Broyles v. Estate of Brown

CAMPBELL, J.,

dissenting.

I dissent. The majority has adopted a new rule interpreting ORS 19.160 and affirms the Court of Appeals. I disagree with the new rule and continue to favor the old rule. For those reasons I would reverse the Court of Appeals. An assessment of 10 percent of the damages should not be imposed against the defendant in this case.

ORS 19.160 in almost the same identical form has been a part of our laws since the Deady Code. 1 During that *805 period of time, this court through its case law developed the following test for the assessment of a penalty under the statute: A party who desired an appellate court to assess this 10 percent penalty was required to prove both that there was no probable cause for the appeal and that the appeal was taken to delay enforcement of a valid obligation. We required that the party meet both parts of the test.

At least three different cases by this court support the above test.

In Stirling v. Dari-Delite, Inc., 262 Or 359 , 491 P2d 1168 , 494 P2d 252 , 498 P2d 753 (1972), we said at 370:

“We have also previously held that the purpose of ORS 19.160 was to impose a penalty to discourage frivolous appeals taken without probable cause for the purpose of delay, as in this case.”

In Harlow v. Chenoweth, 158 Or 343 , 75 P2d 937 (1938):

“We believe that this is a proper instance to invoke * * * for frivolous appeal, a penalty of 10 per cent * * * for the reason that it is apparent that this appeal was taken for the purpose of delay and without any probable cause.” 158 Or at 349 .

In Loveland v. Plant, 132 Or 619 , 287 P 219 (1930):

“The appeal * * * is frivolous and trivial. It appears * * * that the appeal taken in the instant action was for the purposes of delay. * * * [T]he plaintiff * * * is allowed an additional 10 per cent of the judgment as damages for the delay caused by the appeal * * *.” 132 Or at 622 .

In the case of Erb v. Shope, 140 Or 253 , 12 P2d 308 (1932), this court did not assess a penalty but at page 256 set out the purpose of the statute in question:

“The purpose of that enactment was to prevent the taking of an appeal where there was no probable cause therefor and to impose a penalty where the purpose of the appeal was for delay.”

The majority, without playing taps and without naming the departed in an obituary, has overruled the above cases. *806 The doctrine of stare decisis has been ignored. The majority is going to “write off’ that part of the previous test which required that the appeal be taken for “purposes of delay.” 2

Although this court has not said so directly, an examination of the cases indicated that we have equated “lack of probable cause” with “frivolous” and “bad faith” with “for the purpose of delay.” See Shaw v. Pacific Supply Corp., 166 Or 508 , 113 P2d 627 (1941); Harlow v. Chenoweth, supra; Cobb v. S,. P. & S. Ry. Co., 150 Or 226 , 44 P2d 731 (1935; Christensen, Inc. v. Hansen Co., 142 Or 549 , 21 P2d 195 (1933); McCulley v. Homestead Bakery, 141 Or 460 , 18 P2d 226 (1933); Loveland v. Plant, supra; State ex rel Swalko v. Elliott, 113 Or 632 , 233 P 867 (1925); Manary v. Runyon, 43 Or 495 , 73 P 1028 (1903).

The majority has designed a test that is aimed solely at the merits of the appeal. It says:

“The problem involved in determining whether the appeal is or is not based on probable cause is not whether the attorney acted in the honest belief that probable cause existed, but whether any reasonable lawyer would conclude that any of the legal points asserted on appeal possessed legal merit.” 295 Or at 801.

Michael S. Oberman writing in 47 Brooklyn Law Review 1057 3 (Coping With Rising Caseload II; Defining the Frivolous Civil Appeal, 1981) at page 1070:

“Absent a procedural context evidencing * * * abuse or bad faith conduct, sanctions should not be imposed for insufficiency of the merits of an initial, direct appeal. A course of conduct may, in the context of a very close legal question, appear to be determined advocacy; in the context of the ‘long shot’ appeal, the same conduct may be seen as a dilatory ploy.

*807 * * * *

“Nonethless, the primary focus should not be a test of the merits. Judging the strength of the merits and the correctness of a district court opinion, while part of every litigator’s calling, is far from an exact science. If, in good faith, an attorney concludes that the power of persuasion may prevail and a district court judgment may be overturned, that attorney and his or her client should not face sanctions if affirmance ultimately follows * * *. The costs of appeal borne by an appellant today, including printing the brief and appendix as well as attorney fees, are a significant factor weighing heavily against pursuit of a non-meritorious appeal.”

See In Re Marriage of Flaherty, 31 Cal 3d 637, 183 Cal Rptr 508, 646 P2d 179 (1982). 4

The previous test by this court which required proof that the appeal was taken “for purposes of delay” took into account the “good faith” of the appeal in addition to the question of “lack of probable cause.” 5

This writer can find no reported civil cases from this court, other than malicious prosecution cases, which define “probable cause.” The majority now adopts a definition from State v. Iverson, 76 Idaho 117 , 278 P2d 205 (1954), to the effect that “probable cause for appeal” does not require grounds for the reversal of the judgment, but only grounds “that are open to doubt, or are debatable, or over which rational, reasonable or honest discussions may arise.” 295 Or at 801.

The record in this case shows that the defendant had probable cause to appeal under the majority’s definition of that term.

*808 The defendant, in its brief in the Court of Appeals, said that its first assignment of error presented the following question:

“Does a trial court abuse its discretion in denying a motion for mistrial promptly made upon the voluntary interjection of defendant’s insurance company by the plaintiff in a non-responsive answer?”

