Date: 01-11-2015

Case Style: Mark Vukanovich v. Larry Kine

Case Number: A148776

Judge: Lagesen

Court: Oregon Court of Appeals on appeal from the Circuit Court, Lane County

Plaintiff's Attorney: George W. Kelly argued the cause and filed the briefs for appellant.

Defendant's Attorney: Craig R. Berne argued the cause for respondents. With him on the brief was Harris Berne Christensen LLP.

Description: Judgment reversed and remanded for entry of judgment
reinstating jury’s verdict of $686,000; otherwise affirmed.
______________
* Lagesen, J., vice Wollheim, S. J.
624 Vukanovich v. Kine
Vukanovich and Kine, both real estate developers, agreed to work together
to purchase a parcel of real property from Umpqua Bank (the bank). The joint
endeavor failed, and the parties became competitors, each seeking to purchase
the property independently. The bank rejected Vukanovich’s offer and accepted
Kine’s offer. Vukanovich sued, among others, Kine and Larry Kine Properties,
LLC (Kine Properties) (collectively, “defendants”). Vukanovich asserted claims
against Kine for fraud and breach of contract, including breach of the implied
covenant of good faith and fair dealing; and against Kine Properties for breach
of contract, including breach of the implied covenant of good faith and fair dealing,
and intentional interference with economic relations. After a jury returned
a verdict in favor of Vukanovich on all claims, the trial court granted defendants’
motion for a judgment notwithstanding the verdict (JNOV). Vukanovich
appealed. Held: The trial court erred in granting JNOV on the contract claim
and in concluding that the equitable doctrines of unclean hands and equitable
estoppel bar Vukanovich’s recovery.
Judgment reversed and remanded for entry of judgment reinstating jury’s
verdict of $686,000; otherwise affirmed.
Cite as 268 Or App 623 (2015) 625
LAGESEN, J.
Plaintiff Mark Vukanovich and defendant Larry
Kine (defendant) entered an 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 by 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
1 Plaintiff also sued the investors who joined with defendant to purchase
the property, Alan Evans and Charles Kingsley, as well as the limited liability
company that defendant, Evans, and Kingsley formed to purchase the property,
Stonecrest Properties, LLC (Stonecrest). The trial court granted summary
judgment to Evans, Kingsley, and Stonecrest. Although plaintiff appealed that
ruling, plaintiff and those defendants ultimately settled, and those defendants
have been dismissed from this appeal, leaving Kine and Kine Properties as the
only remaining respondents on appeal. For ease of reading, this opinion refers
to defendant Kine as “defendant” and to defendant Kine Properties by name.
References to “defendants” encompass both Kine and Kine Properties.
2 Defendants moved for a directed verdict on all claims. Although the trial
court concluded that defendants were entitled to a directed verdict on each of the
claims against them, the court submitted the case to the jury under the procedure
authorized by ORCP 63 B:
“In any case where, in the opinion of the court, a motion for a directed verdict
ought to be granted, it may nevertheless, at the request of the adverse party,
submit the case to the jury with leave to the moving party to move for judgment
in such party’s favor if the verdict is otherwise than as would have been
directed or if the jury cannot agree on a verdict.”
After the jury returned the verdict in favor of plaintiff, defendants moved for
the judgment as a matter of law as contemplated by the rule, and the trial court
granted the motion, describing its decision as “reaffirm[ing] its earlier grant of
a directed verdict against Plaintiff.” On appeal, the parties dispute whether the
court’s ruling should be characterized as the grant of a directed verdict or the
626 Vukanovich v. Kine
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 Facts3
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 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
grant of a JNOV. We believe that where, as here, a court submits a case to a jury
under ORCP 63 B, the jury returns a verdict in favor of one party, and the court
ultimately enters judgment for the other party notwithstanding that verdict, the
court’s action is properly characterized as the grant of a JNOV. Regardless of
characterization, our standard of review is the same. See Bales v. SAIF, 294 Or
224, 234, 656 P2d 300 (1982) (noting that, “[w]here a verdict is directed against
a party, or where judgment notwithstanding the verdict is entered after verdict,
the losing party is entitled to have all evidence in his favor considered as being
true”).
