Court Opinion

ID: 3008735
Source: CourtListenerOpinion
Date Created: 2015-10-08 15:11:56.186726+00
Date Added: 2024-06-11T15:03:02.337255
License: Public Domain

26	                          October 8, 2015	                         No. 38

              IN THE SUPREME COURT OF THE
                    STATE OF OREGON

                  BROWNSTONE HOMES
              CONDOMINIUM ASSOCIATION,
               an Oregon non-profit corporation,
                     Petitioner on Review,
                               v.
          BROWNSTONE FOREST HEIGHTS, LLC,
           an Oregon limited liability company, et al,
                          Defendants,
                              and
           CAPITOL SPECIALTY INSURANCE, CO.
                    Respondent on Review.
          (CC 0606-06804; CA A145740; SC S061273)

   En Banc
  On motion to dismiss filed September 5, 2013, considered
and under advisement September 23, 2014.
   Wendy M. Margolis, Cosgrave, Vergeer, Kester, LLP,
Portland, argued the cause and filed the briefs for petitioner
on review. With her on the briefs was Thomas W. Brown.
   Brian C. Hickman, Gordon & Polscer, LLC, Portland,
argued the cause and filed the briefs for respondent on
review. With him on the briefs was Gregory A. Baird.
    Travis Eiva, The Corson & Johnson Law Firm, Eugene,
filed the brief for amicus curiae Oregon Trial Lawyers
Association.
   LANDAU, J.
   Motion to dismiss denied.
    Case Summary: Plaintiff in a damages action obtained a stipulated judgment
in a settlement with defendant, and sought to garnish the amount of the judg-
ment from defendant’s liability insurer under ORS 18.352. The insurer moved for
summary judgment, arguing that, because the settlement agreement included a
covenant by plaintiff not to execute against defendant, defendant had no covered
liability within the terms of the defendant’s policy with the insurer. The trial
court granted the motion for summary judgment, and plaintiff challenged that
decision, first in the Court of Appeals and then in the Supreme Court, arguing
Cite as 358 Or 26 (2015)	27

that, contrary to the trial court’s view, the non-execution covenant in the settle-
ment agreement had not affected the insurer’s coverage obligations. While the
case was pending in the Supreme Court, the insurer moved to dismiss, argu-
ing that the case had become moot because plaintiff and defendant had since
modified their settlement agreement and the non-execution covenant on which
the trial court’s decision had been based. Held: An opinion as to the legal conse-
quences of the original settlement agreement will have a practical effect on the
rights of the parties and review of the trial court’s decision therefore is not moot.
    Motion to dismiss denied.
28	 Brownstone Homes Condo. Assn. v. Brownstone Forest Hts.

	       LANDAU, J.
	        Defendant Capitol Specialty Insurance Co. has
moved to dismiss this appeal on the ground that it has
become moot. According to Capitol, the issues to be decided
in the appeal pertain to the terms of an agreement settling
an underlying construction defect case, but those very terms
have been superseded by amendments to the agreement
adopted during the pendency of the appeal. We conclude
that, because the amendments to the settlement agreement
do not have the effect of superseding the terms of the origi-
nal agreement, a judicial decision about that original agree-
ment will have a practical effect on the rights of the parties.
Consequently, the appeal is not moot, and the motion to dis-
miss is denied.
	        The facts relevant to Capitol’s motion are not in dis-
pute. Plaintiff Brownstone Homes Condominium Association
initiated a construction defect action against a contractor,
A&T Siding, Inc. A&T was insured by Capitol. Brownstone
and A&T ultimately settled, and the settlement included a
stipulated judgment against A&T. It also included an uncon-
ditional release and covenant not to execute that judgment
against A & T, along with A & T’s assignment to Brownstone
of any claim it might assert against Capitol.
	        Brownstone served a writ of garnishment on Capitol
under ORS 18.352 to satisfy the judgment. When Capitol
objected, Brownstone initiated a garnishment proceeding.
Capitol moved for summary judgment on the ground that
Brownstone’s release and covenant not to execute the judg-
ment against A&T extinguished A&T’s liability and, thus,
Capitol’s liability as well. The trial court agreed, granted
summary judgment in favor of Capitol, and entered judg-
ment dismissing the garnishment proceeding. Brownstone
appealed.
	         Meanwhile, Brownstone and A&T executed an
“addendum” to their original settlement agreement, which
recited that its purpose was to enable Brownstone to sat-
isfy its judgment by collecting from Capitol. To accomplish
that, the addendum modified the release and covenant not
to execute, and eliminated the assignment of A&T’s claims
against Capitol, replacing the assignment provision with a
Cite as 358 Or 26 (2015)	29

