Riedel v. First Nat. Bank of Oregon

• Citation: 287 Or. 285,598 P.2d 302
• Decision Date: 07 August 1979
• Docket Number: No. TC,TC
• Parties: , 27 UCC Rep.Serv. 503 Richard L. RIEDEL and Tammy J. Riedel, Plaintiffs, v. FIRST NATIONAL BANK OF OREGON, a national banking association, United States National Bank of Oregon, a national banking association, Respondents, and Portland General Electric Company, a corporation, Appellant. A7611-16311; SC 25613.
• Court: Supreme Court of Oregon

Page 302

598 P.2d 302

287 Or. 285, 27 UCC Rep.Serv. 503

Richard L. RIEDEL and Tammy J. Riedel, Plaintiffs, v. FIRST NATIONAL BANK OF OREGON, a national banking association, United States National Bank of Oregon, a national banking association Respondents and Portland General Electric Company, a corporation, Appellant.

No. TC A7611-16311; SC 25613.

Supreme Court of Oregon, Department 1.

Argued and Submitted Jan. 5, 1979.

Decided Aug. 7, 1979.

David N. Hobson, Portland, argued the cause for appellant. With him on the briefs was Phillips, Coughlin, Buell, Stoloff & Black, Portland.

Ridgway K. Foley, Portland, argued the cause for respondents. With him on the brief were Miller, Anderson, Nash, Yerke & Wiener, Bruce A. Rubin, Souther, Spaulding, Kinsey, Williamson & Schwabe, and John E. Hart, Portland.

Before DENECKE, C. J., and HOLMAN, HOWELL and LENT, JJ.

LENT, Justice.

The parties are agreed that this appeal involves actions on cross claims made by First National Bank ^B against U.S. National Bank (USNB) and Portland General Electric Company (PGE), and by USNB against PGE in the nature of indemnity for the recovery of attorney fees allegedly authorized by ORS 74.2070(3). Both banks incurred attorney fees in defending a cause brought against them by plaintiffs herein. The plaintiffs, Mr. and Mrs. Riedel, brought an action against PGE, USNB and FNB charging all three defendants with recklessness and seeking general and punitive damages.

The parties are agreed on the following: On August 28, 1976, plaintiff wife made out a check in the sum of $37.50 on plaintiff's joint checking account at FNB, payable to the Teamsters Union, Local # 162. The check was intended as payment of plaintiff husband's union dues. Thereafter, on September 8, PGE received the check in its Oregon City office. The plaintiffs denied having anything to do with delivering the Teamster check to PGE, although there was evidence that a friend of plaintiffs delivered the check to PGE to be applied on plaintiffs' bill. PGE did not notice that the check was made out to the Teamsters and endorsed the back of the check with PGE's stamp and credited plaintiffs' account. PGE then deposited the check with USNB, which endorsed the check with its stamp containing the letters "p. e. g.," which letters mean "prior endorsements guaranteed." No one at USNB is instructed to check to see if the endorsements on checks processed by it are proper, except that 500 checks are "fanned through" at a time by the bank personnel. Thereafter the check was delivered to FNB for payment, and FNB debited plaintiffs' account. The process is done mostly by computer and no one at FNB checked to see if the check was properly endorsed. As a result of the fact that the subject check was not delivered to the Teamsters, husband had to pay an additional $100 to reinstate him in the union.

Plaintiffs alleged recklessness on the part of all three defendants in cashing a check not properly endorsed and sought general damages in the sum of $1,000 and punitive damages in the sum of $10,000. In their respective answers, each defendant admitted that the check did not bear the endorsement of the Teamsters but denied any recklessness and affirmatively alleged contributory negligence on the part of plaintiffs in delivering the check to PGE. In addition, FNB filed cross claims against USNB and PGE, and USNB filed a cross claim against PGE.

At the conclusion of plaintiffs' case, the court granted the motions for involuntary nonsuit of both FNB and USNB on the grounds that the banks had both acted in a commercially reasonable manner in handling the check and, therefore, as a matter of law, there was no negligence on the part of either bank, despite failure to look for or discover the improper endorsement on the check. At the conclusion of the trial, the court found PGE and plaintiffs each 50 percent negligent, and awarded a judgment to plaintiffs in the sum of $125. Thereafter the court, on the basis of briefs and affidavits, entered a judgment order on the cross claims awarding FNB a judgment against PGE and USNB for attorney fees in the sum of $2,757.05 and awarding USNB a judgment against PGE for attorney fees in the sum of $4,183.71.

The court had deferred hearing the cross claims until after the plaintiffs' case was concluded. The cross claims were drawn on the theory that PGE was liable to the banks for any judgment obtained against the banks by plaintiffs, because under the law PGE warranted the validity of the check to the banks; however, since the plaintiffs did not get a judgment against either bank, the banks sought to recover from PGE only their attorney fees incurred in the case.

