Carey v. Lincoln Loan Co.

• Citation: 203 Or. App. 399,125 P.3d 814
• Decision Date: 28 December 2005
• Docket Number: 9706-04753; A117696.
• Court: Supreme Court of Oregon
• Parties: David Lee CAREY and Tanya Maria Carey, husband and wife, Appellants, v. LINCOLN LOAN CO., an Oregon corporation, Respondent.

125 P.3d 814

203 Or. App. 399

David Lee CAREY and Tanya Maria Carey, husband and wife, Appellants, v. LINCOLN LOAN CO., an Oregon corporation, Respondent.

9706-04753; A117696.

Court of Appeals of Oregon.

Argued and submitted June 27, 2005.

Decided December 28, 2005.

COPYRIGHT MATERIAL OMITTED

John M. Berman, Tigard, argued the cause for appellants. With him on the briefs was Damon J. Petticord, Tigard.

Steven E. Benson argued the cause and filed the brief for respondent.

Before LANDAU, Presiding Judge, and BREWER, Chief Judge,^* and ARMSTRONG, Judge.

BREWER, C.J.

Plaintiffs David Lee Carey (David) and Tanya Marie Carey (Tanya) brought this declaratory judgment action to challenge the enforceability of several provisions in a land sale contract by which they purchased a house from defendant. They alleged that the provisions together make it impossible for them to sell the house. The trial court originally ruled that the provisions violated statutes that apply to loan agreements and that a limitation on prepayment was an impermissible restraint on alienation. We reversed that decision and remanded for the trial court to decide plaintiffs' argument that the provisions are unconscionable. Carey v. Lincoln Loan Co., 165 Or.App. 657, 998 P.2d 724 (2000). On remand, the trial court ruled against plaintiffs, and they appeal. We reverse.

The first issue that we must resolve is defendant's challenge to our jurisdiction over this or any other case.¹ According to defendant, the only legitimate courts are those named in Article VII (Original), section 1, of the Oregon Constitution.² Because the legislature does not have the constitutional authority to create any additional court, including an intermediate court of appeals, defendant argues, this court has no legal existence. We first describe the facts that are relevant to defendant's arguments and then discuss those arguments. After explaining why we reject defendant's position, we will turn to the facts that are relevant to the merits of the appeal.³

Article VII (Amended), section 1, of the Oregon Constitution (section 1), provides that the "judicial power of the state shall be vested in one supreme court and in such other courts as may from time to time be created by law." It thereby authorizes the legislature to create this and other courts inferior to the Supreme Court. However, before the adoption of Article VII (Amended) in 1910, Article VII (Original), section 1, vested the judicial power of the state in the courts that it specifically named, which did not include an intermediate court of appeals. Because the list of courts was exclusive, the legislature was without power to create additional courts. Section 1 removed the establishment of lower courts from the constitution and gave the authority to make that determination to the legislature. "[U]nder § 1 of Art VII, as amended in 1910, the Supreme Court is the only court created by the constitution itself; all other courts are to be created by legislative act." State ex rel Madden v. Crawford, 207 Or. 76, 82, 295 P.2d 174 (1956).⁴ Article VII (Amended), section 2, retained the existing judicial system only until the legislature exercised its authority under section 1 to modify the system or create a new one. Id. at 82-83, 295 P.2d 174.

Defendant recognizes that, if section 1 is part of the constitution, it authorizes the legislature to create this court. Defendant argues, however, that none of Article VII (Amended) is part of the constitution because the procedures that led to its purported adoption did not comply with constitutional standards. The consequence, according to defendant, is that Article VII (Original) is the only valid constitutional provision governing the judiciary. Thus, the courts that Article VII (Original), section 1, names are the only constitutionally permissible courts and the legislature had no authority to create this court.⁵

Defendant argues that the adoption of Article VII (Amended) was procedurally flawed in three separate ways, each of which involved a failure to comply with one of the requirements for amending the constitution, and that any one of those defects is sufficient to invalidate the entire amended article. Defendant asserts, first, that F.W. Benson, who was the elected Secretary of State and who, in 1910, acted in both that capacity and as Governor in canvassing the votes and proclaiming the adoption of Article VII (Amended), was legally neither the Governor nor the Secretary of State. Thus, according to defendant, there never was a legal proclamation of the adoption of Article VII (Amended). Or Const, Art XVII, § 1. Second, defendant asserts that the petitions that voters signed to place Article VII (Amended) on the ballot did not contain "the full text of the proposed * * * amendment to the Constitution." Or Const, Art IV, § 1(2)(d). Finally, defendant asserts that the ballot presented Article VII (Amended) to the people in a way that required voters to vote for or against the article in its entirety, thereby violating the requirement that voters be able to vote separately on separate amendments. Or Const, Art XVII, § 1; see, e.g., Armatta v. Kitzhaber, 327 Or. 250, 959 P.2d 49 (1998). We consider each of defendant's arguments in turn.

