Hanzl v. Collier et al

Filing 52

ORDER Accepting 42 Report and Recommendations recommending plaintiff's 34 Motion to enforce settlement be granted and Hanzl's request for an award of attorney fees be denied. See text of Order for details.. Signed by Senior Judge Donald E O'Brien on 3/8/13. (djs)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
MARIANNE HANZL,
Plaintiff,

No. 10-CV-4122-DEO

vs.

ORDER ON REPORT AND
RECOMMENDATION

ROBERT L. COLLIER and
GERTRUD M. COLLIER,

Defendants.
____________________
Before the Court and on file at Docket #42 is the Report
and Recommendation (“R&R”) issued by Magistrate Judge Leonard
T.

Strand

concerning

the

Plaintiff’s

Motion

to

Enforce

Settlement. Docket #34. The Magistrate recommended enforcing
the settlement in the manner argued by the Plaintiff, Marianne
Hanzl [hereinafter the Plaintiff]. Robert and Gertrud Collier
[hereinafter the Defendants] filed a timely Objection to the
Report and Recommendation.

Docket #44.

The parties appeared telephonically for hearing on the
Objection on January 30, 2013.

After conferring with the

parties, the Court allowed the Plaintiff additional time to
file a written response to the Defendants’ Objection.
Plaintiff filed a response on February 3, 2013.

The

The parties

appeared for a second telephonic hearing on February 26, 2013.

After listening to the parties’ arguments, the Court took the
matter under advisement and now enters the following:
I.

FACTS
Magistrate Strand set out the relevant facts in his

Report

and

Recommendation.

incorporates

the

fact

Accordingly,

section

contained

in

the

Court

Docket

#42,

including the relevant facts from the evidentiary hearing
conducted by Judge Strand, into this order.
Briefly, the situation is as follows:
Marianne Hanzl, lives in Germany.

the Plaintiff,

She bought a vacation home

in Arizona and became acquainted with the Defendants while in
Arizona.

They became friends.

Eventually, the Plaintiff

decided to sell her home in Arizona.

She executed the

appropriate paperwork allowing the Defendants to sell the home
on her behalf.
The Defendants sold the Arizona home; however, they did
not transfer the money to the Plaintiff.
period

of

back

and

forth,

during

which

After a lengthy
the

Defendants

purchased the Sioux City property at issue in this case, the
Plaintiff decided that the Defendants were not going to give
her the money for the Arizona home and filed the present suit.

2

Eventually, the parties had a settlement conference and
reported to the Court that they had reached a settlement.
The

parties

agree

that

under

terms

of

the

Defendants were to pay the Plaintiff $262,500.

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agreement,

The agreement

gave the Defendants six months to sell their property in Sioux
City.

The parties agree that under the agreement, if the

Defendants did not sell the property within six months or
otherwise pay the Plaintiff, they would tender her the deed
for the property.
Unfortunately,
memorialized.

the

agreement

was

not

formally

The six months passed and the Defendants did

not sell the property. The Defendants did vacate the property
and allowed the Plaintiff to begin trying to sell it on her
own.
II.

ISSUE
All

of

undisputed.

the

facts

discussed

above

appear

relatively

The issue presently before the Court is the

effect of the Defendants providing the Plaintiff the deed for

1

The evidence regarding the agreement is based upon the
statements of the attorneys in this case, the communications
they had with each other, and the evidence collected by the
Magistrate during an evidentiary hearing.
3

the property.

Specifically, the parties dispute whether

tendering the deed for the property would completely satisfy
the Defendants’ debt to the Plaintiff, or if the Defendants
would be required to pay the difference of any shortfall
between the value of the property and the $262,500.

The

Plaintiff argues that the settlement was for $262,500, with
the property acting as a type of security for that debt.

The

Plaintiff maintains that the Defendants owe $262,500 and must
pay her the difference between that number and the net sale
price of the Sioux City property if the sale is for less than
$262,500.

The Defendants argue that the settlement was for

$262,500 or, after six months, the deed for the Sioux City
property.

The Defendants argue that giving the Plaintiff the

Sioux City property satisfies their obligation completely.
In his Report and Recommendation, the Magistrate agreed
with the Plaintiff and ordered the Defendants to pay the
difference
$262,500.

between

the

net

sale

price

the

property

and

2

2

The Magistrate also denied an award of attorney’s
fees. No objection was filed to that portion of the Report
and Recommendation, and the Court adopts it without further
comment.
4

III.

