Int. Assn. Machinists, Woodworkers Local W-246 v. Heil ( 2020 )

685
Argued and submitted August 29, 2019, reversed January 8, 2020
INTERNATIONAL ASSOCIATION OF
MACHINISTS, WOODWORKERS LOCAL W-246,
an Oregon corporation,
Plaintiff-Respondent,
v.
John HEIL
and Beverly Heil, husband and wife,
Defendants-Appellants,
and
ALL OCCUPANTS OR INHABITANTS OF
THE REAL PROPERTY LOCATED AT
2203 5TH STREET, TILLAMOOK, OREGON
TELEPHONE: UNKNOWN,
Defendants.
Tillamook County Circuit Court
14LT00553; A166909
457 P3d 357
Defendants appeal a supplemental judgment awarding attorney fees to
plaintiff. Defendants objected in the trial court to plaintiff’s fee petition, arguing
that plaintiff had failed to allege a sufficient basis for fees in its complaint under
ORCP 68 C(2)(a). Plaintiff then filed a motion to amend its complaint. The court
concluded that plaintiff’s initial complaint had sufficiently alleged a basis for
fees under ORCP 68 C(2)(a). The court then denied plaintiff’s motion to amend as
moot. Defendants assign error to the trial court’s fee award. Defendants argue
that plaintiff had not properly alleged a basis for attorney fees in its complaint.
Plaintiff responds that its complaint alleged facts that would be sufficient to sat-
isfy the requirements of ORCP 68 C(2)(a). In the alternative, plaintiff argues
that any deficiency in its complaint should be disregarded under ORCP 12 B
because plaintiff had attempted to amend its complaint to comply with the tex-
tual requirements of ORCP 68 C. Held: The trial court erred in awarding fees.
Plaintiff’s complaint did not allege a statutory or contractual basis for attorney
fees, nor did it allege facts that would provide a basis for fees. Plaintiff’s argu-
ment in the alternative fails because plaintiff’s attempt to amend its complaint
was not an “error” or “defect” in the pleading under ORCP 12 B.
Reversed.
Jonathan R. Hill, Judge.
Harry D. Ainsworth argued the cause and filed the brief
for appellants.
686 Int. Assn. Machinists, Woodworkers Local W-246 v. Heil
William H. Sherlock argued the cause for respondent.
Also on the brief was Hutchinson Cox.
Before Ortega, Presiding Judge, and Shorr, Judge, and
James, Judge.
SHORR, J.
Reversed.
Cite as 301 Or App 685 (2020) 687
SHORR, J.
Defendants appeal from a supplemental judgment
awarding costs and attorney fees to plaintiff. Defendants
assign error to the trial court’s ruling that the facts alleged
in plaintiff’s complaint were sufficient to provide a basis
for an award of attorney fees under ORCP 68 C. For the
reasons that follow, we conclude that the court erred by
awarding attorney fees because plaintiff’s pleadings did not
“allege the facts, statute, or rule that provides a basis for the
award of fees,” as required by ORCP 68 C(2)(a). Accordingly,
we reverse the award of attorney fees in the supplemental
judgment.
This case has a long and complicated procedural
history, and we state only the following relevant, uncon-
tested facts. The parties entered into a land sale contract for
certain real property owned by plaintiff. Defendants failed
to make payments pursuant to the contract’s terms, lead-
ing plaintiff to ultimately file an eviction complaint against
defendants. The only facts pleaded in the complaint were as
follows:
“1. Defendants are in possession of a dwelling unit,
premises and real property described above * * *.
“2. Plaintiff is entitled to possession of the premises
because:
“It has fully complied with the requirements set forth
in ORS 93.915 and ORS 93.930 and, having recorded the
Affidavit of Forfeiture with Tillamook County Deeds and
Records, are not required to provide additional notice to
Defendants, who are deemed tenants at sufferance [as] a
matter of law, and may be removed from possession pursu-
ant to ORS 105.105 to ORS 105.168.
“3. Defendants are unlawfully holding the premises
with force.
“4. Wherefore, Plaintiff prays for possession of the
premises, costs and disbursements and attorney fees, if
applicable.”
(Emphasis added.)
A trial was scheduled, but the trial was cancelled
when the parties reached a settlement agreement ahead of
the trial date. Among other things, the settlement agreement
688 Int. Assn. Machinists, Woodworkers Local W-246 v. Heil
provided that, if defendants failed to pay plaintiff the full
purchase price within 90 days, defendants would voluntarily
vacate the premises and have judgment entered against
them in this case. The settlement also included the follow-
ing provision for attorney fees and costs:
“6. Attorney Fees and Costs. Should any of the par-
ties successfully prosecute or defend any action, claim for
relief or any other proceeding relating to any of the rights,
duties or obligations arising under this Agreement, that
party shall be entitled to recover the reasonable value of
its attorney fees, paralegal fees, costs, disbursements and
other expenses, including, without limitation, fees and
costs arising before and at any trial, arbitration, media-
tion, or bankruptcy proceeding and any appeal thereof.”
