Court Opinion

ID: 9787011
Source: CourtListenerOpinion
Date Created: 2023-08-31 00:08:20.761414+00
Date Added: 2024-06-11T07:36:51.206568
License: Public Domain

EDMONDS, J.,
dissenting.
This case presents the issue whether plaintiff can bring a claim in tort or whether he is limited to a remedy for breach of contract. Plaintiff appeals after the trial court dismissed his negligence claim pursuant to ORCP 21B.
Plaintiff filed a civil complaint against defendants for damages in which he alleged claims based on negligence and breach of contract arising out of actions taken by defendants with regard to his investment account with them. *569Defendants moved for judgment on the pleadings under ORCP 21 B as to both claims. The trial court granted defendants’ motion as to the negligence claim but denied it as to the breach of contract claim. The breach of contract claim was subsequently tried to a jury, which returned a verdict for defendants. On appeal, plaintiff assigns error to the trial court’s ruling dismissing his negligence claim.
ORCP 21 B provides that, “[a]ffcer the pleadings are closed, but within such time as not to delay the trial, any party may move for judgment on the pleadings.” Under ORCP 21B, a motion for judgment on the pleadings assumes the truth of all well-pleaded facts, and the party pleading a claim is entitled to the benefit of all reasonable inferences that can be drawn in that party’s favor. Simons v. Beard, 188 Or App 370, 372, 72 P3d 96 (2003). The motion may be granted only when the pleadings taken together affirmatively show that the plaintiff has no cause of action against the defendant or when the defendant affirmatively alleges a complete defense that is admitted by the reply. Salem Sand v. City of Salem, 260 Or 630, 636, 492 P2d 271 (1971).
Plaintiff, in his third amended complaint, alleged, in part:
“6. * * * [D]efendant Howell was [plaintiffs] financial consultant acting as his agent to provide him with Financial Consultation and services including his commodities transactions * * *.
* * * *
“9. As part of the relationship between [plaintiff] and the defendants, the defendants had complete control to execute and carry out [plaintiffs] commodities transactions; defendants had complete control over [plaintiffs] margin trading limits; defendants had complete control over the amount of credit they were willing to extend [plaintiff] to allow him to trade, and they had complete control over the information they would impart to [plaintiff] relating to his orders and trades.
“10. The defendants knew the services they provided [plaintiff] were for the purpose of furthering [plaintiffs] economic and financial interests.
^ * *
*570“44. Defendants owed [plaintiff] the duty to use reasonable care and judgment in their affairs with [plaintiff].
“45. Defendants breached the duties they owed to [plaintiff] in one or more of the following ways:
“a. By failing to timely inform [plaintiff] as to what defendants were going to do with his December 14, 2000 orders;
“b. By failing to disclose to [plaintiff! that Smith Barney was going [to] force him to trade the February 2001 Crude Oil contracts within a day of his purchase on December 14, 2000;
“c. By failing to tell [plaintiff] in a timely manner that Smith Barney would only fill one of his December 14, 2000 commodities orders but not both;
“d. By failing to timely disclose to [plaintiff] on December 14, 2000 that Smith Barney canceled his order for three January 2001 Natural Gas Contracts;
“e. By failing to timely inform [plaintiff] that Smith Barney was going to cancel his December 14, 2000 Natural Gas contracts order.
“f. By failing to properly account for the $7,422 margin call payment [plaintiff] made on December 13, 2000;
“g. By accepting [plaintiffs] December 14,2000 orders;
“h. By placing [plaintiffs] Crude Oil order on December 14, 2000 without informing him that he would be forced to sell his positions within a day.
“46. As a direct result of defendants’ conduct, [plaintiff] was damaged in the following ways:
“a. canceling the Natural Gas contracts caused him lost profits of approximately $69,000.00;
“b. the purchase of the thirty February 2001 Crude Oil contracts caused [plaintiff] losses of approximately $12,200;
“c. defendants were unjustly enriched by the $2,250 in commissions generated from the Crude Oil contracts transaction;
*571“d. [plaintiff] suffered additional consequential damages estimated to be approximately $176,000 from losses on forced liquidations and profits he would have earned if he had been able to use the profits from the Natural Gas contracts.”
