Court Opinion

ID: 9550386
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:34:50.866445+00
Date Added: 2024-06-11T15:21:28.760765
License: Public Domain

*204RICHARDSON, J.,
concurring in part; dissenting in part.
I disagree with the majority’s holding that Epstein is not entitled to attorney fees under the contractual provision. Unlike the plaintiff in Pickinpaugh v. Morton, 268 Or 9, 519 P2d 91 (1974), and the counterclaiming defendant in Bodenhamer v. Patterson, 278 Or 367, 563 P2d 1212 (1977), Epstein did not seek a judicial nullification of the contract’s existence. His “disaffirmance” was simply a defense to liability in plaintiffs action on the contract. I dissent from the part of the majority’s opinion which extends Pickinpaugh and Bodenhamer to reach these facts.
The case the majority cites which is closest to the point is Anaheim Co. v. Elliott, 45 Or App 597, 609 P2d 382 (1980), where we held that the defendant was entitled to attorney fees under the provision for them in a mortgage which he disaffirmed. The essence of the dispute in Anaheim was somewhat analogous to the controversy here. The defendant resisted the plaintiffs claim for foreclosure of the mortgage, and counterclaimed for its cancellation, on the grounds that the plaintiff had fabricated the sales transaction which the mortgage putatively secured and had substituted pages in the transaction documents without the defendant’s knowledge.
The reason why the counterclaim did not have to be tried was that, in rejecting the plaintiffs foreclosure claim, the court released the defendant’s property from the lien of the mortgage, because it found “that there was no agreement between the parties giving rise to a mortgage.” 45 Or App at 603. We concluded that the counterclaim was “effectively mooted by the dismissal of the cause of suit for foreclosure and by the court’s direction that the recorded lien be expunged.” 45 Or App at 604. The defendant prevailed on the plaintiff s claim through what was, in substance if not in name, a defense based on the invalidity of the mortgage under which the defendant sought and was awarded attorney fees. The factual basis for the defense was identical to the grounds for the defendant’s rescission counterclaim, which was not tried. Stated otherwise, the defendant prevailed on his defense that the mortgage was a nullity rather than on his counterclaim that it was a nullity.
*205The majority criticizes my reliance on Anaheim and quotes certain language from that opinion which, read in isolation, it regards as inconsistent with Bodenhamer. However, the majority does not respond to the central point in Anaheim or to the central point of this dissent: There is a difference between a defense to an action on a contract and a claim or counterclaim through which a party seeks to have the court declare that the contract never did or no longer does exist. The majority cites no case which has applied the Pickinpaugh-Bodenhamer rule against a party who has done no more than raise a defense which “disaffirms” a contract. The majority does not acknowledge that, by applying the rule in that way, it is extending the rule rather than following it. Consequently, the majority offers no response to my reasons for concluding that the rule should not have the new application which the majority gives it.
It may be that, as a practical matter, a successful defense based on a contract’s invalidity may leave the contract in as unenviable a posture as a successful counterclaim seeking that it be declared invalid. However, the distinction is a meaningful one in connection with what a defendant is attempting to achieve in an action and in connection with the rationale for Pickinpaugh v. Morton, supra, and its progeny. An invalidity defense, raised solely for purposes of avoidance, cannot result in an adjudication that the contract does not exist; if the defense succeeds, the defendant is not liable, but the existence of the contract is not directly affected by the court’s judgment. The majority correctly observes that, under Pickinpaugh and related cases, the rationale for not awarding attorney fees is that, when a contract is declared non-existent, there is no longer a contractual provision on which to base an award of fees. Whatever merit that rationale may have when the litigation does result in a determination that there is no contract, the rationale loses much of its force when the judgment determines only the defendant’s lack of liability or responsibility and not the non-existence of the contract itself.
There is far more legal fiction than reality to the notion that a contractual attorney fee provision disappears when a court rescinds or otherwise nullifies the contract. It is likely that the intent of most parties to contracts containing such provisions is that the losing party should pay the other’s attorney fees in any litigation arising out of the contractual *206relationship, regardless of the nature of the parties’ claims. See Pickinpaugh v. Morton, supra, 268 Or at 18-19 (O’Connell, C.J., dissenting). Be that as it may, the notion that the attorney fee provision disappears becomes wholly untenable when, as here, the remainder of the contract does not disappear by virtue of the judgment that the defendant seeks and the court gives.
A prevailing defendant who does not seek rescission or other relief which negates the contract should not be treated differently for purposes of attorney fees depending on the nature of his defense. Whether the defense falls on one side of the “disaffirmance” line or the other, the defendant is obliged to go to court and defend against the plaintiffs action. When there is no counterclaim, the parties’ efforts are directed entirely at prosecuting or resisting the plaintiffs claim. If the plaintiff prevails, he is entitled to attorney fees; under the majority’s holding, the defendant is not entitled to attorney fees if he prevails on a defense which denies the contract rather than the breach. ORS 20.096 states a strong legislative policy favoring reciprocal rights under contractual attorney fee provisions. We should not add to the judicial erosion of that policy by extending Pickinpaugh v. Morton, supra, and Bodenhamer v. Patterson, supra, in the way that the majority does.
I respectfully dissent from the holding of the majority which this opinion discusses. I join the majority in all other respects.