Meyer v. Kesterson

• Decision Date: 16 November 1997
• Citation: 151 Or.App. 378,950 P.2d 896
• Parties: Tom and Heidi MEYER, Husband and Wife, Respondents, v. Mary F. KESTERSON, Appellant, and Laurence Kesterson and Pacific Coast Timber Co., Inc., Defendants. 95-2007; CA A94811.
• Court: Oregon Court of Appeals

Page 896

950 P.2d 896

151 Or.App. 378

Tom and Heidi MEYER, Husband and Wife, Respondents, v. Mary F. KESTERSON, Appellant and Laurence Kesterson and Pacific Coast Timber Co., Inc., Defendants.

95-2007; CA A94811.

Court of Appeals of Oregon.

Argued and Submitted July 14, 1997.

Decided Nov. 16, 1997.

Harold L. Olsen, St. Helens, argued the cause for appellant. With him on the briefs was Olsen, Huffman & Horn.

John F. Hunnicutt, St. Helens, argued the cause and filed the brief for respondents.

Before RIGGS, P.J., and LANDAU and LEESON, JJ.

RIGGS, Presiding Judge.

Plaintiffs filed this action for specific performance of an earnest money agreement, pursuant to which they claim they are to purchase the subject property from defendant. ¹ In the alternative, plaintiffs sought a money judgment for breach of contract. Defendant denied the enforceability of the earnest money agreement because of an uncertainty as to the payment terms and property description and also contended that the agreement terminated by its own terms 30 days after it became known to the parties that the property was not marketable. As a counterclaim, defendant asked that the earnest money agreement be rescinded due to mistake or that defendant be awarded restitution for having reforested the property and having obtained access to it.

As a matter in equity, the case was tried to the court. The trial court entered a judgment of specific performance requiring plaintiffs to tender the purchase price and defendant to tender to the clerk of the court a warranty deed conveying title to the premises. Defendant Mary Kesterson filed a notice of appeal. Plaintiffs thereafter filed a motion to amend the judgment to provide for an alternate remedy of the payment of $68,000, shown at trial to be the difference between the agreed-upon purchase price and the present value of the property, in the event that defendant was unable to convey marketable title. The trial court entered the amended judgment, and this amended notice of appeal followed.

Because this is a proceeding in equity, we review the record de novo. ORS 19.125(3). Defendant owned land in Columbia County that lay in Sections 11 and 14, Township 3 north, Range 2 west, Willamette Meridian. He logged the property and then sold two parcels to William H. and Sue A. Nesheim and two parcels to Leonard L. Olive, taking trust deeds in return. When Olive fell delinquent in his payments, defendant hired attorney David Williamson to foreclose on the trust deeds.

In the fall of 1988, plaintiffs sought Williamson's legal advice in an unrelated matter. Coincidentally, plaintiffs had become interested in purchasing the subject property, which had been shown to them by Olive. Olive and plaintiffs agreed that plaintiffs would purchase the property for $32,000. As a down payment, plaintiff Tom Meyer, who is a builder, would do some construction on a house located on a different portion of Olive's property that plaintiffs would not be purchasing. After plaintiff Tom Meyer had done the work, plaintiffs and Olive had a disagreement concerning the amount of the down payment, and Olive insisted that plaintiffs pay additional cash.

In May 1989, plaintiffs asked Williamson for advice with regard to their dispute with Olive. Coincidentally, Williamson was preparing to foreclose on the trust deeds, and in June 1989, Williamson filed suit on behalf of defendant to foreclose on the two trust deeds, one of which covered the subject property. The action was settled when Olive signed deeds in lieu of foreclosure. At that time, aware that defendant was interested in selling the subject property, Williamson offered it to plaintiffs for the same purchase price that plaintiffs had agreed to pay Olive. As part of the down payment, Williamson promised that defendant would credit plaintiffs with $800 for the value of the construction work done by Tom Meyer on the house on the neighboring parcel, which also had been deeded back to defendant by Olive. Williamson told plaintiffs that defendant would accept an additional $4,000 as earnest money, and plaintiffs paid that amount to Williamson, to be held in a client trust account.

Plaintiffs thought that Williamson was their attorney, representing their interest in the Kesterson/Meyer transaction. In Williamson's view, he was representing only defendant in the transaction. In any event, Williamson acted as an intermediary between the parties. The parties in this case never met or spoke to each other until the taking of depositions in this litigation in July 1996.

