76 Or. App. 166 708 P.2d 1173

Argued and submitted February 25,

affirmed in part, reversed in part and remanded October 30, 1985,

reconsideration denied January 31,

petition for review denied March 4,1986 (300 Or 563)

FLIGHT DYNAMICS, INC., Appellant - cross-respondent, v. QUESTECH CAPITAL CORPORATION, Respondent - cross-appellant.

(A8204-02006; CA A31183)

708 P2d 1173

*167John M. Volkman, Portland, argued the cause for appellant - cross-respondent. With him on the briefs was Stephen L. Griffith, Portland.

Stuart M. Brown, Portland, argued the cause for respondent - cross-appellant. With him on the brief were Tonkon, Torp, Galen, Marmaduke & Booth, Portland.

Before Richardson, Presiding Judge, and Warden and Newman, Judges.

NEWMAN, J.

*168NEWMAN, J.

Plaintiffs appeal challenges the part of a judgment that denied it attorney fees. Plaintiff borrowed $500,000 from defendant under a loan agreement which provided that defendant could convert the amount due into plaintiffs common stock1 at any time before or after default. The loan agreement also provided in section 8.2:

“In case any one or more of the Events of Default shall happen and be continuing, the Note holder may proceed to protect and enforce his rights either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, condition, or agreement contained in this agreement or the Note or in aid of the exercise of any power granted in this agreement or the Note or to enforce any other legal or equitable right of the Note holder. In any suit, action, or proceeding to collect the Note or to enforce any provision of this agreement, the Note holder shall be entitled to recover costs of collection and enforcement, including, without limitation, reasonable attorney’s fees.”

In March, 1982, defendant notified plaintiff that it was in default and demanded that plaintiff pay the balance within two days. Plaintiff filed an action for a declaration that it was not in default. Defendant counterclaimed for the full amount of the loan.

*169On October 25, 1982, plaintiff, without admitting liability, tendered the full balance of $516,208.30. Defendant then asserted in a letter to plaintiff that it was entitled to convert under paragraph 2.1. Plaintiff immediately filed a second amended and supplemental complaint which, as a first claim, asked for a declaration that plaintiff was not obligated to convert and alleged:

“XI

“The Agreement provides for the recovery of costs of collection of the Note on enforcement of the Agreement, including reasonable attorneys’ fees. The sum of $10,000 is a reasonable attorneys’ fee for adjudication of the defendant’s claim of a right to and demand for warrants.”

Plaintiffs prayer asked for:

“2. Plaintiffs attorneys’ fees in the amount of $10,000, or such other amount as the court finds reasonable * *

Defendant moved to strike paragraph XI as sham. It asserted:

“On the face of plaintiffs first claim for relief, plaintiff appears to allege that defendant is not entitled to exercise its rights * * *. Plaintiffs argument appears to be that the agreement has been terminated by the payment to defendant of $516,208.33. If that is the case, plaintiff cannot recover attorney fees based on the agreement for the simple reason that the agreement no longer exists.
“If the agreement does exist, and if the attorney fee clause is enforceable, then defendant’s demand for conversion under paragraph 2.1 of the agreement is just as enforceable, and plaintiff has wrongfully cut off that right, all to the damage of defendant.”

The court allowed defendant’s motion. It denied plaintiffs motion for reconsideration but ruled that plaintiff could make an offer of proof on attorney fees at trial.2

Plaintiff filed a third amended and supplemental complaint similar to its previous pleading, except that former *170paragraph XI on attorney fees was not included. Defendant then filed a second amended answer and a counterclaim that asked for plaintiffs common stock and alleged:

“XVII
“The agreement provides for recovery of attorney fees by the prevailing party in any lawsuit brought to enforce the terms of the note or agreement. Defendant should be awarded its reasonable attorney fees incurred herein.”

Plaintiffs reply admitted that the agreement contained the provision for attorney fees that defendant alleged.

Shortly before trial defendant advised plaintiff that it would dismiss its counterclaims and allow plaintiff to take judgment against it on the remaining issues in the lawsuit. At trial plaintiff made an offer of proof on attorney fees. The court entered judgment for plaintiff on its claim for declaratory relief and provided:

“Defendant may not demand of plaintiff and plaintiff is not under any duty to issue to defendant, any warrants for stock, or any stock, in plaintiff corporation.”

Nonetheless, it denied plaintiff attorney fees on its first claim, although plaintiff was the prevailing party on that claim, because it was for declaratory relief. Based on plaintiffs offer of proof, however, the court found as a matter of fact that $25,000 would be a reasonable award of attorney fees were they recoverable.3

Plaintiff assigns as errors that the court (1) struck paragraph XI of plaintiffs second amended and supplemental complaint; (2) denied its motion to reconsider; and (3) did not grant its request for attorney fees either as prevailing party on its first claim or as prevailing party on defendant’s counterclaim for the stock. Plaintiff also asserts that it is entitled to reasonable attorney fees of $25,000. Defendant cross-appeals and assigns as error the court’s finding that $25,000 was a reasonable sum for plaintiffs attorney fees on its first claim.4 We reverse on the appeal and affirm on the cross-appeal.

