Opinion ID: 1663637
Heading Depth: 1
Heading Rank: 1

Heading: pfabs' appeal

Text: I. Pfabs' waiver of rescission. The trial court found that Leibold's employee McIntyre had made four inaccurate statements to Pfabs before they offered to purchase the farm. The court found that two of the inaccuracies, including the matter of soil type, were not material. The court found that the other two inaccuracies, relating to productivity and the amount of tile on the farm, were material but that Pfabs waived any right to rescind the contract because they continued to treat the contract as a subsisting obligation after learning the truth. Moreover, the court found the conditions on the farm complained about in February did not establish a new ground for rescission. Pfabs contend the trial court was wrong. They support this contention by two arguments. They maintain waiver could not be based on reissuance of the advance money check because the new check was written only after Leibold's agent McIntyre persuaded them that the information they obtained in their independent investigation was incorrect. They also argue that waiver could not be based on their receiving additional consideration through Gordons' agreement to allow them to forego principal payments in any year of more than 50 percent crop failure because they deny that any such agreement was proven, relying on trial testimony by Clifford Pfab that he could not recall such agreement being reached and that he never saw the agreement in written form. These arguments depend on existence of facts contrary to those found by the trial court. The court found that Pfabs' reaffirmance was not the result of further misrepresentations by the Gordons or Leibold as claimed by the Pfabs. Also, the court found agreement was reached regarding waiver of principal payments as alleged by Gordons. Several established principles fix the scope of our review of these findings by the trial court. We listed them in Farmers Insurance Group. v. Merryweather, 214 N.W.2d 184, 186 (Iowa 1974), as follows: Since this is a law action our review is not de novo but only on errors assigned; trial court's findings of fact are equivalent to the special verdict of a jury; if supported by substantial evidence they will not be disturbed; we view the evidence in its light most favorable to the judgment, whether contradicted or not; the findings of the trial court are to be broadly and liberally construed, rather than narrowly or technically, and in case of ambiguity, they will be construed to uphold, rather than defeat, the judgment. Applying those principles to the record, we hold that the trial court's findings of fact are supported by substantial evidence and therefore may not be disturbed. Although Clifford Pfab testified he relied on false reassurances by McIntyre in reissuing the check for the advance payment, the trial court was not required to credit this assertion. Pfab also testified he went to Ralph Gordon immediately after the discussion with McIntyre to seek agreement regarding waiver of principal payments in the event of crop failure. This conduct supports a reasonable inference that Pfab was not persuaded by McIntyre that the information he had obtained in his own investigation was false. The court's finding that the parties made the agreement regarding waiver of principal payments is similarly supported. Although Clifford Pfab denied on direct examination any recollection of agreement having been reached, he admitted on cross-examination that something like that or close [to it] had been agreed on. McIntyre testified Pfab later told him the agreement had been made. In this state of the record, it is not essential to determine whether the agreement was ever executed in writing. It is Clifford Pfab's conduct in obtaining the agreement which the trial court found manifested affirmation of the purchase contract, and this finding was not dependent on proof the agreement was reduced to a signed writing. Because the trial court's finding that Pfabs waived their right to rescind the purchase contract is supported by substantial evidence, we are precluded from interfering with it. We find no merit in Pfabs' first assignment of error. II. Failure to find mutual rescission. Pfabs contend the trial court erred in failing to find the parties mutually rescinded the contract. This contention rests on the undisputed fact that Gordons rented the land after they learned Pfabs would not buy it. We are unable to find evidence which would compel the trial court to find mutual rescission as a matter of law. When a purchaser breaches a land contract, the vendor has three alternative remedies. He may rescind, or he may tender compliance with the contract and bring an action for specific performance, or he may retain the land and bring an action for damages for loss of the bargain. Prichard v. Mulhall, 127 Iowa 545, 103 N.W. 774 (1905); 8A Thompson on Real Property § 4476 at 435-436 (1963). Here, the trial court found Gordons elected to keep the land and bring an action against Pfabs for loss of their bargain. Their rental of the land to another was entirely consistent with that course of action. We find no merit in Pfabs' contrary contention. III. Enforceability of the contract. Pfabs allege the trial court should have held the contract unenforceable because of Gordons' failure to follow the forfeiture procedures in Code chapter 