by Lance Olsen

McCarthy Holthus, LLP *

USFN Member (AZ, AR, CA, CO, ID, NV, NM, OR, TX, WA)

In the summer of 2020, the Oregon legislature passed House Bill 4204 addressing foreclosure during the time of the Covid-19 emergency. In addition to prohibiting most foreclosure activity during a defined emergency period, the bill also restricted a lender’s ability to pass through certain costs of default.  Further, the bill compelled deferment to maturity any amounts that came due during the emergency period unless the borrower agreed otherwise.

By its specific language, HB 4204 was automatically repealed on March 31, 2021, 90 days after the end of the emergency period created by the bill.

Recently, the United States District Court for the District of Oregon had the opportunity to rule on the impact of that repeal as well as the continuing effect of HB 4204.

As described in the facts of Corvallis Hospitality, LLC v. Wilmington Trust, National Association et. al, 2022 WL 10475079, between May and October of 2020, Corvallis Hospitality, LLC, the owner and operator of the Corvallis Hilton Garden Inn, faced pandemic-related hardships and defaulted on monies owed to their lender. Corvallis at *2. On October 7, 2020, the lender advised the hotel owners that they were in default, imposing late fees, interest on past due payments, and accelerating the note. Efforts at a workout followed, but by April of 2021, the lender moved forward with non-judicial foreclosure. Id.

On December 14, 2021, the hotel owners filed suit against their lender alleging, among other things, that the lender had violated HB 4204. Id. Specifically, the hotel owners argued that their lender had improperly assessed charges associated with the default and had not deferred to maturity all amounts that came due during the emergency period. Id.

Under HB 4204, a borrower who suffers an ascertainable loss of money or property because a lender took an action prohibited by the Act is allowed to bring an action to recover actual damages, as well as the borrower’s court costs and attorney fees.

On June 22, 2022, the defendant lender moved for judgment on the pleadings arguing that no cause of action remains under HB 4204. The court agreed. Id.

The court noted that on June 1, 2021, the Oregon legislature expressly repealed Section 1 of HB 4204 in its entirety without provision of a savings clause or any preservation of any part of that section. Id. at *3. This repeal included the remedies section of HB 4204 under which the hotel’s action had been brought.  Because after June 1, 2021, HB 4204 ceased to exist, no action can be brought alleging violation of HB 4204 after that date. Whether the alleged misconduct occurred during a time when the bill was in effect is not relevant when the entirety of the bill has been repealed.

The District Court noted that if the legislature had intended for claims arising under HB 4204 to survive, it would have expressly preserved those claims in HB 2009, a successor bill that specifically repealed HB 4204. Id. at *4. The legislature having chosen not to do that, the court declined to read into the law a contradiction to the actual words in the law.

It should be noted that this opinion is subject to appeal, and thus, it is possible that we have not heard the last word in Oregon. However, as of today, it would appear any action based on HB 4204 that was not pending before June 1, 2021 (and possibly as early as March 31, 2021) cannot survive.

Also of note is HB 2009, enacted by the legislature on June 1, 2021, provides largely identical restrictions and remedies that had been provided by HB 4204. Although no subsequent bill repealed HB 4204 in the same way that HB 2009 repealed HB 4204, Section 12 of HB 2009 provides that Section 1 of HB 2009, the section that includes a borrower’s remedy for violation of the Act, is repealed 90 days after the expiration of the emergency period. Thus, after March 31, 2022, any action brought under HB 2009 would seem to be subject to the same arguments that terminated causes of action under HB 4204.

There are other state and federal cases pending that seek to define the terms and boundaries of both HB 4204 and HB 2009. As case law develops, further articles and analysis will be offered.

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USFNews - Nov. 2

* Denotes firm is a 2021 USFN Award of Excellence recipient