26 October 8, 2015 No. 38

IN THE SUPREME COURT OF THE

STATE OF OREGON

BROWNSTONE HOMES

CONDOMINIUM ASSOCIATION,

an Oregon non-profit corporation,

Petitioner on Review,

v.

BROWNSTONE FOREST HEIGHTS, LLC,

an Oregon limited liability company, et al,

Defendants,

and

CAPITOL SPECIALTY INSURANCE, CO.

Respondent on Review.

(CC 0606-06804; CA A145740; SC S061273)

En Banc

On motion to dismiss filed September 5, 2013, considered 

and under advisement September 23, 2014.

Wendy M. Margolis, Cosgrave, Vergeer, Kester, LLP, 

Portland, argued the cause and filed the briefs for petitioner 

on review. With her on the briefs was Thomas W. Brown.

Brian C. Hickman, Gordon & Polscer, LLC, Portland, 

argued the cause and filed the briefs for respondent on 

review. With him on the briefs was Gregory A. Baird.

Travis Eiva, The Corson & Johnson Law Firm, Eugene, 

filed the brief for amicus curiae Oregon Trial Lawyers 

Association.

LANDAU, J.

Motion to dismiss denied.

Case Summary: Plaintiff in a damages action obtained a stipulated judgment 

in a settlement with defendant, and sought to garnish the amount of the judgment from defendant’s liability insurer under ORS 18.352. The insurer moved for 

summary judgment, arguing that, because the settlement agreement included a 

covenant by plaintiff not to execute against defendant, defendant had no covered 

liability within the terms of the defendant’s policy with the insurer. The trial 

court granted the motion for summary judgment, and plaintiff challenged that 

decision, first in the Court of Appeals and then in the Supreme Court, arguing 
Cite as 358 Or 26 (2015) 27

that, contrary to the trial court’s view, the non-execution covenant in the settlement agreement had not affected the insurer’s coverage obligations. While the 

case was pending in the Supreme Court, the insurer moved to dismiss, arguing that the case had become moot because plaintiff and defendant had since 

modified their settlement agreement and the non-execution covenant on which 

the trial court’s decision had been based. Held: An opinion as to the legal consequences of the original settlement agreement will have a practical effect on the 

rights of the parties and review of the trial court’s decision therefore is not moot.

Motion to dismiss denied.
28 Brownstone Homes Condo. Assn. v. Brownstone Forest Hts.

LANDAU, J.

Defendant Capitol Specialty Insurance Co. has 

moved to dismiss this appeal on the ground that it has 

become moot. According to Capitol, the issues to be decided 

in the appeal pertain to the terms of an agreement settling 

an underlying construction defect case, but those very terms 

have been superseded by amendments to the agreement 

adopted during the pendency of the appeal. We conclude 

that, because the amendments to the settlement agreement 

do not have the effect of superseding the terms of the original agreement, a judicial decision about that original agreement will have a practical effect on the rights of the parties. 

Consequently, the appeal is not moot, and the motion to dismiss is denied.

The facts relevant to Capitol’s motion are not in dispute. Plaintiff Brownstone Homes Condominium Association 

initiated a construction defect action against a contractor, 

A&T Siding, Inc. A&T was insured by Capitol. Brownstone 

and A&T ultimately settled, and the settlement included a 

stipulated judgment against A&T. It also included an unconditional release and covenant not to execute that judgment 

against A & T, along with A & T’s assignment to Brownstone 

of any claim it might assert against Capitol.

Brownstone served a writ of garnishment on Capitol 

under ORS 18.352 to satisfy the judgment. When Capitol 

objected, Brownstone initiated a garnishment proceeding. 

Capitol moved for summary judgment on the ground that 

Brownstone’s release and covenant not to execute the judgment against A&T extinguished A&T’s liability and, thus, 

Capitol’s liability as well. The trial court agreed, granted 

summary judgment in favor of Capitol, and entered judgment dismissing the garnishment proceeding. Brownstone 

appealed.

Meanwhile, Brownstone and A&T executed an

“addendum” to their original settlement agreement, which 

recited that its purpose was to enable Brownstone to satisfy its judgment by collecting from Capitol. To accomplish 

that, the addendum modified the release and covenant not 

to execute, and eliminated the assignment of A&T’s claims 

against Capitol, replacing the assignment provision with a 
Cite as 358 Or 26 (2015) 29

requirement that A&T pursue its claims directly against 

Capitol and pay any proceeds to Brownstone.

