December 21, 2016
CONNIE KUNZ, Plaintiff-Appellee,
ROBERT KUNZ, Defendant-Appellant.
from the Iowa District Court for Lee County (South), Mary Ann
Kunz appeals from a jury verdict in favor of Connie Kunz in
her breach-of-contract action. REVERSED AND REMANDED.
F. Dennis, Keokuk, for appellant.
R. Dial of the Law Office of Curtis Dial, Keokuk, for
by Danilson, C.J., and Doyle and McDonald, JJ.
Kunz appeals from a jury verdict in favor of Connie Kunz in
this breach-of-contract action. He contends the settlement
memorandum signed by Connie and him were only preliminary
negotiations and not a binding agreement. Even if it was a
binding agreement, his obtaining financing was a condition
precedent that did not occur. He challenges the court's
refusal to give his proposed jury instructions regarding the
condition precedent. He also challenges the district
court's decision to allow evidence regarding his personal
Kunz and Robert Kunz, brothers, started a business in 1973
called Happy Homes, Inc., which sold factory-built homes.
This was a "family business, " and Richard's
wife, Connie, and Robert's wife, Dorothy, were actively
involved. Richard and Robert jointly owned the business and
9.7 acres of real estate upon which Happy Homes was located.
In 2007, Richard died, and his interest in Happy Homes went
to Connie. In 2008, Connie and Robert began discussing the
sale of the business. Initially, Connie was interested in
purchasing Robert's share of the business and continuing
to operate Happy Homes with her son, Denton. Connie and
Robert eventually entered mediation, and, on April 23, 2010,
Connie, Robert, Dorothy, and their respective attorneys all
signed a document entitled "Settlement Memorandum."
Settlement Memorandum stated,
1. Robert will purchase Connie's shares of stock in Happy
Homes, Inc. for the sum of $250, 000.00 including the real
estate owned jointly by Connie and Robert and Dorothy. Curtis
Dial and Hubert Staff [attorneys] will prepare all detailed
agreements necessary for the purchase of the corporate stock
and the real estate. The escrow fund is to be intact as to be
verified by the accountant. This agreement is subject to
Robert Kunz being able to arrange financing for this
2. All of Connie's shareholder debt will be canceled.
3. Robert will seek to obtain a release by the bank on
individual guarantees of corporate indebtedness by
4. Robert agrees to indemnify Connie against corporate debt
per the agreement prepared by the attorneys.
5. The real estate will be conveyed using normal real estate
purchase and sale closing procedures. It is anticipated or
expected that this matter will be closed within forty-five
(45) days of this date.
6. Included in this agreement is the agreement of Robert to
take over ownership of the individual homes owned by Connie
and assume the debt on those homes.
7. Connie will receive the 1997 Chevrolet C-10 truck formerly
used by Richard.
8. The parties agree to take all action and execute all
documents necessary to effectuate this agreement.
2, 2010, Robert's attorney notified Connie's attorney
Robert and Dorothy "have been unsuccessful in obtaining
a loan" and would not proceed with the purchase.
28, 2010, Connie filed a breach-of-contract suit against
Robert and Dorothy, which she subsequently dismissed without
prejudice. On February 17, 2011, Robert and Dorothy filed
suit against Connie for partition and liquidation of Happy
Homes. The modular homes, real estate, and other assets of
Happy Homes were sold at auction on May 5, 2012. Robert
purchased the 1997 Chevrolet C-10 truck for $4000. The
original purchaser of the real estate bid $160, 000 but
backed out, forfeiting a $16, 000 down payment. Robert then
purchased the real estate from Happy Homes. The proceeds from
the sales of Happy Homes assets ($251, 066.47) were placed in
a trust account, outstanding loans to State Central Bank were
paid off, as were attorney fees and other items, and, on
October 25, 2012, $88, 225.88 was distributed each to Connie
thereafter reinitiated her suit against Robert and Dorothy
for breach of the settlement memorandum, seeking the
difference between what she received from liquidation of the
company and the purchase price set forth in the settlement
memorandum. Dorothy was later dismissed as a party.
