Opinion
No. 3-406 / 02-1538
Filed October 15, 2003
Appeal from the Iowa District Court for Jones County, Amanda Potterfield, Judge.
Karla D. Jensen, as executor of the estate of Thomas E. Jensen, appeals from the district court order denying her petition for declaratory judgment. AFFIRMED.
Matthew McQuillen and Marty Hagge of Remley, Willems, McQuillen Voss, Anamosa, for appellant.
Max Kirk and Jen Bries of Ball, Kirk Holm, P.C., Waterloo, for appellee.
Heard by Huitink, P.J., and Vaitheswaran and Eisenhauer, JJ.
Karla D. Jensen, as executor of the estate of Thomas E. Jensen, appeals from the district court order denying her petition for declaratory judgment. She contends the district court erred in concluding a contract existed between Thomas and Terry Jensen for the sale of Thomas Jensen's one-half interest in the parties' business. She also contends the court erred in failing to award reasonable attorney fees. We affirm.
I. Background Facts and Proceedings. Brothers Thomas (Tom) and Terry Jensen began a partnership called Jensen Ready Mix in 1965. Although their partnership was never formalized, they were equal partners, each owning one-half interest in Jensen Ready Mix. Tom and Terry shared the partnership responsibilities until Tom suffered an aneurysm in 1982. The aneurysm affected Tom's short term memory to the extent he was no longer able to perform duties at Jensen Ready Mix. However, Tom continued as a partner and received one-half of the profits while Terry performed all the work. In the decades after Tom's aneurysm, Terry asked Tom to sell his interest in the partnership. Since he relied on the income he received in the partnership, Tom refused Terry's offers.
Late in 1999, Tom was diagnosed with lung cancer. In March 2000, Tom was placed in the Anamosa Care Center where he stayed until his death on March 21, 2000. Tom and his family became concerned Tom would not be able to pay the cost of his residential care from the partnership proceeds. Upon investigating, Terry's wife, Jane, learned Tom could receive Social Security disability benefits if he sold his interest in the partnership and no longer had any earned income.
Terry and Tom again discussed the sale of Tom's interest in the partnership. When Terry offered Tom $150,000 for his interest, Tom asked, "That much?" and happily accepted. This discussion was witnessed by Terry's wife, Jane. At trial, both Terry and Jane testified that the specific terms of the sale were discussed, and Tom was informed the sale included the certificates of deposit, as well as bank and investment accounts. Tom and Terry's father, Thomas P.C. Jensen, testified that Tom told him he had sold his interest in Jensen Ready Mix to Terry for $150,000, and that Tom was satisfied with the price. Thomas understood from the conversation that Tom was selling his entire interest, including the plant, land, and accounts.
Terry and Jane met with attorney Adrian Knuth to draft the necessary documents to transfer Tom's interest in the partnership to Terry. However, Tom died before the sale documents were prepared or signed.
Tom had married Karla Jensen in 1967. In 1989, Tom and Karla divorced but remained close friends. In 1990, Tom changed his will to name Karla as the primary beneficiary and her father and his father as contingent beneficiaries. Following Tom's death, Karla was appointed as the executor of Tom's estate. On August 16, 2000, Terry, through Attorney Knuth, tendered payment to Tom's estate in the amount of $155,322.08, the purchase price for Tom's share in the partnership plus interest computed at the rate of 8.75 percent per annum.
Karla, as executor of Tom's estate, filed a petition for declaratory judgment in the district court, seeking to determine the value of Tom's interest in Jensen Ready Mix at the date of his death, and that judgment be entered against Terry in the amount by which Tom's interest exceeds $150,000. Following trial, the court determined that a valid contract existed between Terry and Tom by which Tom agreed to sell his interest in all the assets of the partnership for $150,000. The court denied the estate's claim for attorney fees.
The estate appeals, contending the district court erred in concluding Tom agreed to sell his one-half interest in Jensen Ready Mix, including all its assets, for $150,000. The estate argues that if this court concurs that the agreement included the sale of Tom's interest in the partnership's assets, the agreement was unenforceable because it lacked consideration or was an undelivered gift. The estate also contends the agreement would be unenforceable because Terry would have breached the fiduciary duties he owed Tom. Finally, the estate claims the district court erred in failing to award reasonable attorney fees.
II. Scope of Review. We review law actions for corrections of errors of law. Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000). The district court's findings of fact are binding on us if supported by substantial evidence. EnviroGas, L.P. v. Cedar Rapids/Linn County Solid Waste Agency, 641 N.W.2d 776, 780-81 (Iowa 2002). Evidence is substantial for purposes of sustaining a finding of fact when a reasonable mind would accept it as adequate to reach a conclusion. Land O'Lakes, 610 N.W.2d at 522. The evidence is viewed in a light most favorable to the district court's judgment. Van Oort Constr. Co. v. Nuckoll's Concrete Serv., Inc., 599 N.W.2d 684, 689 (Iowa 1999).
III. Existence of an Enforceable Contract. The only required elements of a binding contract are mutual assent to the contractual terms manifested by an offer and acceptance. In re Guardianship Conservatorship of Price, 571 N.W.2d 214, 216 (Iowa Ct.App. 1997). The existence of an oral contract, as well as its terms, are ordinarily questions for the trier of fact. Gallagher, Langlas, Gallagher v. Burco, 587 N.W.2d 615, 617 (Iowa Ct.App. 1998). To prove the existence of an oral contract, the terms must be sufficiently definite for a court to determine with certainty the duties of each party, the conditions relative to performance, and a reasonably certain basis for a remedy. Id. Where a contract appears to exist, courts are reluctant to find it too uncertain to be enforceable. Id. However, when the terms are not definite, courts are reluctant to impose reasonable terms on contracting parties. Id. Moreover, for an oral contract to be found and enforceable, the terms must be so definitely fixed so that nothing remained except to reduce the terms to writing. In re Price, 571 N.W.2d at 216.
