The Law Office of Melvin O. Shaw, P.L.C. v. A & M Development, L.L.C.

IN THE COURT OF APPEALS OF IOWA _______________ No. 25-1285 Filed August 19, 2026 _______________ The Law Office of Melvin O. Shaw, P.L.C., Plaintiff–Appellee, v. A & M Development, L.L.C., Defendant–Appellant. _______________ Appeal from the Iowa District Court for Johnson County, The Honorable Andrew Chappell, Judge. _______________ AFFIRMED _______________ Robert N. Downer and Isaac D. Sarinana of Shuttleworth & Ingersoll, Cedar Rapids, attorneys for appellant. Kevin J. Visser and Nicholas Petersen of Simmons Perrine PLC, Cedar Rapids, attorneys for appellee. _______________ Considered without oral argument by Tabor, C.J., and Greer and Langholz, JJ. Opinion by Tabor, C.J. Dissent by Greer, J. 1 TABOR, Chief Judge. In its commercial lease, the Law Office of Melvin O. Shaw, P.L.C. had a right of first refusal to buy its rented space if the landlord received a third- party purchase offer. But the landlord, A & M Development, L.L.C., failed to notify Melvin Shaw when it sold the property in 2015. Seven years later, Shaw sued for breach of contract. A & M contends that Shaw waived his claim under the doctrine of estoppel by acquiescence and that his delay led to an unreasonable failure to mitigate damages. Following a bench trial, the district court rejected both defenses. On appeal, A & M renews its argument that Shaw should have acted sooner after learning of the breach and asks us to reduce the damage award because Shaw failed to mitigate. Because the district court properly rejected those theories, we affirm. I. Facts and Prior Proceedings Located in Coralville, Plaza on 5th is a multi-use real estate development built in 2013. The City of Coralville contracted with McComas- Lacina Construction—a company owned by Mike Hahn and Al Morelock— to complete the project. Plaza on 5th houses the Coralville Center for the Performing Arts, residential condominium units, and several commercial office spaces. It was owned and operated by A & M Development, a company created by Hahn and Morelock to keep the real estate business separate from their construction company. When the building was finished, A & M hired real estate broker Teresa Morrow to manage its interests. Melvin Shaw is an attorney who has been in solo practice since 2006.1 In 2013, Shaw expressed interest in moving his firm into Plaza on 5th, and the parties drafted a letter of intent to lease. The letter of intent provided for 1 Like the parties, we will refer to Shaw as both the individual and his law firm. 2 three three-year renewal periods with an option to purchase the unit at the end of the third year of the base period. Later, the parties reached different terms. Instead of a purchase option, Shaw held a right of first refusal to purchase the unit if A & M received a bona fide third-party purchase offer. That lease term required notice to Shaw: Tenant shall have a Right of First Refusal to purchase the Unit. If Landlord receives a Bonafide third party offer to purchase the condominium unit, Landlord shall send written notice to the Tenant giving the terms of the offer to purchase. Tenant shall have forty-five (45) days to arrange financing and commit to purchase of the Unit at the offered price. If Tenant does not commit to purchase the unit and close within sixty (60) days of Landlord notice of the first offer, Landlord shall be free to sell the unit to the third party. The Landlord and Tenant agree to execute and record a Memorandum of Lease to establish this option of record. Two years into Shaw’s lease, broker Morrow was approached by a third-party buyer, the Mostafavi family. Morrow negotiated the sale of some units in the development, including Shaw’s office. The deal closed in August 2015. A & M did not notify Shaw that an offer was presented or that a sale was completed. Shaw learned of the sale months later when speaking with a neighboring tenant. In 2019 and 2020, Shaw negotiated a lease with the new owners, bargaining again for the right of first refusal. At the same time, he asked about purchasing his unit. During those two years, he sent emails on at least four occasions to Morrow—who continued to manage the property— and to representatives of the Mostafavi family. On Morrow’s advice, the Mostafavi family declined to sell. Finally, in 2022, Shaw demanded to know the terms of the Mostafavi offer. A & M acknowledged failing to honor Shaw’s right of first refusal. But A & M contended that Shaw’s subsequent 3 actions had waived any claims related to that right. Shaw then sued A & M for breach of contract. After a bench trial, the district court awarded Shaw $257,216 in damages plus post-judgment interest. It reached this number using a methodology proposed by Shaw, considering unrealized appreciation, the net difference between rent paid and the mortgage which would have been paid, and the loss of principal from not being granted the right of first refusal. In calculating the unrealized appreciation, Shaw estimated his unit to be worth $275 per square foot. The district court instead used $166.73 per square foot, the price paid by the new owners for the units they purchased. A & M now appeals the district court’s judgment. II. Scope and Standard of Review In a breach-of-contract action, we review for correction of errors at law. Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 2013). The district court’s factual findings carry the weight of a special verdict and are binding if supported by substantial evidence. CMT Highway, LLC v. Logan Contractors Supply, Inc., 34 N.W.3d 508, 514 (Iowa 2026). But we don’t extend that deference to the court’s legal determinations. R.E.T. Corp. v. Frank Paxton Co., 329 N.W.2d 416, 419 (Iowa 1983). “We view the evidence ‘in the light most favorable to the trial court’s judgment.’” Brokaw v. Winfield-Mt. Union Cmty. Sch. Dist., 788 N.W.2d 386, 388 (Iowa 2010) (quoting Miller v. Rohling, 720 N.W.2d 562, 567 (Iowa 2006)). III. Analysis A & M reprises his two defenses, arguing (1) Shaw waived his breach of contract claim under the estoppel by acquiescence doctrine and (2) Shaw failed to mitigate his damages. We consider these claims in turn. 4  A. Estoppel by Acquiescence A & M invokes the doctrine of estoppel by acquiescence. Estoppel by acquiescence is treated as a waiver theory. See Westfield Ins. Cos. v. Econ. Fire & Cas. Co., 623 N.W.2d 871, 880 (Iowa 2001). This treatment corresponds “to the absence of . . . justifiable reliance and prejudice elements.” Id. The doctrine applies when parties know or should know that they are entitled to enforce a right and neglect to do so for so long as to imply that they intended to waive or abandon their right. Id. To prove estoppel by acquiescence, A & M must show that (1) Shaw knew his rights and the material facts; (2) took no action for a considerable time; and (3) behaved in a manner that led A & M to believe that he approved of its sale to a third party. See Markey v. Carney, 705 N.W.2d 13, 21 (Iowa 2005). A & M asserts that by remaining silent, Shaw led it to believe that he had acquiesced to the breach. A & M also contends that by negotiating lease renewal terms with the new owners, Shaw impliedly waived his breach of contract claim. The district court disagreed, finding that A & M failed to prove that Shaw acted in a manner that led the former landlord to believe that he did not object to the breach. The right at issue is Shaw’s right of first refusal when A & M received a purchase offer. We have described the right of first refusal as “a conditional option” that depends on the owner’s decision to sell the property. Stone v. Stone, No. 11-1146, 2012 WL 2122319, at *2 (Iowa Ct. App. June 13, 2012) (citation omitted). After the landlord provides notice of a bona fide offer from a third party, the tenant’s right of first refusal ripens into an option to purchase under the terms of that offer. Id. at *3. A right of first refusal may be waived. Pistol Ltd. v. Green Family Flooring, Inc., No. 22-0126, 2023 WL 2905165, at *3 (Iowa Ct. App. Apr. 10, 2023). 5  When he entered the lease with A & M including a right of first refusal, Shaw had a dormant right, enforceable when he received notice of the third- party purchase offer. See McGehee v. Elliot, 849 N.E.2d 1180, 1188 (Ind. Ct. App. 2006). In McGehee, the Indiana Court of Appeals held that right-holders are not entitled to enforce their right until they receive notice of the offer. Id. at 1189. When the owner sold without first giving the right-holder the chance to exercise the option, the “breach of the agreement was complete.” Id. After the breach, the right-holder was not required to act immediately. Id. Instead, the only time limitation was the statute of limitations. Id. When a landlord breaches a right of first refusal, tenants typically have two possible remedies: sue for specific performance against the new owner or for damages against the previous owner. See C & J Delivery, Inc. v. Vinyard & Lee & Partners, Inc., 647 S.W.2d 564, 569 (Mo. Ct. App. 1983). Different time standards restrict those two remedies. In an action for specific performance against the new owner, if the tenants fail to invoke their right of specific performance “within a reasonable time after the breach,” they have waived that right. Id. (emphasis added). But in an action for damages against the previous owner, the tenants retain their cause of action provided they sue “within the period of time fixed by the statute of limitations.” Id. (emphasis added). In Abdallah v. Abdallah, the Third Circuit held that a tenant’s choice to continue its lease with the new owner did not bar the right to sue for damages “within the period of time fixed by the statute of limitations.” 