People v. Debt Reducers, Inc.

• Decision Date: 06 May 1971
• Citation: 92 Adv.Sh. 867,484 P.2d 869,5 Or.App. 322
• Parties: The PEOPLE of the State of Oregon, Acting by and through Lee Johnson, Attorney General, Appellant, v. DEBT REDUCERS, INC., an Oregon corporation, David J. Lees, Lewis M. Finley, James, A. Carney and Ted. Dowd, Respondents.
• Court: Oregon Court of Appeals

Page 869

484 P.2d 869

5 Or.App. 322

The PEOPLE of the State of Oregon, Acting by and through Lee

Johnson, Attorney General, Appellant, v. DEBT REDUCERS, INC., an Oregon corporation, David J. Lees, Lewis M. Finley, James, A. Carney and Ted. Dowd,

Respondents.

Court of Appeals of Oregon, Department 1.

Argued and Submitted Feb. 17, 1971.

Decided May 6, 1971.

J. Bradford Shiley, Sp.Asst. to the Atty. Gen., Salem, argued the cause for appellant. With him on the brief were Lee Johnson, Atty. Gen., Jacob B. Tanzer, Sol. Gen., and Alan H. Johansen, Asst. Atty. Gen., Salem.

R. Alan Wight, Portland, argued the cause for respondents. With him on the brief were Norman J. Wiener, and King, Miller, Anderson, Nash & Yerke, Portland.

Before SCHWAB, C.J., and LANGTRY and THORNTON, JJ.

LANGTRY, Judge.

This is a suit brought in the name of the People of the State of Oregon through the Attorney General 'on behalf of John E. Black, Real Estate Commissioner,' pursuant to alleged authority in ORS 180.060(1)(d) and (6), and ORS ch. 697. The Real Estate Commissioner verified the complaint, but is not named a party in the title of the case. In this regard it should be noted that ORS 16.070 requires that verification shall be made by parties. The complaint also alleges that the Attorney General, pursuant to ORS 180.060(6) brings the suit as Parens patriae to protect the public interest. The Attorney General appeals from the trial court's adverse ruling on his authority to bring the suit. The complaint alleges, in substance, that defendant Debt Reducers, Inc., and the individual defendants, operated a business which adjusted and paid off debts of individuals. The numerous individuals who were clients of the service would pay their income to defendant, and for a fee defendant would apportion the income to debtors and the individual. The Attorney General alleged fraud, various violations of law practiced by defendant in such business to the damage of the clients, and sought injunctive relief, accounting and reimbursement, and appointment of a receiver for defendant. After an Ex parte preliminary injunction had been ordered and a receiver appointed, the Attorney General and defendants' attorney arrived at a stipulation under which certain restraints would be continued, the receivership terminated, and the issue of the Attorney General's authority to bring this as a class suit, Parens patriae, segregated for initial determination. The circuit court approved the stipulation, made an order effecting it, and proceeded to determine the segregated issue.

The Attorney General claims his authority to represent the public interest and particularly the allegedly overcharged clients stems from the doctrine of Parens patriae. The stipulation that segregates this issue apparently does not contemplate that the court shall take note of the allegations by which the Attorney General also claims in the same cause of suit that he acts on behalf of the Real Estate Commissioner of Oregon pursuant to ORS ch. 697. After hearing arguments and being briefed, the circuit court held that the Attorney General did not have the claimed authority, observing:

'* * * (T)he plaintiff does not have the right to proceed in this case on the parens patriae theory in behalf of the plaintiffs named. As counsel pointed out, there is no case law in this state, or any other, that I have read, that would clearly permit the Attorney General of the state to act in the capacity he is seeking to act in this case. I completely agree that under the English historical basis the doctrine was used only for incompetents and the insane, and I don't think it has been stretched in this county or this state to cover this kind of situation where one private citizen has an alleged claim against another private citizen of the state. This does not seem to me to be a proper case for the doctrine of parens patriae to be employed * * *.'

The court said its holding was 'particularly true in view of the fact' that other litigation involving the same charges against defendants was pending in circuit court--a class suit by individual plaintiffs in the Fourth Judicial District of Oregon. ¹

The trial court and the parties have treated the stipulation to segregate the issue of the Attorney General's authority as though it were a demurrer on the grounds set out in ORS 16.260(2) or (4); namely, lack of capacity to bring the suit, or defect of party plaintiff. This is its effect and we will so treat it. ²

Pointed mention of a similar pending proceeding in the Fourth Judicial District was made at oral argument in this court. Inasmuch as the pleadings and stipulation do not present to us an issue which amounts to a demurrer on the ground of ORS 16.260(3)--another such suit pending--we will not consider that question in this decision. ³

ORS 180.060(1)(d) and (6) provide:

'(1) The Attorney General shall:

'* * *

'(d) Appear, commence, prosecute or defend any action, suit, matter, cause or proceeding in any court when requested by any state officer, board or commission when, in his discretion, the same may be necessary or advisable to protect the interests of the state.

