Court Opinion

ID: 4250309
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:24:36.524119+00
Date Added: 2024-06-11T14:17:02.476782
License: Public Domain

IN THE SUPREME COURT OF IOWA
                              No. 27 / 04-0874

                           Filed April 14, 2006

DORIS N. PASSEHL ESTATE,
David Passehl and Karen
Zander, Co-Executors,

      Appellee,

vs.

JERRY W. PASSEHL and
VOLNETTA PASSEHL,

      Appellants.
________________________________________________________________________
      On review from the Iowa Court of Appeals.

      Appeal from the Iowa District Court for Franklin County, John S.

Mackey, Judge.

      Appellants seek further review from the court of appeals’ decision

affirming the trial court’s decision interpreting and enforcing a settlement

agreement. DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT      JUDGMENT           REVERSED      AND      REMANDED        WITH

INSTRUCTIONS.

      G. A. Cady III of Cady & Cady, Hampton, for appellants.

      John J. Haney of Hinshaw, Danielson, Kloberdanz & Haney, P.C.,

Marshalltown, for appellee.
                                            2

STREIT, Justice.

         As the cynic Ambrose Bierce once said, “Death is not the end.

There remains the litigation over the estate.” 1               Jerry and Volnetta

Passehl claim the district court erred by enforcing a penalty provision in

their settlement agreement with the Doris N. Passehl Estate (hereinafter

“the Estate”).       They now seek further review of the court of appeals’

decision affirming the district court’s ruling. Because we find the terms

of the penalty provision were not met, we vacate the decision of the court

of appeals and reverse and remand to the district court with instructions.

         I. Facts and Prior Proceedings

         Jerry, Karen, and David are the children of Doris N. Passehl. Doris

died in 1997. At the time of her death, Doris owned approximately 160

acres of farmland in Franklin County.                Jerry Passehl and his wife,

Volnetta (hereinafter “Passehls”), have, for the past fifteen years,

occupied a five-acre portion of this land and operated an auto salvage

business thereon. The portion of land occupied by Passehls was covered

with vehicles and, for the most part, surrounded by a fence. The fence

was erected in 1990 after the Franklin County Zoning Board of

Adjustment approved the use of the land as a dismantling and recycling
center on the condition that a six-foot-high enclosure fence surround the

premises. Two grain bins were also located within the fenced area. The

other 155 tillable acres were, and still are, leased to a third party. The

lease provides that the third party can use the two grain bins located on

the land occupied by Passehls.

         Karen and David serve as co-executors of the Estate. After Doris’s

death, family disputes over Passehls’ operation of the salvage business

         1Ambrose   Bierce, The Collected Works of Ambrose Bierce 865 (Neale Publ’g Co.
1911).
                                             3

resulted in two separate lawsuits. In one lawsuit, the Estate filed suit

against Passehls for breach of contract, conversion, and nonpayment of

rent. In another lawsuit, the Estate filed an ejectment action to remove

Passehls from the land.           In an effort to resolve their differences, the

parties agreed to settle these lawsuits through a written settlement

agreement.        The settlement agreement, signed October 17, 2002,

provides:

       2.   [Passehls] agree to return to Karen Zander and David
       Passehl the motorized Shriner’s car and the cornsheller.
               ....

       4.    [The Estate] agrees to sell to [Passehls] and [Passehls]
       agree to buy from [the Estate] . . . [a]n approximate five acre
       tract . . . [t]he legal description [of such land] shall be
       established by survey which shall coincide with existing
       fence boundaries required by Franklin County Zoning
       Ordinances.

             [Passehls] agree to deposit into the Brian D. Miller
       Trust Account[ 2 ] Twenty Thousand Dollars ($20,000.00) on
       or before October 18, 2002. The purchase price for the
       above described real estate shall be Fifty Thousand Dollars
       ($50,000.00). Closing shall be held on or before March 1,
       2003. The parties agree that the $20,000.00 deposited into
       the Brian D. Miller Trust Account shall be applied toward the
       purchase price at time of closing.