7, 2015, Robert filed a motion in limine asking that the
court exclude his personal financial statement as irrelevant.
The court denied the motion noting,
One of the issues in this case will be whether [Robert]
complied with the terms of a contract that he "arrange
financing" to make a payment to [Connie]. Counsel agreed
that one of [Robert's] defenses to not completing the
terms of the contract was that he was not able to arrange
financing. As a result the Court can envision how his
financial condition would be relevant to a trier of fact to
evaluate on whether he had been able to "arrange
financing" to complete payment of the contract
trial, Connie testified Robert agreed at mediation to buy her
interest in the real estate and business for $250, 000 and
that he would obtain a release of her individual guarantees
of corporate indebtedness. She considered the Settlement
Memorandum a contract. She acknowledged she had received
three checks from the liquidation of Happy Homes'
assets and that she had been released from liability on Happy
Homes' indebtedness. Connie asked that she be awarded the
difference between the $250, 000 promised and what she had
January 2010, Robert's financial statement with his bank,
State Central Bank, indicated his net worth was over $2, 720,
000. Robert agreed he had signed the settlement memorandum
and "agreed to purchase Connie's interest in the
business and the real estate for $250, 000, and she would
also get the truck she wanted." Robert testified he went
to his bank and sought financing to pay Connie, offering the
assets of Happy Homes as collateral. He did not offer his
personal family assets as collateral because "personal
family assets and this does not get mixed in with a
business." He also stated he went to a distant relative,
who was a banker in Illinois, and asked for a loan and was
denied. He did not fill out a loan application at either
Robert also testified as follows:
Q. Did you ever attempt to use your personal finances to
obtain a loan?
A. No, I did not.
Q. And would you agree that had you used your personal
finances, you could have obtained financing?
A. I wouldn't say that.
Q. Well, you could have paid for it yourself, couldn't
A. No, I couldn't have.
Q. Did you purchase the real estate that Happy Homes had been
on at the auction?
A. Yes, I did.
Q. Did you get a loan for that?
A. No, I just took it out of the proceeds.
Q. What do you mean, the proceeds?
A. The sale of the buildings.
Q. The auction?
A. The houses, tools and everything, my half.
Q. So when that real estate was purchased by you, you did not
need any kind of loan for that at all?
A. I think I might have had a loan on it.
Q. Who did you get the loan from?
Q. What family?
A. I don't think that's necessary.
Q. Well, you paid a hundred thousand dollars for real estate,
Q. Over a hundred thousand, didn't you?
A. A little over.
Q. And you got a loan from a family member?
A. (No audible response.)
Q. But you couldn't go to that family member and get a
loan to purchase Happy Homes from Connie?
Q. All right. So after you made the two attempts, meeting
with Scott Piper and then meeting with your distant relative
in Lima [Steve Harms], you made-that's all the attempts
you made to finance the business?
A. That's correct.
acknowledged he did not go to other banks in the area seeking
financing. Nor did he use "the $168, 000 cash on
hand" to get a loan.
Piper at State Central Bank testified he denied Robert's
request for a loan of $250, 000 because Robert wanted the
loan secured by Happy Homes' real estate and "the
mobile homes that were left, " and Piper was
"concerned" the depreciated inventory would not be
sufficient collateral. Piper also testified he would have
been aware of Robert's financial statement and financial
assets, and Robert could have offered to use his personal
finances to secure a loan but did not. Piper testified:
Q. And you were aware they had pretty substantial financial
A. I knew they had a farm, uh-huh.
Q. Well, did you have the net worth statement that indicated
their net worth was $2, 720, 348?
A. Probably did. I-that was a long time ago.
. . . .
