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Blankenship v. Smalley

Court of Appeals of Oregon

April 16, 2014

DIANNA BLANKENSHIP, Plaintiff-Respondent,
ROBERT SMALLEY, Defendant, and CAROL SMALLEY, Defendant-Appellant

Argued and Submitted: January 31, 2013.

Clatsop County Circuit Court 102175. Cindee S. Matyas, Judge.

Lisa T. Hunt argued the cause for appellant. With her on the briefs was Law Office of Lisa T. Hunt, LLC.

Thomas Raymond Rask, III, argued the cause and filed the brief for respondent.

Before Ortega, Presiding Judge, and Sercombe, Judge, and Hadlock, Judge.


Page 574

[262 Or.App. 242] ORTEGA, P. J.

In this contract dispute, defendant appeals a limited judgment, contending that the trial court erroneously granted summary judgment to plaintiff. Plaintiff initiated an action against defendant Carol Smalley and Carol's ex-husband, Robert Smalley,[1] for, among other things, breach of contract. The dispute centered on the Smalleys' purchase of plaintiff's shoe business, and related specifically to a June 2009 contract executed by plaintiff and Robert that set forth the purchase terms. Plaintiff alleged that she had orally agreed to sell the business to the Smalleys in February 2009,[2] and that the written contract that plaintiff and Robert entered into in June 2009 served to memorialize that February 2009 agreement. Plaintiff further alleged that defendant had breached that contract by not making the required payments. Defendant responded that the oral agreement that she reached with plaintiff in February 2009 differed from the terms of the June 2009 contract, that she was not bound by the latter contract, and that she had satisfied the terms of the February 2009 agreement.

Plaintiff moved for summary judgment on a partnership and agency theory, contending that there was no genuine issue of material fact that defendant, as Robert's business partner, was bound by the terms of the June 2009 contract executed by Robert, and that defendant had breached that contract. The trial court agreed and granted summary judgment.

On appeal, defendant raises three assignments of error. First, she asserts that the court improperly concluded that the June 2009 contract bound " a purported 'partnership' arising from [defendant's] solely-owned LLC." Second, she contends that genuine issues of material fact existed as to whether plaintiff had " legally sufficient notice" that Robert [262 Or.App. 243] lacked authority to enter into a contract binding defendant. Third, she maintains that the court could not determine the amount of damages " on this record as a matter of law." As explained below, we conclude that defendant failed to preserve her first and third assignments of error. Accordingly, we only address the merits of her second assignment and, on that assignment, we conclude that the court properly determined that no genuine issues of material fact existed as to whether plaintiff knew or had received a notification that Robert lacked authority to bind the partnership in June 2009. Therefore, we affirm.

Page 575

Summary judgment is appropriate if there is no genuine issue of material fact for trial and the moving party is entitled to prevail as a matter of law. ORCP 47 C. There is no issue of material fact if, based on the record, " no objectively reasonable juror could return a verdict for the adverse party on the matter that is the subject of the motion for summary judgment." Id. To determine whether a genuine issue of material fact exists, we review the summary judgment record in the light most favorable to the nonmoving party--in this case, defendant--and draw all reasonable inferences in her favor. Jones v. General Motors Corp., 325 Ore. 404, 413, 939 P.2d 608 (1997). We state the facts consistently with that standard.

The Smalleys are former spouses. Robert resides in Seaside, Oregon, and defendant resides in Scottsdale, Arizona. Plaintiff operated a shoe and clothing store in Seaside called Place 2, along with a similar store in Gearhart. The Smalleys operated a shoe and clothing store in Tillamook. Defendant generally handled the financial aspects of that business and Robert handled the day-to-day operations.

During a telephone conversation in the fall of 2008, defendant asked plaintiff if she was interested in selling Place 2 or having the Smalleys take over the business. In that conversation, defendant told plaintiff, " If anything comes to fruition, I will be your contact." Subsequently, Robert and plaintiff discussed the terms of a possible sale or takeover of Place 2, and Robert relayed the details of those discussions to defendant. In late February 2009, defendant called plaintiff to confirm the terms of a purchase agreement, to get [262 Or.App. 244] additional information, and to confirm that she and Robert were going to take over the store on March 1. During that conversation, defendant confirmed her understanding of the agreement with plaintiff. She explained to plaintiff that she understood that plaintiff wanted her to take over Place 2 by purchasing the existing inventory at the manufacturer's cost, which was estimated to be $34,200.[3] Defendant informed plaintiff that she was prepared to pay " $5,000 down" and $2,000 per month " until it is satisfied." Defendant expected to pay off the inventory cost by the fall, and defendant informed plaintiff that, by purchasing the inventory, she was also purchasing the business. The parties did not reduce that agreement to writing. Defendant did not speak to plaintiff again until August 2009.

The Smalleys took possession of Place 2 on March 1, 2009, changed the name of the store to Seaside Shoes, and registered the business with the Secretary of State. Defendant's business registration listed her and Robert as co-owners of the store. Over the next few months, defendant sent payments to plaintiff in various amounts. Robert also sporadically paid plaintiff with cash out of the store's cash register. In total, plaintiff was paid between $17,000 and $18,000. In addition, the Smalleys provided some inventory to plaintiff for her to sell at her Gearhart store. Defendant alleged that the value of that inventory was between $30,000 and $40,000.

In the months that followed the February 2009 agreement, Robert and plaintiff discussed reducing that agreement to writing. Robert represented to plaintiff that he and defendant were partners and that he had full authority to execute an agreement on behalf of the partnership. In June 2009, Robert and plaintiff executed a written contract for the purchase of plaintiff's business that varied from the terms that defendant and plaintiff had agreed to during their February 2009 telephone conversation.[4] Under the June 2009 contract, the purchasers of Place 2 were to [262 Or.App. 245] pay $39,000 for the inventory and an additional sum that was equal to the average yearly sales for 2009 and 2010. In addition, 10 percent of the monthly sales of Place 2 were to be paid to plaintiff, and those amounts were to be credited against the ultimate purchase price of the business. The

Page 576

parties agree that the average yearly sales for 2009 and 2010 equaled $156,500. The June 2009 contract did not list the name of any corporate entity and was executed solely by Robert and plaintiff.

Defendant had no knowledge of the contract executed by Robert and plaintiff. She first became aware of it in the fall of 2009 when plaintiff's lawyer contacted defendant requesting additional payments. Defendant was " furious" with Robert and did not believe that he was authorized to enter into any agreement with plaintiff as to the purchase of Place 2. In January 2010, defendant brought an action against Robert, seeking damages for the conversion of Seaside Shoes. According to defendant's allegations in that action, Robert had taken over the business and excluded her from it without her consent or approval.

In March 2010, plaintiff filed a claim against the Smalleys for, among other things, breach of contract, alleging that they had breached the June 2009 contract by not paying the purchase price agreed upon.[5] Plaintiff alleged that the Smalleys were business partners, that the parties had agreed to the purchase terms of Place 2 around March 1, 2009, that the written contract of June 2009 memorialized the terms of that agreement, that the Smalleys had paid a little over $17,000 towards the purchase price and inventory, and that the Smalleys were entitled to $21,700 in credit for inventory that they had provided to plaintiff's Gearhart store. Accordingly, plaintiff sought damages of $156,806.55--the remainder of the amount allegedly owing under the contract. In her answer, defendant raised an affirmative defense that the parties had entered into an oral [262 Or.App. 246] contract in late February 2009 to purchase the business for the cost of the inventory; she further ...

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