Court Opinion

ID: 9900377
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:11:53.107639+00
Date Added: 2024-06-11T09:21:04.912607
License: Public Domain

456                  August 16, 2023                No. 414

         IN THE COURT OF APPEALS OF THE
                 STATE OF OREGON

                  James WOLFSTON,
                     an individual,
                 and Calaveras II, LLC,
           an Oregon limited liability company,
                  Plaintiffs-Appellants,
                             v.
                EASTSIDE BEND, LLC,
           an Oregon limited liability company,
                 Defendant-Respondent.

                EASTSIDE BEND, LLC,
           an Oregon limited liability company,
           and Darrin Kelleher, an individual,
                Petitioners-Respondents,
                            v.
                  James WOLFSTON,
                      an individual,
                 and Calaveras II, LLC,
           an Oregon limited liability company,
                Respondents-Appellants.
             Deschutes County Circuit Court
                  19CV54546; A177019

  Walter Randolph Miller, Jr., Judge.
  Argued and submitted December 22, 2022.
   Michael W. Peterkin argued the cause for appellants. Also
on the briefs were Peterkin Burgess and Janet M. Schroer
and Hart Wagner.
   Christopher J. Manfredi argued the cause for respon-
dents. Also on the brief were Martin E. Hansen and Francis
Hansen & Martin LLP.
  Before Shorr, Presiding Judge, and Lagesen, Chief Judge,
and Mooney, Judge.
Cite as 327 Or App 456 (2023)   457

  SHORR, P. J.
  Affirmed.
458                                   Wolfston v. Eastside Bend, LLC

           SHORR, P. J.
         Plaintiffs James Wolfston and Calaveras II, LLC
(Calaveras) appeal from a general judgment in favor of
defendants Eastside Bend, LLC (Eastside) and Darrin
Kelleher1 that was entered after the trial court denied
plaintiffs’ petition to vacate an arbitration award in favor of
defendants and, instead, confirmed the arbitration award.
In two assignments of error, which plaintiffs combine in one
argument, plaintiffs contend that the trial court erred in
denying their petition to vacate the arbitration award under
ORS 36.705(1)(a). They maintain that the trial court was
required to vacate the award after defendants purportedly
engaged in fraud or other undue means during the arbitra-
tion proceeding by both withholding production of relevant
and ordered discovery and then falsely testifying at the
arbitration in a manner inconsistent with the withheld dis-
covery. For the reasons briefly discussed below, we conclude
that the trial court was not required to vacate the arbitra-
tion award. The trial court did not err when it concluded
that the implications of the newly discovered evidence were
ambiguous and that the arbitration decision was not pro-
cured by fraud or other undue means. We therefore affirm.
         We summarize the material facts. Defendant
Eastside is a real estate development company wholly
owned by Gary Miller. Eastside owned a platted subdivi-
sion in Bend, Oregon with 76 lots and initially intended to
develop townhomes on the lots. However, Eastside executed
a real estate sale agreement selling the undeveloped prop-
erty to another company, Canterra. Eastside later approved
the assignment of that sale agreement to plaintiff Wolfston.
        The sale agreement contemplated the purchase
occurring in three phases and required Wolfston to make
closing payments at each phase of the development as he

     1
       We collectively refer to Eastside and Kelleher as “defendants” for ease
of reference. Strictly speaking, plaintiffs only sued defendant Eastside in the
Deschutes County Circuit Court. The case, however, was stayed pending reso-
lution of plaintiffs’ identical arbitration claim against Eastside. Plaintiffs later
brought a separate arbitration claim against Kelleher, which was consolidated
with the original arbitration. Both Eastside and Kelleher are listed as judgment
creditors in the general judgment for the amount of their costs and attorney fees
expended in prevailing as respondents in the underlying arbitration matter.
Cite as 327 Or App 456 (2023)                              459

purchased different groups of lots within the subdivision.
Eastside’s owner Miller provided Wolfston with several
extensions to the closing dates during the first two phases
in exchange for additional deposits into escrow or additional
fee payments. The parties completed the closings on the first
two phases of the development.
         As the closing date for the third and final phase
approached, Wolfston had issues obtaining a loan to fund
the completion of that phase before the agreed upon closing
date of August 24, 2019. He again sought an extension on
the closing date from Miller. Miller either failed to respond
or, after the phase three closing date, rejected the exten-
sion requests. Ultimately, Wolfston did not secure funding
to close on phase three and did not purchase the 23 lots allo-
cated to that phase.
         Plaintiffs Wolfston and Calaveras then brought
four arbitration claims against Eastside for failing to deliver
the 23 phase three lots. Those claims essentially alleged a
breach of contract and sought either specific performance or
damages, or, in the alternative, a claim for unjust enrich-
ment. The arbitrators rejected each of those claims, reject-
ing many of them because it concluded that the failure to
close was due to Wolfston’s inability to get a loan or make
the necessary payment before the phase three closing date.
         Plaintiffs also brought an arbitration claim against
Eastside’s real estate agent, Kelleher, claiming that Kelleher
interfered with plaintiffs’ business relations with Eastside for
Kelleher’s own personal gain. That claim essentially alleged
that Kelleher was not acting as an honest real estate broker
at the time of the sale of the development. It alleged that
Kelleher had sabotaged the closing of phase three because
he wanted to construct buildings on the phase three lots
for his own benefit in his capacity as a builder through his
construction company, Franklin Brothers. Plaintiffs alleged
that, after the failed closing on phase three, Kelleher and
Franklin Brothers became the builder of the units and
Franklin Brothers was listed as the contractor of record at
the design review stage of the development.
        Kelleher testified at the arbitration hearing in
July 2020 that, while he worked as both a real estate agent
and contractor during his career, he was only interested
460                         Wolfston v. Eastside Bend, LLC

