Beik v. American Plaza Co.

• Decision Date: 06 December 1977
• Citation: 572 P.2d 305,280 Or. 547
• Parties: Harry F. BEIK and Dorothy H. Beik, husband and wife, Edgar F. Arnold and Evelyn W. Arnold, husband and wife, Neil L. Bowen and Diane L. Bowen, husband and wife, T. M. Curtin, Kenneth D. Fennell and Antoinette Fennell, husband and wife, G. E. Gjerde and Mabel M. Gjerde, husband and wife, Florida Kissling, Marian R. Morley, Jan Mauritz, E. E. Oberhofer, Riley H. Taylor and Catherine M. Taylor, husband and wife, Frank P. Tracy and Evelynne Tracy, husband and wife, Ronald L. Travers and Judy A. Travers, husband and wife, Jeannine B. Cowles, Respondents-Cross-Appellants, v. AMERICAN PLAZA CO., a corporation, and W. C. Sivers Co., a corporation, Appellants-Cross-Respondents, American Condominium Homes, Inc., a corporation, Defendant.
• Court: Oregon Supreme Court

Page 305

572 P.2d 305

280 Or. 547

Harry F. BEIK and Dorothy H. Beik, husband and wife, Edgar F. Arnold and Evelyn W. Arnold, husband and wife, Neil L Bowen and Diane L. Bowen, husband and wife, T. M. Curtin Kenneth D. Fennell and Antoinette Fennell, husband and wife G. E. Gjerde and Mabel M. Gjerde, husband and wife, Florida Kissling, Marian R. Morley, Jan Mauritz, E. E. Oberhofer Riley H. Taylor and Catherine M. Taylor, husband and wife, Frank P. Tracy and Evelynne Tracy, husband and wife, Ronald L. Travers and Judy A. Travers, husband and wife, Jeannine B. Cowles, Respondents-Cross-Appellants, v. AMERICAN PLAZA CO., a corporation, and W. C. Sivers Co., a corporation, Appellants-Cross-Respondents, American Condominium Homes, Inc., a corporation, Defendant.

Supreme Court of Oregon, Department 1.

Argued and Submitted Sept. 12, 1977.

Decided Dec. 6, 1977.

[280 Or. 548-A] Miles J. Sweeney, Portland, argued the cause for appellants-cross-respondents. With him on the briefs were Richard J. Brownstein, David J. Sweeney and Gilbertson, Brownstein, Sweeney & Kerr, Portland.

Paul R. Meyer, Portland, argued the cause for respondents-cross-appellants. With him on the briefs were Elizabeth H. Yeats and Kobin & Meyer, Portland.

Before DENECKE, C. J., HOWELL and LENT, JJ., and GILLETTE, J. Pro Tem.

HOWELL, Justice.

This is a suit in equity for specific performance of a contract or, alternatively, for money damages for breach of the contract. The plaintiffs, condominium purchasers, prevailed in the trial court and the defendants appeal.

Defendant American Plaza Company is the owner and developer of a high-rise condominium The controversy here focuses on the condition of several condominium units in the second tower, Grant Tower, and whether or not the contracts between the plaintiffs and the developer were breached by the way in which the condominiums were constructed.

development in Portland, Oregon, called the American Plaza (Plaza). The Plaza, when completed, is to consist of three multistoried towers, covered parking facilities, a recreation hall, putting green, wine cellar, and other amenities. At present only two of the three towers are completed. W. C. Sivers, Inc. (Sivers), another defendant, was the contractor employed to build the towers and also was part owner of American Plaza Co. at the time of the execution of the contracts between the plaintiffs and American Plaza Co. in 1971, 1972 and 1973. In April of 1975 Sivers became the sole owner of American Plaza Co.

The plaintiffs are all owners of condominium units in Grant Tower who purchased their units under a sales agreement which states, in pertinent part:

"THE AMERICAN PLAZA CONDOMINIUM

Sales Agreement

"THIS AGREEMENT, * * * between AMERICAN PLAZA CO., an Oregon Corporation, hereinafter called 'Seller', and _______ * * * hereinafter called 'Purchaser'.

"WITNESSETH:

"WHEREAS, Seller is the holder of certain rights with respect to parcels of real property located on S.W. First and Lincoln Streets in the City of Portland, Oregon;

"WHEREAS, the Seller proposes to construct on said property a number of residential buildings in accordance with plans and specifications prepared by Travers-Johnston, Architects, subject to such changes or modifications therein as said architects shall deem appropriate or necessary to effect improvements and betterments to the project, a copy of which plans are on file and available for Purchaser's inspection at the Seller's sales office at the project site ;

"WHEREAS, upon completion of such construction the Seller shall file with the recording officer of Multnomah County, Oregon, a declaration to create a unit ownership project pursuant to the provisions of ORS 91.505 to 91.675 to be known as American Plaza, hereinafter called 'Project';

"WHEREAS, Purchaser desires to buy from Seller, and Seller desires to sell to Purchaser a condominium unit in the premises hereinafter described pursuant to the terms, covenants and conditions of this agreement;

"The parties hereto agree as follows:

"1. SALE AND DESCRIPTION OF PREMISES. Seller hereby sells to the Purchaser and Purchaser hereby purchases from Seller:

"(a) Condominium Unit No. ______ in said Project, which is _______ type Unit, in _______ Tower, as shown on said plans as the same may be bettered and improved.

