Lincoln Loan Co. v. City of Portland

• Decision Date: 25 May 2006
• Docket Number: (CC 0307-07891; CA A124756; SC S51666).
• Citation: 340 Or. 613,136 P.3d 1
• Parties: LINCOLN LOAN COMPANY, an Oregon corporation, Petitioner on Review, v. The CITY OF PORTLAND, a municipal corporation, Respondent on Review, and State of Oregon, Intervenor-Respondent on Review.
• Court: Oregon Supreme Court

Page 1

136 P.3d 1

340 Or. 613

LINCOLN LOAN COMPANY, an Oregon corporation, Petitioner on Review, v. The CITY OF PORTLAND, a municipal corporation, Respondent on Review, and State of Oregon, Intervenor-Respondent on Review.

(CC 0307-07891; CA A124756; SC S51666).

Supreme Court of Oregon.

Argued and Submitted March 10, 2005.

Decided May 25, 2006.

Ridgway K. Foley, Jr., of Greene & Markley, P.C., Portland, argued the cause and filed the briefs for petitioner on review. With him on the briefs was Steven E. Benson, Portland.

Harry M. Auerbach, Senior Deputy City Attorney, Portland, argued the cause for respondent on review.

Mary H. Williams, Solicitor General, Salem, argued the cause for intervenor-respondent on review State of Oregon.

Thomas M. Christ, Portland, filed an amicus brief for himself.

Before CARSON, C.J.^*, GILLETTE, DURHAM, RIGGS, BALMER, and KISTLER, JJ.^**

BALMER, J.

In this declaratory judgment action, plaintiff challenges the constitutionality of the procedure by which the voters adopted Article VII (Amended) of the Oregon Constitution in 1910. For the reasons that follow, we conclude that plaintiff may not challenge that procedure in this case. Accordingly, we affirm the circuit court's judgment in favor of defendant.

The issue arises in prosaic circumstances. In 1995, plaintiff Lincoln Loan obtained a money judgment against defendant City of Portland in Multnomah County Circuit Court (the "1995 judgment"). Defendant appealed, and the Court of Appeals reversed the judgment. Lincoln Loan Co. v. City of Portland, 158 Or.App. 574, 976 P.2d 60 (1999), rev. den., 330 Or. 138, 6 P.3d 1098, cert. den., 531 U.S. 1013, 121 S.Ct. 570, 148 L.Ed.2d 488 (2000) (Lincoln Loan I). After the final appellate judgment in that case had issued, plaintiff filed this declaratory judgment action seeking to set aside that judgment on the ground that the Court of Appeals "does not lawfully exist" and to obtain a declaration that the 1995 judgment is valid and enforceable.

Plaintiff alleged that the 1910 initiative measure that amended Article VII violated the Oregon Constitution because it had been adopted improperly. Plaintiff argued that the 1910 initiative (1) encompassed multiple constitutional amendments that were not closely related, but did not permit voters to vote separately on each amendment, in violation of Article XVII, section 1, of the Oregon Constitution; (2) had been enacted without complying with the canvass and proclamation requirements of Article XVII, section 1; and (3) failed to set forth the full text of the proposed constitutional amendment in violation of Article IV, section 1(2)(d), of the Oregon Constitution. Plaintiff asserted that, absent the provisions of Article VII (Amended) that had been made part of the constitution by the 1910 initiative, the legislature had no authority to enact the statutes by which it created the Court of Appeals in 1969. Therefore, plaintiff contended, the Court of Appeals did not lawfully exist and had "no jurisdiction and no authority" to overturn the 1995 judgment.

The trial court entered summary judgment in favor of defendant, holding that plaintiff had filed its challenge to the 1910 initiative too late to comply with any applicable statutes of limitations and that plaintiff had no standing to challenge the 1910 initiative. Plaintiff appealed. The Court of Appeals certified the appeal to this court, and we accepted that certification.

As we describe more fully below, we conclude that the final judgment in Lincoln Loan I bars plaintiff from bringing this action. Plaintiff could have raised the legal theories that it asserts in this declaratory judgment proceeding in the earlier case that it brought against defendant. Plaintiff litigated that case to final judgment. Under longstanding principles of claim preclusion, plaintiff may not collaterally attack that final judgment in this proceeding.

