242 P.3d 723
Or. Ct. App.2010Background
- Forest Products and Greenwood entered the APA in Feb 2002 to transfer seven bulk inventory units over two years, with price at cost plus 2% and replenishment during transition.
- Inventory transfers were completed in 13–14 months; Greenwood issued three promissory notes as final payment, totaling about $3.4 million, later partially paid.
- Plaintiffs alleged Forest Products misstated inventory cost, causing Greenwood to overpay by approximately $819,731.68 and sought rescission/relief.
- Fahey, Forest Products’ former head bookkeeper, committed embezzlement; Greenwood later uncovered accounting discrepancies after a 2003–2005 audit.
- At trial, plaintiffs amended to seek rescission of the notes, and after evidence, the court allowed an amendment to claim that Forest Products had "erroneously accounted for" inventory.
- The jury awarded damages for overpayment and accounting fees; defendants prevailed on nonpayment of notes; disputes over fees and expert costs followed, with a later supplemental judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did APA obligate accurate inventory costing? | Jewett-Cameron/Greenwood: APA requires cost-based pricing, implying obligation to accurately state cost. | Forest Products: APA allege no duty to accurately account for cost; no explicit/implicit obligation. | Directed verdict for Forest Products; APA imposes no accuracy obligation. |
| Was misstatement a breach or tort? | Misstatement constitutes breach of contract, not tort. | Any misstatement could be tort/negligent misrepresentation; no special relationship proven. | Court treated as breach of contract claim; substantial evidence supported breach only if misstatement is contract breach. |
| Erred in denying amendment and directed verdict renewals? | Amendment to add ‘erroneously accounted for inventory’ broadens alleged breach. | Amendment improperly altered theory; required to be specific and timely. | Amendment immaterial; directed verdict proper as a matter of law. |
| Entitlement to expert expenses under promissory-note fees? | Prevailing party entitled to all expenses including expert fees under note language. | Malot limits to costs under ORCP 68 A(2) for 'expenses'. | Defendants entitled to expert expenses; trial court error in denying. |
| Preservation of cross-appeal on rescission of June Note? | Trial court should rescind June note; preserved by theory of mutual mistake. | Issue not preserved; not reviewable. | Cross-appeal unreviewable for lack of preservation. |
Key Cases Cited
- Malot v. Hadley, 102 Or.App. 336 (1990) (expense/fees interpretation under promissory notes; defines 'expenses')
- Asiatic Company (USA), Inc. v. Expeditors International of Washington, Inc., 183 Or.App. 528 (2002) (issues regarding attorney fees; per curiam considerations)
- Peeples v. Lampert, 345 Or. 209 (2008) (preservation requirements for appellate review)
- State v. Rumler, 199 Or.App. 32 (2005) (preservation and appellate argument standards)