Willms v. AmeriTitle, Inc.

• Decision Date: 22 September 2021
• Docket Number: A165216
• Citation: 499 P.3d 79,314 Or.App. 687
• Parties: Henry W. WILLMS and Dolly G. Willms, Plaintiffs-Respondents Cross-Appellants, v. AMERITITLE, INC., a Delaware corporation, converted from an Oregon corporation by Articles of Conversion dated January 15, 2016, Defendant-Appellant Cross-Respondent.
• Court: Oregon Court of Appeals

314 Or.App. 687

499 P.3d 79

Henry W. WILLMS and Dolly G. Willms, Plaintiffs-Respondents Cross-Appellants,

v.AMERITITLE, INC., a Delaware corporation, converted from an Oregon corporation by Articles of Conversion dated January 15, 2016, Defendant-Appellant Cross-Respondent.

A165216

Court of Appeals of Oregon.

Argued and submitted October 28, 2019.

September 22, 2021

Duane A. Bosworth, Portland, argued the cause for appellant-cross-respondent. Also on the briefs were Chris Swift and Davis Wright Tremaine LLP.

Kathryn H. Clarke argued the cause for respondents-cross-appellants. Also on the briefs was D. Zachary Hostetter.

Jon W. Monson and Cable Huston LLP filed the brief amicus curiae for Oregon Land Title Association, Inc.

Before Ortega, Presiding Judge, and Shorr, Judge, and James, Judge.

SHORR, J.

Defendant AmeriTitle, Inc., appeals from a judgment in favor of plaintiffs Henry and Dolly Willms for $3,225,000, which was entered after a jury found for plaintiffs on their claims for fraud and violations of the Oregon Racketeer Influenced and Corrupt Organizations Act (ORICO), ORS 166.715 to 166.735.¹ Plaintiffs cross-appeal a supplemental judgment that denied their request for attorney fees that was made pursuant to ORS 166.725(14), the prevailing-party attorney fee provision in ORICO. Defendant raises nine assignments of error. For the reasons discussed below, we affirm the judgment on plaintiffs' common law fraud claim and reverse the judgment on plaintiffs' ORICO claim because the trial court erred when it prevented defendant from arguing to the jury that plaintiffs' claims were time barred under the five-year limitations period provided by ORS 166.725(11)(a).

In plaintiffs' cross-appeal, they contend that the trial court erred in failing to make findings of fact when exercising its discretion to reject plaintiffs' attorney-fee request. Because we reverse the judgment in favor of plaintiffs on their ORICO claim, there is no basis for an award of attorney fees on that claim. As a result, we dismiss plaintiffs' cross-appeal as moot.

Because much of our opinion is directed at defendant's assignments of error relating to the trial court's denial of defendant's motion for a directed verdict, we begin our opinion by stating the facts of the underlying dispute in the light most favorable to plaintiffs, the nonmoving parties. See MAT, Inc. v. American Tower Asset Sub, LLC , 312 Or. App. 7, 10, 493 P.3d 14 (2021) (doing same in appeal involving multiple legal issues but focusing primarily on the trial court's denial of a directed verdict motion). Where additional substantive or procedural facts relate to other assignments of error, we state those facts separately below, consistently with the corresponding standard of review.

I. FACTS

A. The Facts Giving Rise to This Dispute

The disputes that gave rise to this lawsuit between plaintiffs and defendant AmeriTitle, Inc., a title company, arise from different sets of agreements, loans, and payments that were made, or not made, under those agreements. There are multiple individuals and entities involved in the various agreements and loans, including several who are not parties to this appeal. We parse those out as best we can to set the stage for this dispute.

Plaintiff Henry Willms and his wife, plaintiff Dolly Willms, acquired a 524-acre property in Anderson, California (the Anderson property) that they intended to develop. Mr. Willms was introduced to Rowe Sanderson, a developer in Bend who had an interest in developing California property. Sanderson was a principal in Sanderson Company, Inc. (SCI) and a company called Sanderson Communities, Inc.

1. The original option agreement on the Anderson property

In 2002, the Willms Family Trust and SCI entered into an option agreement that gave SCI the option to purchase the Anderson property. The agreement also effectively permitted SCI to finance the development of the Anderson property by taking loans out against the Anderson property. In 2005 and 2006, SCI or Sanderson caused to be borrowed nearly $8 million from a bank and opened a revolving line of credit for $2 million more that were both either secured by the Anderson property or guaranteed by Willms himself.

2. The LPV property and LPV note

Separately, in late November 2005, SCI sold real property in central Oregon (the LPV property) to LaPine Village LLC (LPV). As part of that transaction, LPV agreed to pay $1.5 million to SCI by making a promissory note (the LPV note) payable to SCI. The LPV note was secured by a trust deed to the LPV property and named defendant as the trustee. The LPV note was signed by LPV's managing member, Dominic Chan. Payments were to be made directly to SCI's office in Bend. The LPV note contemplated a quick repayment with monthly payments commencing in January 2006 and the balance paid in full by November 2006.

