Portland Gen. Elec. Co. v. Ebasco Services, INC.

• Decision Date: 25 July 2013
• Docket Number: CA A143752,(CC CV05120776,SC S060584).
• Citation: 306 P.3d 628,353 Or. 849
• Parties: PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation, Plaintiff–Respondent, Petitioner on Review, v. EBASCO SERVICES, INC., fka Esicorp, Inc.; et al., Defendants, and Lexington Insurance Company, Defendant–Appellant, Respondent on Review. EECI, Inc., a Nevada corporation, Third–Party Plaintiff, v. General Electric Company, a New York Corporation; et al., Third–Party Defendants.
• Court: Oregon Supreme Court

353 Or. 849

306 P.3d 628

PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation, Plaintiff–Respondent, Petitioner on Review,

v.EBASCO SERVICES, INC., fka Esicorp, Inc.; et al., Defendants,andLexington Insurance Company, Defendant–Appellant, Respondent on Review.

EECI, Inc., a Nevada corporation, Third–Party Plaintiff,

v.General Electric Company, a New York Corporation; et al., Third–Party Defendants.

(CC CV05120776; CA A143752; SC S060584).

Supreme Court of Oregon, En Banc.

Argued and Submitted April 29, 2013.

Decided July 25, 2013.

On review from the Court of Appeals.^*

Brian R. Talcott, Dunn Carney Allen Higgins and Tongue, LLP, Portland, argued the cause for petitioner on review. With him on the brief were Thomas H. Tongue and Bridget D. Lynn.

David M. Axelrad, Horitz & Levy LLP, Encino, California, argued the cause for respondent on review. On the brief were Stephen F. Deatherage and Daniel F. McNeil, Bullivant Houser Bailey, PC, Portland.

BREWER, J.

Plaintiff Portland General Electric Company (PGE) seeks review of a Court of Appeals decision that reversed and remanded a trial court order denying defendant Lexington Insurance Company's motion under ORCP 71 to set aside a default judgment entered against it in PGE's favor, on the ground that the trial court lacked jurisdiction to enter the default judgment. On review, the issues are (1) whether a default judgment awarding monetary relief violates ORCP 67 C if the underlying complaint did not state the specific amount of money or damages being sought; and (2) if so, whether such a defect renders the judgment merely voidable and therefore not subject to collateral attack or, instead, renders the judgment void and therefore subject to challenge at any time. We conclude that the default judgment did violate ORCP 67 C in the asserted respect. However, we also conclude that, in the circumstances of this case, the rule violation did not render the judgment void. Accordingly, we reverse the decision of the Court of Appeals and remand to that court for further proceedings.

The pertinent facts are procedural and not in dispute. A former employee of PGE brought a personal-injury action against PGE based on asbestos exposure. In December 2005, after settling that action, PGE sued certain insurers that had issued insurance policies to PGE for the period during which the exposure had occurred. In its complaint, PGE alleged that it had entered into a confidential settlement agreement in the underlying asbestos personal injury case; that it had tendered its claims to its insurers; that it had fulfilled its obligations under the policies or was excused from any such obligations; that the policies provided coverage for the claims resulting in the settlement; and that PGE's insurers had breached the insurance contracts by failing to indemnify PGE for the settlement. In the prayer of the complaint, PGE sought a judgment providing that the insurers were “liable to reimburse [PGE] regarding the settlement of the underlying lawsuit.” Lexington was one of the insurers, and it was a party to a policy providing coverage not to exceed $5 million. Because it had only a 16–percent share in that policy, Lexington had a maximum exposureof $800,000. However, PGE did not allege any specific amount of monetary loss or damages that resulted from Lexington's breach of its indemnity obligation. Although a copy of the pertinent insurance policy was attached to the complaint as an exhibit, PGE did not allege that it was seeking damages equivalent to the liability limit under that policy. Moreover, PGE's complaint did not specify the amount of money for which PGE had settled the underlying asbestos-exposure litigation, stating instead that the settlement amount had been “reasonable.”

In 2006, PGE served the complaint on a New York law firm specified in the policy as an authorized agent for service of process on the subscribing insurers. That firm forwarded the complaint to another law firm, which filed an answer on behalf of other insurers but not on behalf of Lexington, because it did not represent Lexington. All the other solvent insurer defendants appeared and defended, but Lexington did not.

