Macadam Bay Homeowners Association v. David Soyster, Joy Soyster and James Idle

Defendants David Soyster, Joy Soyster, and James

Idle appeal from a general judgment granting declaratory

relief to plaintiff Macadam Bay Homeowners Association

(Macadam Bay). On appeal, defendants assign error to the

trial court’s grant of Macadam Bay’s motion for summary

judgment. Defendants contend that the trial court incorrectly

concluded, as a matter of law, that defendants could

not exercise the options contained in the leases that they

obtained from Macadam Bay because those options were

subject to an unfulfilled condition precedent.1 We disagree

with defendants and conclude that the trial court correctly

determined that defendants could not exercise their options.

As a result, the trial court properly granted summary judgment

to Macadam Bay and issued a declaratory judgment in

its favor. Consequently, we affirm.

Because defendants assign error to the trial court’s

grant of summary judgment, we view the evidence and all

reasonable inferences that may be drawn from the evidence

in the light most favorable to the party opposing summary

judgment—here, defendants. Jones v. General Motors Corp.,

325 Or 404, 408, 939 P2d 608 (1997). On November 1, 1983,

the State of Oregon (the state) leased to the City of Portland

(the city) submerged and submersible land located on the

Willamette River near SW Macadam Avenue in Portland so

that a houseboat moorage could be constructed at that location

(the DSL lease). That original DSL lease was to expire

on October 31, 2013. On November 8, 1983, Macadam Bay

entered into a lease (the upland lease) with the city for the

“tract of land” directly up-bank from the submerged and

submersible lands that had been conveyed to the city in the

DSL lease. The upland lease also sublet the city’s interest in

the DSL lease to Macadam Bay. The upland lease was set

to expire on November 8, 2013. The Macadam Bay moorage

was completed in 1986, and, at that time, Macadam Bay

entered into individual lease agreements (the slip leases)

1 The disputed leases in this case have been assigned multiple times. For

ease of reference, throughout this opinion we refer to Macadam Bay and its predecessors

in interest as “Macadam Bay” and defendants and their predecessors

in interest as “defendants.”

844 Macadam Bay Homeowners Assn. v. Soyster

for houseboat slips with defendants. Both of the slip leases

expired on October 31, 2013.

The upland lease between the city and Macadam

Bay contained an option to renew. It provided:

“At the end of the term of this lease, if [Macadam Bay] is

not then in default, [it] shall have the right, at [its] option,

to renew [the] lease of these premises for a period of ten

(10) years immediately consecutive to the end of the initial

lease term. If such option is so exercised and [Macadam

Bay] is not in default of the lease at the end of that renewal

term, [it] shall then have the right, at [its] option, to lease

the premises for a second immediately consecutive ten (10)

year term. * * * Immediately following [Macadam Bay’s

notice to the city of a desire to exercise either option], the

parties shall promptly begin good-faith negotiations on the

amount of money rent to be paid by [Macadam Bay] for the

renewal period in question. If the parties do not agree * * *

on the amount of such rent, [the amount of rent will be

determined by arbitration].”

Defendants’ slip leases also contained options.2 The slip

leases stated:

“[Macadam Bay’s] existing leases with the City of

Portland and the State of Oregon terminate on or about

November 1, 2013. However, [Macadam Bay] may extend

its leases for two additional 10-year terms. If and when

[Macadam Bay] extends its leases with the City of Portland

and the State of Oregon, and if Tenant is not then in default,

Tenant shall have the right, at his option, to extend this

Agreement * * *.”

The slip lease addendums also provided that “[Macadam

Bay] will notify Tenant on or before August 1, 2013 if the

first additional extension is available.”

The DSL lease did not contain an option to extend;

however, the city and the state entered into a new DSL

lease in 2008 to expand the leased area to include a location

2 There was some dispute in the trial court as to whether defendant Idle’s slip

lease actually contained an option. For the purposes of this opinion, we assume

without deciding, as the lower court did, that Idle’s slip lease did contain an

option agreement, because, as we discuss below, whether he had an option does

not matter because the conditions necessary for him to exercise that option were

not met.

