Fassett v. Deschutes Enterprises, Inc.

• Court: Oregon Court of Appeals
• Writing for the Court: WARDEN
• Citation: 686 P.2d 1034,69 Or.App. 426
• Parties: Leroy FASSETT and Donna Fassett Reynolds, Respondents, v. DESCHUTES ENTERPRISES, INC., and Ole J. Lilleoren, Appellants. DESCHUTES ENTERPRISES, INC., an Oregon Corporation, Appellant--Cross-Respondent, v. Leroy FASSETT and Donna Fassett Reynolds, Respondents-Cross-Appellants. CA 31441; CA A27234; CA 31434; CA A27235.
• Decision Date: 12 October 1984

Page 1034

686 P.2d 1034 69 Or.App. 426 Leroy FASSETT and Donna Fassett Reynolds, Respondents,
v.
DESCHUTES ENTERPRISES, INC., and Ole J. Lilleoren, Appellants.
DESCHUTES ENTERPRISES, INC., an Oregon Corporation,
Appellant--Cross-Respondent,
v.
Leroy FASSETT and Donna Fassett Reynolds,
Respondents-Cross-Appellants. CA 31441; CA A27234; CA 31434; CA A27235. Court of Appeals of Oregon. Argued and Submitted Jan. 11, 1984.
Decided Aug. 8, 1984.
Reconsideration Denied Oct. 12, 1984.

[69 Or.App. 427]

Page 1035

John R. Faust, Jr., Portland, argued the cause for appellants and appellant-cross-respondent. With him on the briefs was Schwabe, Williamson, Wyatt, Moore & Roberts, Portland.

R.L. Marceau, Bend, argued the cause and filed the brief for respondents and respondents-cross-appellants.

Before RICHARDSON, P.J., and WARDEN and NEWMAN, JJ.

[69 Or.App. 428] WARDEN, Judge.

Defendants Ole J. Lilleoren (Lilleoren) and his solely owned corporation, Deschutes Enterprises, Inc. (Deschutes), appeal a judgment in case No. CA A27234 awarding plaintiffs, Leroy Fassett and Donna Fassett Reynolds (Fassetts) the sum of $52,800, plus attorney's fees and costs. Deschutes also appeals a judgment entered in case No. CA 27235 awarding damages of $32,000 to the Fassetts, who cross-appeal in that case. We reverse the judgment in case No. CA A27234 and affirm the judgment in case No. CA A27235.

The complicated set of facts in this case began in 1968, when the Fassetts sold the Skyline Steak House and Sage Room Lounge business and equipment in Bend to Gerald Corrigan and Ray Thomas. As part of that transaction, the Fassetts leased the business premises to Corrigan and Thomas. Lilleoren acquired a 40% interest in the restaurant business after Corrigan and Thomas purchased it. He guaranteed one-third of the Corrigan and Thomas contract with the Fassetts.

In 1971, Deschutes acquired the remaining Corrigan and Thomas interests. The lease was assigned to Deschutes, and Lilleoren personally guaranteed payment of the contract and the lease. Simultaneously, the Fassetts agreed to release Corrigan and Thomas from liability. Deschutes operated the business on the leased premises until 1975.

In 1975 Deschutes sold the restaurant business and equipment to Gerald and Carol Huston (Hustons) for $170,000. Three years remained of the original term of the lease, which Deschutes also assigned to the Hustons. The Fassetts consented to the assignment, and Lilleoren personally guaranteed the Hustons' obligation to the Fassetts under the lease.

On May 1, 1978, the Fassetts and the Hustons renewed the lease for five years. The rent, which had been $1050 per month, was raised to $1,600 per month. Lilleoren was not involved in the negotiations, nor was he notified of the increased monthly rent.

The Hustons paid the $1,600 monthly rent from May, 1978, through January, 1980, when they stopped paying. The Fassetts informed Lilleoren that the Hustons had stopped. On [69 Or.App. 429] May 20, 1980, the Hustons turned the keys to the leased premises over to the Fassetts, who put locks on the doors to secure it. The Hustons did

Page 1036

not remove any of the restaurant equipment purchased from Deschutes that remained in the premises.

On June 16, 1980, the Hustons filed for bankruptcy. They still owed Deschutes $82,957.53. The trustee in bankruptcy advised the Fassetts that he hoped to sell the restaurant business as a going concern. He asked the Fassetts whether they would be willing to continue to lease the business premises, and they indicated that they would.

In the first part of December, the trustee advised both the Fassetts and Lilleoren that he was abandoning his efforts to find a buyer. Even though the Hustons had delivered possession of the premises, the Fassetts could not reopen the lounge, because the Oregon Liquor Control Commission required a bill of sale evidencing ownership of the equipment before it would issue a license.

Also in December, 1980, the Fassetts' attorney wrote Lilleoren that he was personally liable for the rent that the Fassetts were losing and requested a meeting with Lilleoren and his attorney to resolve the situation. The parties met in February, 1981. At that meeting, Lilleoren's lawyer told the Fassetts that Lilleoren would relinquish his interest in the equipment remaining on the premises for $40,000. The Fassetts counteroffered $10,000 to "remove the cloud on the title" to the equipment that had been created when Lilleoren filed a financing statement perfecting his security interest. The parties were unable to agree. On April 17, 1981, the Fassetts' attorney wrote to Lilleoren, demanding that the equipment be removed from the leased premises by May 1, 1981. Lilleoren arrived in Bend on April 29, claiming that he was prepared to remove the equipment. Mr. Fassett claims to have gone to the premises at the appointed time and that Lilleoren was not there. Each party had witnesses to his version of the events.

On February 9, 1982, Deschutes sued to recover the equipment. The Fassetts counterclaimed for their costs incurred in storing and preserving the equipment and for damages incurred by reason of their being unable to rent the premises housing it. On December 10, 1982, the Fassetts sued [69 Or.App. 430] Lilleoren on his guarantee for the Huston's unpaid rent and, in a separate claim for relief, sued both Deschutes and Lilleoren for interference with a prospective re-leasing of the premises. The two cases were consolidated for trial.

The court found in case No. CA A27235 that Deschutes was entitled to the return of its equipment and that the Fassetts were entitled to judgment of $32,000 on their counterclaim as damages for their being unable to lease the premises while Deschutes' equipment remained there. In case No. CA A27234 the court entered judgment for the Fassetts on Lilleoren's guarantee of the Hustons' rent in the sum of $52,800, plus interest of $6,557.43, and attorney fees and costs, less any sums recovered from Deschutes on the judgment in case No. CA A27235. Lilleoren and Deschutes appeal both judgments, and the Fassetts cross-appeal that portion of the judgment in case No. CA A27235 awarding Deschutes possession of the fixtures.

Lilleoren first argues that the trial court...