Page 1 – OPINION & ORDER

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

EUGENE DIVISION

MERITAGE HOMEOWNERS’

ASSOCIATION,

Plaintiff, No. 6:16-cv-00300-AA

v. OPINION & ORDER

BANK OF NEW YORK MELLON,

Defendant,

BANK OF NEW YORK MELLON,

Third-Party Plaintiff, 

v. 

MERITAGE HOMEOWNERS’ 

ASSOCIATION,

Nominal Third-Party Plaintiff, 

v. 

KURT FREITAG, 

Third-Party Defendant.

_______________________________________

AIKEN, District Judge.

This case comes before the Court on the Petition of the Receiver, Rohn Roberts. 

ECF No. 248. The Court held a two-day evidentiary hearing on February 13 and 14, 

2024. ECF Nos. 301, 352. The Court GRANTS the Petition. The Receiver’s objection 

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to claims presented by Big Fish, Sue Cowden, and PSRG Trust are merited and the

claims disallowed. The deeds of trust placed on Meritage-owned properties in favor 

of PSRG Trust are void and title to the Meritage-owned properties is quieted in favor 

of Meritage. 

LEGAL STANDARDS

Courts possess “extremely broad” power when “determin[ing]” the appropriate 

action to be taken in the administration of the receivership.” SEC v. Hardy, 803 F.2d 

1034, 1037 (9th Cir. 1986). The court’s power and its related “wide discretion” extend 

to “determine[ing] the appropriate relief in an equity receivership.” SEC v. Lincoln 

Thrift Ass’n, 577 F.2d 600, 606 (9th Cir. 1978).

When administering the distribution of receivership assets, federal district 

courts may “make rules which are practicable as well as equitable,” including 

approving the use of summary procedures. Hardy, 803 F.2d at 1038-39. Specifically, 

“[r]ecievership courts have the general power to use summary procedure in allowing, 

disallowing, and subordinating the claims of creditors.” United States v. Ariz. Fuels 

Corp., 739 F.2d 455, 458 (9th Cir. 1984). Generally, it is the claimant’s burden to 

establish a valid claim against the receivership estate. Lundell v. Anchor Constr. 

Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir. 2000) (describing the general rule that, 

in the bankruptcy context, creditors must establish a valid claim against the debtor); 

see also SEC v. Cap. Consultants, LLC, 397 F.3d 733, 745 (9th Cir. 2005) (finding 

bankruptcy “analogous” to and, therefore, persuasive in the administration of 

receivership estates). 

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BACKGROUND & FINDINGS OF FACT

The full background of this case is set forth in the Court’s decision on the 

Motion for Summary Judgment, ECF No. 119, (the “April 2018 O&O”) and is 

incorporated by reference. The Court will reproduce aspects of the background as 

necessary.

I. The Parties and Claimants 

Plaintiff Meritage Homeowners Association (“Meritage” or “the HOA”) is an 

Oregon domestic nonprofit corporation founded to serve as a homeowners association 

for the Meritage at Little Creek development in Newport, Oregon. Meritage covers 

eighteen townhouses (the “Units”) built between 2003 and 2006. Meritage provides 

certain services to the owners of the Units, including maintenance on the exterior of 

the Units, except for the Units’ windows, which are the responsibility of the owner of 

the Unit. To pay for these services, owners of Units must pay homeowner dues 

quarterly based on the established annual budget for services. 

On May 25, 2018, this Court appointed Rohn M. Roberts as the Receiver for 

Meritage. ECF No. 157 (the “May 2018 O&O”). Among his responsibilities, the 

Receiver was directed to conduct a complete accounting of Meritage’s assets and 

liabilities. This Order concerns resolution of several claims made against Meritage, 

to which the Receiver has made objections. 

Claimant Big Fish Partners (“Big Fish”) is an Oregon multi-family real estate 

developer originally registered in 2000. Third-Party Defendant Kurt Freitag is the 

managing partner of Big Fish. In that capacity, Freitag was the developer who 

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planned and built Meritage and was the declarant for the community for purposes of 

the Oregon Planned Communities Act. As discussed in greater detail below, Freitag

exercised administrative control over Meritage until the Court appointed the 

Receiver.

Claimant Sue Cowden is the owner of one of the Units in the Meritage 

development (the “Cowden Unit”). Big Fish manages the Cowden Unit on behalf of 

Cowden. As relevant to this Order, Big Fish and Cowden assert a claim for $5,586.00 

against Meritage for the repair of an exterior window in the Cowden Unit. All other 

claims advanced by Big Fish and Cowden were voluntarily dismissed without 

prejudice during the hearing. The Receiver has objected to Big Fish and Cowden’s 

claim. ECF No. 213. 

Claimant Professional Services Resource Group Profit Sharing Plan (“PSRG 

Trust”) is a claimant in this case. PSRG Trust is a retirement trust account for the 

sole benefit of Freitag and his spouse Rita Schaefer, and for which Freitag is the 

grantor, trustee, and beneficiary. PSRG Trust asserts a claim for $1,125,000 against 

Meritage to recover money PSRG Trust claims to have advanced to the HOA. The 

Receiver has objected to PSRG Trust’s claim. ECF No. 211. 