3 Plaintiff’s version of the facts differed significantly from defendant’s version
of the facts in key respects; the parties’ testimony was flatly contradictory in
a number of instances. As required by our standard of review (discussed in the
text), our statement of the facts reflects plaintiff’s version of events, to the extent
that the evidence, and reasonable inferences drawn from the evidence, would
permit a reasonable factfinder to find that plaintiff’s version was more likely than
not the true version of events.
Cite as 268 Or App 623 (2015) 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.
628 Vukanovich v. Kine
“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 jointly on this project.”
(Ellipsis in original.)
A month after entering into their agreement, the
parties made their first joint offer to the bank, in the amount
of $1.51 million. Although plaintiff and defendant worked
together on that offer, defendant extended the offer to the
bank, and the proposed sales agreement identified the purchaser
as “Larry Kine Properties, LLC.” Umpqua rejected
that offer.
While the parties were putting together their
offers, plaintiff shared a substantial amount of information
with defendant that plaintiff would not have shared absent
their agreement to jointly purchase the property. Among
other things, plaintiff and defendant discussed plaintiff’s
bonds. At one point, defendant suggested to plaintiff that
they tap the bonds to pay for the Phase 2 infrastructure
and that, “if the bond company comes after [plaintiff], [he]
[could] file for bankruptcy.” Plaintiff told defendant “that’s
not an option for me financially or ethically.” Defendant
nonetheless continued to explore the potential use of the
bonds, discussing the possibility with his other investment
Cite as 268 Or App 623 (2015) 629
partners, Evans and Kingsley. Defendant wanted the city
to enforce the bonds “to build out infrastructure on Phase
2.” He further recognized that “[i]t would be very difficult”
to accomplish that plan if he remained partners with plaintiff,
in light of the fact that the bond company could go after
plaintiff for any expenditures it was required to make on
the bond.
In early December 2009, the parties made a second
joint offer on the property, proposing to purchase it from the
bank for $1.71 million. The parties again submitted the offer
through defendant and designated “Larry Kine Properties,
LLC” as the proposed purchaser. The bank countered with
an addendum, which lowered the price to $1.6 million, but
specified that the property would be sold “as is” and the deal
must close by December 30, 2009. Plaintiff and defendant
accepted, agreeing to the terms proposed by the bank.
Plaintiff and his investment partner, Steve
Dandurand, were prepared to close the deal by the end of
December, as planned. On December 28, two days before
the transaction was scheduled to close, defendant told plaintiff
that he and his group were not ready to close the deal
and would have to request a 30-day extension. In fact, at
that time, defendant intended to terminate his partnership
with plaintiff and was working with Evans and Kingsley
to purchase the property without plaintiff’s involvement, so
that defendant could pursue the use of the bonds to pay for
the Phase 2 infrastructure. In early January 2010, defendant
left a voicemail for plaintiff, requesting that plaintiff
provide him more information about the bonds and other
details about plaintiff’s dealing with the bank, ostensibly
for the purpose of “mak[ing] [the parties’] offer back to the
bank.” Shortly thereafter, on January 12, 2010, the parties
spoke again. At that time, defendant told plaintiff both that
he no longer wanted to pursue the transaction with plaintiff
and that he was not interested in purchasing the property
at all:
“[Defendant] was very quick on letting me know they
decided they did not want to move forward on buying the
property. There were too many issues and they had—there
was other opportunities and they were not going to buy it at
all and that was it.”
630 Vukanovich v. Kine
After defendant ended their partnership, plaintiff
remained committed to purchasing the property. However,
he was not “in a huge rush to go out and make an offer right
away,” because, in light of defendant’s representation that
defendant was not going to buy the property, plaintiff “felt
time was on [his] side.” Meanwhile, defendant, along with
Evans and Kingsley, continued to work on their plan to
acquire the property and use the bonds to finance the Phase
2 infrastructure. After defendant “hit total pay dirt” in early
February 2010 by obtaining documentation regarding the
development—including “canceled checks showing the two
bonds had been paid and cashed,” which would be essential
to enforcing the bonds—defendant made a $1.6 million offer
on the property. During the same time period, defendant or
his investment partners were exerting pressure on the city
to enforce the bonds.
