Court Opinion

ID: 9537557
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:19:53.938394+00
Date Added: 2024-06-11T14:56:46.606383
License: Public Domain

WARDEN, J.,
dissenting.
Because I am satisfied that the trial court did not err in finding the parties’ agreement to refund to plaintiff a portion of the premium it paid for workers’ compensation insurance to be illegal and therefore unenforceable, I am unable to join the majority. Therefore, I dissent.
The parties’ rebate agreement clearly violates ORS 746.035 and ORS 746.045, because it is not included in the policy of insurance. The majority, however, although it recognizes the agreement’s illegality, finds it enforceable. In doing so, the majority quotes from Hendrix v. McKee, 281 Or 123, 128, 575 P2d 134 (1978):
“It is often stated that courts will not enforce ‘illegal’ contracts. This is an oversimplification of a legal principle, the application of which often involves construction of statutes and contractual provisions, delineation and balancing of public policies, and a difficult sorting and sifting process.”
No mention is made by the majority of the first sentence of the paragraph immediately following the above quoted language in Hendrix. It says:
“If the consideration for the contract or its agreed purpose is illegal or against public policy on its face, it will not be enforced. ” 281 Or at 128. (Emphasis supplied.)
Defendant agreed to a rebate of a portion of the premiums paid by plaintiff; plaintiff agreed to receive the rebate. Those terms were not set out in the written contract of insurance. On its face, the agreed purpose is illegal as clearly violating ORS 746.035 and ORS 746.045. It is also against the public *322policy embodied in those statutes. Under the rule stated in Hendrix, it is not enforceable.
The majority, in quoting from Uhlmann v. Kin Daw, 97 Or 681, 689, 193 P 435 (1920), again omits a significant sentence, which immediately proceeds the quoted portion:
“If a statute having a penalty and a prohibition, express or implied, or only a penalty or only a prohibition, is silent and otherwise contains nothing from which the contrary is to be inferred, then an agreement which conflicts with the statute is void.”
ORS 746.035 and 746.045 expressly prohibit making agreements such as plaintiff seeks to enforce and, as the majority amply points out, ORS chapter 731 provides a variety of penalties for violations. ORS 746.035 and 746.045 are silent as to whether an agreement in conflict with them is void, and I find nothing from which it may be inferred that such an agreement is not void. The majority draws an inference from the wide variety of sanctions and penalties available to the Insurance Commissioner in ORS chapter 731. In other words, it infers from the fact that there are penalties that the agreement is not void and therefore unenforceable. Making that inference is directly contrary to the rule in Uhlmann, the case on which the majority purports to rely, which is that an agreement in violation of a statute is void if the statute has a penalty or prohibition, unless the statute says that it is not or contains something from which it may be inferred that it is not.
In Uhlmann the defendant sought to abate the foreclosure of a mortgage on the ground that the plaintiffs had failed to file an assumed name certificate in the county in which the mortgage was executed prior to its execution. The statute involved prohibited conducting business under an assumed name unless a certificate setting forth the true and real name or names of the party or parties conducting the business had been filed in the office of the county clerk of the county in which the business was to be conducted. The statute further provided that such persons were not entitled to maintain any suit or action without alleging and proving that an assumed name certificate had been filed. The plaintiffs in Uhlmann had filed an assumed business name certificate after the mortgage was executed but before bringing suit to foreclose it.
*323The Supreme Court, in finding that plaintiffs failure to file the assumed name certificate before the mortgage was executed did not render the mortgage void, said:
“Our conclusion is that failure to file the certificate affects only the qualification of the person to sue, and that upon filing a certificate the disqualification is removed, and a suit or action may be maintained on a contract made before or after such filing.” 97 Or at 695.
The court, in discussing legislative intent, said:
“Here the primary purpose is, not to prevent business, but to require the performance of a statutory duty which is entirely collateral to any agreement that may arise out of any business transaction.” 97 Or at 692-93.
Clearly, the statute involved in Uhlmann did not prohibit the making of mortgage contracts, but, as construed by the court, merely affected the capacity of parties to sue.
