Title: Coulter Property Management, Inc. v. James
Citation: N/A
Docket Number: S43732
State: Oregon
Issuer: Oregon Supreme Court
Date: December 17, 1998

Filed: December 17, 1998

IN THE SUPREME COURT OF THE STATE OF OREGON

COULTER PROPERTY MANAGEMENT, INC.,

	Respondent on Review,

	v.

SAMUEL JAMES, 

	Petitioner on Review.

(CC 9305-02944; CA A85455; SC S43732)

	On review from the Court of Appeals.*

	Argued and submitted September 10, 1997.

	Jeffrey C. Jacobs, Portland, argued the cause and filed the
briefs for petitioner on review.

	Ralph C. Spooner, of Spooner &amp; Much, P.C., Salem, argued the
cause for respondent on review.  With him on the briefs was Mary
Kim Wood.

	Annette E. Talbott, Portland, filed briefs on behalf of
amicus curiae Oregon Trial Lawyers' Association.

	Before Carson, Chief Justice, and Gillette, Van Hoomissen, 
Durham, and Kulongoski, Justices.**

	VAN HOOMISSEN, J.

	The decision of the Court of Appeals is reversed, and the
case is remanded to that court to consider petitioner's cross-appeal.

	*Appeal from Multnomah County Circuit Court,

	 Lee Johnson, Judge.

	 138 Or App 568, 910 P2d 397 (1996).

	**Fadeley, J., retired January 31, 1998, and did not
participate in this decision; Graber, J., resigned March 31,
1998, and did not participate in this decision.

		VAN HOOMISSEN, J.

		This is a landlord-tenant personal injury action.  We
address two questions on review:  First, do the habitability
requirements of the 1991 version of the Oregon Residential
Landlord and Tenant Act (RLTA), ORS 90.100 et seq. (1991) require
that a tenant prove that the landlord knew or should have known
of an alleged habitability violation?  Both the circuit court and
the Court of Appeals concluded that the 1991 RLTA requires proof
of actual or constructive knowledge.  Coulter Property
Management, Inc. v. James, 138 Or App 568, 910 P2d 397 (1996). 
However, we recently reached the opposite conclusion in Davis v.
Campbell, 327 Or 584, 965 P2d 1017 (1998).  Accordingly, we
reverse that part of the Court of Appeals' decision without
further discussion.

		The second question is whether the principles set out
in section 358 of the Restatement (Second) of Torts (1965), 
should continue to govern a landlord's common-law liability to a
tenant.  The circuit court chose not to apply section 358 and,
instead, applied a general foreseeability standard.  The Court of
Appeals reversed, concluding that section 358 is the appropriate
source of law.  Coulter Property Management, 138 Or App at 573-74.  
As discussed below, we disagree with that conclusion as
well.  Accordingly, we reverse the decision of the Court of
Appeals and remand the case to that court to consider tenant's
cross-appeal.

		The following facts are undisputed.  Samuel James
(tenant) leased a unit in the Mitchell Court Apartments in
Portland beginning in July 1992.  Coulter Property Management,
Inc. (landlord) had been managing those apartments since January
1992.  In February 1993, tenant was injured when he and two
guests fell from the unit's second-story balcony after the
balcony's railing came loose.  Neither tenant nor landlord knew
that the railing, which had been inspected on various earlier
occasions, presented a safety hazard.  After the incident, tenant
failed to pay rent when due, and landlord brought a forcible
entry and detainer action.

		In response, tenant filed counterclaims against
landlord including a common-law negligence claim and a statutory
claim for damages under the RLTA.  The thrust of tenant's
negligence claim was that landlord had failed to inspect the
railing or properly maintain it.  In defense, landlord argued
that it had no notice of any defect in the railing and that
tenant had been engaging in horseplay with his guests on the
balcony and was intoxicated when the accident occurred.

		Before trial, landlord dismissed its forcible entry and
detainer claim.  Proceedings before the jury, therefore, involved
only tenant's counterclaims.  At the close of tenant's case,
landlord moved for a directed verdict against the RLTA claim. 
The circuit court allowed that motion, but permitted tenant to
amend his common-law negligence counterclaim to include the
alleged RLTA habitability violations as specifications of
landlord's negligence.  As a result of those and other motions
and stipulations concerning tenant's claims, the circuit court
submitted to the jury only tenant's negligence claim, augmented
by the RLTA-based specifications of negligence.