Shortly after defendant made his offer to purchase
the property, plaintiff independently offered to purchase the
property, first for $1.1 million and then for $1.25 million. At
the time, plaintiff was aware that an offer had been made
on the property, but was unaware that it was defendant who
had made that offer. Umpqua ultimately agreed to sell the
property to defendant for $1.2 million, and the property was
purchased in the name of Stonecrest. Defendant’s investment
group continued to negotiate with the city regarding
the enforcement of the bonds to pay for the Phase 2 infrastructure,
and defendant’s pro forma for the project estimated
profits based on the assumption that defendant and
his partners would be able to obtain “free infrastructure” by
enforcing the bonds.
B. Procedural Facts
Plaintiff sued defendant for breach of contract,
including breach of the implied covenant of good faith and
fair dealing, and fraud. He also sued Kine Properties, alleging
claims for breach of contract, including breach of the
implied covenant of good faith and fair dealing, and intentional
interference with economic relations. At trial, plaintiff’s
theory on the contractual claim was that defendant
breached the express terms of the “Letter of Understanding”
and the implied covenant of good faith and fair dealing by
Cite as 268 Or App 623 (2015) 631
refusing to go through with the agreed-upon purchase of the
property based on his determination, using information provided
to him in confidence by plaintiff, that he could obtain
a better deal for himself and his investment group if he pursued
the property separately from plaintiff:
“So at the end of the day, what happened here? The parties
entered into agreement. [Plaintiff], in good faith and
relying on the agreement and confidentiality provisions,
provided [defendant] with all the information that he had
amassed over two to four years of working on this project
and developing it, getting the entitlements and doing everything
necessary to push this transaction forward. After
that, [defendant] and him worked together to purchase the
property.
“In December of 2009 it’s clear that a better offer came
along. [Defendant] decided to go with the better offer,
despite putting his name on a contract with [plaintiff] saying
they were going to jointly purchase this property.”
Plaintiff’s theory of the fraud claim was that, when
defendant repudiated the contract in the January 12 phone
call, defendant falsely stated that he was no longer interested
in purchasing the property; and that plaintiff, thinking
he had no competition for the property, justifiably relied
on that false statement to delay submitting an offer on the
property, ultimately submitting a “lowball” offer, resulting
in damage to plaintiff in that he did not succeed in purchasing
the property because the bank decided to sell the
property to defendant. As plaintiff argued at trial:
“Now, on the fraud claim. On January 12, [defendant]
told [plaintiff], ‘We are out of the deal. We’re done.’ And
no one else can tell you what transpired besides [plaintiff]
and [defendant] in that conversation. But what we do know
is after that conversation, [plaintiff] made an offer to the
bank for 1.1 million in February of 2010. Now, that was
$500,000 less than an offer the bank had just accepted in
December.
“Now, if he knew that there was competition out there,
why would he make an offer that was that much less? He
knew that he was the only person left, based on the representation
by [defendant], going after this property.
632 Vukanovich v. Kine
“He relied on the representation that they were not
interested in the property. He took his time to make an
offer. He made a lowball offer and then he finds out after
the fact that someone’s made an offer prior to him and is
already in first position.”
Plaintiff’s theory of the intentional interference
claim was that defendant’s February 19, 2010, offer to purchase
the property was submitted to the bank under the
name of “Larry Kine Properties, LLC,” and that, consequently,
Kine Properties had interfered with the contract
between plaintiff and defendant.
