City of Eugene v. Monaco

• Citation: 171 Or. App. 681,17 P.3d 544
• Parties: CITY OF EUGENE, a municipal corporation, Respondent, v. Joseph MONACO, dba Office Furniture Liquidators, Appellant.
• Decision Date: 27 December 2000
• Court: Oregon Court of Appeals

17 P.3d 544

171 Or. App. 681

CITY OF EUGENE, a municipal corporation, Respondent, v. Joseph MONACO, dba Office Furniture Liquidators, Appellant.

(16-98-03917; CA A105054).

Court of Appeals of Oregon.

Argued and Submitted February 28, 2000.

Decided December 27, 2000.

Gary M. Georgeff, Brookings, argued the cause and filed the briefs for appellant.

Jens Schmidt, Eugene, argued the cause for respondent. With him on the brief was Harrang Long Gary Rudnick.

Before EDMONDS, Presiding Judge, and ARMSTRONG and KISTLER, Judges.

KISTLER, J.

Plaintiff City of Eugene filed this action against defendant Joseph Monaco for breaching a lease. Monaco counterclaimed for breach of the lease and for breach of the duty of good faith.¹ Monaco appeals from a judgment in the city's favor. We affirm in part, reverse in part, and remand.

The city leased a building to Monaco² in 1993. Monaco used the building to operate a discount furniture business. In 1994, the parties executed a one-year written lease setting Monaco's rent at $3,120 per month. The written lease expired on June 30, 1995. On July 26, 1995, the city sent Monaco a letter stating that: (1) all of the conditions of the written lease were still in effect but Monaco's tenancy was now a month-to-month tenancy at will; (2) when the written lease expired, Monaco's option to renew the lease also expired; (3) the city was looking for other tenants but would provide Monaco with 30 days' notice if it accepted an offer from another tenant; and (4) the city was increasing Monaco's rent from $3,120 per month to $4,120 per month. According to Monaco, he agreed to the increased rent, in part, in exchange for a promise from the city that there would be no further rent increase unless someone else offered to lease the building.

Approximately a year later, the city sent Monaco another letter stating that as of October 1, 1996, it was raising Monaco's rent from $4,120 to $6,400 a month. The city later made the rent increase effective January 1, 1997. Monaco asked to see a copy of the competing offer to lease the building, which he believed was the condition for raising his rent. When the city refused, Monaco concluded that the city was not acting in good faith and refused to pay the increased rent.³ At the end of January 1997, the city gave Monaco 30 days' notice to vacate the building and terminated Monaco's tenancy on March 1, 1997. Monaco moved the business to another location where it ultimately failed.

In March 1998, the city filed this action against Monaco, alleging breach of contract and an alternative claim in quantum meruit to recover $12,027.36 for two months' unpaid rent and various unpaid fees. In his amended answer, Monaco alleged, as an affirmative defense, that the city was estopped from holding him personally liable because it knew that Office Furniture Liquidators, Inc., an Oregon corporation, had leased its building and that Monaco had only been acting as the corporation's agent. He also asserted counterclaims against the city for breach of the lease and for breach of the duty of good faith.

Before trial, the city moved to exclude any evidence that Office Furniture Liquidators was a corporation. The city reasoned that, because the 1994 written lease was between it and "Joe Monaco, dba Office Furniture Liquidators," see n 2 above, the parol evidence rule barred Monaco from proving that he was not the lessee. The trial court granted the city's motion but on a different ground. It reasoned that "if the Defendant's theory was that he is not personally liable and then in fact the corporation should be personally liable, * * * [t]hen the corporation should have been joined as a party in interest." Because Monaco had not joined the corporation as a party, the trial court ruled that "there cannot be any evidence with respect to that corporation, nor can it be referred to in argument or in opening statement."

At the close of the evidence, the city moved for a directed verdict on Monaco's counterclaims for breach of contract and breach of the duty of good faith. The trial court granted the motion because Monaco had failed to prove his damages with a reasonable degree of certainty. The court submitted the city's claims against Monaco to the jury, which found that Monaco had breached the lease and that the city's damages were $5,528. The trial court entered judgment accordingly.

Monaco raises seven assignments of error on appeal. Five of his assignments are directed at evidentiary rulings that could have affected the jury's verdict in favor of the city, and two assignments focus on the trial court's directed verdict rulings. We begin with the evidentiary rulings. Monaco assigns error to the trial court's ruling precluding him from introducing evidence of Office Furniture Liquidators' corporate status. He argues that, without that evidence, he was effectively barred from arguing that he acted as the agent for a disclosed principal and that the corporation was in fact liable for the lease payments.