		A disagreement arose as to the proper standard of care
that a landlord owes a tenant under the common law.  Landlord
argued that section 358 of the Restatement provides the
appropriate standard.  Based on that argument, landlord proffered
two instructions, which provided in part:

		"Under Oregon law, Coulter Property Management, as
the managers of the apartment complex where Mr. James
lived, may by liable to Mr. James under this claim of
negligence only if all of the following conditions are
proven:

		"1.  First, the condition that Mr. James is
complaining of, that is the deck and railing, must
involve an unreasonable risk of physical harm to the
tenant;

		"2.  Second, Mr. James, as a tenant, must not know
or have reason to know of the condition or the risk
involved;

		"3.  Third, Coulter Property Management, as
managers of the apartment complex, must know of or have
reason to know of the condition and realize or should
realize the risk involved; and 

		"4.  Fourth, the apartment manager must have
reason to expect that the tenant will not discover the
condition or realize the risk.

		"Under a common law claim for negligence, a
property manager does not have a duty to inspect the
tenant's apartment for dangerous conditions.  In order
for a property manager to be liable for concealing or
failing to disclose an unreasonably dangerous
condition, it is not enough that the dangerous
condition is one which might be discovered by a
reasonable inspection of the premises. * * *"(1)  

		The circuit court rejected landlord's proposed
instructions and instead gave a general instruction on negligence
as follows:

		"In general, it is the duty of everyone in our
society to use reasonable care to avoid injury to
themselves and to others.  Reasonable care is that care
which persons of reasonable prudence exercise in the
conduct of their own affairs.

		"Negligence is the doing of some act which a
reasonably prudent person would not do or the failure
to do something which a reasonably prudent person would
do under similar or -- under the same or similar
circumstances to avoid injury.  The care should be in
keeping with that required at the time and
circumstances of the incident in question, not in the
light of hindsight."

		The jury found for tenant, awarding him $32,892.60 in
economic damages and $333,000.00 in noneconomic damages.  
Landlord appealed from the judgment entered on the jury's verdict
and from a supplemental judgment awarding tenant attorney fees
under the RLTA and costs.  Tenant cross-appealed from the
supplemental judgment, challenging the sufficiency of the trial
court's award of attorney fees. 

		The Court of Appeals reversed and remanded, concluding
that the circuit court erred by failing to instruct the jury
based on the Restatement:

		"In sum, the trial court erred in giving a
standard negligence instruction instead of landlord's
special instruction * * * which was based on section
358 of the Restatement.  The pertinent question in this
case is whether landlord had 'reason to know' about the
allegedly dangerous condition of the balcony railing,
specifically, whether landlord's annual inspections
were negligently performed and as a result failed to
uncover existing defects.  However, because of the
manner in which the court instructed the jury, that
question was neither asked nor answered."  Coulter
Property Management, 138 Or App at 574.

		The Court of Appeals also concluded that, although the
circuit court properly had struck tenant's RLTA claim, because
landlord had no notice of the railing's defect, the trial court
erred "when it allowed that same claim to go forward under a
different label," i.e., negligence per se.  Id. at 574-75.  As
noted, the premise underlying that ruling was incorrect.  The
Court of Appeals also held that the circuit court erred by
refusing landlord's request to poll the jury as to each question
on the special verdict form, rather than as to only the broader
question whether each juror agreed with the verdict.  Id. at
575.(2)  Finally, because the Court of Appeals earlier had
determined that tenant "had no legal basis for a claim under the
RLTA," the court refused to consider tenant's cross-appeal
regarding attorney fees.  Ibid.

		On review, tenant makes three arguments concerning the
Restatement's continuing applicability.  First, he argues that,
by framing the "pertinent question" to be whether landlord should
have known about the defect, 138 Or App at 574, the Court of
Appeals failed to capture the total import of section 358 and
landlord's proposed instructions.  Tenant is correct.  Applying
section 358 and using landlord's instructions would have required
tenant to prove, among other things, that landlord knew or should
have known of the defective railing and that tenant himself
neither knew nor should have known about the defect.  The Court
of Appeals' analysis, therefore, was incomplete.  Agreeing with
tenant on this point, however, does not advance meaningfully our
effort to answer the question on review, namely, should the court
continue to follow the approach of section 358 in landlord-tenant
cases?

		Tenant next argues that we should disavow the
Restatement as a statement of the common law in Oregon, because
the standard that the Restatement espouses is inconsistent with
the habitability provisions of the RLTA, which the legislature
enacted after the court adopted section 358.  With respect to the
interplay between the RLTA and existing common law, this court
stated in Davis:  

		"Given the lack of contrary legislative intent, a
tenant may choose to maintain claims of common-law
negligence and statutory liability against a landlord
in the same action."  327 Or at 592 (citing Bellikka v.
Green, 306 Or 630, 638, 762 P2d 997 (1988)).  

