273 P.3d 116
Or.2012Background
- Two Oregon corporations (Greenwood/Forest Products) arranged to transfer Greenwood's inventory from Forest Products over two years under an Asset Purchase Agreement (APA) with a 2% premium.
- The plan created Greenwood as a purchaser of Forest Products' nationwide inventory in seven units, with Forest Products replenishing inventories during a two-year transition and Greenwood paying cost plus 2%.
- Greenwood employees, including former Forest Products personnel, managed inventories and accounts, blurring separation of operations during transition.
- After closing in 2002, Greenwood paid for inventory and financed the transition; by 2003 disputes arose over overpayment and misaccounting there were embezzlement issues by a Greenwood bookkeeper, Fahey.
- Schmidt reconstructed Greenwood and Forest Products’ books, concluding Greenwood paid about $819,731.68 for inventory it did not receive.
- Plaintiffs sued for breach of contract and equitable relief; trial court denied directed verdicts; jury awarded damages to plaintiffs, but Court of Appeals reversed on the breach claim, prompting Supreme Court review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did APA impose an obligation to accurately state inventory costs? | Plaintiffs: APA impliedly required accurate accounting of cost; defendants breached by erroneous accounting. | Defendants: APA did not obligate accurate cost accounting; no express/implicit duty to state costs. | No, implied obligation exists; remanded for further consideration. |
| Was there sufficient evidence to sustain a breach of contract verdict? | Evidence showed Forest Products controlled accounting; Greenwood employees acted as Forest Products’ agents. | Evidence failed to prove an act constituting breach; proper scope and causation were lacking. | Yes, evidence supported breach under amended claim; directed verdict improper. |
| Was the Court of Appeals' reasoning to reverse the verdict proper? | Court of Appeals relied on no-obligation theory not raised below; argument preserved here. | Court of Appeals correctly found no explicit obligation to state costs. | Court of Appeals’ reversal disturbed by preserved grounds; Supreme Court reverses and remands. |
| Whether attorney fees were properly awarded? | Plaintiffs prevailed on breach; fees warranted. | Fees improper if breach claim invalid or limited. | Remanded to address remaining unresolved assignments of error including fees. |
Key Cases Cited
- Knepper v. Brown, 345 Or. 320 (Or. 2008) (trial standard for directed verdict when reviewing the movant's grounds)
- Remington v. Landolt, 273 Or. 297 (Or. 1975) (grounds not stated in motion cannot be considered on appeal)
- Card v. Stirnweis, 232 Or. 123 (Or. 1962) (necessary implication doctrine for implying obligations)
- Pinnacle Packing Co. v. Herbert, 157 Or. 96 (Or. 1937) (early articulation of necessary implication concept)