              In the event that [the Estate] provides marketable title
       to the subject real estate, but closing does not occur on or
       before March 1, 2003, as a result of nonperformance by
       [Passehls], then the parties agree that the $20,000.00
       deposited into the Brian D. Miller Trust Account shall be
       forfeited to [the Estate].

               ... .

             The parties agree that Karen Zander and David
       Passehl shall have an easement for access to the grain bins
       located on the Passehl property but owned by Karen Zander
       and David Passehl for the purpose of loading and unloading
       grain. The parties acknowledge that Karen Zander and David

        2Brian D. Miller is the attorney for the Estate. The trust account is his client

trust account.
                                         4
       Passehl shall be entitled to any and all income from said
       bins. The [Estate] shall have the right to make repairs to the
       bins as necessary.
(Emphasis     added.)      The    district   court   approved     the   settlement

agreement. Both lawsuits, along with an unrelated pending appeal by

Passehls, were dismissed with prejudice. On the same day, the parties

signed an Iowa State Bar Association real estate contract form for the

land described in the settlement agreement. At the time the agreement

and contract were drafted, neither party had a precise legal description of

this land. In both the settlement agreement and the real estate contract,

the land was described as the following:

       The acreage locally known as 513 160th St., Latimer, Iowa
       and described as: An approximate five acre tract located in
       the Northwest Quarter (NW1/4) of section 26, Township 92
       North, Range 22 West of the 5th P.M., Franklin County,
       Iowa. The legal description shall be determined by survey,
       which shall coincede [sic] with existing fence boundaries
       required by Franklin County Zoning.

The real estate contract also stated the purchase price for the real estate:

              1. PRICE. The total purchase price for the Real Estate
       is . . . ($50,000.00) of which . . . ($20,000) has been paid.
       Buyers shall pay the balance to Sellers at Hampton, Iowa or
       as directed by Sellers, as follows: Said down payment of
       $20,000.00 shall be deposited in the Brian D. Miller Trust
       account before October, 18, 2002. Closing shall be on or
       before March 1, 2003. In the event the [Estate] provide[s]
       marketable title to the subject real estate, but as a result of
       nonperformance by [Passehls], the sale does not close then
       the parties agree that the $20,000.00 deposited in the Brian
       D. Miller Trust Account shall be forfeited to the [Estate].

The real estate contract set March 1, 2003, as the closing date. 3

       A subsequent survey determined the fence did not “line-up” with

the boundaries set forth by the zoning ordinance. The land zoned for the

salvage business was approximately 22,457 square feet less than the

        3Both parties later agreed to postpone the scheduled March 1 closing due to a

family emergency with one of the attorneys.
                                            5

land demarcated by the fence. The boundary line described in the zoning

ordinance cut through an existing garage, horse barn, and driveway,

while the fence boundary did not. 4             After the survey, a disagreement

developed between Passehls and the Estate as to whether the fence or

the zoning ordinance boundary controlled the property to be conveyed.

       On March 19, 2003, the Estate’s attorney sent Passehls a letter

with the following requirements for the real estate closing:

       1. The motorized Shriner’s car and corn sheller needs to be
       delivered by Jerry and Volnetta to Karen’s residence, prior to
       the real estate closing.

       2. Karen reports that the east bin cannot be accessed
       because of junk and junk vehicles stored around it. The
       junk and junk vehicles need to be cleared from the bins.

       3. The horse pasture fence needs to be removed. Karen and
       David would like to know if Jerry and Volnetta plan to
       remove the fence and if so, the date by which they can
       expect the fence to be removed.

       4. The junk vehicles located outside the fence and on the
       tillable farm ground need to be removed. Karen and David
       would like to know if Jerry and Volnetta plan to move these
       junk vehicles and if so, the date by which they can expect
       them to be moved.

       5. As we have already mentioned by letter, the junkyard
       fence is not properly located per the Franklin County Zoning
       Variance. Karen and David want to know if Jerry and
       Volnetta plan to move the fence to the legal description
       consistent with the County Zoning Variances and if so, when
       that work will be completed by.

