Medak v. Hekimian

• Decision Date: 30 June 1965
• Parties: John D. MEDAK and Charles F. Medak, doing business as Medak Realty Co., Respondents, v. Anton HEKIMIAN and Araxy Hekimian, husband and wife, Appellants.
• Court: Oregon Supreme Court

Page 203

404 P.2d 203

241 Or. 38

John D. MEDAK and Charles F. Medak, doing business as Medak

Realty Co., Respondents, v. Anton HEKIMIAN and Araxy Hekimian, husband and wife, Appellants.

Supreme Court of Oregon, Department 2.

Argued and Submitted June 11, 1965.

Decided June 30, 1965.

Thomas H. Ryan, Portland, argued the cause for appellants. With him on the brief were Ryan & Ryan and James J. Kennedy, Portland.

John Ronchetto, Portland, argued the cause for respondents. With him on the brief were Mize, Kriesien, Fewless & Douglass and Earl Fewless, Portland.

Before McALLISTER, C. J., and SLOAN, GOODWIN, HOLMAN, and LUSK, JJ.

HOLMAN, Justice.

Plaintiffs were real estate agents and leased from defendants in January of 1952 premises for a business office in a building on the southeast corner of Tenth and Broadway in the city of Portland. The lease was for five years with an option to renew for an additional five years. The rental was $100 per month and plaintiffs had the right to cancel the lease at any time by giving thirty days written notice. The parties were not previously acquainted and dealt at arm's length.

In 1954 defendants were approached by the promoters of Lloyd Center, a proposed integrated shopping complex of enormous proportions. They wished to purchase the premises, a portion of which plaintiffs occupied, for inclusion in the planned complex. The transaction was contingent, however, upon getting a release from plaintiffs of their option to renew the lease for an additional five years. As a result, plaintiffs and defendants entered into another contract whereby defendants agreed to construct another building on the southwest corner of the same intersection on property also owned by them and to rent a portion of the premises to plaintiffs for a period of five years commencing in January 1957 at the expiration of plaintiffs' lease on the premises which was being sold to the Lloyd Center. The rental was to be $100 per month, the same as the rental under plaintiffs' option. The agreement also provided that in the event defendants did not construct the building defendants would pay plaintiffs $5,000 as liquidated damages for their failure to perform.

Defendants failed to erect the building as agreed, and this action was brought to recover the $5,000 provided as liquidated damages for the contract's breach. The defendants appeal from a judgment of $5,000 entered upon a jury verdict.

Defendants' first charge of error is that the court improperly struck from their answer allegations relative to plaintiffs' being licensed real estate brokers, that they were in a position of trust and confidence to defendants and that they took advantage of their position. Defendants alleged no facts and presented no proof giving rise to any special duty owed by plaintiffs to them. The relationship between the parties was not that of real estate broker and client. The parties were dealing at arm's length in behalf of their personal interests. Plaintiffs owed no duty to defendants other than that of honesty and fair dealing which any other person would have owed under the same circumstances.

Defendants next claim that the initial lease was without consideration because plaintiffs had the right to cancel it upon thirty days notice while defendants were bound for a period up to ten years. While the consideration on plaintiffs' part is disproportionate to that of defendants, it cannot be said there was no consideration.

The Restatement of the Law of Contracts, § 79, states as follows:

'A promise or apparent promise which reserves by its terms to the promissor the privilege of alternative courses of conduct is insufficient consideration if any of these courses of conduct would be insufficient consideration if it alone were bargained for.'

Illustration 1 under the section reads:

'A promises B to act as B's agent for three years on certain terms, and B agrees that A may so act, but reserves the power to cancel the agreement at any time. B's agreement is insufficient consideration, since it involves nothing that can properly be called a promise. Otherwise, if B reserves the power to cancel on thirty days notice.' (Emphasis ours)

In 1 Williston, Contracts, (3rd ed.) 454 § 115, it is said:

'It is an 'elementary principle that the law will not enter into an inquiry as to the adequacy of the consideration.' This rule is almost as old as the law of consideration itself. Therefore anything which fulfills the requirements of consideration will support a promise whatever may be the comparative value of the consideration, and of the thing promised. * * *'

Defendants urge that where the consideration is so disproportionate it takes only slight evidence of fraud to invalidate the contract and that they were prevented from inquiring into evidence of fraud upon cross examination of the plaintiff John Medak when the following occurred:

'Q Did you explain to he Hekimians they had no way of holding you there?

'A No, the Hekimians----'

The answer was then interrupted by an objection which was sustained. While this may have been error, it was not prejudicial error as the Hekimians were allowed to testify in detail concerning the conversations relative to the rights of plaintiffs to cancel upon thirty days notice. They testified they objected to the provision and asked plaintiffs why it was there and that plaintiffs told them that one of them was in the armed forces reserve and might be called into the service as the Korean Conflict was then in progress. They testified that with this explanation they were willing to go ahead.

The record is absolutely devoid of any evidence of fraud by plaintiffs. Defendants contend they were just inexperienced Armenians. At the time of this transaction they had been in the cleaning and pressing business in Portland for 34 years and were substantial persons of property with business experience. They owned and operated a motel at the coast worth $80,000 as well as their Portland business. They had an established line of credit at the bank and gave every indication of...