Title: Jewell v. Triple B. Enterprises, Inc.
Citation: 290 Or. 885, 626 P.2d 1383
Docket Number: N/A
State: Oregon
Issuer: Oregon Supreme Court
Date: April 28, 1981

626 P.2d 1383 (1981)
290 Or. 885
Dale Donald JEWELL, Jr., Petitioner,
v.
TRIPLE B. ENTERPRISES, INC., Dba Executive Institute of Hair Design for Men and Women, Respondent.
CA 15244; SC 27234.

Supreme Court of Oregon, In Banc.
Argued and Submitted January 6, 1981.
Decided April 28, 1981.
*1384 Cynthia L. Barrett, Portland, argued the cause and filed the briefs for petitioner.
Peter H. Glade, Portland, argued the cause for respondent. With him on the brief were O'Connell, Goyak, Hagen, Elliott &amp; Krage, P.C., Portland.
DENECKE, Chief Justice.
The sole issue is whether plaintiff is entitled to a judgment for his attorney fees.
Plaintiff and defendant entered into a contract by which plaintiff enrolled as a student in defendant's school to receive training as a barber and cosmetologist. Defendant terminated plaintiff from the program. Plaintiff brought this action alleging that the termination violated the terms of the enrollment agreement and that he had been damaged by that wrongful termination in the amount of $7,275, which included tuition paid to the defendant, the costs of replacement schooling and the loss of earnings due to plaintiff's inability to take the Board of Barber's licensing examination as scheduled. He further sought reasonable attorney fees. After a jury verdict for plaintiff for $1,265, the trial court awarded $1,650 to plaintiff as attorney fees.
The enrollment contract was on a printed or mimeographed form and provided:
Defendant appealed the award of attorney fees. The Court of Appeals reversed, with the majority holding that there was no basis for an award of attorney fees under ORS 20.096(1). 47 Or. App. 281, 614 P.2d 135 (1980).
ORS 20.096(1) provides as follows:
The statute requires reciprocity of recovery of attorney fees. The issue is whether the statute should be construed so that where a contract allows a seller attorney fees if he prevails in an action for collection, the buyer's right to attorney fees should also be limited to an action for collection or should the buyer's right be extended to cover actions for breach by the seller of other provisions of the contract the seller was obliged to perform. We adopt the broader approach and allow plaintiff his attorney fees.
The majority of the Court of Appeals chose the narrower construction, holding that:
The legislative history of ORS 20.096(1) shows that it was "directed to the inequality of bargaining power which is so common in many commercial transactions." McMillan v. Golden, 262 Or. 317, 320, 497 P.2d 1166 (1972). The purpose was to allow the buyer and the seller the same right to collect attorney fees despite onesided contractual provisions, and thereby "equalize the rights of disfavored parties to adhesion contracts who lacked bargaining power." North Pacific Lumber Co. v. Oliver, 286 Or. 639, 665, 596 P.2d 931 (1979).
As Judge Warren stated in his dissent, the import of the decision of the majority of the Court of Appeals was to allow the seller to subvert that legislative intent and avoid true reciprocity of attorney fees "by limiting its own right to attorney fees to duties under the contract which can only be breached by the other party." 47 Or. App. at 285, 614 P.2d 135. The remedial and reciprocal purpose of the statute is subverted if by skillful drafting the seller in a contract has the security of attorney fees if he prevails in an action to enforce the primary contractual obligation of the buyer, but the buyer is not allowed fees if he wins in an action to enforce the reciprocal primary contractual obligation of the seller.
ORS 20.096(1) provides that where a contract provides that attorney fees incurred to enforce the provisions of the contract shall be awarded to one of the parties, the prevailing party, whether the party specified in the contract or not, in an action on that contract, shall be entitled to attorney fees.
"[T]he provisions of the contract," as that phrase is used in ORS 20.096(1), refers to "provisions of the contract" containing the obligations of the person who the contract obliges to pay attorney fees; in this case the student. In the contract the student has only one obligation; that is, to pay tuition. The statute uses the plural, "provisions"; however, in the present contract there is only one provision containing the one obligation of the student. With but one obligation the attorney fees clause is similar in effect to one providing that "attorney fees and costs incurred to enforce the provisions of the contract shall be awarded to" the school. The reciprocal right of the other party to the contract, the student, would be to be entitled to attorney fees in litigation to enforce any of the obligations of the school. We, therefore, hold that attorney fees are awardable to the prevailing party (the plaintiff student) for enforcing any or all of the provisions of the contract containing the obligations of the school.[2]
Webster v. General Motors Accept., 267 Or. 304, 516 P.2d 1275 (1973), supports our present decision but in a limited way. In Webster, the plaintiff purchased a truck and executed a conditional sales contract. The plaintiff defaulted, foreclosure proceedings were instituted, the truck was sold and a surplus was generated. Plaintiff successfully prosecuted an action for the surplus and sought attorney fees. We concluded the contract provided that the seller was entitled to attorney fees incurred in collecting any deficiency; therefore, under ORS 20.096(1) the buyer was entitled to attorney fees for collecting a surplus. We, in effect, concluded that the right to a surplus was the reciprocal to the right to collect a deficiency, and if the seller had a right to attorney fees for collecting a deficiency under the statute, the buyer had a right to an attorney fee for collecting a surplus.