A party seeking to enforce any agreement has the burden of proving the terms of the contract. Advance Elevator Co. v. Four State Supply Co., 572 N.W.2d 186, 188 (Iowa Ct.App. 1997). The law is settled that in an action for the specific performance of an oral contract for the conveyance of real estate, the burden of proof is on the plaintiff to prove the existence of the contract by clear, satisfactory and convincing evidence. Anderson v. Armstrong, 264 N.W.2d 619, 622 (Iowa Ct.App. 1978). This does not mean that proof of the contract must be undisputed or to an absolute certainty; reasonable certainty is sufficient. Id. Further, specific performance will not be ordered where there is vagueness, indefiniteness or uncertainty with regard to any of the essential terms of the agreement. Id. at 622-23. Because Terry seeks to enforce the contract, he has the burden of proving its terms.
Terry alleges their agreement for sale of Tom's interest included all cash, accounts receivable, investments, and debts. The estate contends Tom did not give mutual assent to be bound by those terms. It argues the value of the partnership was $729,000, which includes $429,000 in cash and liquid assets. The trial court made no finding as to the value of the business, merely noting the contentions of each side. The estate claims Tom would not have been "tickled" with the purchase price of $150,000 if he had known it included the cash and liquid assets. The estate also notes the parties could not have agreed to the sale of Tom's interest in all current partnership assets because Terry testified to his belief that the $146,196.10 Kemper Fund and the $76,737.72 Commercial Federal accounts were not partnership assets. However, the court, having found the Kemper Fund and Commercial Federal accounts were partnership assets, concluded those assets were to be included in the transaction.
The court noted the value of the current assets of the partnership was $429,000. The court further noted Terry's testimony that the partnership was worth $300,000 as a going concern. However, Terry was already receiving the benefit of the business as a going concern, and the $300,000 figure should arguably not be considered in a sale between two partners.
We conclude substantial evidence supports the district court's finding that Tom agreed to sell his entire interest in Jensen Ready Mix for $150,000. Terry and Jane testified that Tom was informed the sale included the certificates of deposit, as well as bank and investment accounts. Thomas P.C. Jensen testified that in discussing the sale with Tom, he understood that Tom was selling his entire interest. Although the estate argues any such agreement is unenforceable because it lacks consideration, Tom's agreement to sell his interest for less than its full value does not render the agreement unenforceable. Either a benefit to the promisor or detriment to the promisee constitutes consideration. Insurance Agents, Inc. v. Abel, 338 N.W.2d 531, 534 (Iowa Ct.App. 1983). Where such benefit or detriment exists, the court generally will not inquire further into the "adequacy" of the consideration given. Kristerin Dev., Co. v. Granson Inv., 394 N.W.2d 325, 331-32 (Iowa 1986). Having found substantial evidence supports the conclusion adequate consideration exists to support the agreement, we reject the estate's claim the agreement is unenforceable as an undelivered gift.
We likewise reject the estate's argument that the agreement is unenforceable because Terry breached the fiduciary duties he owed Tom. A fiduciary relationship exists between partners. Hum v. Ulrich, 458 N.W.2d 615, 617 (Iowa Ct.App. 1990). The burden of proof normally rests with the partner claiming damages. Id. However, the burden may shift if, under the facts presented, a fiduciary is shown to be in a position to take advantage over the principal, or appears to have closer access to the facts. Id. Although Tom no longer performed work for the business, he and Terry were equal partners. While Tom never requested a balance sheet or any other financial information regarding the partnership, he continued to have access to all financial information for Jensen Ready Mix. We conclude the evidence does not reveal Terry had closer access to the facts or was in a position to take advantage of Tom. There is substantial evidence to support the trial court's conclusion the estate failed its burden to prove Terry breached a fiduciary duty owed to Tom.
Finally, we address the estate's contentions regarding the district court's conclusion that the Kemper Fund and Commercial Federal accounts were partnership assets. Although Terry testified these accounts were held by he and Tom as joint tenants, the estate argued they should be considered partnership assets. The trial court found the evidence of ownership to be "confused and less than convincing on the point of the right of survivorship claim." Even though the instruments were denominated as owned by the brothers as joint tenants, they were listed on partnership tax returns. The estate contends if Terry did not intend to include these assets in the sale, there is no reason to believe Tom intended to include them. The estate then asserts this uncertainty makes it unclear what the parties intended to include in the sale, and therefore there was no contract.
Had Terry intended the accounts to be excluded from the sale, and Tom had intended they be included, a unilateral mistake would have occurred. Aunilateral mistake by one party will not release that party from its obligation under the contract absent fraud, misrepresentation, or other misconduct. State v. Unisys Corp., 637 N.W.2d 142, 150 (Iowa 2001). The trial court clearly concluded the brothers, after years of partnership and unusual circumstances due to Tom's health, made an agreement. Their father confirmed the existence of the agreement. As there is no evidence of fraud, misrepresentation, or misconduct here, any unilateral mistake will not release the parties from the contract.
Because substantial evidence supports the district court's conclusion the parties entered into an enforceable contract for the sale of Tom's interest in all the assets of Jensen Ready Mix, we affirm.
IV. Attorney Fees. Iowa Code section 486A.701(9) (1999) allows an award of reasonable attorney fees against a party that acted arbitrarily, vexatiously, or not in good faith. Because the evidence does not show Terry acted arbitrarily, vexatiously, or not in good faith, we conclude the district court did not err in denying the estate's request for attorney fees.