" * * *." (Emphasis supplied.)

Plaintiffs contended in the trial court that the defendants breached the sales agreement and sought specific performance of the agreement or, alternatively, damages. Plaintiffs complained specifically that the windows leaked air and water in contravention of the specifications; the sliding glass doors did not conform to the SGD-A3HP performance standard as provided for in the specifications; the air conditioning units were not Remington type EK units as provided for in the specifications; items required in the architect's final inspection had not been completed, such as painting and items of that nature; and the contractor had failed to provide a wine cellar, putting green, roof garden, skylight, rental cars and a minibus. The defendants admit that the specifications were not followed literally, but attempt to argue that variations from the specifications are permissible.

The trial court found for the plaintiffs on all items except the rental cars and minibus.

The defendants appeal only from the adverse decision as to the sliding glass doors, air conditioners, putting green, roof garden, and skylight. In all other matters the trial court's decision is not questioned.

The defendants' first several assignments of error all argue that for one reason or another the specifications for construction of Grant Tower are not in the contract between the condominium purchasers and the developer. Defendants argue in succession that the recitals at the top of the sales agreement prefaced by "WHEREAS" are not part of the contract and thus the Remington type EK air conditioner and the SGD-A3HP sliding door specifications are not part of the contract; that if they are part of the contract, they refer only to the plans and not to the specifications of the tower; and that if the contract includes both the plans and specifications, only those specifications authored by the architects, Travers-Johnston, are included in the contract.

We think that it is obvious from reading the contract that the whereas clauses, which clearly refer to both plans and specifications, were intended to be included in the contract. We find that all of the plans and specifications are part of the contract. ¹

Defendants next argue that if all of the specifications are included in the contract, then paragraph 3.1, Division 1 of General Requirements, is applicable and legitimizes the substitutions made by the contractor. Paragraph 3.1 provides:

"MATERIAL SUBSTITUTION

"3.1 Notwithstanding any reference in the specifications to any article, device, product, material, fixture, form or type of construction by name, make or catalogue number, * * * the Contractor, in such cases, may at his option, use any article, device, product, material, fixture, form or type of construction which in the judgment of the Owner expressed in writing is equal to that specified. See Instructions to Contractor and Subcontractors for method of requesting approval." (Division 1, p. 1-1, of Specifications, Travers/Johnston, Architects.)

The defendant Sivers argues that the above clause allows the contractor to substitute materials with the approval of the owner, and since he was both the owner and the contractor, any substitution actually made was necessarily approved or it would not have been made in the first place. Further, the defendants argue that the provision requiring a writing from the owner is mere verbiage because the owner and the contractor are the same person.

The plaintiffs properly point out that at the time of the execution of the contract there was no identity of interest between the owner and the contractor because Sivers was not then the sole owner of American Plaza. We think that the lack of identity at the execution of the contract, coupled with the lack of a writing authorizing the substitution, is dispositive of this argument. We do not suggest that a writing would necessarily have been conclusive. A contracting party, under a provision like this one, is required to exercise his judgment in good faith. In addition to preventing disputes between the owner and the contractor, the writing requirement in Paragraph 3.1 provides some assurance that the owner, when approving a substitution, has actually considered and exercised his judgment about its equivalence. The plaintiffs in this case, who purchased with reference to Paragraph 3.1, are entitled to the benefit of its provisions.

Given the inclusion of the specifications in the contract, defendants next argue that those specifications are only performance standards which have been met by what was actually installed. We shall discuss each item individually.

SLIDING GLASS DOORS

Each unit contains at least one sliding glass door. Actually, the door installations constitute an entire wall in the living areas of each apartment. They are as wide as 15 feet and consist of two fixed glass panels and a sliding glass door. Some of the units are slightly smaller. The applicable specifications state that "all aluminum sliding glass doors shall meet or exceed SGD-A3HP requirements" which means a high performance heavy duty door. The A3HP door is designed for high-rise buildings and is constructed with high-grade material for maximum performance.

The defendants do not actually claim that the doors in place at Grant Tower meet A3HP specifications. Rather, they maintain that they should be permitted to modify the installations at their expense and that such modifications will bring the present doors up to A3HP standards. The modifications proposed by the defendants contemplate two alterations. They propose to secure a heavy...