin and Violet Siebels, both now deceased, were the parents of eight children, and according to their 1979 will, they intended to distribute their assets equally among their children when they died.
In December of 1983, Ervin and Violet bought a 128-acre farm in rural Anamosa from the estate of Violet's mother. Testimony at trial indicated the purchase price was approximately $125,000 or $951 per acre. Their daughter, Lela Walker, and her family, including husband, James Walker, the respondents in this case, immediately moved into the farmhouse on the property and began paying rent of $200 a month to the Siebels. The house was apparently in poor condition when the respondents moved in.
There is conflicting evidence in the record as to whether the farm is 123 or 128 acres.
We recognize that 123 acres at $951 per acre equals just under $117,000, and that 128 acres at $951 per acre equals just over $121,700.
According to testimony by Lela Walker and Linda Kollias, Lela's sister, Violet had bought the property from her mother's estate with the vision of transforming it into a horseback riding retreat and ministry for troubled youth. The property included farmland, pasture, woods, and a pond, along with the farmhouse. Linda testified that Violet was intent upon purchasing the farm and asked Roger Siebels, who was Violet's son and Linda's brother, as well as Linda, about helping her finance it. Linda testified that neither she nor Roger was in a position to help, but that respondents had agreed to sell their house in town and rent the farmhouse from the Siebels with, according to Linda, the plan eventually to buy the farm. Lela Walker testified she shared Violet's vision of turning the farm into a horse-riding retreat and ministry. After acquiring the land, the Siebels rented the farmhouse to the respondents and the farmland and pasture to other individuals. The Siebels used the $200 rent from the respondents, along with rent collected from the farmland and pasture, to make their farm payments.
In January of 1985 Violet sought to formalize the rental agreement with the respondents. Attorney Andrew McKean drew up the agreement on an Iowa State Bar Association Dwelling Unit Rental Agreement Form. The provisions of that agreement included the following: (1) rent was $200 per month; (2) the agreement applied to "The Siebels Farm in Fairview Township (except pasture rented out and farmland)"; (3) tenants were to be reimbursed by the landlord for improvements; (4) tenants had the option to buy with rent applying to the purchase price; (5) the lease was automatically renewable every year unless notice was given by December 1; and (6) the purchase price was not to exceed $951 per acre.
Violet died in May of 1985, leaving all of her property to Ervin. The respondents continued to live on the farm and pay Ervin rent. Ervin lived with respondents for about a year until they, along with other members of the extended family, built him a small house next to the farmhouse. Ervin often ate meals with the respondents, and sometimes they offset the rent they owed Ervin with money he owed them for food, newspapers, and other items. Over the years that they lived there, the respondents made many improvements to the farmhouse, including repairing and painting walls; installing new cupboards, flooring, windows, carpet and the exterior door; and replacing electrical wiring and plumbing. They also cleaned up the farm and made fence repairs. The respondents claim these improvements totaled $9565.85. In spite of these improvements, however, the worth of the farmhouse did not always increase, instead losing about $16,500 in value between 1999 and 2000, but gaining back approximately $5000 of that lost $16,500 by 2001.
This house was built largely with Ervin's money.
Ervin died on March 3, 2000. Following his death, respondents sought to exercise their option to buy the farm. Roger and Maurice Siebels, the executors of Ervin's estate, determined that the terms of the will did not provide for such an option.
The respondents estimate they paid $200 per month, in rent payments or payments in kind, since they began occupying the house in 1983. Evidence indicated the respondents had made rent payments of $34,753, which they claim should be credited toward the purchase price of the farm under the provisions of the rental agreement.
Evidence at trial indicated both that the Siebels loved their children equally and wished to provide for them equally, as stated in Ervin's 1979 will, and that they wished to make special provision for the respondents in giving them the option to buy the entire farm at a reduced price, perhaps because the respondents shared the vision of turning the farm into a horse retreat. Although the rental agreement states that the lease applies only to the farmhouse, evidence also indicates the purchase option, located on the same rental agreement form, applies to the entire farm. The plain language of the rental agreement states the lease does not apply to "pasture rented out and farmland" and tax returns show the Siebels counted income from the farmland as their own income, indicating the lease agreement applies only to the farmhouse. Yet testimony also indicated Ervin believed respondents' purchase option — located on the same rental agreement document — did extend to the whole farm, as Ervin apparently referred to respondents' purchase option in refusing Maurice's offer to buy part of the farmland for $500/acre, and Loren dropped his proposal to buy the farm pond after learning of the purchase option and talking to Ervin. Other testimony similarly indicated an understanding on the part of family members that Violet intended for respondents to buy the entire farm for the price Ervin and Violet had paid, $951 per acre.
