Ying v. Lee

• Decision Date: 26 October 1983
• Docket Number: No. 125,005,125,005
• Citation: 65 Or.App. 246,671 P.2d 114
• Parties: Matthew YING and Goretta Ying, Husband and Wife, Respondents-Cross-Appellants, v. Dean H. LEE, Appellant-Cross-Respondent. ; CA A24533.
• Court: Oregon Court of Appeals

Page 114

671 P.2d 114

65 Or.App. 246

Matthew YING and Goretta Ying, Husband and Wife Respondents-Cross-Appellants, v. Dean H. LEE, Appellant-Cross-Respondent.

No. 125,005; CA A24533.

Court of Appeals of Oregon.

Argued and Submitted Jan. 17, 1983.

Decided Oct. 26, 1983.

Michael J. Kavanaugh, Portland, argued the cause and filed the briefs for appellant-cross-respondent.

Robert L. Engle, Woodburn, argued the cause for respondents-cross-appellants. With him on the brief was Eichsteadt, Bolland, Engle, Schmidtman & Rohrer, Woodburn.

Before GILLETTE, P.J., and WARDEN and YOUNG, JJ.

GILLETTE, Presiding Judge.

This case began as an action for fraud in connection with the sale of a restaurant; plaintiffs later added a claim for rescission. Defendant counterclaimed, seeking ejectment. Defendant appeals from the trial court's decree allowing "rescission" after a finding that no contract existed between plaintiffs and defendant. Plaintiffs cross-appeal from the trial court's allowing defendant $1,000 per month as the reasonable rental value of the premises. We affirm.

The restaurant is located in Woodburn. The evidence at trial showed that, despite several land sale contracts, the restaurant real property is in fact owned by Fairway Plaza Shopping Center, Inc. On April 9, 1976, Fairway Plaza sold the property on land sale contract to defendant, who operated the restaurant until August 16, 1977, when he sold the real property on contract to Hossein Homaizad. Homaizad sold the property on contract to Uncle Hank's Experience Co., an Oregon corporation, on or about October 25, 1978. Henry Martin operated the restaurant for the corporation until sometime in September, 1980.

In September, 1980, plaintiffs entered into an "agreement of sale" with Martin, who was acting on behalf of Uncle Hank's Experience Co. Under that agreement, plaintiffs were to purchase the restaurant business and the real property from Uncle Hank's Experience for $468,000, paying $38,000 in cash, $30,000 by assignment of the equity in plaintiffs' home in Vancouver, Washington, and the balance of $400,000 at $3,200 per month, with 10 percent interest. In October, 1980, defendant contacted plaintiffs and advised them that neither Martin nor the corporation owned any interest in the premises that they could sell to plaintiffs. The corporation was in default, but defendant had not foreclosed. Plaintiffs and defendant then negotiated the sale of the restaurant business and the real property, even though Fairway Plaza then had the title to the real property.

There was substantial disagreement at trial regarding what representations defendant made concerning the marketability of his title to the restaurant and what terms were agreed upon. Plaintiffs contend that defendant represented that he had marketable title to the property and that he would sell on the terms and conditions previously negotiated with Martin. Plaintiffs further contend that defendant represented that persons of Oriental descent need not place agreements in writing and that the restaurant had been grossing a specified monthly amount of sales. On the basis of those representations, plaintiffs voided a check previously issued to Martin and issued a check to defendant in the amount of $38,000.

Defendant contended at trial that he had disclosed to plaintiffs the state of the title, that the $38,000 down payment was only a partial down payment and that plaintiffs had offered an additional $30,000 cash to complete the down payment. Defendant admitted discussing what Martin had been grossing per month and what, in defendant's opinion, the business could make with a few changes and longer hours. Defendant denied ever agreeing to accept plaintiffs' house in lieu of cash.