STANDARD
Pursuant to statue, this Court’s standard of review for

a magistrate judge’s Report and Recommendation is as follows:
A judge of the court shall make a de novo
determination of those portions of the
report or specified proposed findings or
recommendations to which objection is made.
A judge of the court may accept, reject, or
modify, in whole or in part, the findings
or recommendations made by the magistrate
[judge].
28 U.S.C. § 636(b)(1).
Similarly, Federal Rule of Civil Procedure 72(b) provides
for review of a magistrate judge’s Report and Recommendation
on

dispositive

motions

and

prisoner

petitions,

objections are made as follows:
The district judge to whom the case is
assigned shall make a de novo determination
upon the record, or after additional
evidence, of any portion of the magistrate
judge’s disposition to which specific
written
objection
has
been
made
in
accordance with this rule.
The district
judge may accept, reject, or modify the
recommendation decision, receive further
evidence, or recommit the matter to the
magistrate judge with instructions.
FED. R. CIV. P. 72(b).

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where

IV.

ANALYSIS
The Court has reviewed the Report and Recommendation,

along with the entire file, and finds Judge Strand’s analysis
and recommendations are appropriate and correct.

3

The parties agree that Iowa law applies in this case.
See Barry v.

Barry, 172 F.3d 1011, 1013 (8th Cir. 1999)

(stating a settlement contract must be construed according to
state law in a case based on diversity jurisdiction).
Iowa law, settlements are favored.

Under

See Peak v. Adams, 799

N.W.2d 535, 539 (Iowa 2011) stating that:

"Iowa has a strong

public policy favoring settlements."
Under Iowa law, basic contract principles apply to this
type of dispute.
Settlement
agreements
are
essentially
contracts, and general principles of
contract law apply to their creation and
interpretation.
City of Dubuque v. Iowa
Trust, 587 N.W.2d 216, 221 (Iowa 1998);
Fees v. Mut. Fire & Auto. Ins. Co., 490
N.W.2d 55, 58 (Iowa 1992). The intent of
the parties controls the interpretation
issues.
Magina v. Bartlett, 582 N.W.2d
159, 163 (Iowa 1998).
In order to be
bound,
the
contracting
parties
must
3

Although this Court will not set out the Magistrate’s
entire Report and Recommendation, it is incorporated in its
entirety by reference.
6

manifest their mutual assent to the terms
sought to be enforced. Kristerin Dev. Co.
v. Granson Inv., 394 N.W.2d 325, 331 (Iowa
1986).
Sierra Club v. Wayne Weber LLC, 689 N.W.2d 696, 702 (Iowa
2004).

“When interpreting contracts, [the Court] may look to

extrinsic evidence, including ‘the situation and relations of
the

parties,

the

subject

matter

of

the

transaction,

preliminary negotiations and statements made therein, usages
of trade, and the course of dealing between the parties.’”
Nevada Care, Inc. v. Dep't of Human Servs., 783 N.W.2d 459,
466 (Iowa 2010) (quoting Fausel v. JRJ Enters., Inc., 603
N.W.2d 612, 618 (Iowa 1999)). In interpreting the contract of
the settlement agreement “[t]he key is to ascertain the mutual
intent of the two parties...”

Peak, 799 N.W.2d at 544.

“[M]utual assent is based on objective evidence, not on the
Schaer v. Webster County, 644

hidden intent of the parties.”
N.W.2d 327, 338 (Iowa 2002).

The Magistrate applied the appropriate legal standard and
found that under the terms of the settlement agreement, the
Plaintiff is entitled to $262,500.

The Magistrate stated

three primary reasons for his conclusion:

7

First, as of the date of the settlement
conference Hanzl had no basis to know, or
even approximate, the fair market value of
the West Street property.
There is no
evidence that the property was appraised
before the settlement conference... I do
not believe Hanzl would have simply
accepted the truth of the Colliers’ stated
opinion of value.
No rational litigant
would agree to accept property in full
settlement of a claim without having some
basis for at least estimating the value of
that property... Second, if the Colliers
truly intended the terms of the agreement
to provide that they could fully satisfy
their obligations by simply conveying the
West Street property to Hanzl after six
months, they did a terrible job of
communicating this proposed term. This is
especially true in light of Hanzl’s
rejection,
immediately
prior
to
the
discussions at issue, of their offer to
convey the West Street property in full
settlement of this case.
Because Hanzl
rejected an immediate conveyance of the
property to settle her claims, the Colliers
could hardly assume she would accept a
delayed
conveyance...
The
intention
expressed
in
the
words
actually
communicated prevails over a party’s secret
intentions. See, e.g., First Northwestern
National Bank v. Crouch, 287 N.W.2d 151,
153 (Iowa 1980). Regardless of what the
Colliers now claim they intended or
understood, the words exchanged by the
attorneys during the negotiations fail to
support their position.
Third, having
personally observed both of the Colliers
during their testimony at the hearing, I
have questions about their credibility.
This is especially true with regard to
Gertrud Collier.
She professed to have
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virtually no recollection of anything that
happened during the settlement conference,
yet had perfect recall of what she claimed
to be the final terms of settlement. In
general, any details that would have been
inconvenient for her to recall were
forgotten, while helpful details were
perfectly clear ... based on her demeanor
and the content of her answers, I afford
virtually no weight to Gertrud’s testimony.
For all of the reasons discussed herein,
I recommend entry of an order of specific
performance in favor of Hanzl with regard
to the following, agreed settlement terms:
Hanzl is entitled to payment in the amount
of $262,500.
Docket #42, p. 15-17.
This Court agrees with those conclusions.