A party drafting a contract imposing several obligations on the other party could limit the drafting party's right to recover attorney fees to the enforcement of one obligation. We express no opinion on the *1386 right of either party to attorney fees when the enforcement of other obligations of the contract is in litigation.
Reversed.
PETERSON, Justice, dissenting.
This case presents an extremely close question, the resolution of which involves competing public policies. After considerable indecision, I have concluded that ORS 20.096(1) does not permit the award of attorney fees in this case.
ORS 20.096(1) was enacted in 1971. Prior to the enactment of the statute, it was common for contracts to contain provisions for the payment of attorney fees by one of the parties to the contract. Such provisions put the disfavored party at a distinct tactical disadvantage. For example, if the disfavored party could assert a defense but the likelihood of success was less than certain, the party might be reluctant to defend the case for fear of the substantial "penalty" in the form of attorney fees to the prevailing party. The effect of such one-sided contractual provisions was to deter the assertion of meritorious defense and to cause some cases to be settled or go undefended when the disfavored party would otherwise defend.
The purpose of ORS 20.096 was to put the parties on equal footing, so that if (1) the favored party stood to obtain attorney fees by asserting a claim, the disfavored party, if the claim were successfully defended, would also obtain attorney fees, and (2) if the disfavored party successfully asserted a claim involving a contractual provision providing for attorney fees to the favored party, attorney fees would be allowed to the disfavored party. The passage of the statute resulted in the withdrawal of the tactical advantage previously enjoyed by only the favored party.[1]
The result of the majority opinion is to make the attorney fee provisions in the case at bar reciprocal with a capital R, for the disfavored party's rights, under the majority opinion, exceed the rights given to the favored party under the contract.
There are two types of contractual provisions which may arise under ORS 20.096, one being a "limited" provision such as we have in the case at bar, and the other being an "unlimited" provision. An example of an "unlimited" provision would be one reading along these lines:
No problem arises under contracts containing an "unlimited" provision, because any suit or action would necessarily be covered by the provision of the contract, as modified by the reciprocal effect of ORS 20.096(1). As to a "limited" provision, however, the analysis is less clear. There are four types of claims which might arise under a limited provision. They are:
1. A claim by the favored party for a breach of contract with which the limited provision is concerned, and any defense thereto.
2. A claim by the favored party for breach of a contract provision other than the limited provision and any defense thereto.
3. A claim by the disfavored party for breach of contract relating to the limited *1387 provision and a defense thereto by the favored party.
4. A claim by the disfavored party for breach of a contract provision other than the limited provision, and a defense thereto by the favored party.
I read the majority opinion as follows: Under categories 1 and 3, the prevailing party, whether the favored party or the disfavored party, would obtain attorney fees. Reciprocity and mutuality are achieved. On a category 4 claim (the case at bar) the disfavored party gets attorney fees. The opinion does not address the issues arising from a category 2 claim or a category 4 claim in which the favored party prevails. I dissent because the effect of the majority analysis achieves neither reciprocity nor mutuality and fails to attain the goal of the statute.
My resolve to dissent was fortified by this statement in McMillan v. Golden, 262 Or. 317, 497 P.2d 1166 (1972). McMillan was our first decision involving ORS 20.096, and in that opinion the court stated:
In North Pacific Lumber Co. v. Oliver, 286 Or. 639, 665-666, 596 P.2d 931 (1979), we stated:
A recent California decision, Sciarrotta v. Teaford Const. Co., 110 Cal. App. 3d 444, 167 Cal. Rptr. 889 (1980), involved a statute which is virtually identical to ORS 20.096(1) and from which our statute was taken. The issue in that case was stated to be:
The case involved a claim by a homeowner against a contractor for breach of the contractor's agreement to construct a house in a "good and workmanlike manner." The homeowner claimed attorney fees under a contract which contained this clause:
The trial court denied the plaintiff's claim for attorney fees. The California court affirmed, holding that although the purpose of their counterpart of ORS 20.096 was to create reciprocity, the reciprocal *1388 statutory right should be no greater than the contractual right upon which it was based.
The court stated the plaintiff's position as follows:
In denying recovery of attorney fees, the court stated:
The court concluded that the clear language of the contract operated to limit the claim for attorney fees only to claims for the unpaid balance due under the contract. 167 Cal. Rptr.  at 893. The California court concluded:
ORS 20.096 must be construed with one pervasive principle in mind: the purpose of the statute is to achieve reciprocity and mutuality. The disfavored party is entitled to the same rights as the favored party, no more and no less. It follows that the disfavored party, by reason of the statute, is not entitled to more rights than the favored party. The statute should be construed so that reciprocity and mutuality result. If one changes the order of the sentences in ORS 20.096, the meaning of the statute becomes more apparent.
