Dergo v. Kollias

567 N.W.2d 443, 1997 Iowa App. LEXIS 71, 1997 WL 432518

• Court: Court of Appeals of Iowa
• Decided: May 29, 1997
• Docket: 96-96
• Status: Published

Opinions

CADY, Judge.

This is an appeal from the district court order granting specific performance of a real estate contract. On our de novo review, we find specific performance is not supported by the evidence and reverse the decision of the district court.

Sophia Kollias owned a home in Davenport, Iowa. She listed it for sale with a real estate agent and received a written offer from Rosemary Dergo. The offer required acceptance upon presentment, and was subject to a zoning change for commercial use. Kollias accepted the offer. She understood the buyer wanted to build a nursing home for the elderly.

Kollias later learned Dergo was merely acting as an agent for a group of individuals who owmed the property located next to the Kollias property. An Eagle Food Store was located on this property. Dergo was an employee of a company operated by two of the owners of the Eagle Food Store property.

The rezoning was not completed by the time of the scheduled real estate closing. Dergo, nevertheless, requested to close. Kollias claimed the failure to rezone was an unsatisfied condition precedent which excused her from performance under the contract. She refused to close.

Dergo filed a petition for specific performance. The district court granted the petition following a hearing.

Kollias appeals. She claims the buyer’s failure to perform the condition precedent relieved her from her contractual obligation to sell. She also claims specific performance was not justified because the identity of the real purchaser was concealed from her.

I. Waiver of Condition Precedent

Parties to a contract may waive a condition precedent to their performance of an obligation under the contract when the condition exists for their sole benefit and protection. Rodgers v. Baughman, 342 N.W.2d 801, 806 (Iowa 1983). The waiving party may then compel performance by the other party to the contract who has no interest in the performance or nonperformance of the condition. Id.

Although the question whether a condition precedent exists for the sole benefit of the buyer is one of fact, some conditions normally have no benefit or interest to the seller. An example is an offer to purchase property subject to the buyer’s ability to sell other property owned by the buyer. See id. Similarly, we think an offer to purchase property subject to rezoning typically exists for the sole benefit of the buyer. We are unable to find any facts to reasonably conclude the seller in this case had any interest in the condition precedent. She had no personal or financial interest in the contemplated commercial construction on the property. Her sole interest was to sell the property. We agree with the finding of the district court. Dergo waived the condition precedent.

II. Specific Performance

Specific performance is not granted unless based upon equity and good conscience, and unless the agreement was entered into without misapprehension or misrepresentation. Vermeulen v. Meyer, 238 Iowa 1033, 1042-43, 29 N.W.2d 232, 237 (1947). Thus, when the identity of the buyer is concealed from a seller through an agent acting on behalf of an undisclosed principal, equity will refuse specific performance. Id. at 1036, 29 N.W.2d at 234. This is because parties to a contract have a right to know with whom they are dealing unless they consent to deal with an agent on behalf of an undisclosed principal. Id.

Dergo acknowledges a seller’s right to know the true identity of the buyer, but asserts the nondisclosure in this case did not constitute misapprehension or misrepresentation. She points out, as did the trial court, there were no affirmative misrepresentations and Kollias suffered no harm as a result of the undisclosed principal. The trial court found Kollias placed no reliance on the identity of the buyer at the time the contract was made and only wanted to later rescind the contract because she felt she could have negotiated a higher contract price had she known the real buyer.

We recognize the general proposition that the mere nondisclosure of the real purchaser to a land contract is insufficient to deny specific performance when the personality of the buyer was not important to the seller or there was no evidence the seller suffered any loss by reason of the nondisclosure. 71 Am.Jur.2d Specific Performance § 51 (1973). However, our long-standing prior appellate decisions appear to depart from this general proposition. In Iowa, a party has the right to rely upon representations made as to the identity of the other party to the contract, and, if deceived by such representations, is entitled to resist specific performance on this ground alone. New York Brokerage Co. v. Wharton, 143 Iowa 61, 66, 119 N.W. 969, 971 (Iowa 1909). Moreover, the actual reasons a seller may have for refusing to complete the contract after discovering the true identity of the buyer are not material even if the reason is to merely get the largest sum possible for the property. Ellsworth v. Randall, 78 Iowa 141, 145, 42 N.W. 629, 630 (1889). Furthermore, it is unimportant the seller may actually be indifferent to the identity of the buyer or the seller was not prejudiced by the change in the buyer. Id. The right of a seller to know the buyer is clear, and the failure to disclose an unknown principal is grounds for denying specific performance. See Vermeulen, 238 Iowa at 1036, 29 N.W.2d at 234; 81 C.J.S. Specific Performance § 79 (1977).

We also think it is important in this case that Kollias was an extremely unsophisticated seller. She had a third-grade education and was given no opportunity to consider the offer or discuss it with family members. Although Dergo never met Kolli-as before the transaction and had no conversations with her, she clearly represented to Kollias in the written offer she was the purchaser. This representation was not true. The written offer and acceptance did not contain an assignment clause or a consent to act on behalf of an undisclosed principal.

We review requests for specific performance de novo. Breitbach v. Christenson, 541 N.W.2d 840, 843 (Iowa 1995). Specific performance is not granted as a matter of right, but is within our discretion. Id. It is to be granted only in extraordinary cases, in which irreparable harm will result. Id. It should be denied when it would produce injustice. Id.

We conclude specific performance should be denied. Kollias was denied her right to know the true identity of the buyer. It would be unjust to require performance under the circumstances of this case. We do not suggest our laws require a principal to be disclosed. Specific performance, however, was the remedy sought. It is an equitable doctrine, which is inappropriate under the facts of this case.

We reverse the decision of the district court and remand the case for entry of judgment for Kollias. Costs are assessed to Der-go.

REVERSED.

All judges concur except HABHAB, C.J., and STREIT, J. who dissent.