       On March 24, 2003, the parties met to close the sale. Passehls

brought a check for $30,000, but the Shriner’s car and cornsheller had

       4The  land zoned for heavy industry, rather than for agricultural use, is described
as the following:

       a tract of land beginning at the Northwest corner of Section 26, Township
       92 North, Range 22 West of the 5th P.M., thence 370.0 feet to the point
       of beginning; thence S 500 feet; thence East 500 feet; thence West 500
       feet to the point of beginning.
                                            6

not yet been delivered to Karen and David. 5 The attorney for the Estate

brought a deed, but the deed only conveyed the lesser amount of land

defined by the zoning ordinance.             An argument erupted between the

parties.   Karen, as co-executor of the Estate, stated Passehls had not

performed because the Shriner’s car and cornsheller had not been

delivered, there were still vehicles surrounding one of the grain bins, and

there were still vehicles outside of the fenced area. Jerry also objected

because the property described in the deed did not match the property

the parties had agreed upon.             The discussions deteriorated, and the

parties did not close the transaction.

      On March 26, the Estate sent a letter to Passehls assigning April 1

as the new closing date. The letter declared “this will be the last time

this real estate closing will be rescheduled . . . Karen and David are not

willing to extend this matter further.” The letter also reiterated the “five

specific items that Jerry and Volnetta needed to take care of prior to the

closing.” The letter also stated the following:

      if the real estate closing cannot take place on April 1st, at
      the scheduled time, as a result of their non-compliance with
      the settlement agreement, my letter dated March 19, 2003,
      and this letter, the $20,000.00 currently being held in my
      Trust Account [will be] forfeited by Jerry and Volnetta.

      On April 1, Passehls’ attorney came to the closing with a check for

$30,000. The Shriner’s car and cornsheller had already been delivered to

Karen and David; however, vehicles still surrounded one of the grain

bins, and some junk vehicles still remained outside of the fenced-in area.

The Estate came to the closing with a deed that did not conform to the

existing fence boundaries. As before, Karen contended the terms of the

      5The   Shriner’s car and cornsheller were delivered later that day or the next day.
                                     7

contract were not fulfilled, and Jerry disputed the correct legal

description of the property. Once again, the closing did not occur.

      Days later, the Estate’s attorney took the $20,000 out of his client

trust account and paid it to Karen and David.

      Passehls filed a motion to enforce the terms of the settlement

agreement.   The Estate filed a cross motion to enforce the settlement

agreement. The Estate’s requested relief included all of the following:

            A. That the $20,000.00 placed in the Brian D. Miller
      Trust Account on or before October 18, 2002, is forfeited
      based upon [Passehls] failing to close the real estate
      transaction on or before March 1, 2003;

            B. That the Court declare the survey conducted on
      December 6, 2002, establishing the fence boundary required
      by Franklin County Zoning Ordinance to be the legal
      description of the property subject to the Settlement
      Agreement and transaction with [Passehls];

            C. That [Passehls] be forced to comply with the
      Settlement Agreement, consistent with the previous two
      Declaratory Judgment requests, by paying $50,000.00 to
      [the Estate] for the purchase of the real estate;

            D. That pursuant to Rule 1.1501 of the Iowa Rules of
      Civil Procedure, an injunction issue prohibiting [Passehls]
      from placing anything within 20 yards of the bins, thereby
      preventing [Passehls] from interfering with [the Estate’s]
      access easement.

            E. That [Passehls] be enjoined from placing property
      of any kind outside of the boundary required by Franklin
      County Zoning Ordinances;

             F. That [Passehls] be required to indemnify and hold
      harmless the [Estate] from any civil or criminal proceeding
      relating to [Passehls] operation of a junkyard.

      After a bench trial, the trial court concluded the parties’ intent was

clear at the time the settlement agreement and real estate contract were

signed—the fence was to remain, and the survey and conveyance would

coincide with the fence.   The court then concluded the $20,000 down
                                     8

payment was forfeited because Passehls “failed to perform by not only

providing access to the grain bins but also by failing to remove junk cars

from outside the fence boundary, an agreed upon contingency required

prior to closing.” The court then ordered the Estate to execute a deed

and convey the property within the fenced boundary once Passehls: paid

an additional $50,000 to the Estate, moved all junk vehicles away from

the grain bins, removed an unrelated horse fence, and removed the junk

vehicles that were still outside the fenced-in area.       The court also

enjoined Passehls from placing anything within twenty yards of the grain

bins and from placing anything else outside the existing fence boundary.

