Carey v. Lincoln Loan Co.
Decision Date | 01 March 2000 |
Citation | 998 P.2d 724,165 Or. App. 657 |
Parties | David Lee CAREY and Tanja Marie Carey, husband and wife, Respondents, v. LINCOLN LOAN CO., an Oregon corporation, Appellant. |
Court | Oregon Court of Appeals |
Steven E. Benson, Portland, argued the cause and filed the briefs for appellant.
John M. Berman, Tigard, argued the cause for respondents. With him on the brief was Damon J. Petticord.
Before De MUNIZ, Presiding Judge, and HASELTON and WOLLHEIM, Judges.
Defendant Lincoln Loan Company appeals, assigning error to the trial court's allowance of plaintiffs' motion for summary judgment on their claims for declaratory relief and to the court's related award of attorney fees.1 The trial court concluded that the maximum prepayment restriction of the parties' land sale contract was unenforceable as violating ORS 82.170 and that, alternatively, the combination of that prepayment restriction and the contract's restrictions on assignment violated public policy as effecting an impermissible restraint on the alienability of real property. We conclude that the trial court erred in both of those alternative rationales and, accordingly, reverse and remand.
For purposes of this appeal, the following facts are uncontroverted: On June 14, 1990, the parties entered into a land sale contract by which plaintiffs agreed to purchase from defendant a home in North Portland. Defendant provided the contract, a preprinted Stevens-Ness form entitled "Contract-Real Estate." On that form, defendant had added the following pertinent provisions:
The transaction involved only the land sale contract. Plaintiffs gave no promissory note or trust deed.
Thereafter, plaintiffs thrice borrowed funds from defendant to make improvements to the property and for other purposes. Each of those loans was secured by a note and mortgage against the property. Plaintiffs also obtained a loan from, and gave a mortgage to, the Portland Development Commission to make improvements to the property. As a result of each of those transactions, plaintiffs' total indebtedness secured by their interest in the property was approximately $60,000.
In December 1996, a third party made an offer to purchase the property from plaintiffs. Defendant agreed that plaintiffs could pay off the mortgages but, invoking the land sale contract's prepayment restriction, defendant refused to allow plaintiffs to pay off the principal balance under that contract. Defendant informed plaintiffs that, with defendant's consent, the land sale contract could be assumed by a new buyer, explaining that its consent was necessary to "verify that the new buyer had seen the home and had the financial ability to make the contract payments." The prospective buyers refused to assume the contract. Consequently, the sale failed.
In August 1997, plaintiffs filed this action, seeking, inter alia, a declaration of their rights under the land sale contract. The operative first amended complaint alleged, in part:
Plaintiffs sought a declaration that they were entitled to prepay the entire amount owed to defendant and, upon payment, to sell their residence, with defendant being required to execute "any documents necessary to terminate" its interest. Plaintiffs further sought a declaration that defendant was not entitled to interest that accrued on the principal balance after November 1996, when plaintiffs presented a purchaser for the property and defendant refused to accede to the sale. Finally, plaintiffs sought attorney fees under the fee provision of the land sale contract.
After some preliminary procedural sparring, the parties filed cross-motions for summary judgment. Specifically, plaintiffs sought a summary determination that: (1) the prepayment restriction was "void for lack of notice under ORS 82.170," and, consequently, plaintiffs had "an absolute right to prepay"; (2) the prepayment restriction and assignment clauses were unenforceable as unlawful restraints on plaintiffs' right to alienate their property; (3) the contractual restrictions on prepayment and sale or assignment were "unconscionable and violate defendant's duty to act in good faith"; and (4) because plaintiff was entitled to pay the full balance due, defendant's failure to accept payment terminated the accrual of interest and damages on plaintiffs' obligation under the contract.2
Defendant's position was, essentially, the obverse: First, ORS 82.170 did not apply to the land sale contract and, consequently, that statute did not bar enforcement of the maximum prepayment restriction. Second, neither the prepayment restriction nor the assignment restriction of the land sale contract either individually or in combination effected an unlawful restraint on the alienability of the property.3
The trial court granted plaintiffs' motion for summary judgment and denied defendant's cross-motion:
The court consequently declared that plaintiffs were entitled to sell the property and that, upon full payment of the contract balance, they were entitled immediately to "receive a deed to the property deeding to them marketable title." The court subsequently entered its judgment setting the terms for the sale of the property and a supplemental judgment awarding plaintiffs fees pursuant to the contract.
On appeal, defendant raises four assignments of error. The first three pertain to the allowance of summary judgment and, specifically, to the trial court's determinations that the land sale contract is subject to ORS 82.170 and that the disputed contract provisions are unenforceable as unreasonable restraints against alienation. The fourth assignment challenges the award of contractual attorney fees.
In its first assignment of error, defendant asserts that the trial court erred in concluding that a land sale contract is a "loan agreement" governed by the notice provisions of ORS 82.170. ORS 82.170 provides:
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