in obtaining the real estate commission at the time of the
failed closing and did not want to build the townhomes on
the phase three lots at that time. He testified that he had
“[n]o agreement” with Miller to build townhomes on the
phase three lots. He also testified at the arbitration hearing
that “there’s no truth to me being involved in those 23 [phase
three] lots or * * * intending to build or contract to build
on those lots.” Miller similarly testified on that date that
Kelleher had no involvement in applying for the building
permits and that Miller had no agreement “with Kelleher
or Franklin Brothers that they will build the 23 lots.” Miller
had also testified earlier in a deposition before the arbitra-
tion that Kelleher did not have “any * * * involvement with
[the property] at any time after August 24th of 2019,” the
date of the failed closing.
         The arbitration panel issued its decision on
October 7, 2020, rejecting all of plaintiffs’ claims. That
included plaintiffs’ claims against Kelleher for his alleged
intentional interference with plaintiffs’ contractual rela-
tionship with Eastside. Among other things, the arbitra-
tion panel concluded that, at the time of the failed late
August 2019 closing, Kelleher “did not have a present inter-
est in the project, and that his company was not the contrac-
tor for the construction of the townhomes on the remain-
ing 23 lots.” (Emphasis added.) The panel also stated that
“Kelleher presented credible testimony that he was not the
contractor on the project after Phase III did not close.”
         In early January 2021, after the arbitration deci-
sion, a contractor for Wolfston was looking at a new online
construction permit portal that the City of Bend had created.
He discovered that, according to the online portal, Kelleher’s
company, Franklin Brothers, was listed as the contractor
for the 23 phase three lots in building permit applications
filed on September 8, 2019, a few weeks after the failed clos-
ing date. Plaintiffs then asked the arbitration panel for a
new hearing on the grounds of “fraud, newly discovered evi-
dence and contempt of discovery order.” They maintained
that Kelleher and Miller had (1) failed to produce requested
and ordered discovery and then (2) falsely claimed at the
arbitration hearing that Kelleher was not the contractor on
Cite as 327 Or App 456 (2023)                             461

the phase three lots after Wolfston failed to timely close on
that phase. They contended that the newly discovered infor-
mation demonstrated that “Kelleher/Franklin Brothers was
the general contractor for the project likely before and cer-
tainly after [the] August 24, 2019” phase three closing date.
         For their part, Kelleher and Miller noted that the
purported new evidence was in fact from a third party, the
City of Bend, and was therefore not controlled by defendants
or inaccessible to plaintiffs. They noted that Miller, and not
Kelleher or Franklin Brothers, had paid for the building
permits. They also argued that plaintiffs themselves had
presented evidence during the arbitration proceeding that
Eastside and Franklin Brothers were working together on
building out the 23 lots in October 2019, which meant that
the purported “new” evidence was not a particular surprise.
The arbitration panel then rejected plaintiffs’ request for a
new hearing, simply concluding that “[t]he motion is denied.”
         Plaintiffs then petitioned to vacate the arbitration
award in the circuit court pursuant to ORS 36.705(1)(a),
which provides that “the court shall vacate an award made
in the arbitration proceeding if * * * [t]he award was procured
by corruption, fraud or other undue means.” We understand
that statute to require the trial court to vacate an arbitra-
tion award when both (1) the prevailing party in arbitration
engaged in fraud or other undue means and (2) that fraud or
other undue means procured the arbitration award.
         Plaintiffs contended, much as they had previously
argued to the arbitration panel in seeking a new hearing,
that defendants obtained the arbitration award by their
fraudulent testimony and by other undue means, including
the violation of an arbitration discovery order and the fail-
ure to produce relevant discovery. The trial court denied the
petition to vacate, finding that “[m]ovant did not meet its
burden to show that the award was procured by fraud or
other undue means.” It found that while it was clear that
“the alleged permits [filed by Franklin Brothers] existed at
the time they were requested” in discovery, plaintiffs had
not met their burden to show that the Eastside or Kelleher
“possessed or controlled the permits when requested or prior
to the [arbitration] trial.” Further, it found that the above
462                          Wolfston v. Eastside Bend, LLC

