Wilkes v. Zurlinden

• Decision Date: 11 June 1999
• Docket Number: CC 93-3620-L-3, Agency No. 17988-101; CA A91278 (Control, A91800; SC S44912)
• Parties: Allen WILKES, dba S.A.W. Construction, Respondent on Review, v. Dennis ZURLINDEN and Sharie Zurlinden, husband and wife, Petitioners on Review. Allen Wilkes and Shirley Wilkes, dba S.A.W. Construction, Petitioners Below, v. Construction Contractors Board, Dennis Zurlinden and Sharie Zurlinden, Respondents Below.
• Court: Oregon Supreme Court

984 P.2d 261

328 Or. 626

Allen WILKES, dba S.A.W. Construction, Respondent on Review, v. Dennis ZURLINDEN and Sharie Zurlinden, husband and wife, Petitioners on Review.

Allen Wilkes and Shirley Wilkes, dba S.A.W. Construction, Petitioners Below, v. Construction Contractors Board, Dennis Zurlinden and Sharie Zurlinden, Respondents Below.

(CC 93-3620-L-3, Agency No. 17988-101; CA A91278 (Control), A91800; SC S44912)

Supreme Court of Oregon.

Argued and Submitted September 10, 1998.

Decided June 11, 1999.

William V. Deatherage, of Frohnmayer, Deatherage, Pratt, Jamieson & Clarke, P.C., Medford, argued the cause for petitioners on review. With him on the petition was John R. Huttl.

Matthew Sutton, of Kellington, Krack, Richmond, Blackhurst & Sutton, LLP, Medford, argued the cause for respondents on review.

Before CARSON, Chief Justice, and GILLETTE, VAN HOOMISSEN, DURHAM, LEESON, and RIGGS, Justices.¹

LEESON, J.

In this action on a construction contract, the issue is whether the trial court erred in designating defendants as the prevailing party under ORS 20.096² and awarding them attorney fees under the parties' contract. After a trial in which it denied affirmative relief to both plaintiff³ and defendants, the court designated only defendants as the prevailing party. The Court of Appeals reversed, holding that neither party was the prevailing party. Wilkes v. Zurlinden, 146 Or.App. 371, 932 P.2d 584 (1997), on remand 152 Or.App. 130, 952 P.2d 569 (1998). For the reasons that follow, we reverse the decision of the Court of Appeals, modify the judgment of the circuit court, and remand the case to the circuit court for further proceedings.

In May 1992, plaintiff, a construction contractor, entered into a written contract with defendants to build a house for defendants in Medford. The contract contained an attorney fees provision, under which plaintiff was entitled to fees if he instituted suit or employed an attorney to collect money under the contract. Early in 1993, defendants ordered plaintiff to cease work on the project and to leave the premises. Thereafter, plaintiff filed this action for breach of contract, seeking $19,080.42 in economic damages and attorney fees. Defendants filed an answer denying that they had breached the contract. They also filed a counterclaim against plaintiff alleging breach of contract and negligence, and seeking affirmative relief. Defendants sought $103,201 in economic damages and attorney fees.

After a trial to the court, the court issued a memorandum decision in which it found "in favor of defendants and against the plaintiff on plaintiff's claim and in favor of plaintiff and against the defendants on their counterclaim." Consequently, the court did not award damages to either party, and it ordered each party to pay its own costs.

Defendants' proposed form of judgment stated that defendants were the prevailing party. Plaintiff objected. The trial court overruled plaintiff's objection, designated defendants as the prevailing party, and awarded them attorney fees in the amount of $7,500.⁴

Although plaintiff had sought attorney fees at the trial court level, which the trial court denied, on appeal plaintiff assigned error only to the trial court's designation of defendants as the prevailing party for purposes of an award of attorney fees. Plaintiff argued that, because neither party succeeded on its claim or counterclaim, neither was the prevailing party under ORS 20.096(5). Consequently, he maintained, neither party was entitled to an award of attorney fees under the contract. As noted, the Court of Appeals agreed with plaintiff and reversed the trial court. Wilkes, 146 Or.App. at 377,932 P.2d 584. On petition for review of that decision, this court vacated and remanded for further consideration in light of Anderson v. Jensen Racing, Inc., 324 Or. 570, 931 P.2d 763 (1997), and Domingo v. Anderson, 325 Or. 385, 938 P.2d 206 (1997). On remand, the Court of Appeals adhered to its original opinion, reasoning that neither of those cases was relevant to the issue in this case. Wilkes, 152 Or.App. at 133-34, 952 P.2d 569.

