Angelini v. Delaney

• Decision Date: 30 September 1998
• Citation: 156 Or.App. 293,966 P.2d 223
• Parties: Tulio A. ANGELINI and Florence B. Angelini, husband and wife, Charles J. Botti, Jr., Alexander Briones, Dominador Briones, III, Donato Carreta and Alice M. Carreta, husband and wife, John M. Doyle, Robert Galligani and Diane Galligani, husband and wife, Albino A. Ravella and Antonia T. Ravella, husband and wife, and Michael J. Rush, and Frank R. Delosa and Clella Delosa, husband and wife, Appellants, v. Richard DELANEY and Dolphin Real Estate Group Investments, Inc., Respondents. 9505-02954; CA A92691.
• Court: Oregon Court of Appeals

Page 223

966 P.2d 223

156 Or.App. 293

Tulio A. ANGELINI and Florence B. Angelini, husband and

wife, Charles J. Botti, Jr., Alexander Briones, Dominador

Briones, III, Donato Carreta and Alice M. Carreta, husband

and wife, John M. Doyle, Robert Galligani and Diane

Galligani, husband and wife, Albino A. Ravella and Antonia

T. Ravella, husband and wife, and Michael J. Rush, and Frank

R. Delosa and Clella Delosa, husband and wife, Appellants, v. Richard DELANEY and Dolphin Real Estate Group Investments, Inc., Respondents.

9505-02954; CA A92691.

Court of Appeals of Oregon.

Argued and Submitted Feb. 17, 1998.

Decided Sept. 30, 1998.

David J. Sweeney, Portland, argued the cause for appellants. With him on the briefs were Paul G. Dodds and Brownstein, Rask, Arenz, Sweeney, Kerr & Grim, L.L.P.

Lynn R. Nakamoto, Portland, argued the cause for respondents. With her on the brief were Lynn R. Stafford and Markowitz, Herbold, Glade & Mehlhaf, P.C.

Before De MUNIZ, P.J., and HASELTON and LINDER, JJ.

HASELTON, Judge.

Plaintiffs appeal, seeking reversal of a judgment and supplemental judgment for defendants on counterclaims for, inter alia, imposition of an equitable lien, breach of contract, unjust enrichment, money had and received, and contribution, all arising from defendants' management of a mobile home park owned by plaintiffs. The principal issues pertain to plaintiffs' liability to defendants with respect to monies borrowed from third parties to obtain funds to operate the mobile home park. We affirm in part and reverse in part.

The material facts are as follows: In 1980, plaintiffs, who are all California residents, purchased the Vista Park Mobile Home Estates (Vista), a mobile home park in Hermiston. From the time of plaintiffs' purchase of Vista until December 1988, plaintiffs employed defendant Dolphin Real Estate Group Investments, Inc. (Dolphin), a California corporation, to manage the mobile home park.

Dolphin, a closely-held corporation, was operated by plaintiff Charles Botti, defendant Richard Delaney, and a third principal, Konrad von Emster. From 1980 to 1988, Botti and Delaney were shareholders, directors, and employees of Dolphin. In 1980, Botti also purchased an ownership interest in Vista and retained that interest at all material times.

Soon after plaintiffs purchased Vista, the park experienced cash flow problems. Dolphin discussed the adverse cash flow situation with plaintiffs, but they refused to contribute cash for Vista's operations. In November 1981, to obtain funds to operate Vista, Dolphin, without authorization from plaintiffs, borrowed $5,000 from the Forestview Mobile Home Park, which Dolphin also managed, executing a promissory note in that amount.

In June 1982, as Vista's cash flow problems continued, Dolphin called a meeting to discuss those problems. Plaintiffs, while continuing to refuse to advance cash to fund the park's operation, ultimately agreed to borrow funds to operate the park. Plaintiffs, except for the Angelinis and Doyle, signed a promissory note and a trust deed in favor of Dolphin in the amount of $20,000. The deed of trust not only secured the $20,000 note, but it also secured "such further sums as the then record owner of said [Vista] property hereafter may borrow from the beneficiary [Dolphin]." Plaintiffs asked Dolphin not to record the deed of trust because recording might damage plaintiffs' ability to refinance the property. Botti assured Dolphin that plaintiffs' loan obligations would be paid when the property was sold or refinanced. Based on that representation and similar acknowledgments, Dolphin did not record the deed. Notwithstanding the execution of the promissory note and trust deed, as described below, Dolphin itself never directly loaned plaintiffs $20,000.

After the parties executed the note and trust deed, plaintiffs authorized Dolphin, as Vista's managing agent, to borrow funds from third parties to operate Vista. Plaintiffs represented that, upon the sale or refinancing of the Vista property, plaintiffs would repay Dolphin for obligations Dolphin assumed on plaintiffs' behalf. From November 1982 until October 1983, Dolphin, as Vista's managing agent, six times borrowed funds from different mobile home parks that it managed. ¹ On each occasion, Dolphin, as Vista's managing agent, ² executed a promissory note in favor of the lending park. Each note provided that the loan was payable "on demand" and provided for attorney fees in the event of an action on the note.