Ultimately, defendants failed to make the payments pur-
suant to the settlement agreement. In a separate case (the
breach of contract case), plaintiff filed a claim for breach
of contract based on defendants’ nonpayment and alleged
breach of the settlement agreement.1 Plaintiff initially
sought at least some of its attorney fees for this case as eco-
nomic damages in that case.
Around the same time, a hearing was held in this
case. At that hearing, the parties put the settlement on
the record. The trial court subsequently entered a general
judgment against defendants, in which the court found that
defendants had failed to make the agreed-upon payments
and that plaintiff was entitled to possession of the premises
plus costs. The general judgment recited some of the terms
of the settlement agreement, but it neither mentioned the
attorney fee provision nor awarded attorney fees.2
Plaintiff then filed a statement of attorney fees “per
ORCP 68,” seeking $29,219.30 in attorney fees plus other
1
In that breach of contract case, International Association of Machinists,
Woodworkers Local W-246 v. Heil (Tillamook County Circuit Court Case No.
15CV04458; Court of Appeals Case No. A164772), plaintiff sought damages and
costs related to defendants’ breach of the settlement agreement, their subsequent
failure to return possession of the property to plaintiff, and their “frivolous”
appeal in this case. That case was litigated separately from the case at hand and
is the subject of a related appeal.
2
Defendants appealed that judgment, and we affirmed without opinion. See
International Association of Machinists, Woodworkers Local W-1 v. Heil, 277 Or
App 783, 376 P3d 306 (2016), rev den, 361 Or 350 (2017).
Cite as 301 Or App 685 (2020) 689
costs and expenses. In its statement of fees, plaintiff alleged
that the basis for those fees was “pursuant to paragraph 6 of
the Parties’ Settlement Agreement[.]” Defendants objected,
and a hearing was held. At that hearing, defendants argued
that plaintiff was not entitled to fees because the basis for
fees was not alleged in a pleading, as required by ORCP
68 C(2)(a). Defendants contended that the settlement agree-
ment could not provide the legal basis for an attorney fee
award, because the settlement agreement did not exist and
had not been contemplated at the time the original com-
plaint was filed, and plaintiff had filed no amended plead-
ing. Therefore, defendants argued, plaintiff’s request for
attorney fees should be denied because the pleading require-
ments of ORCP 68 C(2) had not been met.
In response, plaintiff argued that it had met the
pleading requirement of ORCP 68 C. Plaintiff asserted that
the complaint included an assertion of an entitlement to
attorney fees, and the settlement agreement that formed
the basis for a fee award had been “subsumed” into this case
when the parties executed the settlement agreement and put
it on the record at an earlier hearing. Plaintiff also argued
that defendants had suffered no prejudice from any alleged
insufficiency of the pleadings because defendants knew that
plaintiff would seek fees, based on both the complaint and
the terms of the settlement agreement. Under those cir-
cumstances, plaintiff argued, the pleadings requirements
of ORCP 68 C had been met. The court declined to rule on
the issue at that hearing and set a later hearing so that the
parties could develop their arguments in writing.
Defendants then filed a memorandum in which, in
addition to the arguments raised at the hearing, defendants
contended that the trial court could not properly permit
plaintiff to amend or supplement its pleadings under ORCP
23. Plaintiff filed a response, and, in addition to reiterating
its arguments raised at the hearing, plaintiff moved to file
an amended complaint under ORCP 23 B3 to plead the set-
tlement agreement as the basis for its attorney fees claim.
3
ORCP 23 B provides:
“When issues not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects as if they had
been raised in the pleadings. Such amendment of the pleadings as may be
690 Int. Assn. Machinists, Woodworkers Local W-246 v. Heil
Another hearing was held, in which the trial court
heard further argument on defendants’ objection to plain-
tiff’s request for attorney fees. Plaintiff again acknowledged
that the specific basis for fees was not alleged in its com-
plaint but stated that the parties had “implicitly tried that
matter—when the settlement agreement was brought to the
floor,” and that the court should permit plaintiff to amend
its complaint pursuant to ORCP 23 B. Plaintiff also argued
that it would be a “gross injustice” to disallow the amend-
ment because, plaintiff argued, the parties and the court
had agreed in the breach of contract case that attorney fees
for this case should be sought through the ordinary ORCP 68
process in this case. Defendants argued that, at that hearing
in the breach of contract case, they had expressly reserved
their right to object to any attorney fee petition filed in this
case.
