Nelson v. Brostoff

• Decision Date: 21 December 1984
• Citation: 70 Or.App. 486,689 P.2d 1056
• Parties: , 39 UCC Rep.Serv. 1754 Roger A. NELSON, Donald R. Dwyer and Roderick O'Hearn, Appellants, v. Benjamin BROSTOFF, Respondent. A8209-05728; CA A26783.
• Court: Oregon Court of Appeals

Page 1056

689 P.2d 1056

70 Or.App. 486, 39 UCC Rep.Serv. 1754

Roger A. NELSON, Donald R. Dwyer and Roderick O'Hearn, Appellants, v. Benjamin BROSTOFF, Respondent.

A8209-05728; CA A26783.

Court of Appeals of Oregon.

Argued and Submitted Feb. 15, 1984.

Decided Oct. 31, 1984.

Reconsideration Denied Dec. 21, 1984.

John S. Folawn, Portland, argued the cause for appellants. With him on the briefs were Lee S. Aronson, and Holmes, DeFrancq & Schulte, P.C., Portland,

James N. Westwood, Portland, argued the cause for respondent. With him on the brief were John F. Neupert, and Miller, Nash, Wiener, Hager & Carlsen, Portland.

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

RICHARDSON, Presiding Judge.

Plaintiffs brought this action to specifically enforce a contract whereby defendant purportedly agreed to sell all of the stock of Rico's Red Lion Pizza Parlors, Inc., to plaintiffs. Defendant moved for summary judgment on the ground that the alleged contract violated the "applicable statutes of fraud [sic]." The trial court granted the motion, plaintiffs appeal and we affirm.

After the parties reached some level of preliminary agreement in late August or early September, 1982, defendant's attorney drafted a proposed written purchase and sale agreement. It provided that defendant would sell and plaintiffs would purchase 102 shares of Rico's for a price of $950,000. It also contained a provision relating to the future lease to Rico's of property owned by defendant. For reasons that are not material to our discussion, plaintiffs found the proposed contract unacceptable. On September 13, 1982, the parties had a meeting to discuss the matter, followed by a meeting that afternoon among plaintiff Nelson, defendant and defendant's accountant, Eastern. At that meeting and, apparently, at earlier phases of the negotiations, Eastern acted as defendant's adviser and spokesman. During the meeting, he prepared a handwritten document on a piece of memorandum paper. It reads:

"1. Prepayment penalty.

"2. November 15

"3. Standard sellers warranties

"4. Stock of Rico's or securities not both.

"5. Default--work out Don DeFrancq. ¹

"6. Any moneys due corporation by [defendant] payable one year."

Nelson signed that document, and Eastern initialed it. Plaintiffs argued and introduced some evidence to show that each of the notations on Eastern's writing refers to a topic about which agreement was reached at the meeting. Plaintiffs rely in particular on the deposition of defendant, whose testimony was to the effect that there was consensus among him, Eastern and Nelson about some of the matters synopsized by Eastern's notations. Defendant also testified that, after Nelson signed and Eastern initialed the document, defendant said to Nelson, "We've got a deal." The "deal" never advanced beyond that level of formalization, and defendant later sold Rico's to a different purchaser, who had offered a higher price.

Plaintiffs rely on ORS 78.3190(1) and (4), ² which provide:

"A contract for the sale of securities is not enforceable by way of action or defense unless:

"(1) There is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price; or

" * * *

"(4) The party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract was made for sale of a stated quantity of described securities at a defined or stated price."

Although plaintiffs do not dispute that there was no single signed writing containing the elements specified by ORS 78.3190(1), they nevertheless argue that there was an enforceable agreement under that statute. Their theory is that evidence in the summary judgment proceeding would support findings that (a) Eastern was defendant's agent; (b) he initialed the document he prepared at the September 13 meeting; (c) that document was connected with the proposed contract and referred to the same transaction; (d) the proposed contract meets all of the requirements of ORS 78.3190(1) other than the requirement that it be signed by defendant or his agent; and (e) Eastern's initials on the other document satisfy the signature requirement of the statute. ³

Plaintiffs rely principally on Haspray v. Pasarelli, 79 Nev. 203, 380 P.2d 919 (1963). In that case, there were two writings, one signed and the other not. The signed writing in itself did not contain all of the elements necessary to satisfy the Statute of Frauds, but the second supplied the missing ones. The Nevada Supreme Court reversed the trial court's summary judgment for the defendant who asserted the Statute of Frauds defense and held:

"Two separate writings may be sufficiently connected by internal evidence without any express words of reference of one to the other. That they refer to the same transaction and state the terms thereof may appear from the character of the subject matter and from the nature of the terms. 2 Corbin, Contracts § 514.