359 F.2d 170, 175 (3d Cir. 1966). So did Shaw, upon learning second-hand of the sale, act in a way that led A & M to believe that he waived his right to enforcement? The district court analyzed each element in Markey and found that Shaw did not explicitly waive any substantive right. The court found that while Shaw did not move 6 to enforce the right promptly after learning of the sale, there was nothing he could have done aside from suing A & M. The district court also found that Shaw’s conduct did not imply waiver. The court’s reasoning was twofold. First, Shaw’s interactions after the 2015 sale were with the new owner, not A & M. Thus, any behavior suggesting an intent to waive would not have been directed at A & M. Second, Shaw’s interactions with the Mostafavi family did not convey an intent to waive. Shaw bargained for a right of first refusal in the renewed lease, showing he never intended to forego this right. We agree with the district court’s conclusion. When A & M sold the property to the Mostafavi family without notice to Shaw, the breach was complete. After the breach occurred, Shaw’s only deadline for his damage claim was the ten-year statute of limitations. See Iowa Code § 614.1(5) (2023); see also McGehee, 849 N.E.2d at 1189; C & J Delivery, 647 S.W.2d at 569; Abdallah, 359 F.2d at 147–75. The district court’s findings are supported by the evidence, and we will not disturb its decision. B. Mitigation of Damages Turning to damages, A & M contends that Shaw’s award should be reduced because he failed to mitigate his losses by waiting to sue. A & M bears the burden to offer substantial evidence that “(1) there was something [Shaw] could have done to mitigate his loss, (2) requiring [Shaw] to do so was reasonable under the circumstances, (3) [Shaw] acted unreasonably in failing to undertake the mitigating activity, and (4) a causal connection exists between [Shaw’s] failure to mitigate and the damages claimed.” See Vasconez v. Mills, 651 N.W.2d 48, 53–54 (Iowa 2002). 7  A & M points to evidence that Shaw remained idle for years, and incurred greater damages by doing so. We see the record differently. Shaw did not sit idly by and allow damages to pile up. He made several requests to purchase the property from the new owners. If successful, his efforts would have prevented damages from accumulating. And even if Shaw could have sued sooner, it was not unreasonable to wait. As the district court explained, Shaw had ten years to bring his breach of contract claim; his failure to sue sooner—without more—was not enough to show an unreasonable failure to mitigate. We affirm the district court’s ruling. AFFIRMED. Langholz, J., concurs; Greer, J., dissents. 8 GREER, Judge (dissenting). I respectfully dissent from the majority decision. In my view, their analysis creates a new standard to apply in cases involving a defense of estoppel by acquiescence in contract claims that I cannot find supported by any Iowa case. The majority advocates that Melvin “Shaw’s only deadline was the ten-year statute of limitations” to suggest that his inaction could continue until just before the statute of limitations was to run and that because he had ten years to bring his claim, “his failure to sue sooner— without more—was not enough to show an unreasonable failure to mitigate.” As A & M Development, L.L.C. (A & M) adeptly states in its appellate reply brief, “hitching these two defenses to the statute of limitations to determine whether a plaintiff has waived a claim or failed to mitigate his damages collapses the analysis for those defenses into a statute of limitations argument.” Based upon Shaw’s inaction and the existing case law, I would dismiss the petition as a matter of law as I would find the defense of estoppel by acquiescence applies and Shaw waived his breach of contract claim. “Estoppel by acquiescence occurs when a person knows or ought to know of an entitlement to enforce a right and neglects to do so for such time as would imply an intention to waive or abandon the right.” Schiltz v. Teledirect Int’l, Inc., 524 N.W.2d 671, 674 (Iowa Ct. App. 1994); see also id. (applying the defense of estoppel by acquiescence to conduct where base rent was accepted for a twenty-nine-month period without objection). Schiltz provides guidance in the situation involving a breach of the contractual terms of a lease.2 Id.; see also Jack Moritz Co. Mgmt. v. Walker, 429 N.W.2d 127, 129 2 I believe care should be exercised in extending reasoning under Markey v. Carney to non-child-support cases. 