Petitioners claim the district court's ruling finding the respondents had an option to buy the entire farm for $951 per acre is directly contrary to Ervin's stated wishes in his will to treat all of his children equally. Testimony at trial indicated that the land, which is in a prime location for development, is actually worth $2500 per acre, and allowing respondents to reap a windfall by buying it at $951 per acre results in an inequitable distribution of the Siebels's assets.
II. SCOPE OF REVIEW
We review a declaratory judgment from this equity proceeding de novo. In re Estate of Todd, 585 N.W.2d 273, 275 (Iowa 1998); Knight v. Anderson, 292 N.W.2d 411, 412 (Iowa 1980). We give weight to the fact findings of the trial court, especially when considering the credibility of witnesses, but are not bound by them. In re Trust of Cross, 551 N.W.2d 344, 346 (Iowa Ct.App. 1996).
III. PURCHASE OPTION
The trial court concluded from the evidence that respondents had a valid option to buy the entire farm at $951 per acre. The court's reasoning for this finding was that the only evidence in the agreement that the respondents were not to have an option to purchase the entire farm was the boilerplate language in the form agreement chosen by attorney McKean. The court determined that the terms and descriptions supplied by the Siebels indicate to the contrary of the boilerplate language, that the option to purchase applied to the entire farm.
In interpreting this dwelling unit rental agreement we look to ordinary contract principles. Dickson v. Hubbell Realty Co., 567 N.W.2d 427, 430 (Iowa 1997). Our objective is to ascertain the meaning and intention of the parties as expressed in the language used. United Warehousing Corp. v. Interstate Acres Ltd. P'ship, 458 N.W.2d 14, 15 (Iowa Ct.App. 1990). An ambiguity may occur in a contract if there is a genuine uncertainty as to which of two reasonable interpretations is proper. Hartig Drug Co. v. Hartig, 602 N.W.2d 794, 797 (Iowa 1999). If a contract has ambiguous terms, extrinsic evidence is admissible to aid the interpretation of the contract. Uhl v. City of Sioux City, 490 N.W.2d 69, 73 (Iowa Ct.App. 1992). Extrinsic evidence is admissible as an aid to interpretation when it sheds light on the situation of the parties, antecedent negotiations, the attendant circumstances, and the objects they were striving to attain. Dental Prosthetic Servs., Inc. v. Hurst, 463 N.W.2d 36, 39 (Iowa 1990). We can examine the subsequent acts of the parties following the contract to assist our determination of their intent at the time of the contract. See Tansil v. McCumber, 201 Iowa 20, 30-31, 206 N.W. 680, 685 (1925).
When the meaning of an agreement depends on extrinsic evidence, a question of interpretation is left to the trier of fact unless "the evidence is so clear that no reasonable person would determine the issue in any way but one." Fausel v. JRJ Enterprises, 603 N.W.2d 612, 618 (Iowa 1999) (quoting Restatement (Second) of Contracts § 212, cmt. e(1979)).
Contrary to the conclusion of the district court, it is not solely the boilerplate language which indicates the purchase option does not apply to the entire farm. The language supplied by the Siebels to the dwelling unit rental agreement form indicates the agreement applies to "The Siebels Farm in Fairview Township (except pasture rented out and farmland)." (Emphasis supplied). And it is in this dwelling unit rental agreement that the purchase option is spelled out, again in language supplied by the Siebels: "2. Tenants shall have option to buy with rent applying to the purchase price. . . . 4. Purchase price shall not exceed $951.00 per acre." Testimony supporting an interpretation that the option applies only to the property included in the lease agreement came from attorney McKean who testified that if he were preparing an option to sell an entire farm, he would have prepared a separate option agreement with terms much more extensive than those included in the dwelling unit rental agreement. Furthermore, although the purchase option is defined in terms of price per acre, which logically would indicate it was intended to apply to a large number of acres, the farmhouse stands on a plot of land of about three acres, and evidence indicates the respondents also used up to seven acres of land for their horses. Under the facts and the terms supplied by the Siebels in the dwelling unit rental agreement, then, the purchase option could be interpreted to apply to those acres including the house and the horse pasture and other land not rented out as farmland or pasture, but specifically not the whole farm.
