IN THE COURT OF APPEALS OF IOWA
No. 16-1897
Filed August 16, 2017
ALTA VISTA PROPERTIES, L.C.,
Plaintiff-Appellant,
vs.
MAUER VISION CENTER, P.C.,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Black Hawk County, Bradley J.
Harris, Judge.
Alta Vista Properties appeals from an adverse judgment in its breach-of-
contract action against Mauer Vision Center. AFFIRMED.
Kevin D. Ahrenholz of Beecher, Field, Walker, Morris, Hoffman &
Johnson, P.C., Waterloo, for appellant.
Mark L. Zaiger and Kristymarie Shipley of Shuttleworth & Ingersoll, P.L.C.,
Cedar Rapids, for appellee.
Considered by Danilson, C.J., and Potterfield and Bower, JJ.
2
DANILSON, Chief Judge.
Alta Vista Properties, L.C. (Alta Vista) appeals from an adverse judgment
in its breach-of-contract action against Mauer Vision Center, P.C. (Mauer Vision).
Because there is substantial evidence supporting the fact findings of the district
court and we find no error of law, we affirm.
In June 2006, Alta Vista, owned by Ben Stroh, purchased property located
at 124 Second Street NE, in Waverly, Iowa, for $900,000. The seller of the
property was I4NI, L.L.C., an entity owned by Dr. Richard Mauer. At the time of
the sale in 2006, the property was subject to a fifteen-year lease with a remaining
guaranteed rental income of $1.1 million from the tenant, Mauer Vision. The
lease was assigned to Alta Vista at the time of purchase.1 Mauer Vision retained
the right of first refusal to purchase the building.
In February 2012, Alta Vista sought to sell the property through Sulentic-
Fischels Commercial Group (Sulentic). The original asking price was a little over
$1 million, but eventually the asking price was reduced to $960,000. In 2011, the
property had an assessed value of $438,330.2 However, the remaining
guaranteed lease payments from Mauer Vision would have been about
$650,000.
Sometime in May 2012, Sulentic and a representative from Alta Vista
requested the property be made available for persons interested in touring the
1
As found by the district court:
This lease was a triple net lease to extend to year 2019 with two
additional 5-year options to extend the lease held by tenant. Rental
amount paid upon the lease was excessive for the Waverly area. [Alta
Vista] determined the purchase and assignment to be a good investment
due to the rental rate, the triple net feature of the lease and the personal
guaranty of the lease by the owner of Mauer Vision Center, P.C.
2
This is the 2011 assessed value per the Bremer County assessor’s office.
3
property. Karen Stubbe, the administrator for Dr. Mauer’s practice,
communicated to Alta Vista the public areas of the business could be viewed but
the property was not available for touring3 and referred Alta Vista to Mauer
Vision’s legal counsel. Mauer Vision asserted that under the lease, access was
not permitted until ninety days before the end of the lease term. Alta Vista
asserted it had the right to sell the property and, therefore, to show the property
to potential buyers.
On June 27, 2012, Alta Vista filed a declaratory-judgment action seeking
an interpretation of the commercial lease.
On July 25, 2012, more than six years into the guaranteed thirteen-year
income stream, Brent Dahlstrom and Alta Vista entered into a purchase
agreement for the sale of the property for $950,000. The following day, Alta
Vista’s attorney provided Mauer Vision documentation of the offer in connection
with the right of first refusal to purchase the property. Mauer Vision declined to
purchase the property for $950,000. Dahlstrom took no further action to pursue
the property, including failing to request access to the property or visit the
portions of the building open to the public, and the transaction did not go forward.
Both Alta Vista and Mauer Vision filed motions for summary judgment in
the declaratory-judgment action. On February 2013, the district court found the
commercial lease unambiguous and granted summary judgment to Mauer Vision.
On May 21, 2013, Alta Vista agreed to sell the property at issue as part of
a “package deal” to Kyle Hawthorne. Alta Vista allocated $600,000 of the total
3
Mauer Vision is a medical office subject to federal confidentiality rules and regulations,
and a failure to comply can result in substantial financial penalties.
4
purchase price to the Mauer Vision property. Alta Vista presented the offer to
Mauer Vision, which exercised its right and purchased the property for $600,000.
On December 5, 2013, this court affirmed the district court’s summary
judgment ruling in the declaratory-judgment action. Alta Vista Props., L.L.C. v.
Mauer Vision Ctr., P.C., No. 13-0496, 2013 WL 6403078 (Iowa Ct. App.
December 5, 2013).
Alta Vista sought and was granted further review from the supreme court.
On October 31, 2014, the supreme court issued its opinion vacating this court’s
opinion and the district court’s grant of summary judgment to Mauer Vision. Alta
Vista Props., L.L.C. v. Mauer Vision Ctr., P.C., 855 N.W.2d 722, 724 (Iowa
2014). The supreme court observed, “This case requires us to determine
whether the lease permits the lessor to enter the property at reasonable times to
show it to prospective purchasers during the lease term.” Id. at 726. After
reviewing the rules of contract interpretation and the various provisions of the
lease, the court found:
In sum, as we read the lease, the parties expressly
contracted to limit the more intrusive aspects of advertising and
resale to the last ninety days of the term, but the lease also allows
Alta Vista to exhibit the building to prospective buyers of the
underlying real estate at reasonable times outside that period. A
sign advertising the property for sale could adversely affect Mauer’s
business. Thus, paragraph 12 confines such signs to the final
ninety days. But temporary, reasonable access to show the
property to a potential buyer would not affect Mauer’s business and
is a logical corollary to paragraphs 13, 19, and 27 of the lease.
