Morgan v. Baunach

• Decision Date: 06 June 1984
• Docket Number: No. A8201-00582,A8201-00582
• Citation: 684 P.2d 589,68 Or.App. 496
• Parties: Margaret Ann MORGAN and Rebecca Kay Schorzman, Respondents, v. John R. BAUNACH, Cleo A. Baunach, Exchange Partner, Inc., an Oregon corporation, Miriam Wood, John S. Wood, Olympia Danae Wood, Charles Howard and Lucy Howard, Defendants, Donald E. Johnston, Marjorie J. Johnston, Werner Talmon-L'Armee and Karen B. Talmon-L'Armee, Appellants. ; CA A26744.
• Court: Oregon Court of Appeals

Page 589

684 P.2d 589

68 Or.App. 496

Margaret Ann MORGAN and Rebecca Kay Schorzman, Respondents, v. John R. BAUNACH, Cleo A. Baunach, Exchange Partner, Inc., an Oregon corporation, Miriam Wood, John S. Wood Olympia Danae Wood, Charles Howard and Lucy Howard, Defendants Donald E. Johnston, Marjorie J. Johnston, Werner Talmon-L'Armee and Karen B. Talmon-L'Armee, Appellants.

No. A8201-00582; CA A26744.

Court of Appeals of Oregon.

Argued and Submitted Oct. 26, 1983.

Decided June 6, 1984.

Ronald Allen Johnston, Portland, argued the cause for appellants. With him on the briefs were John F. Reynolds and McCormick & Reynolds, Portland.

J. Bradford Shiley, Portland, argued the cause and filed the brief for respondents.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

BUTTLER, Presiding Judge.

This appeal involes two parcels of commercial real estate and the respective parties' rights to them under Agreements to Purchase and leases executed the same day. Plaintiffs brought an action in ejectment seeking to recover possession of the properties and damages for wrongful withholding and failure to make lease payments. Defendants Johnston counterclaimed for specific performance of the Agreements to Purchase. After a trial without a jury, the court ruled that plaintiffs were entitled to immediate possession of the properties and denied defendants' counterclaim. The court also awarded damages against defendants Johnston and defendants Talmon-L'Armee for wrongful withholding, and against defendants Baunach for failure to make lease payments. Only the Johnstons and the Talmon-L'Armees appeal. Because we conclude that the trial court improperly characterized the transaction and the legal obligations flowing therefrom, we reverse.

On November 17, 1976, plaintiffs, as vendors, and defendants Baunach, as vendees, executed the following "Agreement to Purchase" the Lori-Dell Apartment complex:

"WITNESSETH: That in consideration of the mutual covenants and agreements herein contained, the seller agrees to sell unto the buyer, and the buyer agrees to purchase from the seller all of the following described lands and premises * * * for the sum of Two Hundred Sixty Thousand Dollars ($260,000.00) hereinafter called the purchase price, in part payment of which the buyer assumes and agrees to pay a contract or mortgage * * * the unpaid principal balance of which is $164,000.00 (approximately) together with the interest hereafter to accrue on said contract or mortgage according to the terms thereof; the buyer agrees to pay the balance of said purchase price to the order of the seller at the times and in amounts as follows, to-wit:

"One payment in an amount equal to the difference between the unpaid principal balance on the above mentioned mortgage on the date of payment under this contract and the purchase price of Two Hundred Sixty Thousand Dollars ($260,000.00) assuming that the mortgage had been paid when due and on time.

" * * *

"The buyer shall be entitled to possession of said lands on November, 1981, and may retain such possession so long as he is not in default under the terms of this contract. The buyer agrees that at all times he will keep the buildings on said premises, now or hereafter erected, in good condition and repair and will not suffer or permit any waste or strip thereof; that he will keep said premises free from mechanic's and all other liens and save the seller harmless therefrom and reimburse seller for all costs and attorney's fees incurred by him in defending against any such liens; that he will pay all taxes hereafter levied against said property, as well as all water rents, public charges and municipal liens which hereafter may be imposed upon said premises, all promptly before the same or any part thereof become past due; that at buyer's expense, he will insure and keep insured all buildings now or hereafter erected on said premises against loss or damage by fire (with extended coverage) in an amount not less than $260,000.00 in a company or companies satisfactory to the seller, with loss payable first to the seller and then to the buyer, as their respective interests may appear and all policies of insurance to be delivered to the seller as soon as insured. Now if the buyer shall fail to pay any such liens, costs, water rents, taxes or charges or to procure and pay for such insurance, the seller may do so and any payment so made shall be added to and become a part of the debt secured by this contract and shall bear interest at the rate aforesaid, without waiver, however, of any right arising to the seller for buyer's breach of contract.

