Morasch v. Hood

• Citation: 222 P.3d 1125,232 Or. App. 392
• Decision Date: 09 December 2009
• Docket Number: A134436.,051010891.
• Parties: Michael MORASCH and Denise Downey, Plaintiffs-Appellants, v. Greg HOOD, an individual; Barbara Hood, an individual; Thomas J. Hood, an individual; Hood Custom Homes, LLC, an Oregon limited liability company; F.A. Lesick, an individual; and J.L. Thompson, an individual, Defendants-Respondents, and Alexander Bondarchuck, an individual; and Tatyana Bondarchuck, an individual, Defendants.
• Court: Court of Appeals of Oregon

222 P.3d 1125

232 Or. App. 392

Michael MORASCH and Denise Downey, Plaintiffs-Appellants, v. Greg HOOD, an individual; Barbara Hood, an individual; Thomas J. Hood, an individual; Hood Custom Homes, LLC, an Oregon limited liability company; F.A. Lesick, an individual; and J.L. Thompson, an individual, Defendants-Respondents, and Alexander Bondarchuck, an individual; and Tatyana Bondarchuck, an individual, Defendants.

051010891.

A134436.

Court of Appeals of Oregon.

Argued and Submitted May 13, 2009.

Decided December 9, 2009.

James N. Westwood, Portland, argued the cause for appellants. With him on the briefs were Stoel Rives LLP, and Matthew A. Wand and Wand Maddoux LLC.

Thomas W. Brown, Portland, argued the cause for respondents Greg Hood, Hood Custom Homes, LLC, F.A. Lesick, and J.L. Thompson. With him on the brief were Julie A. Smith and Cosgrave Vergeer Kester LLP.

Mark M. McCulloch, Portland, argued the cause for respondents Barbara Hood and Thomas Hood. With him on the brief were Keith Shepherd, Corey Tolliver, and Powers, McCulloch & Bennett, LLP.

Before EDMONDS, Presiding Judge, and WOLLHEIM, Judge, and SERCOMBE, Judge.

SERCOMBE, J.

This case arises out of a sale of real property to plaintiffs by defendants Thomas Hood and Barbara Hood (the Hoods). Plaintiffs brought suit against the Hoods along with their son, Greg Hood (Greg), his construction company, Hood Custom Homes, LLC (HCH), and several other defendants. In their complaint, among other things, plaintiffs alleged claims for an express or implied easement benefitting their property breach of warranty, fraud, and conspiracy to commit fraud. The trial court granted summary judgment in favor of defendants on plaintiffs' claims relating to breach of warranty and seeking to establish an express easement. In addition, the court granted motions for directed verdict on plaintiffs' remaining easement-related claims. After the jury returned a verdict finding in plaintiffs' favor on the fraud and conspiracy claims, the trial court granted judgments notwithstanding the verdict in favor of defendants. Finally, the trial court permitted defendants to recover their attorney fees, as well as enhanced prevailing party fees. Plaintiffs appeal and set forth eight assignments of error regarding those rulings. We reject without discussion all of plaintiffs' assignments of error, with the exception of those relating to the fraud and conspiracy claims and attorney fees.¹ On those limited issues, we affirm the judgments notwithstanding the verdict in favor of defendants on the fraud and conspiracy claims, but reverse and remand as to the trial court's award of attorney fees and vacate and remand the award of enhanced prevailing party fees.

We begin by recounting the facts relevant to plaintiffs' fraud claim. Because this case relates to defendants' motions for judgment notwithstanding the verdict, we state the relevant facts in the light most favorable to plaintiffs. Staley v. Taylor, 165 Or.App. 256, 258, 994 P.2d 1220 (2000).

Plaintiffs purchased a piece of residential real property from the Hoods. The Hoods also owned an area of undeveloped property ("the west lot") that bordered the property purchased by plaintiffs. Defendants planned to transfer the west lot to their son, Greg, for development and, before completion of the sale to plaintiffs, had begun the process to partition the west lot. Before closing, plaintiffs expressed their concern to the Hoods about future development of the west lot. Although they knew that the west lot was not available for them to purchase, plaintiffs were not specifically informed of the development plans. The Hoods completed the sale of the west lot to defendant HCH, a company owned and operated by Greg, several weeks after plaintiffs closed on their property. Eventually, HCH successfully partitioned the west lot into several properties and built and sold a house on one of the resulting lots.

