Community School District of Postville v. Gordon N. Peterson, Inc.

LARSON, Justice

(concurring specially).

I concur in the result reached in the majority opinion filed herein, but cannot agree that it is necessary or desirable at this time to change the well-established rule announced and followed by this court in Dungy v. Benda, 251 Iowa 627 , 102 N.W. 2d 170 . That relatively-recent decision was recognized and approved by a unanimous court in Petersen v. Bring, 254 Iowa 288 , 117 N.W.2d 509 , and, although considered in Johnson v. Harnisch, 259 Iowa 1090 , 147 N.W.2d 11 , it was specifically not overruled. I find it unnecessary to do so here and, although I may favor some modification of that rule when the occasion of necessity arises, I prefer to place this decision upon plaintiff’s third contention, “That defendant Peterson is estopped from maintaining that the receipt of such $5,640.00 from Flintkote and the delivery of the release, or *176 purported release, released and discharged defendant Peterson from the claims made by plaintiff.” If I understand the rule adopted by the majority here, which has only the full support of six jurisdictions and some legal publications, when a claim is unliquidated, extrinsic evidence may be received to determine the intent of the parties no matter how clear or unambiguous or well-settled the legal terms are that are used in the written release. This means no agreement of release or settlement of an unliquidated claim can be relied upon as concluding the matter involved, and all such settlements will be subject to factual review and determination thereafter. I am not willing to go so far at this time.

I. It would be difficult indeed to draw a document which more clearly expresses an intent to release and satisfy a liquidated or unliquidated claim than the one executed herein. The document entitled “Release” which plaintiff concedes it executed and delivered to Flintkote and the Peerless Insurance Company was as follows :

“In consideration of Five Thousand Six Hundred and Forty Dollars ($5,640.00) to be paid to the POSTVILLE COMMUNITY SCHOOL DISTRICT, Postville, Iowa (hereinafter referred to as Postville), by THE FLINTKOTE COMPANY, and in consideration of the return to The Flint-kote Company of Guaranty Bond No. 20-03-A-1452; said Postville on behalf of itself, successors and assigns, does hereby release and forever discharge the Flintkote Company and Peerless Insurance Company, Keene, New Hampshire; and each of their respective successors and assigns, from any and all demands, claims, damages or suits of any kind to persons and/or property which have resulted or may result directly or indirectly from the sale and application of Flintkote products on the roof of the high school building of said Post-ville, and which is the subject of Guaranty Bond No. 20-03-A-1452, which Bond shall be considered null and void.”

It was recognized in Dungy v. Benda, supra, that our rather technical rule might result in some hardships and unsatisfactory results, but we concluded that, unless such a rule was adopted, few if any full releases, no matter how clearly written, could be relied upon. In any event, it was pointed out that if anything but full satisfaction was contemplated, the instrument should say so, and it recognized that a covenant not to sue or the use of a qualified release was available to avoid the release of other involved wrongdoers. It was then believed that such a well-established rule was desirable. Except as to a modification of the rule extending the release to parties not named therein, I feel the majority pronouncement would not settle, but unsettle and make uncertain, all releases executed hereafter. I would avoid that issue here.

I find in the case at bar no ambiguity in the release, and am convinced the language used in it leaves no doubt that Flintkote and its bondsman are fully released, and that as to them full satisfaction had been acknowledged upon the payment by them of the sum of $5,640.00. However, I find the plaintiff has alleged sufficient ultimate facts to establish its contention that Peterson and Rafoth are estopped from setting up the release to Flintkote as a defense to their actions and that the trial court erred in dismissing plaintiff’s petition pursuant to the hearing under Rule 105, R.C.P.

II. In its reply to defendant’s affirmative defense of full release by operation of law plaintiff alleged the facts which it contends plead a good cause of action for es-toppel. Under this pleading appellant argues that it was entitled to introduce evidence as to the claimed agreement between it and the defendants Peterson and Rafoth which preceded the settlement and release of Flintkote, and that the trial court erred in ruling on that factual issue in a proceeding to determine law points. I am inclined to agree.

In general, the doctrine of equitable estoppel is based upon the grounds of public policy, fair dealing, good faith, and justice, and its purpose is to forbid one *177 to speak against his own acts, representations, or commitments, to the injury of one to whom they were directed and who reasonably relied thereon. Such a doctrine is neither odious nor in disfavor in law or equity. Smith v. Coutant, 232 Iowa 887, 891 , 6 N.W.2d 421, 424 , and citations; 28 Am.Jur.2d, Estoppel and Waiver, § 28, p. 629.

To raise the issue of estoppel, it is essential that the ultimate facts upon which that claim arises must appear on the face of the pleadings. Farmers & Mechanics Sav. Bank v. Campbell, 258 Iowa 1238, 1247 , 141 N.W.2d 917, 922 ; Halvorson v. City of Decorah, 258 Iowa 314 , 138 N.W.2d 856 ; Paveglio v. Firestone Tire and Rubber Co., Iowa, 167 N.W.2d 636, 638 .

