Title: Care Medical Equipment, Inc. v. Baldwin
Citation: N/A
Docket Number: S45893
State: Oregon
Issuer: Oregon Supreme Court
Date: December 21, 2000

Filed:  December 21, 2000
IN THE SUPREME COURT OF THE STATE OF OREGON

CARE MEDICAL EQUIPMENT, INC.,an Oregon corporation,
	Respondent on Review,
	v.
MARK BALDWIN,
	Petitioner on Review,
	and
STEP SAVER, INC.,
	Defendant.
(CC 9509-06169; CA A95996; SC S45893)

	En Banc
	On review from the Court of Appeals.*
	Argued and submitted November 4, 1999.
	Charles E. Corrigan, of O'Donnell Ramis Crew Corrigan &amp;
Bachrach, LLP, Portland, argued the cause for petitioner on
review.  With him on the briefs was Mark L. Busch.
	Joseph D. McDonald, of Palmer, Feltz, Smith &amp; McDonald,
Portland, argued the cause for respondent on review.  With him on
the brief was Laura E. Vaught.
	VAN HOOMISSEN, J.
	The decision of the Court of Appeals is affirmed.  The
supplemental judgment of the circuit court is reversed.
	*Appeal from Multnomah County Circuit Court, Ellen F. Rosenblum, Judge. 154 Or App 678, 963 P2d 85 (1998).
		VAN HOOMISSEN, J.  
		Plaintiff employer brought this action against
defendant employee for breach of a noncompetition provision in an
employment contract between the parties.  The trial court ruled
that the noncompetition provision of the contract was void and
unenforceable, and it dismissed plaintiff's claims.  After
entering judgment in defendant's favor, the court awarded
defendant $25,000 in attorney fees.  The Court of Appeals
reversed the award of attorney fees.  Care Medical Equipment,
Inc. v. Baldwin, 154 Or App 678, 963 P2d 85 (1998).  The issue is
whether the trial court erred in awarding attorney fees to
defendant.  For the reasons that follow, we affirm the decision
of the Court of Appeals.  
		Plaintiff hired defendant as a sales representative. 
Later, the parties entered into an "EMPLOYMENT SERVICES CONTRACT"
that contained the following provision:
	"IV.  NON-COMPETE AGREEMENT
		"Employee agrees that upon termination of the
employment relationship for whatever reason, he shall
not directly compete with Employer, through subsequent
employment nor independently, in the field of durable
medical equipment marketing, sales or leasing within
the general Multnomah County, Oregon and Clark and
Cowlitz Counties, Washington area for a period of two
(2) years.  Employee shall neither solicit nor accept
business from referral sources in said area for the
two-year period.  Employee also agrees that a list of
his referral sources within the general Multnomah,
Clark and Cowlitz county geographical areas will be
disclosed to Employer from time-to-time throughout the
duration of the Employer/Employee relationship, and an
up-dated list of such referral sources shall be
provided to Employer upon termination of said
relationship.
	"Such sources shall not be disclosed to Employer's
competitors or potential competitors for a period of
two (2) years after termination of Employer and
Employee's employment relationship.  'Referral sources'
shall mean those individuals and companies which
provide recommendations to and provide contacts with
consumers and businesses for the purchase or lease of
goods from the Employers.  It is agreed that violation
of this provision shall cause incalculable and
irreparable harm to Employer such that the Employer
shall be entitled to injunctive relief and the cost of
pursuing legal action to enforce this agreement."  
(Emphasis added.)  
		Thereafter, plaintiff brought this action against
defendant for breach of the noncompetition provision of the
parties' contract.  Defendant argued that the noncompetition
provision was void and unenforceable under ORS 653.295(1) because
the parties had not entered into the noncompetition agreement in
conjunction with a bona fide advancement of defendant. (1)  The jury
agreed and, as noted, the trial court dismissed plaintiff's claim
and awarded attorney fees to defendant. 
		On appeal, the only issue was attorney fees.  Plaintiff
argued that, because defendant successfully had established that
the noncompetition agreement was void and unenforceable,
defendant was not entitled to attorney fees.  Defendant responded
that, because the trial court ruled only that the noncompetition
provision of the parties' contract, not the contract in its
entirety, was void, he was entitled to attorney fees under ORS
20.096(1). (2)  The Court of Appeals agreed with plaintiff,
explaining:
	"Defendant's argument that the attorney-fee clause
somehow survives the voiding of the noncompetition
agreement fails in light of the fact that the express
language of that agreement indicates that the fee
provision applies only to actions brought to enforce
that agreement.  Because the court determined that the
noncompetition agreement was void, it follows that the
attorney-fee provision is as well."
154 Or App at 681 (emphasis in original).  We allowed defendant's
petition for review.     
		Defendant argues that ORS 20.096(1) requires an award
of attorney fees to the prevailing party in any action on a
contract that contains an attorney-fees provision.  Defendant
asserts that, as the prevailing party in an action on a contract,
he is entitled to attorney fees under the wording of the contract
and under ORS 20.096(1).  Plaintiff responds that a right to
attorney fees under ORS 20.096(1) is predicated on the existence
of an attorney-fees provision in the contract on which the action
was brought.  According to plaintiff, when the noncompetition
provision of the contract, of which the attorney-fees provision
was an integrated and inseparable part, was rendered void by
operation of ORS 653.295(1), the attorney-fees provision also
ceased to exist.  Therefore, plaintiff argues, defendant has no
right to recover attorney fees under the parties' contract and
ORS 20.096(1). (3) 
		A contract provision allowing for attorney fees is a
necessary predicate to the application of ORS 20.096(1).  In this
case, defendant asserted successfully that there never was a
noncompetition agreement.  That defense rendered void the very
provision of the parties' employment contract on which recovery
of attorney fees by "the prevailing party," i.e., defendant,
depended.  Therefore, there remains no contract provision to make
reciprocal under ORS 20.096(1).
		Defendant's reliance on Bennett v. Baugh, 329 Or 282,
985 P2d 1282 (1999), is misplaced.  In that case, the attorney-fees provision in a promissory note that the defendants gave to
the plaintiff provided:
		"In event of suit or action to enforce payment of
this note, promisor shall be liable for attorney fees
and costs incurred in commencement and prosecution of
such action or suit."
Id. at 284.  The plaintiff argued that the defendants were not
entitled to an award of attorney fees because they succeeded in
rescinding the contract.  This court concluded that, because the
judgment did not rescind the parties' contract, the defendants
were entitled to attorney fees under the contract and ORS
20.096(1).  Id. at 286.  In contrast, defendant here succeeded in
having the noncompetition agreement declared void and
unenforceable.  That agreement was the only source of defendant's
entitlement to an award of attorney fees.
		Defendant argues, in the alternative, that the court
may sever the void and unenforceable noncompetition agreement
from the attorney-fees provision.  The Court of Appeals addressed
the issue of severance as follows:
	"Although we agree that our past decisions have dealt
only with actions in which the entire contract was
voided or nullified, we see no principled reason why
the same logic should not apply to a case such as this
one, where the disputed fee provision is of a piece
with that portion of the contract that has been
voided."  
Care Medical Equipment, 154 Or App at 681.
		In arriving at its conclusion, the Court of Appeals
properly looked to the wording of the contract.  The extent to
which a contract is divisible and whether one promise may be
severed from another depends on the intention of the parties,
which we determine by interpreting the contract.  Pettigrove v.
Corvallis Lbr. Mfg. Co., 143 Or 33, 35, 21 P2d 198 (1933).  The
court must interpret the wording of a contract to effectuate the
intentions of the parties, as those intentions can be determined
from that wording and other relevant circumstances.  Bauman v.
Bauman, 245 Or 574, 577, 423 P2d 181 (1967).  
		In the present case, paragraph IV of the contract
limits the right to recover attorney fees to enforcement of "this
provision of the contract," i.e., the noncompetition agreement. 
The attorney-fees provision that supplemented the noncompetition
agreement was legally viable only if the noncompetition agreement
was enforced.  Once the court determined that the noncompetition
provision of the contract was void, no provision of the parties'
contract permitted defendant to claim attorney fees. 
Accordingly, the trial court erred in awarding attorney fees to
defendant under ORS 20.096(1).
		The decision of the Court of Appeals is affirmed.  The
supplemental judgment of the circuit court is reversed.



