Genest v. John Glenn Corp.
| Decision Date | 06 March 1985 |
| Citation | 298 Or. 723,696 P.2d 1058 |
| Parties | Stan GENEST, Respondent on Review, v. JOHN GLENN CORPORATION, an Oregon Corporation; Eastside Properties, Inc., an Oregon Corporation; and Glenn Wilbur and John C. Wilbur, Petitioners on Review. TC 113,798; CA A23098; SC 29599. |
| Court | Oregon Supreme Court |
J. Michael Alexander, Salem, argued the cause for petitioners on review. With him on the briefs were Charles D. Burt and Burt, Swanson, Lathen, Alexander & McCann, Salem.
Paul J. Lipscomb, Salem, argued the cause for respondent on review. With him on the briefs were Ron MacDonald and Blair, MacDonald, Jensen & Lipscomb, Salem.
We are first required to ascertain the terms of an option to purchase real property and then to decide whether the holder of the option is entitled to a judgment for specific performance. Both the trial court and the Court of Appeals, Genest v. John Glenn Corporation, 62 Or.App. 562, 661 P.2d 1383 (1983), found that plaintiff had established that the option fixed a purchase price of $425,000 with a limit of 29 percent thereof to be paid in the first year of exercise of the option, and a certain amount paid under the terms of a lease of the property to be credited against the purchase price. The trial court denied a judgment of specific performance, however, because the court believed the contract to be "too incomplete" in other essential respects to entitle plaintiff to specific performance. The Court of Appeals, on the other hand, relying on what it perceived to be the trend of the law pronounced by this court in recent years, determined that the plaintiff was entitled to specific performance and remanded the cause to the trial court to fashion a decree "not inconsistent with" the appellate court's opinion. Although we agree with both courts that the terms of the option were as above described, we agree with the trial court that plaintiff is not entitled to the specific remedy of specific performance in equity.
When we allowed defendants' 1 petition for review, we did not limit review to questions of law as we might have under ORS 19.125(4); therefore, we believe we are to try the cause "anew upon the record." 2 The facts we now state are those we find to be either undisputed or established by the evidence.
In 1971 defendants, desiring to sell their restaurant business, known as the Keg & Platter, employed a business broker named Crain to effect a sale. 3 The listing agreement was for sale of the business, a ten-year lease of the real property on which the business was conducted and a right in the buyer of the business and lessee of the property of first refusal if the realty were sold.
Crain placed newspaper advertisements that first attracted the interest of the plaintiff in the summer of 1971, but nothing came of it at that time. Plaintiff expressed renewed interest in February of 1972, and serious negotiations began at that time. Plaintiff and the individual defendants did not meet or deal directly with each other during the entire period of negotiations. Defendant John Wilbur had the laboring oar for defendants and dealt with plaintiff only through Crain.
We shall describe the various offers and counter offers in some detail so as to demonstrate the close bargaining on terms that did occur.
After some negotiations between Crain and plaintiff, Crain prepared a form dated February 5, 1972, entitled "Earnest Money Receipt" and forwarded it to plaintiff. The Receipt provided for sale of the business for $275,000 plus the value of the inventory at the time of closing. The Receipt provided for $5,000 earnest money, and the payment of an additional $70,000 plus the value of inventory on closing. The balance was to be paid at $2,325 or more per month, including seven percent interest on the unpaid balance. No more than 29% of the purchase price was to be paid in the first year. 4 The purchaser was to be granted a ten-year lease payable at $3,500 per month, or seven percent of gross sales. The lease was to contain an option to purchase the real property, which could be exercised at any time after the commencement of the fifth year of the leasehold period. No price for the realty was set forth. The lease was also to provide "tax escalation clause and building maintenance and insurance provision clauses." The terms of the Receipt were not acceptable to plaintiff.
Crain prepared another Earnest Money Receipt dated February 21, 1972. The terms of the proposed sale of the business were essentially the same, but the lease was to be payable at $3,500 per month or five percent of gross food sales plus seven percent of gross liquor sales, whichever would prove to be greater. The lease was to contain an option to purchase the realty, exercisable after the commencement of the fifth year for a price of $425,000, with ten percent of the lease payments "to be allowed as credit against purchase." The lease would be the same as to taxes, maintenance and insurance. Plaintiff rejected this proposal.
Crain and plaintiff then discussed the matter further. Plaintiff made it clear to Crain that the option to purchase the realty was very important to consummation of the sale of the business. Crain then prepared another Earnest Money Receipt, also dated February 21, 1972. This Receipt was essentially the same as to terms of sale of the business, the term of the lease and the rental payments, and the purchase price of the realty. The material changes were that 20% of the lease payments would be credited against the purchase price, and the language concerning a tax escalation clause, building maintenance and insurance was not included. Plaintiff signed this Receipt, as did Crain.
On February 29, 1972, Crain presented the Receipt to the Wilburs. They were unwilling to accept the terms. They informed Crain of changes they believed to be essential, and Crain prepared documents to supplement the Receipt. Under the terms of the supplement the plaintiff would be bound to assume certain leases for business signs and would be required to continue the sellers' existing insurance program for buildings, equipment and stock and for liability and business interruption. The supplement further provided:
On February 29, 1972, the Wilburs signed the Receipt and signed the supplement for the Keg & Platter Corporation. 5
Crain then took the Receipt and supplement to plaintiff, who would not agree without further change. Crain prepared another supplement that, among other things, specified, "Credit on lease fees paid to be increased from 10% to 15%." That supplement was dated March 1, 1972, and was signed as "Approved" by the Wilburs and plaintiff. By their terms, the supplements were to be attached to and become a part of the Receipt.
The Wilburs undertook to have their lawyer prepare a lease and a contract of sale. John Wilbur, without any discussion of the matter with plaintiff or securing his prior approval, told the lawyer to change the option price to "not less than $425,000." That part of the lease was drawn to read as follows:
6
When Crain presented the lease to plaintiff, plaintiff drew Crain's attention to the words "not less than $425,000.00" and inquired as to the "significance" of that language. Crain told him that it was not significant "because the purchase price was specifically spelled out in the sales agreement and the exhibits attached thereto as $425,000."
The lease required the lessor to pay all real property taxes and special assessments against the realty.
The lease further contained the following paragraph:
By its terms the lease was "made this 23rd day of March, 1972," and the parties "have caused these presents to be executed" on that date.
Wilburs' same lawyer prepared a document entitled "SALE AGREEMENT" for the sale of the business. That document contained the following paragraph:
"Attached hereto and marked 'Exhibit C' and 'Exhibit E' is the earnest money...
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