Passehls appealed.

      The court of appeals affirmed the decision of the trial court, and we

granted Passehls’ application for further review.

      II. Scope of Review

      The parties dispute the scope of review.      The Estate claims our

review is for correction of errors at law because the case was filed at law.

See Iowa R. App. P. 6.4. Passehls contend our review is de novo because

the original motion to enforce judgment and the Estate’s corresponding

motion were both tried in equity. See id.
      The original basis of this action, the settlement agreement,

pertained to two cases, both of which were filed at law, and both of which

were filed by the Estate. The settlement agreement ultimately led to the

dismissal of the two underlying cases.      Rather than file the present

agreement under a new case number, Passehls filed the present motion

under the case numbers of the dismissed cases. The fact that these two

underlying actions were brought by the Estate as actions at law does not

control our review of the present case. Passehls’ motion to enforce the

settlement agreement is separate from the causes of action in the cases
                                    9

underlying the settlement agreement. We therefore focus our attention

on the nature of Passehls’ motion and the Estate’s subsequent motion.

      Passehls’ motion did not seek monetary damages; instead,

Passehls asked the court to order the Estate to execute a court officer’s

deed. Similarly, the Estate’s motion did not seek monetary damages; the

Estate asked the court to force Passehls to comply with the settlement

agreement, to declare the land conveyed in the settlement agreement to

be that which coincided with the zoning ordinance, and to declare that

Passehls’ $20,000 down payment was forfeited due to nonperformance.

The Estate’s motion also asked the court to enjoin Passehls from placing

anything within twenty yards of the grain bins, to enjoin Passehls from

placing any property of any kind outside of the zoning boundary, and to

indemnify and hold harmless the Estate from any civil or criminal

proceeding relating to the operation of the junkyard.

      Both parties have asked the court to force the other party to fulfill

its obligations according to the precise terms in the settlement

agreement. This is a form of specific performance. Specific performance

is a form of equitable relief. See Levis v. Hammond, 251 Iowa 567, 576,

100 N.W.2d 638, 644 (1960).       Similarly, the Estate’s request for an
injunction is a request for equitable relief. Myers v. Caple, 258 N.W.2d
301, 304-05 (Iowa 1977).

      It is less clear whether the Estate’s numerous requests for

declaratory judgment were actions at law or in equity.      Our review of

actions for declaratory judgment depends upon how the action was tried

to the district court.   Owens v. Brownlie, 610 N.W.2d 860, 865 (Iowa

2000).   To determine the proper standard of review, we consider the

“pleadings, relief sought, and nature of the case [to] determine whether a

declaratory judgment action is legal or equitable.” Nelson v. Agro Globe
                                           10

Eng’g, Inc., 578 N.W.2d 659, 661 (Iowa 1998). We also consider “whether

the court ruled on evidentiary objections” as an important, although not

dispositive, test of whether the case was tried in law or equity. See Sille

v. Shaffer, 297 N.W.2d 379, 380-81 (Iowa 1980)

       Both parties’ motions impliedly ask the court to use its equitable

powers. Although the district court ruled on some evidentiary objections

in the course of trial, the objections were minor and did not have a

significant effect on the proceedings. 6 The district court ultimately used

its equitable powers to order specific performance and to issue an

injunction. The nature of the pleadings and the court’s decision leads to

the conclusion that this case was fully tried in equity.

       Because this matter was tried by the district court wholly in

equity, we review this appeal de novo. Iowa R. App. P. 6.4; Owens, 610
N.W.2d at 865.

       III. Merits

       Bad blood, demands outside the four corners of the settlement

agreement and corresponding real estate contract, and real estate

contract forfeiture law have unnecessarily clouded the facts of this case.

