Dean Vincent, Inc. v. McDonough

• Court: Supreme Court of Oregon
• Writing for the Court: TONGUE; LENT
• Citation: 281 Or. 239,574 P.2d 1096
• Decision Date: 08 February 1978
• Parties: DEAN VINCENT, INC., Appellant, v. Chester J. McDONOUGH and Stanley Amundson, Respondents.

Page 1096

574 P.2d 1096 281 Or. 239 DEAN VINCENT, INC., Appellant,
v.
Chester J. McDONOUGH and Stanley Amundson, Respondents. Supreme Court of Oregon, In Banc. Argued and Submitted Oct. 3, 1977.
Decided Feb. 8, 1978.

[281 Or. 240] Gregg C. Sayre, Portland, argued the cause for appellant. With him on the briefs were Marvin S. W. Swire, and Rosenberg, Swire & Riebe, Portland.

Willard L. Cushing, McMinnville, argued the cause for respondents. With him on the brief were Robert M. Johnstone, and Cushing, Johnstone & Peterson, McMinnville.

[281 Or. 241] TONGUE, Justice.

This is an action by a real estate broker for damages for breach of a listing agreement by the owners of business property near McMinnville who withdrew plaintiff's authority to sell that property, in violation of the terms of that agreement. The case was tried before a jury, which returned a verdict in favor of plaintiff in the sum of

Page 1097

$250. Plaintiff appeals from the resulting judgment. We affirm.

Plaintiff's complaint was in two counts: one seeking to recover $17,500 as liquidated damages under the terms of the listing agreement; the other seeking to recover $17,500 as the actual damages suffered by plaintiff as the result of the breach of that agreement. Defendants' answer admitted the signing of a "purported" listing agreement and pleaded various affirmative defenses which are not in issue on this appeal. Defendants did not, however, plead as an affirmative defense that the contract provision for liquidated damages was invalid for failure to satisfy the established requirements (a) that "the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach" and (b) that "the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation." ¹

Plaintiff's sole assignment of error is that the trial court erred in denying a directed verdict for $17,500 as the amount of liquidated damages stipulated in the contract because the defendants did not plead the invalidity of the liquidated damage clause.

The facts and the record.

The listing agreement in this case is on a printed form prepared by plaintiff. The top "half" of that form [281 Or. 242] consists of a series of blank spaces, which were filled in with such information as the "business name" and address, the "price" and "terms," the property included, and the year's "gross business" and "net profit." Then follows a provision granting to plaintiff "the sole and exclusive right to sell" for a stated period and an agreement by the owner to "accept a price" as stated (here $175,000) and to pay to plaintiff "a fee" in the amount stated (here $17,500).

Several paragraphs in small print then follow, including the following:

"In the event said property is sold, leased or exchanged during the period of this contract, or Dean Vincent Inc. procures a purchaser ready, able and willing to purchase at the terms above specified, or places the Owner in touch with a purchaser to whom at any time within 180 days from the termination of the exclusive character of this contract the Owner sells or conveys the said property, or if the Owner during the period of this contract withdraws the authority hereby given, the Owner shall pay to Dean Vincent Inc. the same fee as hereinabove specified. * * * "

This listing agreement was signed by defendants and by Anthony J. Maksym, on behalf of plaintiff, and was dated August 20, 1974.

Mr. Maksym testified that he "read the entire document" to defendants; that "we read it together" and discussed "each line carefully," including the "fee of $17,500" and that "they readily agreed to pay the fee."

Defendant McDonough testified, however, as follows:

"Q * * * was the entire agreement read to you by Mr. Maksym?

"A Absolutely not.

"Q Did you read in great detail the lower half of the form, the printed portion?

"A I didn't read any of it.

[281 Or. 243] "Q You just said you read some of it?

"A I'm talking about the fine print on the bottom, I did not read that.

"Q You read up above that?

"A Yes. That was filled in.

" * * *Tha

"Q * * * Did you read all the matters that he wrote into the listing agreement?