At the close of plaintiff’s case, defendant moved
for a directed verdict on all claims. The trial court granted
the motion but submitted the case to the jury pursuant
to ORCP 63 B. The jury found in favor of plaintiff on all
claims, awarding plaintiff $686,000 on the breach of contract
claim, $1,063,000 in economic damages and $75,000 in
noneconomic damages on the fraud claim, and $650,000 in
economic damages and $75,000 in noneconomic damages on
the intentional interference claim. Notwithstanding the verdict,
defendants moved for entry of judgment as a matter of
law in accordance with ORCP 63 B. The trial court granted
the motion, renewing its rulings on defendants’ motion for
a directed verdict. The court also ruled, in the alternative,
that the equitable doctrines of unclean hands and estoppel
barred plaintiff’s recovery on all claims. Plaintiff timely
appealed, assigning error to the trial court’s grant of a JNOV
to defendant on the fraud and breach of contract claim,4 to
the trial court’s grant of a JNOV to Kine Properties on the
intentional interference with economic relations claim, and
to the trial court’s ruling that plaintiff’s recovery is barred
by the doctrines of unclean hands and estoppel.5
II. STANDARDS OF REVIEW
Plaintiff’s assignments of error implicate two different
standards of review. Three of plaintiff’s assignments of
4 Plaintiff does not assign error to the trial court’s grant of a JNOV to Kine
Properties on the breach of contract and fraud claims. Accordingly, with respect
to those claims, we address only whether there was evidence to support the jury’s
verdict against Kine.
5 Plaintiff also filed a motion for relief from judgment under ORCP 71, raising
the same issues that he raises on appeal. The trial court denied the motion.
Cite as 268 Or App 623 (2015) 633
error challenge the trial court’s decision to enter a JNOV. On
appeal from a JNOV, we view the evidence “in the light most
favorable to the party who prevailed before the jury”—here,
plaintiff—and examine “the record to ascertain whether
it contains evidence which supports the verdict.” Jacobs v.
Tidewater Barge Lines, 277 Or 809, 811, 562 P2d 545 (1977).
“[O]ur review of the record is circumscribed by the case
actually presented to the jury through pleadings, evidence,
and jury instructions.” Northwest Natural Gas Co. v. Chase
Gardens, Inc., 333 Or 304, 310, 39 P3d 846 (2002). We “must
reinstate the jury verdict unless we can say affirmatively
that there was no evidence to support it.” Bennett v. Farmers
Ins. Co., 332 Or 138, 147-48, 26 P3d 785 (2001).
Plaintiff’s fourth assignment of error challenges
the trial court’s ruling that the equitable defenses of
unclean hands and estoppel bar plaintiff’s recovery on all
claims. Those defenses—which were tried to the court—
are equitable in character and eligible for de novo review.
SERA Architects, Inc. v. Klahowya Condominium, LLC,
253 Or App 348, 362, 290 P3d 881 (2012), rev den, 353 Or
533 (2013) (stating that “we review [equitable] defenses
according to their character”). However, neither party has
requested that we exercise our discretion to review those
defenses de novo, and this case, on its face, does not appear
to be an “exceptional case[ ]” warranting de novo review. See
ORAP 5.40(8)(c); see also ORS 19.415(3)(b) (making de novo
review discretionary). We therefore review the trial court’s
legal conclusions for legal error and review its factual findings
to determine whether those findings are supported by
any evidence in the record. Drayton v. City of Lincoln City,
244 Or App 144, 146, 260 P3d 642 (2011).
III. ANALYSIS
A. Judgment Notwithstanding Verdict
Plaintiff’s first three assignments of error challenge
the trial court’s grant of a JNOV on plaintiff’s claims
for intentional interference with economic relations, fraud,
and breach of contract. For the reasons explained below, we
affirm the trial court’s ruling with respect to the intentional
interference and fraud claims, but reinstate the jury’s verdict
on the claim for breach of contract.
634 Vukanovich v. Kine
As an initial matter, we reject plaintiff’s assignment
of error challenging the grant of a JNOV on the intentional
interference claim for procedural reasons. Plaintiff
has not identified any evidence in either his opening brief
or his reply brief that would support the jury’s verdict on
that claim. Instead, plaintiff quotes the allegations in the
complaint and argues that “the evidence supports each
allegation in the complaint,” without specifying what the
evidence is or where we might locate it in the record. As we
have previously held, “[w]e are not required to search the
record for the evidence to support [plaintiff’s] assignments
of error, and we will not do it.” Tidewater v. Wheeler, 55
Or App 497, 502, 638 P2d 499, rev den, 292 Or 722 (1982).
That prudential, procedural rule has particular force on
appeal from the grant of a JNOV, where we are asked to
determine whether there is “any” evidence to support the
jury’s verdict; if there is “any” evidence to support the verdict,
it is the appellant’s responsibility to direct us to that
evidence. For that reason, we reject plaintiff’s contention
that the trial court erred in granting a JNOV on the intentional
interference claim.