The evidence and testimony at the hearing was that Freitag comingled the 

funds of Big Fish, Meritage (during the period of his control of the HOA), PSRG Trust, 

and, apparently, Freitag’s own personal assets. As such, the Receiver considered the 

three Freitag-controlled entities “as one collective entity.” Ex. 135, at 2. The Court 

concludes, based on the testimony and evidence, that there was little practical 

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financial distinction between the three entities, and it appears that Freitag freely 

moved money between them. The Court concludes that the Receiver’s view of the 

Freitag entities as a single collective entity is reasonable in light of the facts 

presented. 

II. Freitag’s Control of the HOA

As the declarant, Freitag exercised administrative control over the HOA 

pursuant to the Oregon Planned Communities Act. This period of administrative 

control was meant to last only until there were a certain number of homeowners in 

the HOA at which point control of the HOA was meant to pass from the declarant, 

Freitag, to the Unit owners. April 2018 O&O, at 3. However, this handover of power

never occurred and Freitag retained administrative control of Meritage until 2018 

when this Court determined that:

Under the unambiguous terms of the Declaration, mandatory turnover 

was triggered on June 5, 2004. Oregon law provides that once 

mandatory turnover is triggered, the period of declarant control ends 

and the rights and responsibilities associated with management of the 

homeowners’ association pass to the owners. Freitag therefore lacked 

legal authority to act on behalf of Meritage after June 5, 2004. 

April 2018 O&O, at 44. 

In May 2018, the Court appointed Rohn Roberts to act as the Receiver for 

Meritage and, since that appointment, the Receiver has exercised administrative 

control over Meritage. 

In addition, Freitag’s simultaneous control of Meritage, Big Fish, and PSRG 

Trust put Freitag in a position where he was able to engage in a considerable course 

of poorly documented self-dealing. The inherent difficulties in disentangling that 

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self-dealing are exacerbated by Freitag’s failure to memorialize transactions between 

the entities he controlled and his failure to preserve financial records. The Court is 

left, in many places, with little more than Freitag’s testimony that certain sums were 

advanced to Meritage by PSRG Trust and that those sums were not repaid. The 

Court considered Freitag’s demeanor and manner of testifying, as well has his 

obvious pecuniary interest in the outcome of PSRG Trust’s claim and finds Freitag’s 

testimony not credible. 

In addition, Freitag testified that Jim Johnstone, a former Meritage 

homeowner and the chief operating officer of Meritage under Freitag, has absconded, 

taking the HOA’s financial records with him. The Court finds this testimony not 

credible. The picture painted by the evidence is one of multiple Freitag-controlled 

enterprises with comingled and poorly documented finances. Even if the Court were 

to accept that Johnstone was the custodian of Meritage’s financial records, he would 

not have been in a position to control the records of PSRG Trust or Big Fish or Freitag 

himself and those records would have been unaffected by Johnstone’s disappearance. 

Those records are not, however, available to support PSRG Trust’s claims, apparently 

through Freitag’s own self-imposed document retention policy. It seems far more 

credible to this Court that the HOA financial records never existed in the first place 

rather than that Johnstone conveniently made off with them. 

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III. Prior Litigation Involving Meritage 

In 2008, Meritage and Big Fish filed a construction defect action in Oregon 

state court alleging defective installation of the windows in all eighteen Meritage 

Units (the “window litigation”). April 2018 O&O, at 3. 

In December 2010, Meritage’s then-attorney informed the attorneys for two of 

the Unit owners that there were two possible arrangements for the repair of the 

windows in the Units. Ex. 316. The owners could either assign the claim to the 

developer, Big Fish/Freitag, and have the window replaced as part of the window 

litigation, or the owner could make direct arrangements with a vendor, Dallas Glass,

to replace the windows. Id. The “very rough” estimate for the cost of replacing the 

windows was $100,000 for a one-bedroom Unit; $125,000 for a two-bedroom Unit; and 

$150,000 for a three-bedroom Unit. Id.

In 2011, many of the Meritage homeowners sued Freitag, Big Fish, and 

Meritage in Oregon state court alleging claims for breach of fiduciary duty and 

negligence (the “HOA litigation”). The Unit owners also used the HOA litigation to 

attempt to force Freitag to turn over control of Meritage to the homeowners. The 

Unit owners also intervened in the window litigation. April 2018 O&O at 4. 

Concurrent with the HOA litigation, many of the Unit owners withheld 

payment of HOA dues as a “dues strike.” In response, Meritage sued the Unit owners 

in Oregon state court for failure to pay assessments, dues, and other fees (the 

“collection litigation”). April 2018 O&O, at 4. 

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In 2011, Freitage “acting as princip[al] of [Big Fish] and PSRG Trust, asserts 

that he arranged a lending relationship between [Meritage] and PSRG Trust, 

whereby PSRG Trust could make advances to [Meritage] under a letter of 

understanding and authority, which as signed on July 13, 2011 by Jim Johnstone, 

the Chief Operating Officer of [Meritage].” Ex. 758, at 5. 

In 2012, the HOA litigation settled. April 2018 O&O at 5. To meet the cost of 

the HOA litigation and the cost of repairing the windows, Freitag caused the HOA to 

levy significant fines and special assessments against the homeowners. Ex. 136, at 

5. Many of the homeowners were unable to pay the assessments. Id. 

In September 2013, Freitag, in his capacity as declarant, approved a resolution 

imposing a fine of $500 per day, up to $5,000 per month, against any unit owner that 

failed to repair the windows or deposit money to begin the window replacement 

process. April 2018 O&O, at 5. 

