Emmert v. No Problem Harry, Inc.

• Decision Date: 03 September 2008
• Docket Number: A134284.,021111858.
• Citation: 192 P.3d 844,222 Or. App. 151
• Parties: Terry W. EMMERT, dba Emmert Development Co., Plaintiff-Respondent, v. NO PROBLEM HARRY, INC., an Oregon corporation; and Chao Lin Liu, Defendants, and Way W. Lee, Defendant-Appellant. Way W. Lee, Counterclaim Plaintiff, v. Terry W. Emmert, dba Emmert Development Co., Counterclaim Defendant.
• Court: Oregon Court of Appeals

192 P.3d 844

222 Or. App. 151

Terry W. EMMERT, dba Emmert Development Co., Plaintiff-Respondent, v. NO PROBLEM HARRY, INC., an Oregon corporation; and Chao Lin Liu, Defendants, and Way W. Lee, Defendant-Appellant.

Way W. Lee, Counterclaim Plaintiff, v. Terry W. Emmert, dba Emmert Development Co., Counterclaim Defendant.

021111858.

A134284.

Court of Appeals of Oregon.

Argued and Submitted April 29, 2008.

Decided September 3, 2008.

Steven W. Seymour, Portland, argued the cause for appellant. With him on the briefs were Timothy J. Resch and Samuels Yoelin Kantor Seymour & Spinrad LLP.

Aaron M. Wigod, Portland, argued the cause and filed the brief for respondent.

Before LANDAU, Presiding Judge, and SCHUMAN, Judge, and ORTEGA, Judge.

SCHUMAN, J.

This case involves a dispute between plaintiff, the landlord of a warehouse, and defendant,¹ who had a security interest in merchandise stored in that warehouse. Defendant appeals from a limited judgment awarding plaintiff $220,411 in damages for breach of contract and $84,091.33 in prejudgment interest. He alleges that the trial court erred in ruling that the contract was supported by consideration, that it was not ambiguous, that plaintiff adequately pleaded a claim for prejudgment interest, and that defendant's counterclaims for conversion and intentional interference with economic relations lacked merit. We affirm.

Except as noted, the following facts are undisputed. No Problem Harry, Inc. (NPH) leased space in plaintiff's warehouse. The lease provided that failure to pay rent when due constituted default and that, in the event of default, the landlord could reenter and take possession of the premises. By March 27, 2002, NPH was more than $250,000 in arrears. Plaintiff exercised its option to reenter and took possession by changing the locks. Defendant had a perfected security interest in some of the property in the warehouse, and had already found a buyer for it. In order to gain access to the property and complete that sale, he signed an agreement to pay plaintiff $50,000 toward the satisfaction of NPH's debt and (according to plaintiff) to pay the balance of that debt—$220,411—by June 15, 2002, in exchange for access to the warehouse. Defendant, as we explain below, contends that he never agreed to pay the $220,411. In any event, defendant was allowed access to the warehouse, sold the goods, and paid plaintiff $50,000 from the proceeds. However, he did not pay the balance of NPH's debt by June 15. Plaintiff brought this action against defendant for breach of the agreement. Defendant argued that the agreement was unenforceable because it was not supported by consideration and because it was fatally ambiguous. He also counterclaimed, arguing that, after June 15, plaintiff had wrongfully blocked access to defendant's property still stored in the warehouse, thereby effecting a conversion and an intentional interference with defendant's economic relations with prospective buyers. As noted above, the court rejected those arguments and entered judgment in favor of plaintiff for $220,411 plus prejudgment interest. This appeal ensued.

Defendant's first assignment of error concerns the following agreement, which defendant signed on May 8, 2002:

"This agreement shall be binding between the undersigned parties herein for the purpose of continuation of a lease dated October, 1999 between Chow [sic] Lin, dba: [NPH] and [plaintiff].

"The parties agree that as of today, the balance of rent and cam charges due and owing unto [plaintiff] by the lessee is approximately $270,411.00.

"The landlord agrees to waive late fees pursuant to the terms of the subject lease up to the execution of this agreement to [defendant] * * *. Subject to delivery [to the warehouse] a certified check for $50,000.00, and an agreement to pay the balance of rent and cam charges accrued under the subject lease on or before June 10, 2002. In the event that the balance is not paid by June 10, 2002, [defendant] agrees to make full payment by June 15, 2002 * * * by 5pm or shall be in default of this agreement.

"This agreement, in no way shall mean any waiver of rights entitled to [plaintiff] for possession * * * in the event of default of this agreement.

"* * * * *

"[Defendant] hereby further declares that he has full security interest in any and all goods at the leased address * * *. [Defendant] further agrees to take full responsibility financially and severally for any and all property * * * upon entrance into the subject property."