We also reject plaintiff’s assignment of error challenging
the grant of a JNOV on the fraud claim, concluding
both that plaintiff presented insufficient evidence to permit
the jury to find either that plaintiff justifiably relied on a
false statement by defendant or that plaintiff suffered damages
resulting from such reliance. See Cocchiara v. Lithia
Motors, Inc., 353 Or 282, 296-97, 297 P3d 1277 (2013) (noting
that two elements of a fraud claim are justifiable reliance
on a misrepresentation and resulting damages).
As this court has explained,
“[t]he requirement that a plaintiff’s reliance be justified
serves as a balance between, on the one hand, the policy
that a person who intentionally deceives another should
not be allowed to profit from the deception and, on the
other hand, the recognition that the person deceived, as an
autonomous individual, should be responsible for protecting
his or her own interests when making a decision.”
Murphy v. Allstate Ins. Co., 251 Or App 316, 324, 284 P3d 524
(2012). Whether reliance on an alleged misrepresentation is
Cite as 268 Or App 623 (2015) 635
justifiable turns on “the totality of the parties’ circumstances
and conduct.” OPERB v. Simat, Helliesen & Eichner, 191 Or
App 408, 428, 83 P3d 350 (2004). Among other things, for
reliance to be justifiable, the party claiming reliance must
have taken “reasonable precautions to safeguard [his or
her] own interests” under the particular circumstances of
the case. Gregory v. Novak, 121 Or App 651, 655, 855 P2d
1142 (1993); see Coy v. Starling, 53 Or App 76, 80, 630 P2d
1323, rev den, 291 Or 662 (1981). What precautions a person
must take to protect his or her own interests turns on the
nature of the person’s relationship with the person making
the alleged misrepresentation, and that person’s experience
and sophistication with the type of transaction at issue, as
well as with the subject matter of the misrepresentation. See
OPERB, 191 Or App at 427-28.
On this record, we agree with the trial court that no
reasonable factfinder could find that plaintiff’s reliance on
defendant’s alleged misrepresentation was justified, because
no reasonable factfinder could find that plaintiff took reasonable
precautions to safeguard his interest in competing for
the opportunity to purchase the property from the bank. As
noted, plaintiff asserts that he relied on defendant’s representation
that he was no longer interested in purchasing the
property in determining that he could both proceed slowly
on submitting a new offer to the bank and could make a low
offer on the property, without concern for any competition
from defendant. However, at the time that defendant made
the alleged misrepresentation, plaintiff was aware that his
joint efforts to purchase the property with defendant had
ended, and, as a result, the parties had returned to their
earlier status as potential competitors. Plaintiff was an
experienced land development professional who knew that
the market was competitive; the reason that plaintiff had
entered into the agreement with defendant in the first place
was to minimize competition for the property. Plaintiff also
knew that, before the parties had entered their agreement
to attempt to jointly purchase the property, defendant had
submitted a bid on the property and was a potential competitor
for the property. Further, plaintiff acknowledged that,
when defendant informed him that he no longer wanted to
pursue the joint purchase, plaintiff “was a little relieved”
636 Vukanovich v. Kine
because, as they had worked together, plaintiff had come to
“not feel comfortable” with defendant’s business practices.
Given those circumstances, no reasonable factfinder could
find that plaintiff took reasonable precautions to protect his
own interests in competing to purchase the property when
plaintiff, a sophisticated real estate professional, relied on
the representation of a potential competitor whom he already
distrusted for the proposition that plaintiff could take his
time formulating a lowball offer for the property without
concern for whether defendant might compete against him
for the property.
In addition, the evidence in the record is also insufficient
to support a finding that plaintiff suffered damages
as a result of his reliance on defendant’s misrepresentation
regarding his interest in purchasing the property.
On appeal, plaintiff asserts that, from the evidence that
(1) plaintiff “delayed * * * the making of a new offer” as a
result of defendant’s misrepresentation and (2) plaintiff’s
offer therefore came in later than defendant’s, a factfinder
could infer that plaintiff would have succeeded in purchasing
the property in the absence of defendant’s tortious conduct.