Also in 2013, the window litigation settled. April 2018 O&O, at 5. The relevant 

parties to the window litigation settlement were Freitag, Schaefer, Big Fish, 

Meritage, and the owners of the Units. Ex. 134, at 1. The windows litigation 

settlement included a mutual release, although that release did not apply to 

Meritage’s claims against “any owner of a unit in Meritage for failure to pay dues, 

assessments or fines or for non-compliance with the Covenants, Conditions and 

Restrictions of Meritage or any action taken pursuant thereto.” Id. at 3-4. Notably, 

PSRG Trust was the only Freitag entity connected to Meritage that was not a party 

to this settlement. Of the eighteen Unit owners in the windows litigation, twelve 

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assigned their rights to Big Fish, while the remaining six elected to pursue their own 

claims. Id. at 3. 

The settlement of the window litigation resulted in payment of $1,145,000 to 

Big Fish. Ex. 134, at 5. After payment of itemized amounts set forth in the settlement 

agreement, Id. at 6-8, Big Fish received a net payment of $675,926.55. Ex. 135, at 2. 

The Receiver calculated that Freitag, Big Fish, and PSRG Trust collectively 

advanced $389,714.99 to repair the windows.1 Ex. 135, at 2. In total, Big Fish 

received $286,211.56 more from the windows litigation settlement than the various 

Freitag entities had advanced to repair the windows. Id.

In February 2014, Meritage obtained a judgment against at least some of the 

Unit owners in the collection litigation. April 2018 O&O, at 5. As a result of the 

collection litigation, Meritage acquired title to several of the Units and, as of the time 

of the hearing, Meritage owns eight of the eighteen Units. 

IV. The Dallas Glass Payments 

During the litigation of this case, Dallas Glass, which actually performed the 

replacement of the exterior windows in the Units, provided the parties with an 

accounting of payments it received for the replacement of the windows and the 

identity of the payor. The assistance of Dallas Glass in furnishing this information 

was necessary because records of these payments were not preserved by the Freitag 

1 Additional sums of $156,886.75 and $83,000 were advanced directly to individual homeowners by 

PSRG Trust to replace the windows in those homeowners Units. Ex. 135, at 2. The Receiver 

excluded these separate loans, which did not concern Meritage, from the analysis and the Court 

concludes that this exclusion was proper. Ex. 135, at 2. 

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entities or by Meritage, which was under Freitag’s control at the time of the 

transactions. 

Freitag and Schaefer made payments totaling $225,286.75 between February 

28, 2011, and June 9, 2011, and made further payments totaling $320,805.29 between 

December 31, 2012, and August 7, 2014. Ex. 309, at 5. These payments drew from 

the Fidelity account of Freitag and Schaefer. 

Freitag made additional individual payments, for which no originating bank is 

recorded, between November 12, 2012, and December 3, 2012, which totaled $30,600. 

Ex. 309, at 5. 

Big Fish made a single payment of $17,000 on February 20, 2012, which drew 

on Big Fish’s account at West Coast Bank. Ex. 309, at 5. 

PSRG Trust made three payments between April 26, 2012, and September 4, 

2012, which totaled $26,750, and drew on PSRG Trust’s account at Fidelity bank. Ex. 

309, at 5.

There were two unidentified VISA payments on January 14, 2013, for $8,500 

and on August 15, 2014, for $659.70. Ex. 309, at 5. 

Between October 28, 2014, and November 6, 2017, all entity-related payments 

were made by Meritage, drawing on accounts at Columbia State Bank and Northern 

Trust. Ex. 309, at 5. The Meritage payments totaled $271,304.48. Id. Individual 

Unit owners made additional payments totaling $354,475.00. Id.; Ex. 136, at 14. 

In total, Dallas Glass was paid $1,255,381.22 to replace exterior windows in 

the Meritage Units. Ex. 136, at 14. $629,601.74 of that money came from a Freitag 

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entity—Big Fish, PSRG Trust, Freitag himself, or Freitag and Schaefer together. Id. 

Meritage provided $271,304.48 and the remaining $354,475.00 came from the 

homeowners. Id.

The evidence indicates that the amount received by the Freitag entities from 

the settlement of the window litigation exceeded the amount they paid to Dallas Glass 

by $50,774. Ex. 136, at 15. 

IV. The Letters of Understanding 

In July 2011, PSRG Trust and Meritage signed a “Letter of Understanding.” 

Ex. 709. The Letter of Understanding referenced the dues strike, which was part of 

the HOA litigation, as well as Meritage’s need for funds to maintain operations and 

continue the HOA litigation. Id. The Letter relates that PSRG Trust was the “only 

entity” willing to provide funding to Meritage. Id. 

Under the Letter, Meritage assigned to PSRG Trust, “on the terms and 

conditions set forth in the documents related to the loan contemplated by the parties, 

its accounts receivable, its lien rights against the homeowners, and all other rights 

and remedies it might possess under law or agreement related to such assets.” Ex. 

709, at 1-2. In return, PSRG Trust agreed to make an initial advance of $25,000 and 

might “make subsequent advances based upon its sole discretion prior to the 

finalization of the financing documents.” Id. at 2. Money advanced to Meritage was 

to accrue simple interest at a rate of 9%. Id. 

The Letter was signed by Freitag on behalf of PSRG Trust and by Jim 

Johnstone on behalf of Meritage. Ex. 709, at 3. 

