Opinion ID: 1414812
Heading Depth: 1
Heading Rank: 3

Heading: The burden of pleading and proof.

Text: As previously noted, plaintiff's sole assignment of error is that the trial court erred in denying its motion for a directed verdict on Count I of its complaint for the reason that plaintiff did not plead the invalidity of the liquidated damage clause. In other words, plaintiff does not deny that there was sufficient evidence to support that finding by the jury, but contends that it is entitled to judgment for $17,500 because defendants did not plead that defense. In support of that contention plaintiff says that the weight of authority in the United States is to the effect that the defendant has the burden of not only proving, but also pleading, that a liquidated damage clause is invalid as a penalty, citing cases from other states. In addition, plaintiff cites our decision in Wright v. Schutt Construction Co., 262 Or. 619, 629, 500 P.2d 1045 (1972), as holding that this question is open for decision in Oregon and also cites our decision in Chaffin v. Ramsey, 276 Or. 429, 435-36, 555 P.2d 459 (1976), as indicating that in future cases it might recognize a more liberal rule in favor of liquidated damages. The difficulty with plaintiff's position is that although there may be merit in its contention that in future cases (i.e., cases decided after Chaffin ) this court should adopt the view that the defendant has such a burden of pleading and proof, it would appear that the law of Oregon at the time this case was tried was to the effect that the burden was upon the plaintiff to prove that a liquidated damage clause in a contract was not invalid as a penalty. It is apparent that both defendants' attorney and the trial judge in this case proceeded upon that understanding. If defendants were correct in that understanding and had no good reason to believe at the time of the trial of this case that this court was considering a change in the rules of the game, so as to impose upon defendants the contrary burden of pleading and proof, we believe that defendants should not be penalized by a subsequent change in that rule. Prior to the decision of this court in Wright it had been held in a series of cases that the burden is upon the plaintiff to prove that a contract provision for liquidated damages is not invalid as a penalty. [4] In Wright, however, we said (262 Or. at 629, 500 P.2d at 1050) that:    Because such evidence was offered by plaintiff we need not decide in this case whether, in the usual case, the plaintiff may have the burden to offer evidence to sustain such a payment as one of liquidated damages, rather than as a penalty, or whether the defendant may have the contrary burden. We do not believe, however, that this was a sufficient red flag so as to warn trial lawyers and trial judges that this court was about to change the rules of pleading and proof of liquidated damages. Indeed, in the next two cases decided after Wright involving liquidated damages this court did not change that rule, but continued to impose that burden upon the plaintiff. [5] Chaffin was not decided until after the trial of this case and in Chaffin it was expressly recognized that such was the law of Oregon as of that date in an opinion which refused to repudiate that rule. Indeed, it was not until Chaffin that it was suggested (276 Or. at 429, 555 P.2d at 463) that in Wright this question is treated as still open for decision. And it was not until our decision in Layton Manufacturing v. Dulien Steel, 277 Or. 343, 560 P.2d 1058 (1977), that this court said (at 348-49, 560 P.2d at 1061) that: We recently recognized in Chaffin v. Ramsey, supra [276 Or. 429, 555 P.2d 459 (1976)] that the better rule may be to assign the burden of proof to the defendant in cases where defendant resists the enforcement of an agreed damages provision. In Chaffin, it was unnecessary to adopt such a rule due to the evidentiary posture of that case. Although this court is not unanimous in its views upon this subject, [6] it is now the opinion of the majority of its members that this court should adopt what was referred to in Chaffin (at 436, 555 P.2d 459) as the modern view to the effect that parties who negotiate the terms of a contract may properly include a provision for liquidated damages and that, in the absence of proof of oppression or adhesive circumstances, the defendant should have the burden to both plead and prove that such a contract provision is invalid for failure to satisfy the two requirements of the rule as stated in Restatement of Contracts § 339, supra, and as previously adopted by this court. [7] As previously stated, however, and as also recognized in Chaffin (at 435, 555 P.2d 459), the rule on this subject in Oregon at the time of that decision, and at the time of the trial of this case, was that the burden of proof was upon the plaintiff to plead and prove that a contract provision for liquidated damages was not invalid for failure to satisfy those requirements. As also previously noted, even if the burden be placed upon the defendants in this case there was ample evidence to sustain such a burden of proof. Under these circumstances, we believe that it would be unfair to the defendants to reverse the verdict of the jury and the judgment of the trial court and to order that judgment be entered in favor of plaintiff for $17,500 in liquidated damages solely because defendants did not plead as an affirmative defense the invalidity of the contract provision for liquidated damages. Although not directly in point, this is also in accord with the holding in Chaffin in which substantially the converse situation was presented and it was held (at 436, 555 P.2d 459) that even though the plaintiff in that case had the burden to prove that the contract provision for liquidated damages in that case satisfied the Restatement requirements for its validity, in accordance with the established rule in Oregon at that time, the evidence in that case clearly established that such requirements were satisfied, so as to require the entry of judgment in favor of plaintiff in that amount and the reversal of findings and judgment by the trial court to the contrary. Despite the fact that this case was tried prior to our decisions in Chaffin and Layton, it may be that plaintiff would be entitled to a new trial if it had sought a new trial based upon error not only in the denial of its motion for a directed verdict, but also in instructions to the jury. It would appear, however, that plaintiff has made a deliberate choice not to seek a new trial, perhaps for the reason that the jury might well return the same verdict under the same evidence, even though the invalidity of the liquidated damage clause was pleaded as an affirmative defense and even though it was instructed that the burden was upon the defendants to establish such a defense. Instead, plaintiff has taken an all or nothing position by limiting its appeal to the contention that it was entitled to a directed verdict for the full amount of the liquidated damages in the sum of $17,500, despite the fact that there was evidence sufficient to support the finding of the jury that the contract provision for liquidated damages was invalid and based solely upon the contention that defendants failed to affirmatively plead such defense, which defendants were not required to do at the time of the trial of this case. For the reasons previously stated, we reject that contention and affirm the judgment of the trial court.