1. 	 ORS 653.295 provides, in part:
		"(1) A noncompetition agreement entered into
between an employer and employee is void and shall not
be enforced by any court in this state unless the
agreement is entered into upon the:
		"(a) Initial employment of the employee with the
employer; or
		"(b) Subsequent bona fide advancement of the
employee with the employer.
		"* * * * *
		"(6) As used in this section:
		"* * * * *
		"(c) 'Noncompetition agreement' means an
agreement, written or oral, express or implied, between
an employer and employee under which the employee
agrees that the employee, either alone or as an
employee of another person, shall not compete with the
employer in providing products, processes or services,
that are similar to the employer's products, processes
or services for a period of time or within a specified
geographic area after termination of employment."

2. 	 ORS 20.096(1) provides:
		"In any action or suit on a contract, where such
contract specifically provides that attorney fees and
costs incurred to enforce the provisions of the
contract shall be awarded to one of the parties, the
prevailing party, whether that party is the party
specified in the contract or not, at trial or on
appeal, shall be entitled to reasonable attorney fees
in addition to costs and disbursements."
See Jewell v. Triple B. Enterprises, 290 Or 885, 888, 626 P2d
1383 (1981) (purpose of ORS 20.096(1) is to allow buyer and
seller same right to collect attorney fees despite one-sided
contractual provisions, thereby equalizing rights of disfavored
parties to adhesion contracts).

3. 	Generally, a party is not entitled to an award of
attorney fees unless the award is authorized by statute or by a
specific contractual provision.  Mattiza v. Foster, 311 Or 1, 4,
803 P2d 723 (1990).