In addition to inquiring about the west lot, plaintiffs asked about the drainage system for a swimming pool that existed on the property. Defendant Thomas Hood's response to their query led plaintiffs to believe that the swimming pool drained into the sewer system, although it did not. Instead it drained into a dry well on the property. Plaintiffs also asked whether there were oil tanks on the property. As to the presence of an oil tank on the property, the Hoods represented that they "paid to have oil heat converted to gas [heat]" decades before and had "no information." In fact, there was a working oil tank still on the property at the time of the sale that had been in use as late as 1997, during the time that the Hoods had lived on the property.

Plaintiffs testified at trial that they would not have purchased the property if they had known of the plans for development. They presented evidence that it would cost $23,000 to install trees along the border between their property and the west lot in order to remedy their loss of privacy that resulted from the development of the west lot. Relating to the swimming pool, plaintiffs' witness testified regarding the cost to connect the pool drainage to the sewer system. In addition, plaintiffs testified that, if they had known about the oil tank, they would have refused to close the sale until defendants paid to have it removed from the property. Plaintiffs presented evidence that the cost to remove the heating oil tank and the pool house under which it was located and then to rebuild the pool house would be $41,950. Plaintiffs did not present other evidence of damages stemming from defendants' alleged fraudulent conduct. As part of its instructions to the jury, the trial court stated that, as to damages, "[t]he measure of damages for fraud is the difference between the purchase price of the property and the fair market value of the property on the same date."

The jury returned a verdict in favor of plaintiffs. On special verdict forms, the jury found that plaintiffs had proved, by clear and convincing evidence, that the Hoods committed fraud, that Greg and HCH had conspired with the Hoods to defraud plaintiffs, and that plaintiffs proved their resulting damages against defendants by a preponderance of the evidence. The jury found that the Hoods' fraud caused plaintiffs damages in the amount of $41,950. It also awarded plaintiffs punitive damages against the Hoods in the amount of $29,400. As to Greg and HCH, the jury found plaintiffs were damaged in the amount of $23,000.

Thereafter, defendants filed motions for judgment notwithstanding the verdict. In support, they contended, in part, that plaintiffs had not presented evidence at trial sufficient to support the jury's damages findings. Specifically, defendants contended that damages resulting from any fraud would be the difference between the price plaintiffs paid for the property and the fair market value. However, according to defendants, plaintiffs

"simply did not have any evidence to show the comparison. They * * * attempted to do it on this cost basis. They have not had any comparison between the purchase price, which we know, and the fair market value. There is no evidence of fair market value.

"* * * * *

"If I have one point to make, and I think we have a number of valid points that support our judgment notwithstanding the verdict, the point that pertains to everything in this case with respect to the fraud is this damages matter. I would argue that that clear law, the out-of-pocket rule applies for all claims of damages, and in none of the claims of damages, none of the three claims of damages, have the Plaintiffs brought forth any evidence to allow the jury or this Court to make a comparison between the purchase price and the fair market value."

Plaintiffs, in contrast, asserted that they were entitled to "benefit of the bargain" damages. They contended that, "[i]n this case[,] it was falsely represented as things not being there, and so [our damages are] the cost of removing them." Plaintiffs further contended that the evidence of the cost to remove the oil tank supported a finding "that the fair market value of the house was [the purchase price] less the cost of removing the tank. There was no evidence to say that [the price plaintiffs paid for the house] was an appropriate fair market value or that there were any other people out there willing to pay $615,000 [the price plaintiffs paid for the house] for a house that had an oil tank on it * * *."

In response to the parties' arguments, the court asked plaintiffs' counsel, "In this case, who said the property was $41,000 less in value than [$]615[,000]?" Counsel replied that "Mr. Morasch did when he said, `I would not have bought it. I would not have paid for that—I would not have paid that price.'" The court then made its ruling:

"[T]hat's not sufficient.

"[Plaintiffs' counsel], the problem here, for your side, is that—I disagree completely with your reading of the law and with your reading of the evidence. I denied the motions for directed verdict for the reasons many judges do in the middle of trial, because we assume that the jury is going to assess the evidence and find that there is no evidence there to support the plaintiffs' case, and we assume the jury's going to follow the instructions.

"And we assume, therefore, that this jury would have brought in a verdict for the defense. They didn't do that. They should have. And I'm obligated to grant the motions for * * * judgment notwithstanding the verdict for all of the defendants, for the reason that there was no evidence to support the jury verdict, and they ignored the instructions."

In addition to granting judgment to defendants, the trial court also allowed defendants to recover attorney fees, as well as enhanced prevailing party fees from plaintiffs.

We turn first to plaintiffs' contention that the trial court erred in granting defendants' motion for judgment notwithstanding the verdict on the fraud claim....