Court Opinion

ID: 4196291
Source: CourtListenerOpinion
Date Created: 2017-08-16 15:07:15.787627+00
Date Added: 2024-06-11T14:39:55.947864
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 16-1897
                              Filed August 16, 2017

ALTA VISTA PROPERTIES, L.C.,
     Plaintiff-Appellant,

vs.

MAUER VISION CENTER, P.C.,
     Defendant-Appellee.
________________________________________________________________

      Appeal from the Iowa District Court for Black Hawk County, Bradley J.

Harris, Judge.

      Alta Vista Properties appeals from an adverse judgment in its breach-of-

contract action against Mauer Vision Center. AFFIRMED.

      Kevin D. Ahrenholz of Beecher, Field, Walker, Morris, Hoffman &

Johnson, P.C., Waterloo, for appellant.

      Mark L. Zaiger and Kristymarie Shipley of Shuttleworth & Ingersoll, P.L.C.,

Cedar Rapids, for appellee.

      Considered by Danilson, C.J., and Potterfield and Bower, JJ.
                                             2

DANILSON, Chief Judge.

       Alta Vista Properties, L.C. (Alta Vista) appeals from an adverse judgment

in its breach-of-contract action against Mauer Vision Center, P.C. (Mauer Vision).

Because there is substantial evidence supporting the fact findings of the district

court and we find no error of law, we affirm.

       In June 2006, Alta Vista, owned by Ben Stroh, purchased property located

at 124 Second Street NE, in Waverly, Iowa, for $900,000. The seller of the

property was I4NI, L.L.C., an entity owned by Dr. Richard Mauer. At the time of

the sale in 2006, the property was subject to a fifteen-year lease with a remaining

guaranteed rental income of $1.1 million from the tenant, Mauer Vision. The

lease was assigned to Alta Vista at the time of purchase.1 Mauer Vision retained

the right of first refusal to purchase the building.

       In February 2012, Alta Vista sought to sell the property through Sulentic-

Fischels Commercial Group (Sulentic). The original asking price was a little over

$1 million, but eventually the asking price was reduced to $960,000. In 2011, the

property had an assessed value of $438,330.2                   However, the remaining

guaranteed lease payments from Mauer Vision would have been about

$650,000.

       Sometime in May 2012, Sulentic and a representative from Alta Vista

requested the property be made available for persons interested in touring the
1
  As found by the district court:
         This lease was a triple net lease to extend to year 2019 with two
         additional 5-year options to extend the lease held by tenant. Rental
         amount paid upon the lease was excessive for the Waverly area. [Alta
         Vista] determined the purchase and assignment to be a good investment
         due to the rental rate, the triple net feature of the lease and the personal
         guaranty of the lease by the owner of Mauer Vision Center, P.C.
2
  This is the 2011 assessed value per the Bremer County assessor’s office.
                                            3

property.     Karen Stubbe,        the administrator for Dr. Mauer’s practice,

communicated to Alta Vista the public areas of the business could be viewed but

the property was not available for touring3 and referred Alta Vista to Mauer

Vision’s legal counsel. Mauer Vision asserted that under the lease, access was

not permitted until ninety days before the end of the lease term.              Alta Vista

asserted it had the right to sell the property and, therefore, to show the property

to potential buyers.

       On June 27, 2012, Alta Vista filed a declaratory-judgment action seeking

an interpretation of the commercial lease.

       On July 25, 2012, more than six years into the guaranteed thirteen-year

income stream, Brent Dahlstrom and Alta Vista entered into a purchase

agreement for the sale of the property for $950,000. The following day, Alta

Vista’s attorney provided Mauer Vision documentation of the offer in connection

with the right of first refusal to purchase the property. Mauer Vision declined to

purchase the property for $950,000. Dahlstrom took no further action to pursue

the property, including failing to request access to the property or visit the

portions of the building open to the public, and the transaction did not go forward.

       Both Alta Vista and Mauer Vision filed motions for summary judgment in

the declaratory-judgment action. On February 2013, the district court found the

commercial lease unambiguous and granted summary judgment to Mauer Vision.