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V. The Promissory Notes and the Deeds of Trust 

On July 17, 2014, Meritage and PSRG Trust executed a promissory note for 

$250,000 “or so much thereof as may be from time to time owing under this 

Promissory Note” at 7% interest. Ex. 742, at 1. The 2014 promissory note is signed 

by Freitag as “President/Secretary” of Meritage. Id. at 4. 

The 2014 promissory note was ostensibly secured by a deed of trust to three of 

the Meritage-owned Units. Ex. 744. This deed of trust was signed by Freitag on 

behalf of Meritage. Id. at 10.

In January 2015, the deed of trust was modified to reflect a debt of $1,000,000 

secured by liens on an additional Unit. Ex. 746. This modification is signed by 

Freitag on behalf of both Meritage and PSRG Trust. Id. 

In June 2015, Meritage issued a “Resolution” in which it determined that it 

would borrow a sum of $1,000,000 from PSRG Trust at 7% interest. Ex. 747. The 

“Resolution” stated that “[t]he Officer of the HOA authorized to sign on behalf of the 

HOA is Kurt Freitag, President.” Id. The Resolution is signed by Freitag as president 

of Meritage. Id. 

On December 14, 2016, Meritage and PSRG Trust entered into further

promissory note, this time for $1,000,000. Ex. 749. The 2016 promissory note relates 

that the 2014 promissory note remains unpaid and that “Lender has made further 

advanced [sic] to Borrower since the date of the note,” and “the total advances, plus 

accrued and unpaid interest, total approximately $800,000.” Ex. 749, at 1. As with 

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the 2014 promissory note, the 2016 promissory note was signed by Freitag as 

President/Secretary of Meritage. Id. at 5.

Both promissory notes were entered into during a period in which this Court 

has already ruled that Freitag lacked the legal authority to exercise control over 

Meritage. In addition, both promissory notes are the product of self-dealing, as they 

were “negotiated” between Freitag, acting on behalf of Meritage, and Freitag in his 

capacity as trustee and beneficiary of PSRG Trust. In addition, as discussed below, 

the promissory notes contradict both one another and the other evidence in the record 

concerning the amounts allegedly advanced to Meritage by PSRG Trust and provide 

little insight into repayment of those sums by Meritage. 

VI. Meritage Resolutions 

PSRG Trust has also presented the Court with “Resolutions” of the HOA 

concerning the claimed loans from PSRG Trust to Meritage. Exs. 741, 747. Freitag 

was in sole control of Meritage at the time of the Resolutions. These Resolutions were 

issued by Freitag, signed by Freitag, and purported to authorize Freitag to borrow

funds at 7% interest from the Freitag-controlled PSRG Trust. They are not supported 

by source documents evincing transfers of funds to Meritage by PSRG Trust. In 

addition, the evidence before the Court is that these Resolutions were issued at HOA

“meetings” that were only attended by Freitag and, perhaps, Jim Johnston. See Ex. 

714 (minutes of an advisory committee meeting from August 2013, at which “[t]he 

committee approved the resolution required for the loan agreement,” and showing 

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those present were Freitag and Johnstone and “Those Absent: None”). The Court 

finds that these Resolutions provide little support for the existence of the alleged debt.

VII. Personal Checks 

PSRG Trust has provided a series of personal checks written by Freitag to 

Dallas Glass and drawing on Freitag’s personal account. Ex. 701, 702, 703, 706, 707, 

708, 710, 725, 736, 738, 739, 740, 743. Notably, none of these checks reference PSRG

Trust or give any indication that they were advanced on behalf of PSRG Trust, as 

opposed to some other Freitag entity. 

The testimony at the hearing was that PSRG Trust often does not maintain a 

significant balance on its accounts. Freitag testified that he would frequently move 

money between PSRG Trust and other Freitag-owned entities, such as Big Fish, and 

would only balance the books at intervals. In addition, Freitag testified that he would 

send money to Meritage but that these transfers were actually coming from PSRG 

Trust. These transfers of money were generally not memorialized or documented and 

this fact has plagued all efforts to disentangle the relationship between the various 

Freitag entities and the HOA, including the efforts of PSRG Trust’s own expert. Ex. 

758. 

The Court is left, essentially, with Freitag’s testimony that checks made out to 

Dallas Glass and drawing on Freitag’s personal bank accounts were, in fact, loans 

made by PSRG Trust to Meritage. As previously discussed, the Court found this 

testimony not credible. 

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VIII. Meritage Financial Reports 

PSRG Trust has also provided the Court with Financial Statements for the 

HOA, prepared by Fischer, Hayes & Associates, which purport to show income from 

the proceeds of loans from PSRG Trust. See, e.g., Ex. 724. The Couch report, 

discussed below, demonstrates that CPAs preparing such reports do not warrant

their accuracy and that, in this case, the reports are drawn from statements provided 

to the CPA by Freitag. As the Couch report states, there are none of the supporting 

source documents one would expect to find to support the existence of such a loan. In 

addition, as the Couch report noted, there are no financial reports on Meritage beyond

2013. The Court concludes that these financial reports are not reliable evidence of 

the existence or amount of any debt owing to PSRG Trust. 

IX. The Expert Reports

Both the Receiver and PSRG Trust retained experts, who prepared reports and 

offered testimony concerning PSRG Trust’s claims against Meritage. 

