Lead Opinion
Plaintiff appeals the trial court’s judgment dismissing plaintiff’s action on the ground that his complaint failed to state ultimate facts sufficient to constitute a claim under the Uniform Fraudulent Transfer Act (UFTA), ORS 95.230. ORCP 21A(8). Assuming the truth of plaintiffs well-pleaded allegations and facts that might be adduced as proof of such allegations, we consider whether the pleadings are legally sufficient to state a claim. Brennen v. City of Eugene,
On October 23,1993, Floyd Greer conveyed by statutory warranty deed all of his interests in residential real property to Linda Greer, his wife. Before that conveyance, the Greers (defendants) had owned the property as tenants by the entirety. The property was also encumbered by a preexisting note and mortgage in the amount of $35,000. In October 1994, plaintiffs assignor agreed to extend an unsecured line of credit to Floyd, who subsequently defaulted. In May 1997, plaintiff obtained a money judgment against Floyd, which remains unsatisfied. Plaintiff brought this suit, alleging that the 1993 real property conveyance was fraudulent under ORS 95.230.
In order to state a claim under UFTA, plaintiff must plead the occurrence of a conveyance of property that constitutes a “transfer” under the statute. “Transfer” is defined as “every mode * * * of disposing of or parting with an asset or an interest in an asset * * ORS 95.200(12). “Asset” is defined, in part, as
“* * * property of a debtor but does not include:
“(a) Property to the extent that it is encumbered by a valid lien;
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“(c) An interest in property held in tenancy by the entirety to the extent that it is not subject to process by a creditor holding a claim against only one tenant.” ORS 95.200(2).
Defendants moved to dismiss the action, arguing that plaintiffs complaint did not allege facts that, if true, would establish that the 1993 conveyance transferred an “asset” under UFTA as defined in ORS 95.200(2)(a) or ORS 95.200(2)(c). Plaintiff did not file a written response to defendants’ motion. The trial court received oral argument at a hearing, but neither party requested that the proceeding be recorded. After considering the motion, the pleadings, and the arguments of counsel, the trial court entered an order to dismiss for failure to state a claim based on defendants’ two specific arguments. The trial court held that the note and mortgage constituted a “hen” on the whole property and, therefore, the conveyance of the property was not a “transfer” of an “asset.” The court also held that, because the property had been held by defendants as tenants by the entirety, plaintiff had no process against the property to collect its money judgment. Therefore, the court reasoned, the conveyance of the property was not a “transfer” of an “asset.” On appeal, plaintiff challenges the arguments under both provisions made by defendants and adopted by the trial court.
Defendants raise a preliminary challenge to our ability to review plaintiffs assignment of error. Defendants argue that, by failing to file a written response to the motion to dismiss or to record oral arguments, plaintiff has failed to create and designate a record in which it can demonstrate that it preserved its arguments for appeal. In particular, defendants contend that the record does not allow an appellate court to determine whether plaintiff raised the question of whether ORS 95.200(2)(a) applied and the question of whether ORS 95.200(2)(c) applied, much less whether plaintiff raised arguments concerning the proper interpretation of those separate provisions.
ORAP 5.45 provides that only assignments of error preserved below may be considered on appeal and that the “pertinent portions of the record” must be designated to enable review of those assignments. See also York v. Bailey,
First, defendants made a motion to dismiss for failure to state a claim on the very statutory sections at issue on appeal. By appearing at a hearing to oppose the motion, plaintiff raised its objection to that issue and identified both of the statutory sources for its objection. See Hitz,
“ ‘[T]he rules pertaining to preservation of error in trial courts are intended to advance goals such as ensuring that the positions of the parties are presented clearly to the initial tribunal and that parties are not taken by surprise, misled, or denied opportunities to meet an argument.’ ” Northwest Natural Gas Co. v. Chase Gardens, Inc.,328 Or 487 , 499-500,982 P2d 1117 (1999) (quoting Davis v. O’Brien,320 Or 729 , 737,891 P2d 1307 (1995)).
