Riverside Homes, Inc. v. Murray

• Decision Date: 12 August 2009
• Docket Number: C053944CV.,A135387.
• Citation: 230 Or. App. 292,214 P.3d 835
• Parties: RIVERSIDE HOMES, INC., an Oregon corporation, Plaintiff-Appellant Cross-Respondent, v. Linda Lapp MURRAY and Irene E. West, Defendants-Respondents Cross-Appellants.
• Court: Oregon Court of Appeals

214 P.3d 835

230 Or. App. 292

RIVERSIDE HOMES, INC., an Oregon corporation, Plaintiff-Appellant Cross-Respondent, v. Linda Lapp MURRAY and Irene E. West, Defendants-Respondents Cross-Appellants.

C053944CV.

A135387.

Court of Appeals of Oregon.

Argued and submitted on December 1, 2008.

Decided August 12, 2009.

Thomas M. Christ argued the cause for appellant-cross-respondent. With him on the briefs were Julie A. Smith and Cosgrave Vergeer Kester LLP.

William E. Gaar argued the cause for respondents-cross-appellants. With him on the briefs were Michelle E. Lentzner and Buckley LeChevallier P.C.

Before EDMONDS, Presiding Judge, and ARMSTRONG, Judge, and WOLLHEIM, Judge.

ARMSTRONG, J.

Plaintiff brought this action against defendants seeking specific performance of a land sale contract. At the close of plaintiff's case-in-chief, the trial court granted defendants' motion for judgment of dismissal with prejudice pursuant to ORCP 54 B(2), but awarded plaintiff $136,024.66 as reimbursement for development costs expended by plaintiff during the pendency of the sale of the land. In a supplemental judgment, the court further determined that defendants, as the prevailing parties, were entitled to an award of attorney fees, costs, and disbursements in the amount of $72,427.61, and denied plaintiff's request for fees. Plaintiff appeals, arguing that the trial court erred in (1) granting defendants' motion for dismissal; and (2) awarding attorney fees to defendants and denying plaintiff its fees. Defendants cross-appeal that portion of the judgment awarding plaintiff reimbursement of its development costs. On appeal, we reverse and remand the judgment of dismissal and, consequently, vacate the supplemental judgment awarding defendants their attorney fees and costs. We dismiss defendants' cross-appeal as moot.

The following facts are undisputed. On November 12, 2003, plaintiff entered into a contract with defendants to purchase four and one-half acres of undeveloped land owned by defendants in Hillsboro. Plaintiff intended to develop the property into a subdivision of homes. The purchase price was $1,000,000. The contract required plaintiff to deposit $35,000 in earnest money; it further provided that the agreement was subject to plaintiff completing, within 45 days, a feasibility study for the development of the property. If plaintiff determined that it would be "economically viable" and "architecturally feasible" to develop the property as it intended, it would remove the feasibility contingency and release the earnest money; otherwise, the transaction would be "null and void" and the deposited earnest money was to be returned to plaintiff. The agreement also contained a "time is of the essence" clause, stating that it "shall apply to all terms and conditions of this Agreement."

Paragraph 6 of the contract contained the parties' agreement with respect to closing. As originally drafted, it provided that the transaction would close within six months of the earnest money deposit; it also allowed plaintiff to purchase up to six one-month extensions of the closing date for a fee of $5,000 each. Paragraph 6 further stated that, in the event of an appeal of the preliminary plat for the subdivision, the six-month deadline for closing and other deadlines would be extended. Finally, it reserved plaintiff's right to waive all contingencies and close the transaction.

During the feasibility study, plaintiff discovered that a portion of the property was zoned industrial rather than residential and, therefore, that an amendment to the City of Hillsboro's comprehensive plan was required before the property could be developed. As a result, the parties eventually agreed to revised Addendum A, dated December 8, 2003, which amended paragraph 6 to require that the transaction close within six months of notification by the city of the zoning change.

