Summer Oaks Ltd. Partnership v. McGinley

• Decision Date: 25 September 2002
• Citation: 183 Or.App. 645,55 P.3d 1100
• Parties: SUMMER OAKS LIMITED PARTNERSHIP and Willamette University, Appellants, v. Michael E. McGINLEY; Steven Morrison; Patrick Whitmore; Eastern Western Corporation, dba Cheyenne Properties; Michael Morrison, dba Morrison Construction; Morrison Building Corp.; and Steven Morrison and Patrick Whitmore, dba Ironwood Investments, an Oregon general partnership, Respondents.
• Court: Oregon Court of Appeals

55 P.3d 1100

183 Or.App. 645

SUMMER OAKS LIMITED PARTNERSHIP and Willamette University, Appellants, v. Michael E. McGINLEY; Steven Morrison; Patrick Whitmore; Eastern Western Corporation, dba Cheyenne Properties; Michael Morrison, dba Morrison Construction; Morrison Building Corp.; and Steven Morrison and Patrick Whitmore, dba Ironwood Investments, an Oregon general partnership, Respondents.

16-98-20928; A108927

Court of Appeals of Oregon.

Argued and Submitted December 18, 2001.

Decided September 25, 2002.

G. David Jewett, Springfield, argued the cause for appellants. With him on the briefs was Thorp, Purdy, Jewett, Urness & Wilkinson, P.C.

Thomas W. Brown, Portland, argued the cause for respondents. With him on the brief were Wendy M. Margolis, Robert E. Sabido, and Cosgrave, Vergeer & Kester LLP.

Before HASELTON, Presiding Judge, and LINDER and WOLLHEIM, Judges.

WOLLHEIM, J.

In this case involving a claim of unjust enrichment stemming from a sale of real property, plaintiffs appeal from a grant of summary judgment in favor of defendants.¹ Plaintiffs argue that the trial court erred in concluding that "system development charge" (SDC) credits awarded to them by the City of Eugene "ran with the land," so that, when plaintiffs sold land to defendants, defendants acquired the right to use those credits to offset any SDCs imposed by the city as a condition to issuance of a building permit.² Defendants respond, inter alia, by arguing that plaintiffs' argument was not preserved for appeal and, in all events, is founded on the incorrect premise that a contract for the sale of real property does not necessarily also transfer any SDC credits related to that property. We reject defendants' preservation argument and conclude that the trial court erred in concluding that the SDC credits here necessarily ran with the land.³ Consequently, we reverse and remand.

The facts on summary judgment are as follows. Plaintiffs are the developers and former owners of a piece of real property located in the City of Eugene. While plaintiffs still owned the property, including the portion that was subsequently sold to defendants, they privately constructed various public improvements on the undeveloped property, including streets, sidewalks, and sewer and water facilities. Based on those improvements, plaintiffs applied for and received SDC credits from the City of Eugene totaling $361,617.

In 1996, Ironwood Investments (Ironwood) entered into a written contract to purchase the property underlying this dispute, which consisted of roughly a three-acre portion of the complete parcel⁴ owned by plaintiffs. By its terms, the agreement was contingent upon, inter alia, (1) plaintiffs obtaining approval to partition the lot from a larger parcel owned by plaintiffs; (2) Ironwood entering into an anticipated lease agreement with the state Department of Human Resources; and (3) Ironwood receiving several zoning-related changes to ensure that the property could be used for Ironwood's intended use. The agreement was silent as to SDC credits, and it included an integration clause that stated that the agreement was "the entire agreement and understanding of the parties with respect to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements between them with respect thereto." Thereafter, Ironwood assigned its rights under the contract to Cheyenne Properties (Cheyenne).

In January 1998, the City of Eugene granted defendants' application for a building permit and assessed defendants with $127,025 in SDCs for the proposed improvements. The city, however, offset those charges by $74,779 in SDC credits, $72,858 of which were drawn from the $361,617 in credits granted to plaintiffs.

On April 9, 1998, with all of the contingencies to the contract having been satisfied, plaintiffs sold the property to Cheyenne.⁵ Shortly thereafter, on April 28, 1998, plaintiffs demanded that defendants reimburse them for $72,858 in credits that the city had used to offset the SDCs. Defendants refused, and this action ensued.