A. The Bradford Report 

PSRG Trust retained Emily Bradford, CPA, CFE, to serve as an expert in 

support of PSRG Trust’s claim. Bradford’s efforts to review PRSG Trust’s claims were 

dogged by the same lack of consistent or reliable records that have plagued the 

Court’s review of the claim. This fact significantly undermines the utility of the 

Bradford report and Bradford’s testimony. As Bradford observed: 

We were not provided with bank statements and other source documents 

that would allow us to inspect all transactions of PSRG Trust and 

related entities of Mr. Freitag and [Meritage] for the entire time period 

July 14, 2011 to July 17, 2014, which impacted our ability to verify the 

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occurrence of certain transactions and could mean that there are 

transactions that occurred but were not identified by us. 

Mr. Freitag could have authored transactions of [Meritage] during the 

time period subject to our analysis, that resulted in a direct benefit to 

PSRG Trust, Mr. Freitag or related entities of Mr. Freitag, and such 

transactions may not have been identified to us due to the information 

that was not made available to use, including detailed information that 

would support the transactions in the records we inspected.

Ex. 758, at 

The Court has considered the Bradford report but the lack of supporting 

evidence and source documents available to Bradford limit the value of both the 

report and Bradford’s testimony in establishing the validity and amount of PSRG 

Trust’s claim. 

B. The Couch Report 

The Receiver retained Tiffany Couch, CPA/CFF, CFE to “examine the HOA’s 

financial statements and to assess whether they accurately reflect the amounts owed 

to Kurt Freitag, Big Fish Partners, or PSRG Trust (Freitag Entities).” Ex. 136, at 1. 

Much like Bradford, Couch’s efforts were impeded by the lack of evidence and source 

documents for PRSG Trust’s claims. In her report, Court reached five conclusions:

(1) There was insufficient relevant evidence to determine the amounts owed to 

the Freitag entities. Couch found there was “little substantive evidence 

documenting alleged advances, evidence produced contradicts alleged loan 

advances, and payments received have not been properly accounted for.” 

Ex. 136, at 4. 

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(2) The compilation reports provide no assurances by the CPA. Accountants 

are not required to verify the accuracy or completeness of information 

provided or to gather evidence under a compilation agreement. As a result, 

the fact that the Meritage financial reports “were signed by a CPA does not 

make them reliable to determine the nature of, amount, or current value of 

alleged loans to the Freitag Entities.” Ex. 136, at 4.

(3) The CPA working paper did not include any proof of the alleged loan 

transactions. Couch reviewed the financial statements for Meritage 

between January 2011 and March 2013 and found that the documents 

provided by the CPA firm “only include journal entries related to alleged 

loans between the HOA and the Freitag Entities or emails with Mr. Freitag

confirming the amounts to be loans.” Ex. 136, at 4. “There are no bank 

documents, cancelled check images, detailed general ledgers, loan 

documents, or other information that state the purpose, amount, or dates 

of the alleged loans.” Id. 

(4) There is no Meritage financial reporting after December 31, 2013. Couch 

found that there were no financial reports for Meritage after March 31, 

2013, and that there was only a trial balance showing alleged ending 

balances for the end of 2013. “It does not appear that an external CPA was 

asked to analyze the financial records, properly categorize income and 

expenses, and/or audit or review the books and records of the HOA.” Ex. 

136, at 4. “The lack of proper financial reporting and the fact that Mr. 

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Freitag had sole control of [Meritage]’s finances in the intervening years 

creates doubt about the Freitag Entities claims.” Id. 

(5) Freitag’s promissory notes and amortization schedules are unreliable. 

Couch noted that the promissory notes and letters of understanding contain 

varying amounts due and varying interest rates. “Most notably, one 

promissory note contains an amortization schedule which shows ‘advances,’ 

but those amounts are deposits payable to the HOA from external third 

parties, not from any of the Freitag Entities,” and “the amortization 

schedule does not account for payments received by the Freitag Entities.” 

Couch found that this rendered the calculations “unreliable and put into 

question the veracity of earlier alleged ‘loan advances.’” Ex. 136, at 4. 

The Court finds Couch’s report thorough, searching, and reliable. The Court 

also finds Couch’s testimony to be reliable and compelling.

DISCUSSION & CONCLUSIONS OF LAW

As relevant to this proceeding, the Receiver made two requests in his Petition 

to the Court: 

(1) For an Order declaring that the deeds of trust executed by Kurt Freitag

(purporting to act on behalf the HOA) in favor of PSRG Trust and allegedly 

encumbering certain HOA owned Units are void and of no force or effect, 

quieting title to such Units in the HOA; and awarding the HOA its attorney 

fees incurred in connection therewith; and 

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(2) For a Scheduling Order establishing a process to adjudicate the validity of the 

claims presented to the Receiver by the developer-related parties—PSRG 

Trust, Big Fish Partners, and Sue Cowden.

The Court held a two-day evidentiary hearing on the validity of the claims 

brought by PSRG Trust, Big Fish Partners and Sue Cowden on February 13 and 14, 

2024. Big Fish Partners and Cowden withdrew most of their claims either before the 

hearing or during the hearing itself. The sole remaining claim for Big Fish Partners 

and Cowden concerns a claim for damage to a window in Cowden’s Unit. The Receiver 

stipulated to the withdrawal of the other claims without prejudice but reserved his 

right to petition for the recovery of attorney fees and costs incurred in preparing to 

defend against those claims. The Court accepts the stipulation and all claims brought 

by Big Fish Partners and Sue Cowden, with the exception of the claim concerning 

damage to the window in the Cowden Unit, are withdrawn without prejudice. The 

Court recognizes the Receiver’s reservation of the right to pursue attorney fees and 

costs associated with preparing to defend those claims and will consider a petition for 

fees and costs at the appropriate time. 

