Venture Properties, Inc. v. Parker

• Decision Date: 29 October 2008
• Docket Number: A131404.,CV04040547.
• Parties: VENTURE PROPERTIES, INC., an Oregon corporation, Plaintiff-Appellant, v. Jeff PARKER, Defendant-Respondent.
• Court: Oregon Court of Appeals

195 P.3d 470

223 Or. App. 321

VENTURE PROPERTIES, INC., an Oregon corporation, Plaintiff-Appellant, v. Jeff PARKER, Defendant-Respondent.

CV04040547.

A131404.

Court of Appeals of Oregon.

Argued and Submitted on March 18, 2008.

Decided October 29, 2008.

Maureen Leonard argued the cause for appellant. With her on the briefs were W. Eugene Hallman and Hallman & Dretke.

Jeffrey M. Batchelor, Portland, argued the cause for respondent. With him on the brief were David B. Markowitz, Charles J. Paternoster, and Markowitz, Herbold, Glade & Mehlhaf, P.C.

Before HASELTON, Presiding Judge, and BREWER, Chief Judge, and ROSENBLUM, Judge.

HASELTON, P.J.

Plaintiff Venture Properties, Inc., (Venture) brought this action against defendant Jeff Parker, alternatively seeking damages for breach of contract or rescission of the contract. Plaintiff alleged as separate claims breach of contract, mutual mistake, intentional misrepresentation, and innocent misrepresentation. On the mutual mistake and innocent misrepresentation claims, plaintiff sought rescission; on the breach of contract and intentional misrepresentation claims, plaintiff sought damages or, alternatively, rescission. The trial court struck various allegations in the pleadings pursuant to ORCP 21 E and dismissed plaintiff's breach of contract claim for damages under ORCP 21 A(8). After plaintiff amended its pleadings to reflect the court's ORCP 21 rulings, the remaining claims proceeded to trial and, after plaintiff presented its case-in-chief, the court granted defendant's motion to dismiss the remaining claims under ORCP 54 B(2). Plaintiff appeals, challenging both of those rulings, and we conclude that the trial court erred in both respects. Accordingly, we reverse and remand.

In our analysis below of the trial court's rulings under ORCP 21 A(8) and ORCP 54 B(2), we will recount the material pleadings and evidence under the controlling standards of review. For present, introductory purposes, the following circumstances are uncontroverted: This dispute arose after defendant Jeff Parker and plaintiff Venture's owner, Don Morissette, reached an agreement by which plaintiff would buy from defendant property located in Happy Valley, Oregon, hereinafter referred to as "the property." Defendant had received approval from the City of Happy Valley to subdivide the property into 210 lots on which homes were to be built.

On January 28, 2004, the parties entered into a purchase and sale agreement for the property. That agreement contained a provision that "[t]he size, configuration or location of the Property will not be changed without the prior written consent of the Purchaser." The agreement also contained a number of specific warranties, including the following:

"vii) To the best of the Seller's knowledge, the Property is materially in compliance with applicable state and federal environmental standards and requirements affecting it.

"viii) The Seller has not received any notices [o]f violation or advisory action by regulatory agencies regarding environmental control matters or permit compliance with respect to the Property."

In the spring of 2004, plaintiff discovered that there were unresolved—and, in its view, undisclosed and material—issues concerning wetlands on the property. Those concerns led plaintiff to conclude that the property would not be able to be developed in the manner shown on the preliminary plat approval and in the time frame in which it expected to develop the property. Plaintiff, consequently, refused to go forward with the transaction. In a letter dated April 14, 2004, plaintiff informed defendant that it was rescinding the contract, and demanded return of its earnest money plus development-related costs incurred for a total of approximately $1 million. Defendant refused, and plaintiff initiated this action several days after it informed defendant that it was rescinding the contract.

Plaintiff initially sought only rescission of the contract; it later amended its pleading to also seek breach of contract damages as an alternative remedy. In particular, plaintiff's second amended complaint sought not only rescission of the contract, but alternatively sought damages including consequential damages for a total of approximately $7.5 million, either for breach of contract or for intentional misrepresentation.

Defendant moved, pursuant to ORCP 21 E, to strike the allegations in plaintiff's second amended complaint pertaining to damages as frivolous, and also moved, pursuant to ORCP 21 A(8), for dismissal of the breach of contract claim for failure to state a claim. Both of those motions were based on the same general theory: Because plaintiff had refused to go through with the sale and had informed defendant that it was rescinding the contract, plaintiff had irrevocably elected rescission as its remedy—and, given that election, plaintiff could not concurrently seek consequential damages based on defendant's alleged breach of contract. The trial court, as described more fully below, struck numerous allegations and dismissed the breach of contract claim pursuant to ORCP 21 A(8).