I. PLAINTIFF'S THEORY OF THE CASE

We first outline plaintiff's theory of the case. As noted previously, plaintiff asserts that the procedure by which the voters adopted Article VII (Amended) in 1910 suffered from three constitutional defects. For that reason, according to plaintiff, Article VII (Amended) never became part of the Oregon Constitution, and Article VII (Original) "remains in full force and effect today." Article VII (Original), section 1, provides, in part, that "[t]he Judicial power of the State shall be vested in a Supr[e]me Court, Circuit[ ] Courts, and County Courts * * *." That provision also refers to justices of the peace and to municipal courts. However, Article VII (Original) does not mention or provide for an intermediate Court of Appeals and does not authorize the legislature to create a Court of Appeals — or, indeed, any court. In contrast, Article VII (Amended), section 1, provides, in part:

"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. * * * "

The legislature created the Court of Appeals in 1969. Or Laws 1969, ch 198. If Article VII (Amended), section 1, is a valid part of the Oregon Constitution, then the legislature had the authority to create the Court of Appeals, and plaintiff's claim fails. If Article VII (Amended), section 1, is not a valid part of the Oregon Constitution, then the legislature had no authority to create the Court of Appeals, the Court of Appeals had no authority to reverse plaintiff's 1995 judgment against defendant, and that judgment, as plaintiff alleges, "is valid and enforceable in its entirety."

II. DEFENDANT'S CLAIM PRECLUSION ARGUMENT

Defendant answered the complaint by admitting and denying plaintiff's allegations and asserting a number of affirmative defenses. Among those affirmative defenses, defendant asserted that the trial court should decline to exercise jurisdiction over plaintiff's declaratory judgment action because "[p]laintiff had a more appropriate remedy to challenge the jurisdiction of the Court of Appeals by direct challenge to such jurisdiction in response to defendant's appeal of the [1995 judgment]." Defendant also raised a related affirmative defense of estoppel, asserting that, by participating throughout the litigation of Lincoln Loan I, "plaintiff affirmatively asserted the benefit of provisions of Article VII as amended by the initiative measure plaintiff attacks in this action."¹

Although defendant did not denominate it as such in its answer, those affirmative defenses squarely raise the issue whether, under the doctrine of claim preclusion, the entry of a final, litigated judgment in Lincoln Loan I bars plaintiff from bringing this action. We begin by outlining the contours of claim preclusion and then consider the application of those principles to this declaratory judgment proceeding.

This court recently described claim preclusion in Bloomfield v. Weakland, 339 Or. 504, 510-11, 123 P.3d 275 (2005):

"The doctrine of claim preclusion, formerly known as res judicata, generally prohibits a party from relitigating the same claim or splitting a claim into multiple actions against the same opponent. As this court stated in Rennie v. Freeway Transport, 294 Or. 319, 323, 656 P.2d 919 (1982) "`a plaintiff who has prosecuted one action against a defendant through to a final judgment binding on the parties is barred on res judicata grounds from prosecuting another action against the same defendant where the claim in the second action is one which is based on the same factual transaction that was at issue in the first, seeks a remedy additional or alternative to the one sought earlier, and is of such a nature as could have been joined in the first action.'

"See also Drews v. EBI Companies, 310 Or. 134, 140-41, 795 P.2d 531 (1990) (to same effect). The rule forecloses a party that has litigated a claim against another from further litigation on that same claim on any ground or theory of relief that the party could have litigated in the first instance. Dean v. Exotic Veneers, Inc., 271 Or. 188, 194, 531 P.2d 266 (1975)."

As an initial matter, the doctrine of claim preclusion appears to apply to plaintiff's complaint here. The record demonstrates that in 1994 plaintiff filed an action against defendant (and others) and that, in 1995, plaintiff filed a fourth amended complaint that, in part, alleged violations of its federal constitutional rights and sought damages under 42 USC section 1983. As a result of a jury verdict, plaintiff obtained the 1995 judgment against defendant, which awarded plaintiff damages of more than $2.7 million. Defendant appealed that judgment, and plaintiff participated in the appeal, briefing and arguing the appeal in the Court of Appeals. After the Court of Appeals reversed the 1995 judgment, plaintiff filed a petition for review by this court, which this court denied, and then it filed a petition for a writ of certiorari from the United States Supreme Court, which that court denied. Ultimately, as the complaint in this action alleges, in August 2000, the circuit court clerk entered an appellate judgment issued by the Court of Appeals pursuant to its opinion reversing the 1995 judgment. The entry of that appellate judgment concluded the earlier litigation between plaintiff and defendant.

To bring a declaratory judgment action, a plaintiff must allege that its "rights, status or other legal relations are affected" by, inter alia, a constitutional provision or statute. ORS 28.020. Plaintiff argues that the 1995 judgment was a property right of plaintiff's that was impaired when the Court of Appeals reversed it and that the alleged constitutional infirmity of the Court of Appeals "affected" plaintiff's rights because the Court of Appeals had no authority to reverse the 1995 judgment. Plaintiff's complaint seeks a declaration that the 1995 judgment "is valid and enforceable." Thus, the only claim that plaintiff asserts in its complaint in this action arises from the...