       On May 21, 2013, Alta Vista agreed to sell the property at issue as part of

a “package deal” to Kyle Hawthorne. Alta Vista allocated $600,000 of the total

3
 Mauer Vision is a medical office subject to federal confidentiality rules and regulations,
and a failure to comply can result in substantial financial penalties.
                                          4

purchase price to the Mauer Vision property. Alta Vista presented the offer to

Mauer Vision, which exercised its right and purchased the property for $600,000.

         On December 5, 2013, this court affirmed the district court’s summary

judgment ruling in the declaratory-judgment action. Alta Vista Props., L.L.C. v.

Mauer Vision Ctr., P.C., No. 13-0496, 2013 WL 6403078 (Iowa Ct. App.

December 5, 2013).

         Alta Vista sought and was granted further review from the supreme court.

On October 31, 2014, the supreme court issued its opinion vacating this court’s

opinion and the district court’s grant of summary judgment to Mauer Vision. Alta

Vista Props., L.L.C. v. Mauer Vision Ctr., P.C., 855 N.W.2d 722, 724 (Iowa

2014).     The supreme court observed, “This case requires us to determine

whether the lease permits the lessor to enter the property at reasonable times to

show it to prospective purchasers during the lease term.”         Id. at 726.    After

reviewing the rules of contract interpretation and the various provisions of the

lease, the court found:

                 In sum, as we read the lease, the parties expressly
         contracted to limit the more intrusive aspects of advertising and
         resale to the last ninety days of the term, but the lease also allows
         Alta Vista to exhibit the building to prospective buyers of the
         underlying real estate at reasonable times outside that period. A
         sign advertising the property for sale could adversely affect Mauer’s
         business. Thus, paragraph 12 confines such signs to the final
         ninety days. But temporary, reasonable access to show the
         property to a potential buyer would not affect Mauer’s business and
         is a logical corollary to paragraphs 13, 19, and 27 of the lease.

Id. at 729. The court held,

         [T]he lease gives Alta Vista the right to access the premises
         temporarily at reasonable times to show the property to prospective
         buyers.    Because we have reached this conclusion without
         considering extrinsic evidence and the only available extrinsic
                                         5

       evidence further supports Alta Vista’s interpretation, we can
       interpret the lease as a matter of law even though it is ambiguous.
       Accordingly, we reverse the district court’s judgment and remand
       the case with instructions to grant summary judgment in favor of
       Alta Vista.

Id. at 732–33 (footnote omitted) (citations omitted).

       However, in a footnote, the court emphasized:

       [T]hat access must be on reasonable terms so as not to interfere
       with Mauer’s rights of possession. The D.C. Municipal Court of
       Appeals recognized this principle when it stated, “The right of the
       landlord to show the premises must, of course, be exercised
       reasonably and in good faith and cannot be used to harass the
       tenant or unreasonably interfere with his enjoyment of possession.”
       Nat’l Metro. Bank of Wash. [v. Judge], 37 A.2d [446,] 447 [D.C.
       1944)]. The Gronek court stated that the landlord showing the
       property to prospective tenants did not breach the tenant’s right to
       enjoy the property when it was done at the tenant’s convenience.
       [Gronek v. Neuman, 201 N.E.2d 617, 618 (1964).] Iowa’s [Uniform
       Residential Landlord and Tenant Act] requires the landlord to give
       “at least twenty-four hours’ notice . . . and enter only at reasonable
       times.” Iowa Code § 562A.19(3).
              We agree that Alta Vista’s right to show the property to
       prospective purchasers should be exercised reasonably and with
       minimal interference with Mauer’s rights of possession and
       enjoyment of the property. In particular, because Mauer is a health
       care provider, the parties should work together to ensure that any
       showing of the property complies with the privacy provisions of the
       Health Insurance Portability and Accountability Act of 1996
       (“HIPAA”). Pub. L. No. 104–191, 110 Stat. 1936 (1996) (codified as
       amended in scattered sections of 42 U.S.C.).

Id. at 733 n.6.