In their operative amended complaint, plaintiffs first asserted that defendants were unjustly enriched in the amount of $72,858 by virtue of receiving the credits as an offset to their total SDC. Plaintiffs further alleged that defendants had orally agreed to reimburse plaintiffs for the amount of any credit used to offset any SDCs assessed by the city. Finally, plaintiffs alleged that defendants had fraudulently misrepresented to plaintiffs that defendants would pay for any SDC credits, thus inducing plaintiffs to enter into the contract.

After discovery, defendants moved for summary judgment. In support of that motion, defendants argued that the written contract constituted an integrated agreement and that, in view of ORS 41.740 (codifying the parol evidence rule) and ORS 41.580 (codifying the statute of frauds), the contract could not be altered by the alleged oral agreement to pay for the SDC credits. Defendants' basic position was that, given the written agreement's silence regarding SDC credits, it followed that the SDC credits passed to defendants along with the subject property.

In opposition to defendants' motion for summary judgment, plaintiffs submitted an affidavit of counsel that attached copies of the complete depositions given by (1) Richard Minkler, plaintiff Summer Oaks' controller; (2) Richard Cone, Summer Oaks' president; (3) Steven Morrison, marketer and developer for Morrison Construction Company; and (4) Ken Allen, project manager for Morrison Construction Company. In addition, plaintiffs submitted a memorandum in opposition to summary judgment. In its memorandum, plaintiffs argued that the excerpted portions of the Minkler, Cone, Morrison, and Allen depositions included with its memorandum demonstrated (1) the existence of material facts regarding whether there was an oral agreement between the parties regarding SDC credits, (2) the terms of that oral agreement, and (3) whether that agreement was breached. Plaintiffs further asserted that defendants' reliance on the statute of frauds and parol evidence rule was misplaced because the SDC credits were not part of the parties' land sale contract:

"In the present case, there are two contracts. One is for the purchase and conveyance of the subject property, which includes a specific recitation for the defendants to pay all building permit fees. The second oral contract deals with reimbursement to the plaintiffs of any SDC credits utilized by the defendants."

In other words, plaintiff argued that defendants had no right under the written contract to the SDC credits and that the parties' alleged oral agreement obligated defendants to pay for whatever SDC credits they might use.

In response to that memorandum, defendants, inter alia, moved to strike the complete, unexcerpted portions of the Minkler, Cone, Morrison, and Allen depositions, asserting that plaintiffs' failure to relate unexcerpted portions of those depositions to material facts in dispute precluded consideration of those materials as part of the summary judgment record. The trial court, however, never reached the merits of that argument. Instead, at oral argument on defendants' summary judgment motion, the court questioned counsel as to whether the transfer of real property, pursuant to the parties' written agreement, necessarily included the entitlement to SDC credits. Plaintiffs argued that the credits were not part of the sale and, thus, that their evidence of an oral agreement was precluded by neither the statute of frauds nor the parol evidence rule:

"[PLAINTIFFS' COUNSEL]: Your Honor, we must reinforce that the credits are a separate matter from the conveyance of the dirt. That if there had been no credits associated with this property, which could very well have been the factual situation when [defendant] applied, that he wouldn't have received $72,000 less charges."

Plaintiffs further argued, in response to the trial court's assertion that the SDC credits ran with the land, that the particular method that plaintiffs chose for recovering the credits suggested that the credits did not run with the land and that the credits were, in fact, not directly related to the land itself:

"[PLAINTIFFS' COUNSEL]: * * * the way that the city sets up the allocation of the credits to the various properties, and they have to eligible properties, is that * * * they utilized one of three alternative methods that the city allows for the use of these credits.

"One is a pro-rata distribution of the credits.

"The second method is the allocation method, which says for this particular property, this amount of credits will be assigned to that particular parcel.

"The third, and chosen method, was the draw-down balance method, which allowed this pot of SDC credits that [the developer] had for putting in Crescent Drive to be utilized on a sort of first come, first serve basis. And that number can't be calculated until the building plans and permits are submitted to the city.

"* * * * *

"So the issue really is sort of specious that this goes with the land, because you can't-number one, there might not have been any credits at the time that Morrison submitted his permit, that's number one."

Defendants, in response, argued that, as owner of the property, they were automatically entitled to the SDC credits that related to the property because "[o]nce we acquire ownership we acquire the credits."

Ultimately, the court agreed with defendants, concluding as a matter of law that the right to SDC credits was one that categorically "flows with the land" because "once you get title, then you have the right to what that land produces." Building on that conclusion, the court noted that the contract was silent as to SDC credits and was an integrated agreement. Thus, the court concluded, plaintiffs could not rely on extrinsic oral evidence to alter the terms of that integrated writing. Accordingly, the...