We disagree. On this record, it is speculative whether
plaintiff could have succeeded in purchasing the property
from the bank. When, and to whom, to sell the property was
within the discretion of the bank; the bank had rejected
multiple offers on the property; and plaintiff presented no
testimony from a bank representative or any other evidence
as to what, in particular, the bank was looking for in terms
of offers on the property. It, therefore, cannot be inferred
that the bank would have accepted an offer from plaintiff
had plaintiff only acted with more alacrity. Moreover, there
is no evidence that plaintiff had the capacity to put together
an offer that would have had more appeal for the bank than
the ones that it had previously rejected or the one submitted
by defendant. That is particularly so in light of the fact that,
although defendant’s offer initially was greater than plaintiff’s
$1.25 million offer, defendant subsequently reduced its
offer below that amount, yet the bank still opted to sell the
property to defendant rather than to plaintiff.
We reach a different conclusion regarding the trial
court’s grant of a JNOV on the contract claim. As developed
Cite as 268 Or App 623 (2015) 637
at trial, plaintiff’s claim for breach of contract was predicated
on the theory that defendant breached both the
express terms of the parties’ “Letter of Understanding” and
the implied covenant of good faith and fair dealing,6 damaging
plaintiff by cutting plaintiff and his investment partner
out of an ownership interest in the property and the profits
generated by the property. The record contains sufficient
evidence permitting the jury to find in plaintiff’s favor on
that theory.
Specifically, based on the evidence presented at trial,
the jury could permissibly find that plaintiff and defendant
entered into a contract to buy the property together and that
defendant breached the express terms of that contract when,
after the bank accepted the parties’ joint offer to purchase
the property in December 2009, defendant refused to close
on the purchase and subsequently repudiated the contract,
even though defendant had the capacity to close the agreed
upon December 2009 purchase of the property. The jury also
could permissibly find that defendant lied to plaintiff about
the reasons for not closing the December 2009 purchase of
the property from the bank and used confidential information
provided by plaintiff to develop a more lucrative plan
for the property that cut out plaintiff, thereby breaching
the implied covenant of good faith and fair dealing. Finally,
the jury could find that defendant’s breaches damaged
plaintiff—that, but for those breaches, the December 2009
purchase would have been completed, and plaintiff would
have been a part owner of the property and would have
been entitled to a share of the profits that the property was
expected to earn.7
6 “All contracts include an implied covenant of good faith and fair dealing.”
Morrow v. Red Shield Ins. Co., 212 Or App 653, 661, 159 P3d 384 (2007). That
implied covenant requires the parties “to facilitate performance and enforcement
of the contract when it is consistent with and in furtherance of the agreed-upon
terms of the contract, or where it effectuates the parties’ objectively reasonable
expectations under the contract[.]” Id. at 661-62. Breach of the covenant is a
breach of the contract. See generally Northwest Natural Gas Co., 333 Or at 310-
13 (treating claim of breach of implied covenant of good faith and fair dealing as
claim of breach of contract).
7 On that point, we note that the amount of the jury’s damages award on the
breach of contract claim reflects approximately that portion of the profits from the
property to which, according to the evidence presented at trial, plaintiff would
have been entitled, had the property been purchased jointly with defendant.
638 Vukanovich v. Kine
Notwithstanding that evidence, defendant argues
that the trial court correctly granted the JNOV on the contract
claim. Specifically, defendant argues that the JNOV
was proper because, after the agreement was undisputedly
terminated in January 2010, both plaintiff and defendant
made separate attempts to purchase the property. Defendant
contends that his efforts to purchase the property after the
contract was terminated could not constitute a breach of the
parties’ contract because, at that point in time, both parties
understood that the agreement was over and were engaging
in similar conduct.
The problem with defendant’s argument is that
plaintiff ultimately did not predicate his breach of contract
claim on defendant’s conduct of purchasing the property
separately from plaintiff. Although the complaint identified
defendant’s separate purchase of the property as “among”
the breaches committed by defendant, plaintiff’s focus at
trial—and in opposing the motion for a JNOV on the contract
claim—was on defendant’s conduct in December 2009:
specifically, defendant’s refusal to complete the purchase
of the property with plaintiff, his surreptitious use of the
information that plaintiff had provided him to devise a
more favorable transaction for himself and his other business
partners, and his lies to plaintiff about his reasons for
not closing the deal.8 It is the evidence of that conduct, not
the evidence of defendant’s conduct following the termination
of the contract, that permits the finding that defendant
breached the parties’ contract, damaging plaintiff by causing
the planned December 2009 purchase of the property to
fail. Accordingly, the trial court erred by granting the JNOV
on the contract claim.