See also Jones v. Bierek, 306 Or 42, 46, 755 P2d 698 (1988)
(rejecting argument that "the Legislative Assembly intended [the]
RLTA to be the exclusive source of a tenant's remedies against a
landlord").  Accordingly, simply because the RLTA imposes certain
affirmative duties on landlords does not necessarily mean that
those duties automatically supplant the common law.  

		Finally, tenant argues that we should reject section
358, because the legal standard that that section espouses
includes elements of traditional contributory negligence and
implied assumption of the risk, concepts that the legislature has
abolished.(3)  In response, landlord contends that section 358

	"merely places the burden on the tenant, as the person
in the best position to know after the tenancy
commences, to become aware of defects in the tenant's
unit and to notify the landlord of any defects when
they are discovered."

We agree with tenant.  We hold that section 358 of the
Restatement (Second) of Torts (1965) no longer accurately states
the common law of Oregon. 

		As an initial matter, accepting tenant's argument
necessarily requires that we reconsider a prior common-law rule. 
Although the court has changed common-law rules from time-to-time, 
see Hammond v. Central Lane Communications Center, 312 Or
17, 26 n 7, 816 P2d 593 (1991) (collecting cases), it "will not
lightly overturn precedent, especially when the precedent has
been followed for a long time," id. at 26.  This court will
reconsider a court-created rule or doctrine if "surrounding
statutory law or regulations have altered some essential legal
element assumed in the earlier case."  G.L. v. Kaiser Foundation
Hospitals, Inc., 306 Or 54, 59, 757 P2d 1347 (1988) (setting out
other circumstances as well).  See also Heino v. Harper, 306 Or
347, 373-74, 759 P2d 253 (1988) (following analysis in abolishing
doctrine of interspousal immunity); Dahl v. BMW, 304 Or 558, 567-68, 748 
P2d 77 (1987) (enactment of comparative fault statutes
supported reexamination of prior decision rejecting failure to
wear safety belt as defense).  As we explain below, such a
circumstance is present in this case.

		This court has paraphrased section 358 as follows:

	"[A] landlord is liable if he fails to disclose to his
lessee any condition which involves an unreasonable
risk of harm if (a) the lessee has no reason to know of
the condition or risk and (b) the lessor has reason to
know of the condition and should realize the risk
involved and has reason to expect that the lessee will
not discover the condition or realize the risk." 
Richards v. Dahl, 289 Or 747, 749, 618 P2d 418 (1980)
(emphasis added).

The court first generally acknowledged section 358 and its
counterparts in 1968, shortly after the American Law Institute
adopted the Restatement (Second) of Torts.  See Macomber v. Cox,
249 Or 61, 69-70, 435 P2d 462 (1968) ("The rules applicable to
the lessor-lessee relationship are stated in the Restatement
(Second) of Torts, §§ 356-62 (1965)."); id. at 70 n 9 (citing and
quoting section 358). 

		As Macomber indicates, section 358 does not exist in
isolation.  Instead, it states one of several "exceptions" to
what the Bellikka court described as the "rule of immunity" set
out in section 356 of the Restatement.  306 Or at 643.  Section
356 provides:

		"Except as stated in §§ 357-362, a lessor of land
is not liable to his lessee or to others on the land
for physical harm caused by any dangerous condition,
whether natural or artificial, which existed when the
lessee took possession."

That rule, which also is known as "caveat lessee," is grounded on
the following rationale:

		"When land is leased to a tenant, the law of
property regards the lease as equivalent to a sale of
the land for the term of the lease.  The lessee
acquires an estate in the land, and becomes for the
time being the owner and occupier, subject to all of
the liabilities of one in possession, both to those who
enter the land and those outside of it."  Restatement
(Second) of Torts, § 356, comment a (1965).

		This court has not adopted the rule stated in section
356 as the law in Oregon.  In Jensen v. Meyers, 250 Or 360, 363,
441 P2d 604 (1968), this court rejected section 356, stating: 
"The property concept standing alone is not a satisfactory
explanation for immunizing the lessor from liability."  In
articulating a different standard, the Jensen court noted that
the exceptions to section 356, sections 357-362, recognized that
tenants likely will not remedy hazards created by a lessor and
that "the lessor is made liable upon the well accepted principle
that one is liable for reasonably foreseeable harms."  250 Or at
363.  The court concluded:  

	"But this is not to say that the lessor should be
liable in every case where a dangerous condition exists
at the time of leasing the premises.  As one court has
expressed it, '* * * the nature of the defect might be
such that the landlord would reasonably expect that the
tenant would take steps to remedy the defect or
otherwise to safeguard persons entering them at his
invitation.'" Id. at 363-64 (ellipsis in original).

