Summary
holding that Oregon courts will enforce choice-of-law provisions
Summary of this case from Union Pacific Railroad Company v. MowerOpinion
C 8911-60-CV; CA A68297
Argued and submitted March 30, 1992
Remanded with instructions to vacate award of attorney fees; otherwise affirmed December 9, 1992
Appeal from Circuit Court, Washington County.
Alan C. Bonebrake, Judge.
Barry L. Adamson, Lake Oswego, argued the cause for appellant. With him on the brief was H. Richard Sause, Portland.
Bill Allen, Vancouver, Washington, argued the cause for respondent Rick R. Bowler. On the brief was James L. Sellers, Vancouver, Washington.
Donald A. Bick, Eugene, argued the cause for respondent Thomas N. Bowen. With him on the brief were Claud Ingram and Bick Monte, Eugene.
Before Richardson, Presiding Judge, and Joseph, Chief Judge, and Durham, Judge.
DURHAM, J.
Remanded with instructions to vacate $25,921.41 of attorney fees award; otherwise affirmed.
Plaintiff appeals from a summary judgment for defendants in an action to collect on a note. ORCP 47B. We review the record in the light most favorable to plaintiff. Tolbert v. First National Bank, 312 Or. 485, 494, 823 P.2d 965 (1991). We vacate part of the attorney fees award and otherwise affirm.
On April 26, 1982, plaintiff loaned $75,000 to a partnership comprised of defendants Bowler and Bowen. The loan was secured by four houses in Indiana that the partnership owned. On November 5, 1982, Bowler and Bowen dissolved the partnership. Bowler took title to the houses and agreed with Bowen that he would repay the loan from plaintiff. Bowler executed and recorded a deed that conveyed the houses to plaintiff. The deed provided that it was subject to:
Bowler executed the deed on November 5, 1982, and recorded it on October 3, 1983. On May 17, 1983, he executed a note and a mortgage for the houses that had identical terms to the 1982 conveyance from the partnership, except that he was named individually as obligor and mortgagor. Bowler recorded the mortgage on July 26, 1983.
"Cancellation of all outstanding indebtedness by Rick R. Bowler to Raymond Fiedler."
The deed also provided that it was subject to "Income reserved until 6/30/84 for Rick R. Bowler," who is a defendant. Plaintiff hired Bowler to manage the properties at first. The record is unclear about whether Bowler kept any rents before January 1, 1984, but he did not thereafter. See note 5, infra.
In October 1983, plaintiff received the deed and a title report, which revealed that other creditors had begun foreclosure on the houses in November 1982. Plaintiff consulted an attorney, who advised him not to accept the deed, because it would cancel the debt. In November 1983, plaintiff's attorney wrote Bowler a letter that said:
"This office represents Raymond Fiedler * * *.
"This is notice to you that we do not accept the deed as any discharge of indebtedness owed by Rick R. Bowler and Thomas Bowen to Raymond Fiedler.
"The recording surreptitiously by Mr. Bowler or an agent on his behalf does not effect [ sic] one iota the claims of Mr. Fiedler * * *."
Plaintiff then hired another attorney to clear his title to the houses. On January 30, 1984, he hired a company to manage them as rental properties. In March 1986, an Indiana court entered a judgment of foreclosure, and the houses were sold at a sheriff's sale.
The court granted summary judgment on the ground that plaintiff had accepted the deed and, under the doctrine of accord and satisfaction, that satisfied defendants' debt. An accord and satisfaction occurs when a debtor tenders payment on the condition that the creditor accept it in discharge of an unliquidated debt and the creditor accepts the payment on that condition. Kilander v. Blickle Co., 280 Or. 425, 429, 571 P.2d 503 (1977). Defendants have the burden of proving an accord and satisfaction; however, if plaintiff accepted the deed subject to the condition stated in it and assumed ownership of the houses, we will infer that he intended an accord and satisfaction. Seger v. Drews, 100 Or. App. 56, 58, 784 P.2d 133 (1989); Les Schwab Tire Centers v. Ivory Ranch, 63 Or. App. 364, 367, 664 P.2d 419 (1983). Plaintiff argues that he did not accept the deed and that he only acted as he did to protect the loan collateral.