At oral argument, the city acknowledged that the trial court's reason for excluding the evidence was incorrect. We accept the city's concession. If the evidence is otherwise admissible, a general denial is sufficient to permit a defendant to "offer evidence that he was acting as the agent of a corporation not only to disprove any individual liability on his part, but also to show that the contract alleged by [the] plaintiff is not the contract of the parties[.]" Lokan v. Roberts, 270 Or. 349, 352, 527 P.2d 720 (1974). In this case, Monaco not only denied the city's allegations generally, but he also alleged, as an affirmative defense, that the city should have sued the corporation for unpaid lease payments and fees.

The city argues that the trial court's ruling may be affirmed on an alternative ground. It reasons that the parol evidence rule bars Monaco from proving that he signed the lease in any capacity other than as "Joe Monaco, dba Office Furniture Liquidators." See ORS 41.740 (codifying parol evidence rule). We agree with the city that the writing is, on its face, unambiguous. It identifies Monaco as the person who is liable on the lease. The use of the phrase "dba Office Furniture Liquidators" implies that Monaco conducts his business under an assumed business name, but that fact does not suggest that Monaco is not personally responsible for the lease payments. Cf. Mitchell v. The Timbers, 163 Or.App. 312, 314, 319, 987 P.2d 1236 (1999)

.⁴ We also agree with the city that if the writing is unambiguous, the parol evidence rule applies to the use of extrinsic evidence to discharge the agent of a disclosed principle from contractual liability. Ritchie v. Mundon, 268 Or. 283, 286-288, 520 P.2d 445 (1974); Barbre v. Goodale, 28 Or. 465, 472, 38 P. 67, 28 Or. 465, 43 P. 378 (1896); accord Restatement (Second) of Agency § 320 comment b (1958) (parol evidence rule may bar an agent sued on a contract from proving that the other party knew that he or she was acting as an agent for a disclosed principal).⁵

Monaco does not dispute that the phrase "Joe Monaco, dba Office Furniture Liquidators" is itself unambiguous.⁶ He argues instead that the phrase is ambiguous when viewed in light of certain extrinsic evidence and legal rules. His argument is based in part on evidence that Office Furniture Liquidators, Inc., is a registered Oregon corporation. He also relies on an administrative rule for the proposition that Office Furniture Liquidators could not have been registered as an assumed business name because it is too similar to the registered corporate name. See OAR 160-010-0010(2)(a) (omission of the abbreviation "Inc." is insufficient to distinguish an assumed business name from a registered corporate name). It follows, Monaco concludes, that the phrase "Joe Monaco, dba Office Furniture Liquidators" could mean, when read in light of extrinsic evidence and relevant administrative rules, that he was doing business under the assumed business name of Office Furniture Liquidators, Inc.

One of the difficulties with Monaco's argument is that the evidence he relies on to establish an ambiguity is not the sort of extrinsic evidence that may be considered in deciding whether a writing is ambiguous. The court has stated that a trial court "may consider parol and other extrinsic evidence to determine whether the terms of an agreement are ambiguous. ORS 42.220." Abercrombie v. Hayden Corp., 320 Or. 279, 292, 883 P.2d 845 (1994).⁷ The statement in Abercrombie does not stand for the proposition that any extrinsic evidence may be considered in determining whether a term is ambiguous. Rather, Abercrombie's reliance on ORS 42.220 as support for its statement makes clear that the extrinsic evidence that may be considered is limited to the circumstances under which the agreement was made.⁸ See Hurst v. W.J. Lake & Co., 141 Or. 306, 314-15, 16 P.2d 627 (1932) (recognizing that the type of extrinsic evidence described in ORS 42.220 may be considered to determine whether a term is ambiguous); Criterion Interests, Inc. v. The Deschutes Club, 136 Or.App. 239, 243, 902 P.2d 110, on recons. 137 Or.App. 312, 903 P.2d 421 (1995) (same). In this case, Monaco did not ask the trial court to consider the circumstances under which the lease was made to show that an ambiguity existed. See Hurst, 141 Or. at 314-15, 16 P.2d 627. Rather, he sought to use contradictory evidence to vary an otherwise unambiguous term in the contract. Abercrombie does not go that far. See Criterion Interests, Inc.,136 Or.App. at 246,902 P.2d 110. The trial court correctly granted the city's motion in limine. Monaco has provided no reason for disturbing the jury's verdict that he breached his lease with the city.⁹

Monaco also assigns error to the court's ruling granting a directed verdict on his counterclaims for breach of good faith and breach of contract. The city argues that the court's ruling was correct but that, in any event,...