In sum, there are three remaining issues that require determination: (1) the 

claim for damage to the window of the Cowden Unit; (2) the validity of the deeds of 

trust; and (3) the claims of PSRG Trust. The second and third issue are closely related 

and will be discussed together. 

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I. Cowden’s Claim for Damage to the Window of the Cowden Unit 

As noted, Big Fish and Cowden withdrew all but one of their claims against 

the HOA. That remaining claim concerns $5,586 expended by Big Fish and Sue 

Cowden to repair a broken window at the Unit owned by Cowden and managed on 

her behalf by Big Fish. Big Fish and Cowden assert that the window was damaged 

by an independent contractor hired by the HOA to perform unrelated repairs to the 

exterior of the Cowden Unit. 

The evidence presented at the hearing was that the damage to window was not 

discovered by or disclosed to Cowden at the time the damage is alleged to have

occurred. Instead, an outgoing tenant informed Cowden of the damage months after 

the fact. All evidence that the damage to the window was caused by the contractor, 

rather than by some other entity, amounted to second-hand information and 

supposition. The Court finds that testimony less-than-credible and concludes that 

Big Fish and Cowden have not carried their burden of establishing that the damage 

was caused by a contractor working for the HOA. 

In addition, all parties agree that the work done to the exterior of the Cowden 

Unit was performed by an independent contractor. Even assuming that Big Fish and 

Cowden had presented sufficient evidence that the damage to the window was caused 

by the contractor, the HOA would not be liable for the damage. See Johnson v. Salem 

Title Co., 246 Or. 409, 413 (1967) (“The general rule is that the employer of an 

independent contractor is not liable for the contractor’s negligence.”); Buckel v. Nunn, 

131 Or. App. 121, 125 (1994) (“The general rule in Oregon is that one who hires an 

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independent contractor is not vicariously liable for the torts of that independent 

contractor.”). This general rule is subject to certain exceptions, such as when the 

employer has a non-delegable duty. Johnson, 246 Or. at 413. Big Fish and Cowden 

claim that the HOA had a non-delegable duty to repair the exterior windows. 

However, Article 4.30 of the Covenants, Conditions, & Restriction for the Meritage 

HOA provide that the lot owners, rather than the HOA, are responsible for 

maintenance of the windows on the Units. Ex. 302, at 8. This is a notable exception 

to the duty of the HOA to maintain the other commonly maintained property. In the 

absence of sufficient proof that the damage was caused by an HOA contractor and a 

further showing that the HOA can and should be held liable for a tort committed by 

an independent contractor, the party responsible for the paying for the damaged 

window is the lot owner, Sue Cowden. 

The Court concludes that the Receiver’s objection to the claim for $5,586 by Big 

Fish Partners and Sue Cowden for damage to the window of the Cowden Unit is 

merited and that claim is rejected. 

II. PSRG Trust Claims 

PSRG Trust has presented a claim to the Receiver seeking to recover 

approximately $1,125,000 that PSRG Trust alleges it advanced to the HOA. PSRG 

Trust asserts that between January 2010 and December 2017, it loaned Meritage a 

net amount of $825,000, with accrued interest totaling a further $300,000. Ex. 758, 

at 4, 6. There were, allegedly, two types of loans: (1) advances made to pay Meritage’s 

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operating costs during the homeowners’ dues strike and (2) advances paid for window 

replacements in Units acquired by the HOA. Id. at 4-5. 

As previously noted, it is the claimant’s burden to establish a valid claim 

against the receivership estate. Lundell, 223 F.3d at 1039. The standard of proof is 

a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 286 (1991). For 

the reasons discussed in the Findings of Fact, and below, the Court concludes that 

PSRG Trust has failed to meet its burden of establishing the existence or amount of 

a debt owed to it by Meritage. 

A. Promissory Notes

PSRG Trust offers the promissory notes as evidence of the existence of a debt

owed by Meritage. These notes were entered into during the period in which the 

Court has already determined that Freitag did not have the lawful authority to 

control the HOA and, in addition to the obvious self-dealing involved in the notes, 

there is little evidence of subsequent ratification of the alleged debt. 

As the declarant, Freitag exercised the powers and responsibilities of the board 

of directors for the HOA. ORS 94.550(10)(c). Under ORS 65.361, a transaction in 

which a director of a mutual benefit corporation has a conflict of interest may be 

approved (1) “[i]n advance by a vote of the board of directors or a committee of the 

board of directors if the material facts of the transaction and the director’s interest 

were disclosed or known to the board of directors or a committee of the board of 

directors,” or (2) “[i]f the material facts of the transaction and the director’s interest 

were disclosed or known to the members and the members authorized, approved or 

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ratified the transaction.” ORS 65.361(3); see also ORS 65.361(6) (describing the 

process of voting to ratify a transaction covered by ORS 65.361(3)(b)). 

Here, it is undisputed that no vote took place. PSRG Trust asserts that the 

transactions were ratified by the Meritage homeowners by their silent acquiescence. 