Plaintiff does not assert that he has any remaining claims against Bowen or the partnership on the note.
We conclude that there was an accord and satisfaction. The deed covered four houses that were the security for the loan. It expressly provided that acceptance of it canceled the debt. After plaintiff received the deed, and acting as "owner" of the houses, he made an agreement with a company to manage them. He accepted rents. He reported the rents as income and deducted depreciation and expenses on his 1984, 1985 and 1986 tax returns. After defendants' creditors foreclosed on the houses, he claimed on his 1986 income tax return a $61,905 loss on property held for a trade or business that had a basis of $75,000. He claimed a refund for the previous three tax years by carrying back the loss. IRC § 172. His conduct demonstrates that he did accept the deed subject to the provision that it would cancel the debt.
On December 20, 1983, plaintiff's attorney wrote the management company a letter that stated that plaintiff owned the houses and enclosed a copy of the deed from Bowler. The letter states, in part:
"You will note on the deed that Mr. Bowler reserved rents through June of 1984. However, this was not agreed to by Mr. Fiedler and that reservation in the deed will not be honored."
Plaintiff asserted on the 1986 tax return that he had owned the properties from January 1, 1984, to April 15, 1986. He had previously taken the balance of the basis as depreciation.
Plaintiff also assigns error to the court's award of $29,246.41 in attorney fees to Bowen, including $25,921.41 under a provision in the note entitling the lender to fees in a collection action and ORS 20.096(1), which requires an award of fees to the prevailing party where the instrument provides for an award of fees to any party. Plaintiff points out that the note provides that Indiana law applies and asserts that Indiana has no reciprocal fee provision. Defendants concede that, if we apply Indiana law, the award is erroneous.
The note provides:
"On failure to pay the principal or interest when due or to comply with any of the conditions of the Mortgage of even date herewith securing this Mortgage Note, all of said debt then unpaid shall, at the option of the holder, become due and collectible. Borrower agrees to pay all reasonable attorneys' fees and costs of collection."
ORS 20.096(1) provides:
"In any action or suit on a contract, where such contract specifically provides that attorney fees and costs incurred to enforce the provisions of the contract shall be awarded to one of the parties, the prevailing party, whether that party is the party specified in the contract or not, at trial or on appeal, shall be entitled to reasonable attorney fees in addition to costs and disbursements."
Defendants argue that ORS 20.096(1) is remedial and that the law of the forum should govern. An award of fees pursuant to ORS 20.096(1) is a matter of substance, not procedure. Seattle-First National Bank v. Schriber, 51 Or. App. 441, 448, 625 P.2d 1370 (1981).
We will enforce the Indiana law provision in the note unless doing so would circumvent a fundamental public policy of Oregon law. W.J. Seufert Land Co. v. Greenfield, 262 Or. 83, 87, 496 P.2d 197 (1972); Allen v. American Hardwoods, 102 Or. App. 562, 567, 795 P.2d 592, rev den 310 Or. 547 (1990). Defendants have not established any "clear and overpowering" policy reason to interfere with the parties' freedom to choose Indiana law for this transaction. See Young v. Mobil Oil Corp., 85 Or. App. 64, 69, 735 P.2d 654 (1987). Applying Indiana law to disallow the fees is not "offensive to our moral standards" or "injurious to the public welfare." See Schultz v. First Nat. Bk. of Portland, 220 Or. 350, 358, 348 P.2d 22 (1959); Young v. Mobil Oil Corp., supra, 85 Or App at 69.
Part of the fee award, however, $3,325, is for Bowen's defense of plaintiff's motion for a restraining order. Plaintiff filed the motion and failed to appear at the hearing on it. The court concluded that, in seeking the motion, plaintiff failed to fulfill many requirements of ORCP 79. The court had authority to award a reasonable fee. ORCP 17C.
Remanded with instructions to vacate $25,921.41 of attorney fees award; otherwise affirmed.