Petix v. Gillingham

550 P.3d 414

332 Or.App. 504

Jeanette A. PETIX, Plaintiff-Appellant,

v.Aaron L. GILLINGHAM et al., Defendants,andJames B. Shikany, Defendant-Respondent.

A176528

Court of Appeals of Oregon.

Argued and submitted on September 15, 2022.

May 8, 2024

Washington County Circuit Court, 19CV49445; Theodore E. Sims, Judge.

Stanley D. Gish, Portland, argued the cause and filed the briefs for appellant.

J. Aaron Landau, Eugene, argued the cause for respondent. Also on the brief were Graham M. Sweitzer and Harrang Long Gary Rudnick P. C.

Before Ortega, Presiding Judge, and Powers, Judge, and Hellman, Judge.

POWERS, J.

₅₀₆In this fraudulent transfer action under the Uniform Fraudulent Transfers Act (UFTA), we must decide whether a nontransferee attorney may be held jointly liable for the alleged fraudulent transfer of his client. The trial court concluded that the attorney could not be held jointly liable and entered a limited judgment dismissing plaintiff’s claims against the attorney based on the attorney’s motion for judgment on the pleadings. As explained below, we conclude that, based on the text and context of the statutory framework, claims under the UFTA are limited to those brought against a debtor, transferee, or the transferred asset itself. In this case, because the nontransferee attorney is neither the debtor nor transferee, we affirm the trial court’s limited judgment,

STANDARD OF REVIEW AND BACKGROUND

[1] In reviewing a trial court’s judgment on the pleadings, we accept as true all well-pleaded allegations in the complaint. Eklof v. Persson, 369 Or. 531, 548, 508 P.3d 468 (2022) (citing Rowlett v. Fagan, 358 Or. 639, 649, 369 P.3d 1132 (2016)). In accordance with that standard, we briefly set out the relevant facts as described in plaintiff’s amended complaint.

Plaintiff is a Judgment creditor, having a Judgment with an unpaid balance secured by a lien against a residential property that debtor John Lucas owned. Plaintiff’s lien against the property was foreclosed when a mortgagee bank secured a judgment of foreclosure against the property and sold it at an open-bidding foreclosure sale. Lucas retained title and a statutory right of redemption to the property for a 180-day period and sought funding from Aries Holdings, LLC, Gillingham (Aries’s manager), and defendant Shikany (Aries's attorney), to repurchase the property.¹

Rather than provide funding for Lucas to repurchase the property through statutory redemption—whereby any liens, including plaintiff’s, would reattach—Aries purchased. the property itself. Aries and defendant used the ₅₀₇potential redemption price if redeemed by Lucas to negotiate a purchase price that was considerably less than the market value at the time. On the same day that Aries purchased the property, Lucas paid Aries $45,000 and signed a written Lease Option Agreement, allowing him to stay in possession of the home, make rental and option payments, and have an opportunity to purchase the property in the future. The lease option was not recorded, and neither were three bargain and sale deeds that Lucas used to transfer his interest in the property to Aries. Over the next year, Lucas paid Aries $28,500 in rent and option fees.

Plaintiff brought suit against Aries, Gillingham, and defendant, among others. She alleged that Lucas’s payments to Aries were fraudulent transfers, under Oregon’s UFTA and that defendant was a coconspirator who took concerted action with Lucas and Aries to transfer assets from Lucas to Aries with the intent to defraud. Plaintiff further asserted that Aries was a shell entity under ORS 63.661(1)(a)(C) and that defendant was liable as Aries’s agent. Plaintiff sought a money judgment against Aries, Gillingham, and defendant, jointly and severally.

The trial court dismissed some of plaintiff’s claims against Gillingham, Aries, and defendant, including the portion of her UFTA claim that asserted that there was a fraudulent transfer related to the foreclosure redemption rights of the mortgagor.² As gave rise to this appeal, the parties continued to litigate the remaining portion of the UFTA claim—plaintiff’s demand to recover amounts that Lucas paid under the lease option agreement—and defendant ultimately moved for a judgment on the pleadings pursuant to ORCP 21 B. The trial court granted that motion, explaining that:

"[Defendant] is not a debtor nor the transferee in the property at issue. ORS Ch. 95 (Oregon Fraudulent Transfer and Conveyances Act) limits its application to the debtor, the transferee or the asset transferred.