Those six loans, along with the initial November 1981 loan, brought the total indebtedness to the third-party mobile home parks to $73,000. In addition, in August 1985, Dolphin itself loaned $7,500 to plaintiffs, receiving a promissory note.

In obtaining the loans from the other mobile home parks, Dolphin guaranteed repayment when the lending parks were sold. In accordance with that guarantee, as each mobile home park was sold, Dolphin purchased the promissory note, repaying with interest the funds borrowed on plaintiffs' behalf. Plaintiffs themselves made no payments on the promissory notes. To obtain funds to pay off the promissory notes, Dolphin established a line of credit from Dolphin Mortgage Co., a related entity. That line of credit was secured by Delaney's, Botti's, and von Emster's personal residences. Dolphin Mortgage went out of business in 1987, and the loan was "rolled over" to another entity, Investek Financial Corp., which loaned Dolphin additional money to operate parks other than Vista. Investek obtained another promissory note from Delaney and Botti, which was secured by their residences.

In December 1988, plaintiffs terminated Dolphin as manager of Vista. Defendants subsequently demanded that Botti contribute to paying that portion of the Investek loan corresponding to repayment of the Vista-related loan, but Botti refused.

On July 1, 1994, plaintiffs brought this action, seeking, inter alia, to quiet title in Vista against potential adverse claims by defendants. ³ On October 21, 1994, defendants answered, asserting affirmative defenses and counterclaims against all plaintiffs collectively, as well as against Botti individually. With respect to all plaintiffs, defendants asserted counterclaims for fraud, imposition of equitable lien, breach of contract, money had and received, and unjust enrichment. The latter three counterclaims represented alternative theories of recovery for the same damages--i.e., each sought damages in the amount of the Vista-related loans, as well as prejudgment interest on those amounts, and additional damages for unpaid management fees. In addition, defendants alleged an entitlement to contractual "prevailing party" attorney fees under the promissory notes and deed of trust.

With respect to Botti individually, defendants asserted counterclaims for indemnity, contribution, money had and received, breach of fiduciary duty, negligent misrepresentation, and declaratory relief. Each of those counterclaims arose from Botti's alleged personal liability on the Vista-related portion of the Investek loan. Plaintiffs replied to all counterclaims, asserting various affirmative defenses, including statute of limitations, laches, and lack of authority to contract.

After plaintiffs successfully moved for summary judgment on their quiet title claim, defendants' counterclaims were tried to the court. Applying Oregon law to all counterclaims, the trial court entered judgment for defendants against all plaintiffs on the counterclaims for imposition of an equitable lien, breach of contract, money had and received, and unjust enrichment. ⁴ On each of the latter three counterclaims, the court separately awarded damages of $95,633.49, representing the total of the Vista-related loans from third-party parks ($73,000), Dolphin's direct loan to Vista ($7,500), and unpaid management fees assessed at a rate of six percent of Vista's gross monthly income ($15,133.49). ⁵ In addition, the court awarded prejudgment interest on each of the Vista-related loans, at the rate specified in the note, with interest running from the date of the execution of each note. The court also awarded defendants attorney fees of $77,143.18 pursuant to the fee provisions of the promissory notes and of the June 1982 deed of trust.

With respect to Botti, the court entered judgment for Dolphin against Botti on defendants' contribution counterclaim, awarding damages of $45,375, representing half of the balance of the Investek loan, which was attributable to payments on Vista's behalf. The court entered judgment for Botti on the remaining counterclaims.

Plaintiffs appeal, raising eleven assignments of error. In their first assignment, plaintiffs argue that the trial court erred in applying Oregon, rather than California, law to each counterclaim. Plaintiffs assert that California law should control because all parties are California residents or corporations, all contracts were executed in California, and all loans were made in California and to be repaid in California. In rejecting that argument, the trial court observed:

"[t]he interests and policies of Oregon are at stake because (1) the plaintiffs, who own the Oregon land, selected the Oregon forum; (2) the plaintiffs borrowed money that was used in the operation of the land a mobile home park in Oregon; and (3) the plaintiffs intended that the debts would be secured through an interest in the Oregon land. Oregon has a significant stake in controlling the enforceability of security interests in Oregon land and the underlying debts that arose out of the ownership of that land."

On appeal, plaintiffs again emphasize the parties' and the transactions' California contacts. That emphasis, however, ignores a vital threshold issue: "Contacts" notwithstanding, Oregon courts first look to whether there is a material difference between Oregon substantive law and the law of the other forum. If there is no material difference--if...