quoted arbitration and deposition testimony was ambiguous
as to whether defendants had made any knowing misrep-
resentations or knowingly withheld documents. Finally, it
explained that “[i]rrespective, the award must have been
procured by the alleged fraud or undue means[,]” and that
the arbitrators, having been presented with the claimed
fraud, nevertheless “unanimously chose not to amend or
alter their decisions. That result is relevant.” (Emphasis in
original.)
         Plaintiffs appeal that decision. Before briefly
addressing the merits, we turn to the standard of review,
which largely drives the result here. Plaintiffs claim that,
under federal law, we should undertake de novo review of
the facts that occurred during and right after the arbitra-
tion proceeding. But we question how federal law could apply
to the standard of review here—plaintiffs have not provided
us with any authority that provides that federal law or the
Federal Arbitration Act preempt our state court appellate
review standards for issues arising under Oregon’s Uniform
Arbitration Act. Plaintiffs also misstate the type of de novo
review generally applied in the federal court. Federal courts
use the term “de novo review” to describe the review of a trial
court’s legal conclusions for errors of law—the same type
of review we apply to those rulings, albeit under a differ-
ent name. See Vasquez-Lopez v. Beneficial Oregon, Inc., 210
Or App 553, 582, 152 P3d 940 (2007) (stating that we review
legal issues “for errors of law—what the federal courts call
‘de novo’ review”).
          Applying Oregon law, we “review the trial court’s
findings to determine whether there is any evidence to sup-
port them.” Couch Investments, LLC v. Peverieri, 359 Or 125,
135, 371 P3d 1202 (2016). Further, we note that the burden
of persuasion was on plaintiffs in the trial court to demon-
strate that defendants engaged in fraud or other undue
means that procured the arbitration award. Therefore, plain-
tiffs must demonstrate that the trial court was required to
find or, in other words, could only find based on the evidence
that defendants engaged in fraud or other undue means. See
State v. Johnson, 335 Or 511, 523, 73 P3d 282 (2003) (noting
that appellate courts are bound by a trial court’s findings,
Cite as 327 Or App 456 (2023)                                              463

including a trial court’s “finding” that it was not sufficiently
persuaded by a party’s evidence, if there is evidence in the
record to support those findings and unless the evidence is
such that the finder of fact “could decide a particular factual
question in only one way”); see also Prime Properties, Inc.
v. Leahy, 234 Or App 439, 449, 228 P3d 617 (2010) (stating
same).
         We understand plaintiffs to argue that the trial
court was required to infer from the facts that defendants’
arbitration testimony was fraudulent and that they had
intentionally withheld relevant documents during the arbi-
tration. That is, plaintiffs challenge the court’s factual find-
ings and the inferences it drew from the evidence. Applying
the foregoing standard and reviewing the record, we are
not convinced that the trial court was required to find that
defendants engaged in fraud or other undue means.2 On
this record, the trial court could reasonably determine that
plaintiffs had not proved that defendants had possession
or control of the building permit applications when the dis-
covery order and discovery requests were issued during the
arbitration proceeding. The trial court could also reason-
ably determine that plaintiffs had not proved that defen-
dants fraudulently testified when they claimed that, at
least around the time of the failed closing on August 24,
2019, Kelleher did not intend to be and was not the builder
of any lots. Some of the evidence on precisely when Kelleher
may have become a builder for the phase three lots was
ambiguous or related to dates occurring after the failed
phase three closing. A reasonable finder of fact certainly
could find otherwise based on the evidence, but the trial
court was not required by the evidence to find fraud or other
undue means.3

     2
       We note that the elements of fraud generally must be proved by clear and
convincing evidence. Vasquez-Lopez, 210 Or App at 578-79. However, we do not
decide here whether plaintiffs had to prove “fraud or other undue means” under
ORS 36.705(1)(a) by clear and convincing evidence or merely by a preponderance
of the evidence. We would reach the same result under either standard.
     3
       We also reject without further discussion plaintiffs’ contention that they
necessarily proved to the trial court that defendants’ arbitration testimony was
fraudulent in a way that affected plaintiffs’ arbitration claim against Eastside
for failing to deliver “finished lots.”
464                                  Wolfston v. Eastside Bend, LLC

          We also agree with the trial court’s conclusion that
plaintiffs did not prove that any fraud or undue means,
assuming for the moment that there were any, procured
the arbitration award. See ORS 36.705(1)(a). Plaintiffs con-
tend that the trial court erred in entirely deferring to the
arbitrators and their decision not to grant a new hearing
in response to newly discovered evidence. We do not read
the trial court’s decision to entirely defer to the arbitration
panel. The trial court made its own findings of fact, both
explicit and implicit. We understand the court to have con-
sidered the arbitrators’ decision to deny the motion for a new
hearing as at least “relevant” to the question of causation.4
That conclusion was not erroneous. We also understand the
court to have considered plaintiffs’ evidence before explic-
itly finding that plaintiffs had not met their burden to show
causation. We again conclude that that finding was not erro-
neous. For all those reasons, we affirm.
           Affirmed.

    4
      Significantly, the arbitrators had previously and separately concluded that
Wolfston’s inability to secure funding for the phase three lots caused the phase
three closing to fail.