However, Oregon law provides that for ratification to occur, there must be full

knowledge of the material facts. Alldrin v. Lucas, 260 Or. 373, 382 (1971); see also 

Philips v. Colfax, 195 Or. 285, 296 (1952) (requiring “full knowledge of the facts” for 

ratification of an unauthorized contract). Here the evidence indicates that there was 

substantially less than “full” knowledge of the material facts of the alleged loans 

between PSRG Trust and Meritage. See, e.g., Ex. 118 (email from a homeowner 

stating “I found out about the PSRG loan I think after receivership. Not sure how I 

could object to its terms without knowing about it. I have never signed a document 

to accept its terms!!”); 119 (another homeowner email stating “We were never asked 

or notified in any clear, comprehensible way about said loa[n]. Pure fiction.”); 120 

(another homeowner email stating “Is there any documentation that Kurt [Freitag] 

informed the homeowners about these loans and the conditions of these loans? I 

certainly never knew about it.”); 126 (another homeowner email stating “I have no 

knowledge of either [the PSRG loan or deeds of trust]. There has never been any true 

owners meetings or allowed input or voting of any kind for the last 10+ years only 

threats, belittling, and domination from Kurt [Freitag].”) One email from a pair of 

homeowners to the Receiver lays out the lack of information provided to the 

homeowners plainly: 

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His [Freitag’s] letter of March 15th stated homeowners were well aware 

of the loans from PSRG Trust and never objected to them. This is false. 

The extent of those loans were never disclosed to the homeowners until 

he filed his claim . . . Why were financial statements no longer provided 

to the homeowners after June 30, 2012? (They resumed again when you 

took over as Receiver in mid 2018) . . . On the last financial statement 

we received dated June 30, [2012] the loan balance to PSRG Trust was 

$205,368. His PSRG Trust claim against the HOA is $1.125M. Where 

is the accounting of each advance including date and amount? . . . 

Freitag claims the loans were partly used to replace windows in HOA 

owned units. There were also insurance settlements for the windows. 

Can he account for what was spent what was received in settlements?

Ex. 121. 

What information was disclosed to the homeowners concerning the loans fell

far short of providing them with “full knowledge” of all “material facts” of the loan.2 

As a result, there was no ratification of Freitag’s self-dealing transaction by the 

homeowners. 

There is also little evidence of transfers of money from PSRG Trust specifically

to Meritage, as opposed to, for example, payments made by Freitag to Dallas Glass. 

Furthermore, even if the Court were to accept the promissory notes as prima facie

evidence of the existence of a debt, they do not clearly establish the amount of the 

debt. Even on the face of the notes, they give a value of the note qualified by “or so 

much thereof as may from time to time be owing under this Promissory Note.” The 

Court finds that the Couch report in particular provided valuable information and 

analysis in assessing the defects in the promissory notes. 

2

Indeed, a lack of knowledge of all material facts continues to infect this claim even in its 

presentation to the Court. PSRG Trust’s own expert reported an inability to reconstruct the full

contours of any loan between PSRG Trust and Meritage. Ex. 358. 

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In sum, the Court concludes that the promissory notes do not establish either 

the existence or the amount of a valid debt owed by Meritage to PSRG Trust. 

B. Deeds of Trust 

Freitag, purporting to act on behalf of the HOA, executed deeds of trust 

encumbering several Meritage-owned Units, allegedly to secure debts owed by the 

HOA to PSRG Trust. The Receiver seeks to have these deeds of trust declared void

and have the encumbered titles quieted in favor of Meritage. 

The Oregon Planned Communities Act (“OPCA”) provides that “a homeowner’s 

association may sell, transfer, convey or subject to a security interest any portion of 

the common property if 80 percent or more of the votes in the homeowners 

association, including 80 percent of the votes not owned by a declarant at the time of 

the vote, are cast in favor of the action.” ORS 94.665(1). As previously noted, the

declarant was Freitag. “Common property” is defined as “any real property or 

interest in real property within a planned community which is owned, held or leased 

by the homeowners association or owned as tenants in common by the lot owners, or 

designated in the declaration or the plat for transfer to the association.” ORS 

94.550(7). This would include the HOA-owned Units. ORS 94.660 describes how 

votes of an HOA are to be taken for purposes of the OPCA: 

(1) The vote or consent of a lot may be cast or given; 

(a) In person at a meeting of the homeowners association.

(b) In the discretion of the board of directors, by absentee ballot 

in accordance with subsection (3) of this section.

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(c) Unless the declaration or bylaws or ORS 94.550 to 94.783 

provide otherwise, pursuant to a proxy in accordance with 

subsection (2) of this section. 

(d) by written ballot in lieu of a meeting under ORS 94.550 to 

94.783.

(e) By any other method specified by the declaration or bylaws or 

ORS 94.550 to 94.783.

ORS 94.660(1). 

The Meritage Bylaws provide that homeowners “may cast votes in person, by 

written ballot, or by proxy.” Ex. 530, at 6. 

Here, the evidence and testimony presented to the Court indicate that no 

formal vote of the association members was ever taken with respect to the deeds of 

trust. Although PSRG Trust urges the Court to conclude that the members of the 

HOA silently ratified the deeds of trust by failing to object, the plain terms of ORS 

94.665(1) require an affirmative vote and no such vote was ever taken. 

In addition, the Court has previously held that Freitag lacked authority to 

control the Meritage HOA after the mandatory turnover in 2004. May 2018 O&O 

ECF No. 139. The Court observed that this ruling did “not automatically invalidate 

every legal decision Freitag made on behalf of Meritage from 2004 onwards.” May 

2018 O&O at 13. However, the placement of the deeds of trust on the units by Freitag, 

purporting to act for the HOA, for the benefit of PSRG Trust, an entity to which 

Freitag is grantor, trustee, and beneficiary, is another clear instance of self-dealing 

on the part of Freitag. 