       On July 27, 2015, Alta Vista filed this breach-of-contract action against

Mauer Vision, asserting it had been denied access to the property on July 25,

2012—the day it entered into the purchase agreement with Dahlstrom—and

suffered damages as a result. The case proceeded to a two-day bench trial. On

October 11, 2016, the district court entered judgment for Mauer Vision. The

court made the following findings (among others):
                                                   6

                  On July 25, 2012, while the [declaratory] action was pending,
          James Sulentic prepared a purchase agreement from Brent
          Dahlstrom for the Waverly property. Purchase price of the property
          and lease was set at $950,000. Dahlstrom was advised that a
          problem had previously arisen regarding the opportunity to view the
          property; however, it was believed that the problem would be
          resolved because a written offer was now prepared. Dahlstrom left
          the preparation of the paperwork and the arrangements for the
          inspection of the property up to Sulentic. Dahlstrom was later
          advised that he would be unable to view the property and
          Dahlstrom therefore withdrew his offer.           When asked if he
          attempted to gain access to the property for Dahlstrom to perform
          an inspection, Sulentic testified, “I don’t recall. I’m sure that we
          tried one more time to get in, and we didn’t get in.” [Alta Vista]
          provided no further evidence showing attempts to gain access to
          the property. Karen Stubbe testified on behalf of [Mauer Vision]
          that no request was made to inspect the property after the call from
          [Alta Vista] on May 24, 2012, approximately two months prior to the
          Dahlstrom offer. No evidence was provided to the court of any
          request to view the property after any offer had been made.
                  Attorney Kirsten Arnold of the Beecher law firm sent to the
          attorney for [Mauer Vision] a letter dated July 26, 2012. This letter
          gave [Mauer Vision] notice of the proposed sale and involved
          [Mauer Vision’s] right of first refusal to purchase the property at the
          contract purchase price. Although the Beecher firm represented
          [Alta Vista], Sulentic and Dahlstrom, no request was made to
          [Mauer Vision] for access to the property.
                  After Dahlstrom withdrew his offer to purchase the property,
          [Alta Vista] sold the property in question in conjunction with a
          property located in Waterloo, Iowa. [Alta Vista] determined that that
          amount of the total purchase price allocated to the purchase of the
          Waverly property to be $600,000.[4] [Mauer Vision] exercised his
          right of first refusal and purchased the Waverly property for
          $600,000.
                  ....
                  No issue exists as to the existence of the contract or that
          [Alta Vista] has performed all that was required of [it] under the
          terms of the contract. The Supreme Court in its decision filed
          October 31, 2014, has determined that as a term of the contract,
          [Mauer Vision] was required to make the property available for
          viewing by prospective buyers. [Alta Vista] has, however, failed to
          prove that [Mauer Vision] breached the terms of the contract or
          failed to make the property available for buyers.
                  The evidence presented to this court established that at
          some time prior to May 24, 2012, Jim Sulentic or someone on his

4
    Stroh testified, “I thought that’s the most we could get out of it . . . .”
                                          7

       behalf contacted [Mauer Vision] and requested that the property be
       available for inspection by prospective buyers. Although originally
       agreeing to an inspection, after speaking with [Mauer Vision] and
       legal counsel, Karen Stubbe advised that the property would not be
       available for inspection.
              Still prior to May 24, 2012, a person identifying herself as an
       attorney for [Alta Vista] spoke with Stubbe and again requested an
       inspection of the property. Stubbe referred this person to her legal
       counsel. No evidence was presented to the court that the referral
       to legal counsel was ever followed up upon by counsel for [Alta
       Vista]. [Alta Vista] never requested nor was [Alta Vista] denied
       access to the property after [Alta Vista] had been referred to [Mauer
       Vision]’s legal counsel. [Alta Vista’s] personal call to [Mauer Vision]
       on May 24, 2012, contained only threats and obscenities but made
       no request that potential buyers be allowed to view the property.
       Without a request to view the property, [Alta Vista] has failed to
       show that [Mauer Vision] breached the contract by refusing access
       to the property to potential buyers. Because [Alta Vista] has failed
       to prove an element required for recovery, their action must be
       dismissed.