The parties are agreed that the questions presented on appeal are: Are the judgments awarded by the court supported by the pleadings in the cross claims? Does ORS 74.2070(3) provide for recovery of attorney fees as an "expense" in a breach of warranty case? Under the allegations of the complaint, did PGE have a duty to defend the banks? We hold that ORS 74.2070(3) does not authorize an award of attorney fees in Oregon and that PGE had no duty to defend the banks on the record in this case. Accordingly, we do not reach the first question presented.

The banks contend that the award of attorney fees is authorized under ORS 74.2070(3);

"The warranties and the engagement to honor set forth in subsections (1) and (2) of this section arise notwithstanding the absence of indorsement or words of guaranty or warranty in the transfer or presentment and a collecting bank remains liable for their breach despite remittance to its transferor. Damages for breach of such warranties or engagement to honor shall not exceed the consideration received by the customer or collecting bank responsible plus finance charges and Expenses related to the item, if any." (emphasis added) ¹

The trial judge relied upon this section and Gresham State Bank v. O & K Con. Co., 231 Or. 106, 370 P.2d 726, 372 P.2d 187, 100 A.L.R.2d 654 (1962) as authority in awarding attorney fees. In doing so he was influenced by the decision in Bagby v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 491 F.2d 192, reh. den. (8th Cir. 1974).

The statutory language is silent as to attorney fees. The only "legislative" support for awarding attorney fees under this statute comes from the Official Comment to this section of the Uniform Commercial Code:

" * * * The 'expenses' referred to in this phrase may be ordinary collecting expenses and in appropriate cases could also include such expenses as attorneys fees. * * *."

Comment 5 to UCC § 4-207(3). We assume, without deciding, that this is an "appropriate" case within the meaning of the comment (also assuming that the code section is applicable at all). Our attention has been directed to only two decisions concerning the award of attorney fees under this section: Bagby v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, and Security Bank & Trust Co. of Miami, Okla. v. National Bank of Commerce of Tulsa, 9 UCC Rep.Serv. 291 (1971). Both cases involved "collection of an item." See, footnote 1, Supra. In Bagby the Court of Appeals, applying Missouri law, allowed attorney fees. In the other case the Oklahoma Supreme Court denied attorney fees under that state's law. ² These cases are of no help to us in a decision which we find must turn upon the Judicial policy of this state ³ in relation to the awarding of attorney fees in actions at law.

That policy is expressed as well as in any other place in Hughes v. Bembry, 256 Or. 172, 177-178, 470 P.2d 151, 154 (1970):

"We have adopted a narrow policy on the allowance of attorney fees and held that they will not be allowed unless Expressly authorized by a statute or a contract. * * *." (emphasis added)

Given the historical antipathy of this court to awarding attorney fees in the absence of express authority and the legislature's presumed awareness thereof ⁴ we find it reasonable to conclude that had the legislature of this state meant that attorney fees could be awarded under ORS 74.2070(3), it would not have left that authority to be found only in the Commissioners' Comment. The statute does not expressly authorize an award of attorney fees, and in this respect we adhere to our historical position. We hold, therefore, that ORS 74.2070(3) does not authorize an award of attorney fees in this action at law.

The banks further contend that in Gresham State Bank v. O & K Con. Co., 231 Or. 106, 127-129, 370 P.2d 726, 372 P.2d 187, 100 A.L.R.2d 654 (1962) this "court allowed attorney fees in a declaratory judgment (sic) where no statute or contract provided for recovery of the fees. The banks should recover hereunder this authority." Our research does not disclose that case to be a declaratory judgment proceeding. The Abstract of Record found in Oregon Briefs, Vol. 1667, describes the cause as "SUIT IN EQUITY AND BILL OF INTERPLEADER." The complaint contained allegations commonly found in bills of interpleader, and the prayer was for a decree requiring the defendants to interplead and for reasonable attorney fees and all court costs and expenses to be paid out of the stake paid into the registry of the court. At 231 Or. 127-129, 370 P.2d 726, 736-737, cited to us by the banks this court speaks of the case as being one in interpleader. On the issue of the trial court's allowance of attorney fees to plaintiff, this court said:

"When interpleader is allowed ordinarily the plaintiff is entitled to an award of a reasonable attorney's fee and reasonable costs and disbursements. This is true even though the plaintiff would have been subject to an action by one or both of the interpleaded parties and the interpleader suit is brought simply to determine which of the two parties is entitled to recover. Recovery is permitted whether the proceeding is regarded as a 'pure' bill of interpleader or in the nature of a bill of interpleader. However, where the...