Defendant argues that the agreement was unenforceable for two reasons. First, he argues, it was not supported by consideration; he promised to pay plaintiff and received nothing in return. Second, he argues, the agreement is fatally ambiguous. We discuss those arguments in turn.

Defendant argues that plaintiff's stated promises to "continu[e][the] lease" and "waive late fees" fail to constitute sufficient consideration because defendant derived no benefit from those promises; the benefit accrued to NPH, the lessee. Plaintiff responds that continuing the lease benefitted defendant in at least one respect: it allowed him access to his merchandise in the warehouse until June 15, 2002, so that he could sell it. Plaintiff also points out that those promises constitute a detriment to plaintiff in that plaintiff agreed to collect less than he was owed and to forbear exercise of his rights under the lease.

The parties' arguments conflate two distinct issues: whether the agreement was supported by consideration and whether the agreement "expressed" that consideration for purposes of ORS 41.580(1)(b), the provision in the Oregon statute of frauds governing "agreement[s] to answer for the debt * * * of another." We first consider whether the agreement was supported by consideration. Consideration is defined as some right, interest, profit, or benefit to the promisor (here, defendant) or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the promisee (here, plaintiff). Shelley v. Portland Tug & Barge Co., 158 Or. 377, 387, 76 P.2d 477 (1938); Cummings v. Central Oregon Bank et al., 110 Or. 101, 103, 223 P. 236 (1924). "Benefit" means that the promisor has, in return for the promise, acquired some legal right to which he or she would not otherwise have been entitled. Shelley, 158 Or. at 388, 76 P.2d 477. "Detriment" means that the promisee has, in return for that promise, forborne some legal right that he or she would otherwise have been entitled to exercise. Id.

Here, the undisputed facts establish that plaintiff agreed to allow defendant access to defendant's property in the warehouse-a clear benefit to defendant, who already had a buyer for the property-in exchange for defendant's promise to answer for at least part of NPH's $270,411 debt. Defendant concedes as much in his opening brief. ("[Plaintiff] would not allow access to the warehouse unless [defendant] signed the Letter of Agreement.") We therefore conclude that the agreement was supported by consideration. That conclusion, however, does not necessarily answer defendant's statute of frauds claim. That claim is based on the statutory requirement that "[a]n agreement to answer for the debt * * * of another" is "void unless it, or some note or memorandum thereof, expressing the consideration, is in writing and subscribed by the party to be charged[.]"² ORS 41.580(1)(b) (emphasis added). Thus, the undisputed fact that plaintiff agreed to permit defendant access in return for defendant's promise to pay part of NPH's debt, while establishing the existence of consideration, leaves unanswered the question whether that consideration is expressed within the four corners of the agreement itself.

That question presents a legal issue. McInnis v. Lind, 198 Or.App. 139, 146, 108 P.3d 578 (2005). An "express[ion] of consideration" sufficient to comply with ORS 41.580(1) "need not be specific" but must "appear with reasonable clearness from the entire contract." Public Fire Ins. Co. v. Weatherly, 148 Or. 407, 411, 36 P.2d 989 (1934). In this case, the agreement expressly states the following: First, NPH is approximately $270,411 in arrears in its lease and other payments to plaintiff. Second, defendant promises to undertake to pay at least part of that debt. Third, the purpose of the agreement—that is, the reason that defendant is willing to pay off at least part of the lessee's debt—is "continuation" of the lease. Fourth, defendant anticipates his "entrance into" the warehouse. Fifth, plaintiff reserves the right to possess the premises "in the event of default" by defendant. From these provisions, it "appear[s] with reasonable clearness," id., that plaintiff, in return for receiving payment on the lease (and only so long as it receives such payment), will "continu[e]" the lease by foregoing its right to possess the premises—that is, by foregoing its right to lock defendant out. Accordingly, the expression of consideration in the agreement is sufficient to comply with ORS 41.580(1).

Defendant also argues, as part of his first assignment of error, that the agreement is ambiguous on its face because its terms can reasonably be given more than one meaning. Specifically, he focuses on the following provision:

"The landlord agrees to waive late fees pursuant to the terms of the subject lease up to the execution of this agreement to [defendant]. Subject to delivery to [the warehouse] a certified check for $50,000.00, and an agreement to pay the balance of rent and cam charges accrued under the subject lease on or before June 10, 2002."³

Defendant concedes that the above provision obligated him to pay plaintiff $50,000, but maintains that it does not further obligate him to pay the balance of the arrearage. He asserts that the language, "[s]ubject to * * * an agreement to pay the balance" is merely an agreement to negotiate, at some future point in time, how the "balance" will be calculated and...