In Bellikka, this court reaffirmed the standard set out in Jensen
as "a sound premise for determining liability to 'others on the
property' of leased premises."  306 Or at 647.  However, the
court expressly limited that decision "to a discussion of the
proper basis of potential liability for landowners with respect
to visitors who are on the property at the invitation of the
tenant."  Id. at 640.

		Unlike section 356, this court has approved section 358
as a statement of Oregon common law.  See Lapp v. Rogers, 265 Or
586, 588, 510 P2d 551 (1973) (stating the rule); Richards, 289 Or
at 749 (applying the rule and stating that "[w]e have previously
stated that the principles announced in the Restatement of Torts
(Second) reflect our views of the law governing the liability of
a landlord to a tenant").(4)  The concurring opinion in Richards
noted that the court's decision in Lapp predated the
legislature's abolition of the doctrine of implied assumption of
risk in 1975, that section 358 arguably "carries with it some of
the trappings of implied assumption of risk[,]" and that, if it
does, "this court could no longer analyze the liability of
landlord to tenant under that section."  Richards, 289 Or at 755
(Lent, J., concurring).  This case presents the issue posed by
the concurrence in Richards.

		As landlord's proffered instructions indicate, section
358 provides that, if tenant either knew or should have known
that the railing presented a safety hazard, he would be barred
from any recovery.  See Lapp, 265 Or at 588 ("If the common law
rules defining the lessor's duty are applicable, then the
demurrer was properly sustained because the complaint alleges as
the cause of injury a condition which would be known to
plaintiff.").  At a minimum, such a regime would revitalize the
concept of contributory negligence, because a tenant is precluded
from any recovery if the tenant knew or should have known either
of the condition or the risk involved, even if the tenant's fault
or negligence is less than the landlord's.  ORS 18.470 precludes
such a result.  In other words, ORS 18.470 alters an "essential
legal element assumed in the earlier case," Kaiser Foundation
Hospitals, 306 Or at 59, i.e., the propriety of a liability
scheme that includes contributory negligence as an element.

		Two decisions of this court support our conclusion. 
Nylander v. State of Oregon, 292 Or 254, 637 P2d 1286 (1981),
involved a wrongful death action in which a personal
representative alleged that the state negligently had failed to
post warnings about the icy condition of a bridge.  The trial
court had instructed the jury that, if it found that the decedent
either knew or reasonably should have known of the nature and
extent of the danger, then the state had no duty to warn.  Id. at
257.  This court held the instruction erroneous, reasoning, in
part, as follows:

		"Although the instruction * * * asked the jury to
consider what [the decedent] actually knew when she
drove onto the bridge, it could well be understood to
state a defense of implied assumption of the risk that
was abolished by ORS 18.475. * * * Insofar as the
instruction asked the jury to decide what she
'reasonably' should have known when she did so, it
could be understood to state a defense of contributory
negligence.  But any contributory negligence on her
part would be relevant only as 'comparative fault'
under ORS 18.470, whether or not it is the kind of
negligence that before ORS 18.475 was described as
implied assumption of the risk."  Nylander, 292 Or at
260 (citation omitted).

		In Woolston v. Wells, 297 Or 548, 687 P2d 144 (1984),
the plaintiff sought damages for injuries he sustained when he
fell while ascending stairs to deliver a television to the
landlord's tenant.  The trial court instructed the jury on the
basis of the Restatement (Second) of Torts, §§ 343(b) and
343(A)(l) (1965).  Woolston, 297 Or at 551-52.  Those sections
provide, respectively:

		"A possessor of land is subject to liability for
physical harm caused to his invitees by a condition on
the land if, but only if, he:

		"* * * * *

		"(b) should expect that they will not discover or
realize the danger, or will fail to protect themselves
against it * * *."

		"A possessor of land is not liable to his invitees
for physical harm caused to them by any activity or
condition on the land whose danger is known or obvious 
to them, unless the possessor should anticipate the
harm despite such knowledge or obviousness."  

