Opinion ID: 1658367
Heading Depth: 1
Heading Rank: 3

Heading: The Effect of the Stevens, Fike, and Greene Reconveyances to Currys.

Text: The assignee defendants Stevens, Fike, and Greene attempted to reconvey to Currys by quitclaim deeds their indivisible one-sixth interests in the farm after they obtained an extension of time for making the 1984 contract payments, but before the foreclosure action was commenced by the plaintiffs. They contend that their reconveyances discharged any duty they otherwise owed to the plaintiffs as third party beneficiaries under the joint venture contract and acceptance of assignment. The parties have briefed at considerable length the question whether Illinois or Iowa law applies to this attempted modification of the assignee defendants' obligations to the plaintiffs as third party beneficiaries. We need not resolve that conflict of law issue. Assuming without deciding that Iowa law applies, as the assignee defendants contend, we conclude that their obligations to perform the Bridgman-Curry contract were not discharged by their reconveyances. Iowa cases allow promisors to modify or terminate their obligations to third party beneficiaries only if the contract is modified or terminated before the beneficiary has acquired rights in it. Iowa Home Mutual Casualty Co. v. Farmers Mutual Hail Insurance Co., 247 Iowa 183, 188, 73 N.W.2d 22, 25 (1955); see Winchester v. Sipp, 252 Iowa 156, 161, 106 N.W.2d 55, 58 (1960). This principle is consistent with the black-letter rule of the Restatement (Second) of Contracts, section 311 (1981), which provides that the promisor and promisee retain power to discharge or modify the duty by subsequent agreement unless and until the beneficiary, without notice of the discharge or modification, materially changes his position in justifiable reliance on the promise or brings suit on it or manifests assent to it at the request of the promisor or the promisee. Id. at § 311(2), (3). This Restatement rule has been adopted by a majority of jurisdictions, and we consider it sound. See 17 Am.Jur.2d Contracts § 317 (1964); 17A C.J.S. Contracts § 373 (1963). Applying these principles in this case, we conclude that the plaintiffs had acquired rights as third party beneficiaries under the joint venture contract and assignment of the Bridgman-Curry contract before the defendant assignees Stevens, Fike and Greene quitclaimed their interests back to Currys in their belated attempt to avoid further obligations to plaintiffs. Before those assignee defendants in late April of 1984 attempted reconveyance to Currys, the plaintiffs had manifested assent to the joint venturers' contract and acted to some extent in reliance on it. In 1983 they had accepted from the joint venturers a check drawn on their bank accountentitled Curry-Stevens-Fike-Greene-Biboin payment of the principal and interest due that year. Before the attempted reconveyances, the plaintiffs also demonstrated justifiable reliance on the joint venturers' promises to pay by granting Currys an extension of time to make the payments due in March of 1984, agreeing to the extension when Curry said, We'll get you the money. Whether or not that reliance alone would have been sufficient to terminate the defendant assignees' power to modify their duties to plaintiffs, the plaintiffs acquired rights in the joint venture contract by their manifestation of assent to the joint venture agreement. We recognize, as does the Restatement, that manifestation of assent should be sufficient without a separate showing of change of position or reliance because the third party beneficiary, here the plaintiffs, may rely in ways difficult or impossible to prove. Restatement (Second) of Contracts § 311 comment h (1981). It is noteworthy that the three assignee defendants who attempted to quitclaim their interests in the farm back to Currys apparently did not comply with the provisions of the joint venture contract requiring that they give the remaining joint venturer Bibo an opportunity to purchase their interest. We have found, however, that their attempt to avoid liability was unsuccessful because plaintiffs had already acquired rights as third party beneficiaries. Consequently, that failure to comply with the terms of the joint venture contract is not controlling in our disposition of this issue. We conclude that the Stevens, Fike, and Greene reconveyances to Currys did not affect their obligations to perform the Bridgman-Curry contract in accordance with the terms of the joint venture agreement and acceptance of assignment.