705 N.W.2d 13, 22 (Iowa 2005). In Markey, the court distinguished cases that attempted to bar recovery of child support by requiring “some kind of affirmative act, inconsistent with the intention to collect child support, in order to 9 (Iowa 1988) (noting, in the context of a lease agreement, “[t]he inference the lessor has waived a breach is supported by conduct of the lessor which is ‘consistent with the continued existence of the lease and inconsistent with its termination by forfeiture’” (citation omitted)); Yuska v. Kelley, No. 00-1866, 2002 WL 535062, at *1 (Iowa Ct. App. Apr. 10, 2002) (concluding the landlord “waived his right to enforce the lease against [the tenants] by continuing to lease the apartment . . . following actual notice that [one of the tenants] had moved” as landlord’s action or failure to act “was inconsistent with an intent to immediately terminate the lease”). “Estoppel by acquiescence is based on an examination of the rightholder’s acts to determine whether the right has been waived.” Schiltz, 524 N.W.2d at 674 (citation omitted). This “estoppel” doctrine “is, in reality, a waiver theory.” Westfield Ins. Cos. v. Econ. Fire & Cas. Co., 623 N.W.2d 871, 880 (Iowa 2001). “Waiver can be shown by the affirmative acts of a party, or can be inferred from conduct that supports the conclusion waiver was intended.” Scheetz v. IMT Ins., 324 N.W.2d 302, 304 (Iowa 1982) (noting that, when evidence is undisputed, the resolution of a waiver “issue is one of law for the court”). To me, Shaw’s conduct is more in line with conduct showing waiver. Shaw went from 2016 until 2022 before making contact with A & M about the breach of the right of first refusal contract term and continued leasing the unit with Mostafavi. The doctrine of estoppel by acquiescence “advances a policy of stability and conclusiveness.” Am. Fam. Mut. Ins. v. Allied Mut. Ins., imply the obligee parent intended to waive the right to child support.” Id. That same reasoning has not been applied to contract cases involving estoppel by acquiescence. Compare id. with Schiltz, 524 N.W.2d at 674 (finding knowledge of entitlement to enforce a right and neglect to do so would imply an intention to waive or abandon the right). 10 562 N.W.2d 159, 165 (Iowa 1997) (citation omitted). Still, both the district court and the majority discount the passage of time because “there was nothing he could have done aside from suing A & M.” To me that is a conclusion and not a reference to conduct by Shaw. In my view, the touchstone of the analysis is the rightholder’s conduct related to the contract right—here, the right of first refusal. The timeline is undisputed.3 Before the lease was negotiated and signed at the end of 2013, Mike Hahn, a principal of A & M, met Shaw in the buildout of the unit and received feedback about what Shaw might need in the office space. According to Hahn, Shaw could not purchase the property at that time. The property Shaw leased was sold by A & M to Mostafavi in August 2015.4 As a part of the deal, Mostafavi was assigned and assumed all existing leases, including Shaw’s. The property manager, Teresa Morrow, testified that all tenants would have been mailed notices indicating the new lease holder to be paid and where to send the lease payments, but no copy of a notice was produced at trial. Still, she clarified that the checks were required to be issued to the current landlord. In any event, based upon Shaw’s testimony, he knew about the breach by A & M of the contract term related to his right of first refusal by “[e]arly 2016, fall of 2015.” At trial, Hahn testified he did not provide a written notice about the purchase, nor did he speak with Shaw again after the property was sold to Mostafavi. After learning of the sale, Shaw, who described himself as a real estate lawyer, continued making lease payments under his existing lease and initially It is also undisputed that A & M did not send written notice of the offer from 3 Mostafavis and thus, breached the contractual term to offer Shaw the right of first refusal. 4 Both Jalil and Mahrooyeh Mostafavi purchased the real estate from A & M, but we refer to them collectively as Mostafavi. 11 did not make any objections related to the sale of the property. In fact, there was no mention of Shaw’s right of first refusal when Shaw emailed Morrow in January 2019 to ask about buying his office from Mostafavi. Then in May, Shaw asked Morrow for a proposed lease agreement but added “I have a purchase option5 that I’d like to exercise instead. Let me know if the Mostafavi family will entertain an offer.” (Emphasis added). In June, Shaw followed up again expressing an interest to purchase the unit, but the owners were not interested in selling. So in August, Shaw proposed that his renewal lease have a first right of refusal clause, which was rejected by Mostafavi. Because Shaw only had the right of first refusal, not an option to purchase, there was no opportunity to purchase the unit from Mostafavi. Shaw then selected new lease terms with a renewal term in 2022 and signed the lease in September. In August 2020, Shaw again tried to purchase the unit and again the proposal was rejected. Time went by, and in May 2022, Morrow reached out to Shaw to inquire if he still wanted to lease the unit. A new lease was proposed, Shaw did not ask for a right of first refusal, and he renewed his lease in June 2022 with no option for first right of refusal. Now, seven years out, in August 2022, Shaw sent a letter