Reynolds v. Schrock

107 P.3d 52, 197 Or. App. 564, 2005 Ore. App. LEXIS 174
CourtCourt of Appeals of Oregon
DecidedFebruary 16, 2005
DocketC991357CV; A119200
StatusPublished
Cited by8 cases

This text of 107 P.3d 52 (Reynolds v. Schrock) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Reynolds v. Schrock, 107 P.3d 52, 197 Or. App. 564, 2005 Ore. App. LEXIS 174 (Or. Ct. App. 2005).

Opinion

*566 SCHUMAN, J.

Reynolds 1 brought this action alleging contract and tort claims against defendant Schrock, who was Reynolds’s joint venturer in a real estate investment, and tort claims against Markley, 2 the lawyer who represented Schrock in a transaction involving that investment. Plaintiff and Schrock settled their claims, and Schrock was dismissed from the case. The trial court granted Markley’s motion for summary judgment as to plaintiffs claims against him. Plaintiff appeals, and we reverse.

I. BACKGROUND

Viewed in the light most favorable to plaintiff, who was the nonmoving party, ORCP 47 C, the facts are as follows. Reynolds was a naturopath and Schrock was one of his patients. In addition to that provider-patient relationship, they also had a business relationship, together purchasing two parcels of real estate. On one parcel was timber, which they considered harvesting and selling for profit; the other parcel was known as the “lodge property” and was held for recreational purposes. Each party had a one-half interest in each parcel. Reynolds’s total investment in the parcels amounted to $500,000.

A dispute arose concerning the land, and Schrock sued Reynolds. Shortly thereafter, Schrock also sued Reynolds for alleged sexual impropriety stemming from the provider-patient relationship. The cases were consolidated, and the parties reached a settlement that was designed to dispose of all the claims in both of the cases. Markley, as Schrock’s attorney, assisted in negotiating and drafting the settlement agreement.

*567 The agreement was complex but, as relevant to this case, it called for Reynolds to convey his interest in the lodge property to Schrock. In return, Reynolds was to receive the proceeds from the sale of the timber property, which the agreement called for the parties to sell, thereby leaving Schrock with sole ownership of the lodge parcel and no proceeds from the timber parcel, while Reynolds would have no interest in either parcel but all of the proceeds from the sale of the timber parcel. In order for that solution to compensate Reynolds fairly, however, the sale of the timber parcel had to yield $500,000; if it yielded less, Reynolds would not regain his investment. In anticipation of that possibility, the settlement provided that, if the timber property yielded less than $500,000, Schrock would pay Reynolds any deficiency, and Reynolds would hold a security interest in the lodge property to secure that obligation. If the net sale proceeds for the timber property exceeded $500,000, Reynolds would not retain any security interest in the lodge property.

Reynolds deeded his interest in the lodge property to Schrock, as contemplated under the settlement agreement. Markely, meanwhile, advised Schrock that, as he interpreted the settlement agreement, once she received Reynolds’s interest, she could dispose of the lodge property in whatever way she wished; that is, she was not obligated to keep it for the purpose of securing a possible deficiency owed to Reynolds in the event that the timber property sale yielded less than $500,000. Schrock, with assistance from Markley, then sold the lodge property to a third party. Apparently fearing that Reynolds might attempt to protect his investment by interfering with the sale, Markley asked the escrow officer who handled it to refrain from giving Reynolds any information about it, and, in fact, the sale occurred without Reynolds’s knowledge. For his services rendered in handling the transaction, Markley received $135,111.71. Schrock’s share was $209,440.68. Schrock subsequently prevented the sale of the timber property. As a result, Schrock ended up with over $200,000 in cash from sale of the lodge property. Markley ended up with his six-figure attorney fee. Reynolds, expecting the return of his $500,000 investment, ended up with his unsecured interest in the timber property.

*568 Reynolds sued Schrock and Markley, asserting, among other claims, breach of fiduciary duty 3 and conversion. Specifically, Reynolds alleged that Schrock had a fiduciary duty to retain the lodge parcel in case it was required to offset any deficiency owed to Reynolds resulting from sale of the timber property for less than $500,000. The duty was fiduciary because it derived from an agreement to wind down the joint venture. In the conversion claim, Reynolds alleged that Schrock converted his purported “unrecordable security interest” in the lodge property when she sold the parcel. Markley incurred joint liability for Schrock’s breach and conversion, according to Reynolds’s complaint, because he substantially assisted in the sale.

Markley moved for summary judgment on Reynolds’s claims against him. The trial court granted the motion, holding that, even though Schrock “probably” had a fiduciary duty to Reynolds in the performance of events contemplated by the settlement agreement, Markley did not owe such a duty independently, nor was he jointly liable. The trial court also determined that Markley was not jointly liable for conversion because he was only “reasonably advising his * * * client regarding the interpretation of a contract.” This appeal ensued.

II. BREACH OF FIDUCIARY DUTY

A. Schrock’s fiduciary duty to Reynolds

Whether Markley can be jointly liable for Schrock’s breach of fiduciary duty to Reynolds depends initially on whether, in fact, Schrock had such a duty. We conclude that she did. The relevant historical facts are undisputed; whether those facts support the conclusion that a fiduciary exists is a question of law. See Wescold, Inc. v. Logan International, Ltd., 120 Or App 512, 519, 852 P2d 960 (1993), rev den, 318 Or 459 (1994).

*569 The record indicates that Reynolds and Schrock jointly held the timber property as part of a business plan. In that context, each had a fiduciary duty to the other. Commerce Mortgage Co. v. Industrial Park Co., 101 Or App 345, 352-53, 791 P2d 132, adh’d to as modified on recons, 102 Or App 284, 793 P2d 894 (1990), rev den, 311 Or 87 (1991) (“Partners in a joint venture owe a fiduciary duty to one another [which includes duties] of loyalty, fair dealing and full disclosure in all matters [a]ffecting the conduct of the venture’s business.”) (bracketed material added; internal quotation marks and citation omitted).

As noted above, a dispute arose concerning the timber and lodge properties, and Schrock sued Reynolds. That suit was consolidated with Schrock’s other suit against Reynolds for molestation, and the settlement agreement resolved the consolidated case. Reynolds characterizes that settlement agreement as a blueprint for the “winding up” of the joint timber property venture and argues that the parties would owe fiduciary duties until the venture was finally complete. Thus, according to Reynolds, the settlement agreement was not a typical arm’s-length contract matter under which the parties would not owe fiduciary duties. We agree.

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Cite This Page — Counsel Stack

Bluebook (online)
107 P.3d 52, 197 Or. App. 564, 2005 Ore. App. LEXIS 174, Counsel Stack Legal Research, https://law.counselstack.com/opinion/reynolds-v-schrock-orctapp-2005.