The trial court initially granted plaintiff’s motion
to amend its complaint and entered an order reflecting that
ruling. Plaintiff subsequently filed an amended complaint
alleging a right to attorney fees pursuant to the parties’ set-
tlement agreement. Defendants then filed a motion to strike
plaintiff’s amended complaint, arguing that the court lacked
jurisdiction to allow the amended complaint. Accordingly,
defendants asserted, the trial court’s order granting plain-
tiff leave to amend its complaint and plaintiff’s amended
complaint itself were both void.
Another hearing was held on defendants’ motion to
strike. The parties raised various arguments related to the
trial court’s authority to allow plaintiff to amend its com-
plaint under ORCP 23. After hearing argument, the court
rescinded its earlier ruling granting plaintiff’s motion to
amend and stated that it would reconsider the parties’ argu-
ments and issue a written ruling.
necessary to cause them to conform to the evidence and to raise these issues
may be made upon motion of any party at any time, even after judgment; but
failure so to amend does not affect the result of the trial of these issues. If evi-
dence is objected to at the trial on the ground that it is not within the issues
made by the pleadings, the court may allow the pleadings to be amended
when the presentation of the merits of the action will be subserved thereby
and the objecting party fails to satisfy the court that the admission of such
evidence would prejudice such party in maintaining an action or defense
upon the merits. The court may grant a continuance to enable the objecting
party to meet such evidence.”
Cite as 301 Or App 685 (2020) 691
In a subsequent letter opinion, the trial court denied
plaintiff’s motion to amend and awarded attorney fees to
plaintiff. The court reasoned that, although it could have
allowed plaintiff’s motion to amend, it was not necessary to
do so because plaintiff’s claim for attorney fees was properly
pleaded under ORCP 68 C. The court explained:
“Based on the holding in Htaike v. Sein[, 269 Or App
284, 344 P3d 527, rev den, 357 Or 595 (2015),] the Court
could properly allow the amended complaint. However, the
issue to be resolved prior to allowing the amended com-
plaint is if the issue of attorney fees is already alleged.
“* * * * *
“Based on Rymer v. Zwingli[, 240 Or App 687, 247 P3d
1246, rev den, 350 Or 716 (2011)], the Court finds that
attorney fees were alleged properly under ORCP 68 C(2)(a)
and that the parties entry into the settlement agreement
clearly put both parties on notice [that] attorney fees would
be sought.”
The court quoted from our opinion in Rymer, in which we
observed that
“[a] defendant who includes a bare assertion of an entitle-
ment to attorney fees in a pleading when defending against
a claim in which the allegations of fact in the plaintiff’s
pleading satisfy ORCP 68 C(2)(a) has adequately alerted
the plaintiff that the defendant is seeking fees on the same
basis as the plaintiff, and, therefore, the defendant’s plead-
ing satisfies ORCP 68 C(2)(a).”
240 Or App at 695. The court entered a supplemental judg-
ment awarding plaintiff $20,831.80 in attorney fees for
fees incurred after the parties entered into the settlement
agreement.
Defendants now appeal from that supplemental
judgment, raising a single assignment of error: that the trial
court erred in awarding attorney fees under ORCP 68 C,
because plaintiff’s complaint had not sufficiently alleged
that the basis for attorney fees was the parties’ settlement
agreement. We review for legal error. Makarios-Oregon,
LLC v. Ross Dress-for-Less, Inc., 293 Or App 732, 739, 430
692 Int. Assn. Machinists, Woodworkers Local W-246 v. Heil
P3d 142, adh’d to as modified on recons, 295 Or App 449, 430
P3d 1125 (2018) (“Whether a party is entitled to attorney
fees presents a question of law[.]”).
Defendants argue, as they did below, that plaintiff
failed to comply with ORCP 68 C and that that failure pre-
cludes plaintiff’s recovery of attorney fees. Plaintiff concedes
that it did not allege the statutory or contractual basis for
attorney fees, however plaintiff contends that it alleged facts
in its complaint sufficient to satisfy ORCP 68 C. Specifically,
plaintiff asserts that its complaint alleged that defendants
wrongfully withheld the property. Plaintiff argues that,
because defendants’ wrongful withholding led to the parties’
settlement agreement and because the settlement agree-
ment was the basis for the award of attorney fees at issue
here, by alleging defendants’ wrongful withholding, plain-
tiff pleaded facts sufficient to put defendants on notice that
it would be seeking fees pursuant to the settlement agree-
ment. Plaintiff also argues that defendants were not preju-
diced by any insufficiency in the complaint because defen-
dants were aware that plaintiff would be seeking fees on
that basis. Alternatively, plaintiff argues that we should dis-
regard any error or defect in its complaint under ORCP 12 B
because, plaintiff argues, it attempted to amend the com-
plaint to comply with the textual requirements of ORCP 68 C.
