## Facts

- A developer obtained a $7.5 million construction loan from a bank for a luxury apartment project, secured by a deed of trust; interest was payable monthly and principal due at maturity, with extension provisions.
- After construction, rental rates declined and the developer struggled to meet obligations; the bank granted one maturity extension.
- Following continued financial stress and another default, the bank refused further extensions and initiated foreclosure under the loan documents.
- The developer alleged it had a prospective buyer willing to pay roughly $8.6–$8.85 million while the debt was about $7.8 million, but the bank refused to postpone foreclosure.
- At the trustee’s sale, the bank bought the property for the debt amount (about $7.8 million), despite an appraisal around $8.85 million, and then resold to the prospective buyer for roughly the same $7.8 million, allegedly depriving the developer of anticipated profit.
- Separately, the developer alleged it was pursuing a business relationship with Wright Runstad Co. and that the bank conditioned lending to Wright Runstad on excluding the developer from that venture.
- The trial court dismissed all claims for failure to state a claim; the intermediate appellate court affirmed in part and reversed in part; the state supreme court reviewed on the pleadings standard accepting well-pleaded facts as true.

## Issues

1. Whether a lender breaches the implied contractual duty of good faith and fair dealing by foreclosing and refusing further extensions when those actions are authorized by express loan terms after borrower default.
2. Whether a borrower may recast alleged “bad faith” performance of a commercial loan as a tort claim absent an independent standard of care or special relationship.
3. Whether allegations that a lender used control of credit to induce a third party to exclude the plaintiff from a prospective venture state a claim for intentional interference with economic relations.

## Decision

- The court held that the developer failed to state claims on the first through fourth claims for relief challenging the bank’s refusal to extend and foreclosure-related conduct.
- The court held that the developer stated a claim for intentional interference with economic relations based on allegations that the bank conditioned third-party financing on the developer’s exclusion from a separate venture.
- The case was remanded for further proceedings on the surviving fifth claim.

## Legal Principles

- The implied duty of good faith and fair dealing is a contract doctrine that cannot contradict or override an express contractual term.
- A party does not breach contractual good faith merely by exercising an expressly authorized remedy, including declaring default and foreclosing after nonpayment.
- In ordinary commercial lending, tort liability for “bad faith” requires a duty independent of the contract; absent a special relationship or independent standard of care, contract-based allegations do not support a tort claim.
- Intentional interference with economic relations requires interference with a relationship or expectancy through improper means or improper purpose and resulting damages.
- A mere refusal to deal or the exercise of one’s own contractual rights typically is not improper interference, but using refusal to deal as affirmative leverage to induce a third party to sever or alter its relationship with the plaintiff may constitute improper means at the pleading stage.

## Conclusion

The court concluded that foreclosure and refusal to extend credit, when expressly permitted by the loan documents after default, did not support contract or tort “good faith” theories, but allegations that the lender used credit leverage to pressure a third party to exclude the developer from a separate business opportunity adequately pleaded intentional interference with economic relations.


Uptown Heights Assocs. Ltd. P'ship v. Seafirst Corp., 320 Or. 638, 891 P.2d 639 (1995)