3. SCI borrows $500,000 from plaintiffs in October 2006 and provides them with the LPV note as security

In the fall of 2006, Sanderson approached Mr. Willms for a $550,000 loan, stating that he was in need of operating capital. In October 2006, SCI issued a note (the SCI note) in which it promised to pay plaintiffs $550,000 with 10 percent interest. Although not memorialized in the SCI note, Mr. Willms testified that plaintiffs ended up loaning only $500,000 to SCI because plaintiffs did not have the other $50,000 available. Mr. Willms understood from Sanderson that SCI was due to be paid back on the LPV note in late November 2006 and that plaintiffs would be paid out of those loan proceeds.

SCI provided a formal security agreement by which plaintiffs were given a security interest in the LPV note and could enforce the LPV note. As security for the loan, SCI agreed to transfer the LPV note to plaintiffs upon their request. The agreement provided that, upon the request of plaintiffs, "Sanderson will * * * assist [plaintiffs] in taking possession of the LPV Note" and deliver the note "with one or more assignments indorsed in blank." The LPV note was transferred to Mr. Willms, although it was not indorsed. The security agreement also stated that the LPV note was secured by a deed of trust. As noted, the LPV note was, in fact, secured by a trust deed to the LPV property in central Oregon.

4. The security agreement is placed in escrow with defendant

As part of the loan from plaintiffs to SCI, plaintiffs required that the security agreement, granting plaintiffs an interest in the LPV note, be placed in escrow. SCI's controller delivered the security agreement to Libby Hervey at defendant in November 2006. The SCI controller included a cover note with the delivery that stated, "Hi Libby, here is the Security Agreement for the [SCI] Note. So we owe Hank [Willms] $500,000 plus interest @ 14% when the [LPV] Note from Dominic [Chan at LPV] is paid in full."

The correspondence, which attached the security agreement, caused Hervey to open up the escrow file. Hervey knew Sanderson because he was a client for whom she had closed numerous transactions over the years. Hervey also knew Mr. Willms through a prior escrow transaction.

Significant to this dispute, Mr. Willms testified that he had informed Hervey that he was in possession of the LPV note.² Mr. Willms believed that he had had that conversation with Hervey "more than once." Mr. Willms and his daughter, Catherine Locke, also testified that they discussed with Hervey that plaintiffs were to be paid funds from the payments made by LPV into escrow. Mr. Willms understood from Hervey that she would pay plaintiffs out of that escrow.

Mr. Willms also spoke with Hervey around the time that the LPV note was due at the end of November 2006. Hervey stated that Chan, LPV's principal, was sick and that LPV could not pay back the note. When the Willms's daughter followed up later in March 2007, Hervey again stated that Chan was sick, that the escrow had not closed, and that Hervey understood that plaintiffs were anxious. Hervey further stated that she would "definitely let [plaintiffs] know the minute she had heard anything different."

5. The increasing SCI debt and the modified option agreement between SCI and plaintiffs

Following the opening of the escrow, Sanderson borrowed additional money directly from plaintiffs, including additional loans of $125,000 and $375,000 in December 2006. By July 2007, plaintiffs faced a threat of foreclosure of the Anderson property due to the unpaid loans that Sanderson or SCI had caused to be incurred against the property. To avoid foreclosure, plaintiffs were required to obtain a $10.2 million loan to refinance the debt that encumbered plaintiffs' property. As a result, in July 2007, plaintiffs and Sanderson entered into a modified option agreement. Among other things, the modified option agreement provided for certain payments to be made in July and August 2007 and beyond. On August 27, 2007, Sanderson Communities, Inc., made a payment of $507,117.33 to Mr. Willms. Mr. Willms testified that this was a "benchmark payment[ ]" that had been made under the modified option agreement. Mr. Willms testified that this was not a payment for the SCI note.³ The modified option agreement and correspondence from Locke to Sanderson anticipated a payment due of over $500,000 on August 25, 2007, that would be applied against the "Willms debt." The Willms debt was defined in the modified option agreement to encompass several different loans from plaintiffs to Sanderson including the October 2006 loan of $500,000 and the December 2006 loans of $125,000 and $375,000, respectively. Locke also wrote that the LPV note would not be returned until plaintiffs were "free of the Bank's lien on our property."

6. LPV's delayed payment of the LPV note and defendant's representations made during escrow

As set out above, the LPV note was due in November 2006, but defendant had informed Mr. Willms and Locke, as late as March 2007, that LPV could not pay the LPV note. Mr. Willms later learned that Chan was, in fact, having...