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Sterling Savings Bank v. Thornburgh Resort Company LLC

United States District Court, D. Oregon

January 5, 2015

STERLING SAVINGS BANK, a Washington Chartered Commercial Bank, Plaintiff,
v.
THORNBURGH RESORT COMPANY LLC, an Oregon Limited Liability Company, Defendant.

Charles R. Markley, Sanford R. Landress, Greene & Markley, P.C., Portland, OR, Attorneys for Plaintiff.

Gary Underwood Scharff, Law Office of Gary Underwood Scharff, Portland, OR, Heather A. Brann, Portland, OR, Attorneys for Defendant.

OPINION AND ORDER

GARR M. KING, District Judge.

Plaintiff Sterling Savings Bank ("Sterling") seeks a declaration that any claims Thornburgh Resort Company, LLC ("Thornburgh") makes against Sterling are invalid. Thornburgh, in turn, alleges Sterling breached its fiduciary duty to a surety, intentionally interfered with Thornburgh's business expectancy, tortiously breached the duty of good faith and fair dealing, and is liable under common law indemnity.

Pending before the Court are Sterling's Motion for Summary Judgment [54], Thornburgh's Motion for Partial Summary Judgment on Counterclaim I [61], and Thornburgh's Motion to Strike Sterling's Affirmative Defenses [63].

BACKGROUND

Thornburgh began designing and obtaining permits for a destination resort on its land in about 2004. Most of the land had belonged to the grandfather of Thornburgh's principal, Kameron DeLashmutt. Jeff Parker and William Wilt formed Parker Group Investments, LLC ("PGI") to invest in Thornburgh's project. To effectuate that investment, Thornburgh, PGI, Parker, and Wilt entered into an Investment Agreement in 2007 giving PGI an interest in Thornburgh's property in exchange for PGI obtaining financing; Thornburgh also agreed to grant an interest in its property as security for the payment of any loan PGI obtained.

On November 19, 2007, Sterling Savings Bank loaned $10, 956, 000 to PGI pursuant to a promissory note (the "Note"). Parker and Wilt guaranteed the Note. Thornburgh was not a party to the Note. PGI, Thornburgh, and others executed and delivered to Sterling a Line of Credit Trust Deed on Thornburgh's property; the Trust Deed encumbered Thornburgh's real property and secured the Note.[1] The Note was also secured by cash owned by PGI in the amount of $7, 229, 655 ("Cash Collateral") held in a § 1031 exchange account. Parker executed an Assignment of Cash Account in favor of Sterling for this purpose.

The next day, on November 20, 2007, PGI and Thornburgh amended their Investment Agreement (for the fourth time) to specifically reference the $10, 956, 000 loan from Sterling.

Sterling released the loan proceeds to PGI, which passed the proceeds on to Thornburgh pursuant to a "pass-through-loan."

On December 11, 2007, unbeknownst to Thornburgh, Parker asked Sterling to disburse the Cash Collateral to pay down other debts Parker and Wilt owed to Sterling. Sterling agreed and it disbursed the Cash Collateral on December 17, 2007. It did not request replacement collateral immediately. There is evidence Sterling attempted to obtain replacement collateral several months later, but no evidence it succeeded.

The PGI loan fell into default. In February 2010, Thornburgh offered $5.1 million to buy the Note and Trust Deed from Sterling. Sterling countered with $9.5 million.

Sterling commenced a non-judicial foreclosure of the Trust Deed in October 2010.

Parker approached Sterling to buy the loan, but Sterling informed him it would not sell to defaulting borrowers; it would sell to third parties, however. Parker formed Central Oregon Investment Holdings, LLC, for the purpose of buying the loan. Two days before Sterling was scheduled to foreclose, Sterling sold the Note and Trust Deed to Central Oregon Investment Holdings, LLC, for $4 million. Parker's Assignment of Cash Account was included among a reference to other loan documents included in the sale. Central Oregon then sold the Note, Trust Deed, and other loan documents, including the Assignment of Cash Account, to Loyal Land, LLC. Loyal Land delayed the foreclosure sale date.

On March 11, 2011, Thornburgh filed for Chapter 11 bankruptcy in an attempt to stop Loyal's foreclosure. Loyal quickly sought an order for relief from the automatic stay so it could complete the foreclosure. Thornburgh opposed Loyal's motion and initiated discovery. As part of discovery, Thornburgh took the deposition of John Sears, who had been an employee of Sterling's subsidiary until June 2008. Sears testified that Sterling had disbursed the Cash Collateral and had not obtained replacement collateral, but Sears had no knowledge of the loan or collateral after he left.

Thornburgh brought an adversary proceeding in Bankruptcy Court against Sterling and other defendants in May 2011. It alleged Sterling caused Thornburgh $20 million dollars worth of damage by, among other things, disbursing the Cash Collateral without obtaining replacement collateral.[2] Sterling and the other defendants in that case admitted to the release but denied "all other allegations." DeLashmutt Decl. Ex. S, at ¶11 [62].

The Bankruptcy Court granted Loyal relief from the automatic stay on June 16, 2011.

One day before Loyal was scheduled to foreclose, Thornburgh brought a declaratory and quiet title action against Loyal and others in Deschutes County. Thornburgh included an allegation in that case, too, about Sterling's improper release of the Cash Collateral.[3]

Loyal's nonjudicial foreclosure of the Trust Deed occurred on August 31, 2011.

LEGAL STANDARDS

Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(a). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. Once the initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On a motion for summary judgment, the court "must view the evidence on summary judgment in the light most favorable to the non-moving ...


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