to A & M and Mostafavi demanding access to the terms of the 2015 purchase. Interestingly, Shaw contended that A & M failed to perform its duties related to the right of first refusal but also that Mostafavi had “actual notice” of the 5 At no time has Shaw had a lease with a purchase option, which allows for a purchase and is different that a right of first refusal. A right of first refusal is distinct from a purchase option. See In re Est. of Cawiezell, No. 19-1214, 2020 WL 6484004, at *4 (Iowa Ct. App. Nov. 4, 2020) (noting an option to purchase is a power to compel the owner to sell, whether or not the owner is willing to part with the real estate, and a right of first refusal is the right to elect to buy the property at the same terms as those contained in a third party’s good-faith offer). 12 lease and thus “is not and never was a bona fide purchaser of the Unit.” A & M responded asserting that Shaw waived the error in the sale process by making eighty-four lease payments to Mostafavi and then renewing the lease in September 2019 and again in June 2022, extending the lease to July 31, 2025. In April 2023, almost ten years after signing the A & M lease and over seven years after learning of the sale, Shaw petitioned for damages under a breach-of-contract claim. The record supports A & M’s argument that Shaw “assessed” his situation for three years after learning of the sale without any contact about the right of first refusal to A & M, Mostafavi, or the property manager, Morrow. That three-year time lapse provides ample evidence of an intent to waive because Shaw knew of his “entitlement to enforce a right and neglect[ed] to do so for such time as would imply an intention to waive or abandon the right.” Schiltz, 524 N.W.2d at 674. The majority maintain that the payment of rent over the years to Mostafavi should not be a factor in showing Shaw’s acquiescence to A & M’s breach of the right-of-first-refusal clause in the contract. I disagree as it goes to Shaw’s conduct. It is hard to square the argument that Shaw’s negotiations with Mostafavi for a right of first refusal somehow supports Shaw’s desire to not waive his claim related to the right of first refusal to A & M. If we are to focus on Shaw’s conduct solely with A & M, it is difficult to avoid estoppel by acquiescence. Contrary to the majority view, I find Shaw’s conduct in attempting to negotiate a right of first refusal anew with Mostafavi supportive of his waiver of the right under the first lease since he never opted to raise that right until 2019. Instead, I would be more convinced of the majority’s conclusion on the waiver issue if Shaw had, upon learning of the sale, made any contact with A & M to demand enforcement of his right. 13 And in the scope of what he might have done years back, his 2022 letter to A & M and Mostafavi asserts a theory that both had notice and both had responsibility. Finally, on the proof of waiver, I find persuasive Shaw’s description of his conduct during cross-examination at trial: Q. My question was: Did you take any action? It was not related to your thought processes that you went through. And did you take any action at that time and, if so, what was it? A. Please explain, what do you mean by action? Q. Did you write a letter to someone? Did you make a telephone call? Did you send a fax? Did you initiate a lawsuit? Did you take any action relative to this sale that was based upon your learning that this had taken place and in what you thought was contrary to the terms of your lease? A. If you’re asking me if I contacted A & M—is that your question, sir? Q. I’m asking if you took any action. I’m not limiting it to A & M. A. Okay. The action that I took was to assess where did I stand in relation to the contract to where—to having the notice. So the action that I took was to determine how do I comply with the lease? How do I preserve my right of first refusal? What are my options as—against the buyer, which is what is—what are the litigation costs? Is there a practical solution to this matter? Those are the actions that I took. But missing from Shaw’s answers are any reference to his conduct related to A & M directly and specifically to his failure to assert his contractual rights as to A & M. The lack of action initially upon learning of the breach, the payment of lease payments over the course of several years, and the acceptance of lease terms without a right of first refusal implies that, as to A & M, Shaw abandoned his contractual right. That he had other legal options early on and that the statute of limitations had not run do not change the undisputed fact that he knew of the entitlement to the right and neglected 14 to enforce the right for such time as to show waiver. See id. (finding acceptance, without objection, to rent payments and the execution of a lease with other terms showed conduct that the options to renew had been exercised). I would dismiss Shaw’s petition. 15