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Kunz v. Kunz

Court of Appeals of Iowa

December 21, 2016

CONNIE KUNZ, Plaintiff-Appellee,
v.
ROBERT KUNZ, Defendant-Appellant.

         Appeal from the Iowa District Court for Lee County (South), Mary Ann Brown, Judge.

         Robert Kunz appeals from a jury verdict in favor of Connie Kunz in her breach-of-contract action. REVERSED AND REMANDED.

          James F. Dennis, Keokuk, for appellant.

          Curtis R. Dial of the Law Office of Curtis Dial, Keokuk, for appellee.

          Heard by Danilson, C.J., and Doyle and McDonald, JJ.

          MCDONALD, Judge.

         Robert 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 finances.

         I.

         Richard 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."

         The 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 purchase.
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 Connie.[1]
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.

         On June 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.

         On June 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 and Robert.

         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.

         On July 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 obligations.

         At 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[2] 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 already received.[3]

         In 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 bank.

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, ...

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