Twin Oaks Memorial Gardens and Mausoleum has taken a long time, up to two years in one case, to get grave markers in place, but its problems go far deeper than that.

The facility has been foreclosed on by a Portland lender.

In addition, the present operator says in court papers that more than $450,000 prepaid for plots, crypts and related items had not been deposited by previous owners.

If the money is gone, the 800-plus clients who paid it may be out of luck.

It all adds up to a legal and financial quagmire unprecedented in Oregon graveyard history, said Michelle Gaines, executive director of the Oregon Mortuary and Cemetery Board.

"We're certainly monitoring the situation," Gaines said. "Obviously the state is interested."

Long wait for a marker

The Democrat-Herald began looking into Twin Oaks, 34275 Riverside Drive S.W., three weeks ago after receiving a letter from Patrick Burke of Tigard.

Burke's father, Art, had died in March 2007, and his grave at Twin Oaks had remained unmarked for more than a year and was still not marked in the manner that Art had paid for in 1994.

Burke added that his family, particularly his sister Vicky Heintzman of Albany, had been getting the runaround from Mike Terwilliger, who runs the cemetery.

Terwilliger is a licensed funeral director who first became associated with Twin Oaks when, as a lessee, he set up a mortuary there in July 2004.

In 2005 he and William F. Clark Sr. bought the cemetery for $800,000 from a corporation set up by a Jefferson couple, Andres and Chantelle Hernandez. The corporation is known as Twin Oaks Memorial Park Inc.

A reporter met with Terwilliger at the cemetery on Sept. 30. He said he would call the Burke family and promptly rectify the situation, and when he didn't, the paper published a story about the Burke family's wait.

The article prompted about a dozen other Twin Oaks clients to contact the paper, and each told a tale similar to the Burke family's. Other readers called attention to legal action involving the cemetery.

There are two cases:

• Case No. 07-1684, in which Judge John A. McCormick on Feb. 19 issued a judgment of foreclosure against Terwilliger, investor Clark and junior lien holders Acctcorp Int'l of Salem and Twin Oaks Memorial Park Inc. The foreclosure judgment was on behalf of six individual investors lined up by Acuity Lending of Portland, a short-term mortgage firm that now owns the 15-acre cemetery.

• Case No. 07-2457, filed on Aug. 30, 2007, in which Twin Oaks Memorial Park Inc. is suing Terwilliger and Clark for defaulting on a $200,000 note relating to the cemetery purchase agreement entered into on Nov. 18, 2005.

That second case is pending in Linn County Circuit Court, and the defendants' answers to the complaint include counterclaims. Barring settlement, attorneys expect a trial in April or May.

Who owes whom?

In his countersuit, Clark, a 91-year-old retired laborer represented by Dennis Messoline of Salem, contends "plaintiff intentionally misrepresented -. that the cemetery had certain characteristics, income potential, and contractual rights, trust funds, and physical characteristics that were not true."

He seeks $600,000 in economic damages from Twin Oaks.

Clark also asserts Terwilliger breached their agreement and wants $600,000 from him, too, accusing him of "converting funds for the cemetery for his own use -. and failing to pay debts and obligations from the cemetery income as promised and agreed."

"The person who dealt with all the finances, the customers, the cadavers and running the business was Terwilliger," Messoline said in an interview. "The center of the hub is Terwilliger."

For his part, Terwilliger alleges in court papers that Clark refused to refinance as agreed upon to pay off Acuity, and he also accuses the Hernandezes' corporation of not making required contributions to trust funds for plot sales and pre-arranged sales from 1994 to 2005.

According to Terwilliger, the "unfunded liability" for paid-for plots and pre-arranged sales totals $453,531. He says that in the last three years he's used $38,774 of his own money to cover burial expenses that should've been taken care of by the previous owner.

As an endowment care cemetery, Twin Oaks is required by the state to deposit 15 percent of plot sales into a perpetual care trust fund and 90 percent of merchandise sales into a trust account.

Terwilliger says that for at least 872 clients who worked directly with Chantelle Hernandez, that didn't happen. He estimates the total number of affected clients could be in the thousands.

The Hernandezes did not return a phone call Friday from the Democrat-Herald. They're represented by William D. Brandt of Salem, who said in an interview:

"There was no misuse. They (Terwilliger and Clark) bought the place subject to their own audit, liabilities and all. They had the opportunity to inspect the whole operation, and there are routine audits by the board that oversees this business. There was never a problem when my clients ran the place."

Looking to the state

One hope of Terwilliger and his recently hired counsel, Tre Kennedy of Lebanon, is that the cemetery can end up in state receivership, which Kennedy believes would help make whole the clients whose prepaid monies his client says are gone.

Kennedy thinks state control would make it easier for those clients to get relief via a consumer protection fund administered by the Department of Consumer and Business Services' Division of Finance and Corporate Securities.

The cemetery board's Gaines, however, says there's no direct mechanism in place to trigger a state takeover of a foreclosed cemetery.

"Typically what we would try to do is help find a buyer and make sure there was someone licensed to operate the facility," she said.

That new buyer - who'd be getting, Terwilliger says, 2,000 plots left to sell in the 10 acres already developed as a graveyard, plus five undeveloped acres - might agree to pony up the money Terwilliger says is missing; that would be one way of sparing grieving client families the pain of having to pay for services again.

Or the new buyer may not agree to cover those costs, leaving each family to wend its way through the process of filing a complaint and trying to tap into those consumer protection dollars.

Uncharted territory

While not ruling out state ownership of Twin Oaks, Gaines says that would represent a step probably never before taken in Oregon. Then again, the cemetery has already made history via the myriad court filings and accusations of financial impropriety.

According to Terwilliger's counterclaim, among those affected is 88-year-old Jean Burke. She's the widow of the Albany accountant whose grave marker is still not right, the Burkes' daughter Vicky Heintzman said Friday.

Terwilliger's filing includes a list of Twin Oaks' prepaid clients and the status of their accounts at the time Terwilliger and Clark bought the cemetery.

Jean's shows an unfunded liability of $625. It also indicates Terwilliger has put $1,720 into the account since coming on board.

"I feel like nobody has played by the rules in this except me," said Terwilliger, whose reasons for wanting to buy Twin Oaks included not wanting to lose the roughly $100,000 in improvements he'd made to the property as a lessee funeral director.

Terwilliger and Clark last month declined an offer to settle with the Hernandezes' corporation for $20,000 apiece.

Terwilliger, who says his original agreement with Clark made Clark a 99-percent owner and Terwilliger a 1-percent owner - a claim that Messoline, Clark's attorney, flatly denies - is clear on what he wants out of this mess, mainly:

• Dismissal of the Hernandezes' complaint plus attorney's fees.

• Any unfunded prepaid services used as an offset against any monies he might owe to the Hernandezes.

• Any damages he might be assessed covered by Clark.

• 100 percent interest in the cemetery and mortuary.

But still, he and Kennedy, his lawyer, acknowledge the time just to cut losses may be approaching. That's what state receivership would offer - that and the chance, client and attorney say, to help cemetery clients get what they've paid for.

"I've just tried to represent Twin Oaks, and I feel like I'm in a black hole," Terwilliger said. "I just wanted to make everybody whole, and I've been made out to be the heel. I just didn't want to have to tell the grieving people that I'm sorry, the money your loved one paid is gone, you'll have to pay again."

Steve Lundeberg is the Democrat-Herald's associate editor. He can be reached at steve.lundeberg@lee.net.