'* * *

'(6) The Attorney General shall have all the power and authority usually appertaining to such office and shall perform the duties otherwise required of him by law.'

The stipulation seeks to limit the claim of authority by the Attorney General which we may consider to the doctrine of Parens patriae. This doctrine as applied here simply means that the Attorney General, in his traditional capacity under the common law, claims the authority which was first thought to be that of the sovereign acting in a large sense as the father of all the people in the sovereignty. As the trial court indicated in the part of its opinion which we have quoted above, the doctrine of Parens patriae is usually applied for the benefit of people who are Non sui juris. However, it is not invariably so limited in its application. ⁴

The United States Supreme Court pointed out in Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 (1945), which was a suit brought by Georgia as Parens patriae for a class of its citizens under the Clayton-Anti-Trust Act to restrain certain railroads from discriminating against persons of Georgia in setting freight rates:

'* * * The rights which Georgia asserts, Parens patriae, are those arising from an alleged conspiracy of private persons whose price-fixing scheme, it is said, has injured the economy of Georgia. * * * Suits by a State, Parens patriae, have long been recognized. * * *

'* * *

'It seems to us clear that * * * Georgia may maintain this suit as Parens patriae acting on behalf of her citizens * * *.' 324 U.S. 439, 447, 450, 65 S.Ct. 716, 721--722, 89 L.Ed.2d 1051.

If the Attorney General otherwise has authority to bring this kind of proceeding, the doctrine seems broad enough to encompass it. The holding in State of Hawaii v. Standard Oil of California, 431 F.2d 1282 (9th Cir. 1970), urged by defendant, does not appear to be inconsistent with such a conclusion. The Ninth Circuit Court of Appeals noted that an injury to the general economy of the state, which is what was alleged in that case, is not an injury to the business or property of the state or its people. It distinguished Georgia v. Pennsylvania R. Co., supra, and said that the general economy of a region 'cannot be regarded as property in possession of the residents individually or publicly.' The remoteness of the alleged damage was a principal factor contributing to the court's dismissal of the case. The case at bar is much more restricted than one in which the Attorney General seeks redress for an injury to the general economy. Although it is alleged that the theory of Parens patriae is involved 'in the public interest' in the case at bar, it is obvious that it is so because direct damage to a large number of individuals becomes a matter of public interest.

We conclude that the state derives from the common law the power, in general, to bring a suit such as this, Parens patriae. The question remains whether the Attorney General has authority to bring the suit in the manner attempted.

State ex rel. Thornton v. Williams, 215 Or. 639, 336 P.2d 68 (1959), in conformance with previous Oregon Supreme Court decisions, held that in the field of criminal law the Attorney General of Oregon has no authority except that specifically set forth in the statutes. Other criminal law authority is vested in the district attorneys. See cases cited in Williams, 215 Or. [5 Or.App. 329] at 645, 336 P.2d 68. In Williams, before proceeding to the conclusion that the Attorney General of Oregon has no general non-statutory authority to conduct criminal matters, the court noted that in 1915 there was added to the Attorney General's authority, by General Laws of Oregon 1915, ch. 196, § 1, p. 256:

'* * * 'He shall be the law officer of the State, and shall have all of the power and authority usually appertaining to that office * * *.' (And said) (e) xcept for the significant clause terminating this section (the clause which limits the Attorney General's powers in criminal matters), it might be agreed that § 1 conferred all of the common-law powers and duties enjoyed by the attorneys general of England. * * *.' 215 Or. at 647, 336 P.2d at 72.

In this context, it is obvious that the court was referring only to the Attorney General's authority in criminal matters.

The briefs which we have studied are cognizant of the above language in Williams but they overlook specific language used in Gibson v. Kay, 68 Or. 589, 594, 137 P. 864, 866 (1914), cited in Williams. There, in a civil matter in which the Supreme Court was considering the authority of the Oregon Attorney General, it said:

'* * * '(T)he discretionary power vested in and exercised by the attorney general at common law devolves, in this country, in the absence of any statutory regulations, on the...