Troutman v. Erlandson

• Decision Date: 13 September 1977
• Citation: 287 Or. 187,598 P.2d 1211
• Parties: Albert TROUTMAN, Appellant, v. Ralf ERLANDSON, Respondent. TC 94099; SC 25129. . *
• Court: Oregon Supreme Court

Page 1211

598 P.2d 1211

287 Or. 187

Albert TROUTMAN, Appellant, v. Ralf ERLANDSON, Respondent.

TC 94099; SC 25129.

Supreme Court of Oregon In Banc. ^*

Argued Sept. 13, 1977, before Department No. 1. ^**

Re-argued Sept. 11, 1978, before the court in banc.

Record on appeal perfected July 10, 1979.

Decided July 31, 1979.

Gerald R. Pullen, Portland, argued the cause and filed briefs for appellant.

Ralf H. Erlandson, Milwaukie, argued the cause and filed briefs pro se for respondent.

LENT, Justice.

This is an action at law (Clackamas County Circuit Court Case No. 94099, hereinafter called the "second case") filed October 24, 1975, for damages for alleged common law fraud. The trial court held for defendant upon a plea of res judicata. We affirm the judgment.

Before proceeding to the merits we take the rather unusual step of discussing the procedural path of this case in this court to make understandable to the litigants and the bench and bar the lapse of time between original oral argument herein and decision. The cause was first argued on September 13, 1977, before a department of this court consisting of three regular members and one justice pro tempore. Because of some uncertainties described later in this opinion, we ordered reargument, which took place on September 11, 1978. While the cause was still under consideration but in the final stages of the decision making process, defendant-respondent filed a motion on April 18, 1979, to dismiss the appeal on the ground that although plaintiff-appellant had designated all testimony to be included in the record on appeal, the transcript of proceedings filed in this court did not include the testimony of plaintiff taken on the first day of trial. (Neither party had relied upon the content of that testimony in briefing and twice arguing the cause in this court.) The motion to dismiss was denied on May 22, 1979, but the court requested affidavits from each party as to whether there was anything in the omitted portion of the record which would be necessary for this court to have in arriving at a decision. Based upon the affidavits thereafter filed and the designation of record, the court then ordered that the appellant complete the record. The transcript was then ordered from the court reporter and was received in this court on July 10, 1979.

Prior to commencement of this second case, a decree had been entered in Clackamas County Circuit Court Case No. 90753 (hereinafter called the "first case"). In the first case, which was a melange of legal and equitable claims between the parties, there were many allegations of wrongful conduct on the part of the defendant as to failure to perform his promises and undertakings, including claimed misrepresentation. ¹ Other than the allegations set forth in the footnote the complaint did not contain other standard allegations of a claim based upon fraud. For example, there were no allegations of scienter and detrimental reliance. That first case, filed February 18, 1975, was a suit by this plaintiff and his wife ² against this defendant, in which the complaint was entitled "Complaint in Equity for Dissolution of Partnership and Accounting." In that first case, however, the trial court found that the parties had already accomplished dissolution by written agreements dated June 21, 1974, and July 18, 1974. ³ The decree, in effect ordered the parties to carry out the terms agreed upon in those instruments.

In this second case plaintiff alleges:

"I.

"Commencing in approximately June, 1972, defendant was an attorney at law representing plaintiff in various business matters, and in addition Was a partner with plaintiff in certain business ventures, and a relationship of full trust and confidence existed between the parties. (emphasis added)

"II.

"At all relevant times plaintiff was the owner of a corporation Ogden Farms Inc., which was the owner of a large farm of 464 acres near Aurora, Oregon, which had valuable mineral deposits and which had a total value including said mineral deposits in excess of $2,000,000.

"III.

"Commencing in June, 1972 and continuing to the present date defendant devised a scheme to defraud plaintiff out of his interest in said farm and obtain an interest of said farm in himself by various false and fraudulent misrepresentations hereinafter set forth, to wit:

"(a) Furnished plaintiff false financial statements showing a net worth between $450,000 to $800,000.

"(b) Furnished false and fraudulent financial statements to creditors of plaintiff, by means of which said creditors discharged other joint obligors of plaintiff who had substantial assets in excess of $140,000 and substituted defendant in their place.