If this were the only evidence available, it would be difficult to justify the trial court's conclusion that the purchase option applied to the entire farm. But as the district court noted and as evidenced by the testimony, the greater context in which this land was purchased and rented out, the manner in which many of the family members treated the purchase option, and the lack of any specific evidence, besides Ervin's general wish to treat all his children equally, to contradict the evidence that the option did apply to the entire farm, indicate to us that the purchase option was intended to cover the entire farm.
Both respondent, Lela Walker, and her sister, Linda Kollias, testified that Violet Siebels, who bought the farm in her sixties, did so because she had a vision of transforming it into a retreat for troubled youth. Both also testified that the respondents shared that vision with Violet, and that Violet consequently intended to sell the farm to the respondents at a reduced price, the same price at which she had bought the farm. As an indicator of respondents' shared vision for the farm, they agreed to move there immediately after it was acquired in December of 1983, leaving their more comfortable house in town, reportedly at Violet's request, in order to inhabit the farm and keep it from being vandalized, in spite of its being poorly insulated and very cold. Respondents proceeded to expend a great deal of effort and money to make improvements in the farmhouse. Furthermore, during the many years they rented, respondents occupied more than merely the property on which the house stood, another sign of an understanding and shared vision for the whole farm between Violet and the respondents. Testimony by respondent Lela Walker indicated their horses took up about seven acres which were not otherwise rented, and that the land rented out to others, both pasture and farmland, totaled only about sixty-one of the total 123 or 128 acres. Lela Walker also testified that the woods on the property were not rented out, and that she would have felt free to walk through or hunt on that part of the farm as well.
Further supporting respondents' claims, Linda testified that the option to buy, in her understanding, applied to the whole farm, and that she had informed Maurice of this when he had earlier sought to buy approximately forty acres of the farm for $500 per acre from Ervin. Maurice, in response, claimed he had only asked Ervin about the agreement, that Ervin had responded his will provided for equality among his children, and that Maurice had then told Ervin to "check into it." Loren Siebels testified that he too had approached Ervin about buying a portion of the land, that he was apprised of the respondents' purchase option, that he discussed this a bit with Ervin, and that he then decided not to pursue buying any of the property. Additional evidence of Ervin's belief that a purchase option existed covering the entire farm came in the form of an affidavit signed by Ervin's companion, Leona Luck, indicating that Ervin had told her respondents had an option to purchase the entire farm.
Notably, no evidence directly contradicted respondents' claims that the Siebels intended for them to have the option to purchase the whole farm. Both Maurice and Roger testified that their parents wished to treat all of their children equally, but they had no evidence that their parents wished not to allow respondents, who had lived there and worked on the farm, to have the option of purchasing it. Given the district court's inclination to believe the respondents' story of their shared vision with the Siebels, together with the fact that the evidence largely supports, and never directly contradicts, the respondents' claims, we conclude the option to purchase evidenced in the dwelling unit rental agreement applied to the entire farm.
IV. CREDIT FOR IN-KIND RENT
Respondents argue in their cross-appeal that the district court erred by not crediting their purchase price with the amount of rent they paid, including rent paid in kind, over the years they rented the farmhouse. The record shows that although respondents owed $200 per month, they sometimes paid less than that. Respondents claim the reason for this was that Ervin, who began living on the property, shared meals and newspapers and other items with them, and they subtracted any money he owed them from the rent they paid him. While this is certainly a plausible explanation, we defer to the trial court's determination of credit based upon rent paid, most of which is documented, rather than the less verifiable claims of rent paid in kind. We affirm on this issue.
V. IMPROVEMENTS
Respondents also argue they should be credited, as provided for in the purchase option agreement, for the $9565 worth of improvements they made to the farmhouse. The district court determined, based on the net worth of the property, that no credit should be given for improvements which did not increase the value of the property. If respondents are buying the farm for $951 per acre, without paying additional money for the house, they directly benefit from their improvements and will not be paying twice for them upon acquiring the house. As there have been no improvements to the land measurable in terms of dollars and cents, respondents will not be penalized for any improvements they have made by having to pay extra for those improvements. We affirm on this issue.