The parties disagree on the size of the property; both parties claim the
other failed to perform their obligations under the contract, and neither

party can agree on the meaning of the penalty provision. 7 Because this
case can be resolved under basic contract principles, we will not

       6During   trial, the judge ruled on objections. Normally, this is the “hallmark of a
law trial,” but the fact that the trial judge did so does not automatically make this an
at-law proceeding. See Sille, 297 N.W.2d at 381. Where, as here, no one claims the
trial court improperly excluded evidence, the trial court’s ruling on objections does not
prevent a de novo review. Id.

       7Neither party argues there was a mutual mistake at the time of the formation of

the contract.
                                           11

obfuscate the matter with irrelevant Iowa Code provisions concerning

real estate contract forfeitures. 8

       A. Size of the Property

       Both parties dispute the meaning of the terms describing the

property to be conveyed.

       The Restatement (Second) of Contracts provides rules to aid our

interpretation of contract terms.           See Fausel v. JRJ Enters., Inc., 603
N.W.2d 612, 618 (Iowa 1999) (applying sections 202 and 212 to the

interpretation of contract terms). Section 202 provides:

              (1) Words and other conduct are interpreted in the
       light of all the circumstances, and if the principal purpose of
       the parties is ascertainable it is given great weight.

             (2) A writing is interpreted as a whole, and all writings
       that are part of the same transaction are interpreted
       together.

Restatement (Second) of Contracts § 202 (1981).                  These rules “do not

depend upon any determination that there is an ambiguity, but are used

in determining what meanings are reasonably possible as well as in

choosing among possible meanings.”                Id. § 202 cmt. a.         In addition,

section 212 provides:

              Any determination of meaning or ambiguity should
       only be made in the light of the relevant evidence of the
       situation and relations of the parties, the subject matter of
       the transaction, preliminary negotiations and statements
       made therein, usages of trade, and the course of dealing
       between the parties. But after the transaction has been
       shown in all its length and breadth, the words of an
       integrated agreement remain the most important evidence of
       intention.

       8The  Iowa State Bar Association real estate contract form contains a boilerplate
forfeiture provision; however, this provision is inapplicable because the arguments in
this case do not center upon this provision and do not call for a forfeiture of the subject
property.
                                    12

Restatement (Second) of Contracts § 212 cmt. b (emphasis added)

(citations omitted); see also id. § 209(1) (“An integrated agreement is a

writing or writings constituting a final expression of one or more terms of

an agreement.”). With these rules in mind, we turn to the language of

the agreement and the circumstances surrounding the signing of the

agreement.

      The settlement agreement and the real estate contract both recite

the following description of the property to be conveyed:

      The acreage locally known as 513 160th St., Latimer, Iowa
      and described as: An approximate five acre tract located in
      the Northwest Quarter (NW1/4) of section 26, Township 92
      North, Range 22 West of the 5th P.M., Franklin County,
      Iowa. The legal description shall be determined by survey,
      which shall coincede [sic] with existing fence boundaries
      required by Franklin County Zoning.

(Emphasis added.)     At trial, Passehls argued the parties wrote the

contract so that Passehls could keep the junkyard as defined by the

boundary fence. The Estate argued the fence was immaterial because

the land to be conveyed was the land described by the zoning ordinance.

      The record belies the Estate’s argument. To conclude the intent of

the parties was to convey only the property set forth in the zoning
ordinance would require us to excise any reference to the fence in the

property description as follows:

      The legal description shall be established by survey which
      shall coincide with existing fence boundaries required by
      Franklin County Zoning Ordinances.

(Strikethrough added.) We value each word in a written contract, and we

are not persuaded to eliminate the phrase “existing fence” when a more

suitable explanation is apparent. See id. § 212 cmt. b (“the words of an

integrated agreement remain the most important evidence of intention”).
                                    13

      A more sensible interpretation of the contract is that the phrase

“required by Franklin County Zoning Ordinances” described the “fence”

that was to be the subject of the survey. There were at least two fences

in the area—a “horse pasture fence” and the boundary fence surrounding

the junkyard.    The boundary fence was erected in 1990 after the

Franklin County Zoning Board of Adjustment approved the use of the

site as a dismantling and recycling center on the condition that a six-

foot-high enclosure fence surround the premises. The reference in the

contract to the zoning ordinance was meant to describe the fence that

controlled the size of the property; the zoning ordinance itself was not

meant to control the size of the property.