In their answer to the third amended complaint, defendants denied the allegations in paragraphs 9, 10, 45, and 46. Defendants’ answer also alleged,
“[i]n answering the allegations of paragraph 44, defendants state that their duties and obligations regarding [plaintiff] are governed by the commodity client agreement. Defendants deny the remaining allegations of paragraph 44.”
Defendants also alleged in their second affirmative defense:
“[Plaintiffs] relationship with defendants arises from and is governed by the commodity client agreement. As a consequence, [plaintiff] is not entitled to assert claims for negligence against defendants.”
In their answer to plaintiffs third amended complaint, defendants attached a copy of the commodity client agreement. It provides, in pertinent part:
“5. I understand that you have, at any time, and in your sole discretion, the right to limit or reduce positions in my accounts, to decline to accept any orders and to require that my accounts be transferred to another firm. I understand that if I do not promptly transfer my positions upon your demand you reserve the right to liquidate positions in my accounts at your discretion. I understand that you in your sole discretion may elect to net settlement payments on foreign exchange contracts where those payments are for the same currency and value date.
“6. I understand you act as agent and not as principal for your clients’ commodity futures and commodity options transactions which are effected on exchanges. Consequently, you do not guarantee the performance of the obligations of any party (including your affiliates) to the futures or options contracts purchased and/or sold by your clients. I understand you may act as principal in certain cash, forward and foreign commodity transactions.
“7. Any property belonging to me or in which I have an interest held by you or any of your subsidiaries or affiliates *572or carried in any account shall be subject to a general lien and security interest and right of set-off for the discharge of my obligations to you, wherever or however arising and without regard to whether or not you have made advances with respect to such property, and you are hereby authorized to sell and/or purchase any and all such property without notice to satisfy such general lien and security interest. I irrevocably appoint you as my attorney-in-fact with power of substitution to execute any documents for the perfection or registration of such general lien and security interest * * *
“8. I agree to maintain such collateral and/or margin as you may from time to time in your discretion require and agree to pay immediately on demand any amount owing with respect to any of my accounts. Against a ‘short’ position in any commodity contract, prior to the maturity thereof, I will give you instructions to cover or furnish you with all necessary delivery documents, and in default thereof you may without demand or notice, cover the liability in the manner, deemed most appropriate by you, or if an order to buy in such contracts cannot be executed under prevailing conditions, you may procure the actual commodity and either make delivery thereof upon any terms or take any other action you deem appropriate.
“9. In the event I fail to deposit sufficient funds to pay for any coins, commodities, contracts for the future delivery thereof, commodity options, or forward commodity and foreign exchange contracts and/or satisfy any demands for original and/or variation margin, or whenever in your discretion you consider it necessary, you may without prior demand or notice, when and if you deem appropriate based upon your own business judgment notwithstanding any rule of any exchange, liquidate the positions in my account, hedge and/or offset those positions in the cash market or otherwise, sell any property belonging] to me or in which I have an interest, cancel any open orders for the purchase and sale of any property, or borrow or buy any property required to make delivery against any sales, including a short sale, effected for me, all at my sole risk.”
Thereafter, defendants moved for judgment on the pleadings under ORCP 21 B. In substance, they argued,
“The commodity agreement precludes [plaintiff] from proceeding on his claims against defendants. [Plaintiff] *573cannot properly assert a negligence claim against defendants because their duties and obligations to [plaintiff] are defined by contract, not tort. * * * Because the pleadings show that [plaintiff] is not entitled to relief on any of his claims, defendants request that the court enter judgment against [plaintiff].”
After hearing argument on the motion, the trial court granted defendants’ motion.
In Georgetown Realty v. The Home Ins. Co., 313 Or 97, 106, 831 P2d 7 (1992), the court, after reviewing a number of its cases over the past century, observed:
“When the relationship involved is between contracting parties, and the gravamen of the complaint is that one party caused damage to the other by negligently performing its obligations under the contract, then, and even though the relationship between the parties arises out of the contract, the injured party may bring a claim for negligence if the other party is subject to a standard of care independent of the terms of the contract. If the plaintiffs claim is based solely on a breach of a provision in the contract, which itself spells out the party’s obligation, then the remedy normally will be only in contract [.]”