*171The trial court erred in holding that plaintiff was not entitled to attorney fees as the prevailing party on its first claim. The loan agreement provided that defendant could recover attorney fees “[in] any suit, action or proceeding to collect the Note or to enforce any provisions of this agreement.” Had defendant sued for a declaration that it was entitled to convert under section 2.1 and prevailed, it would have been entitled to attorney fees under section 8.2. That section does not exclude an action for declaratory relief from its broad language.

Furthermore, ORS 20.096(1) provides:

“In any action or suit on a contract, where such contract specifically provides that attorney fees and costs incurred to enforce the provisions of the contract shall be awarded to one of the parties, the prevailing party, whether that party is the party specified in the contract or not, at trial or on appeal, shall be entitled to reasonable attorney fees in addition to costs and disbursements.” (Emphasis supplied.)

Plaintiff was the prevailing party on its first claim. Its action to declare unfounded defendant’s claim that warrants or common stock were due it was an “action * * * on a contract * * Its assertion that defendant was not entitled to convert concerned the application of section 2.1 of the loan agreement. Had defendant sought a declaration that it was entitled to convert under section 2.1, it would have been an action on a contract to enforce its provisions within the meaning of ORS 20.096(1). The remedial purpose of ORS 20.096(1), to provide “true reciprocity of attorney fees,” requires that plaintiffs reciprocal right be just as broad. Jewell v. Triple B. Enterprises, 290 Or 885, 888, 626 P2d 1383 (1981). Finally, the court’s conclusion that ORS 20.096(1) does not apply to an action for declaratory relief is not supported by Oregon authorities. See Stark Street Properties v. Teufel, 277 Or 649, 562 P2d 531 (1977).

The court, therefore, erred when it struck paragraph XI of the first claim in plaintiffs second amended and supplemental complaint, denied plaintiffs motion to reconsider and denied its request for attorney fees under that claim. Moreover, although the services of plaintiffs attorney for prosecution of the first claim and defense against defendant’s *172counterclaim overlapped, the evidence contained in plaintiffs offer of proof supports the court’s finding. The court did not abuse its discretion in finding that $25,000 was a reasonable attorney fee for prevailing on its first claim.

Defendant asserts that plaintiffs judgment does not comply with ORCP 67B because it “does not dispose of all claims made in the present case” and does not conta in “an express determination that there was no just reason for delay” and “an express direction for the entry of judgment.” We disagree. Plaintiffs initial claim for declaratory relief was superseded by its subsequent pleading. A judgment does not fail to comply with ORCP 67B if it does not address superseded pleadings. Moreover, in open court on November 4, 1983, defendant withdrew its counterclaims and stated that it would not offer any evidence in their support. See ORCP 54A(1).5 To comply with ORCP 67B the judgment does not have to dispose of counterclaims that the record shows defendant voluntarily withdrew. The judgment resolved all of the claims before the court.

We do not agree with defendant’s argument that plaintiff must plead both the contract and ORS 20.096 to support its request for attorney fees. Plaintiff alleged in paragraph XI of its first claim (the paragraph that that court erroneously struck) that the loan agreement provided for the recovery of attorney fees. Pleading the contract was enough. Rule 68C(2) provides that a party must plead the facts, statute or rule that provides the basis for the award. See Parkhurst v. Faessler, 62 Or App 539, 542, 661 P2d 571 (1983). The purpose of ORCP 68 is to give parties “some warning of a potential claim for attorney fees prior to trial.” Merrill, Oregon Rules of Civil Procedure: A Handbook, 150 (1981). Defendant knew from the commencement of the litigation that plaintiff sought attorney fees and the basis for its claim. Plaintiff did not also need to plead ORS 20.096(1).

*173Defendant did not raise below its argument that, if plaintiff is entitled to attorney fees, its claim is limited to $10,000. In any event, it is without merit. Plaintiffs second amended and supplemental complaint asked for reasonable attorney fees and did not limit its claim to $10,000.6

Defendant’s assignments of error in its cross-appeal are without merit.7

Reversed on appeal and remanded for entry of judgment for plaintiff, including attorney fees of $25,000 on its first claim; affirmed on the cross-appeal.

Flight Dynamics, Inc. v. Questech Capital Corp.
76 Or. App. 166 708 P.2d 1173

Case Details

Name
Flight Dynamics, Inc. v. Questech Capital Corp.
Decision Date
Oct 30, 1985
Citations

76 Or. App. 166

708 P.2d 1173

Jurisdiction
Oregon

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