      The circumstances surrounding the signing of the contract also do

not support the Estate’s proposed description. Such a description would

result in a property line that divided an existing garage, horse barn, and

driveway. Such a description would also require that the existing fence

be moved.     Karen and David, the co-executors of the Estate, both

testified they did not contemplate the boundary fence or any building or

driveway would have to be moved for the conveyance. Their testimony

indicates their primary concerns were to keep the junkyard from growing
onto the land rented to a third party and to shield themselves from any

liability relating to possible environmental contamination.

      We therefore agree with the finding of the trial court; the intent of

the parties was clear at the time the agreements were signed—Passehls

contracted to purchase the land contained within the fenced boundary.

      Presenting a deed conveying property that is 22,457 square feet

less than the property bargained for does not constitute substantial

performance of the terms of the settlement agreement or the real estate
                                    14

contract.   Therefore, the Estate effectively refused to perform its

obligations under the contract.

      B. Penalty Provision

      The settlement agreement and contract contain a penalty provision

which provides the following:

      In the event that [the Estate] provides marketable title to the
      subject real estate, but closing does not occur on or before
      March 1, 2003, as a result of nonperformance by [Passehls],
      then the parties agree that the $20,000.00 deposited into the
      Brian D. Miller [the Estate’s attorney’s] Trust Account shall
      be forfeited to [the Estate].

A plain reading of this provision indicates the Estate must provide a

marketable title to the subject real estate before the penalty provision

can be enforced.    Because the penalty provision sets forth a specific

order of performance, the Estate’s obligation to provide title to the

appropriate real estate is a precondition to the enforcement of the

penalty provision. As mentioned above, the Estate never proffered a deed

to the real estate described in the settlement agreement or the real estate

contract. Therefore, the penalty provisions contained within the written

settlement agreement and real estate contract were not triggered.

      C. Breach
      Despite the clear language of the penalty provision, the trial court

still concluded the Estate was entitled to the $20,000 penalty because

Passehls failed to perform “an agreed upon contingency prior to closing.”

The trial court found Passehls failed to perform this contingency by not

providing access to the grain bins and not moving all junk vehicles into

the fenced-in area. However, neither the settlement agreement nor the

real estate contract expressly states this contingency. In order to find

that this additional contingency existed, the trial court apparently
                                         15

accepted the Estate’s argument that there was a subsequent oral

modification to the contract. 9

       The Estate contends a new oral agreement was formed on March

24 after Passehls “failed” to close. At that time Karen, the co-executor of
the Estate, stated she would not enforce the $20,000 penalty so long as

Passehls agreed to complete five specific items by April 1. These items

included returning the Shriner’s car and cornsheller, removing the junk

vehicles from around the grain bins, removing the horse pasture fence,

removing the junk vehicles from outside of the fenced areas, and moving

the fence to comply with the zoning requirements.               Although Passehls

contends there was no such agreement, the Estate claims the agreement

was memorialized through a letter prepared by the Estate’s attorney and

sent to Passehls on March 26.

       A written contract may be modified by a subsequent oral contract

that has the essential elements of a binding contract. Berg v. Kucharo

Constr. Co., 237 Iowa 478, 489, 21 N.W.2d 561, 567 (1946). Consent to

the modification may be either express or implied from acts and conduct.

Davenport Osteopathic Hosp. Ass’n v. Hosp. Serv., Inc., 261 Iowa 247,

253, 154 N.W.2d 153, 157 (1967).              However, proof of a claimed oral
contract must come from more than “loose and random conversations.”

Ehlinger v. Ehlinger, 253 Iowa 187, 192, 111 N.W.2d 656, 659 (1961)

(citations omitted).