In Conway v. Pacific University, 324 Or 231, 240-41, 924 P2d 818 (1996), the court explained one context in which a standard of care independent of the terms of a contract may exist because of the duty undertaken to further the economic interests of a client:
“Another way to characterize the types of relationships in which a heightened duty of care exists is that the party who owes the duty has a special relationship toward the other party. That is so because the party who is owed the duty effectively has authorized the party who owes the duty to exercise independent judgment in the former party’s behalf and in the former party’s interests. In doing so, the party who is owed the duty is placed in a position of reliance upon the party who owes the duty; that is, because the former has given responsibility and control over the situation at issue to the latter, the former has a right to rely upon the latter to achieve a desired outcome or resolution.
“This special responsibility exists in situations in which one party has hired the other in a professional capacity, *574as well as in principal-agent and other similar relationships. It also exists in the type of situation described in Georgetown Realty, in which one party has relinquished control over the subject matter of the relationship to the other party and placed its potential monetary liability in the other’s hands.”
(Emphasis in original.)
We applied these principles in Wallace v. Hinkle Northwest, Inc., 79 Or App 177, 717 P2d 1280 (1986), in the context of a claim against a stockbroker for the breach of a fiduciary duty. In that case, the plaintiffs alleged, in part, that the defendants owed a fiduciary duty to the plaintiffs because the investment agreement between them permitted the defendants to exercise discretionary control over the plaintiffs’ security transactions. We held that “[a] stockbroker is a fiduciary if his client trusts him to manage and control the client’s account and he accepts that responsibility.” Id. at 181. We distinguished the facts in Wallace from the facts in Berki v. Reynolds Securites, Inc., 277 Or 335, 560 P2d 282 (1977), a case in which the agreement between an investor and a stockbroker was an agreement by the broker to buy and sell at the direction of the investor. Under the circumstances in Berki, no fiduciary duty arose because the broker had no control over the investments that were made.
More recently, we applied the principles governing “special relationships” in Moore Excavating, Inc. v. Consolidated Supply Co., 186 Or App 324, 63 P3d 592 (2003). In that case, the defendant contracted to sell pipe and glue to the plaintiff. Although there was evidence that the plaintiff relied on the defendant for information, we held that that fact did not change the nature of their arm’s-length contractual relationship into a relationship where the defendant exercised independent judgment on the plaintiffs behalf. We concluded, therefore, that because the plaintiff had not demonstrated a special relationship with the defendant that would give rise to a duty independent of their sales agreement, the trial court correctly granted the defendant’s motion for summary judgment on the plaintiffs negligence claim. Id. at 334.
*575Defendants rely on Berki and Moore to argue that their standard of care is governed exclusively by the commodity client agreement with plaintiff and that they merely exercised their rights in accordance with it. However, when plaintiff is given the benefit of all reasonable inferences from the facts in the pleadings, plaintiff alleges more than an arm’s-length agreement. In particular, plaintiff alleges in paragraph 9 of his complaint that, “[a]s part of the relationship between [plaintiff] and the defendants, the defendants had complete control to execute and carry out [plaintiffs] commodities transactions” and had “complete control over [plaintiffs] margin trading limits.” Indeed, defendants deny those allegations, thereby creating disputed issues of fact.
Moreover, paragraph 5 of the agreement grants the sole discretion to defendants to “limit or reduce positions in [plaintiffs] accounts [,]” and in the event that plaintiff does not transfer accounts upon defendants’ demand, defendants are granted the authority to “liquidate positions in [plaintiffs] accounts at [their] discretion.” Paragraph 7 grants authority to defendants “to sell and/or purchase” any property or interest held by plaintiff “whether or not [defendants] have made advances with respect to such property’ without notice to plaintiff. Under the terms of paragraph 7, defendants are irrevocably appointed as attomey-in-fact to act on behalf of plaintiff with the power “to execute any documents for the perfection or registration” of a general lien and security interest. Additionally, paragraph 8 provides that, if a “short position” arises, defendants are authorized to “cover the liability in the manner, deemed most appropriate by [defendants], or, if an order to buy in such contracts cannot be executed under prevailing conditions, [defendants] may procure the actual commodity and either make delivery thereof upon any terms or take any other action [defendants] deem appropriate.” Finally, paragraph 9 authorizes defendants
“without prior demand or notice, when and if you deem appropriate based upon your own business judgment * * * [to] liquidate the positions in my account, hedge and/or offset those positions in the cash market or otherwise, sell any property belonging] to me or in which I have an interest, cancel any open orders for purchase and sale of any property, or borrow or buy any property required to make delivery against any sales * * * all at my sole risk.”