Two constructions of the statute are possible. One construction (the more liberal one) is that the phrase "to enforce the provisions of the contract" means "to enforce [any of] the provisions of the contract." The more restrictive construction is to construe the phrase "to enforce the provisions of the contract" to mean "to enforce a provision of the contract which allows attorney fees."
Under the liberal construction, if the contract contains (1) a provision for the allowance of attorney fees "to enforce the provisions of the contract" (and this contract contains one such provision), (2) "in any action or suit on [such] contract" (and this is an action or suit on such a contract), (3) "the prevailing party, whether that party is the party specified in the contract or not * * * shall be entitled to reasonable attorney fees * * *." The determinative words of the statute, under this analysis, are the words "in any action or suit on [such] contract." Under this analysis, if the contract contains a provision for the allowance of attorney fees, in any action or suit on the contract, the prevailing party is entitled to attorney fees.
The result is both mutual and reciprocal, for the prevailing party, whether favored or disfavored, gets attorney fees. In any action or suit on the contract, the prevailing party gets attorney fees.
The more restrictive construction is to limit the right to attorney fees to a claim which relates to a breach of the specific provision. Under this construction, before attorney fees would be recoverable, the claim would have to relate to a breach of the specific provision or the contract would have to contain a clause to the same effect as the words of the statute  language similar to the clause quoted above  that attorneys fees would follow "in case suit or action is brought to enforce any of the provisions hereof." Such a construction is also consistent with the goal of the statute, insofar as mutuality and reciprocity are concerned.
The majority opinion suggests an "intermediate" construction, in which the right to attorney fees is determined by whether the disfavored party has but "one obligation." If the attorney fees provision permits the favored party to recover attorney fees from the disfavored party for breach of the later's "one obligation," then the reciprocal right of the disfavored party is the entitlement "* * * to attorney fees in litigation to enforce any of the obligations of the [favored party]." (Emphasis added.)
The statute neither states, suggests nor implies that the disfavored party's right to attorney fees on a claim against the favored party is to be determined by whether the disfavored party has but one obligation, and if so, the disfavored party gets attorney fees from the favored party for a breach of any obligation. I believe that the statute must be construed either to restrict attorney fees to only the claim(s) referred to in the agreement (including the type of claim involved in Webster v. General Motors Accept., 267 Or. 304, 516 P.2d 1275 (1973)), or to allow the recovery of attorney fees for any claim for breach of contract. I favor the more restrictive view for the reasons mentioned in the California case discussed above and for two additional important reasons. First, the statute itself suggests that reciprocity applies only to the assertion or defense of a contract claim as to which attorney fees are provided in the contract. North Pacific and McMillan support this conclusion. See also, Webster v. General Motors Accept., 267 Or. 304, 309, 516 P.2d 1275 (1973). Second, it is important that *1390 parties have the freedom to limit or extend their contractual obligations as they see fit. It may be that parties to a contract may want to provide for attorney fees for some breaches and not others. A construction of ORS 20.096 which provides for attorney fees for any breach of contract when the contract provides for attorney fees for but one type of breach effectively restricts freedom of contract.
Let me illustrate. I think that the effect of applying ORS 20.096 to the contract at bar is to rewrite the contract clause, by operation of law, to read as follows:
Suppose that after extended negotiations, with both the school and the student represented by capable lawyers, the parties signed a contract containing that very clause. The effect of the majority opinion is to rewrite the contract, even though the contract is reciprocal and mutual, and even though that is what the parties intended. The effect of this construction effectively reduces the bargaining ability of the parties far beyond that which was intended by the legislature when ORS 20.096 was enacted.
The effect of the majority opinion is to rewrite the statute to read as follows:
Such a result was not intended, operates to give one party an unfair advantage, and most importantly, restricts the freedom of persons to contract. An appealing case should not blind us to the detrimental aspects of the rule contained in the majority opinion.
TONGUE and TANZER, JJ., join in this dissenting opinion.
[1]  The clause was apparently copied from a caluse in a promissory note. "Maker" must mean student. Neither party raises any issue regarding "maker."
[2]  ORS 20.096(1) was modeled after a California statute. A California Court of Appeals interpreted the California statute more restrictively than we do. Sciarrotta v. Teaford Const. Co., 167 Cal. Rptr. 889, 110 Cal. App. 3d 444 (1980).
[1]  Even so, the possibility of an attorney fees award to the prevailing party still, to some degree, tends to encourage the settlement of some cases because neither party is willing to take the risk of having to pay the other's attorney fees.
[2]  This provision is extracted, in part, from an old Stevens-Ness form.