## Facts

- Doris Passehl died owning approximately 160 acres of farmland in Franklin County, Iowa.
- For about fifteen years, her son Jerry Passehl and his wife Volnetta occupied and rented an approximately five-acre portion of the farm where they operated an auto-salvage business.
- The salvage business area was enclosed (for the most part) by a fence; zoning approval for the operation required an enclosure fence.
- The Estate filed two lawsuits against the Passehls asserting various claims arising out of their use of the property.
- The parties entered a written settlement agreement (Oct. 17, 2002) under which the Estate would sell the Passehls the “approximate five acre tract” for $50,000.
- The agreement required that the legal description “be established by survey” and “coincide with existing fence boundaries required by Franklin County Zoning Ordinances.”
- The Passehls paid a $20,000 down payment. The agreement stated the down payment would be forfeited if the Estate provided marketable title prior to closing and the Passehls then failed to perform.
- A survey later showed the fence line did not conform to local zoning boundaries, creating a mismatch between the fenced salvage area and what could be legally described and conveyed under the agreement.
- The transaction did not close. The Estate refused to return the $20,000, asserting a later oral agreement required the Passehls to remove junk cars from the property before any refund.
- The Passehls moved to enforce the written settlement agreement and sought return of the down payment; the Estate filed a cross-motion seeking enforcement in its favor.
- The district court found the parties contemplated the tract would conform to the existing fence but still enforced forfeiture based on the asserted junk-car removal condition; the court of appeals affirmed.

## Issues

1. Did the settlement agreement allow forfeiture of the $20,000 down payment when the Estate did not satisfy the condition that it provide marketable title to the contracted five-acre tract before closing?
2. Could the Estate rely on an alleged subsequent oral agreement (junk-car removal) to support forfeiture or retention of the down payment when that condition was not included in the written settlement?

## Decision

- The Iowa Supreme Court granted further review, vacated the court of appeals decision, reversed the district court, and remanded with instructions.
- The court held the forfeiture clause was not triggered because the Estate had not provided marketable title as required by the settlement agreement.
- The court rejected the asserted oral junk-car removal condition as a basis to keep the down payment.

## Legal Principles

- Forfeitures and penalty provisions are disfavored and are construed narrowly; the party seeking forfeiture must prove that the contract’s stated triggering conditions occurred.
- When a contract makes forfeiture contingent on the seller’s tender of marketable title before closing, forfeiture cannot be imposed unless the seller can convey the parcel described in the contract with a marketable title.
- Marketable title requires a title and description that can be conveyed as promised without reasonable doubt as to the buyer’s rights; an inability to convey the described tract defeats a contractual condition calling for marketable title.
- Courts enforce settlement agreements according to their written terms; a claimed later oral term cannot be used to add or substitute a new condition that changes the written deal, especially where it would create or expand a forfeiture.

## Conclusion

Because the settlement required a surveyed legal description that coincided with the existing fence boundaries as required by zoning, and the survey showed the fence did not conform to those requirements, the Estate did not provide the marketable title that the forfeiture clause made a prerequisite to keeping the $20,000 down payment; the claimed oral junk-car condition could not supply that missing prerequisite, so the down payment had to be returned.


Passehl Estate v. Passehl, 712 N.W.2d 408 (2006)