First, and

most importantly, there simply is no direct evidence that
conveying the Sioux City property was meant as a way to fully
discharge the Defendants’ debt to the Plaintiff.

What is

clear from the statements of the attorneys and the evidence
gathered by the Magistrate is that the parties agreed to a
settlement amount of $262,500. There is clearly mutual assent
to that term.

As stated above, "[t]he key is to ascertain the

mutual intent of the two parties..." Peak, 799 N.W.2d at 544.
"[M]utual assent is based on objective evidence, not on the
hidden intent of the parties."
There

is

objective

evidence

Schaer, 644 N.W.2d at 338.
that

9

the

parties

reached

a

settlement for the amount of $262,500, and that the Sioux City
property was security for the settlement, and the Defendants
had six months to raise the money.

There is no evidence or

reason to believe that there was mutual assent to the clause,
advocated by the Defendants, that conveying the Sioux City
property after six months would fully satisfy the settlement
agreement.

Accordingly, the Magistrate correctly found that

a complete discharge of the debt for the property was not part
of the settlement agreement.
Secondly,

it

is

clear

from

the

testimony

that

the

Defendants offered the Plaintiff immediate possession of the
Sioux City property and the Plaintiff rejected that offer.
Instead, the Plaintiff demanded $275,000.
offered $250,000.

The Defendants

The obvious middle ground is $262,500.

It

makes sense that $262,500 was the agreement amount reached by
the parties, and is the outcome they intended to reach.

It

does not make sense the Plaintiff would abandon her demand for
a certain amount in favor of getting the property after six
months.

This is especially true considering the Plaintiff’s

situation.

The Sioux City property had not been appraised.

The Plaintiff is elderly and lives in Germany.

10

Her counsel,

fluent in German, practices in Florida and is admitted in this
case pro hac vice.

There is no reason to believe that either

the Plaintiff or her attorney would be in a position to
speculate as to the value of property in Northwest Iowa.

4

Considering the history the parties have had with each
other,

it

defies

logic

to

construe

the

existence

of

a

settlement agreement contingent upon the Plaintiff taking on
faith the Defendants’ representations regarding the value of
the Sioux City property.

It is not believable that this was

the intent of the parties at the time the agreement was
reached.

As stated above, in determining the meaning of a

contract, the Court may look to the situation and relations of
the parties.

The Magistrate’s conclusions are supported by

both the evidence and the situation of the parties.
Finally, the Magistrate stated that he did not find the
Defendants credible. This is a de novo review. However, this
Court is deferential to the conclusions of the lower Court
when the lower Court had the opportunity to directly observe

4

It is true the Plaintiff knew the amount the
Defendants originally paid for the property.
But, it is
common knowledge that property prices have declined markedly
since the great recession.
11

the demeanor of the witnesses. Based upon the unlikely nature
of the Defendants’ representations, this Court agrees with the
Magistrate’s conclusions.
V.

CONCLUSION
This

Court

Recommendation.
1.

accepts

Judge

Strand’s

Report

and

Accordingly:

Based on the settlement agreement reached at the

April 24, 2012, settlement conference, Hanzl is entitled to
payment in the amount of $262,500 in full satisfaction of all
claims against the defendants in this case.
2.

Because the Colliers did not make that payment to

Hanzl within 180 days, Hanzl is entitled to a deed to the West
Street property to permit her to sell that property (subject
to the requirement of good faith and fair dealing.
Colliers

shall

deliver

counsel,

conveying

a

fully-executed

marketable

title

to

deed
the

to

The

Hanzl’s

West

Street

property to Hanzl, within fifteen days of this Order.

Hanzl

shall then undertake reasonable efforts to sell the West
Street Property.
3.
Street

Within 20 days after closing on her sale of the West
property,

Hanzl

shall

12

file

a

status

report

that

includes a complete itemization of the gross sale price, the
transaction-related expenses and the net sale proceeds.

If

the Colliers object to the transaction on grounds that it is
not a good faith, arms-length transaction, they shall file
their objections within 20 days after Hanzl files her status
report and itemization.
4.

Regardless of whether the Colliers file objections

to the sale, if the net sale proceeds exceed $262,500, Hanzl
shall pay the excess to the Colliers no later than 20 days
after closing on her sale of the West Street property.
5.

If the net sale proceeds are less than $262,500,

judgment will be entered against both defendants, jointly and
severally, for the amount of the deficiency, unless the court
adjusts the amount of the deficiency based on any objections
the Colliers file with regard to the sale of the property.
6.

Finally, Hanzl’s request for an award of attorney

fees is denied.
IT IS SO ORDERED this 8th day of March, 2013.

__________________________________
Donald E. O’Brien, Senior Judge
United States District Court
Northern District of Iowa

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