Pgf Care Center, Inc. v. Wolfe

• Decision Date: 27 September 2006
• Docket Number: 0401-00608.,A127626.
• Citation: 144 P.3d 983,208 Or. App. 145
• Parties: PGF CARE CENTER, INC., an Oregon corporation, Appellant, v. H.L. WOLFE and E.J. Wolfe, Trustees under the Wolfe Living Trust dated July 22, 1992, Respondents. H.L. Wolfe and E.J. Wolfe, Trustees under the Wolfe Living Trust dated July 22, 1992, Third-Party Plaintiffs, v. Phillip G. Fogg, Jr., and Angela J. Fogg, husband and wife, Third-Party Defendants.
• Court: Oregon Court of Appeals

144 P.3d 983

208 Or. App. 145

PGF CARE CENTER, INC., an Oregon corporation, Appellant, v. H.L. WOLFE and E.J. Wolfe, Trustees under the Wolfe Living Trust dated July 22, 1992, Respondents.

H.L. Wolfe and E.J. Wolfe, Trustees under the Wolfe Living Trust dated July 22, 1992, Third-Party Plaintiffs, v. Phillip G. Fogg, Jr., and Angela J. Fogg, husband and wife, Third-Party Defendants.

0401-00608.

A127626.

Court of Appeals of Oregon.

Argued and Submitted January 9, 2006.

Decided September 27, 2006.

Kevin H. Kono, Portland, argued the cause for appellant. With him on the brief were Timothy R. Volpert, Rodney E. Lewis, Jr., and Davis Wright Tremaine LLP. On the reply brief was Kent B. Thurber.

Robert J. Miller, Sr., Eugene, argued the cause for respondents. With him on the brief were Brien F. Hildebrand, Beaverton, and Moomaw, Miller & Hildebrand, LLP.

Before LANDAU, Presiding Judge, and BREWER, Chief Judge, and SCHUMAN, Judge.

LANDAU, P.J.

At issue in this case is the extent to which a lease-option agreement that calls for a valuation of the premises binds the parties to the value that an appraiser produced. Specifically, the parties dispute whether the contractual definition of the "property" to be appraised precludes the appraiser from considering in the valuation the fact that the property currently houses an ongoing business. Both plaintiff, the lessee, and defendants, the lessors, filed claims for specific performance, based on their respective views about the proper valuation of the premises. The trial court entered summary judgment for defendants, concluding that, as a matter of law, the lease-option agreement permits the appraiser to include the disputed component of value. Plaintiff appeals, arguing that, as a matter of law, the lease-option agreement precludes consideration of the fact that there is an ongoing business on the premises. In the alternative, plaintiff argues that the lease-option agreement is at least ambiguous on the point. We agree with plaintiff that the agreement is ambiguous and therefore reverse and remand.

The relevant facts are not in dispute. In 1994, plaintiff entered into a 10-year lease-option agreement with defendants. Under the terms of that agreement, plaintiff agreed to lease from defendants the Columbia Manor Nursing Home, a long-term care facility in Portland. The agreement includes an option to purchase the facility. It provides that, if plaintiff decides to exercise its purchase option, the parties will attempt to agree on a purchase price, but, if unable to do so, they will hire an appraiser to determine the fair market value of "the Property." The agreement provides that the sale price then consists of that value less $100,000. The agreement specifically defines "the Property" as "the Land and the Building and the Personal Property, collectively." The constituent parts of "the Property" are also expressly defined in the lease, as follows:

"`Building' shall mean that certain building referred to as Columbia Manor Nursing Home * * * together with all improvements to and additions now or hereafter erected[.]

"* * * * *

"`Land' shall mean that certain parcel of land, in the city of Portland, county of Multnomah, and state of Oregon as more fully described in [an attached exhibit.]

"* * * * *

"`Personal Property' shall mean all property used and useful in the operation of the Columbia Manor Nursing Home and located on or about the Building[.]"