*576When plaintiff is given the benefit of all reasonable inferences that flow from his allegations and from the provisions of the commodity client agreement, it can be reasonably inferred that the parties entered into a relationship whereby defendants would control plaintiffs account and would exercise their discretion to further plaintiffs financial interests. Thus, the facts distinguish this case from Berki, where the stockbroker exercised no discretion with respect to the account; rather, the facts are similar to those in Wallace, where the defendants’ assumption of control over the plaintiffs’ investments created a special relationship that implied a duty on the part of the defendants to act in the best interests of the plaintiffs.
Thus, defendants’ assertion that they only exercised their rights under the commodity client agreement — though a permissible inference from the facts in the pleadings — is not the only reasonable inference that arises from the pleadings when plaintiffs allegations are read in light of the terms of the commodity client agreement.1 Those allegations also allege facts that, if true, give rise to a fiduciary duty on the part of defendants to exercise independent judgment on plaintiffs behalf to advance his best interests. In summary, when a special relationship exists, like the one plaintiff alleged here, the law will give effect to contractual rights and additionally, to any implied responsibilities that exist outside the terms of the contract. It follows that the trial court erred *577when it reasoned that defendants merely exercised their rights under the commodity client agreement.
As an alternative basis for affirming the trial court, defendants argue that the trial court’s error in granting their motion was harmless because plaintiffs negligence and breach of contract claims are based on identical allegations by plaintiff and because the jury returned a verdict for defendants on plaintiffs contract claim after the trial court struck a number of plaintiffs specifications of breach. In defendants’ view, “even if the trial court erred in not allowing [plaintiff] to proceed with his negligence claim, that error would be harmless because the trial court and jury determined that [plaintiffs] specifications of breach were deficient.” However, we considered a similar argument in Wallace and rejected it, in part, because the “plaintiffs were entitled to have [their negligence claim] separately submitted to the jury” based on the summary judgment record before us. 79 Or App at 182.
Our reasoning in Wallace informs our decision in this case, subject to the obvious factual contrast between the cases. In Wallace, the plaintiff had an opportunity to present evidence supporting his tort claim on summary judgment. Here, the trial court’s ruling prevented plaintiff from offering any evidence to support his allegations. Moreover, his theory regarding the negligence claim depends on duties that exist independently of the terms of the agreement with defendants. Consequently, it would be pure conjecture on our part to hold that the same evidence is probative of both claims or that the factual issues are the same merely because the allegations in the claims are identical. Indeed, defendants’ contention, though couched as a harmless error argument, in substance resembles an argument regarding issue or claim preclusion. However, the application of those doctrines is predicated on circumstances where a party has previously adjudicated identical issues or has had that opportunity. Drews v. EBI Companies, 310 Or 134, 140, 795 P2d 531 (1990). Here, plaintiff has not had the opportunity to litigate his allegations that defendants breached duties owed to him as a result of their fiduciary relationship. For all of these reasons, I am unpersuaded that the limited record in this case permits us to conclude that the trial court’s erroneous ruling was harmless.
*578Landau, Haselton, Wollheim, and Sercombe, JJ., join in this dissent.

 The concurring opinion holds, in effect, that there is only one permissible inference that can he drawn from the commodity client agreement — that “the control that the contract gave defendants over plaintiff’s trading activities was control to protect Salomon Smith Barney’s interests, not plaintiffs.” 213 Or App at 567. That premise leads the concurring opinion to conclude that, “[u]nder those circumstances, defendants cannot be understood to have had a fiduciary obligation to act to protect plaintiff’s economic interests.” Id. In my view, the concurring opinion’s premise is flawed because it fails to heed the applicable standard of review — that a motion for judgment on the pleadings assumes the truth of all well-pleaded facts, and that the party pleading a claim is entitled to the benefit of all reasonable inferences that can he drawn from the pleadings as a whole, and not just part of the pleadings considered in isolation. Although a trier of fact could find at trial that the commodity client agreement was intended to give defendants control over their own interests only, plaintiff’s allegations, when considered with the provisions of the agreement, give rise to the competing inference that the parties intended defendants to exercise control over plaintiff’s investments for plaintiff’s benefit. That competing inference precludes granting defendants’ motion for judgment on the pleadings.