Opinion ID: 2093775
Heading Depth: 1
Heading Rank: 3

Heading: Did the Bertrams Make a Bona Fide Offer?

Text: As an alternative argument, Corey Development urges that the Bertrams' offer was not bona fide. As support for this contention, it strongly relies on this court's decision in Imperial Refineries, 254 Iowa at 944, 119 N.W.2d at 878. That case, like the present case, involved an agreement granting one of the parties a right of first refusal with respect to third-party offers. In Imperial Refineries this court found that a priest's offer to purchase property from his mother was not a bona fide offer. We did not question the priest's motives or good intentions and accepted the contention that he would have made every effort to carry out the contract because he considered his purchase of the property a benefit to his mother and himself. However, given the facts and circumstances under which the offer was made, including the facts that the offer was for $60,000, the priest's salary was $1000 per year, and he had no appreciable assets, we concluded that the offer was not bona fide. Id. at 943-44, 119 N.W.2d at 878. Our decision in Imperial Refineries relied heavily on the case of Shell Oil Co. v. Kapler, 235 Minn. 292, 50 N.W.2d 707 (1951). In that case, the jury had found that a third-party offer to purchase which was subject to a right of first refusal was not bona fide due to the offeror's financial inability to meet the terms of his offer. On posttrial motions, the trial court approved the jury's finding on that issue but granted a new trial based on evidentiary rulings. On appeal the Minnesota Supreme Court concluded that the evidentiary rulings did not warrant the granting of a new trial and upheld the jury's finding that the offer was not bona fide. Kapler, 50 N.W.2d at 713. In so doing, the court made two seemingly inconsistent pronouncements. The opinion initially states: Rules for testing a purchaser's financial ability to buy are not to be reduced to any unyielding formula, but must be flexible enough to accomplish their purpose according to the particular facts of each case. In ascertaining the rules reflected by an endless variety of cases, it is particularly important to bear in mind that no decision is authoritative beyond the scope of its controlling facts. Id. at 712. In an apparent contradiction of that conclusion, the opinion later purports to lay down rigid bright line criteria for determining when a purchaser is financially able to buy. These suggested criteria are: Generally speaking, a purchaser is financially ready and able to buy: (1) If he has the needed cash in hand or (2) if he is personally possessed of assets which in part may consist of the property to be purchasedand a credit rating which enables him with reasonable certainty to command the requisite funds at the required time, or (3) if he has definitely arranged to raise the necessary moneyor as much thereof as he is unable to supply personallyby obtaining a binding commitment for a loan to him for that purpose by a financially able third party, irrespective of whether such loan be secured in part by the property to be purchased. Id. In choosing between the flexible approach to determining financial responsibility that was initially advanced in the opinion of the Minnesota court and the rigid criteria that it later espoused, we favor the former approach. Cases cited by the Minnesota court in support of its more structured rules for determining financial responsibility involve issues concerning a broker's entitlement to a commission after having secured an offeror for the property to whom the seller refused to sell based on a perceived lack of financing. The rules in those cases are designed to protect the seller's right to obtain reasonable assurance that a buyer tendered by a broker will be able to perform. Different considerations are involved in determining the bona fide nature of a third-party offer that gives rise to a contractual right of first refusal. Unless such an offer is shown to be collusive, some deference should be given the seller's desire to take advantage of a favorable proposal. In dealing with that type of transaction, proof of the bona fide nature of the offer in the face of a challenge by the holder of a right of first refusal may, we believe, be less exacting than in the broker commission cases. The existence of a legally binding commitment by a lender should not always be a condition for upholding the bona fides of such a transaction. Rather, an objective determination of the bona fides of the proposed offer should be made based on the decision that a reasonable offeree might make, given the circumstances of the proposed transaction. At the trial of the present case, evidence was presented that would allow the district court to find, as it did, that Steven Bertram had a legitimate business interest in acquiring this property. Although Steven and his wife lacked the financial means to personally complete the transaction with Eunice Lewis or her successors, they had a year to come up with the money. Steven testified that adjacent property had recently sold for $34,000 an acre. We believe that Corey Development's prompt action in matching the Bertrams' $30,000 per acre offer provides confirmation of the value of the property. Steven indicated that it was his intent to sell off part of the property to obtain a portion of the required payment and that his father had committed to backing him for the balance. Eunice Lewis testified that Steven Bertram's father, who the record indicates owned assets in excess of $1,300,000, had assured her that he was committed to bankrolling that portion of the purchase price that Steven was unable to raise through selling off a portion of the subject property. Steven's father testified he had spoken with a banker about the matter and was advised that the bank would be interested in helping him when he presented a specific proposal. Eunice Lewis testified that she had confirmed the willingness of the father's bank to assist in financing the transaction. After considering the evidence, we are convinced that the bona fides of the Bertrams' offer was an issue of fact to be resolved by the district court. That court's finding on the issue has the effect of a jury verdict. Iowa R.App.P. 14(f)(1). We have considered all issues presented and conclude that the judgment of the district court should be affirmed. AFFIRMED.