On October 31, 1989, plaintiffs and defendant signed a Stevens-Ness form entitled "Owner's Sale Agreement and Earnest Money Receipt," prepared by Williamson, which provided, in part:

"RECEIVED OF Thomas J. Meyer and Heidi M. Meyer, husband and wife, hereinafter called purchaser, $4,800.00, as earnest money and in part payment for the following described real estate situated in the City of Scappoose, County of Columbia, State of Oregon, described as follows, to-wit: 24 acres, more or less, on Coal Creek Road, part of Tax Lot No. 91-08-3214-000-0080--see attached map. Exact legal description to be provided at time of closing. (*See Exhibit 'A' attached) which we have this day sold to the purchaser for the sum of Thirty-Two Thousand and no/100 Dollars $32,000.00 on the following terms, to-wit: The earnest money hereinabove receipted for $4,800; upon acceptance of title and delivery of deed or delivery of contract $0; * * * balance of * * * $27,000 payable as follows: monthly installments of not less than $______ each, including interest at the rate of 10% per annum, commencing on the ______ day of ______, 1989, and continuing on the ______ day of each month thereafter until ______, at which time the entire balance, principal and interest, shall be due and payable in full. Interest on all unpaid balances shall commence on ______. Balance of $27,000 shall be secured by a trust deed and note."

The underscored portions of the form were blank lines that were filled in by Williamson, with the exception of the places that remained blank for monthly installments, the dates of the first and last payments, the due date for the balloon payment and the date on which interest accrues on the unpaid balance. The form portion of the earnest money agreement additionally provided that

"if title to the said premises is not marketable, or cannot be made so within thirty days after a written notice of defects delivered to seller, the earnest money herein receipted for shall be refunded. But if the title to the said premises is marketable, and the purchaser neglects or refuses to comply with any of the conditions of this sale within 30 days and to make payments promptly, as hereinafter set forth, then the earnest money herein receipted for shall be forfeited to the seller as liquidated damages, and this contract shall thereupon be of no further binding effect."

Attached to the earnest money agreement was a map with the subject property outlined by hand and highlighted in yellow. Also attached to the earnest money agreement was an addendum, which provided, in part:

"1. The downpayment of $4,800.00 shall be offset by $800.00 for labor performed by Purchaser, for a net downpayment due of $4,000.00.

" * * * * *

"3. The Purchaser understands that the property must be reforested and specifically agrees to assume that responsibility and that said reforestation has to be completed by May, 1991.

" * * * * *

"6. It is specifically understood and agreed that the title to the access road must be made marketable and sufficient to obtain clear title to the property at Owner's expense.

"7. It is further agreed that the purchase price in this transaction has been adjusted based on Purchaser's reforestation and acceptance of the other provisions set forth above."

Defendant's 1989 conveyances to Nesheim had landlocked the subject parcel. Although there was a road on the property that defendant had used while logging, that road was not intended to provide access to the property for future owners or development. Williamson agreed to make every effort to obtain legal access to the property so that the transaction could close. Paragraph 6 of the addendum accordingly provided that title to the access road to the property would have to be made marketable and sufficient to obtain clear title to the property, at defendant's expense.

Only one copy of the signed earnest money agreement existed, and Williamson kept it in his possession. Both Williamson and defendant testified that they believed that the agreement was not binding on defendant until the blanks were filled in and that the blanks would be filled in when the access problem was resolved and when plaintiffs made an offer of terms that were acceptable to defendant. Plaintiffs also knew that further negotiations were necessary concerning the details of the transaction, but they testified that they believed that the agreement was binding on the parties, with only the details of closing and payment terms to be worked out after the access problem had been resolved.

On November 14, 1989, Williamson obtained a preliminary title report showing the property to be unmarketable because of the road access problem. After prolonged negotiations with the neighbors, Williamson filed suit to clear title and obtain access to the property. In 1992, the matter was settled, defendant agreeing to pay the neighboring property owners $4,000 for the right of access to the subject property. It was not until March 1994 that a judgment was signed. At that time, in addition to the settlement amount, defendant owed Williamson legal fees of approximately $15,000.

Plaintiffs periodically checked with Williamson during the pendency of the access matter. Williamson or his associate assured them that, although the matter would take some time, access would be obtained. In 1992, defendant grew concerned that the process was taking too...