Cite as 285 Or App 841 (2017) 845

where two houseboats were moored that was not included in

the original leasehold. Like the original DSL lease, the 2008

DSL lease only covered the “state-owned submerged lands”

occupied by Macadam Bay. The new DSL lease is effective

from November 1, 2007 to October 31, 2022, and contains an

option to renew for an additional 15 years. The purpose of setting

the expiration date of the 2008 DSL lease to October 31,

2022, was to allow Macadam Bay and the city to extend the

upland lease in 2013 without having to go back to the state

to create another new DSL lease “if Macadam Bay wishe[d]

to extend their [upland] lease in 2013.”

In accordance with the 2008 DSL lease, the city

and Macadam Bay amended the upland lease to include the

new boundaries covered by the DSL lease, but did not agree

to extend the termination date of the upland lease and did

not indicate in any way that Macadam Bay was planning to

exercise its option to extend the upland lease.

Macadam Bay did not always own the moorage at

issue in this case. In 1998, most of the owners of the floating

homes that rented slips in the moorage organized Macadam

Bay. Those owners, through Macadam Bay, then bought the

moorage improvements and the lessee’s interest in the upland

lease from the moorage’s previous owner for $1,701,000.

When Macadam Bay began managing the moorage, every

slip owner except for defendants chose to become members

of the corporation and bought their slips. Defendants were

given the option to become members of the corporation by

buying their slips at that time as well; however, they chose

not to. Though defendants decided not to join their neighbors

in the homeowners association, Macadam Bay recognized

defendants’ right to continue as slip tenants under the

terms of their leases, and allowed them to continue renting

their slips at least through November 1, 2013, when, absent

their options being exercised, their slip leases expired.

After taking over management of the moorage and

purchasing their slips, members of Macadam Bay began

to seek even more stability in their living situation. Before

members could sell or refinance their homes, they were

required to disclose to potential buyers and lenders that the

upland lease with the city was terminating in November

846 Macadam Bay Homeowners Assn. v. Soyster

2013 and, although two 10-year options to renew the lease

existed, there was no guarantee that those options would

be exercised or, if they were, what the new rent for the slips

would be. That uncertainty made it difficult for members of

Macadam Bay to sell or refinance their homes. As a result,

in 2011, Macadam Bay began attempting to find a more

permanent home for the moorage. That process resulted in

Macadam Bay purchasing a permanent easement from the

city on September 10, 2013, over the land that it already

occupied pursuant to the upland lease. Because Macadam

Bay was able to purchase a permanent easement, it did not

exercise its option to renew the upland lease with the city.

The 2013 easement purchased by Macadam Bay

provides that, in exchange for a payment of $400,000,

Macadam Bay has an easement “in gross” that “shall run

with the land for the benefit of grantee, its successors and

assigns.” Further, it provides that the easement will only

terminate “if the use of the easement property as a floating

home moorage shall be permanently abandoned, and all

floating homes shall have been removed from the moorage.”

On September 27, 2013, Macadam Bay provided

defendants notice by letter that the upland lease with the

city was not being extended and that, as a result, the options

to extend their slip leases were not available. Macadam Bay

also notified defendants that, though defendants’ slip leases

expired on October 31, 2013, it would allow defendants to

occupy their slips until January 2014 to allow defendants a

“notice period equivalent to that provided for by the Option

to Extend.” Further, Macadam Bay notified defendants that

it was unable to provide defendants with notice on August 1,

2013—the date that notice was due under the slip leases

“if the first additional extension [with the city] [was] available”—

because, on that date, it was still uncertain whether

the upland lease would be extended or if an easement agreement

would be purchased from the city.