Q. Those are pretty sound financial investments, right?
A. Well, those are-that's a nice net worth-
Q. Especially if you secure it somehow with let's say
real estate or property that you can take, if it doesn't
A. Right, absolutely.
court granted Robert's request that the jury be
instructed on his claims of lack of consideration, waiver,
and impossibility of performance. However, the court rejected
his requested two instructions concerning conditions
precedent. The jury returned special interrogatories finding
there was a contract, Robert had breached the contract, and
Connie should be awarded $80, 267.49. Robert's motion for
judgment notwithstanding the verdict was denied, as was his
motion for new trial. Robert timely filed this appeal.
review actions tried at law for errors of law. Iowa R. App.
P. 6.907. Findings of fact in a law action are binding on us
if supported by substantial evidence. Iowa R. App.
6.904(3)(a). "When reasonable minds would accept the
evidence as adequate to reach the same findings, evidence is
substantial." Easton v. Howard, 751 N.W.2d 1, 5
(Iowa 2008). We review refusals to give jury instructions for
correction of errors at law. Alcala v. Marriott Int'l
Inc., 880 N.W.2d 669, 707 (Iowa 2016). Evidentiary
rulings are reviewed for an abuse of discretion. Giza v.
BNSF Ry. Co., 843 N.W.2d 713, 718 (Iowa 2014). "A
court abuses its discretion when its ruling is based on
grounds that are unreasonable or untenable."
Id. (citation omitted).
argues "the Settlement Memorandum was not a binding
contract- only an agreement to agree." He maintains that
because additional papers were required to finalize the sale
of real property and corporate stock, there was a
"strong inference" the parties did not intend to be
a contract to be valid, the parties must express mutual
assent to the terms of the contract." Schaer v.
Webster Cty., 644 N.W.2d 327, 338 (Iowa 2002). "The
contract terms must be sufficiently definite for the court to
determine the duty of each party and the conditions of
performance." Royal Indem. Co. v. Factory Mut. Ins.
Co., 786 N.W.2d 839, 846 (Iowa 2010). "Mutual
assent is present when it is clear from the objective
evidence that there has been a meeting of the minds."
Id. In deciding whether there is an enforceable
contract, we consider not only the language used but also the
surrounding circumstances and the conduct of the parties.
McCarter v. Uban, 166 N.W.2d 910, 913 (Iowa 1969).
the evidence in the light most favorable to upholding the
verdict as we must, see Royal Indem. Co., 786 N.W.2d
at 846, we conclude there is substantial evidence in support
of the verdict. The language of the settlement memorandum
repeatedly provides the parties reached an
"agreement." Moreover, the actions taken after the
parties signed the agreement provide objective evidence of
mutual assent. The parties agreed "to take all action
and execute all documents necessary to effectuate this
agreement." The parties' attorneys began drafting
the documents that would transfer Connie's shares in the
company and achieve the real estate transfer. "[W]here
parties have agreed upon all essential facts there is a
binding contract, notwithstanding the fact that a more formal
contract is to be prepared and signed later."
McCarter, 166 N.W.2d at 914. Finally, Robert
testified the parties had reached an agreement, but he could
not obtain financing necessary to perform. There is
substantial objective evidence to support the jury's
finding of a binding contract.
contends the district court should have provided an
instruction on the issue of condition
precedent. The district court must give a requested
jury instruction if the instruction (1) correctly states the
law, (2) has application to the case, and (3) is not stated
elsewhere in the instructions. Beyer v. Todd, 601
N.W.2d 35, 38 (Iowa 1999); see Deboom v. Raining Rose,
Inc., 772 N.W.2d 1, 5 (Iowa 2009) ("It is error for
a court to refuse to give a requested instruction where it
'correctly states the law, has application to the case,
and is not stated elsewhere in the instructions.'"
(citation omitted)). "Parties are entitled to have their
legal theories submitted to the jury if they are supported by
the pleadings and substantial evidence in the record."