requirement that A&T pursue its claims directly against
Capitol and pay any proceeds to Brownstone.
	         Brownstone did not advise the Court of Appeals of
the execution of the addendum to the original settlement
agreement. Unaware of the addendum, the Court of Appeals
issued an opinion adjudicating the effect of the original
settlement, ultimately concluding that the trial court had
correctly determined that, because that agreement extin-
guished A&T’s liability to Brownstone, it also extinguished
any obligation that Capitol might have had to cover that lia-
bility. Brownstone Homes Condo. Assn. v. Brownstone Forest
Hts., 255 Or App 390, 298 P3d 1228 (2013). Brownstone
petitioned for review, and we allowed the petition. At that
point, Capitol notified us of the existence of the addendum to
the original settlement agreement and, on the basis of that
addendum, moved to dismiss the appeal.
	        Meanwhile, during the pendency of the state court
appeal, A&T initiated a separate action against Capitol to
recover the stipulated judgment against A&T. That action
was removed to the United States District Court for the
District of Oregon, which ultimately dismissed the action on
the ground that, the original settlement agreement having
extinguished A&T’s liability to Brownstone, any liability
that A&T agreed to under the addendum was contractual in
nature and not subject to coverage under the term of A&T’s
policy with Capitol. A&T appealed to the United States
Court of Appeals for the Ninth Circuit, arguing that, under
the terms of the addendum, it did not undertake any new
contractual obligations to Brownstone, but rather reformed
the original settlement agreement, effectively nullifying
the extinguishment of its liability in that original agree-
ment and restoring Capitol’s obligation to provide coverage
to A&T. The Ninth Circuit certified a question to us con-
cerning the authority of the parties to amend their original
settlement agreement to restore the insurer’s obligation to
provide coverage.
	In A&T Siding, Inc. v. Capitol Specialty Ins. Co.,
358 Or 32, ___ P3d ___ (2015), A&T and Capitol addressed
that certified question. A&T argued that, together with
Brownstone, it had restored Capitol’s obligation to provide
30	 Brownstone Homes Condo. Assn. v. Brownstone Forest Hts.

coverage by virtue of the voluntary reformation of the origi-
nal settlement agreement, based on its own and Brownstone’s
mistake as to the legal effect of that original agreement. We
concluded that such a mistake as to legal effect does not sup-
port reformation of the original settlement agreement. Id. at
___.
	        With that background in mind, we turn to the ques-
tion whether the execution of the addendum has the effect
of mooting the pending appeal before us. Under Oregon
law, when changed circumstances render an appeal moot,
it will be dismissed. State v. Hemenway, 353 Or 498, 501,
302 P3d 413 (2013). Whether an appeal has become moot
may be raised at any time during the appellate process.
ORAP 7.05(1)(c). It has been stated often that this court
lacks constitutional authority to decide moot cases. See, e.g.,
Hemenway, 353 Or at 500 (“Oregon courts have no authority
to decide moot cases: The judicial power granted to courts
under the Oregon Constitution is ‘limited to the adjudication
of an existing controversy.’ ” (Quoting Yancy v. Shatzer, 337
Or 345 Or 345, 362, 97 P3d 1161 (2004).)). More recently,
this court has qualified that broad, categorical assertion.
In Couey v. Atkins, 357 Or 460, 520, 355 P3d 866 (2015),
we concluded that, at least as to public actions and those
involving issues of public importance, whether mootness
requires dismissal of an action is a prudential matter and
not one of constitutional command. In this case, we need
not decide whether this case is such a “public action” or
one that involves issues of “public importance.” Nor do we
need to decide whether, if it is not, the constitution requires
dismissal because, because, at all events, the appeal is not
moot.
	        An appeal is moot when a court decision will no
longer have a “practical effect on the rights of the parties.”
Dept. of Human Services v. G. D. W., 353 Or 25, 32, 292 P3d
548 (2012). In this case, the issue before us is the legal effect
of the original settlement agreement—specifically, whether
the release and unconditional covenant not to execute pre-
clude Brownstone from recovering from Capitol, based on
the insurer’s obligation to provide coverage to its insured,
A&T. Capitol argues that the fact that the addendum to the
original settlement agreement eliminated the release and
Cite as 358 Or 26 (2015)	31

unconditional covenant not to execute renders academic any
opinion about the effect of the original agreement.
	        But that argument rests on the assumption that the
addendum had the effect of eliminating the original release
and unconditional covenant not to execute. As noted above,
358 Or at ___, we have just concluded in A&T Siding, Inc.
that the addendum did not have that effect, at least not ret-
roactively. Moreover, Capitol has not argued that the adden-
dum had that effect because the parties intended to rescind,
to accomplish a novation, or some other theory. Thus, the
issue of whether the original release and unconditional cov-
enant not to execute in the original settlement agreement
extinguished A&T’s liability to Brownstone—and, in the
process, extinguished Brownstone’s right to recover from
Capitol—remains a live issue. And an opinion as to the
legal consequences of that original agreement will have a
practical effect on the rights of the parties. In consequence,
the appeal is not moot.
	       Motion to dismiss denied.