In Blake v. Webster Orchards, 249 Or 348 , 437 P2d 757 (1968), this court, in considering the consequences of the introduction of insurance into a jury trial, said:

“If insurance is not relevant and is intentionally injected into the case, the trial court must grant a motion for mistrial and if it does not it has committed reversible error. Leishman v. Taylor, 199 Or 546 , 263 P2d 605 (1953). If insurance is not relevant, but has come into the case through inadvertence, whether or not to grant a mistrial is in the discretion of the trial court. Denton v. Arnstein, 197 Or 28, 54-56 , 250 P2d 406 (1952).” 249 Or at 354 .

The defendant stipulated that the plaintiffs remarks as to insurance were inadvertent and it is not trying to bring the appeal under the first half of the Blake v. Webster Orchards, supra, test. The defendant is only appealing under the second half of the test claiming the trial court abused his discretion by refusing to grant a mistrial.

It is admitted that appealing from a discretionary call by the trial judge places the appellant on the short end of the odds of winning the appeal, but it does not necessarily follow that the appeal is without probable cause.

In Baker v. Brookmead Dairy, Inc., 230 Or 384 , 370 P2d 235 (1962), the defendant appealed claiming abuse of discretion by the trial judge in denying a motion to file an amended answer on the day of the trial. We affirmed the trial court, but denied the motion for assessment of a 10 percent penalty under ORS 19.160, stating: “This is not such a groundless appeal as to invoke the penalty.”

The majority opinion states: “Further, the fact of insurance was never ‘injected into the case.’ ” (Emphasis in original.) 295 Or at 802. The transcript shows that immediately after the plaintiff volunteered on cross examination, “And then I asked him for his name and his insurance *809 company”, the lawyer for the defendant moved for a mistrial. What more was he to do — wait until the plaintiff further volunteered the name of the company?

In Lunski v. Lindemann, 270 Or 316, 320 , 527 P2d 254 (1974), questions by plaintiffs counsel of defendant asking whether defendant had a sign indicating whether insurance was sold at his office and whether an insurance business was part of his real estate business were considered “injecting insurance” into the case.

If this case were being decided under our previous case law, there would be ample evidence to show that the appeal was not taken “for the purpose of delay.” 6 The defendant’s lawyer could have interpreted the trial judge’s remarks on the record as a strong recommendation to appeal. The experienced trial judge said:

“Your verdict won’t stand up, [plaintiffs counsel]. * * * I’m open to any suggestion; but I have never known of a case that survived interjection of insurance into it and survived on appeal. * * * I have grave concern about the position our appellate court will take * * *.”

The record shows that the defendant was in fact represented by an insurance company. The plaintiffs judgment against the defendant as a result of the jury’s verdict was the sum of $20,000. The attorney who represented the defendant was employed by the insurance company. The insurance policy had a limit of $15,000. The insurance company had a good faith duty to adequately represent the insured defendant. The defendant’s attorney, when faced with the excess judgment of $5,000, must have thought about the possibility of a malpractice action if he did not appeal.

*810 I dissent because: (1) The majority overrules our long-standing case law, (2) To demonstate that our previous case law had a sound basis, and (3) That in any event there was probable cause for the defendant’s appeal in this case — it presents grounds for appeal which in the majority’s words “are open to doubt, or are debatable, or over which rational, reasonable or honest discussions may arise.”

§531 of the Deady Code:

“Whenever a judgment or decree is affirmed on appeal, and the same be for recovery of money or personal property or the value thereof, the judgment or decree shall be given for ten per centum of the amount thereof for damages for the delay, unless it appears evident to the appellate court that there was probable cause for taking the appeal.” (The section has opposite it in the margin the date of “Oct 11, 1862”).

*805 Apparently a similar statute existed as a part of the Oregon territorial law. See Coffin v. Hanner, Jennings & Co., 1 Or 236 (1857).

This footnote is in response to the majority’s footnote number 3.1 agree with the majority that there was no probable cause to appeal in Stirling v. Dari-Delite, Inc., supra, Harlow v. Chenoweth, supra, and Loveland v. Plant, supra. My point is that all three cases stand for the proposition that in order to impose a 10 percent penalty on appeal under what is now ORS 19.160, there must be proof that there was “no probable cause”for the appeal and that the appeal was taken “for purposes of delay.” The majority has overruled those cases because it has scuttled the second part of the test.

The law review article centers on Rule 38 of the Federal Rules of Appellate Procedure. That rule is:

“If a court of appeals shall determine that an appeal is frivolous, it may award just damages and single or double costs for appellee.”

This case calls attention to the fact that there may be some due process concerns if a penalty is imposed without notice and a hearing.

The concept of “good faith” spills over into our Disciplinary Rules. DR 7-102 states:

“(A) In his representation of a client, a lawyer shall not:

«* * * * *

“(2) Knowingly advance a claim or defense that is unwarranted under existing law, except that he may advance such claim or defense if it can be supported by good faith argument for an extension, modification, or reversal of existing law.” (Emphasis added.)

The plaintiff, in her motion and affidavit for the imposition of a penalty, cited and relied upon Parries v. Labato, 44 Or App 71 , 606 P2d 1284 (1980). This case can be distinguished. In both cases, the plaintiff obtained a judgment in excess of the insurance policy limits. The defendants in both cases appealed to the Court of Appeals. Neither defendant posted a supersedeas bond. In Parries, the plaintiff levied execution by way of garnishment, and the insurance company appealed the garnishment proceedings to avoid paying the judgment until the appeal in the principal case was decided. The appeal from the garnishment was clearly frivolous and intended only to delay. There was no penalty asessed when defendants appealed the principal case. Parries v. Labato, 40 Or App 851 , 597 P2d 356 (1979). In this case when the plaintiff garnisheed the insurance company of the defendant, it paid the face amount of the policy in the sum of $15,000.