" * * *

"And it is understood and agreed between said parties that time is of the essence of this contract, and in case the buyer shall fail to make the payments above required, or any of them, and the payments to become due on said contract or mortgage, and interest, or any of them, punctually within ten days of the time limited therefor, or fail to keep any agreement herein contained, then the seller at his option shall have the following rights: (1) to declare this contract null and void, (2) to declare the whole unpaid principal balance of said purchase price with the interest thereon at once due and payable and/or (3) to foreclose this contract by suit in equity * * *.

"This contract may not be assigned by buyers without the prior written consent of the sellers approving the buyers assignee. The sellers expressly agree that they shall not unreasonably without [sic ] their consent to, and acceptance of, buyers assignee.

" * * *

"In case suit or action is instituted to foreclose this contract or to enforce any of the provisions hereof, the buyer agrees to pay such sum as the court may adjudge reasonable as attorney's fees to be allowed plaintiff in said suit or action and if an appeal is taken from any judgment or decree of the trial court, the buyer further promises to pay such sum as the appellate court shall adjudge reasonable as plaintiff's attorney's fees on such appeal."

The parties also executed a substantially identical "Agreement to Purchase" the Cross Roads apartment complex. Almost simultaneously, plaintiffs and defendants Baunach executed lease agreements, whereby the Baunachs agreed to lease each complex for a five-year period, from November 17, 1976, to November 17, 1981. Under the terms of the leases, the Baunachs agreed to assume and pay all sums due under the terms of the mortgage on each property, to pay an additional monthly rental charge and to undertake various other standard lease obligations.

In March, 1981, defendants Baunach attempted to tender full payment under the Agreements to Purchase, but plaintiffs refused the tender, stating that they were not obligated to accept payment until November 17, 1981. On April 15, 1981, defendants Baunach sold their interest under the Agreement to Purchase relating to Lori-Dell to Exchange Partners, Inc. (EPI), which immediately assigned its rights to defendants Johnston. On April 27, 1981, the Baunachs conveyed their interest in Cross Roads to a syndicate of investors, who forthwith assigned their rights to defendants Talmon-L'Armee.

As of November 17, 1981, the amounts due plaintiffs under the Agreements to Purchase were approximately $96,000 on the Lori-Dell complex and $71,000 on Cross Roads. Although all mortgage payments had been made through that date, lease payments were not made after October, 1981. On November 1, 1981, the Baunachs' attorney, Tarlow, offered plaintiffs either $50,000 or $80,000 in cash (it is not clear from the record), plus certain contract equities claimed to be worth about $180,000, to conclude both transactions. On November 30, 1981, Smith, plaintiffs' attorney, wrote Tarlow, stating that the offer was being considered and that it was his understanding that the Baunachs were unable to pay the balance owing. During the month of December, 1981, plaintiffs rejected the Baunachs' offer and a subsequent offer. At trial, Smith testified that both before and after November 17, 1981, Tarlow had informed him that the Baunachs could not, and would not, perform. Tarlow denied having made those statements, and John Baunach denied having authorized Tarlow to make any such remarks. On January 7, 1982, Smith advised Tarlow that, because the Baunachs had failed to make timely payment, their interests had automatically ceased and that plaintiffs desired to take immediate possession of the properties. This action followed.

On March 1, 1982, the Baunachs renewed their November 1, 1981, offer by letter, stating, "We would appreciate your consideration of this offer as we simply have no other way to pay you the cash at this time." Plaintiffs rejected that offer.

On April 7, 1982, the Baunachs assigned all their interests in the Lori-Dell Agreement to Purchase to defendants Johnston, who thereafter offered plaintiffs $96,101 and then $96,359 for Lori-Dell. After also acquiring the various interests in Cross Roads, on November 10, 1982, defendants Johnston offered plaintiffs $71,000 for that complex. Plaintiffs...