FREDERICK LOUIS ZEMKE and CHERYL ZEMKE, husband and wife, Plaintiffs-Appellees, vs. ANNA ZEMKE, Defendant-Appellant.
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IN THE COURT OF APPEALS OF IOWA
No. 9-556 / 08-2054
Filed September 17, 2009
FREDERICK LOUIS ZEMKE and
CHERYL ZEMKE, husband and wife,
Plaintiffs-Appellees,
vs.
ANNA ZEMKE,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Buena Vista County, John P. Duffy,
Judge.
Appellant appeals from the district court’s ordering specific performance of
a contract to purchase. AFFIRMED.
Andrew Howie of Hudson, Mallaney & Shindler, P.C., West Des Moines,
for appellant.
David P. Jennett of David P. Jennett, P.C., Storm Lake, for appellees.
Considered by Vogel, P.J., and Vaitheswaran and Potterfield, JJ.
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VOGEL, P.J.
Anna Zemke appeals from the district court’s order directing her to
specifically perform under a contract to purchase, by conveying certain real
estate to her brother, Fred Zemke. She asserts that Fred did not timely exercise
the option to purchase and therefore she was not required to complete the
transaction.
I. Background Facts and Proceedings
In July 2002, Anna purchased approximately 150 acres of land from Fred
and his wife, Cheryl, subject to Fred’s exercise of an option to repurchase the
land until July 1, 2007. As part of the option agreement, Fred was required to
deliver a written notice, by certified mail, of his election to exercise the option.
He was also required to pay 10% of the purchase price of $180,000 upon
exercise of the option. In August 2006, Fred chose to exercise the option to
repurchase this land.
Anna initially complied by signing and depositing a
warranty deed with her attorney and negotiating terms for a closing statement.
The closing was set for March 9, 2007, but it did not occur. The parties offered
conflicting testimony as to the reason why the closing was abruptly terminated.
Fred claims that his sister wanted “differences not included in the contract” and
he was told that “she would not close and complete the sale.” According to
Anna’s testimony, the conditions for the sale were not met, and “if the terms of
the agreement and the option to repurchase would have been met, the closing
would have taken place.”
Fred then brought this action, seeking specific
performance of the purchase agreement.
The parties and their respective
attorneys met on June 27, 2007, in order to discuss the situation. During the
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meeting, Anna stated that she would not honor Fred’s election of the option to
purchase because she was not given proper notice nor 10% down payment.
Although he was ready and willing to tender the full purchase price, Fred agreed
to meet Anna the next day, June 28, in Des Moines to tender the 10%. He then
proceeded to drive to Des Moines on June 28 and waited for Anna at her house,
from 5:00 p.m. to 8:30 p.m. As Anna was not home, Fred returned to his home in
Storm Lake. The next day, Fred again attempted to hand deliver the election to
exercise the option along with the 10% down payment, this time to Anna’s
workplace. Anna was not available, nor did her fellow coworkers know where
she was. Fred then stopped at Anna’s attorney’s office to deliver the documents,
but was told to leave the office. Anna testified that she and Fred spoke on the
phone but claims she never agreed to meet with him on the 28th, or was even
aware he came to Des Moines.
On June 29, 2007, Fred’s attorney sent to Anna a notice of intent to
exercise the option, as well as the 10% down payment via certified mail. Anna
signed the return receipt on July 3, 2007. At trial, the district court concluded that
Fred properly exercised the option before the July 1, 2007 deadline and was
entitled to specific performance of the purchase agreement. Anna appeals.
II. Scope of Review
As an action in equity for specific performance of a contract, our standard
of review is de novo. City of Ottumwa v. Poole, 687 N.W.2d 266, 268-69 (Iowa
2004). In a de novo review, we make our own fact findings, but we give weight to
the trial court’s findings with respect to the credibility of witnesses. In re Estate of
Rutter, 633 N.W.2d 740, 746 (Iowa 2001).
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III. Exercise of Option
The July 2002 “Option Agreement and Purchase Contract” was divided
into three sections: Article I “Grant of Option,” Article II “Purchase Contract,” and
Article III “General Provisions.”
Article I, subsection (3) entitled “Exercise of
Option,” provided “[Fred] may exercise the option at any time during the option
period by delivering a written notice, by certified mail, stating that [Fred] has
elected to exercise the option.” Article I, subsection (2) “Option Period” provided,
“[t]he option period shall be effective from the date of this agreement and shall
terminate at five o’clock p.m. on July 1, 2007.” Article II, subsection (2) provided
the purchase price of $180,000 plus interest running from July 1, 2002, until
closing: 10% “when the option is exercised”; and the balance due at closing.
The district court found “there is only one disputed issue in this case . . .
whether Fred was required to tender 10% of the purchase price in order to
exercise the option.”
Anna argues the district court came to an incorrect
conclusion by determining that Fred exercised the option before July 1, 2007, as
she contends the exercise was incomplete without Fred’s tendering 10% of the
total purchase price. “The only rule regarding the manner of exercise of an
option is to discover from the language of the instrument the intent of the parties
with reference thereto.” In re Estate of Claussen, 482 N.W.2d 381, 384 (Iowa
1992) (citing Steele v. Northup, 143 N.W.2d 302, 305 (1966)).
The general rule is that the time prescribed for exercise of an option
is of the essence, and if the option is not exercised within the time
limited, all rights of the optionee stand forfeited without notice. On
the other hand, if the optionee is prevented from performing by
obstructive and delaying tactics on the part of the optionor . . . then
the delay is excused.
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Steele, 143 N.W.2d at 305.
The district court found that, “[o]ther than the date of [the March 2007]
closing, Anna indicated a definite intention to honor Fred’s election to exercise
his option to purchase the land.” She demonstrated this knowledge by signing
the warranty deed and preparing for the March 9, 2007 closing. It was conceded
at trial that Anna had timely notice of Fred’s intention to exercise the option to
purchase. Moreover, even after filing this lawsuit, Fred continued to attempt to
hand deliver formal notice of his election of the option, as well as a bank draft
with the 10% down payment.
Additionally, Fred’s attorney made one final
attempt to serve Anna with Fred’s exercise of the option to purchase, by mailing
notice and the 10% down payment to Anna via certified mail on June 29, 2007.
The district court found that Fred made reasonable attempts to serve
notice on Anna, both personally and via certified mail. It further found it was
Anna who cancelled the scheduled March 9, 2007 closing, and that Fred was
fully prepared at that time to complete the purchase by tendering to Anna the full
purchase price. While Anna continues to assert that Fred never fully exercised
his option to purchase, the court found that Fred “tendered the full purchase price
for the property, and . . . payment or tender of 10% of the purchase price would
be nothing but a mere technicality, without meaning.” We agree with the district
court that it was Anna’s obstructive tactics both in failing to close the transaction
in March 2007 and in avoiding service in late June 2007 that impeded Fred’s
efforts to complete the purchase agreement. As such, we affirm the district court.
AFFIRMED.
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