Mark Vukanovich v. Larry Kine

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.

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.