Opinion
No. 1-624 / 00-1302.
Filed February 6, 2002.
Appeal from the Iowa District Court for Pocahontas County, JOEL E. SWANSON, Judge.
The plaintiffs, real estate contract vendors, appeal from the district court's declaratory judgment ruling awarding proceeds of a casualty insurance policy to the defendant, a contract vendor. AFFIRMED.
Willis J. Hamilton of Hamilton Law Firm, P.C., Storm Lake, for appellants.
William M. Alexander, Laurens, for appellee.
Considered by HAYDEN, PETERSON, and HARRIS, Senior Judges.
Senior Judges assigned by order pursuant to Iowa Code section 602.9206 (2001).
This is a dispute between a vendor and purchaser of business property in Laurens, Iowa. It concerns casualty insurance proceeds for a building destroyed by fire. The question is whether the vendor can demand the proceeds be applied to the purchase obligation, or whether the purchaser can apply them to replace the building destroyed in the fire. This appeal by the purchasers is from a trial court holding favoring the vendor. We affirm.
Defendant Michael W. Anderson, for about ten years, conducted a restaurant business on property he owned. In 1998 he sold the property, including personal property related to the business, for $35,000, with $3500 down, the balance payable at $400 per month, including interest. With Anderson's approval, the purchaser assigned the vendee's interest to the plaintiffs, Michael and Kathy Michehl.
Paragraph six of the real estate contract required the buyers to maintain casualty insurance, in an amount not less than the unpaid purchase price. It provided:
Sellers' interest shall be protected in accordance with a standard or union-type payable clause. BUYERS SHALL PROPERLY DEPOSIT SUCH POLICY WITH PROPERTY RIDERS WITH SELLERS for the further security for the payment of the sums herein mentioned. In the event of any such casualty loss, the insurance proceeds may be used under the supervision of the Sellers to replace or repair the loss if the proceeds be adequate, if not, then some other reasonable application of such funds shall be made, but in any event such proceeds shall stand as security for the payment of the obligations herein.
Fire seriously damaged the property in 1999, and $32,000 insurance proceeds were placed in escrow when the parties could not agree on how they were to be used. The Michehls then filed this declaratory judgment action, seeking to replace the restaurant with an L-shaped building, to be used as an arcade and lounge, with no food services. Plaintiff Michael Michehls, an experienced contractor, believes, with his own labor and that of his family and friends, he could construct the new, larger building with the insurance proceeds. The vendor believes he cannot.
Although the plaintiffs contend otherwise, we do not read paragraph six to give them the right to direct the application of the insurance proceeds. It emphasizes that the first priority is to protect the seller when it concludes "in any event such proceeds shall stand as security for the payment of the (purchaser's) obligations." There is a provision that the proceeds "may be used under the supervision of the sellers to replace or repair the loss," but it does not vest the purchaser with authority to make such a call. Relying on Kintzel v. Wheatland Mut. Ins. Ass'n, 203 N.W.2d 799 (Iowa 1973) and Gilberson v. First Fed. Sav. Loan Ass'n of Waterloo, 329 N.W.2d 9 (Iowa 1983), the trial court correctly held it was Anderson's call.
In these circumstances, the law favors protecting a vendor's security over a vendee's financial interest. 46A C.J.S. Insurance § 1395 at 267 (1993). The rule is consistent with countless others intended to foster buying and selling of property. To overcome the preference for vendor's call in the matter, any agreement must contain language yielding the call from the vendor to the vendee.
The plaintiffs consider Anderson's call to be unfair and unreasonable. They insist the "unrefuted facts" show that Anderson's interests would be better protected with the new structure than with the former one. The plaintiffs read too much into the word "unrefuted". Even where evidence is uncontroverted (though it was here) it does not establish a fact for one bearing the burden of proof. Nadler v. City of Mason City, 387 N.W.2d 587, 591 (Iowa 1986). A vendor's call in the matter is not subject to some objective test for its fairness, or even its unreasonableness. It may well be that a vendor's arbitrariness or unreasonableness might reach a point where it could become subject to challenge. If so, such a point is certainly not reached here. Anderson is being asked to accept a changed building, appropriate for a different type of business, at a cost that would factor contributed labor. The trial court was correct in declining to order Anderson to accept such a change in the nature of his security.
AFFIRMED.