The trial court was faced with an issue of statutory interpretation, which is purely a question of law within the province of the court. See Stull v. Hoke,
Second, we find the record sufficient for review. Again, this is an appeal from a motion to dismiss based on the sufficiency of the complaint in light of a statutory provision. Plaintiff has designated its complaint, which we review on its face for its sufficiency. Statutory interpretation is, again, purely a question of law within the province of the court. See Stull,
We turn to the merits. Plaintiff argues that the subject real property is excluded from being an asset under UFTA only “to the extent” that it is encumbered by a lien and that “to the extent” means to the value of that lien. Thus, according to plaintiff, the value of the equity in the property in excess of the amount of the lien is still an asset. Plaintiff would seek to establish that the equity in the subject property exceeds the value of the note and mortgage encumbering it and that the excess equity is an asset. Defendants respond that the phrase “to the extent” refers to the type of lien on a property, not to the amount. They argue that, because the lien on the residential real property promised the whole property and not a portion or section thereof as available to satisfy the debt, the whole property is encumbered and exempt.
We have touched once before on this issue in Kellstrom Bros. Painting v. Carriage Works, Inc.,
That application embodies the intent of the legislature. We need only examine the text of the statute to determine that intent. PGE v. Bureau of Labor and Industries,
Defendants’ interpretation would render the phrase “to the extent” superfluous. The essence of defendants’ argument is that all property that is promised as security for a loan would be subject to a lien; only property not promised as security would not be subject to a lien. Thus, consistent with defendants’ interpretation, the legislature could have simply stated that property “that is encumbered by a valid lien” is exempt. Including the phrase “to the extent” adds nothing to defendants’ interpretation. We are not permitted to omit what has been inserted or insert what has been omitted. ORS 174.010. More importantly, we must, if possible, construe statutes so as to “give effect to all” of its provisions. Id. We, therefore, cannot accept defendants’ interpretation.
We next examine what the legislature did intend by exempting property “to the extent it is encumbered by a valid lien.” Written in active voice, the sentence would read: a valid lien encumbers the property to the extent of the lien. The legislature’s choice of a verb can be a significant indicator of the legislature’s intention. See Martin v. City of Albany,
Applying that logic, we interpret ORS 95.200(2)(a) to mean that property that is exempt from being an “asset” under UFTA is the value of its equity that equals or is included in the amount of the valid hen(s) encumbering it; equity in excess of the amount of the encumbering lien(s) is an “asset” under UFTA.
We next consider whether the fact that defendants held the subject property as tenants by the entirety before the conveyance exempted the property from being an “asset” as defined by ORS 95.200(2)(c). Plaintiff argues that the text of the definition explains that whether property held in tenancy by the entirety is excluded as an “asset” depends on whether state law permits the interest of a co-tenant in a tenancy by the entirety estate to be subject to collection process. Plaintiff argues further that Oregon case law has established that process may be had against a co-tenant in a tenancy by the entirety estate. Defendants argue that adoption of UFTA shields those properties entirely from creditors, but they do not explain how the text of the statute communicates that meaning. Nor do they explain how adoption of UFTA or other precedents altered the common-law rule in Oregon that process may be had against a co-tenant in a tenancy by the entirety estate. They argue only that shielding such estates from creditors is sound policy.
“We * * * believe that public policy prevents a debtor from avoiding payment of his just debts by holding his land by the entirety. It can easily be imagined that a dishonest debtor could thus defeat collection of his financial obligations though he owned valuable real property producing an income sufficient to allow him to live in luxury.” Ganoe v. Ohmart,121 Or 116 ,126,254 P 203 (1927).
“[T]he title held by tenants by the entirety is a single title representing the whole interest in the land and * * * is vested in each tenant subject to defeasance by his death prior to that of his cotenant.” Brownley v. Lincoln County,
“[t]he sale on execution of the interest of the husband would not destroy or affect the right of survivorship in the wife. The wife’s interest would not be touched. The purchaser at such sale would procure one half of the usufruct of the property.” Ganoe,121 Or at 126-27 .