"A I read the things that he put in there, yes."

Page 1098

Defendant Amundson also testified that Mr. Maksym did not read the listing agreement to him, but gave it to him to read and that he "scanned over it" and "read the matters that he printed into the listing."

Defendant McDonough also testified that the next day, August 21, 1974, he called Mr. Maksym and told him that "we did not want to sell" and "wanted to cancel the listing"; and that when some two weeks later Mr. Maksym nevertheless brought the first of two prospective purchasers to look at the property he again told Mr. Maksym that "we did not want to sell"; and that he never received any offer from anyone brought by plaintiff.

To the same effect, defendant Amundson testified that the day after Mr. McDonough called Mr. Maksym, and two days after the date of the listing agreement, he also called Mr. Maksym and told him that they "were not going to sell it"; that at that time he offered to reimburse Mr. Maksym for any out-of-pocket expenses incurred by him to "compensate him for his trouble"; that Mr. Maksym "just ignored it" and that he asked Mr. Maksym "if he had spent any money on it, he said 'no,' not at that time, only two days later." Mr. Amundson also testified that Mr. Maksym about two weeks later brought down a prospective purchaser, but that he did not receive any offer from him.

Mr. Maksym denied most of the foregoing testimony and testified that it was not until September 23, 1974, that he received the "first notice" that defendants did not want to sell the business. He also [281 Or. 244] testified that prior to that time he had run advertisements in the Oregonian, beginning August 30, 1974, and had brought two prospective purchasers to look at the business and that he did not receive an offer or earnest money from anyone. Plaintiff offered no evidence to show the amount of the actual out-of-pocket or other loss or damage incurred by it, in support of Count II of its complaint, other than the testimony of one of its vice presidents that, in his opinion, a purchaser could have been found within 90 days who would have paid $175,000 for the business, based upon his experience and the fact that a new shopping center was "going in across the street."

In February 1976 (18 months after the date of the listing agreement) defendants sold the business, a "Shakey's Pizza" parlor, to another purchaser for $175,000. At that time a shopping center had been completed across the street, apparently including Safeway, Sprouse-Reitz, and Payless. Defendant Amundson testified that at the time of the listing the "land was being prepared" for the shopping center and there were "a lot of rumors," but he didn't know at that time "what stores were going in."

At the conclusion of the foregoing testimony plaintiff moved for a directed verdict upon the ground that the execution of the listing agreement was admitted; that "with reference to the liquidated damages count" there was "no pleading by the defendants contending the invalidity of their provision"; that it was admitted that defendants "withdrew their authorization"; and that it followed, as a matter of law, that plaintiff was entitled to judgment for $17,500 as liquidated damages.

That motion was allowed in part. The trial judge ruled that the contract had been breached and that he was going to direct a verdict for the plaintiff and submit to the jury "only the question of damages," saying that:

[281 Or. 245] " * * * (T)here are two issues of damage. The first being a question of liquidated damages, and the second being a question of general damages. I see it as a jury issue as whether or not the parties believed at the time of coming to agreement the amount of commission to be a reasonable forecast of the loss to be suffered by the plaintiff if there is a breach. That seems to me to be a jury issue. With appropriate instruction, I'll submit that to the jury. In the event they do not so find, then it is appropriate to instruct them to find actual damages or general damages as of the time of the breach." (Emphasis added)

The trial court then instructed the jury to return a verdict of $17,500 for the plaintiff

Page 1099

" * * * if you find that two conditions existed. One, that at the time the contract was made, the amount of harm which plaintiff would suffer in the event of a breach would be incapable of or very difficult of accurate estimation at the time the agreement was drafted; and, two, that the sum of $17,500 was agreed upon by the parties as a reasonable forecast of the loss which would be suffered by plaintiff in the event of a breach by the defendants. If those two conditions exist, then you are to award damages in that sum to the plaintiff as set forth in the agreement. If either of those two conditions do not exist, then under Count II of the Complaint you are to award to the plaintiff a sum which will compensate plaintiff for general damages that it actually suffered...