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Vukanovich v. Kine

Court of Appeals of Oregon

January 22, 2015

Mark VUKANOVICH, an individual, Plaintiff-Appellant,
v.
Larry KINE, an individual; and Larry Kine Properties, LLC, an Oregon limited liability company, Defendants-Respondents, and STONECREST PROPERTIES, LLC, an Oregon limited liability company; Alan Evans, an individual; and Charles Kingsley, an individual, Defendants

Argued and Submitted January 11, 2013

Page 1076

Lane County Circuit Court. 161011969. Charles D. Carlson, Judge.

George W. Kelly argued the cause and filed the briefs for appellant.

Craig R. Berne argued the cause for respondents. With him on the brief was Harris Berne Christensen LLP.

Before Duncan, Presiding Judge, and Lagesen, Judge, and Schuman, Senior Judge.[*]

OPINION

Page 1077

[268 Or.App. 625] LAGESEN, J.

Plaintiff Mark Vukanovich and defendant Larry Kine (defendant) entered an

Page 1078

agreement to work together to purchase a parcel of real property from Umpqua Bank (Umpqua or the bank). Plaintiff previously owned the property, but lost it to the bank when he could not meet his loan obligations. For reasons disputed bye the parties, the joint endeavor failed, and the parties became competitors, each seeking to purchase the property from the bank. The bank rejected plaintiff's offer and accepted defendant's offer, and plaintiff sued defendant for fraud and breach of contract, including breach of the implied covenant of good faith and fair dealing. Plaintiff also sued Larry Kine Properties, LLC (Kine Properties), a company owned by defendant's wife and managed by defendant, asserting claims for breach of contract, including breach of the implied covenant of good faith and fair dealing, and intentional interference with economic relations.[1] After a jury returned a verdict in favor of plaintiff on all claims, the trial court entered judgment in favor of defendants, granting defendants' motion for judgment notwithstanding the verdict (JNOV)[2] and, alternatively, ruling [268 Or.App. 626] that the equitable doctrines of unclean hands and equitable estoppel bar plaintiff from recovering on any of his claims. We conclude that the trial court erred in granting the JNOV on the contract claim and in concluding that the doctrines of unclean hands and equitable estoppel bar plaintiff's recovery and, accordingly, reverse the judgment and reinstate the jury's verdict on the contract claim. We otherwise affirm.

I. BACKGROUND

A. Substantive Facts[3]

Plaintiff is a real estate developer with several decades of varying experience in the industry. In spring 2007, he purchased a 43-acre parcel of land in Eugene, Oregon (the city), with a $4.629 million loan from Umpqua. Plaintiff intended to divide the parcel into 102 residential lots and construct the infrastructure needed for a residential development. He planned to sell the lots in two phases: 40 lots in Phase 1 and 62 lots in Phase 2. To meet city requirements, plaintiff purchased two bonds to ensure the construction

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of the infrastructure for the lots. Plaintiff and his wife personally guaranteed the bonds.

The Phase 1 lots were ready for sale in late 2007, but they did not sell as planned. By early 2009, plaintiff was struggling to make payments to Umpqua, and the bank initiated foreclosure proceedings. Plaintiff attempted to negotiate with the bank in order to retain the property and, among other things, offered to pay $2.25 million to the bank [268 Or.App. 627] in exchange for the property and a release from the loan obligation. Those negotiations failed, and, in August of that year, the bank accepted a deed-in-lieu-of-foreclosure and fully released plaintiff from his loan obligations. Plaintiff nevertheless remained hopeful that he might reacquire the property in the future.

Defendant, who is a real estate broker and developer, first met plaintiff while plaintiff was still in negotiations with the bank. Defendant was representing four or five clients who wanted to purchase lots from plaintiff, but the bank refused to release any lots for sale at the prices offered by defendant. Notwithstanding the failed transactions, defendant's interest in the property was piqued, and he attempted to purchase it from the bank after the bank obtained the deed-in-lieu-of foreclosure from plaintiff. Defendant offered $1.43 million for the property, but the bank rejected that offer, stating that it would accept no less than $2 million.

Defendant later told plaintiff about his attempt to purchase the property. Plaintiff was not " real pleased" to learn that defendant was attempting to acquire the property, which plaintiff still viewed as his own, and " felt like the worst thing for us to do was to start creating a competition." Plaintiff and defendant then agreed to work together to purchase the property, and they executed a written " Letter of Understanding" reflecting that agreement. It provided:

" Larry Kine and Mark Vukanovich are working in conjunction to purchase property in Eugene, Oregon, known as Moon Mountain Subdivision from Umpqua Bank.
" Mark Vukanovich is the original developer of the project and has signed a deed in lieu to Umpqua Bank . . . said deed is in the process of being recorded.
" Larry and Mark are responsible for bringing in 50% of the dollars needed to purchase the property from Umpqua Bank including costs associated with Bonding, Erosion Control and City Fees. It is anticipated that the land will be purchased for $1,750,000 and the associated costs will be $90,000 for a total investment of $1,840,000.
[268 Or.App. 628] " Profits will be split 50% to Larry's group and 50% to Mark's group. A new LLC will be formed as the purchaser of the property.
" Mark and Larry will be equally responsible for management and decisions made. Larry will focus more on lot sales and any home construction activity and Mark will focus more on the land development issues.
" The Pro Forma has reflected 10% of sales price to be allocated for commissions, closing costs, marketing costs, etc. Any of these dollars not given to outside sources (outside agent, newspaper advertising, etc.) will be split 50% to Larry and 50% to Mark for their individual efforts.
" Each party agrees to keep this transaction confidential. Information is to be limited only to those parties that are considered 'Need to Know'. Any new potential investor must sign a confidentiality agreement so as to limit potential competition from other parties.
" Both parties feel that they are able to come up with the required funds to purchase the property on their own. We have agreed to work ...

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