Macadam Bay eventually sought a declaratory judgment

that defendants’ slip leases had expired. Defendants

denied that their slip leases had expired, and counterclaimed

for a declaratory judgment stating so and for specific

performance of their slip leases and options.

Cite as 285 Or App 841 (2017) 847

Both Macadam Bay and defendants filed motions

for summary judgment. Defendants argued in their motion

for summary judgment that (1) the condition precedent necessary

to exercise their options to extend their slip leases

was fulfilled when the state and the city entered into a new

DSL lease in 2008 and Macadam Bay and the city amended

the upland lease in accordance with the new DSL lease;

(2) even if the condition precedent was not fulfilled, Macadam

Bay unduly caused the condition’s nonoccurrence and, thus,

cannot benefit from that nonoccurrence; (3) Macadam Bay’s

2013 easement from the city is the required extension of the

upland lease; and finally, (4) by negotiating for an easement,

rather than a lease extension, Macadam Bay breached its

covenant of good faith and fair dealing with defendants.

The trial court granted Macadam Bay’s motion for

summary judgment, denied defendants’, and entered a

declaratory judgment in favor of Macadam Bay. On appeal,

defendants assign error to the trial court’s grant of Macadam

Bay’s motion for summary judgment, making the same

arguments to us that it made to the trial court.

When reviewing a grant of summary judgment, our

purpose is to determine whether the trial court correctly

concluded that “there is no genuine issue of material fact

and the moving party [was] entitled to judgment as a matter

of law.” Robinson v. Lamb’s Wilsonville Thriftway, 332

Or 453, 455, 31 P3d 421 (2001). When both parties concede

that no genuine issues of material fact exist, a case “presents

only legal issues,” and, consequently, “we review [the

trial court’s decision] for errors of law.” Machado-Miller v.

Mersereau & Shannon, LLP, 180 Or App 586, 589, 43 P3d

1207 (2002). Here, defendants do not contend that a genuine

issue of material fact exists, but rather that the trial court

legally erred when determining that, after interpreting the

various leases in this case, Macadam Bay was entitled to

judgment as a matter of law. We disagree with defendants

and, accordingly, affirm.

We begin by observing that the trial court correctly

concluded that defendants’ options to extend their

slip leases were subject to a condition precedent—that

Macadam Bay renew its existing leases with both the city

848 Macadam Bay Homeowners Assn. v. Soyster

and the state—and that condition was not met. A condition

precedent is a contractual condition that is based on “an

event, not certain to occur, which must occur, unless its nonoccurrence

is excused, before performance under a contract

becomes due.” Wright v. State Farm Mutual Automobile Ins.

Co., 223 Or App 357, 370 n 14, 196 P3d 1000 (2008). To determine

whether a term in a contract is a condition precedent,

we look to “the parties’ intent.” Pioneer Resources, LLC v.

Lemargie, 175 Or App 202, 205, 27 P3d 520 (2001), rev den,

333 Or 399 (2002). To determine intent, we first look “to

the language of the written instrument itself and consider[ ]

its text in the context of the document as a whole.” Id. at

205-06. If the text of the document is “unambiguous, the

analysis ends, and we interpret the provision’s meaning as

a matter of law.” Id. at 206.

In this case, the text of defendants’ options to renew

their slip leases is unambiguous. They state, “If and when

[Macadam Bay] extends its leases with the [city] and the

[state], * * * Tenant shall have the right, at his option, to

extend this Agreement * * *.” (Emphasis added.) The phrase

“if and when” unambiguously demonstrates the parties’

intent at the time of drafting to make defendants’ options conditional

on Macadam Bay extending its leases with the city

and the state. See Webster’s Third New Int’l Dictionary 1124

(unabridged ed 2002) (defining “if” as “on condition that”);

Friedman v. Bridger, 246 Or 549, 553, 426 P2d 859 (1967)

(noting that, under an “if and when” clause in a contract,

“defendants will be entitled to recover” only “if” the condition

of the “if and when” clause was met). Thus, Macadam

Bay “extend[ing] its leases” with the city and the state was

a condition precedent that had to be fulfilled before defendants

could exercise their options to extend their leases.