       9One   might argue the clause in the settlement agreement that stated Passehls
would grant an easement for access to the grain bins “for the purposes of loading and
unloading grain” required the vehicles be moved prior to closing, but the Estate
provides no evidence or case law supporting such an argument. Instead, the Estate
made numerous contentions that the language in the settlement agreement was “clear
and concise” and there was no ambiguity in the contract and therefore “the allowance of
extrinsic evidence to explain the contract [was] irrelevant, immaterial and improper.”
                                     16

      Our de novo review of the record leads us to the conclusion that

Passehls did not agree to any oral modification.       First, the letter that

purportedly contains the terms of the contract does not reference any

new oral agreement; instead, it threatens forfeiture if Passehls did not

perform five tasks by April 1.      Second, we find it unlikely Passehls

abruptly abandoned the argument that the land conveyed was the land

within the fence and then agreed to remove and erect a new fence to

comply with the Estate’s deed. Third, in order to accept that the parties

agreed to this new contract, we must find the parties agreed to change

not only what was due at closing, but also agreed to alter the specific

order of performance set forth in the forfeiture provision. Given the fact

that Jerry, Karen, and David had been feuding about their mother’s

estate for more than five years and the fact that this feud had sparked at

least three separate lawsuits, we find it incredible that all would agree to

a major modification of an existing settlement agreement and real estate

contract without reducing the agreement to writing.

      We therefore find there was no oral agreement modifying the

existing contract.

      D. Current Status of Contract
      In a real estate transaction, the law contemplates that each party

will only relinquish their tight grip on their money or deed once they have

their other hand firmly planted on the other party’s money or deed;

therefore, the law generally requires simultaneous performance. Braig v.

Frye, 199 Iowa 184, 189, 199 N.W. 977, 979 (1924); see also 13 Richard

A. Lord, Williston on Contracts § 38:8, at 407 (4th ed. 2000) [hereinafter

Williston on Contracts] (stating the obligation of each party in a real estate

contract “is subject to the condition precedent that the other party either

perform, or make an absolute or conditional tender of performance”). The
                                    17

penalty provision is the only language in either the settlement agreement

or real estate contract which could possibly change the presumption of

simultaneous performance.     As discussed above, the penalty provision

required the Estate to first tender a marketable title to the subject

property before the penalty provision became applicable.      At best, this

means the Estate had to perform first by tendering marketable title to the

subject property.

         Even if we assume, arguendo, Passehls failed to tender proper

performance on March 24 and April 1, we would still conclude neither

party tendered proper performance on either date. If both parties fail to

perform their mutual and simultaneous obligations under a contract,

then neither is in default.   Braig, 199 Iowa at 189, 199 N.W. at 979;

Wright v. Swigart, 172 Iowa 743, 746, 154 N.W. 938, 939 (1915); Waters

v. Pearson, 163 Iowa 391, 403, 144 N.W. 1026, 1031 (1914); see also 13

Williston on Contracts § 38:8, at 407 (“[b]efore either party can sue on a

[real estate] contract, that party must first put the other party in default

by tendering or offering to tender performance”). Without a default or

breach by either party, the penalty provision becomes inapplicable and

the contract continues as binding on both parties. See Braig, 199 Iowa

at 189, 199 N.W. at 979.

         IV. Disposition

         Because the Estate never proffered a deed to the appropriate

property, the trial court erred when it decided the Estate was entitled to

the $20,000 “forfeiture.” We therefore reverse the decision of the district

court.

         At present, all of the obligations explicitly set forth in the

settlement agreement and real estate contract have been performed by

Passehls.     The pending appeal was dropped; the Estate received the
                                   18

$20,000 down payment; the remaining $30,000 rests in Passehls’

attorney’s trust account; the Shriner’s car and cornsheller have been

delivered; and Passehls acknowledged the easement for access to the

grain bins.

      Upon remand, the district court shall direct the Estate to tender

performance by executing a court officer’s deed to the property described

herein. The remaining $30,000 shall be simultaneously transferred to

the Estate.

      DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT         JUDGMENT     REVERSED       AND      REMANDED        WITH

INSTRUCTIONS.