"This Court lacks authority to award a judgment against a person who is neither a judgment debtor nor a transferee ₅₀₈of the property at issue. In addition, because there is therefore no underlying claim to support a civil conspiracy theory, that claim is also dismissed."

The trial court then entered a limited judgment of dismissal as to the claims against defendant. Plaintiff timely appeals from that limited judgment.

On appeal, plaintiff contends in a single assignment of error that the trial court erred in granting defendant’s motion for judgment on the pleadings. She argues that, although defendant was not a transferee of the alleged fraudulent transfer, he was nevertheless jointly liable with the transferee, Aries, under both a civil conspiracy theory of joint liability and a shell entity theory of liability. Under a theory of civil conspiracy, plaintiff argues that, where an attorney knowingly participates in a fraudulent transfer made with the intent to defraud, the acts of the transferee are imputed to the attorney. That is, plaintiff contends that a fraudulent transfer violating the UFTA provides an underlying tort, and that civil conspiracy provides a remedy to impose joint liability on persons that are not directly liable for the tort. Under a theory of shell entity liability, plaintiff argues that defendant was an "agent" of Aries and that his failure to record the deed or lease makes him jointly liable.

As to both of plaintiff’s arguments, defendant asserts, among other arguments, that relief under the UFTA is not available against a person who is neither a transferee nor a debtor. Because it is undisputed that defendant is neither, he argues that the trial court correctly granted his motion dismissing the claims against him.

DISCUSSION

[2, 3] We review the trial court’s disposition of the motion for judgment on the pleadings to determine whether the allegations in the pleadings affirmatively show that plaintiff cannot prevail as a matter of law. Smith v. Washington County, 180 Or App 505, 507, 43 P.3d 1171, rev den, 334 Or. 491, 52 P.3d 1056 (2002). We review issues that implicitly interpret statutory terms for legal error. See S. L. L. v. MacDonald, 267 Or App 628, 631, 340 P.3d 773 (2014).

[4–6] ₅₀₉Plaintiff’s claim for relief is based on the UFTA, which is codified at ORS 95.200 to 95.310. The UFTA "does not name any specific causes of action[,]" but rather "describe[s] when a transfer is considered fraudulent and provide[s] remedies for affected creditors." Twigg v. Opsahl, 316 Or App 775, 783, 505 P.3d 486, modified on recons, 317 Or App 815, 505 P.3d 516, rev den sub nom Twigg v. Rainier Pacific Development, LLC, 370 Or. 303, 518 P.3d 128 (2022). We are aware of no controlling authority that has construed whether civil conspiracy and shell entity liability are actionable under the UFTA, nor are we aware of any controlling authority that has directly addressed the related issue of whether a remedy is available under the UFTA against a person other than a transferee or debtor or against the asset itself. We conclude that, even assuming that civil conspiracy and shell entity liability are viable claims under the UFTA, recovery is nevertheless limited to debtors, transferees, and the asset itself, by operation of ORS 95.260 and ORS 95.270 (2019), amended by Or Laws 2023, ch 83, § 5; and ORS 95.290.³ Thus, to the extent that a civil conspiracy or shell entity liability claim is brought against a nontransferee or nondebtor, it is not a viable claim under the UFTA and cannot prevail as a matter of law.

In reaching that conclusion, we examine the operative statutes through the interpretive framework established in State v. Gaines, 346 Or. 160, 171-72, 206 P.3d 1042 (2009) (explaining that we examine a statute’s text, context, and pertinent legislative history to discern the legislature’s intent).

[7] Remedies authorized under the UFTA are provided for in ORS 95.260 and ORS 95.270. Although remedies under the UFTA are cumulative and not exclusive, supplemental provisions of law (which may come with their own remedies) must be grounded within the remedies authorized by the UFTA. See Twigg, 316 Or App at 783, 505 P.3d 486 ("[W]hen an action for relief * * * is based on and seeks a remedy authorized by the UFTA’s provisions, it is an action for relief ‘under’ the ₅₁₀UFTA"). Thus, we examine the text and context of those statutes.

ORS 95.260, which explicitly establishes remedies for creditors under the UFTA, provides:

"(1) In any action for relief against a transfer or obligation under ORS 95.200 to 95.310, a creditor, subject to the limitations provided in ORS 95.270, may obtain:

"(a) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim.

"(b) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by any applicable provision of any other statute or the Oregon Rules of Civil Procedure.

"(c) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure;

"(A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;

"(B) Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or

"(C) Any other relief the circumstances may require.

"(2) If a...