Beyer, 601 N.W.2d at 38. "When we weigh the
sufficiency of the evidence to support a requested
instruction, we review the evidence in the light most
favorable to the party seeking the instruction."
Weyerhaeuser v. Thermogas Co., 620 N.W.2d 819, 824
(Iowa 2000). "Error in giving or refusing to give a
particular jury instruction does not merit reversal unless it
results in prejudice to the party." Wells v. Enter.
Rent-A-Car Midwest, 690 N.W.2d 33, 36 (Iowa 2004).
Khabbaz v. Swartz, 319 N.W.2d 279, 283 (Iowa 1982),
our supreme court defined a condition precedent:
"Conditions precedent are . . . those facts and events,
occurring subsequently to the making of a valid contract,
that must exist or occur before there is a right to immediate
performance, before there is a breach of contract duty,
before the usual judicial remedies are available."
Mosebach v. Blythe, 282 N.W.2d 755, 759 (Iowa Ct.
App. 1979); 3A Corbin on Contracts, § 628 at 16
(1960); see 5 S. Williston, A Treatise on the
Law of Contracts, § 666A at 141-44 (Jaeger ed.
1961). "A determination that a condition precedent
exists depends not on the particular form of words used, but
upon the intention of the parties gathered from the language
of the entire instrument." Mosebach, 282 N.W.2d
submitted two jury instructions on condition precedent,
citing Gildea v. Kapenis, 402 N.W.2d 457 (Iowa
[Proposed No. 3] Conditions precedent are those facts and
events occurring subsequent to the making of a valid contract
that must exist or occur before there is a right to immediate
performance and before there is a breach of contract duty and
before judicial remedies are available.
[Proposed No. 4] Where conditions precedent cannot be met to
satisfy the terms of the contract, the contract is void.
the circumstances, we conclude it was prejudicial error for
the district court to decline to give the instructions.
See M.K. Metals, Inc. v. Container Recovery
Corp., 645 F.2d 583, 587-89 (8th Cir. 1981) (finding
prejudicial error where the court failed to give a condition
precedent instruction); see Deboom, 772 N.W.2d at 5.
The proposed instructions correctly stated the law and were
not stated anywhere else in the instructions. See
Beyer, 601 N.W.2d at 38. The instructions were supported
by substantial evidence in the record. Specifically, the
settlement memorandum specifically provided it was
"subject to Robert Kunz being able to arrange financing
for this purchase." Robert testified he attempted to
obtain financing from two lenders, one of which had a
years-long banking relationship with Robert and Happy Homes,
and was declined.
appeal, the parties dispute whether Robert made a good faith
effort to fulfill the condition precedent (for example,
should he have contacted additional lenders, or was it enough
to contact the lender with whom he had a longstanding
business relationship) and thus whether the parties had a
duty to perform. See Engstrom v. State, 461 N.W.2d
309, 314 (Iowa 1990) ("A contract imposes upon each
party a duty of good faith in its performance and
enforcement." (citing Restatement (Second) of Contracts
§ 205 (1981)). It is the jury's duty to resolve
factual questions, and the jury is free to believe or
disbelieve the witnesses' testimony. Estate of
Hagedorn ex rel. Hagedorn v. Peterson, 690 N.W.2d 84, 88
(Iowa 2004) ("[T]he credibility of witnesses is
peculiarly the responsibility of the fact finder to
assess."). Whether Robert was able to "arrange
financing" or made a good faith effort to "arrange
financing" is a question for the jury, and the district
court should have instructed the jury on the issue. In the
absence of an instruction on the issue, the jury was not able
to resolve the fact question.
the failure to give the condition precedent instruction was
prejudicial and requires a new trial.
choose to address an issue that might arise at retrial.