As discussed below, we disagree and conclude that plaintiff
did not properly allege a basis for fees under ORCP 68 C.
ORCP 68 C provides, in part, that
“[a] party seeking attorney fees shall allege the facts,
statute, or rule that provides a basis for the award of fees in
a pleading filed by that party. Attorney fees may be sought
before the substantive right to recover fees accrues. No
attorney fees shall be awarded unless a right to recover fees
is alleged as provided in this paragraph or in paragraph
C(2)(b) of this rule.”4
ORCP 68 C(2)(a) (emphasis added). The pleading require-
ment is mandatory. Mulier v. Johnson, 332 Or 344, 350, 29
4
ORCP 68 C(2)(b) permits a party to allege a right to attorney fees in a
motion or response to a motion if the party does not file a pleading. Here, because
plaintiff filed a pleading, that subsection is not relevant.
Cite as 301 Or App 685 (2020) 693
P3d 1104 (2001). A party seeking an award of attorney fees
must either allege the statutory or contractual basis for
attorney fees or the party must plead facts that would pro-
vide the basis for such an award, such that the parties have
“fairly been alerted that attorney fees would be sought and
no prejudice would result.” Page and Page, 103 Or App 431,
434, 797 P2d 408 (1990). Because plaintiff concedes that it
did not allege the statutory or contractual basis for attorney
fees, the only question for us to resolve is whether plaintiff
pleaded facts in its complaint that would provide a basis for
attorney fees.
In resolving that question,
“the threshold inquiry is whether the pleading at issue
adequately alleged the facts that provide the basis for the
fee entitlement. Unless that prerequisite is met, we do not
reach the secondary inquiry: viz., whether the parties in
the action have received sufficient notice that attorney fees
were being sought.
“The allegations of fact must clearly relate to the source
of the attorney-fee entitlement, whether the source is a
statutory or contractual provision.”
Rymer, 240 Or App at 691-92 (brackets, citations, and inter-
nal quotation marks omitted). ORCP 68 C(2)(a) “is not sat-
isfied where a pleading includes a request for attorney fees
but does not disclose any discernible source for such an
entitlement.” Swartsley v. Cal-Western Reconveyance Corp.,
212 Or App 365, 370, 157 P3d 1260 (2007) (citing Nguyen v.
McGraw, 210 Or App 192, 194, 149 P3d 1273 (2006)).
Here, plaintiff’s complaint included a bare assertion
to a right to attorney fees, but it alleged no facts identify-
ing the parties’ settlement agreement as the basis for those
fees. Indeed, at the time the complaint was filed, there was
no settlement agreement. We have held that a trial court
lacked authority to award attorney fees under ORCP 68 C(2)
under similar circumstances involving no discernible source
for an entitlement to fees. Swartsley, 212 Or App at 372(holding that the defendant’s answer, in which the prayer
sought attorney fees but did not indicate that a trust deed
served as the basis for the entitlement to attorney fees, was
694 Int. Assn. Machinists, Woodworkers Local W-246 v. Heil
insufficient); Nguyen, 210 Or App at 196-97 (holding same
where the prayer in an answer in a contempt proceeding
requested attorney fees but there was no basis for the fees
alleged in the answer).
The trial court relied on our decision in Rymer to
conclude that plaintiff had sufficiently pleaded facts alerting
defendants to its intention to seek attorney fees pursuant to
the parties’ settlement agreement. The court’s reliance on
that case was misplaced. Rymer involved two consolidated
cases, one for breach of contract (the contract case) and one
for violations of the Unlawful Trade Practices Act (the UTPA
case). 240 Or App at 689. The contract case was tried in
part to a jury, which returned a verdict for the defendant;5
the UTPA case was resolved when the trial court granted
a directed verdict to the defendant. The defendant sought
attorney fees in both cases, which the court awarded, and
the plaintiff appealed. In the contract case, we held that,
because the defendant’s pleadings did not allege facts that,
if proved, would satisfy all of the statutory elements for
an attorney fee award under ORS 20.082, its pleading did
not satisfy ORCP 68 C. Conversely, in the UTPA case, the
defendant’s answer included a prayer for attorney fees “for
defending against the [plaintiff’s] claims.” Id. at 695. We
applied the following rule, which the trial court here quoted
in its opinion:
“A defendant who includes a bare assertion of an entitle-
ment to attorney fees in a pleading when defending against
a claim in which the allegations of fact in the plaintiff’s
pleading satisfy ORCP 68 C(2)(a) has adequately alerted
the plaintiff that the defendant is seeking fees on the same
basis as the plaintiff, and, therefore, the defendant’s plead-
ing satisfies ORCP 68 C(2)(a).”