The court concluded Alta Vista failed to prove a breach of the lease and

dismissed the action.

       Alta Vista now appeals, contending the trial court erred in not finding a

breach of the lease. It argues the supreme court found Mauer Vision had denied

access to Alta Vista. Alta Vista asserts this means the court necessarily found a

breach of the lease, and the district court was precluded from finding otherwise.5

We reject this argument.

5
  Mauer Vision contends the issue was not properly preserved. We note, however, that
in its trial brief, Alta Vista did assert,
                   It is [Alta Vista]’s contention that Dr. Mauer and Mauer Vision
          Center breached the lease by refusing access to give the landlord access
          to the leased property at reasonable times for purposes of showing the
          property to prospective purchasers, and that the Supreme Court’s ruling
          conclusively establishes this breach. As a result of this breach, the
          landlord, ([Alta Vista] in this case), lost out on two prospective purchasers
          who were willing to pay $950,000.00 for this property, which was
          $50,000.00 more than what Alta Vista paid for the property six years
          previously.
                                            8

       Alta Vista misreads the supreme court’s opinion. The supreme court’s

“task [was] to determine whether the landlord is authorized to enter the leased

property to show it to potential buyers.” Id. at 723. The court concluded: “[T]he

lease gives Alta Vista the right to access the premises temporarily at reasonable

times to show the property to prospective buyers.”             Id. at 732.    The other

statements in the opinion upon which Alta Vista relies were not material, relevant,

or necessary to the appeal issue, and thus, are not binding in this later breach-of-

contract action.6    See Am. Family Mut. Ins. Co. v. Allied Mut. Ins. Co., 562

N.W.2d 159, 163-64 (Iowa 1997) (setting out factors necessary for issue

preclusion).

       Further, even if we accept Alta Vista’s contention that the supreme court

determined Mauer Vision had denied access, the supreme court did not conclude

the refusal was related to Dahlstrom’s offer or caused the offer to be withdrawn.

Alta Vista’s damages arise, if at all, from the differential between the purchase

offer and the actual sales price. Accordingly, Alta Vista was required to show

Mauer Vision refused to allow Dahlstrom and Alta Vista access after the

purchase offer was signed and the lack of access caused Dahlstrom to withdraw

his offer. The trial court found that Stubbe’s refusal of access occurred before

the purchase offer was entered into. Alta Vista has not cited any authority for the

premise that the then-pending litigation concerning the interpretation of the lease,

6
 Alta Vista also argues the district court and this court made findings in the declaratory
action that Mauer Vision breached the lease. No court made a finding of breach in the
declaratory-judgment action. Any statement in this court’s opinion as to a denial of
access (which is not necessarily a breach) in any event is of no consequence as this
court’s opinion was vacated. See Hills Bank & Tr. Co. v. Converse, 772 N.W.2d 764,
770 (Iowa 2009) (explaining the consequence of vacating a court of appeals opinion in
part).
                                         9

or past refusals, can substitute for a new breach of contract causing damages.

The damages must naturally arise from the breach.          Meyer v. Nottger, 241

N.W.2d 911, 920 (Iowa 1976). In sum, Alta Vista may not bootstrap past refusals

of access to serve as causation for subsequent damages.

       We also reject Alta Vista’s assertion that the trial court’s findings are not

supported by substantial evidence.      Viewing the evidence in the light most

favorable to the facts found by the trial court, and giving special deference to its

ability to view and assess the credibility of the witnesses, we conclude there is

sufficient evidence to uphold the judgment. See Land O’Lakes, Inc. v. Hanig,

610 N.W.2d 518, 522 (Iowa 2000) (stating we “view the evidence in a light most

favorable” to the judgment and noting the court’s “findings of fact have the effect

of a special verdict and are binding if supported by substantial evidence,” and

evidence is substantial “when a reasonable mind would accept it as adequate to

reach a conclusion” (citations omitted)). We affirm.

       AFFIRMED.