Cascade Shopping Center v. United Grocers, Inc., L-3

• Citation: 808 P.2d 720,106 Or.App. 428
• Decision Date: 03 April 1991
• Docket Number: L-3
• Parties: CASCADE SHOPPING CENTER, an Oregon partnership, Appellant, v. UNITED GROCERS, INC., an Oregon corporation, Respondent, and R.V.L.P. Foods, Inc., an Oregon corporation, and Robert D. Petros, Defendants. 89-2695-; CA A65319.
• Court: Oregon Court of Appeals

Page 720

808 P.2d 720

106 Or.App. 428

CASCADE SHOPPING CENTER, an Oregon partnership, Appellant, v. UNITED GROCERS, INC., an Oregon corporation, Respondent, and R.V.L.P. Foods, Inc., an Oregon corporation, and Robert D.

Petros, Defendants.

89-2695-L-3; CA A65319.

Court of Appeals of Oregon.

Argued and Submitted Jan. 11, 1991.

Decided April 3, 1991.

Patrick G. Huycke, Medford, argued the cause and filed the briefs for appellant.

Robert Bluth, Medford, argued the cause for respondent. On the brief were W.V. Deatherage and Frohnmayer, Deatherage, Pratt, Jamieson & Turner, P.C., Medford.

Before BUTTLER, P.J., and ROSSMAN and DE MUNIZ, JJ.

BUTTLER, Presiding Judge.

Plaintiff lessor brought this action to recover $252,243.96, plus interest, costs and attorney fees from defendant, alleging that defendant is liable for the obligations under plaintiff's lease, as modified, with R.V.L.P. Foods, Inc. (RVLP). ¹ The trial court granted defendant's motion for summary judgment, and plaintiff appeals from the resulting judgment. We review the record in the light most favorable to plaintiff, Seeborg v. General Motors, 284 Or. 695, 588 P.2d 1100 (1978), and affirm.

On February 3, 1987, plaintiff, owner of Cascade Shopping Center, and Drive and Save, Inc. (Lessee) executed a lease for a portion of the shopping center. Plaintiff later consented to Lessee's assignment ² of its interest to Fleming Foods West, Inc. (Fleming), which, in turn, assigned its interest to RVLP on January 13, 1988. In return for plaintiff's consent to the assignment to it, RVLP entered into an agreement modifying the lease by which it agreed to complete "Lessee's Work" ³ by May 15, 1988, and to make monthly payments of $1,148.97 on overdue amounts that its predecessors owed plaintiff. RVLP's failure to complete "Lessee's Work" or to pay the monthly installments constituted a default under the lease.

Defendant held perfected security interests in RVLP's inventory, trade fixtures, equipment, all proceeds therefrom and leasehold improvements and "leasehold interests." When RVLP defaulted on the debt that it owed to defendant, those parties entered into a "Voluntary Relinquishment of Collateral Agreement," which provided, inter alia:

"[RVLP] hereby assigns and transfers unto [defendant] all of its right, title and interest under said leases and [RVLP] hereby acknowledges that said assignments shall not constitute an assumption by [defendant] of any leasehold obligations thereunder nor an assumption by [defendant] of any debts, liabilities or obligations of [RVLP] to any third parties, except as expressly provided herein."

Defendant took possession on December 5, 1988, without plaintiff's consent, and plaintiff did not acknowledge defendant as assignee. Plaintiff and defendant immediately began negotiations for a lease modification that would require extensive renovation of the premises and would result in plaintiff's consent to an assignment from RVLP to defendant to be made on the same date as the modification. While negotiations were pending, defendant agreed that it would pay rental of $8,500 per month, with the understanding that plaintiff's acceptance of rent would not constitute an acceptance of the assignment or a waiver of its right to declare a default. Defendant also paid a portion of the taxes, insurance and common area charges attributable to the period of its occupancy. Defendant paid the rent as it became due.

After several months, negotiations broke down, because defendant refused to agree to the renovation work required by the proposed modification or to assume the obligations that RVLP had assumed. Plaintiff then instituted a forcible entry and detainer action, ORS 105.110, alleging, inter alia, that plaintiff had not consented to RVLP's assignment of the lease to defendant and that defendant had no right to possession. Defendant stipulated to a judgment for plaintiff for possession of the premises and vacated them on May 31, 1989. Plaintiff took possession on June 1, 1989, cancelled the lease on July 1, 1989, and entered into a new lease with a third party. It then began this action.

Plaintiff argues that, as assignee, defendant assumed RVLP's duties and obligations, including the obligations of Lessee and Fleming that RVLP had assumed when plaintiff consented to the assignment of the lease to it. ⁴ The lease provides that "[a]ny assignment or subletting without the prior written consent of Lessor shall be void[.]" It is undisputed that plaintiff never consented to the assignment of the lease to defendant or acknowledged defendant as an assignee. The assignment was, therefore, void, and defendant acquired no rights under the lease other than protection against any claim that might be made by RVLP. As a matter of general contract law, even if an assignment of a contract is valid, it does not impose on the assignee liabilities of the assignor without the assignee's assumption of those liabilities. By assuming the assignor's liabilities, the assignee creates privity of contract with the party to whom the assignor is liable. Daniels v. Parker, 209 Or. 419, 422-23, 306 P.2d 735 (1957). Because defendant expressly refused to assume RVLP's liabilities, it was not in privity of contract with plaintiff and is not...