BRENT PICKRELL, Plaintiff-Appell ee/Cross-Appellant, vs. GARY SCHUBERT, Defendant-Appellant/Cross-Appellee.
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IN THE COURT OF APPEALS OF IOWA
No. 6-1065 / 06-0447
Filed April 11, 2007
BRENT PICKRELL,
Plaintiff-Appellee/Cross-Appellant,
vs.
GARY SCHUBERT,
Defendant-Appellant/Cross-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Pottawattamie County, Charles L.
Smith, Judge.
Gary Schubert appeals the district court’s award of damages to Brent
Pickrell for Schubert’s breach of a business agreement.
REVERSED AND
REMANDED FOR ENTRY OF JUDGMENT OF DISMISSAL.
Mark McCormick of Belin Lamson McCormick Zumbach Flynn, P.C., Des
Moines, for appellant.
Curtis J. Heithoff, Council Bluffs, for appellee.
Heard by Sackett, C.J., and Mahan and Vaitheswaran, JJ.
2
VAITHESWARAN, J.
In this breach of contract action, the key question is whether the plaintiff
established the existence and terms of a contract. We agree with the defendant
that these elements were not proven.
I. Background Facts and Proceedings
Brent Pickrell and Gary Schubert had discussions about opening a
convenience store on an undeveloped parcel of land in Council Bluffs.
The
property was owned by SIMA Construction Company (SIMA), whose principal
was Mike Paulson. Pickrell and Schubert agreed on a sale price of $172,050.00,
with a total down payment of $90,000.00.
Prior to closing, Pickrell and Schubert signed “Schupik’s Daily Operations
Management Agreement,” a one-page document detailing their compensation
plans and operations responsibilities. They subsequently signed a “Management
and Buy-In Agreement,” which provided that Pickrell would quitclaim his interest
in the real estate to Schubert. The agreement also provided that Pickrell would
have an option to buy up to 40,000 shares in the corporation known as
Schupik’s, mentioned in the first agreement. This corporation was to be formed
by Schubert and, according to testimony from the attorney who drafted the
agreement, was to be capitalized with the land.
At the time of closing, Pickrell quitclaimed his interest in the land to
Schubert. Schubert provided the entire down payment. The real estate contract
listed both Pickrell and Schubert as purchasers and a warranty deed was issued
to both.
The real estate contract obligated them to make five installment
payments to SIMA.
3
Pickrell and Schubert defaulted on their first payment.
SIMA filed a
foreclosure action against them and the district court entered a foreclosure
decree and judgment. Schubert later redeemed the property.
Meanwhile,
Schupik’s,
Inc.
(Schupik’s)
was
incorporated,
but
a
convenience store was never built. Pickrell did not purchase 40,000 shares in
the corporation.
Several months after it was incorporated, Schupik’s was
dissolved.
Pickrell sued Schubert for breach of contract, citing the daily operations
management agreement and the management and buy-in agreement. 1
He
sought damages, including, but not limited to, his “loss of bargain and profits in
the venture, and one-half of the increase in the market value of the real estate.”
Schubert filed a counterclaim based on misrepresentation. Following trial, the
district court ruled in favor of Pickrell and awarded damages.
The court
dismissed Schubert’s counterclaim and later overruled Schubert’s motion for new
trial. Both parties appealed.
II. Breach of Contract
In a breach-of-contract action, the complaining party must prove: (1) the
existence of a contract; (2) the terms and conditions of the contract; (3)
performance of all the terms and conditions required under the contract; (4) the
defendant’s breach of the contract in some particular way; and (5) damages
resulting from the breach. Molo Oil Co. v. River City Ford Truck Sales, Inc., 578
N.W.2d 222, 224 (Iowa 1998).
1
Other claims are not at issue on appeal.
4
The district court determined that “Schubert breached his contract or
agreement with Pickrell to be an equal owner of the land by preventing him from
acquiring his interest in Schupik’s or a successor entity.” The court reasoned
that Schubert was aware Pickrell wanted a one-half interest in the real estate, the
real estate was to be placed in Schupik’s irrespective of whether a convenience
store was built, Pickrell had a right to purchase 40,000 shares in Schupik’s, and
Schubert dissolved the corporation before Pickrell could exercise his right.
Schubert maintains that “Pickrell failed either to plead or prove the
existence or terms of the contract the trial court held Schubert breached.” In
considering this contention, we are mindful that the district court’s fact-findings
bind us if supported by substantial evidence.
Land O’Lakes v. Hanig, 610
N.W.2d 518, 522 (Iowa 2000). The district court’s legal conclusions, however, as
well as the court’s application of legal principles, do not bind us. Id. at 522.
Pickrell concedes that nothing in the two written agreements assured him
of a fifty-percent interest in the real estate. He also concedes “[t]he Agreement
was silent regarding whether or not the real estate was to be put into the
corporation.” And he concedes “[t]he Agreement was also silent on whether or
not [his] rights were dependent upon the convenience store being built.” It is
clear, therefore, that the written agreements cited in Pickrell’s petition did not
entitle him to a fifty percent interest in the real estate.
We could end our
discussion here. However, neither the parties nor the district court linked the
evidence to the four corners of the written agreements.