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As discussed in the previous section, self-dealing transactions may 

subsequently be ratified, provided the ratification is made with full knowledge of the 

material facts. However, ratification for the deeds of trust fails for the same reasons 

it failed for the promissory notes: the homeowners were not provided with full 

knowledge of all material facts of the transaction. 

The placement of the deeds of trust on the Units was not done according to the 

requirements of the OPCA. The Court therefore GRANTS the Receiver’s request and 

declares that the deeds of trust are void, thereby quieting title to the Units in favor 

of Meritage. 

C. Unjust Enrichment 

PSRG Trust argues in the alternative that, if it is not allowed to recover the 

sums allegedly advanced to Meritage under a contract or quasi-contract theory, that 

it should be permitted to recover under a theory of unjust enrichment.

For claims of unjust enrichment, Oregon’s Supreme Court utilizes a case-bycase analysis, replacing its previous formulaic approach. Larisa’s Home Care, LLC 

v. Nichols-Shields, 362 Or. 115, 127-132 (2017). Courts are directed to “examine the 

established categories of unjust enrichment, as reflected in Oregon case law and other 

authorities to determine whether any particular enrichment is unjust.” Id. at 132. 

Here, PSRG Trust asserts that its claim fall within an established category “where 

one party conferred a benefit on another but was unable to enforce an express 

agreement regarding payment because of a failure of proof or other obstacles to 

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enforcing the express agreement.” Jones v. Four Corners Rod and Gun Club, 366 Or. 

100, 119 (2020). 

Unjust enrichment is an equitable doctrine. Cumming v. Nipping, 310 Or. 

App. 780, 781 (2021). As such, it is susceptible to equitable defenses, including the 

doctrine of unclean hands. “Recovery in restitution to which an innocent claimant 

would be entitled may be limited or denied because of the claimant’s inequitable 

conduct in the transaction that is the source of the asserted liability.” Restatement 

(Third) of Restitution and Unjust Enrichment § 63 (2011). “‘Under the doctrine of 

unclean hands, a court may refuse to grant equitable relief to a party who has 

engaged in misconduct in connection with the matter for which he or she seeks relief.’” 

Cumming, 310 Or. App. at 793 (quoting Burgdorf v. Weston, 259 Or. App 755, 764 

(2013)). “‘Unconscientious conduct by a party to a controversy, in respect of and 

connected with the matter in dispute, disqualifies such party from seeking the aid of 

a court of conscience.’” Osborne v. Nottley, 206 Or. App. 201, 205 (2006) (quoting 

McKee v. Fields, 187 Or. 323, 326 (1949)). “The misconduct must be serious enough 

to justify denying relief on an otherwise valid claim—such as engaging in a crime, 

fraud, or bad faith—as even equity does not require saintliness.” Cumming, 310 Or. 

App. at 793. However, the “inequitable conduct need not rise to illegality, and it may 

have as its target either the defendant or some third party.” Osborne, 206 Or. App. 

at 205. “The party who stands to benefit from invocation of the unclean-hands 

doctrine also must prove that he or she suffered actual injury due to the alleged 

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misconduct.” Cumming, 310 Or. App. at 793 (internal quotation marks and citation 

omitted). 

Here, Freitag engaged in a flagrant course of self-dealing by purporting to 

enter into loans between Meritage and PSRG Trust. The alleged loans were poorly 

documented and what evidence is available demonstrates the Freitag commingled 

funds between his various entities, obscuring where money went and what money 

might be attributable to which entity. Freitag, who controlled both Meritage and 

PSRG Trust, was the individual responsible for ensuring that the necessary 

documentation was created and/or preserved and he failed to do so. Additionally, 

these loans were entered into unilaterally by Freitag during a period when, as this 

Court has determined, he was unlawfully exercising control over Meritage. The loans 

were entered into without a vote or even the full knowledge of the Meritage 

homeowners. 

In addition, there is evidence that Freitag commingled funds from Meritage 

with his own funds. As the Couch report states: 

[D]uring my review of the [Meritage] bank account statements and

cancelled check images, I found payments to at least 7 credit cards (e.g., 

TJ Maxx, Diner’s Club, AMEX, Chase, Citibank, etc.). These payments 

often exceeded $5,000 per month. These payments stopped once the 

Receiver took over the account.

Ex. 136, at 13-14. 

The Court concludes that PSRG Trust’s inequitable conduct, through Freitag, 

evinces unclean hands to the detriment of Meritage. This will prevent PSRG Trust 

from recovering its claim under a theory of unjust enrichment. 

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In sum, the Court finds that the Receiver’s objections to PSRG Trust’s claim 

are merited and PSRG Trust’s claim is rejected. The Court will consider the 

Receiver’s request for attorney fees upon presentation of a petition for fees. 

CONCLUSION

For the reasons set forth above, the Receiver’s Petition, ECF No. 248, is 

GRANTED. The claim by Big Fish Partners and Sue Cowden for damage to the 

window of the Cowden Unit is rejected and disallowed. The claim by PSRG Trust for 

money allegedly advanced to Meritage is rejected and disallowed. The deeds of trust 

placed on Meritage-owned properties in favor of PSRG Trust are void and title to 

those properties is quieted in favor of Meritage. 

 It is so ORDERED and DATED this _____ day of March 2024

ANN AIKEN

United States District Judge

29th

/s/Ann Aiken

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