Pereira v. Thompson

Decision Date09 September 2009
Docket Number041010858.,A133677.
Citation217 P.3d 236,230 Or. App. 640
PartiesValerium PEREIRA, Plaintiff-Respondent Cross-Appellant, v. Roy THOMPSON and Thompson & Bogran, P.C., an Oregon professional corporation, Defendants-Appellants Cross-Respondents.
CourtOregon Court of Appeals

I. Franklin Hunsaker and Jonathan M. Radmacher, Portland, argued the cause for appellants-cross-respondents. With them on the briefs was McEwen Gisvold, LLP.

Bruce L. Campbell, Portland, argued the cause for respondent-cross-appellant. On the briefs were Mark M. McCulloch, Corey B. Tolliver, and McCulloch & Bennett, LLP.

Before HASELTON, Presiding Judge, and ARMSTRONG, Judge, and ROSENBLUM, Judge.

ARMSTRONG, J.

Attorney Thompson and his law firm, Thompson & Bogran, P.C., (defendants) represented Pereira (plaintiff) on matters relating to a California trust of which plaintiff was a beneficiary. That representation spawned this labyrinthine litigation. Defendants appeal a judgment on a jury verdict on plaintiff's legal negligence claim and on defendants' breach of contract counterclaims; plaintiff cross-appeals and assigns error to trial court orders directing verdicts for defendants on plaintiff's claims for slander of title and misuse of civil proceedings. For the reasons that follow, we (1) reverse and remand for a new trial on plaintiff's negligence claim; (2) reverse and remand on defendants' counterclaim for breach of the parties' contingent fee agreement; and (3) reverse and remand the trial court's order directing verdicts on plaintiff's slander of title and misuse of civil proceedings claims except for the claim involving the California fee litigation.

I. FACTS AND PROCEDURAL HISTORY

We begin with a brief description of the facts and procedural history, which we will supplement with relevant details in the discussions of each assignment of error. Plaintiff, a Portland hairstylist, was the primary beneficiary of a trust established by his former partner (the settlor), who died in April 2001. As beneficiary, plaintiff was to receive full or partial interest in 13 parcels of real property in Palm Springs, California. Plaintiff had retained an attorney to represent him regarding the trust, which was managed by a large bank located in southern California (the bank). As of April 2003, plaintiff had not received any disbursement from the trust. At that point, plaintiff approached the bank about releasing the properties to him. According to the bank, it was finalizing estate tax issues for IRS purposes and, because of that, would not release the properties to plaintiff. The bank told plaintiff that it could proceed in either of two ways: (1) it could release the properties to plaintiff, provided that he deposit a $75,000 reserve from which the bank could draw if any additional problems arose with the estate taxes on the properties; or (2) plaintiff could simply wait until the bank received a closing letter from the IRS indicating that the estate tax issues had been resolved, which it told plaintiff could arrive as soon as the next day or as late as the next year.

Shortly thereafter, plaintiff expressed his frustration with the trust administration to a salon client, Bogran, who was a partner in the defendant law firm. Bogran told plaintiff that the amount of time that the trust administration was taking and the bank's request for a $75,000 reserve were "absurd" and offered to have her and her partner, Thompson, look over plaintiff's paperwork. Plaintiff accepted her offer.

In May 2003, Thompson met with plaintiff and told him, among other things, that plaintiff was a "victim of the system" and that the bank had mismanaged funds, had overcharged $450,000 in professional fees, and possibly had committed fraud. Thompson told plaintiff that he would contact the bank and demand that it release the properties to plaintiff. If that demand were unavailing, Thompson recommended that plaintiff "engage a lot of different litigation[]," including initiating an action in Oregon against the bank to force it to distribute the properties. He told plaintiff that, by employing that strategy, the matter could be resolved within a few months. Thompson further told plaintiff that, along with obtaining the properties and recovering the alleged overcharges, plaintiff had a very good chance of recovering his own attorney fees. Thompson did not tell plaintiff that the bank's attorneys would be paid from the trust or that plaintiff might have to initiate or defend litigation in California.