8 Plaintiff further articulated his theory that defendant’s December 2009
conduct breached the contract in closing argument. Defendant did not object to
the closing argument as presenting a theory that was beyond the scope of the
pleadings or otherwise suggest, through argument or requested jury instructions,
that the jury should be limited to considering only whether defendant’s separate
purchase of the property constituted a breach of the parties’ contract. The
jury instructions that were delivered did not limit what conduct the jury could
consider in assessing whether defendant had breached the parties’ agreement.
And, in fact, the instructions specified that plaintiff’s contract claim was based,
in part, on allegations that defendant had “misrepresent[ed] * * * his intentions
with regard to purchasing the Property,” “shar[ed] confidential information” with
third parties, and used that confidential information “to [his own] advantage.”
Cite as 268 Or App 623 (2015) 639
B. Unclean Hands and Estoppel
Because the trial court erred in granting the JNOV
on the contract claim, we must reinstate the jury’s verdict
on that claim, unless the trial court correctly concluded
that defendant’s affirmative defenses of unclean hands and
estoppel bar plaintiff’s recovery on that claim.9 We conclude
that it did not.
The doctrine of “unclean hands” bars a party from
recovery on an otherwise valid claim if that party “has
engaged in misconduct in connection with the matter for
which he or she seeks relief.” Burgdorf v. Weston, 259 Or App
755, 764, 316 P3d 303 (2013), rev den, 355 Or 380 (2014).10
Among other things, for the doctrine to apply, “the misconduct
must be serious enough to justify a court’s denying relief
on an otherwise valid claim. Even equity does not require
saintliness.” North Pacific Lumber Co. v. Oliver, 286 Or 639,
651, 596 P2d 931 (1979) (noting that court has applied the
doctrine when a plaintiff’s conduct constituted a crime,
fraud, or bad faith). The doctrine of estoppel is similar. It
can preclude a person from asserting a right to recovery
that the person otherwise would have had if (1) the person,
through conduct or statements, makes a false representation;
(2) the party making the representation has knowledge of
the true facts; (3) the other party is unaware of the true facts;
(4) the party making the representation intended for the
other party to rely on it; and (5) the other party was induced
to act upon the false representation. Day v. Advanced M&D
Sales, Inc., 336 Or 511, 518-19, 86 P3d 678 (2004).
9 Because we affirm the trial court’s grant of a JNOV on the fraud and intentional
interference claims, we express no opinion as to the correctness of the trial
court’s ruling that the doctrines of unclean hands and equitable estoppel would
bar plaintiff’s recovery on those claims.
10 Plaintiff argues that the trial court plainly erred in applying the equitable
doctrine of “unclean hands” to plaintiff’s contract claim in the light of our holding
in McKinley v. Weidner, 73 Or App 396, 398-400, 698 P2d 983 (1985), that the
doctrine applies only in equitable cases, and that the applicable defense in a “law
case” is “in pari delicto.” However, plaintiff did not preserve that argument below,
and the doctrines of “unclean hands” and “in pari delicto” are similar enough
that we do not think that it was plainly erroneous for the trial court to apply the
doctrine of “unclean hands” in this case, absent an objection from plaintiff. As
we observed in McKinley, the application of the “unclean hands” doctrine, rather
that the “in pari delicto” doctrine, in a “law case” was only “technically incorrect.”
73 Or App at 400.
640 Vukanovich v. Kine
Here, the trial court concluded that, under both doctrines,
the conduct that precluded plaintiff from recovering
on his claims was his act of attempting to purchase the property
separately from defendant after defendant terminated
the contract.11 The court reasoned that those two doctrines
were applicable because, after the end of the contract, both
parties “felt it was appropriate they were legally available
to go forward and try to negotiate for * * * the repurchase of
the property” separately from one another. The court further
explained its reasoning as follows:
“[M]y problem here is, we’ve got two parties doing the same
thing. Albeit your client thinks he’s in a different position,
but two parties entered into a contract, two parties, in my
view, testified consistently, together, maybe there were
some issues with regard to the date, that this contract had
come to an end.