Plaintiff also learned that the city would allow access to the property only through a neighboring subdivision; as a result, plaintiff would be unable to develop the property until the developer of that subdivision improved and dedicated a connector street. Consequently, plaintiff proposed another change to the contract and, after further negotiation, the parties agreed to Addendum B, dated January 27, 2004. Paragraphs 2 and 3 of Addendum B provided:

"2. The following is hereby added to [paragraph] 6 of the Agreement:

"The Closing of this transaction is contingent upon dedication of a future improved and dedicated street connection at the southeast corner of the property from the adjacent subdivision known as the `Roses Subdivision.[']

"3. The second sentence of [paragraph] 6 of the Agreement [allowing plaintiff to purchase six one-month extensions of the closing date] is hereby deleted and replaced with the following:

"In the event that Buyer has not received final engineering approval from the City of Hillsboro by December 29, 2004, Buyer may exercise up to ten (10) one month extensions of the closing date, for a monthly extension fee of $10,000.00[,] which shall be paid prior to each month, half of which ($5,000.00) shall be applied towards the purchase price at closing."¹

Thus, the parties agree that the final language of paragraph 6, as modified by addenda A and B, provides:

"6. CLOSING—This transaction shall close within Six (6) months of notification by City of Hillsboro that the entire property is zoned residential. In the event that Buyer has not received final engineering approval from the City of Hillsboro by December 29, 2004, Buyer may exercise up to ten (10) one month extensions of the closing date, for a monthly extension fee of $10,000.00[,] which shall be paid prior to each month, half of which ($5,000.00) shall be applied towards the purchase price at closing. In the event that the preliminary plat is appealed, all closing dates, Earnest Money payment dates, and Extension dates and payments shall be extended an equal amount of time from the date of the appeal to the date which preliminary plat approval is granted and all appeals having been resolved and all appeal periods having expired, whichever is later. The Closing of this transaction shall take place at Escrow. Buyer reserves the right to close this transaction and waive all contingencies at any time if, in Buyer's sole discretion, this action is warranted. The closing of this transaction is contingent upon dedication of a future improved and dedicated street connection at the southeast corner of the property from the adjacent subdivision known as the `Roses Subdivision.'"

The city subsequently approved plaintiff's application for a comprehensive plan amendment. However, because plaintiff's engineering plans had not yet been approved on December 29, 2004, plaintiff began exercising its option to extend the closing date. Plaintiff eventually exercised all 10 monthly extensions, paying defendants a total of $100,000. On October 18, 2005, defendants notified plaintiff that the last of the monthly extensions would be exhausted on October 29, 2005, and that, if closing did not take place on or before that date, plaintiff "will be considered to be in default and this transaction will be terminated." At that time, the connector street had not been dedicated, and plaintiff declined to close.

Plaintiff then brought this action for specific performance of the contract, asserting that the street dedication contingency had not been satisfied and requesting judgment directing defendants to convey the property on the terms set forth in the agreement and awarding plaintiff "such further relief [as] the Court deems just and proper." Several months later, on June 16, 2006, plaintiff notified defendants that it was waiving the street dedication contingency and requested that defendants complete the necessary documents to close the transaction.

The case was tried to the court. At trial, plaintiff argued that defendants breached the contract by unilaterally terminating it prior to the event—satisfaction or waiver of the street dedication contingency—upon which closing of the sale was predicated. In addition to evidence of the facts recounted above, plaintiff presented testimony from Wagoner, its land acquisitions manager. Referring to the street dedication contingency reflected in paragraph 2 of Addendum B, Wagoner testified that "we inserted this language and basically wanted to make it clear that closing cannot occur until we have the ability to develop the property, which is out of our control." He further explained that plaintiff also sought the change reflected in paragraph 3, allowing it to purchase extensions for closing,² because

"[i]t's preferable for Riverside our—when we can, we would choose to typically pay some additional monies to extend the closing date to get as close to final engineering approval on the property. So we were proposing to insert more time at our discretion, assuming we didn't have final engineering approval, where we could pay a monthly payment to the sellers to extend the closing date."

Wagoner testified that the purpose of Addendum B was therefore to establish two different and independent closing scenarios— one tied to the dedication of the street (paragraph 2) and the other allowing plaintiff to purchase additional time for closing in the event that the street was dedicated but plaintiff had not yet received final engineering approval (paragraph 3). A meeting was held on January 27, 2004, to discuss Addendum B with defendants and their real estate agent. Wagoner testified that he presented defendants with Addendum B at that meeting and went over each provision of it. He testified that he explained to defendants that paragraphs 2 and 3 represented different closing scenarios and that the latter "was intended to allow more time in the event that the road for some reason was brought in right away, then we wanted to have the ability to purchase additional time to get down the entitlement...