Bennett v. Farmers Insurance ( 1997 )

ARMSTRONG, J.,

concurring in part and dissenting in part.

I concur in the majority’s opinion on all issues except estoppel. I dissent from its holding that plaintiff may not assert that defendants are estopped from enforcing their contractual right to terminate the contract with plaintiff without cause. That holding both misunderstands and unnecessarily rejects our previous cases on estoppel.

The essential point that the majority ignores is that plaintiff is not attempting to create a new cause of action for estoppel but simply to hold defendants to those representations about the terms of the existing contract that they made and on which he relied. That is an appropriate use of estoppel and is consistent with our earlier cases and with the general ways for forming and modifying contracts. In this context, estoppel is merely one way to establish the enforceable requirements of a contract without meeting all of the requirements for the modification of a bilateral contract. The majority expressly recognizes one of the other methods of establishing those requirements and does not question the others.

Immediately before rejecting plaintiffs estoppel claims, the majority holds that a party may waive a contractual right simply by manifesting an intention to relinquish it. Under the facts of this case, the waiver has the effect of modifying the contract to include a requirement that defendants can terminate it only for cause.¹150 Or App at 73-75. Other methods of creating or modifying contractual rights without the traditional trappings of a bilateral contract include notifying the other party of the new terms, which the other party implicitly accepts by continuing to perform as before, see Yartzoff v. Democrat-Herald Publishing Co., 281 Or 651, 657, 576 P2d 356 (1978), promissory estoppel, see Schafer et al v. Fraser et ux, 206 Or 446, 468-72, 290 P2d 190, 294 P2d 609 (1956), Neiss v. Ehlers, 135 Or App 218, 899 P2d 700 (1995), and unilateral contracts, see Oregon State Police Officers’ Assn. v. State of Oregon, 323 Or 356, 368-71, 918 P2d 765 (1996).

The majority’s rejection of estoppel as a way to modify a contract is thus inconsistent with the recognition of these other similar ways to achieve that result. In reaching its conclusion it relies on (and misunderstands) Bramwell v. Rowland, 123 Or 33, 261 P 57 (1927), and Howell v. Oregonian Publishing Co., 82 Or App 241, 728 P2d 106 (1986), on recons 85 Or App 84, 735 P2d 659, rev den 303 Or 699 (1987). Bramwell simply stands for the point that, in contrast to fraud, “all of the elements of estoppel may be present and yet no cause of action exists because estoppel is not a cause of action.” 123 Or at 44. (Emphasis supplied.) Plaintiff does not dispute that point. He is not attempting to use estoppel as the basis for an independent claim but rather to prevent defendants from denying that an existing contract contains the terms that they represented to him that it contained.

We defined “estoppel” in Daly v. Fitch, 70 Or App 18, 21 n 2, 687 P2d 1124 (1984), as

“an equitable principle that precludes someone from exercising a right to another’s detriment if the right holder, through words or conduct, has led the other to believe that the right would not be exercised.”

We pointed out that a court’s refusal to enforce a time-of-the-essence clause in a land-sale contract because of the vendor’s acceptance of late payments is most appropriately described as based on estoppel rather than on waiver. Id. Thus, estoppel changes the parties’ rights under the contract. There is no reason to treat the effect of that change in the parties’ rights as different depending on who is seeking relief.

The cases that the majority discusses are consistent with my view that plaintiff is entitled to assert that defendants were estopped from terminating the contract without cause and that their attempt to do so was a breach of the contract that entitles plaintiff to damages.² In Howell, the plaintiffs brought claims for breach of contract, reformation, and fraud, all relating to their contracts with the defendant. The plaintiffs did not assert that their reliance on the defendant’s alleged representations had affected the terms of the existing contract or was otherwise relevant to their breach-of-contract claims. After resolving the breach-of-contract and fraud claims, we rejected the plaintiffs’ reformation claims as without merit in a one-sentence paragraph, without any reference to estoppel.

