WESTERN PROPERTY HOLDINGS, LLC, an Oregon limited liability company, Plaintiff-Appellant,
AEQUITAS CAPITAL MANAGEMENT, INC., an Oregon corporation, Defendant-Respondent.
and submitted September 1, 2015
County Circuit Court 121114490 Henry C. Breithaupt, Judge pro
Hoesly argued the cause for appellant. With him on the briefs
was Larkins Vacura LLP.
Ridler Aoyagi argued the cause for respondent. With her on
the brief were Christopher J. Pallanch, Steven M. Wilker, and
Tonkon Torp LLP.
Sercombe, Presiding Judge, and Ortega, Judge, and Tookey,
Summary: Plaintiff appeals a judgment for defendant,
assigning error to the trial court's grant of
defendant's motion for summary judgment. Defendant made a
secured loan to a third party, and plaintiff entered into a
loan participation agreement with defendant to provide a
portion of the loaned money in exchange for its share of the
loan repayment or any proceeds from a foreclosure sale of the
collateral. Plaintiff fled this action, claiming that
defendant "blocked" a potential sale of the
collateral that would have allowed plaintiff to recoup all of
the money it loaned, instead choosing to foreclose on the
collateral, resulting in a smaller recovery. Plaintiff
contends that the trial court erroneously granted summary
judgment on claims for breach of duty of good faith and fair
dealing and breach of duties under a "special
relationship." Held: The sale of the collateral
was entirely outside the scope of the agreement between
plaintiff and defendant. Therefore, no reasonable trier of
fact could conclude that defendant violated the duty of good
faith and fair dealing, because, as a matter of law,
plaintiff could not have reasonably expected that defendant
would act to facilitate a sale of the collateral instead of
foreclosing on the loan. Nor, as a matter of law, were the
parties in a "special relationship" that imposed
heightened duties on defendant, and, therefore, no reasonable
factfnder could return a verdict for plaintiff on that claim.
Consequently, the trial court did not err in granting
defendant's motion for summary judgment.
SERCOMBE, P. J.
appeals a judgment for defendant, assigning error to the
trial court's grant of defendant's motion for summary
judgment. Defendant made a secured loan to a third party.
Plaintiff agreed to pay defendant a portion of the loaned
money, and defendant agreed to pay plaintiff its share of the
loan repayment or any proceeds from a foreclosure sale of the
collateral. Plaintiff claimed that defendant blocked a
potential sale of the collateral that would have allowed
plaintiff to recoup all of the money that it provided, and
brought claims for breach of contract, breach of the implied
duty of good faith and fair dealing, breach of duties under a
special relationship, and negligence. On defendant's
motion for summary judgment, the trial court concluded that
there were no genuine issues of material fact precluding
summary judgment and granted the motion. We
appeal from the grant of a motion for summary judgment,
"we will affirm the trial court's judgment if we
agree that 'there is no genuine issue as to any material
fact and the moving party [was] entitled to a judgment as a
matter of law'" O'Dee v. Tri-County
Metropolitan Trans. Dist. 212 Or.App. 456, 460, 157 P.3d
1272 (2007) (quoting Robinson v. Lamb's Wilsonville
Thriftway, 332 Or 453, 455, 31 P.3d 421 (2001) (brackets
in O'Dee)); see also ORCP 47 C. No issue of
material fact exists if, viewing the evidence in the light
most favorable to the nonmoving party-in this case,
plaintiff-"'no objectively reasonable juror could
return a verdict for the adverse party on the matter that is
the subject of the motion for summary judgment.'"
O'Dee, 212 Or.App. at 460 (quoting ORCP 47 C).
We state the facts in accordance with that standard.
dispute arose out of the merger of Catcher Holding, Inc.
(Catcher) and Vivato Networks, Inc. (Vivato). Catcher was a
public company that owned computer-related assets, and Vivato
was a company that owned intellectual property related to
wireless technology. Defendant, Aequitas Capital Management,
is an investment management company, and one of
defendant's affiliates, Aequitas Investment Management
(AIM), was part of a group of investors (the Catcher Note
Holders) who loaned Catcher $4.8 million; AIM contributed
$500, 000 to that amount. In November 2007, Vivato sought
defendant's assistance to raise new equity. Defendant and
Vivato developed a plan to merge Vivato into Catcher as a
wholly owned subsidiary and for Catcher to then sell its
preferred stock in order to raise $8 million.
order to provide interim financing prior to the completion of
the merger, defendant agreed to loan Vivato $1 million. The
loan was secured by Vivato's assets- primarily
patents-which were transferred to a newly formed company
called Vivato Holdings, Inc. (Vivato Holdings). The patents
were valued at approximately $800, 000. Vivato Holdings then
granted defendant a security interest in the patents. After
the merger, Vivato Holdings would remain a separate entity
from Catcher, but it agreed to grant Catcher an exclusive
license and an option to purchase the patents.
to reduce the risk of default, defendant required
Vivato's owners to have a personal financial stake in the
loan. To that end, some of Vivato's shareholders formed
plaintiff, a limited liability company, which then entered
into a loan participation agreement (LPA) with defendant.
