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Windmill Inns of America, Inc. v. Cauvin

Court of Appeals of Oregon

October 2, 2019

WINDMILL INNS OF AMERICA, INC., an Oregon corporation, Plaintiff-Appellant,
Jean Robert H. CAUVIN, aka John Cauvin, an individual, and Melinda Cauvin, an individual, Defendants-Respondents.

          Argued and submitted January 29, 2019

          Klamath County Circuit Court 1304655CV; Benjamin M. Bloom, Judge.

          Richard N. Sieving argued the cause for appellant. Also on the briefs were Michelle K. McClure and The Sieving Law Firm, A.P.C.

          Erik J. Glatte argued the cause for respondents. Also on the brief were Huycke O'Connor Jarvis, LLP; and Robert A. Royal and Tiffany & Bosco, P.A.

          Before Lagesen, Presiding Judge, and DeVore, Judge, and James, Judge.

         Case Summary: Plaintiff appeals limited judgments dismissing its claims on summary judgment. Plaintiff asserted claims for (1) specific performance of an employment agreement to compel the sale of stock at the contract price, (2) breach of contract for failure to convey the stock, (3) breach of contract for violating a restriction on the transfer or assignment of shares, (4) fraudulent misrepresentation, and (5) negligent misrepresentation. On appeal, plaintiff raises five assignments of error challenging the dismissal of each claim respectively. Held: As to the first two assignments of error, the employment agreement did not waive defendants' statutory rights, as dissenting shareholders, to be paid the "fair value" of their shares. ORS 60.554. The third assignment of error was not properly raised; and the fourth and fifth claims were not commenced within the statute of limitations.

         [299 Or.App. 568] DeVORE, J.

         Asserting five assignments of error, plaintiff Windmill Inns of America, Inc. (Windmill) appeals from limited judgments following orders on summary judgment to dismiss its five claims against defendants Cauvin. As to the first two assignments and claims, we determine that an employment agreement did not waive the Cauvins' rights to be paid, under Oregon statute, the "fair value" of their shares as dissenting shareholders rather than to be paid a lesser, contract value under the employment agreement. We do not reach the merits of the third assignment as to the third claim, because the factual and legal questions about application of the statute of limitations were not properly raised on appeal. As to the fourth and fifth assignments, we conclude that Windmill failed to bring its fourth and fifth claims for fraud and negligent misrepresentation within the time limited by statute. Windmill also appeals from a limited judgment awarding the Cauvins' attorney fees and costs. We affirm the limited judgments on the claims for the reasons that follow, and we affirm the limited judgment on attorney fees and costs without written discussion.[1]

         I. FACTS

         Because the issues are presented on several cross-motions for summary judgment, the record consists of documents submitted on all the motions. WSB Investments, LLC v. Pronghorn Bevel. Co., LLC, 269 Or.App. 342, 355, 344 P.3d 548 (2015). We view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Id. at 354-55. We review the rulings on the Cauvins' motions to determine whether they are entitled to judgment as a matter of law. Bergeron v. Aero Sales, Inc., 205 Or.App. 257, 261, 134 P.3d 964, rev den, 341 Or. 548 (2006).[2]

         [299 Or.App. 569] Although many things are disputed, the dispositive facts are not. Windmill is an Oregon corporation that owned and operated hotels in Oregon and Arizona. In December 1989, Windmill continued the employment of defendant John Cauvin as its president and chief executive officer under terms of a written agreement. With that agreement, he received 190 shares of Windmill's stock. The agreement provided that his shares could not be "sold, transferred, assigned, or otherwise disposed of except by sale back to Windmill at the greater of $1, 132 or a formula involving an increase in book value. The agreement further provided:

"If Cauvin dies, retires, or if this Agreement is terminated for any reason, Cauvin agrees to sell, and [Windmill] agrees to purchase, all of Cauvin's [Windmill] stock upon the terms and conditions described above."

         At the time, codefendant Melinda Cauvin was John Cauvin's wife. He, not she, signed the agreement.

         In 2000, the Cauvins separated, and an Arizona court dissolved their marriage.[3] The Arizona court regarded the stock as property of a 15-year marriage, and the resulting dissolution decree awarded Melinda what became 90 shares of Windmill stock. In order to accomplish that property division, John provided the marital settlement agreement to a key principal in Windmill, Wendt, its corporate secretary and president of its controlling shareholder, Jeld-Wen, Inc. (Jeld-Wen). In late June 2000, John received Windmill's estimate of the value of his shares. Windmill did not then object to the disposition of shares to Melinda despite its knowledge of the ordered transfer.