That condition was never fulfilled. As discussed

above, only the DSL lease between the state and the city

was extended. Macadam Bay did not extend the upland

lease with the city. Instead, it purchased an easement. As

a result, because the condition precedent did not occur,

defendants’ options to renew their slip leases never vested,

and the trial court did not err in granting Macadam Bay’s

motion for summary judgment.

Cite as 285 Or App 841 (2017) 849

As noted above, defendants make four arguments

contesting that conclusion. Defendants first argue that

the upland lease was extended when the city and the state

extended the DSL lease in 2008, and Macadam Bay and the

city amended the upland lease in accordance with the 2008

DSL lease. That is not true.

The 2008 amendment to the upland lease based

upon the 2008 DSL lease was not an extension of the term

of the upland lease. The 2008 amendment only expanded

the property conveyed by the upland lease to reflect the

property being leased from the state under the 2008 DSL

lease and increased the rent due under the upland lease

based upon the increased size of the leasehold. It expressly

did not change any other terms of the lease, including the

expiration date. The 2008 amendment to the upland lease

states, “Except as set forth in this Amendment or in previous

amendments, all the terms and conditions of the Lease

shall continue in full force and effect throughout the term

of the Agreement.” Thus, because neither the 2008 DSL

lease nor the 2008 amendment to the upland lease was an

extension of the term of the upland lease, the trial court

correctly concluded, as a matter of law, that the condition

precedent to defendants being able to exercise their options

never occurred.

Defendants next contend that, even if the condition

precedent never occurred, Macadam Bay cannot benefit

from that nonoccurrence because Macadam Bay was the

only party who could attempt to extend the upland lease and

failed to make an effort to do so. Defendants correctly point

out that the Supreme Court has previously held that “[i]t is

a principle of fundamental justice that if a promisor is himself

the cause of [a] failure of performance, either of an obligation

due him or of a condition upon which his own liability

depends, he cannot take advantage of [that] failure.” Public

Market Co. v. Portland, 171 Or 522, 588, 130 P2d 624 (1942).

However, that rule does not apply in this case.

The Restatement (Second) of Contracts section 245

comment a (1981) recognizes an exception to the above rule

when “the risk of * * * lack of cooperation [by one party

in bringing about a condition] was assumed by the other

850 Macadam Bay Homeowners Assn. v. Soyster

party.” That exception comports with our duty to “interpret

the wording of a contract to effectuate the intentions of the

parties, as those intentions can be determined from that

wording and other relevant circumstances.” Care Medical

Equipment, Inc. v. Baldwin, 331 Or 413, 418-19, 15 P3d 561

(2000). If the wording of a contract unambiguously indicates

that the parties intended that one of them was expressly

assuming the risk that the other may not choose to proceed

with a condition in the contract, we must give effect to that

intent.

Here, the parties’ intent that defendants assumed

the risk of Macadam Bay choosing not to renew the DSL or

upland leases is clear from the wording of the slip leases.

The slip leases state:

“[Macadam Bay] may extend its leases for two additional

10-year terms. If and when [Macadam Bay] extends its

leases with the [city] and the [state], and if Tenant is not

then in default, Tenant shall have the right, at his option,

to extend this Agreement * * *.”

