Welch v. Bancorp Management Advisors, Inc., A7606-08607

• Decision Date: 09 June 1982
• Docket Number: No. A7606-08607,A7606-08607
• Citation: 57 Or.App. 666,646 P.2d 57
• Parties: Thomas K. WELCH, Appellant, v. BANCORP MANAGEMENT ADVISORS, INC., U. S. Bancorp, Commerce Mortgage Company, and United States National Bank of Oregon, Portland, Oregon, Respondents. ; CA A20958.
• Court: Oregon Court of Appeals

Page 57

646 P.2d 57

57 Or.App. 666

Thomas K. WELCH, Appellant, v. BANCORP MANAGEMENT ADVISORS, INC., U. S. Bancorp, Commerce Mortgage Company, and United States National Bank of Oregon, Portland, Oregon, Respondents.

No. A7606-08607; CA A20958.

Court of Appeals of Oregon.

Argued and Submitted Jan. 29, 1982.

Decided June 9, 1982.

Mildred J. Carmack, Portland, argued the cause for appellant. With her on the briefs were John R. Faust, Jr., and Schwabe, Williamson, Wyatt, Moore & Roberts, Portland.

William M. McAllister, Portland, argued the cause for respondents. With him on the brief were Gregory R. Mowe, Charles F. Adams, and Stoel, Rives, Boley, Fraser & Wyse, Portland.

Before BUTTLER, P. J., and WARDEN and WARREN, JJ.

WARREN, Judge.

In an action for intentional interference with business relationships, plaintiff appeals from judgment for defendants. Plaintiff assigns as errors: (1) granting summary judgment on the first cause of action; and (2) dismissing a second cause of action, for misrepresentation, which was added in an amended complaint, for failure to relate back to the original complaint within the applicable limitations period. We reverse and remand.

In 1974, plaintiff, ¹ a developer, contracted with U. S. Bancorp Realty and Mortgage Trust, dba US BanTrust (Trust), a real estate investment trust, to provide financing for the purchase and rezoning of 68 acres of land owned by Lloyd Corporation in Washington County that would then be resold for actual development. In return, the Trust was to receive interest on the sum borrowed, secured by a mortgage, and one-half the profits on resale of the property. The agreement provided that plaintiff would submit a proposed zone change application to the Trust and Lloyd to approve as to the form of the application. Plaintiff did so, but the Trust rejected the proposed application and refused to make the loan to plaintiff. In December, 1976, after a jury trial, plaintiff recovered a judgment against the Trust for breach of its contract to provide funds for the proposed real estate development.

In this action, to which the Trust is not a party, plaintiff has proceeded against several investment and banking corporations affiliated with U. S. Bancorp. Defendants' officers and agents sat on an investment committee formed to advise the Trust; the Trust itself was managed by a board of trustees but had no staff of employees. It was also apparently contemplated that the Trust would itself borrow money from one or more defendants to provide financing for plaintiff's development project. Plaintiff alleges that defendants, while acting through their agents as advisers to the Trust, made misrepresentations to the Trust to induce it to breach its contract with plaintiff and, in so doing, were motivated primarily by their own interests as lenders, which were inconsistent with those of the Trust. Plaintiff also alleges that defendants intentionally misrepresented to plaintiff that a proposed zone application submitted in a certain form would be approved by the Trust. Plaintiff seeks to recover lost profits (less his previous recovery for lost profits from the Trust), out-of-pocket expenses and exemplary damages.

Defendants' motion for summary judgment was accompanied by a transcript of testimony from the previous trial concerning meetings of the investment committee in which members of the committee had commented, inter alia, that the interest rate on the proposed loan to plaintiff was less than the cost of money to the Trust, that the loan might appear speculative to the banks and that the banks would not look favorably on the Trust's commitment to plaintiff. The testimony was that the committee had voted to disapprove the proposed zone change application because the Trust had expected a more substantial proportion of commercial uses and because plaintiff had not presented the committee with adequate figures to determine the value of the project. The record contains a letter on the Trust letterhead in which the investment committee informed plaintiff that the value of the development did not provide a sufficient margin over acquisition, financing and development costs to justify the risks involved.

