Find Legal Information

FILED: April 13, 2011

IN THE COURT OF APPEALS OF THE STATE OF OREGON

CAPITAL ONE BANK,
successor-in-interest to Capital One, F. S. B.,

Plaintiff-Respondent,

v.

JOHN W. FORT,

Defendant-Appellant.

Washington County Circuit Court
C074503CV
A140485

Keith B. Rogers, Judge.

Argued and submitted on May 27, 2010.

Craig P. Colby argued the cause for appellant. On the briefs was Bret Knewtson.

Jamie Forbes argued the cause and filed the brief for respondent.

Before Haselton, Presiding Judge, and Armstrong, Judge, and Duncan, Judge.

ARMSTRONG, J.

Reversed and remanded.

ARMSTRONG, J.

Defendant appeals a supplemental judgment, assigning error to the trial court's refusal to award him his requested attorney fees. Defendant contends that the court erred in deciding that the choice-of-law provision in the contract between plaintiff and defendant required the court to apply Virginia law to the contract's one-sided attorney-fee provision rather than Oregon law, which, pursuant to ORS 20.096 (2007),(1) would have made the right to recover prevailing party attorney fees under the attorney-fee provision reciprocal and entitled defendant, as the prevailing party in the action, to an award of attorney fees. We agree with defendant and, accordingly, reverse and remand.

The relevant facts are undisputed. Defendant, a resident of Oregon, established a credit account with plaintiff, a Virginia-chartered bank. Plaintiff issued a credit card to defendant with a copy of a cardholder agreement stating the terms of his use of the account. The agreement provided that defendant would pay plaintiff's attorney fees incurred to collect any amount defendant owed under the agreement "[t]o the extent permitted by law." It also included a choice-of-law provision that provided that the agreement would "be governed by Virginia law and Federal law."

Defendant defaulted on his payment obligations under the cardholder agreement, and plaintiff sued him for breach of contract in Washington County Circuit Court, requesting, among other things, an award of attorney fees. Defendant filed an answer asserting that plaintiff's claim was time barred under Virginia's statute of limitations and requesting his attorney fees under the contract pursuant to ORS 20.096. The trial court referred the case to court-annexed arbitration. Although he conceded liability for breach of the cardholder agreement, defendant prevailed on his statute-of-limitations defense. However, on the issue of defendant's entitlement to attorney fees, the arbitrator concluded that "the agreement is governed by Virginia law and Virginia law does not make attorney fees reciprocal or otherwise provide for an award of fees in these circumstances."

Defendant filed with the trial court a written exception to the arbitrator's denial of attorney fees, arguing in part that the public policy interest of Oregon in making the right to recover prevailing party attorney fees under one-sided attorney-fee provisions reciprocal, as reflected by the enactment of ORS 20.096, is so strong that that statute should apply to the attorney-fee provision in the parties' agreement despite the choice-of-law provision. In response, plaintiff argued that defendant could not rely on Virginia law under the choice-of-law provision to establish his statute-of-limitations defense and simultaneously seek to apply Oregon law to the attorney-fee provision. After a hearing, the court reasoned:

"[T]he issue does come down to whether or not [defendant's] public policy arguments trump the bargained-for contract. And, obviously, Oregon does have a strong public policy of protecting those who enter into contracts who are unequal in the bargaining process, and [ORS] 20.096 is intended to be a remedy to protect those people. But having read [Seattle-First National Bank v. Schriber, 51 Or App 441, 625 P2d 1370 (1981) (Seattle-First)], I do not believe that this case comes up to the level where I can say that this applies."

Accordingly, the court concluded that it did not have the authority to apply ORS 20.096 to the case and entered a supplemental judgment denying defendant's request for fees.

On appeal, defendant renews his argument that the application of Virginia law to the attorney-fee provision in the agreement would be contrary to the fundamental public policy of Oregon set forth in ORS 20.096.(2) In response, plaintiff argues that Oregon's public policy encourages freedom of contract and that there is no policy reason to interfere with the parties' freedom to choose to apply Virginia law to the agreement's provisions. For the reasons that follow, we agree with defendant.

We review a trial court's judgment affirming or reversing an arbitrator's determination of a party's entitlement to attorney fees for legal error. Beers v. Jeson Enterprises, 165 Or App 722, 724, 998 P2d 716 (2000). In deciding which state law to apply when construing the provisions of a contract, Oregon courts apply a comparative-interest approach on an issue-by-issue basis, Machado-Miller v. Mersereau & Shannon, LLP, 180 Or App 586, 592, 43 P3d 1207 (2002), with the foundational premise that the intention of the parties to a contract controls a court's interpretation of it, Young v. Mobil Oil Corp., 85 Or App 64, 67, 735 P2d 654 (1987).(3) Accordingly, the parties may include a choice-of-law provision in a contract, which a court will enforce subject to certain restrictions that are described in the Restatement (Second) of Conflict of Laws