Id. at 729. The court held,
[T]he lease gives Alta Vista the right to access the premises
temporarily at reasonable times to show the property to prospective
buyers. Because we have reached this conclusion without
considering extrinsic evidence and the only available extrinsic
5
evidence further supports Alta Vista’s interpretation, we can
interpret the lease as a matter of law even though it is ambiguous.
Accordingly, we reverse the district court’s judgment and remand
the case with instructions to grant summary judgment in favor of
Alta Vista.
Id. at 732–33 (footnote omitted) (citations omitted).
However, in a footnote, the court emphasized:
[T]hat access must be on reasonable terms so as not to interfere
with Mauer’s rights of possession. The D.C. Municipal Court of
Appeals recognized this principle when it stated, “The right of the
landlord to show the premises must, of course, be exercised
reasonably and in good faith and cannot be used to harass the
tenant or unreasonably interfere with his enjoyment of possession.”
Nat’l Metro. Bank of Wash. [v. Judge], 37 A.2d [446,] 447 [D.C.
1944)]. The Gronek court stated that the landlord showing the
property to prospective tenants did not breach the tenant’s right to
enjoy the property when it was done at the tenant’s convenience.
[Gronek v. Neuman, 201 N.E.2d 617, 618 (1964).] Iowa’s [Uniform
Residential Landlord and Tenant Act] requires the landlord to give
“at least twenty-four hours’ notice . . . and enter only at reasonable
times.” Iowa Code § 562A.19(3).
We agree that Alta Vista’s right to show the property to
prospective purchasers should be exercised reasonably and with
minimal interference with Mauer’s rights of possession and
enjoyment of the property. In particular, because Mauer is a health
care provider, the parties should work together to ensure that any
showing of the property complies with the privacy provisions of the
Health Insurance Portability and Accountability Act of 1996
(“HIPAA”). Pub. L. No. 104–191, 110 Stat. 1936 (1996) (codified as
amended in scattered sections of 42 U.S.C.).
Id. at 733 n.6.
On July 27, 2015, Alta Vista filed this breach-of-contract action against
Mauer Vision, asserting it had been denied access to the property on July 25,
2012—the day it entered into the purchase agreement with Dahlstrom—and
suffered damages as a result. The case proceeded to a two-day bench trial. On
October 11, 2016, the district court entered judgment for Mauer Vision. The
court made the following findings (among others):
6
On July 25, 2012, while the [declaratory] action was pending,
James Sulentic prepared a purchase agreement from Brent
Dahlstrom for the Waverly property. Purchase price of the property
and lease was set at $950,000. Dahlstrom was advised that a
problem had previously arisen regarding the opportunity to view the
property; however, it was believed that the problem would be
resolved because a written offer was now prepared. Dahlstrom left
the preparation of the paperwork and the arrangements for the
inspection of the property up to Sulentic. Dahlstrom was later
advised that he would be unable to view the property and
Dahlstrom therefore withdrew his offer. When asked if he
attempted to gain access to the property for Dahlstrom to perform
an inspection, Sulentic testified, “I don’t recall. I’m sure that we
tried one more time to get in, and we didn’t get in.” [Alta Vista]
provided no further evidence showing attempts to gain access to
the property. Karen Stubbe testified on behalf of [Mauer Vision]
that no request was made to inspect the property after the call from
[Alta Vista] on May 24, 2012, approximately two months prior to the
Dahlstrom offer. No evidence was provided to the court of any
request to view the property after any offer had been made.
Attorney Kirsten Arnold of the Beecher law firm sent to the
attorney for [Mauer Vision] a letter dated July 26, 2012. This letter
gave [Mauer Vision] notice of the proposed sale and involved
[Mauer Vision’s] right of first refusal to purchase the property at the
contract purchase price. Although the Beecher firm represented
[Alta Vista], Sulentic and Dahlstrom, no request was made to
[Mauer Vision] for access to the property.
After Dahlstrom withdrew his offer to purchase the property,
[Alta Vista] sold the property in question in conjunction with a
property located in Waterloo, Iowa. [Alta Vista] determined that that
amount of the total purchase price allocated to the purchase of the
Waverly property to be $600,000.[4] [Mauer Vision] exercised his
right of first refusal and purchased the Waverly property for
$600,000.
....
No issue exists as to the existence of the contract or that
[Alta Vista] has performed all that was required of [it] under the
terms of the contract. The Supreme Court in its decision filed
October 31, 2014, has determined that as a term of the contract,
[Mauer Vision] was required to make the property available for
viewing by prospective buyers. [Alta Vista] has, however, failed to
prove that [Mauer Vision] breached the terms of the contract or
failed to make the property available for buyers.