"(c) In representing to plaintiff that if plaintiff conveyed a one-half interest in Ogden Farms to defendant, that defendant had $140,000 available to pay off other persons jointly liable to pay said debts.

"(d) In presenting certain uncollectible investment securities from certain Klamath Indians and representing they had value, with the intent to bolster defendant's credit, and representing the proceeds would be applied to plaintiff's debts.

"(e) In misrepresenting to plaintiff that he would sell all his interest in certain real properties, and contribute all such proceeds to business ventures with plaintiff.

"(f) In misrepresenting to plaintiff that he would provide $2,000 per month from his law practice and in addition provide all sums in excess of $10,000 defendant would earn from several pending law actions, in a total amount of approximately $120,000.

"(g) In assuring plaintiff that defendant could borrow all necessary money to finance Ogden Farms and meet other business obligations of plaintiff.

"(h) In misrepresenting to plaintiff that he would work on the farm up to 30 hours per week, and his two sons would also work as needed on the farm.

"IV.

"That said false representations were made by defendant intentionally and with knowledge of their falsity, under circumstances where plaintiff had a right to rely thereon, with the intention that plaintiff rely thereon; plaintiff did in fact rely upon said misrepresentations, and has transferred certain mineral royalties to defendant from mineral deposits on Ogden Farms of the reasonable value of $1,000,000, and had given defendant an option to purchase one-half interest in the entire Ogden Farms for a payment of $140,000, all to plaintiff's general damages in the sum of $1,430,000. Plaintiff did not discover these misrepresentations were false and fraudulent until after ⁴ April, 1975.

"V.

"That defendant has acted wilfully and maliciously in complete disregard of the fiduciary relationship between the parties, and as a deterrent should be required to pay punitive damages of $500,000."

These allegations are more elaborate than those in the first case and assert different and additional charges of misrepresentation. There is obvious overlapping between the two complaints, however, in the matter of the asserted misrepresentations. ⁵

It appears that trial in the second case commenced on December 1, 1976, at which time a jury was empaneled, opening statements were made, and plaintiff took the stand and testified upon direct examination until near the end of the day. Before proceeding further the trial judge called for legal argument on the issue of res judicata to commence the following morning. The parties agreed that the clerk's file from the first case would be received in evidence, and apparently no other evidence was received. The parties further agreed that in this second case the trial of the issue of res judicata was for the court. The trial judge then granted a motion for continuance of the jury trial to another time, set a briefing schedule, later found that defendant was entitled to prevail on his defense of res judicata, and entered judgment accordingly for defendant for costs and disbursements.

One thing that is immediately apparent is that neither the trial judge had, nor this court has, any basis upon which to determine what evidence was introduced upon trial of the first case, for there was no transcript of the proceedings upon the first case trial introduced on trial of the second case. ⁶ We are required, therefore, to determine from the trial court file in the first case what was litigated and could have been litigated.

This brings us to a rather curious set of circumstances. The complaint in the first case alleged that the parties "orally agreed" in December, 1971, to enter into a partnership or joint venture and reduced "this informal oral agreement into a written agreement on or about June 22, 1972(. )" Resort to footnote 1, Supra, will show that, as to claimed misrepresentations, plaintiff pleaded that they were made To induce plaintiff to enter into the oral agreement of December, 1971. Comparing that complaint with the one in the second case we find that the second case complaint is concerned with alleged misrepresentations (paragraph III) "(c)ommencing in June, 1972" and continuing to the day before the filing of the second case. Despite this apparent segregation by time period of the alleged misrepresentations, as we noted above, there is an obvious overlapping with respect to claimed misrepresentations concerning defendant's net worth and the amount of money that would be available to defendant from his law practice for investment in the partnership business.

Because of our uncertainty as to plaintiff's contentions with respect to the timing of these representations and the legal effects which might flow from that timing we set the case for re-argument. ⁷ Prior to hearing re-argument we addressed several questions to counsel, including the following (also showing relevant parts of plaintiff's answers):

"(2) Were the representations alleged in paragraph III of plaintiff's amended complaint in # 94099 (the second case) all made after the partnership came into existence?"

(Answer) "The representations...