Under the LPA, plaintiff agreed to contribute up to 30
percent of the funds loaned to Vivato, and defendant agreed
to remit a proportionate share of any loan repayments by
Vivato to plaintiff. Additionally, plaintiff would receive a
proportionate share of any net proceeds from a sale of the
collateral in the event of default.
November 30, 2007, the Catcher-Vivato merger, the loan
agreement, and the LPA became effective. Four days later, the
agreement granting Catcher a license and option to purchase
the patents went into effect. Catcher's interest in the
patents under the license agreement was expressly made junior
to defendant's security interest in the patents. From
November 2007 to February 2008, defendant loaned Vivato $987,
750, of which plaintiff contributed $287, 750.
early 2008, Vivato defaulted on the loan. It also became
clear that Catcher's $8 million preferred stock offering
would not be successful. Beginning in December 2007, Vivato
Holdings had been negotiating a sale of the patents to a
company called Intellectual Ventures (IV), which offered to
purchase them for $1.8 million. If the sale was successful,
the proceeds would be used to pay off the loan, with the
remainder going to Catcher to support its operations while
Catcher attempted to raise additional funds. At the end of
February 2008, IV and Vivato Holdings executed a sales
IV would close on the deal, it required assurance that it
would receive clear title to the patents. There were two
encumberances on the title that needed to be removed before
the deal could go through-defendant's security interest
and Catcher's exclusive license and option to purchase.
The security interest would be released when the sales
proceeds were used to repay defendant for the outstanding
balance of the loan. In an attempt to eliminate the license
and option to purchase, on March 24, 2008, Catcher and Vivato
Holdings amended the licensing agreement to eliminate the
option to purchase and made Catcher's license
nonexclusive. Vivato Holdings and IV renegotiated the price
to $1.6 million, and they hoped that the sale could be
completed by the end of April.
April 1, 2008, Catcher stopped doing business and terminated
all of its employees. Shortly thereafter, some of the Catcher
Note Holders became concerned about the validity of the
licensing agreement amendment and the advisability of selling
the patents to IV Those note holders demanded that
defendant's affiliate, AIM, resign as collateral agent.
The note holders asserted that AIM was acting in the interest
of defendant and plaintiff to sell the patents and secure
repayment for the Vivato loan, rather than acting in the
interest of the Catcher Note Holders, who wanted Catcher to
retain an interest in the patents.
responded by writing a memorandum to the Catcher Note Holders
on May 1, 2008. Although AIM contended that it had "at
all times * * * acted appropriately, with full disclosure,
and in the best interests of the Note Holders, " it
resigned as collateral agent, because its "objectivity
ha[d] been called into question." AIM then noted that
the note holders had "concerns" about the sale of
the patents to IV and the validity of the licensing agreement
amendment. AIM explained that one of the effects of the
amendment would be to remove the patents from the collateral
that secured the note holders' note, and thereby place
them "out of the reach of the Note Holders." It
further explained that the consideration for the amendment
was "unclear" and that it shared the note
holders' "concerns" that the amendment
"was not properly authorized and, for that and other
reasons, should be rescinded." AIM urged the note
holders to decide whether the sale to IV was in their best
interest and stated that it had requested legal counsel to
investigate "the rights of Catcher * * * to
acquire" the patents and "the rights of Catcher * *
* with regard to the proposed sale of the [patents] by Vivato
Holdings to Intellectual Ventures, and, derivatively, the
rights of the Note Holders under the Collateral Agreement
with regard to the [patents] and any proceeds of the sale of
the [patents]." It also pledged to comply with the
decision of the majority of the note holders on all issues
discussed in the memorandum.
point, IV remained interested in the patents, but it would
not close until the issue with the licensing agreement
amendment was resolved. The note holders, however, continued
to challenge the validity of the amendment. Defendant hired a
law firm to attempt to negotiate a settlement between the
note holders and Vivato Holdings and to initiate judicial
proceedings to ...