Plaintiff discharged his existing attorney and hired defendants; however, plaintiff and defendants did not immediately establish a fee arrangement for that representation. On May 30, 2003, Thompson wrote a letter to the bank and its attorneys, in essence, stating that his office represented plaintiff; challenging the bank's handling of the trust, its retention of attorneys in the matter, and its use of trust assets to pay its attorneys; and demanding that the bank immediately distribute plaintiff's assets.

An attorney for the bank, Reich, responded in a letter to Thompson dated June 6, 2003 (the Reich letter). In that letter, Reich first explained that it was customary for a bank to retain counsel in administering a trust and that, by its terms, the trust authorized the bank to do so and to pay its retained counsel from trust assets. He also briefly explained the decisions that the bank had made regarding the trust and the tax filings associated with it, all of which had been communicated to plaintiff and his previous attorney. According to Reich, administration of the trust was particularly complicated for tax purposes because the settlor's records were in disarray, the settlor had not filed tax returns for several years, he had owned partial interests in numerous real properties, and he had not properly transferred several properties to the trust. Reich then stated that the bank remained willing to abide by plaintiff's decision either to wait for the IRS closing letter or to provide a reserve to receive his properties, and explained that, if the bank and plaintiff could not come to an agreement, then the bank might be forced to file a petition with the court for instructions and for a formal accounting of the trust, which would further deplete trust assets.

In the meantime, Thompson and plaintiff discussed the details of their fee arrangement for Thompson's representation of plaintiff. Thompson wrote a letter to plaintiff dated June 3, 2003, in which he explained that, although his office rarely took cases on a contingent fee basis, his office was willing to do so for him because the "case [was] exceptionally strong" and they "strongly believe[d]" in his case. Thompson also encouraged plaintiff to contact him with questions and to consult with another attorney regarding the case and fee arrangements. Thompson attached a fee agreement that provided, among other things, that plaintiff would pay defendants 15 percent of the assets "currently held" by the bank, upon their distribution to plaintiff, and 33 percent of "any additional assets obtained from [the bank] or other Defendants." Plaintiff signed that agreement on June 10, 2003.

Thompson then sent plaintiff another letter because he was "concerned about what may, or may not, be a confusion on [plaintiff's] part" regarding the agreement. He explained that the 15 percent provision applied only to the assets held by the bank and that the 33 percent provision applied to any additional assets, such as any amounts allegedly drained from the trust due to the bank's mismanagement, recovered by plaintiff. Thompson further explained that they needed to file a petition within the next week and have it ready to file and serve on the bank "before [the bank] files anything in California (and follows through with their threat to incur even more legal expenses to be drawn from the Trust)." Plaintiff testified that, at the time that he signed the contingent fee agreement, he did not know of the Reich letter or its contents; rather, he did not learn of it until more than a year later, after he had fired defendants. He stated that, had he seen and read the letter, he would not have hired defendants or initiated litigation against the bank, because he believed that the Reich letter adequately addressed his concerns and indicated that the trust administration would be completed while maintaining the trust assets at their highest possible value.

Defendants filed a petition against the bank in circuit court in Oregon on June 30, 2003, seeking instructions to the trustee; the court dismissed the petition for lack of subject matter jurisdiction because none of the property in the trust was located in Oregon. The bank, in early July 2003, filed a petition in a California court for an order confirming the ownership of trust assets. Defendants represented plaintiff in that litigation, which eventually resulted in plaintiff obtaining from the trust his interest in 11 of the 13 properties in fall 2003; the remaining two properties were held in the trust to fund the bank, as trustee, against future litigation threatened by plaintiff. Plaintiff was unhappy with the result because the bank held property worth substantially more than the $75,000 reserve that it had originally requested and because defendants did not seek an award of plaintiff's attorney fees. Thompson assured plaintiff that he would recover those last two properties; ultimately, however, the bank liquidated those properties to cover its costs.

Defendants continued to represent plaintiff on matters related to the trust, as well as other matters. In spring 2004, defendants met with plaintiff to discuss further litigation against the bank and its attorneys; at that point, Thompson told plaintiff that, beginning six months earlier, defendants had begun charging plaintiff at their hourly rate for certain work. Plaintiff was "s...

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