We have said, in order to constitute equitable estoppel or estoppel in pais, false representation or concealment of material facts must exist, that the party to whom the representation or concealment was made must have been without knowledge of such facts, that such representation or concealment must have been made with the intention that it should be acted upon, and that the party to whom it was made must have relied thereon to his prejudice and' injury. We have also said, if any of these elements are clearly lacking, there can be no estoppel. Axtell v. Harbert, 256 Iowa 867, 872 , 129 N.W.2d 637, 639 , cited with approval in Paveglio v. Firestone Tire and Rubber Co., supra.

The four generally-recognized essential elements of estoppel we set out in Axtell and approved in Paveglio at page 638 of 167 N.W.2d as follows:

“A. False representation or concealment of material facts.

“B. Lack of knowledge of the true facts on the part of the person to whom the misrepresentation or concealment is made.

“C. Intent of the party making the representation that the party to whom it is made shall rely thereon.

“D. Reliance on such fraudulent statement or concealment by the party to whom made resulting in his prejudice.”

In considering the first element of false representation or concealment of material facts, it “is not necessary that the one sought to be estopped had a fraudulent intent. It is sufficient if a fraudulent result would follow if he be permitted to enforce a claim inconsistent with his previous declarations or conduct.” We have classified such a result as a constructive fraud upon the injured person. Hart v. Worthington, 238 Iowa 1205, 1219 , 30 N.W.2d 306, 313 , and cases cited therein. Also see Wetzstein v. Dehrkoop, 241 Iowa 1237, 1245 , 44 N.W. 2d 695, 699 , and cases cited therein; Ames Trust and Savings Bank v. Reichardt, 254 Iowa 1272, 1280 , 121 N.W.2d 200, 204 ; Helwig, Admr. v. Fogelsong, 166 Iowa 715, 723, 724 , 148 N.W. 990 , 994; Blackman v. Carey, 192 Iowa 548, 552 , 185 N.W. 87 , 89; Hainer v. Iowa Legion of Honor, 78 Iowa 245, 251 , 43 N.W. 185, 187 ; 28 Am.Jur.2d, Estoppel and Waiver, § 43, pp. 650-651.

In Hainer v. Iowa Legion of Honor, supra, we said: “The estoppel is allowed to prevent fraud and injustice, and exists wherever a party cannot, in good conscience, gainsay his acts or assertions. * * where a party, either by his declarations or conduct, has induced a third person to act in a particular manner, he will not afterward be permitted to deny the truth of the admission, if the consequence would be to work an injury to such third person, or to some one claiming under him.”

In Wetzstein v. Dehrkoop, supra, the court reviewed several of our previous cases and reasserted the view that an estoppel is based upon the idea that one who has made certain representations should not thereafter be permitted to alter his evident position to the prejudice of one who has relied and acted thereon.

In Ames Trust and Savings Bank v. Reichardt, supra, the court said: “Equitable estoppel is based on fraudulent conduct or a fraudulent result. One must knowingly *178 take a position with intention that it be acted upon, * * * ” (emphasis supplied) and when it appears the one to whom it is directed relies thereon to his prejudice, equitable estoppel is established.

In Helwig-, Admr. v. Fogelsong, supra, it was said: “A party who has taken one position by which he expects to be benefited is estopped from repudiating that and taking another inconsistent position to the prejudice of another.”

In Blackman v. Carey, supra, this appears : “Equity will not permit a person to throw another off his guard and through such means obtain an unfair advantage. A person cannot gainsay his own acts and assertions or mislead another to his detriment. If a party to a contract or transaction induces another to act upon the reasonable belief that he will waive certain rights or terms, he will be estopped to insist upon such rights to the injury of him who is misled thereby. * * * Equity requires that a person refrain from enforcing a claim which he has induced another to suppose he would not rely- upon.”

In 28 Am.Jur.2d, Estoppel and Waiver, supra, in discussing this problem, it states: “In many instances, however, it is necessary to extend the terms ‘fraud’ or ‘fraudulent’ to situations which are more accurately described as ‘unconscionable’ or ‘inequitable’. Neither actual fraud nor bad faith is generally considered an essential element. But there must be either actual fraud involving an intent to deceive, or constructive fraud resulting from gross negligence or from admissions, declarations, or conduct intended or calculated, or such as might reasonably be expected, to influence the conduct of the other party, and which have so misled him to his prejudice that it would work a fraud to allow the true state of facts to be proved. * * * The fraud may, and frequently does, consist in the subsequent attempt to controvert the representation and to get rid of its effects, and thus to injure the one who has relied on it. In other words, the doctrine of estoppel in pais is based upon a fraudulent purpose or a fraudulent result.”

Of course, unless the well-pleaded facts are sufficient to estop, a pleading of mere conclusions will not supply the element or elements missing. Halvorson v. City of Decorah, supra; Alexander v. Randall, 257 Iowa 422, 427 , 133 N.W.2d 124, 127 ; Paveglio v. Firestone Tire and Rubber Co., supra, and citations; Townsend v. Armstrong, 220 Iowa 396, 398, 399 , 260 N.W. 17, 18 .