"All of the essential terms of the oral agreement alleged can be found in the two written documents. If they were intended by the parties to constitute one transaction appellants should have been permitted to present evidence to show this * * *." 79 Nev. at 208, 380 P.2d 919.

Plaintiffs also rely on Flegel v. Dowling, 54 Or. 40, 102 P. 178, 135 Am.St.Rep. 812 (1909), as authority for the same basic principle.

Those cases are not apposite. Unlike the supplemental writings in Haspray and Flegel, Eastern's writing here contained no terms that the Statute of Frauds requires; correspondingly, unlike the underlying instruments in Haspray and Flegel, the proposed contract did contain all of the terms required by the statute. The only problem with the proposed contract is that, unlike the underlying instruments in Haspray and Flegel, it was not subscribed by the party to be charged or his agent.

The most relevant Oregon authority we find, Hanks et ux. v. Baillie, 229 Or. 160, 367 P.2d 359 (1961), is not cited by the parties. The plaintiffs-buyers in that case sought to have an earnest money receipt construed together with other writings to take it out of the Statute of Frauds. The receipt had not been signed by the defendant-seller and, standing alone, it suffered from other deficiencies that rendered it unenforceable under ORS 41.580. One of the secondary documents on which the plaintiffs relied, exhibit 1, was a page of notes the defendant wrote and signed while discussing the terms of the contemplated sale with the plaintiffs. In affirming the trial court's judgment of involuntary nonsuit, the Supreme Court said:

"Plaintiffs' position rests heavily upon the idea that Exhibit 1 purported to be a contractual instrument memorializing, at least in part, the agreement of the parties. However, the exhibit does not contain any promissory language, a description of the property, the designation of the contracting parties, or any indication that plaintiffs are bound to purchase the property. The position of defendant's signature on the sheet in relation to the other notations suggests that his name was written not as a signature to bind him to a bargain but simply to record his name and address for plaintiffs' convenience.

"We believe that it is eminently clear that the writings preceding the partial execution of the earnest money receipt were not intended by the parties to be binding upon them and that it was contemplated that some more formal writing would eventually memorialize the final agreement. * * *" 229 Or. at 165, 367 P.2d 359. ⁴

Reduced to essentials, plaintiffs' argument is that Eastern's initials on a page of notes that is devoid of any reference to any term the applicable statute makes a prerequisite to enforcement can render enforceable another writing that was obviously drafted to embody the entire agreement of the parties, that does contain all the terms required by the statute, that defendant did not sign and that plaintiffs expressly refused to sign. We reject that argument and hold that, as a matter of law, plaintiffs produced no evidence of an agreement that can be enforced under ORS 78.3190(1).

Plaintiffs argue next that defendant's deposition testimony makes the agreement enforceable under ORS 78.3190(4). Plaintiffs state that the relevant portion of defendant's deposition

"culminated in his admission that after he and his agent met with Nelson and ironed out the final details of the agreement and after Nelson and Eastern signed [Eastern's writing], the defendant shook Nelson's hand and stated, 'We've got a deal.' " * * * [T]he defendant contends that his declaration 'We've got a deal,' standing by itself, is not sufficient to satisfy the statute. However, taken in context with the preceding events described by the defendant in his deposition, it is clear that the defendant has admitted enough to satisfy ORS 78.3190(4)." ⁵

We note initially that, even if defendant's deposition testimony were sufficiently specific to constitute an admission under ORS 78.3190(4), it would be questionable at best whether his testimonial recollection of a past statement is equivalent to an in court admission for purposes of the statute. ⁶ Defendant did not testify that there had been a "deal" made; his testimony was that he had made the statement "We've got a deal" on a previous occasion. There is of course a difference between a witness' testimony that a fact is true and the impeachment of a witness by a prior inconsistent statement that is contrary to the fact he asserts. That difference may be critical in determining whether defendant's testimony can be an admission of the kind contemplated by ORS 78.3190(4). The purpose of ORS 78.3190(4) is to permit enforcement of an unwritten agreement if the existence of the agreement and its terms are as certain as they would be if there were a writing....