We begin with the information in the record concerning the status of the governorship in 1910. F.W. Benson was elected Secretary of State in 1906 for a four-year term that began in January 1907. In 1909, the Governor, George W. Chamberlain, was elected to the United States Senate and thereupon resigned the governorship. Under the constitution as it then stood, Benson became the Governor. After assuming that office, Benson also continued to act as the Secretary of State. Benson eventually became ill and temporarily turned over the duties of the governorship to the president of the state Senate. He did not resign as Governor, and he retained his position as Secretary of State. Benson later indicated that he intended to resume the duties of Governor, but there is no record that he formally did so. However, on December 3, 1910, Benson acted both as Secretary of State when he canvassed the votes given at the November election and as Governor when he signed the proclamation declaring the adoption of Article VII (Amended).

Those facts may raise a question about whether Benson had the authority of governor de jure on December 3, 1910, given the lack of any record that he formally reassumed the duties of that office. We do not, however, need to decide that issue. Benson became Governor in 1909 as the constitutional successor to Chamberlain. He never resigned the office but only turned its duties over to the president of the senate. He retained the title of Governor until his successor took the oath of office. In light of those facts, we conclude that Benson had a sufficient claim to the office when he proclaimed the adoption of Article VII (Amended) that, in doing so, he at least exercised the duties of governor de facto. Well before 1910, the Supreme Court had established that the actions of an officer de facto are valid as to the public and third persons and are not subject to collateral attack. Hamlin v. Kassafer, 15 Or. 456, 463-64, 15 P. 778 (1887); see also State ex rel Madden, 207 Or. at 89-90, 295 P.2d 174 (discussing acts of judge de facto); Holman et al. v. Lutz et al., 132 Or. 185, 217-22, 284 P. 825 (1930) (Coshaw, J., concurring) (same).

Defendant also challenges Benson's status as Secretary of State, arguing that, when he became Governor he necessarily ceased being Secretary of State. See State ex rel O'Hara v. Appling, 215 Or. 303, 310-11, 334 P.2d 482 (1959) (taking oath as Governor constitutes implied resignation as Secretary of State). Defendant may be correct as to Benson's status de jure. However, the term for which Benson was elected Secretary of State had not expired, he continued to act in that office after becoming Governor, and no one had purported to appoint a replacement. Thus, Benson was at least Secretary of State de facto, and his actions in that capacity are valid as to third parties for the same reason that his actions in his status as Governor de facto were valid. Both Benson's canvassing of the votes as Secretary of State and his proclamation of the adoption of Article VII (Amended) as Governor, therefore, were valid and effective.

We next consider defendant's argument that the 1910 initiative petition that proposed the adoption of Article VII (Amended) did not contain the full text of the proposed amendment. There is no dispute that the petition included the full text of what became Article VII (Amended). Defendant argues, however, that it should also have included the text of the existing Article VII as well as an explanation of what portions of the existing article would remain in effect and how the amended version would relate to the existing version. By not including those items, according to defendant, the petitioners violated the constitutional requirement that the petition set out the complete text of the proposed amendment. In essence, defendant argues that the full text of a proposed amendment includes the text of all provisions that the amendment might affect, not simply the text of the provisions that it would expressly add or amend.

Current Article IV, section 1(2)(d), of the Oregon Constitution was adopted in 1968 to replace Article IV, section 1, which was in effect in 1910. Those sections require that a petition for an initiated measure "shall include the full text of the measures so proposed," former Or Const Art IV, § 1 (repealed by 1967 Legislative Assembly, HJR 16, approved by the voters May 28, 1968), or "shall include the full text of the proposed law or amendment to the Constitution." Or Const Art IV, § 1(2)(d). We do not see any distinction between those requirements that is relevant to this case. In both provisions, the constitution requires that the petition contain the...