Gilley Co. v. Mutual Wholesale Drug Co.

650 P.2d 956, 59 Or. App. 48, 1982 Ore. App. LEXIS 3180
CourtCourt of Appeals of Oregon
DecidedSeptember 8, 1982
DocketNo. 7910-05094, CA 19233
StatusPublished

This text of 650 P.2d 956 (Gilley Co. v. Mutual Wholesale Drug Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gilley Co. v. Mutual Wholesale Drug Co., 650 P.2d 956, 59 Or. App. 48, 1982 Ore. App. LEXIS 3180 (Or. Ct. App. 1982).

Opinion

GILLETTE, P. J.

This was an action for a real estate commission. Defendant, Mutual Wholesale Drug Company (Mutual), appeals from a jury verdict in favor of plaintiff, The Gilley Company (Gilley). Mutual argues that the trial court erred by striking all of its affirmative defenses and several of its counterclaims and by granting Gilley a directed verdict on the counterclaims. We reverse.

In 1977, Mutual asked Charles Cota, a senior vice president of Gilley, to find a lessee for a portion of a warehouse Mutual owned in Portland. One Smith, a Gilley broker, arranged for the lease of the warehouse to the American Red Cross. The lease between Mutual and the Red Cross, executed in 1978, provided that, if Mutual decided to sell the building “on other than a sale/leaseback basis,” Red Cross was to have “first right of refusal to purchase said property at the same price and terms as those acceptable to [Mutual] from any other purchaser * * *.”

In 1979, financial difficulties forced Mutual to sell the warehouse. On May 7, 1979, it entered into a listing agreement with Gilley through Cota. A fee addendum, incorporated into the agreement, obligated Mutual to pay on sale the fee it owed Gilley for obtaining the Red Cross lease. The addendum stated: “The Gilley Company represented both parties to this lease.” Cota recommended that the price for the warehouse be set at $1,400,000. He testified that he was aware that, because of Mutual’s financial difficulties, the warehouse needed to be sold quickly. Krigbaum testified that Cota indicated he knew that the property had to be sold by June 1, 1979, and that a $100,000 down payment was required.

After obtaining the listing on the property, Cota notified May, another Gilley broker, that the building was for sale. May told Tall, a potential buyer, about it. On May 12, 1979, Cota and May took Tall to see the warehouse and Tall expressed an interest in purchasing it. Tall testified that he told Cota and May of his intent to circumvent the Red Cross’ first right of refusal on the property by framing his offer in terms of a sale and leaseback. He testified further that Cota told him that doing so would not totally prevent the Red Cross from exercising that right. Tall also [51]*51told Cota that his offer would be conditioned upon successfully arranging a property management contract with Gilley.

On May 15, 1979, Tall delivered to May a proposed contract that offered $1,225,000 for the property. May and Cota met to discuss the offer early that morning. Without consulting with his client, Mutual, Cota advised May that the amount offered was not acceptable and that $1,250,000 was the absolute minimum offer that Mutual would consider. Cota also said that the property mangement agreement contingency would not be acceptable to Mutual. May conveyed Cota’s remarks to Tall, who agreed to increase his offer to $1,250,000. Tall also agreed to the omission of the property management contingency from the contract, after May assured him that Gilley would manage the property, anyway.

Cota and May presented the modified proposed contract to Mutual’s representative, Krigbaum, on the afternoon of May 15. The contract contained a selling price of $1,250,000, which was below the listing price. The property management contingency had been removed. In other provisions, Mutual was required to pay all closing costs, and the Red Cross’ right of first refusal was not mentioned. Cota and May both testified that they had pointed out to Krigbaum that the offering price was different from the listing price and that the property management contingency originally proposed by Tall had been removed. Both further testified that they had told Krigbaum that Gilley had entered into the collateral management agreement. Krigbaum testified that he had noticed the property management contingency had been striken from the agreement, but he claimed he had not been advised that Gilley had in fact agreed to manage the property.

Cota also testified that he had not noticed that the agreement required Mutual to pay all the costs and that, if he had, he would have brought that fact to Krigbaum’s attention. Krigbaum admitted that he probably had noted the closing costs term, but he testified that he did not know what closing costs were in a commerical context or how those costs were usually divided.

[52]*52Krigbaum asked Cota what he thought of the Tall proposal and Cota advised that it looked like a good, “clean” deal. Initially, Krigbaum indicated that he would ask his attorney to review the contract, and Cota and May did not object. After a minute or two, Krigbaum said, “Oh, the heck with it,” and signed the contract.

On the same day, May 15, Ronald Parr, a broker representing the McKenzie Company, another potential buyer, was trying to reach Cota to present an earnest money agreement for the purchase of the warehouse property. Parr called Cota’s office at 10:00 or 10:30 a.m. and left the message, “Call me” or “I’ve got an offer, call me.” Parr placed two or three other calls to Cota that day. A mid-afternoon message clearly stated that Parr had an offer on Mutual’s warehouse.

Meanwhile, Cota and May were in meetings most of the day. Cota testified that he had met with May in the morning to discuss the warehouse sale. About noon, he said, they went into a meeting concerning Gilley’s possible merger with another company. They remained in that meeting, according to Cota, until 3:00 p.m., when they went directly into the meeting in which Krigbaum accepted the Tall offer.

Cota testified that he had learned of the McKenzie offer at about 5:00 p.m., when he began returning calls that had been held fot him during the meetings. He claimed thát he typically arranged to have his calls held in such situations. Cota returned Parr’s call at that time and learned that McKenzie was prepared to offer $1,265,000 for the warehouse, subject to certain contingencies. Cota told Parr that Mutual had reached an agreement with another party and that they were not taking any more earnest money agreements. According to Cota, the conversation occurred after Krigbaum had signed the Tall contract.

No sale was completed by Mutual’s June 1 deadline. The Red Cross eventually exercised its right to purchase the warehouse and then resold it to McKenzie despite Tail’s unsuccessful challenge to the validity of the Red Cross’ right of first refusal in a suit for specific performance of his contract with Mutual.

[53]*53Gilley brought this action against Mutual for its commission under the listing agreement. Mutual advanced several counterclaims and affirmative defenses. Some were struck prior to trial; most of the remaining allegations were struck before the case was submitted to the jury, which found in favor of Gilley.

Mutual raises 20 assignments of error on appeal which can be divided roughly into four categories: 1) those concerning Gilley’s alleged failure to explain the contract of sale; 2) those concerning Gilley’s alleged failure to inform Mutual of all available offers; 3) those concerning Gilley’s alleged failure to disclose the property management agreement between Gilley and the buyer; and 4) those concerning the claim that Gilley represented conflicting interests.

FAILURE TO EXPLAIN CONTRACT

Mutual alleged that Gilley breached its duty by failing to inform Mutual that the final Tall contract did not mention the Red Cross’ first right of refusal and by failing to tell Mutual that it was required to pay all of the closing costs.

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Bluebook (online)
650 P.2d 956, 59 Or. App. 48, 1982 Ore. App. LEXIS 3180, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gilley-co-v-mutual-wholesale-drug-co-orctapp-1982.