By focusing on the reformation claim in its discussion of Howell, the majority shows that it misunderstands that case. The plaintiffs in Howell attempted to use estoppel as the ground for an independent claim, not as support for their claim for reformation. Nothing in our opinion supports the majority’s statement that the plaintiff based its reformation claim on an assertion that “the parties were estopped from relying on the written provisions of the contract,” nor that we held that “equitable estoppel could not be used to change a term that had not been the subject of mutual assent in an express contract.” 150 Or App at 75-76. Our entire statement on estoppel was:

“Appellants have also pleaded claims for equitable relief. They contend that defendant is estopped from relying on renewal provisions in the written contracts to terminate dealerships without cause, because of defendant’s conduct (the oral promises to renew) on which they have relied. Equitable estoppel, however, is not a cause of action. Bramwell v. Rowland, 123 Or 33, 44, 261 P 57 (1927). We therefore affirm the summary judgment against relief based on the estoppel claims.”

82 Or App at 247. We rejected estoppel as an independent claim for relief, nothing more.

In contrast to Howell, Gillman v. Emel, 89 Or App 153, 156-57, 747 P2d 390 (1987), is directly contrary to the majority’s holding and applies to this case. In Gillman, the plaintiff sued to recover unpaid sales commissions, alleging that she was entitled to a rate greater than the defendants had paid. The defendants counterclaimed to recover commissions that they had already paid her, alleging that she was entitled to a lower rate. In reply, the plaintiff alleged that the defendants had represented that she would receive the higher rate and that they were estopped from denying her any other rate. 89 Or App at 155. That is clearly a use of the doctrine to establish one of the terms of the parties’ agreement.

We held that the plaintiff’s pleading of estoppel was not a separate equitable claim but was part of the legal claim that the trial court submitted to the jury. As a result, the trial court erred when it purported to decide the issue on its own after the verdict. We explained, citing Bramwell, that “[ejstoppel is not in itself the basis for a claim, but it may be a method of proving the facts necessary to establish the claim that the plaintiff does make.” 89 Or App at 156-57 (emphasis supplied). Nothing in our opinion suggests that the procedural fact that the plaintiff first raised estoppel in response to the defendants’ counterclaim made any difference. The plaintiff used estoppel to establish her rate of pay, which was relevant both to her claim and to the defendants’ counterclaim. As we said, she used estoppel “to establish the claim” that she made.³

Plaintiff seeks to use estoppel in this case precisely in the way that we held that the plaintiff in Gillman could use it. He alleges that he relied on defendants’ representations that they would not terminate the Agreement without cause. If he is correct, those representations modified the existing contract by depriving defendants of a right that they otherwise had, and defendants breached the contract as modified. Plaintiff is not seeking to assert estoppel as an independent claim but to use it to show what the parties’ actual agreement was at the time that defendants terminated him and thus to support his breach-of-contract claim. He should be able to do that. The majority fails to give an adequate reason for changing the rule in our previous cases that allows him to do so. I therefore dissent from that portion of its opinion.

Deits, C. J., and Riggs and Leeson, JJ., join in this concurrence and dissent.

1 The majority correctly holds that the jury could find that defendants waived the right to terminate plaintiffs contract without cause on 30 days’ notice, thereby essentially making the contract terminable only for cause. 150 Or App at 74. It does not explain why defendants can create that new requirement by waiver but not by estoppel.

2 The majority points out that equitable estoppel is not a basis for extending coverage under an existing insurance policy. See DeJonge v. Mutual of Enumclaw, 315 Or 237, 843 P2d 914 (1992); ABCD... Vision v. Fireman’s Fund Ins. Companies, 304 Or 301, 744 P2d 998 (1987). That holding is, at least in part, based on considerations unique to insurance law. See DeJonge, 315 Or at 241 n 3. In any case, it is possible for estoppel to be a ground for avoiding a condition of forfeiture, which is similar to its potential use in this case to prevent the enforcement of the provision of the contract that permits termination without cause. That restriction on the enforcement of a provision of an existing contract is not the creation of a new contract for the parties.

3 In Mittleman Properties v. Bank of California, 131 Or App 666, 673, 886 P2d 1061 (1994), we relied on this statement in explaining that an estoppel could arguably give rise to an implied agreement modifying the terms of the lease at issue. The majority treats that statement as dictum and then rejects it. 150 Or App at 76 n 3. Whether or not it is correct on that point, in Mittleman we clearly treated Gillman v. Emel, 89 Or App 153, 747 P2d 390 (1987), as properly stating the law and considered the plaintiffs estoppel arguments on their merits. We repeated that statement, relying on both Bramwell and Gillman, a few days later in Collver v. Salem Insurance Agency, Inc., 132 Or App 52, 60, 887 P2d 836 (1994). The repeated statements of this court on an important point of law deserve greater respect than the majority seems willing to give them in this case.