Plaintiff leased the property and operated a nursing home business there for several years. In 2003, plaintiff elected to exercise its purchase option. The parties were not able to agree upon a price, however. Among other things, they disputed the relevance of any going concern value and its impact on the fair market value of "the Property." Pursuant to their agreement, they hired an appraiser.

The parties instructed the appraiser to appraise the nursing home property in accordance with the terms of the lease agreement. Soon thereafter, the appraiser returned an appraisal. The appraisal explained that the most accurate valuation method for appraising a nursing home is one that is based on the property's future income potential. Applying that approach, the appraisal concluded that the "market value of the fee simple interest in the appraised property" is $2.9 million. The appraisal explained that, under that approach, fair market value is "segregated into the components that make up value. This includes tangible real estate as if vacant (land and buildings), realty related stabilized operations (stabilized occupancy and in-place trained staffing), and personal property (moveable furnishings, fixtures, and equipment). Business value is excluded." The appraisal then allocated the value to each of those components as follows: $2,242,000 to tangible real estate; $506,000 to realty related stabilized operations; and $152,000 to personal property.

A dispute quickly arose between the parties as to whether the fair market value of the property included the $506,000 attributed to "realty related stabilized operations." Defendants maintained that the property's fair market value includes, by definition, any factors that the appraiser determined would affect its price on the open market and, as a result, the appraised fair market value of the property under the agreement was the entire $2.9 million. Plaintiff argued that the agreement limited the definition of "the Property" to a particular piece of land, a particular building, and particular pieces of personal property and that, as a result, the appraisal was required to be limited to what plaintiff describes as simply the "bricks, mortar, dirt and personal property," without reference to any other things, including plaintiff's business, on the site. As a result, plaintiff insisted that the fair market value was only $2.4 million.

At an impasse, the parties resorted to the courts. Plaintiff filed a claim for specific performance, asking for an order requiring defendants to sell the property for $2.3 million, that is, a "proper" valuation of the premises at $2.4 million, less the agreed-to $100,000. Defendants counterclaimed for specific performance, asking for an order requiring plaintiff to buy the property for $2.9 million.

Both parties moved for summary judgment, each arguing that the lease-option agreement unambiguously either precluded or required consideration of the $506,000 in realty related stabilized operations component of the appraisal. The trial court granted defendants' motion, denied plaintiff's motion, and entered judgment accordingly. The court reasoned that the $506,000 is a part of the appraisal, and that ends the matter. According to the trial court,

"[t]his adjustment may be ill-advised. Other appraisers might have omitted it, although nothing in this record supports that conclusion. But, no matter. Even if the appraisal were mistaken, it is beyond the power of this court to correct. The parties agreed to submit the valuation to an appraiser, and to this appraiser in particular. That agreement, like an agreement to arbitrate, is binding on the parties. Absent fraud or misconduct, which has not been alleged, let alone proved, the appraisal cannot be disturbed, even if wrong."

On appeal, plaintiff argues that the trial court erred in granting defendants' motion and in denying its own motion for summary judgment. It essentially renews its argument that the lease-option agreement provision that expressly defines "the Property" that is subject to the appraisal limits the scope of the appraisal to the land, the building, and the relevant personal property, as a matter of law. In the alternative, plaintiff argues that, at the very least, the lease-option agreement is ambiguous on the point, and that the trial court erred in granting summary judgment on the ground that the agreement is unambiguous as a matter of law. Defendants also renew their arguments that, under the unambiguous terms of the lease-option agreement, plaintiff is bound by the full assessed value, including the value of realty related stabilized operations.

When there are cross-motions for summary judgment, and the assignment of error on appeal targets both the granting of one and the denial of the other, both are subject to review. Farmers Ins. Exchange v. Crutchfield, 200 Or.App. 146, 152-53, 113 P.3d 972, rev. den., 339 Or. 609, 127 P.3d 650 (2005). In both instances, we examine the evidence in the light most favorable to the nonmoving party to...