Brownstone did not advise the Court of Appeals of 

the execution of the addendum to the original settlement 

agreement. Unaware of the addendum, the Court of Appeals 

issued an opinion adjudicating the effect of the original 

settlement, ultimately concluding that the trial court had 

correctly determined that, because that agreement extinguished A&T’s liability to Brownstone, it also extinguished 

any obligation that Capitol might have had to cover that liability. Brownstone Homes Condo. Assn. v. Brownstone Forest 

Hts., 255 Or App 390, 298 P3d 1228 (2013). Brownstone 

petitioned for review, and we allowed the petition. At that 

point, Capitol notified us of the existence of the addendum to 

the original settlement agreement and, on the basis of that 

addendum, moved to dismiss the appeal.

Meanwhile, during the pendency of the state court 

appeal, A&T initiated a separate action against Capitol to 

recover the stipulated judgment against A&T. That action 

was removed to the United States District Court for the 

District of Oregon, which ultimately dismissed the action on 

the ground that, the original settlement agreement having 

extinguished A&T’s liability to Brownstone, any liability 

that A&T agreed to under the addendum was contractual in 

nature and not subject to coverage under the term of A&T’s 

policy with Capitol. A&T appealed to the United States 

Court of Appeals for the Ninth Circuit, arguing that, under 

the terms of the addendum, it did not undertake any new 

contractual obligations to Brownstone, but rather reformed 

the original settlement agreement, effectively nullifying 

the extinguishment of its liability in that original agreement and restoring Capitol’s obligation to provide coverage 

to A&T. The Ninth Circuit certified a question to us concerning the authority of the parties to amend their original 

settlement agreement to restore the insurer’s obligation to 

provide coverage.

In A&T Siding, Inc. v. Capitol Specialty Ins. Co., 

358 Or 32, ___ P3d ___ (2015), A&T and Capitol addressed 

that certified question. A&T argued that, together with 

Brownstone, it had restored Capitol’s obligation to provide 
30 Brownstone Homes Condo. Assn. v. Brownstone Forest Hts.

coverage by virtue of the voluntary reformation of the original settlement agreement, based on its own and Brownstone’s 

mistake as to the legal effect of that original agreement. We 

concluded that such a mistake as to legal effect does not support reformation of the original settlement agreement. Id. at 

48.

With that background in mind, we turn to the question whether the execution of the addendum has the effect 

of mooting the pending appeal before us. Under Oregon 

law, when changed circumstances render an appeal moot, 

it will be dismissed. State v. Hemenway, 353 Or 498, 501, 

302 P3d 413 (2013). Whether an appeal has become moot 

may be raised at any time during the appellate process. 

ORAP 7.05(1)(c). It has been stated often that this court 

lacks constitutional authority to decide moot cases. See, e.g., 

Hemenway, 353 Or at 500 (“Oregon courts have no authority 

to decide moot cases: The judicial power granted to courts 

under the Oregon Constitution is ‘limited to the adjudication 

of an existing controversy.’” (Quoting Yancy v. Shatzer, 337 

Or 345, 362, 97 P3d 1161 (2004).)). More recently, this court 

has qualified that broad, categorical assertion. In Couey v. 

Atkins, 357 Or 460, 520, 355 P3d 866 (2015), we concluded 

that, at least as to public actions and those involving issues 

of public importance, whether mootness requires dismissal 

of an action is a prudential matter and not one of constitutional command. In this case, we need not decide whether 

this case is such a “public action” or one that involves issues 

of “public importance.” Nor do we need to decide whether, if 

it is not, the constitution requires dismissal because, at all 

events, the appeal is not moot.

An appeal is moot when a court decision will no 

longer have a “practical effect on the rights of the parties.” 

Dept. of Human Services v. G. D. W., 353 Or 25, 32, 292 P3d 

548 (2012). In this case, the issue before us is the legal effect 

of the original settlement agreement—specifically, whether 

the release and unconditional covenant not to execute preclude Brownstone from recovering from Capitol, based on 

the insurer’s obligation to provide coverage to its insured, 

A&T. Capitol argues that the fact that the addendum to the 

original settlement agreement eliminated the release and 
Cite as 358 Or 26 (2015) 31

unconditional covenant not to execute renders academic any 

opinion about the effect of the original agreement.

But that argument rests on the assumption that the 

addendum had the effect of eliminating the original release 

and unconditional covenant not to execute. As noted above, 

358 Or at 29-30, we have just concluded in A&T Siding, Inc.

that the addendum did not have that effect, at least not retroactively. Moreover, Capitol has not argued that the addendum had that effect because the parties intended to rescind, 

to accomplish a novation, or some other theory. Thus, the 

issue of whether the original release and unconditional covenant not to execute in the original settlement agreement 

extinguished A&T’s liability to Brownstone—and, in the 

process, extinguished Brownstone’s right to recover from 

Capitol—remains a live issue. And an opinion as to the legal 

consequences of that original agreement will have a practical effect on the rights of the parties. In consequence, the 

appeal is not moot.

Motion to dismiss denied.