656. This allegation is based on a mistaken view that the damages provided for in the contract would be recoverable only through forfeiture of their advance payment. The contract contained the following provision regarding damages: If the purchaser fails to fulfill his part of this agreement, he shall pay the Seller a sum equal to any expense incurred by the Seller as liquidated damages. The advance payment named herein shall be forfeited and the same shall be divided equally between the Seller and his agent to apply on his fee, (however not to exceed standard commission percentage). The first sentence of this provision authorizes an award of liquidated damages based on Gordons' expenses. Such an award does not involve forfeiture. This provision was utilized in the present case. The court found Gordons' damages and, after having done so, ordered the advance payment applied to pay them. This was done under the principle that if the amount of a vendor's damages exceeds the advance payments made by the purchaser, the vendor may have such advance payments applied upon the damages, and this extinguishes the right of the purchaser to recover them. Waters v. Pearson, 163 Iowa 391, 399, 144 N.W. 1026, 1030 (1914). We find no merit in Pfabs' assertion that no damages are recoverable under the contract except through forfeiture. IV. The measure of damages. Pfabs contend that the trial court applied an incorrect measure of damages. They point out that the true measure of damages for breach of a land purchase contract is the difference between the fair market value of the land at the time of the breach and the contract price. See Prichard v. Mulhall, supra, 127 Iowa at 550, 103 N.W. at 776. Here the trial court found $9625.50, the amount of the real estate commission incurred by Gordons, constituted foreseeable damages flowing from the breach as well as the amount contemplated by the liquidated damages clause of the contract. Pfabs are correct in saying the measure of Gordons' general damages would be the difference between the farm's market value at the date of breach and the contract price. However, this does not help their position. At trial, Gordons contended the property was worth at least the contract price. Pfabs contended they had a right to rescind because the quality of the land was misrepresented to them. Presumably this would make the land worth less than the contract price. They offered evidence tending to show an increase in market value of the land subsequent to the breach of contract, but this evidence did not establish its value at the time of breach. The trial court did not award Gordons any general damages, and Pfabs did not offer any evidence to establish that the market value of the land at the time of breach exceeded the contract price. Pfabs cannot complain of the court's failure to award Gordons more damages, as the court should have done if the contract price exceeded the market value at the time of breach. And they cannot complain of the court's failure to find the market value exceeded the contract price at the time of the breach when no evidence supported such a finding. Moreover, the record does not support Pfabs' present allegation that they were prevented by the trial court from offering such evidence. Pfabs now also contend the expense reimbursement provision of the liquidated damages clause constitutes a penalty. Assuming, without deciding, that they adequately pleaded this contention in the trial court, they offered no evidence to support it. A party who contends that a liquidation clause is in reality a penalty has the burden to plead that fact and prove the actual damages in the trial court. Korshoj v. Mills, 156 F.Supp. 138, 139 (S.D.Iowa 1957); Heaberlin v. Heaberlin, 255 Iowa 403, 409, 122 N.W.2d 841, 844 (1963); Pace v. Zellmer, 194 Iowa 516, 518, 86 N.W. 420, 421 (1922). Having failed in this burden, Pfabs may not complain now. We hold that the trial court did not err in finding the real estate commission was a compensable expense under the liquidated damages clause in the contract. We do not decide whether this expense would be an item of foreseeable damages which could be recovered in the absence of such a contractual provision. We have not previously faced that issue, and the authorities are divided on it. Compare Barton v. White Oak Realty, Inc., 271 Cal.App.2d 579, 76 Cal.Rptr. 587 (1969), Smith v. Knight, 75 Ga.App. 178, 42 S.E.2d 570 (1947), Trustees of First Presby. Ch. v. Howard Co.Jewelers, 19 N.J.Super. 168, 173-174, 88 A.2d 33, 36 (1952), and Stephenson v. Butts, 187 Pa. Super. 55, 142 A.2d 319 (1958), all allowing commission recovery in varying circumstances, with Manning v. Pounds, 2 Conn. Cir. 344, 199 A.2d 188 (1963), Downing v. H. G. Smithy Co., 125 A.2d 272 (D.C.C.A.1956), Mutual Employees Trademark v. Silverman, 202 So.2d 826, 827 (Fla.App.1967), Linde v. Ellis, 224 Ky. 649, 6 S.W.2d 1089 (1928), Cacavas v. Zack, 43 Mich.App. 222, 203 N.W.2d 913 (1972), Wilhelm Lubrication Co. v. Brattrud, 197 Minn. 626, 268 N.W. 634 (1936), and Ellingsworth v. Shannon, 161 Or. 106, 88 P.2d 293 (1939), all denying recovery. The weight of authority holds that the broker's commission is not an item of damages recoverable from a defaulting purchaser. See 5 Corbin on Contracts § 1034 (1964); Annot., 12 A.L.R.2d 1316 (1951); 92 C.J.S. Vendor & Purchaser § 537c(1). We find no merit in Pfabs' appeal.