Plaintiff opposed the motion for summary judgment with excerpts of depositions from the previous action and trial testimony by defendants' agents that tended to demonstrate that defendants' were concerned during this period with the shaky reputation of real estate investment trusts in general and that defendant U. S. Bancorp was decreasing its extension of credit to the Trust to protect its affiliated banks' own ratings on commercial paper. In oral argument, defendants contended that a back-up line of credit extended to the Trust was adequate to handle this entire project despite the withdrawal of short-term loans. Plaintiff's evidence indicated such back-up credit would be more expensive to the Trust, thus affecting the feasibility of the project. The record does not disclose the extent to which commercial paper credit at lower interest rates was expected to provide the funds to the Trust for the commitment to plaintiff. An inference, however, could be drawn by a trier of fact on this record that defendants had self-serving motives, at least in part, in advising the Trust not to approve the proposed zone change application.

The trial court granted defendants' motion for summary judgment, presumably on the ground that defendants were immune from liability on the tort of interference with contract because they were, at least in part, acting in furtherance of the interests of the Trust, despite other possible motives. In so ruling, the trial court simply cited as controlling the Supreme Court's opinion in Wampler v. Palmerton, 250 Or. 65, 439 P.2d 601, reh. den. (1968).

In Wampler, the plaintiff brought an action against two individuals for intentional interference with the plaintiff's logging contract with a corporation. One defendant was the president, managing officer, board member and stockholder of the company; the other was employed by the company as a business advisor and was also a major unsecured creditor of the corporation and a co-signer on the performance bond of the timber purchase contract between the corporation and the government. The plaintiff alleged that the defendants were enriched through the corporation's benefiting from its breach of the contract with the plaintiff. The court held that corporate officers and employees who, in good faith, give advice to a corporation to abandon a disadvantageous contract, that is, with intent to benefit the corporation, enjoy a "privilege" or immunity from liability for inducing breach of contract. The court stated the policy behind the privilege:

"A party is usually able to abandon a disadvantageous but valid contract and be responsible for breach of contract only. Corporations would substantially be prevented from similarly abandoning disadvantageous but valid contracts, and from securing related business advice, if the officers and employees who advised and carried out the breach had to run the risk of personal responsibility in an action for interference with contract." 250 Or. at 74-75, 439 P.2d 601.

The court held that, because the defendants' actions were "clearly" taken to benefit the corporation and the plaintiff had alleged that the defendants sought a derivative gain from the improved financial condition of the corporation, the motivation attributed to the defendants established privilege and was insufficient to render them liable for the tort of interference with a contract. 25 Or. at 76, 439 P.2d 601. Wampler thus presented no question of fact concerning the defendants' motives. ²

In Straube v. Larson, 287 Or. 357, 371, 600 P.2d 371 (1979) (action against hospital employees for depriving plaintiff of hospital staff privileges), the court held that the evidence created a question of fact whether the defendants' actions were taken for the benefit of the hospital or to satisfy private grudges and that summary judgment was improper unless the privilege could be deemed an absolute one. The court concluded that an absolute privilege was improper in the context of communications made to private organizations. The court characterized the operative rule as "application of a qualified privilege, with the burden of negating this qualified privilege placed upon plaintiff as part of his affirmative case." 287 Or. at 371, 600 P.2d 371.

In Straube, the factual issue of motive was presented as an "either/or" proposition. The court did not address the question posed by cases in which agents of a corporation have acted both for the interests of other principals as well as for those of the entity advised. The question of "mixed motives" in this context must be deemed an open one in Oregon law. Plaintiff urges that we adopt here the "primary motive" concept used to uphold qualified privilege in the context of defamation. See, e.g., Schafroth v. Baker, 276 Or. 39, 56-57, 553 P.2d 1046 (1976) (in slander context, the defendants' communications could be privileged despite bad motives, if the defendants' primary purpose were proper). Prosser analogizes defamation to interference with contract, because they are "different phases of the same general wrong of depriving the plaintiff of beneficial relations with others." Prosser, Torts 926, § 129 (4th ed 1971). Although acknowledging that the few decisions addressing this question ³ have upheld the applicable privilege despite ill will toward the plaintiff if the defendant's purpose was proper, Prosser indicates, not without reservation, ⁴ that a primary motive test may be appropriate here:

" * * * It may be suggested that here, as in the case of mixed motives in the exercise of a privilege in defamation and malicious prosecution, the court may well look to the predominant purpose underlying the defendant's conduct." (Footnotes omitted.) Prosser, Torts 943, § 129 ...