Indeed, during marriage, a purchaser is entitled only to the individual spouse’s share of the rents and profits. Brownley,
Therefore, because in Oregon some interests of a co-tenant in a tenancy by the entirety estate are subject to collection process, the subject property is not excluded from being an “asset” under ORS 95.200(2)(c). The trial court erred in dismissing the action for failure to state a claim because
Reversed and remanded.
Notes
ORS 95.230 states, in part:
“(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
“(a) With actual intent to hinder, delay, or defraud any creditor of the debtor * * (Emphasis added.)
Defendants claim that, in fact, plaintiff only made arguments concerning ORS 95.200(2)(c), tenancy by the entirety. Plaintiff does not concede that. For the reasons discussed below, that fact, if true, is not dispositive.
Other jurisdictions implementing versions of the model UFTA have given the same interpretation to similar language. See In re McFarland,
Again, our review is limited only to whether plaintiffs complaint states a claim for relief. We state no opinion regarding the merits of plaintiffs claim.
Dissenting Opinion
dissenting.
ORAP 5.45(2) provides that “[n]o matter assigned as error will be considered on appeal unless it was preserved in the lower court.” In this case, plaintiff did absolutely nothing to preserve the contentions it now asserts on appeal. The majority nevertheless holds that plaintiffs contentions were preserved. The majority errs in so holding and, in the process, significantly muddies the already murky waters of our preservation case law. See State v. Doern,
The record consists solely of the trial court pleading file. That file reflects that defendants moved to dismiss plaintiffs complaint. Plaintiff did not file any response to the motion. Plaintiff did show up for oral argument on the motion, but the proceedings were not recorded, so we cannot tell what was or was not said. (Plaintiff now says that, at oral argument, it did assert the arguments it now advances on
The majority holds that saying nothing in response to a motion to dismiss is not a problem. The majority advances four reasons for that rather surprising assertion, none of which I find persuasive.
First, the majority states that “[b]y appearing at a hearing to oppose the motion, plaintiff raised its objection [to defendants’ motion] and identified both of the statutory sources for its objections.”
Second, the majority observes that the issue in contest involves merely a matter of statutory construction and that, under Stull v. Hoke,
Moreover, in my view it is the majority that is forgetting the practical underpinnings of the preservation rule. Among the principal justifications of that rule is providing the trial court with a fair opportunity to make the correct decision. See, e.g., Davis v. O’Brien,
Third, the majority observes that the “trial court’s decisions indicates that it actually considered the statutory provisions argued on appeal.”
Finally, the majority points out that the record is sufficient for review.
Aside from the fact that the majority’s opinion offers no persuasive justification for addressing plaintiffs contentions, I am troubled by its implications for future cases. Just how far does the majority’s reasoning extend? The majority holds that the mere fact that plaintiff appeared at a hearing on defendants’ motion suggests that plaintiff opposed it and that such opposition suffices when the sole issue is one of law.
I would hold that plaintiff failed to preserve its claim of error in this case. The record provides no basis for concluding that any of the arguments it asserts on appeal were made to the trial court. I would affirm on that basis and would not address the merits of the sufficiency of the complaint. I therefore respectfully dissent from the majority’s decision to the contrary.
Concurrence Opinion
concurring.
The dissent sees a preservation issue in this case where there is none.
When defendants moved to dismiss for failure of the complaint to state ultimate facts sufficient to constitute a claim, i.e., demurred to the complaint, the issue was joined and the record was complete. Plaintiff was not required by ORCP 21 to file any response (although UTCR 5.030 appears to allow one) or to appear for argument. The issue is only the sufficiency of the complaint; no argument, no evidence is necessary. The trial judge simply erred in ruling on that question. The majority’s, analysis is correct, and I concur.