Defendants again petitioned for review.⁵ On review, they argue that, because they defeated plaintiff's claim against them, the trial court properly designated them as the prevailing party under ORS 20.096(5), and they are entitled to attorney fees under the contract. Plaintiff repeats the same argument here that he made to the Court of Appeals: Because neither party prevailed on its claim or counterclaim, final judgment was not rendered in favor of either party. Consequently, plaintiff contends, neither party is entitled to an award of attorney fees. We conclude that, under the circumstances of this case, both parties are prevailing parties under ORS 20.096(5).

Generally, a party is not entitled to an award of attorney fees unless such an award is authorized by statute or by a specific contractual provision. Mattiza v. Foster, 311 Or. 1, 4, 803 P.2d 723 (1990). As noted above, the construction contract at issue in this case contains an attorney-fees provision. Our analysis of the attorney-fees issue begins with that provision. See Anderson, 324 Or. at 578, 931 P.2d 763 (court begins analysis of attorney-fees issue with contract provision); Domingo, 325 Or. at 389, 938 P.2d 206 (same). In this case, the attorney-fees provision in the parties' contract provides:

"In the event that it becomes necessary to institute suit or to employ an attorney to collect any payment or payments due the undersigned for labor or material furnished under this agreement or any modifications thereof, then you shall be liable to the undersigned for court costs and attorney's fees. * * * "

Although that attorney-fees provision purports to entitle only plaintiff to an award of attorney fees, such one-sided attorney-fees provisions are made reciprocal by ORS 20.096(1). See Niedermeyer v. Latimer, 307 Or. 473, 476, 769 P.2d 771 (1989) (ORS 20.096(1) makes contractual attorney-fees provisions reciprocal but does not itself authorize an award of attorney fees).

The parties agree that whichever party "prevailed" in this action is the "prevailing party" under ORS 20.096(5) and, therefore, is entitled to attorney fees under the contract. According to that statute, the prevailing party in an action on a contract is "the party in whose favor final judgment is rendered."

Determining the party in whose favor final judgment has been rendered can be complicated when multiple claims and counterclaims are involved. See Anderson, 324 Or. at 582-83, 931 P.2d 763 (Durham, J., concurring) (discussing complexity of determining which party is "prevailing party" when number of claims multiplies and when nonmonetary, as well as monetary, relief is granted). This court has held that, when there are claims and counterclaims on the same contract, and both parties are awarded affirmative relief in the form of damages, the court nets the damage awards in determining the party in whose favor final judgment is rendered. See Carlson v. Blumenstein, 293 Or. 494, 499-501, 651 P.2d 710 (1982) (so holding and demonstrating procedure).

In this case, by contrast, neither party was granted affirmative relief and neither was awarded damages. However, each party succeeded in defeating the other's claim. This court has held that, if a plaintiff takes nothing on its claim, then the defendant is the prevailing party under ORS 20.096 and is entitled to an award of attorney fees. See American Petrofina v. D & L Oil Supply, 283 Or. 183, 199-200, 583 P.2d 521 (1978) (interpreting former ORS 20.096(3) (1977), renumbered as ORS 20.096(5) (1979)). The question thus narrows to whether ORS 20.096(5) prevents the American Petrofina rationale from applying here, where plaintiff takes nothing on its claim and defendants take nothing on their counterclaim. In analyzing that statute, we follow the statutory construction methodology summarized in PGE v. Bureau of Labor and Industries, 317 Or. 606, 610-11, 859 P.2d 1143 (1993).

ORS 20.096(5) defines the prevailing party in an action as "the party in whose favor final judgment or decree is rendered." That subsection refers to "the" party in the singular, which suggests that, under the statute, there can be only one prevailing party in an action. However, ORS 20.096(1) provides context for the construction of ORS 20.096(5). As noted above, ORS 20.096(1) makes one-sided contractual attorney-fees provisions reciprocal. The reciprocity provision in that section applies to "any action or suit" on a contract that contains an attorney-fees provision. An action on a contract seeking affirmative relief can be in the form of a claim or a counterclaim. Rogue River Management Co. v. Shaw, 243 Or. 54, 58-60, 411 P.2d 440 (1966). Reference to "the" prevailing party in ORS 20.096(1) and in ORS 20.096(5) does not exclude the possibility of more than one prevailing party when there is both a claim and a counterclaim on a contract and each party succeeds in defeating the other party's claim for relief.

As noted, in this case, plaintiff took nothing on his claim, and defendants took nothing on their counterclaim. Under the rationale of American Petrofina, both are prevailing parties. The next question is whether that conclusion is inconsistent with this court's holding in Carlson, 293 Or. at 499-501, 651 P.2d 710.

In our view, it is not. Carlson also involved a construction contract dispute. The plaintiffs sought damages for the defendants' failure to perform the construction work properly, and the...