Plaintiffs gave defendant the check for $38,000 and took possession of the premises in the first week of November, 1980. They testified that, during the second week of November, defendant stated that he would not accept the equity in plaintiffs' house and demanded $30,000 cash. Plaintiffs claim that, also in November, they orally offered to vacate the restaurant in return for their $38,000. On December 15, 1980, however, plaintiffs' attorney wrote a letter to defendant that did not demand the return of the $38,000, but stated plaintiffs' desire to complete the transaction with certain assurances.

On January 16, 1981, plaintiffs' attorney again wrote to defendant, demanding a renegotiation of the terms of the sale and a return of the $38,000. Defendant demanded that plaintiffs vacate the property on February 6, 1981.

Plaintiffs sued defendant for fraud in the sale of the restaurant. The amended complaint alleged three claims for relief. The first alleged fraud; plaintiffs sought general and punitive damages. Counts two and three alleged intentional and innocent misrepresentations and asked for rescission of the contract.

Defendant answered by admitting that plaintiffs and defendant had "entered into certain negotiations concerning the sale of only * * * the restaurant business * * * " and denied the balance of plaintiffs' complaint. Defendant, by counterclaim, alleged:

"IV

"At all times herein, defendant did advise plaintiffs that said premises had previously been sold and that the prior purchasers were in default in their purchase agreement and had abandoned the restaurant property and business. That the premises were vacant and that defendant had filed suit for foreclosure of said contracts of purchase in Marion County, Oregon.

"V

"Notwithstanding said knowledge, plaintiffs did enter into an oral agreement with defendant to purchase, occupy and operate a restaurant in plaintiffs' name and style at said premises and address. On or about November 20, 1980, plaintiffs did occupy said premises and commence a restaurant business under the name and style of 'China Town Restaurant.'

"VI

"Said occupancy and restaurant operation by plaintiffs was with defendant's knowledge and permission and based upon plaintiffs' assertion to defendant that a standard form earnest money receipt would be entered into setting forth the oral agreement of the parties. An earnest money receipt, marked 'Exhibit A,' attached hereto and made a part hereof, was prepared and submitted to plaintiffs on or about December 24, 1980, who have subsequently failed, neglected and refused to execute the agreement, or any agreement, or pay any sums to defendant for plaintiffs' occupancy."

Plaintiffs replied to defendant's counterclaim:

"That the aforesaid oral agreement is void, being an agreement for the sale of real property, not reduced to writing and not sufficiently clear or unequivocal as will permit secondary evidence of its content to be offered."

After trial to the court, the trial judge found that

" * * * no contract existed and that the defendant should return to the plaintiffs the sum of $38,000.00 previously paid by the plaintiffs to the defendant, subject to a setoff of $1,000.00 per month, being a reasonable rental value of the premises during the period November 7, 1980, through April 1, 1982 * * *."

The trial court's order was captioned "Decree of Rescission."

Defendant's appeal raises three assignments of error. He first asserts that the trial court's finding that no contract existed when beyond the pleadings. Next, he contends that plaintiffs waived "rescission" by operating the restaurant for 16 months after knowledge of the alleged fraud. Finally, he argues that the evidence fails to support the trial court's judgment of $1,000 per month as fair rental value. Plaintiffs cross-appeal from the trial court's award of 16 months rental for the use of the premises. They contend that defendant was not entitled to any amount for rent, because defendant was at no time entitled to possession of the premises.

Defendant's first assignment is essentially that the trial court's finding that no contract existed was sua sponte and based on a theory not pled by the plaintiffs. We disagree.

The general rule is, of course, that the pleadings provide the framework within which relief may be granted. See Hurlbutt v. Hurlbutt, 36 Or.App. 721, 725, 585 P.2d 724, rev. den. 285 Or. 73 (1979); Heintz v. Sinner et ux, 232 Or. 529, 533, 376 P.2d 478 (1962).

Defendant's reliance on the rule of Hurlbutt and Heintz is misplaced. In the present case, the trial court's finding that no contract existed merely established both parties' failure--plaintiffs' under their claim and defendant's under his...