(Emphases added.) The use of the conditional word “may”

and conditional phrase “if and when” to describe Macadam

Bay’s potential actions indicates an intent by the parties

to give Macadam Bay the discretion to choose whether to

attempt to extend its leases with the city and the state. See

Webster’s at 1124, 1396 (defining “may” as “have the ability

or competence to,” “have permission to” or “be in some degree

likely to” and “if” as “on condition that”). It is clear from the

text of the slip leases that the parties all recognized that

the extension of those leases was contingent on Macadam

Bay choosing to exercise its option to extend its upland lease

with the city. Further, the text of the slip leases mirror the

wording of other contracts where one party has assumed the

risk that another party may not proceed with an optional

right given it under the contract. See, e.g., Dennis v. McLean,

53 Or App 282, 284 n 2, 631 P2d 839, rev den, 291 Or 771

(1981) (upholding right of first refusal that stated that, “[i]f

Lessor should decide to sell said real property * * *, Lessees

shall have the first right to refuse the purchase of the property”

(omission in Dennis; internal quotation marks omitted)).

To read those contracts as defendants would like us

to would require us to interpret the word “may” as meaning

Cite as 285 Or App 841 (2017) 851

“shall attempt to” and ignore the conditional nature of the

phrase “if and when.” As a result, we conclude that, because

the text of the contracts evinces the parties’ intent that

defendants assumed the risk that Macadam Bay may not

renew its leases with the city and the state, the trial court

correctly concluded that Macadam Bay was under no obligation

to attempt to renew the upland lease.

Defendants next argue that their options are

enforceable because Macadam Bay fulfilled the condition

precedent necessary for their options to vest when it bought

the easement from the city. We disagree. Specifically, defendants

contend that the “easement agreement” between

Macadam Bay and the city is actually a lease and, thus,

constitutes the lease extension necessary for their options

to vest. That argument is foreclosed by the text of the slip

leases.

Whether the easement agreement is an easement

or a lease is immaterial to this case. The text of the option

agreements contained in the slip leases is unambiguous:

“[Macadam Bay’s] existing leases with the [city] and the

[state] terminate on or about November 1, 2013. However,

[Macadam Bay] may extend its leases for two additional

10-year terms. If and when [Macadam Bay] extends its

leases with the [city] and the [state], * * * [defendants] shall

have the right, at [their] option, to extend this Agreement

* * *.”

(Emphases added.) Consequently, defendants only “ha[d]

the right, at [their] option, to extend” their slip leases “[i]f

and when” Macadam Bay extended its “existing leases” with

the city and the state for either of the two potential “10-year

terms.” (Emphasis added.) As a result, whether the easement

agreement between Macadam Bay and the city is, as a legal

matter, an easement or a lease does not bear on whether

the condition precedent to the vesting of defendants’ options

was fulfilled.3 What matters is whether the easement agreement

is an extension of the existing upland lease between

3 Thus, while we use the terms “easement” and “lease” below, we use those

terms only to reflect the names of the documents in the record, and we do not

make any legal determination regarding whether those documents reflect a true

easement or lease.

852 Macadam Bay Homeowners Assn. v. Soyster

Macadam Bay and the city. Because the easement agreement

is a new agreement, independent of the upland lease

and because of the substantial differences in the terms of

the upland lease and the easement agreement, we are convinced

that the easement agreement is not that extension.

First, and most notably, the easement agreement

is not, and does not purport to be, an amendment to or an

extension of the existing upland lease with the city. Instead,

the easement agreement is a new contract, with new terms,

completely independent from the upland lease.

Second, the terms of the easement agreement and

the upland lease are different. For instance, the duration of

any upland lease extension—as reflected in the slip leases—

and the duration of the easement agreement are substantially

different. Any extension of the existing upland lease,

by the slip leases’ and the upland lease’s terms, was intended

to be for a “10-year term[ ]” with the option to extend for an

additional “10-year term[ ],” for a total potential extension

of 20 years. In contrast, the easement agreement conveys

a perpetual interest to Macadam Bay that only terminates

when “the use of the easement property as a floating home

moorage shall be permanently abandoned, and all floating

homes shall have been removed from the moorage.”

Further, the method of payment for any upland

lease extension and the easement agreement are substantially

different. Just as the slip leases reflected the parties’

expectation that any extension of the upland lease would

be for a 10-year term, they also reflected the expectation

that such an extension would be subject to periodic rent.

