Dalton v. Robert Jahn Corp.

• Decision Date: 01 November 2006
• Docket Number: 00P-1366.,99P-1560.,A122167.
• Citation: 146 P.3d 399,209 Or. App. 120
• Parties: Pamela DALTON, Respondent, v. ROBERT JAHN CORPORATION, an Oregon corporation, Superior Tree Stewards, Inc., an Oregon corporation, and Chester Jahn, Defendants, and Opal Jahn, Appellant, Opal Jahn, Appellant, v. Pamela Dalton and Linda Chertudi, Respondents. Teresa Gitomer, Respondent, v. Chester Jahn and Robert Jahn Corporation, Defendants, and Opal Jahn, Appellant.
• Court: Oregon Court of Appeals

146 P.3d 399 209 Or. App. 120 Pamela DALTON, Respondent,
v.
ROBERT JAHN CORPORATION, an Oregon corporation, Superior Tree Stewards, Inc., an Oregon corporation, and Chester Jahn, Defendants, and
Opal Jahn, Appellant,
Opal Jahn, Appellant,
v.
Pamela Dalton and Linda Chertudi, Respondents.
Teresa Gitomer, Respondent,
v.
Chester Jahn and Robert Jahn Corporation, Defendants, and
Opal Jahn, Appellant. 00P-1366. 99P-1560. A122167. Court of Appeals of Oregon. Argued and Submitted April 25, 2005. Decided November 1, 2006.

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Barbee B. Lyon, argued the cause for appellant. With him on the briefs were Daniel H. Skerritt, Portland, and Tonkon Torp LLP.

Jeffrey M. Batchelor, Portland, argued the cause for respondent Pamela Dalton. With him on the brief were William N. Mehlhaf, Paul Bierly, Portland, and Markowitz, Herbold, Glade & Mehlhaf, P.C.

No appearance for respondent Linda Chertudi.

No appearance for respondent Teresa Gitomer.

Before ARMSTRONG, Presiding Judge, and LANDAU, Judge,^* and BREITHAUPT, Judge pro tempore.

BREITHAUPT, J. pro tempore.

This case arises from a dispute between members of the Jahn family, primarily over control of the Robert Jahn Corporation. Defendant Opal Jahn appeals a decree of specific performance granted by the circuit court, arguing that a settlement agreement signed by the parties is too indefinite to be enforced by that decree. Opal Jahn's daughter, Pamela Dalton, a plaintiff in this case, disagrees, claiming that the settlement agreement is sufficiently definite. We affirm.

Because this is an action in equity, our review is de novo, ORS 19.415(3); Hughes v. Misar, 189 Or.App. 258, 260, 76 P.3d 111 (2003), rev. den., 336 Or. 615, 90 P.3d 626 (2004), although we place "great reliance" on the trial court's determinations regarding the credibility of witnesses. Povey v. Clow, 146 Or.App. 760, 765, 934 P.2d 528 (1997). In 1980, Opal Jahn and her husband Robert Jahn formed a lumber company, the Robert Jahn Corporation (RJC), the corporate stock of which became owned by themselves and each of their children: Pamela Dalton, Teresa Gitomer, Linda Chertudi, and Chester Jahn.¹ In 1992, Opal and Robert transferred their RJC shares to the Jahn Living Trust. The trust held those shares until Robert's death in 1996, at which point the trust was divided into two new trusts (the Opal Jahn Marital Trust and the Jahn Family Credit Shelter Trust), each of which held approximately half of the RJC shares previously held by the Jahn Living Trust. Under the terms of the new trusts, Opal, as trustee, exercised sole control over the RJC shares held by each trust. Through the trusts, Opal controlled a bare majority of RJC's stock. Opal also became the president, secretary, and sole director of RJC.

Subsequently, a dispute began over the future of RJC's assets and business. Particularly contentious was a proposed business deal known as the "Ten Mile" transaction, in

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which Chester apparently proposed to mortgage land or harvest and sell timber owned by RJC in order to buy property in southern Oregon; Chester's company, Superior Tree Stewards, Inc., was allegedly involved in the deal. Pamela thought the transaction would deplete RJC's assets and sought an injunction against it. Separately, Teresa brought suit regarding her 1995 sale of her RJC shares to RJC. She claimed that the sale should be rescinded, or that it was subject to a right to repurchase, which she was prepared to exercise. Opal, Chester, and RJC were defendants in both suits; Superior Tree Stewards, Inc., was also a defendant in Pamela's suit.²

The trial court suggested that the parties attempt to reach a settlement and, when they agreed to do so, appointed William Richardson, a former Chief Judge and current Senior Judge of this court, to preside over the parties' settlement negotiations.³ Richardson conducted two settlement conferences in July and August 2000, during which a proposal developed to split RJC into several corporations. Whereas Pamela's attorney, Feibleman, favored a plan that would have ended in four corporations, each to be headed by one of the Jahn children, Opal's attorney, Brink, drafted documents that would split RJC into five corporations, one of which would still be headed by Opal. The Jahn family members had questions about the tax implications of both plans, so Feibleman asked a specialist in tax and business law, Jennings, to present a reorganization plan at a third settlement conference on September 12, 2000.