The purpose of the statute in this case is quite different. It does not require the performance of the statutory duty which is collateral to the agreement involved but prohibits the making of the very agreement that plaintiff seeks to enforce. The majority states, “[T]he insurance statutes do not declare a rebate agreement void or unenforceable.” But see ORS 746.035; 746.045. How much more clearly must the legislature speak? That the making of “under the counter” rebate agreements like the one plaintiff seeks to enforce is clearly prohibited by those statutory sections makes it clear enough that the legislature meant to allow no effect to be given, rebate agreements, unless they were part of the form of the insurance policies which the legislature required to be submitted to the Insurance Commissioner for his approval or disapproval pursuant to ORS 743.006 and 743.009.
Interestingly, the majority makes no mention of Hunter v. Cunning, 176 Or 250, 154 P2d 562, 157 P2d 510 (1945). In that case, the defendant was the personal representative of a Mrs. Wells who, with her husband, had entered into a written agreement employing the plaintiff to procure a purchaser for her timber lands and agreed to pay him a commission of 5 percent. Plaintiff found a purchaser and transmitted the offer of purchase to Mrs. Wells and her husband, who *324rejected it. Mrs. Wells and her husband continued negotiations with the purchaser and, in fact, completed the sale. In Hunter
“[t]he sale was consummated solely through the employment and efforts of Hunter as the procuring cause thereof, and he fully performed his contract of employment, except that Mrs. Wells, in an effort to escape payment of Hunter’s commission, prevented him from fully consummating the sale, by pretending to reject the offer obtained by him, and secretly, without his knowledge, effecting a sale of the property to [the purchaser procured by Hunter].” 176 Or at 253.
Hunter brought the action for his commission. During the trial, defendant moved for a directed verdict on the ground that the plaintiff was not a licensed real estate broker during the time that he was carrying on negotiations for the sale. The motion was overruled, and the plaintiff recovered judgment. On appeal, the judgment of the trial court was reversed, the Supreme Court holding that the motion for directed verdict should have been sustained, because the plaintiff had procured the purchaser three days before he had secured his broker’s license.
In Hunter, the respondent relied heavily on Uhlmann v. Kin Daw, supra, much as the majority does in this case. The Supreme Court carefully analyzed Uhlmann and distinguished it, stating “that the rule, which avoids a contract made in contravention of a statute, will always be applied when the statute is intended for the protection of the public against those evils which we know from experience society must be guarded against by protective legislation.” 176 Or at 287. The statute in this case is just such a statute. The majority recognizes that the statute has such a purpose but mistakenly uses that as a reason for holding the illegal agreement to be enforceable. Citing ORS 731.008, it proclaims that to hold the agreement of these parties to be unenforceable “would not be consistent with the purpose of the Insurance Code, which is to protect the insurance-buying public.” How strange! It is for precisely that reason that the agreement should be held unenforceable, because one of the very clear pu rposes of ORS 743.035 and 743.045 is to prevent a party, such as this plaintiff, from securing an advantage in rates that is not available to members of “the insurance-buying public.”
*325Because I would find the contract unenforceable, I would also affirm the trial court’s dismissal of plaintiffs claim for reformation.
Because the majority finds this agreement enforceable, it says it was error to dismiss plaintiffs fraud claims. But a contract such as this, being void as against public policy, cannot serve as a basis for an action for deceit. Thielsen v. Blake, Moffitt & Towne, 142 Or 59, 65, 17 P2d 560 (1933).
As the majority recognizes, “the legislature has given the Commissioner broad powers of investigation and an array of sanctions.” Included are those contained in ORS 731.988. ORS 731.988(1) provides for civil penalties to be paid to the general fund of the state by “any person who violates any provision of the Insurance Code” in an amount to be determined by the Commissioner and sets limits on the amounts thereof. ORS 731.988(2) provides:
“In addition to the civil penalty set forth in subsection (1) of this section, any person who violates any provision of the Insurance Code * * * may be required to forfeit and pay to the General Fund of the State Treasury a civil penalty in an amount determined by the commissioner but not to exceed the amount by which such person profited in any transaction which violates any such provision * * *.”
We would do better to let the Commissioner, who is charged with the duty to regulate rebates, apply his expertise to determine, what, if any, sanctions are necessary to protect the insurance-buying public. That is his work.
The trial court did not err and should be affirmed.
I respectfully dissent.
Gillette and Warren, JJ, join in this dissent.