5
We turn, therefore, to the extrinsic evidence introduced by the parties to
supplement the written agreements. 2 There is no question that Pickrell originally
wished to share ownership of the land with Schubert on an equal basis. It is
equally clear that, while this may also have been Schubert’s original intent, both
parties’ intent changed over time. In pre-closing discussions with Schubert and
their attorney, Pickrell did not say he was to receive equal ownership of the land
following the closing. Instead, he stated title to the land was to be placed in
Schupik’s corporation and Pickrell would receive the opportunity to buy into the
corporation.
Following up on this testimony, the district court asked Pickrell
about his interest in the land. Pickrell acknowledged that he did not presently
have a fifty percent interest in the property but “a right to fifty percent.” Later, he
testified,
I had the option, as it says, to purchase 50% of the shares, which
was 40,000 shares, for up to two years after the opening of the
store. That was the way back at the title, because we were using
the title to go into the financing. It never went into Schupik’s. I
never had a chance to get back on the title after I gave it up to him.
The parties’ attorney had a similar recollection. He testified,
At some point, the deal for the purchase of the Paulson property
changed from being a 50/50 split where they were both going to
2
The district court determined that the parol evidence rule did not preclude consideration
of this evidence, notwithstanding an integration clause in the management and buy-in
agreement. We will assume without deciding that the district court correctly decided this
issue. See Whalen v. Connelly, 545 N.W.2d 284, 290 (Iowa 1996) (stating “[a]n
agreement is fully integrated when the parties involved adopt a writing or writings as the
final and complete expression of the agreement,” and stating fully integrated agreement
triggers application of parol evidence rule which “prevents the receipt of any extrinsic
evidence to contradict (or even supplement the terms of the written agreement).”). See
also Restatement (Second) of Contracts § 209(2) (1981) (“Whether there is an
integrated agreement is to be determined by the court as a question preliminary to
determination of a question of interpretation or to application of the parol evidence
rule.”). Schubert suggests the statute of frauds may apply, but Pickrell points out this
doctrine was not raised.
6
pony up the purchase price. At some point that became different,
and it became obvious that [Schubert] was going to be the one
putting up the money. So they were renegotiating how they were
going to get the property from Paulson to them.
The attorney continued,
It had become obvious that [Pickrell] was going to maybe have
trouble coming up with his half of the purchase price by the time of
closing and because of that – I – my recollection was that
management buy-in agreement was really – it was an agreement
that had kind of been negotiated between [Schubert and Pickrell]
more for [Pickrell’s] protection probably than [Schubert’s].
He further stated,
Part of this agreement required [Pickrell] to execute a quitclaim
deed, which was obviously for [Schubert’s] protection, [Schubert]
being the one that was going to have to come up with the full
90,000 up front. The quitclaim deed protected [Schubert’s] interest
as far as putting up the money. My understanding was that the
management agreement was intended to protect [Pickrell’s]
interests making sure that, you know, he wasn't going to get
squeezed out of the deal. It was an attempt to come up with a
vehicle for him to buy into an entity which I don't even know,
frankly, if it had been legally set up at that point, which was
Schupik’s. This was a vehicle to allow [Pickrell] to purchase into
that corporation so he could gain the financial stake in the
operation.
The attorney was specifically asked whether he knew how Pickrell was going to
buy into the land itself. He testified,
I assume it would have been impossible for him to buy in to
Schupik’s under that management agreement at that time because
the corporation had been dissolved. Schupik’s was gone, dead,
etc. I have no idea how he was going to buy into the ownership of
the land.
He continued,
I guess my thought the whole time was that he is out of the land.
The land is moving from one hand into the other hand. It then goes
back into the pot of the corporation, and you know, he has a right to
get back into it. That was kind of the shell game that was being
played. The property leaves [Pickrell] and goes to [Schubert], goes
7
from [Schubert] into the corporation – [Pickrell] owns zero of the
corporation but he has a right to buy in to the corporation. That
was my understanding of the deal.
As noted, this testimony is essentially undisputed and, indeed, is
contained in substance within the district court’s fact findings. Based on this
testimony, we conclude that, at best, Pickrell acquired an option to purchase
stock in a corporation. See Crowe-Thomas Consulting Group, Inc. v. Fresh Pak,
494 N.W.2d 442, 444-45 (Iowa Ct. App. 1992) (stating “an agreement to agree to
enter into a contract is of no effect unless all of the terms and conditions of the
contract are agreed on and nothing is left to future negotiations.”). We recognize
there is substantial evidence to support the district court’s finding that this option
was frustrated by Schubert’s decision to prematurely dissolve the corporation.
The question here, however, is whether the parties contracted to become fifty
percent owners of the land rather than the corporation. On this question, we
conclude as a matter of law that Pickrell did not contract with Schubert, either
orally or in writing, to acquire a fifty percent interest in the real estate. As there
was no agreement for equal ownership of the land, the breach of contract action
fails as a matter of law. 3
REVERSED AND REMANDED FOR ENTRY OF JUDGMENT OF
DISMISSAL.
3
We reach this conclusion without consideration of Schubert’s testimony, which the
district court found not credible.
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