All of the Jahn family members were present at that conference with their attorneys except Linda, who had no attorney, and Teresa, who participated via telephone but whose attorney was present. Richardson made it clear that anyone could enter a side room for private discussions at any time, that anyone could ask any question at any time, and that anyone could propose any settlement terms at any time. All of those options were utilized by the Jahns and their attorneys during the conference.

Jennings gave a detailed presentation of a plan to use a device known as a divisive reorganization to effectively split RJC into four separate corporations: RJC and three newly formed corporations. Each corporation would be headed by one of the Jahn children and each child would control a bare majority of the stock in his or her corporation. The remainder of the stock of each of the four corporations would be in Opal's control through the two trusts, each of which would own nearly equal shares in each child's corporation. The property owned by RJC would effectively be split among the four corporations in roughly equal parts. To the degree that those parts were not equal, the four corporations would grant each other timber deeds, lot line adjustments, or cash payments to equalize the value of each corporation. Moreover, each corporation would pay Opal an equal lifetime consulting fee to cover her living expenses consistent with her then-current standard of living. Each corporation would also share equally the costs of Opal's health and long-term care needs. At Opal's death, the shares in each corporation held by the Jahn Family Credit Shelter Trust would go to the child who controlled that corporation.⁴ Finally, the shares in each corporation held by the Opal Jahn Marital Trust would be subject to a redemption agreement by which each corporation would buy those shares from the trust at the time of Opal's death; the proceeds of that redemption would be distributed in accordance

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with Opal's estate plan, as she controlled ultimate distribution of the Opal Jahn Marital Trust.⁵

The goal of Jennings's proposal was to divide RJC's assets equally among the four corporations controlled by the Jahn children while minimizing adverse tax consequences and to ensure that Opal would be secure in her remaining years and have sole control over the disposition of some assets (sale proceeds from the redemption of shares held by the marital trust). Except for Chester, who had indicated an unwillingness to agree to any of the plans discussed by the other parties, the Jahns shared those goals. Each of the Jahns, except Chester, reacted positively to Jennings's proposal. The plan did not require Chester's agreement because the other family members constituted a majority of RJC's shareholders, Opal controlled a majority of its shares, and Chester would control RJC after the transfer of assets to the three newly formed corporations.

Following Jennings's presentation, the parties began to discuss other terms that were important to them. Despite Chester's reservations, he and his sisters proceeded to divide RJC's properties among the four corporations, with Pamela's corporation taking "the Orchard" and "the Flats," Teresa's corporation taking "Grandma's Place," Linda's corporation taking the "Boys' Place," and RJC (Chester's corporation) retaining "the Home Place."⁶ Opal and her daughters (the settling parties) also agreed that Teresa would buy back her shares from RJC at the price it had paid for them in 1995, adjusted for any debts from her to RJC that RJC had forgiven. The price for the shares in each corporation held by the Opal Jahn Marital Trust, to be redeemed by the corporations on Opal's death, would be their fair market value discounted to reflect minority interest and marketability. Because Opal would continue to live in a home on the Home Place, which would continue to be owned by RJC (Chester's corporation), the settling parties, including Opal acting for RJC, agreed to credit against RJC's share of Opal's consulting fee the fair market rental value of the home, which they believed was $650 per month, the amount that Opal paid RJC for rent. Lastly, the testimony indicates that the settling parties anticipated that they would act reasonably and in good faith to effectuate the proposal.⁷ They also agreed to rely on mutually agreed-upon appraisers and experts, as well as Jennings and the other attorneys, to complete all the necessary steps to effectuate the agreement.

After those details of the settlement proposal had been discussed, Richardson met privately with Opal and her attorney, Brink, to ensure that Opal understood the proposal and to gauge her interest in signing an agreement. Richardson and Brink thoroughly explained the terms of the proposal to Opal. Although Opal was not entirely happy with the proposal, she appeared inclined to agree to it. Richardson then asked the entire group whether they were willing to settle the lawsuits on the terms they had discussed. Although the Jahn daughters were ready to do so, Chester was not, and Opal was reticent to make a final decision. Richardson told Opal that this was the time for her to make a decision, and asked her if she would settle even if Chester would not agree to the proposal. Opal said that she would and that Chester would "just have to live with it."

To memorialize that oral agreement, Richardson...