This court held both instructions invalid.  The instruction based
on section 343(b) "frustrate[d] the purpose of instituting a
system of comparative fault," 297 Or at 556, while the
instruction based on section 343(A)(1) "introduce[d] the concept
of assumption of risk into the liability calculus," id. at 555. 
Tenant argues that section 358 "should suffer the same fate" as
the Restatement sections at issue in Woolston.  We agree.

		One final point bears mentioning.  We do not mean by
our decision to state or imply that evidence of a tenant's actual
or constructive knowledge is irrelevant to a landlord-tenant
negligence action.  Rather, as the court stated in Woolston:  "In
determining and comparing fault, the jury must necessarily
consider the obviousness of danger and the ease or difficulty
with which harm to the plaintiff from that danger could be
avoided by either party."  297 Or at 558; see also id. at 559-61
(Peterson, C.J., concurring) (emphasizing point).  We hold only
that a tenant's actual or constructive knowledge of a dangerous
condition does not determine, as a matter of law, the nature or
extent of a landlord's obligations to the tenant.  

		For those reasons, landlord was not entitled to have
the jury instructed based on the instructions it proffered to the
trial court, and the Court of Appeals' conclusion to the contrary
constituted error.  See Hernandez v. Barbo Machinery Co., 327 Or
99, 106, 957 P2d 147 (1998) (refusal to give requested jury
instruction is not error "if the requested instruction is not
correct in all respects").  Because landlord did not except
separately to the trial court's general foreseeability
instruction as improper, we do not assess the propriety of that
instruction in this case.  Finally, because we conclude that the
Court of Appeals erred in its interpretation of the RLTA, it
should have considered tenant's cross-appeal concerning attorney
fees.  We express no view as to the merits of that issue.

		The decision of the Court of Appeals is reversed, and
the case is remanded to that court to consider petitioner's
cross-appeal.

1. 	Restatement (Second) of Torts § 358 (1965) provides:

		"(1) A lessor of land who conceals or fails to
disclose to his lessee any condition, whether natural
or artificial, which involves unreasonable risk of
physical harm to persons on the land, is subject to
liability to the lessee and others upon the land with
the consent of the lessee or his sublessee for physical
harm caused by the condition after the lessee has taken
possession, if  

		"(a) the lessee does not know or have reason to
know of the condition or the risk involved, and 

		"(b) the lessor knows or has reason to know of the
condition, and realizes or should realize the risk
involved, and has reason to expect that the lessee will
not discover the condition or realize the risk.

		"(2) If the lessor actively conceals the
condition, the liability stated in Subsection (1)
continues until the lessee discovers it and has
reasonable opportunity to take effective precautions
against it.  Otherwise the liability continues only
until the lessee has had reasonable opportunity to
discover the condition and to take such precautions."

2. 	On review, the parties debate the propriety of that
ruling.  In particular, they disagree whether the "we can't tell"
rule of Whinston v. Kaiser Foundation Hospital, 309 Or 350, 788
P2d 428 (1990), should apply to this case and, if so, whether the
court should continue to adhere to that rule.  Given our
disposition of the other issues on review, we need not address
those questions.

3. 	ORS 18.470 provides in part:

		"(1) Contributory negligence shall not bar
recovery in an action by any person or the legal
representative of the person to recover damages for
death or injury to person or property if the fault
attributable to the claimant was not greater than the
combined fault of all persons specified in subsection
(2) of this section, but any damages allowed shall be
diminished in the proportion to the percentage of fault
attributable to the claimant. This section is not
intended to create or abolish any defense."

ORS 18.475(2) provides:

		"The doctrine of implied assumption of the risk is
abolished."

4. 	The court repeatedly has stated that "[t]he exact
formulations of the Restatements are not necessarily
authoritative statements of the law of this state[.]"  Anderson
v. Fisher Broadcasting Co., 300 Or 452, 460, 712 P2d 803 (1986);
see also U.S. National Bank v. Fought, 291 Or 201, 227, 630 P2d
337 (1981) (Linde, J., concurring) ("it is misleading to speak of
pleading or proving a cause of action 'under' [a Restatement
section], at least until this court has firmly said that the
cited section corresponds to the law in Oregon").  Even when the
court decides that a particular Restatement principle corresponds
to Oregon law, the court does not "enact the exact phrasing of
the Restatement rule, complete with comments, illustrations, and
caveats."  Brewer v. Erwin, 287 Or 435, 455 n 12, 600 P2d 398
(1979).  Accordingly, this court's reliance on section 358 in
Lapp and Richards must be viewed in that light.