Robert maintains his personal finances were irrelevant to the
issues at trial and the court erred in allowing evidence of
his personal assets. Robert's personal finances would be
probative of whether he made a good faith effort to obtain
financing. The Settlement Memorandum was silent as to the
means by which Robert would arrange financing for the
purchase of Connie's interest in Happy Homes. Robert
argues the agreement did not require him to use his personal
assets. Had Robert wished to include such a condition upon
his financing of the purchase of Connie's interest, he
was free to do so. He did not. We will not read such a
condition into the parties' agreement. Robert's
personal financial assets were relevant to his ability to
finance his purchase of Connie's shares. We find no
above stated reasons, we reverse the judgment of the district
court and remand for new trial.
DANILSON, Chief Judge. (concurring in part and dissenting in
concur and agree with the majority except I part ways with
the majority on the issue of whether Robert was prejudiced by
the failure to give his requested instructions on condition
precedent. Under the circumstances presented here, I conclude
the failure to give the requested instructions did not
prejudice Robert. I note the issue of whether Robert was able
to arrange financing was litigated at trial. Robert's
failure to obtain financing was urged as a basis and in
support of his defense of impossibility. The jury apparently
rejected Robert's testimony he was not able to arrange
financing. I also acknowledge the distinct difference between
impossibility and a good faith attempt. But it is significant
that Robert's refusal to pledge any of his personal
assets and his attempt to obtain financing solely on the
basis of the company's assets was undisputed. Moreover,
it is clear the mediation agreement does not afford him that
privilege. A good faith attempt to obtain financing required
he use any of his assets as a pledge or security to obtain
financing. I conclude the failure to instruct the jury on
conditions precedent was not prejudicial and does not
constitute reversible error.
add that Robert has failed to preserve error by failing to
object to the instructions in their final form. See
Iowa R. Civ. P. 1.924. Robert did request jury instructions on
condition precedent after the court provided its preliminary
draft instructions, which request was denied. He did not,
however, object to the final form of the instructions-leaving
nothing to be considered on appeal. See id.
 Connie had personally financed some of
the model homes for Happy Homes with State Central
 The first was in November 2012 in the
amount of $88, 225.88; the second on September 9, 2013, in
the amount of $52, 417.40, which was Connie's half of the
proceeds after Robert purchased the Happy Homes real estate;
and the final check on March 13, 2014, in the amount of $15,
128.50 after all Happy Homes' business dealings were
 Connie contended she was owed about
$96, 000. Robert contended she had been paid $16, 000 more
than she acknowledged. The jury found Connie was owed just
over $80, 000, apparently giving credence to the additional
payment. Connie does not appeal the amount of the
 Error was preserved on the issue. The
district court held a conference regarding the instructions
and specifically and unequivocally refused Robert's
proposed instructions regarding condition precedent. The
matter was raised again via posttrial motion, and the
district court denied the motion. Under these circumstances,
error was preserved. See Ostrem v. State Farm Mut. Auto.
Ins. Co., 666 N.W.2d 544, 547-48 (Iowa 2003) (explaining
the court takes a "pragmatic view" to rule 1.924
and holding error is preserved where the instruction was
requested or objection made, the point of law or question of
fact was explained, and the district court ruled upon the
matter); State v. Wright, 274 N.W.2d 307, 312 (Iowa
1979) (holding error was preserved where objection was made
and proposed instructions were deemed "final" for
purposes of error preservation).
Rule 1.924 provides, in part:
Before the argument to the jury begins, the court
shall furnish counsel with a preliminary draft of
instructions which it expects to give on all controversial
issues, which shall not be part of the record. Before jury
arguments, the court shall give to each counsel a copy of its
instructions in their final form, noting this fact of record
and granting reasonable time for counsel to make objections,
which shall be made and ruled on before arguments to the
jury. Within such time, all objections to giving or failing
to give any instruction must be made in writing or dictated
into the record, out of the jury's presence, specifying
the matter objected to and on what grounds. No other grounds
or objections shall be asserted thereafter, or considered on