The evidence presented to this court established that at
some time prior to May 24, 2012, Jim Sulentic or someone on his
4
Stroh testified, “I thought that’s the most we could get out of it . . . .”
7
behalf contacted [Mauer Vision] and requested that the property be
available for inspection by prospective buyers. Although originally
agreeing to an inspection, after speaking with [Mauer Vision] and
legal counsel, Karen Stubbe advised that the property would not be
available for inspection.
Still prior to May 24, 2012, a person identifying herself as an
attorney for [Alta Vista] spoke with Stubbe and again requested an
inspection of the property. Stubbe referred this person to her legal
counsel. No evidence was presented to the court that the referral
to legal counsel was ever followed up upon by counsel for [Alta
Vista]. [Alta Vista] never requested nor was [Alta Vista] denied
access to the property after [Alta Vista] had been referred to [Mauer
Vision]’s legal counsel. [Alta Vista’s] personal call to [Mauer Vision]
on May 24, 2012, contained only threats and obscenities but made
no request that potential buyers be allowed to view the property.
Without a request to view the property, [Alta Vista] has failed to
show that [Mauer Vision] breached the contract by refusing access
to the property to potential buyers. Because [Alta Vista] has failed
to prove an element required for recovery, their action must be
dismissed.
The court concluded Alta Vista failed to prove a breach of the lease and
dismissed the action.
Alta Vista now appeals, contending the trial court erred in not finding a
breach of the lease. It argues the supreme court found Mauer Vision had denied
access to Alta Vista. Alta Vista asserts this means the court necessarily found a
breach of the lease, and the district court was precluded from finding otherwise.5
We reject this argument.
5
Mauer Vision contends the issue was not properly preserved. We note, however, that
in its trial brief, Alta Vista did assert,
It is [Alta Vista]’s contention that Dr. Mauer and Mauer Vision
Center breached the lease by refusing access to give the landlord access
to the leased property at reasonable times for purposes of showing the
property to prospective purchasers, and that the Supreme Court’s ruling
conclusively establishes this breach. As a result of this breach, the
landlord, ([Alta Vista] in this case), lost out on two prospective purchasers
who were willing to pay $950,000.00 for this property, which was
$50,000.00 more than what Alta Vista paid for the property six years
previously.
8
Alta Vista misreads the supreme court’s opinion. The supreme court’s
“task [was] to determine whether the landlord is authorized to enter the leased
property to show it to potential buyers.” Id. at 723. The court concluded: “[T]he
lease gives Alta Vista the right to access the premises temporarily at reasonable
times to show the property to prospective buyers.” Id. at 732. The other
statements in the opinion upon which Alta Vista relies were not material, relevant,
or necessary to the appeal issue, and thus, are not binding in this later breach-of-
contract action.6 See Am. Family Mut. Ins. Co. v. Allied Mut. Ins. Co., 562
N.W.2d 159, 163-64 (Iowa 1997) (setting out factors necessary for issue
preclusion).
Further, even if we accept Alta Vista’s contention that the supreme court
determined Mauer Vision had denied access, the supreme court did not conclude
the refusal was related to Dahlstrom’s offer or caused the offer to be withdrawn.
Alta Vista’s damages arise, if at all, from the differential between the purchase
offer and the actual sales price. Accordingly, Alta Vista was required to show
Mauer Vision refused to allow Dahlstrom and Alta Vista access after the
purchase offer was signed and the lack of access caused Dahlstrom to withdraw
his offer. The trial court found that Stubbe’s refusal of access occurred before
the purchase offer was entered into. Alta Vista has not cited any authority for the
premise that the then-pending litigation concerning the interpretation of the lease,
6
Alta Vista also argues the district court and this court made findings in the declaratory
action that Mauer Vision breached the lease. No court made a finding of breach in the
declaratory-judgment action. Any statement in this court’s opinion as to a denial of
access (which is not necessarily a breach) in any event is of no consequence as this
court’s opinion was vacated. See Hills Bank & Tr. Co. v. Converse, 772 N.W.2d 764,
770 (Iowa 2009) (explaining the consequence of vacating a court of appeals opinion in
part).
9
or past refusals, can substitute for a new breach of contract causing damages.
The damages must naturally arise from the breach. Meyer v. Nottger, 241
N.W.2d 911, 920 (Iowa 1976). In sum, Alta Vista may not bootstrap past refusals
of access to serve as causation for subsequent damages.
We also reject Alta Vista’s assertion that the trial court’s findings are not
supported by substantial evidence. Viewing the evidence in the light most
favorable to the facts found by the trial court, and giving special deference to its
ability to view and assess the credibility of the witnesses, we conclude there is
sufficient evidence to uphold the judgment. See Land O’Lakes, Inc. v. Hanig,
610 N.W.2d 518, 522 (Iowa 2000) (stating we “view the evidence in a light most
favorable” to the judgment and noting the court’s “findings of fact have the effect
of a special verdict and are binding if supported by substantial evidence,” and
evidence is substantial “when a reasonable mind would accept it as adequate to
reach a conclusion” (citations omitted)). We affirm.
AFFIRMED.