“Which is when the alleged fraud immediately arises,
and both parties took the subsequent action of both trying
to cut a deal to buy this property without the knowledge
of the other party. And that’s how my view is on unclean
hands and equitable estoppel encompasses all this tortious
conduct, basically arises all at the same time and through
that same issue.
“* * * * *
“Counsel, the point is, the gravamen of the whole deal
is, each party is trying to buy the property. One person is
successful, one person is not.”
The trial court erred in reaching that conclusion.
Although the court’s finding that, after defendant terminated
the contract, plaintiff attempted to purchase the
property on his own without telling defendant is supported
by the evidence, that fact is insufficient to permit the conclusion
that plaintiff’s recovery on his contract claim is barred
by unclean hands or by estoppel. The doctrine of unclean
11 It was undisputed at trial that defendant was the one who terminated the
contract. Both defendant and plaintiff testified consistently on that point. Their
testimony differed, however, as to the date that defendant terminated the contract
and as to reasons for the termination. In particular, defendant testified that
he called plaintiff on December 28 and said, “You know what, this isn’t going anywhere.
We’re not working together.” Plaintiff testified that defendant delivered a
similar message on January 12.
Cite as 268 Or App 623 (2015) 641
hands does not apply, because plaintiff’s act of attempting
to purchase the property on his own after defendant terminated
the contract does not, as a matter of law, constitute
“misconduct” warranting the application of the doctrine.
Similarly, the doctrine of estoppel does not apply, because
plaintiff’s conduct of attempting to purchase the property
on his own does not, as a matter of law, constitute any sort
of false representation on which defendant reasonably could
rely for the proposition that plaintiff was waiving his right
to seek a remedy for defendant’s breach of the parties’ contract
to acquire the property together.
In short, once defendant terminated the parties’ contract,
there was nothing impermissible about plaintiff seeking
to acquire the property on his own. As plaintiff points
out, he likely was required to do exactly that to mitigate the
damages he incurred when defendant breached the parties’
contract by opting not to close on the agreed-upon December
30, 2009, purchase; had plaintiff succeeded in acquiring the
property on his own after defendant ended the parties’ joint
agreement, then he may not have been damaged at all by
defendant’s decision to repudiate that agreement.
Defendant notes that he presented evidence of inequitable
conduct by plaintiff that occurred before defendant
terminated their agreement and argues that we should
affirm the trial court’s ruling on the “unclean hands” defense
based on the evidence of that conduct. We decline to do so.
The trial court made explicit on the record that it was relying
on plaintiff’s post-termination conduct to conclude that
the doctrine of “unclean hands” barred plaintiff’s recovery,
and we are thus unable to infer that the court also found
that plaintiff had engaged in the alleged pretermination
inequitable conduct, which plaintiff disputed.
Similarly, with respect to estoppel, defendant
argues that we should affirm the trial court’s ruling on that
affirmative defense because the record shows that plaintiff
did not attempt to stop the bank from selling the property to
defendant or otherwise attempt to assert his claims against
defendant until after the sale was complete. We question
whether plaintiff’s failure to stop defendant from purchasing
the property on his own would ever operate to estop plaintiff
642 Vukanovich v. Kine
from asserting his breach of contract claim. However, in all
events, the trial court did not base its estoppel ruling on the
fact that plaintiff did not act to prevent defendant from purchasing
the property and, as we have explained, the conduct
on which the court did predicate its ruling—plaintiff’s act of
attempting to purchase the property on his own after defendant
terminated the contract—is insufficient to establish
that plaintiff is barred from recovery on his contract claim
under the doctrine of equitable estoppel.

Outcome: On the breach of contract claim, we reverse the
judgment and remand for entry of judgment reinstating the
jury’s verdict of $686,000; we otherwise affirm.
Judgment reversed and remanded for entry of
judgment reinstating jury’s verdict of $686,000; otherwise
affirmed.

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