In the case at bar plaintiff pleaded it was led to believe, and did believe, that defendants Peterson and Rafoth urged and agreed to a settlement with Flintkote which would not amount to a satisfaction of the claim against them, but would be a setoff against any damages later adjudged against them in this action, inferring that they were not concerned with the form of any release necessary to obtain that settlement. It does seem obvious Flintkote and its bondsman would not pay the entire bond penalty without a full release, and a finder of fact could reasonably determine that that was in the minds of the parties when the agreement was made and the settlement consummated.

On the other hand, if it were otherwise and these defendants intended to conceal their purpose to use that settlement and “Release” as a defense to the claim against them either at that time or later, plaintiff states it was not aware of that fact.

From the contentions now made by ap-pellees Peterson and Rafoth it is clear those representations and agreements, whatever they were, were made with the expectation and intention that plaintiff would act thereon, and it is now abundantly clear that plaintiff relied upon those representations and under our prior decisions acted to his prejudice and injury in consummating that settlement, unless the defendants Peterson and Rafoth are estopped from setting up the technical third party release defense.

From the record we learn that on August 24, 1968, defendant Peterson amended his *179 answer filed herein to allege that on or about June 7, 1966, the plaintiff executed and delivered to Flintkote a release which fully released and discharged defendant Peterson of any and all demands, claims, damages or suits of any kind resulting from the installation of the school building roof.

Thereafter on October 31, 1968, plaintiff amended its pleadings to allege:

That during the period from September 28, 1965 to September 15, 1966 negotiations were conducted between the plaintiff and defendant Peterson and between' the plaintiff and Peterson and Rafoth, regarding a possible settlement of plaintiff’s claim against defendant Peterson.

That during such period the defendant Peterson and Rafoth requested that the plaintiff should endeavor to collect from Flintkote the amount of such bond and it was agreed among such parties that the amount of such bond should be collected by plaintiff and it was agreed by such persons that the receipt of such amount by plaintiff would not constitute a full satisfaction of plaintiff’s claim against defendant Peterson, but would operate to mitigate the damages which plaintiff claimed against Peterson and the amount of indemnity which Peterson in turn might claim against Rafoth.

That the plaintiff relied upon the said agreement with Peterson and did thereafter undertake to collect from Flintkote the amount of such bond and did on or about June 7, 1966 execute an instrument, a copy of which is attached as Exhibit ‘A’ to defendant’s amendment to answer, and a few days later delivered it to The Flintkote Company.

That on or about September 15, 1966 the plaintiff received from The Flintkote Company the sum of $5,640.00.

That the payment received by plaintiff from Flintkote did not constitute a full satisfaction of the claims and causes of action pleaded by plaintiff in its petition against the defendant Peterson, was not intended by the plaintiff and defendant Peterson to be a satisfaction thereof; and the instrument Exhibit ‘A’ attached to defendant’s Amendment to Answer did not release and discharge the defendant Peterson from its liability to plaintiff.

That the defendant Peterson is estopped from maintaining that the receipt of such $5,640.00 from Flintkote and the delivery of such instrument (Exhibit ‘A’ attached to defendant’s Amendment to Answer) released and discharged defendant Peterson from the claims and causes of action made by plaintiff in its petition, and the defendant Peterson is estopped from asserting the defense which it pleads in paragraph (4) of Division I of its Answer.

It is appellees’ contention that the ultimate facts alleged above would not support an estoppel plea here because plaintiff failed to state that defendant Peterson agreed, in making settlement with Flintkote, that he could give a full and complete release, that plaintiff’s pleading is more significant as to what it does not allege than what it does allege. I think this is a tenuous ground upon which to deny plaintiff a hearing upon the terms of the actual agreement and transaction leading up to and resulting in the release given. I would hold the pleading was sufficient to permit testimony as to the parties’ intentions at the time, and generated a question for the fact-finder rather than a law question for the court.

In Halvorson v. City of Decorah, supra, 258 Iowa 314, 319 , 138 N.W.2d 856, 860 , we considered the matter of doubtful pleadings and said: “If, however, the petition does allege ultimate facts upon which plaintiff might recover and states a claim under which evidence may be introduced in support thereof, or if attack is delayed, the petition should be construed in the light most favorable to the plaintiff with doubts resolved in his favor and the allegations accepted as true”, citing Anthes v. Anthes, 255 Iowa 497, 503 , 122 N.W.2d 255, 258 ; Newton v. City of Grundy Center, 246 Iowa 916, 921 , 70 N.W.2d 162 . No attack was directed at this pleading by motion before *180 the issues were joined and, while plaintiff’s conclusions alone were not sufficient, I am satisfied the alleged ultimate facts and conclusions pleaded were sufficient to establish a fact question as to what plaintiff could or could not do in concluding the settlement with Flintkote. Fair dealing and justice will best be served by a full factual inquiry as to the intentions, understanding, and agreement between the parties leading up to the execution of the “Release.”

In view of my conclusion that the trial court erred in dismissing this petition without a hearing to determine the factual issue raised by plaintiff’s plea of estoppel, I would reverse and remand the matter for further proceedings as indicated herein.

MOORE, C. J., and LeGRAND, J., join in this special concurrence.