         From 2001 to early 2013, Windmill retained Melinda as its outside legal counsel. In 2007, Windmill declined her [299 Or.App. 570] initial request to redeem her stock, but, in January and February 2009, Windmill cooperated in redeeming 50 of her 90 shares at a price of $25, 853 per share.[4] She retained 40 shares.

         In December 2012, Windmill sent the Cauvins a notice of a special meeting of shareholders concerning the proposed liquidation of Windmill's assets. John and Melinda each gave notice of their rights as dissenting shareholders and demanded payment of the fair value of their shares under Oregon statutes. In March 2013, Windmill notified them of a special meeting of shareholders for the sale of its Ashland property. Again, the Cauvins gave notices of their rights as dissenting shareholders. Thereafter, in late April 2013, Windmill terminated the employment of John and Melinda, and, based on the termination of John's employment, Windmill demanded the return of the Cauvin stock according to the terms and price set by the 1989 agreement. They refused to do so on those terms.


         In June 2013, Windmill filed this action against the Cauvins, asserting: (1) a claim against both Cauvins for specific performance of the agreement to compel their sale of stock to Windmill at the contract price; (2) a claim against both Cauvins for breach of the agreement for failure to transfer the shares to Windmill; (3) a claim against John for his transfer of 90 shares to Melinda in 2000 in violation of the restriction on transfer or assignment of shares; (4) a claim against both Cauvins for fraudulent misrepresentation at the time of Melinda's redemption of 50 shares in 2009 by concealment from Windmill of the contract value of shares and demand for payment at a greater value; and (5)a negligent misrepresentation claim against both Cauvins for the same transaction.

         In an early set of cross-motions for summary judgment, the trial court granted the Cauvins' motion in part, ruling that Windmill's fourth and fifth claims, commenced in 2013, were not commenced within two years of the 2009 share redemption as ORS 12.110(1) requires for tort [299 Or.App. 571] claims.[5] In a later set of cross-motions for summary judgment, the trial court granted the Cauvins' motions, ruling that the 1989 agreement did not waive the Cauvins' statutory right to dissent and receive fair value; that the Cauvins asserted dissenter rights before Windmill terminated John and asserted contract terms; and that Windmill had not commenced the third claim within six years of the 2000 transfer or assignment of shares, as ORS 12.080 requires for contract claims.[6] The trial court entered limited judgments for the Cauvins, dismissing all Windmill's claims and leaving for later determination the Cauvins' counterclaims for the fair value of their shares.[7] Thereafter, the trial court held several hearings on the Cauvins' petitions for attorney fees and costs and eventually entered a limited judgment on the petitions in their favor against Windmill for $861, 206.05.[8]

         [299 Or.App. 572] On appeal, Windmill challenges the dismissal of each claim. As to the first two claims, Windmill argues that John waived dissenters' rights to fair value by accepting the restrictive terms of the 1989 agreement. Windmill argues that Melinda is bound to those terms because she helped her former husband negotiate and she had knowledge of the agreement. As to the third claim, Windmill argues in its opening brief that, because John transferred 90 of his shares to Melinda in 2000 pursuant to a marital settlement agreement, he voluntarily transferred shares in violation of the restriction in the 1989 agreement. In its opening brief, Windmill did not address the issue involving the statute of limitations. In its reply brief, Windmill shifted arguments, asserting that John's transfer of shares did not occur until 2009-within the limitation period for a contract claim. On the fourth and fifth claims, Windmill argues that its representative in the 2009 negotiations was unaware of the contract's limit on stock value, such that it did not discover Melinda's alleged concealment of contract value and misrepresentation about entitlement to a greater value. We address those arguments in turn.


         At the time of the 1989 agreement, the particular statutes on which we rely were the same as they are today. In relevant part, ORS 60.167(1) provided:

         "The articles of incorporation, bylaws, agreements among shareholders or agreements between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation."[9] [299 Or.App. 573] A restriction like that in the 1989 agreement would be unremarkable. Oregon statutes allow such restrictions but also provide safeguards for dissenting shareholders. First, ORS 60.534(1) provides:

"A corporation may sell, lease, exchange or otherwise dispose of all or substantially all of its property, with or without the goodwill, other than in the usual and regular course of business, on the terms and conditions and for the consideration determined by the corporation's board of directors, if the board of directors proposes and its shareholders approve the proposed transaction."

(Emphasis added.) In order for a transaction to be authorized, among other things, the shareholders must vote to approve the transaction and, before that occurs, the corporation must notify each shareholder of the proposed shareholders' meeting. ORS 6O.534(2Xb). The notice must advise that the purpose of the meeting is to consider the sale, lease, exchange, or other disposition of all or ...

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