The slip leases note, “The rent for each additional 10-year

term will be * * * monthly base rent,” which includes “1/37th

of the total” “[l]ease payments on the leases with the [city]

and the [state].” (Underscoring in original.) In contrast, the

easement agreement was purchased by Macadam Bay for

the one-time payment of $400,000.

In addition, the easement agreement gives Macadam

Bay substantially more control over what it does with the

property and its interest in the property than the upland

lease did. For instance, the upland lease provided that,

before Macadam Bay could construct any improvements on

Cite as 285 Or App 841 (2017) 853

the leased property, they had to both provide the city with

“detailed plans and specifications” of the proposed improvements

and gain approval from the city for those changes.

In contrast, the easement agreement contains no such provision.

Further, the upland lease—and, as a result, any

extension of it—made any alienation of Macadam Bay’s

lease interest subject to approval by the city. In contrast,

the easement agreement provides, “This easement shall

be in gross, and shall run with the land for the benefit of

[Macadam Bay], its successors and assigns,” with no restrictions

on how Macadam Bay may dispose of its interest. See

Sunset Lake v. Remington, 45 Or App 973, 977, 609 P2d 896

(1980) (“Easements in gross which have commercial value

are assignable.”); Sweetland v. Grants Pass Power Co., 46 Or

85, 91-92, 79 P 337 (1905) (“[A]n easement in gross, where

the grant is to the grantee, his successors and assigns, is

capable of assignment[.]”).

Taken together, all of those differences convince

us that the easement agreement is not the extension of

the upland lease required by defendants’ slip leases. Consequently,

Macadam Bay did not fulfill the condition precedent

necessary for defendants’ options to vest by entering

into that agreement, and the trial court did not err in concluding,

as a matter of law, that defendants could not exercise

their options to extend the slip leases.4

Finally, defendants argue that, by not attempting

to renew the upland lease, Macadam Bay violated its duty of

good faith and fair dealing. “[T]here is an obligation of good

faith in the performance and enforcement of every contract.”

Best v. U.S. National Bank, 303 Or 557, 561, 739 P2d 554

(1987). Further, the duty of good faith is present in every

lease. Pacific First Bank v. New Morgan Park Corp., 319 Or

342, 353, 876 P2d 761 (1994). However, “a party invoking

an express contractual right does not, merely by doing so,

violate the duty of good faith.” Stevens v. Foren, 154 Or App

4 We also note that defendants presented no evidence that Macadam Bay

entered into an easement agreement instead of extending its upland lease in a

bad faith attempt to nullify defendants’ options. In contrast, Macadam Bay presented

a substantial amount of evidence indicating that Macadam Bay entered

into the easement agreement to provide its members more stability so that they

could more easily sell and mortgage their floating homes.

854 Macadam Bay Homeowners Assn. v. Soyster

52, 58, 959 P2d 1008, rev den, 327 Or 554 (1998). In fact,

the duty of good faith does not even “provide a remedy for an

unpleasantly motivated act that is permitted expressly by

contract.” Id.

Here, as we discussed at length above, Macadam

Bay had the contractual right to choose whether to attempt

to extend its leases with the city and the state. Defendants

expressly assumed the risk that Macadam Bay may not do

so, and Macadam Bay chose not to. Exercising that right

here did not constitute a violation of Macadam Bay’s duty

of good faith. Consequently, defendants are not entitled to a

remedy based upon Macadam Bay’s actions. As a result, the

trial court did not err when it concluded that, as a matter

of law, defendants could not exercise their options because

Macadam Bay did not violate its duty of good faith.

In summation, the trial court correctly concluded,

as a matter of law, that defendants could not exercise their

options under their slip leases because those options were

subject to an unfulfilled condition precedent. As a result, the

trial court did not err in granting Macadam Bay’s motion for

summary judgment and issuing the declaratory judgment

in favor of Macadam Bay.

Affirmed.