Doyle v. Oregon Bank
| Decision Date | 30 November 1988 |
| Citation | 764 P.2d 1379,94 Or.App. 230 |
| Parties | James Everett DOYLE; Doyle Milling Co., Inc., an Oregon corporation; and Riverside Forest Products, Inc., an Oregon corporation, Appellants, v. The OREGON BANK, an Oregon banking corporation and Security Bank, an Oregon banking corporation, Respondents. A8605-02951; CA A47080. |
| Court | Oregon Court of Appeals |
John C. Urness, Springfield, argued the cause for appellants. With him on the briefs was Thorp, Dennett, Purdy, Golden & Jewett, P.C., Springfield.
Philip S. Van Der Weele, Portland, argued the cause for respondent The Oregon Bank. On the brief were Barbee B. Lyon and Tonkon, Torp, Galen, Marmaduke & Booth, Portland.
Joel S. DeVore, Eugene, argued the cause for respondent Security Bank. On the brief were Robert H. Fraser and Luvaas, Cobb, Richards & Fraser, P.C., Eugene.
Before WARDEN, P.J., and GRABER and RIGGS, JJ.
Plaintiffs brought this breach of contract action against defendants The Oregon Bank and Security Bank. Plaintiffs claim that The Oregon Bank breached its promise to lend money to two of the plaintiffs, James Doyle (Doyle) and Riverside Forest Products, Inc. (Riverside). The loan agreement contained a condition precedent that Security Bank subordinate some of its security interests in plaintiffs' property to The Oregon Bank. Plaintiffs' claim against Security Bank is based on Security Bank's alleged breach of its promise to subordinate those security interests. The trial court, on defendants' motions, dismissed all of plaintiffs' damage allegations pursuant to ORCP 21 E. 1 Plaintiffs informed the court that they could not in good faith plead any additional facts regarding their damages; consequently, the trial court denied them leave to amend. Plaintiffs then voluntarily dismissed their claims, ORCP 54 A(1), and the court entered judgment pursuant to ORCP 67 B. 2 Plaintiffs appeal, and we affirm.
No previous case discusses the standard by which we review the granting of ORCP 21 E motions. Plaintiffs suggest that our review should be the same as that for ORCP 21 A motions to dismiss: we should accept as true all well-pleaded allegations and any facts that might be adduced as proof of those allegations. Brennen v. City of Eugene, 285 Or. 401, 405, 591 P.2d 719 (1979). We agree. For purposes of appellate review, we perceive no functional distinction between a trial court's ruling that a pleading is frivolous or sham (ORCP 21 E) and its ruling that a pleading fails to state a claim (ORCP 21 A). Accordingly, we state the facts and review the complaint under the Brennen standard.
On April 3, 1984, The Oregon Bank agreed to lend Doyle and Riverside slightly over one million dollars. 3 Doyle owns all the stock in Riverside and in Doyle Milling Co., Inc. (Doyle Milling). In entering the loan agreement, Doyle was acting both for himself and for Doyle Milling, and The Oregon Bank knew that. Doyle told The Oregon Bank that part of the loan would be used for the benefit of Doyle Milling.
When plaintiffs and The Oregon Bank made the agreement, the bank was aware of plaintiffs' financial condition; plaintiffs had incurred substantial debts, which were secured in part by plaintiffs' real and personal property. Doyle had guaranteed some of the debts. One purpose of the loan was to help plaintiffs meet their obligations, amortize the debts, and thereby preserve their equity in the property securing the debts. The Oregon Bank knew, before it agreed to make the loan, that plaintiffs had tried unsuccessfully to borrow money from other sources and that, when it agreed to make the loan, plaintiffs stopped applying for loans elsewhere.
On May 4, 1984, at The Oregon Bank's request, plaintiffs executed the documents necessary to obtain the loan and placed them in escrow for closing. On May 17, 1984, the bank told plaintiffs that it was not going to make the loan. Plaintiffs were unable to obtain a loan elsewhere. As a result, plaintiffs claim damages from two sources: (1) lost profits on a timber contract owned by Doyle Milling, because part of the loan was to have been used to harvest the timber subject to that contract; and (2) lost equity and deficiency judgments resulting from the foreclosure of various mortgages and security interests on property encumbering plaintiffs' previously incurred debts. Plaintiffs allege that, but for The Oregon Bank's failure to make the promised loan, they would have been able to make the payments on those obligations and would have been able to prevent the foreclosures and judgments against them.
The agreement with The Oregon Bank was conditioned on Security Bank's willingness to subordinate some of its security interests in plaintiffs' property to The Oregon Bank. The Oregon Bank claims that Security Bank refused to subordinate its security interests and that, therefore, it was excused from making the loan to plaintiffs. In their complaint, plaintiffs state that they do not know whether Security Bank refused to subordinate but that, if it did, Security Bank is liable for their damages instead of The Oregon Bank.
Plaintiffs ask us to adopt this rule for liability of a lender that breaches a promise to lend money:
"A borrower unable to obtain a substitute loan should be allowed to recover those consequential damages caused by the lender's breach that were reasonably foreseeable to the parties at the time of contracting."
See Restatement of Contracts § 343, comment a (1932); Pipkin v. Thomas & Hill, Inc., 298 N.C. 278, 285, 258 S.E.2d 778 (1979). They argue that, under that rule, their complaint is not sham, frivolous, or irrelevant and that, therefore, the trial court erred in striking their damage allegations. Defendants 4 urge us, first, not to adopt the rule that plaintiffs propose. Second, even if we do, defendants assert, plaintiffs' claim fails because they have not alleged that their inability to obtain substitute financing was foreseeable to The Oregon Bank when it agreed to make the loan. We agree that plaintiffs must allege foreseeability, see Bixler v. First National Bank, 49 Or.App. 195, 200, 619 P.2d 895 (1980); Restatement of Contracts (Second), §...
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