LOST SPRINGS DEVELOPMENT, INC. v. WHITELEY, 106 Or. App. 162 (1991)

807 P.2d 304

89C10655; CA A63098Oregon Court of Appeals.Argued and submitted January 25, 1991.
Affirmed February 27, 1991

Appeal from Circuit Court, Marion County, Rodney W. Miller, Judge.

J. Michael Alexander, Salem, argued the cause for appellants. With him on the briefs was Burt, Swanson, Lathen, Alexander
McCann, Salem.

Steven R. Summers, Stayton, argued the cause and filed the brief for respondents.

Before Warren, Presiding Judge, and Joseph, Chief Judge, and Edmonds, Judge.

EDMONDS, J.

Affirmed.

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EDMONDS, J.

Plaintiffs appeal a judgment that dismissed their claim for specific performance of a purported agreement regarding the sale of real property.[1] On de novo review, ORS 19.125 (3), we affirm.

In 1979, defendants sold the Detroit Lake Marina and Store to the Brandts, secured by a note and trust deed. The Brandts sold the property to plaintiffs in 1985 by a contract of sale. Plaintiffs defaulted on their obligation to the Brandts, who then defaulted on their obligation to defendants. In May, 1988, the Brandts obtained a judgment of foreclosure against plaintiffs, although plaintiffs remained in possession of the property. Defendants began negotiating to sell their interest in the property to plaintiffs. Pursuant to those negotiations, in May, 1988, plaintiffs presented defendants a letter of intent,[2] along with a photocopy of a $500 check and a

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proposed land sale contract.[3] Plaintiffs and defendants signed the letter of intent. However, the Brandts did not sign the letter, and no one signed the proposed land sale contract.

Plaintiffs continued to operate the business and made substantial improvements to the property. They also made regular monthly payments into their attorney’s trust account for tender to defendants and arranged for cash-out financing. The parties exchanged numerous “agreements” and “land sales contracts” but did not execute any. Plaintiffs brought this action in April, 1989, seeking specific performance under the terms of the letter of intent. In May, 1989, the Brandts deeded their interest to defendants in lieu of foreclosure. Judgment was entered for defendants.

Plaintiffs assert that the trial court erred by finding that the agreement between the parties was not definite enough to support specific performance. Defendants argue that the letter was a mere summary of negotiations, that a contract was to be signed later and, therefore, that there were never mutual promises to buy and sell.

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Defendant Arthur Whiteley testified that plaintiff Zane Kelly told him that the letter of intent “was a nonbinding piece of paper and it was just to show the Brandts that [they] were negotiating.” Accordingly, Whiteley “signed it with the intent to let [the] Brandts know that [they] were negotiating.” Defendant Barbara Whiteley agreed, stating that

“Arthur asked [Zane Kelly] what is this [letter of intent]. And Zane’s exact words were I don’t know but it’s not binding, it’s just to get things started.”

Zane Kelly denied that he had done anything to make defendants think that the letter was not binding. He testified that he “understood [the letter of intent] to be an agreement to purchase the marina and write a contract so [they] could continue on with all points of the agreement.” However, on direct examination, he testified:

“I delivered [the letter of intent], if you will, to [defendants’] home, explained to them this was what we had negotiated between us, they can read it and sign it. The contract would follow. This was not the final contract.” (Emphasis supplied.)

Plaintiffs have the burden of proving that the parties intended the letter of intent to be a mutually binding agreement before they can be entitled to specific performance Bock v. Schott, 189 Or. 358, 217 P.2d 768 (1950). The letter of intent contained signature lines for the Brandts, who had an ownership interest in the property in May, 1988, but it was not signed by them. The letter was also accompanied by a contract, which was never signed by the parties, and a copy of a check, delivery of which was conditioned on “completion of contract related to [the] letter of intent.” In the light of those facts and the quoted testimony, we find that there was no binding contract. The trial court did not err in denying specific performance.

Affirmed.

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