Severson v. Elberon Elevator, Inc.
250 N.W.2d 417, 1977 Iowa Sup. LEXIS 867 (1977)
Rule of Law:
An oral contract for the sale of physical assets, including real estate, can be specifically enforced if the terms are sufficiently definite and the parties intended to be bound, even if a written memorial was contemplated, provided the plaintiff proves the contract by clear, satisfactory, and convincing evidence.
Facts:
- Eugene Severson, general manager and part owner of Froning Grain Company, had previously discussed purchasing the Elberon elevator from Larry F. Mosebach, president and co-owner of Elberon Elevator, Inc., in 1970-71 and Fall 1972, but negotiations broke off over price.
- On March 4, 1973, Mosebach initiated a meeting with Severson and A.J. Froning at the Elberon elevator, stating the asking price had been reduced to $75,000 for the corporate stock.
- After inspecting the facilities and negotiating, the parties agreed on a value of $50,000 for the physical assets of the elevator, exclusive of inventory, and Severson gave Mosebach a $5,000 check as earnest money, marking it as 'ten percent earnest money on a $50,000 'purchase price'.
- Following the agreement, Mosebach called his co-owner, Robert C. Blythe, informed him of the terms, and then told Severson, 'Well, you have just bought an elevator,' subsequently notifying the elevator manager of the sale and termination of employment.
- On March 5, 1973, a fire at the Elberon elevator destroyed some of its assets and stored grain, leading Severson and Mosebach to modify their agreement to delay implementation, with Elberon handling insurance claims and Severson receiving the benefit of proceeds for purchased assets.
- Through the summer of 1973, Elberon negotiated insurance settlements, loaded out stored grain, and lost its warehouse license due to grain shortages.
- On August 3, 1973, Severson's lawyer sent a letter demanding that Elberon carry out the oral contract, requesting either the full insurance proceeds for the damaged assets or a reduction in the purchase price.
- On December 6, 1973, Mosebach sent Severson a $5,000 check, representing it as the return of earnest money tendered for a prospective stock purchase, which Severson refused to accept.
Procedural Posture:
- Eugene Severson (plaintiff) filed a petition for specific performance of an oral contract to purchase the physical assets of Elberon Elevator, Inc. (defendant) in trial court.
- The trial court sustained Severson's petition and issued a decree for specific performance.
- Elberon Elevator, Inc. (defendant) appealed the trial court's decree to the Supreme Court of Iowa.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an oral contract for the sale of a grain elevator's physical assets, which includes real estate, qualify for specific performance when the terms are reasonably certain, the parties intended to be bound despite contemplating a future written document, and the buyer has no adequate remedy at law?
Opinions:
Majority - McCormick, Justice
Yes, an oral contract for the sale of a grain elevator's physical assets, including real estate, is eligible for specific performance because the terms were sufficiently certain, the parties intended to be bound, and the buyer lacked an adequate remedy at law. The court found that Severson met his burden to prove the contract by clear, satisfactory, and convincing evidence. Although a written document was contemplated, the oral agreement's terms were definite enough for the court to ascertain the duties of each party, and the parties' actions, such as Mosebach informing his co-owner and the elevator manager of the sale, demonstrated an intent to be bound. The subsequent fire and discussions about insurance proceeds constituted a modification, not a rescission or abandonment, as Severson consistently asserted the contract's validity. Specific performance was appropriate because real estate was an integral part of the purchase, which is assumed to possess unique value, and the assets were uniquely suited to Severson's purpose of operating a grain elevator in that specific location, making monetary damages an inadequate remedy.
Analysis:
This case underscores the enforceability of oral contracts, even for significant transactions involving real estate, when the parties' intent to be bound and the contract's terms are clearly established. It reinforces the principle that contemplation of a future written agreement does not automatically negate a present oral contract. Furthermore, it highlights the unique nature of real estate in contract law, affirming the presumption that monetary damages are an inadequate remedy for a breach of a real estate contract, thereby making specific performance an appropriate equitable remedy. Future cases involving oral agreements, especially for complex asset sales, will likely refer to the factors examined here to determine the parties' intent and the definiteness of terms.