The case proceeded to trial on plaintiff's remaining theories in support of rescission. Because rescission is an equitable remedy, the case was tried to the court. After plaintiff had presented its case (and the court had taken testimony from several defense witnesses out of order), defendant moved for dismissal of plaintiff's remaining claims pursuant to ORCP 54 B(2). The trial court granted defendant's motion, rendering corollary findings and conclusions. Plaintiff appeals, assigning error both to the trial court's allowance of defendant's ORCP 21 motions and to the court's dismissal with prejudice of the remaining claims under ORCP 54 B(2). We address each assignment in turn.

I. ORCP 21 A(8) DISMISSAL OF THE BREACH OF CONTRACT (DAMAGES) CLAIM

The procedural posture of the trial court's ORCP 21 dismissal is convoluted, involving the combination of a motion to strike under ORCP 21 E¹ and a motion to dismiss under ORCP 21 A(8).² However, as noted, the gravamen of those motions collectively was straightforward: Plaintiff had undertaken to rescind the contract and, consequently, could not concurrently seek to recover damages for any breach. The trial court agreed:

"I've allowed the Motion to Dismiss the First Claim of Relief for Breach of Contract. And the basis of this ruling is that the plaintiff elected to rescind the contract. And once that election is made, you can't have it both ways, you can't affirm and sue for damages on the contract and also seek rescission. * * * And you can't wait—the argument that you wait until judgment and then elect is not a viable argument."

Plaintiff asserts that the trial court's disposition rested on a false premise. Specifically, plaintiff contends that, as a matter of law, a party is entitled to plead in the alternative inconsistent claims or remedies, specifically including rescission and damages for breach of contract. See Colonial Leasing Co. v. Tracy, 276 Or. 1193, 1196-97, 557 P.2d 639 (1976) (when a party has multiple possible remedies, "[o]rdinarily, an election is not made until a judicial proceeding has gone to judgment on the merits"). That is, nothing in plaintiff's rescission claims as pleaded irrevocably precluded plaintiff from forgoing rescission and recovering contractual damages instead. In particular, invoking Grider v. Turnbow, 162 Or. 622, 94 P.2d 285 (1939), plaintiff argues that, although its pleadings alleged that it had notified defendant that it was rescinding the sales agreement, a rescission is not actually accomplished until either the parties agree to rescission or a rescission is established by law. Plaintiff asserts that nothing in its pleadings disclosed either of those predicates.

Defendant responds that the allegations of plaintiff's second amended complaint (as well as plaintiff's superseded complaints), taken as true, establish an irrevocable election of the remedy of rescission. In that regard, defendant points particularly to plaintiff's allegations regarding its April 14, 2004, letter to defendant that it was rescinding the agreement. Defendant cites Bridgmon v. Walker, 218 Or. 130, 344 P.2d 233 (1959), for the proposition that plaintiff's allegations of entitlement to rescission, including the allegations described in the April 14 letter, preclude pursuit of an alternative nonrescissionary remedy.

Neither Bridgmon nor any other authority that defendant invokes supports that conclusion. In Bridgmon, the Supreme Court held that the trial court had erred in denying a directed verdict against the plaintiff's breach of contract claim by which the plaintiff sought and received compensatory damages. In so holding, the court noted the general proposition that "a vendee who has been deceived into entering into a contract of purchase may upon discovery of the fraud either affirm or rescind the contract." Id. at 134, 344 P.2d 233 (citing cases). Because the "evidence conclusively disclose[d] that the plaintiffs elected not to affirm the contract," id. at 135, 344 P.2d 233, the Supreme Court concluded that the trial court had properly allowed the motion for directed verdict. Thus, Bridgmon addressed the sufficiency of a plaintiff's proof in the face of a directed verdict motion against a claim for breach of contract; it did not purport to address the sufficiency of pleadings—much less whether a plaintiff's announcement of intent to rescind a contract would preclude the plaintiff from later seeking damages other than rescissionary damages.

Indeed, defendant's construction and application of Bridgmon is at odds with Sheppard v. Blitz, 177 Or. 501, 163 P.2d 519 (1945). In Sheppard, the Supreme Court explicitly addressed the question of when a remedy of rescission has been irrevocably elected. There, the plaintiff initially had sought rescission and, after rescission had been granted but the...