Id. Because the plaintiff’s complaint alleged a right to attor-
ney fees based on specific provisions of the UTPA, we held
that the defendant’s pleading satisfied ORCP 68 C, even
though the defendant had not alleged a specific statutory
basis for the fee award in its own pleading. Id. We noted that
the analysis was “markedly different” in that circumstance,
5
At least one claim was decided by the court, which also found in favor of the
defendant.
Cite as 301 Or App 685 (2020) 695
where the defendant was responding to a complaint that
alleged a source for attorney fees, than in the contract case,
in which the plaintiff alleged no discernible source for fees
in its complaint. But cf. Bridgestar Capital Corp. v. Nguyen,
290 Or App 204, 210, 415 P3d 1095 (2018) (noting that a
prevailing party’s “complete failure” to comply with the tex-
tual requirements of ORCP 68 C(2), including the failure
to “assert any right at all to fees,” cannot be excused by the
fact that the opposing party’s pleadings would have alerted
the opposing party of the prevailing party’s intent to seek
attorney fees).
Here, plaintiff’s complaint included a bare asser-
tion of entitlement to attorney fees, as had the defendant’s
answer in Rymer. Unlike the defendant’s pleading in Rymer,
however, plaintiff’s complaint was not responsive to any
pleading from defendants and would not have alerted defen-
dants that plaintiff was seeking fees on any particular basis.
The trial court’s reliance on Rymer is therefore inapposite.6
Plaintiff alleged no facts in its complaint that would
permit a conclusion that plaintiff had a right to attorney fees
based on the parties’ settlement agreement, which is plain-
tiff’s claimed source of entitlement to attorney fees. The only
facts that plaintiff alleged in its complaint are that (1) defen-
dants are in possession of the subject premises, (2) plain-
tiff is entitled to possession of the premises, because it has
met the requirements of ORS 93.915 and ORS 93.930, and
(3) defendants are withholding the premises by force. None
of those facts relate to a contractual basis for an entitlement
to attorney fees pursuant to the parties’ settlement agree-
ment. The trial court erred in concluding otherwise.
We briefly address plaintiff’s alternative argument
regarding ORCP 12 B.
“We have recognized that the stringent requirements
of ORCP 68 C(2)(a) may be ‘tempered by ORCP 12 B, which
6
To the extent that the trial court concluded that the ORCP 68 C pleading
requirement was satisfied if no prejudice had resulted from plaintiff’s failure to
plead the basis for fees, that conclusion was in error. As we explained in Rymer,
we do not reach the issue of whether defendants received sufficient notice of
plaintiff’s intention to seek attorney fees unless the pleading at issue adequately
alleged the facts that provide the basis for the fee entitlement. 240 Or App at
691-92.
696 Int. Assn. Machinists, Woodworkers Local W-246 v. Heil
directs the court to “disregard any error or defect in the
pleadings or proceedings which does not affect the substan-
tial rights of the adverse party.” ’ Lumbermen’s v. Dakota
Ventures, 157 Or App 370, 375, 971 P2d 430 (1998). However,
ORCP 12 B does not operate to excuse a party from failing
to provide adequate notice to an adverse party of the basis
for an award of fees. Id.”
Nguyen, 210 Or App at 195-96. Plaintiff contends that it is
entitled to the benefit of ORCP 12 B, because it attempted
to amend its pleadings to comply with ORCP 68 C. On that
basis, plaintiff distinguishes this case from Bridgestar, in
which we reversed an award of attorney fees because the
prevailing party had entirely failed to “assert any right
at all to fees.” 290 Or App at 211. Although we agree with
plaintiff that its bare assertion of an entitlement to attorney
fees in the prayer of its complaint distinguishes this case
from Bridgestar, plaintiff has presented no authority sup-
porting its assertion that an attempt to amend a complaint
may properly be considered an “error” or “defect” in the
pleadings under ORCP 12 B. We express no opinion on the
issue of whether the trial court would have had authority to
allow plaintiff to amend its complaint, which is not an issue
that is properly before us.7
For the reasons stated above, we reverse the supple-
mental judgment awarding fees.
Reversed.
7
On appeal, plaintiff does not cross-assign error to the trial court’s ultimate
denial of plaintiff’s motion to amend.