About three years after PGE filed its original complaint, it moved for an order of default and for a limited judgment of default against Lexington for $800,000, plus costs and attorney fees. That motion was served on the firm that represented the other subscribing insurers, but it was not served on Lexington.¹ The motion included a declaration that PGE's loss in the underlying personal-injury action exceeded “the $800,000 policy limit provided by Lexington.” In January 2009, the trial court granted PGE's motion and entered an order of default and limited judgment on default against Lexington for $800,000, plus $26,865 in costs and attorney fees. Lexington learned of the default judgment almost immediately, and it retained counsel to review the matter.

Lexington did not appeal the judgment. Rather, it brought a collateral challenge to it. In July 2009, Lexington filed a motion to set aside the default judgment under ORCP 71. In that motion, Lexington sought relief solely on the grounds of its asserted excusable neglect in failing to appear and the trial court's “inherent discretion.” The trial court concluded that Lexington had failed to provide a reasonable explanation for its failure to appear and, accordingly, denied the motion. The court later entered a supplemental judgment awarding PGE additional costs and attorney fees.

Lexington appealed both the supplemental judgment and the order denying its motion to set aside the limited judgment of default. On appeal, Lexington asserted for the first time that the trial court had lacked jurisdiction to enter the default judgment awarding monetary relief on the ground that PGE had failed to comply with ORCP 67 C.² Lexington argued that, because PGE had not demanded a specific amount of monetary relief in its complaint, the default judgment awarded an amount “exceeding the amount prayed for in the pleadings.” In Lexington's view, that defect rendered the entire judgment void.³ PGE responded that the complaint had provided Lexington with “all of the information necessary to allow it to understand the claim being asserted and to assess its risk of not appearing.” In particular, PGE relied on the complaint's allegation that the subscribing insurers had breached a specific $5 million insurance policy—attached as an exhibit to the complaint—that outlined Lexington's 16–percent share and $800,000 exposure limit.

The Court of Appeals concluded that the default judgment was void because PGE had failed to state a specific amount of damages in its complaint. PGE v. Ebasco Services, Inc., 248 Or.App. 91, 100–01, 273 P.3d 165 (2012). Relying on its prior decision in Montoya v. Housing Authority of Portland, 192 Or.App. 408, 416, 86 P.3d 80 (2004), the court concluded that ORCP 67 C imposes a jurisdictional requirement, such that a trial court lacks jurisdiction to enter a default judgment in any amount where the underlying complaint failed to specify the amount of monetary relief sought. Ebasco Services, 248 Or.App. at 100, 273 P.3d 165. In Montoya, the Court of Appeals had considered whether a default judgment was void for lack of jurisdiction because, in violation of ORCP 67 C, the amount of damages awarded exceeded the amount pleaded. In concluding that the rule had been violated and that the defect was jurisdictional, the court explained:

“ ‘In reaching a conclusion as to what statutory provisions are jurisdictional, a distinction may be made between procedures which are required both by statute and also by the due process clause of the constitution on the one hand, and procedures required by statute alone, over and beyond anything rendered necessary by the constitution, on the other. * * * Those requirements of statute which are essential to due process are, of course, jurisdictional, and we think that statutory requirements over and beyond the bare necessities of due process may also be jurisdictional, but only if it is the legislative intent to make them so.’ ”

192 Or.App. at 415–16, 86 P.3d 80 (quoting Frederick v. Douglas Co. et al., 176 Or. 54, 63–64, 155 P.2d 925 (1945)). The court reasoned that ORCP 67 C is jurisdictional because awarding more than the amount prayed for by default without notice and the opportunity to be heard is the functional equivalent of taking a default judgment on a complaint without service of process. Id. at 416, 86 P.3d 80. Thus, the court held that the default judgment was void to the extent that it awarded monetary relief exceeding the amount prayed for in the complaint. Id.

In this case, the Court of Appeals extended its reasoning in Montoya to the circumstance where PGE's complaint had not provided Lexington with notice “that [PGE] sought to recover any particular amount in damages from [Lexington].” Ebasco Services, 248 Or.App. at 100, 273 P.3d 165. The court concluded that the insurance policy attached to the complaint did not cure the posited defect because the complaint did not otherwise state that PGE sought the maximum amount allowed under the policy or indicate that the underlying asbestos-exposure case had been settled for more than that amount. Id. The court ultimately concluded that the default judgment was void, and it directed the trial court on remand to vacate the default order; the court also vacated the supplemental judgment awarding attorney fees, costs, and disbursements. Id. at 100–01, 273 P.3d 165. PGE petitioned for reconsideration, arguing that the default judgment should be left intact insofar as it adjudged Lexington liable for breach of contract. The Court of Appeals denied reconsideration.

On review, PGE asserts that ORCP 67 C imposes procedural requirements that do not implicate a trial court's jurisdiction and, accordingly, that the Court of Appeals erred in concluding that the default...