HASELTON, C.J.
This case involves an insurance-related dispute arising out of construction defect litigation. Plaintiff Brownstone Homes Condominium Association, an assignee of the insured defendant, A & T Siding, Inc. (A & T), appeals, challenging the trial court's determination that plaintiff was not entitled to garnish the proceeds of an insurance policy issued by A & T's insurer, Capitol Specialty Insurance Co. (Capitol). The trial court's ruling was based on an application of the holding in Stubblefield v. St. Paul Fire & Marine, 267 Or. 397, 400-01, 517 P.2d 262 (1973) ("the Stubblefield rule").
Where, as here, the material facts are undisputed, we review the trial court's grant of summary judgment for legal error. Povey v. City of Mosier, 220 Or.App. 552, 554, 188 P.3d 321, rev. den., 345 Or. 460, 200 P.3d 146 (2008). We also review the trial court's construction of ORS 31.825 for legal error. Horton v. Western Protector Ins. Co., 217 Or.App. 443, 448, 176 P.3d 419 (2008).
This case derives from construction defect litigation, in which the plaintiff association filed claims against defendant A & T, a siding subcontractor, for breach of contract and negligence. A & T was insured by two
(Emphasis added.)
On March 14, 2008, plaintiff, A & T, and Zurich entered into a settlement agreement. A & T agreed to stipulate to a judgment against it in favor of plaintiff for $2 million. Zurich agreed to pay plaintiff $900,000 on behalf of A & T. Plaintiff agreed that
A & T assigned to plaintiff any claims that A & T had against Capitol under the above-quoted policy. In addition, A & T agreed to "reasonably and in good faith cooperate with [plaintiff] in pursuing the rights and claims assigned."
A stipulated general judgment and money award was entered on November 13, 2008. Plaintiff subsequently served a writ of garnishment on Capitol pursuant to ORS 18.352,
The trial court agreed with Capitol and granted the motion for summary judgment in a post-judgment order and letter opinion. The court reasoned that the Stubblefield rule was "fatal to plaintiff's claims," and that ORS 31.825 was inapplicable because the assignment here "occurred long before the judgment was entered."
Plaintiff appeals,
Capitol remonstrates that the Stubblefield rule applies to garnishment actions because plaintiff, as a judgment creditor, "steps into the shoes" of the judgment debtor, A & T, for purposes of prosecuting claims against Capitol and, thus, remains subject to Stubblefield's constraints.
We address each of plaintiff's alternative arguments in turn, and ultimately conclude that plaintiff does not have any enforceable claims against Capitol. Accordingly, the trial court properly granted summary judgment.
We begin with Stubblefield. There, the plaintiff and the insured defendant entered into a settlement agreement in a tort action, which included a stipulated judgment against the defendant in the amount of $50,000. 267 Or. at 398, 517 P.2d 262. As part of the settlement, the plaintiff also agreed to a covenant not to execute the judgment against the insured for any amount over $5,000, which the insured agreed to pay. In return, the insured assigned to the plaintiff all claims against his insurance company in excess of $5,000 arising out of his policy — a policy that provided that "the Company will indemnify the Insured for all sums which the Insured shall be legally obligated to pay as damages and expenses * * *." Id. at 400, 517 P.2d 262 (emphasis added). The plaintiff then filed an action against the insurer. The insurer prevailed in the trial court, and the plaintiff appealed. Id. at 398-99, 517 P.2d 262.
The Supreme Court affirmed, concluding that the result of the nonexecution covenant was that the only sum that the insured was "legally obligated to pay" was $5,000. Id. at 400, 517 P.2d 262. That amount was expressly excluded from the assignment. Consequently, the court determined that, under the terms of the assignment, "plaintiff acquired no rights which [were] enforceable" against the insurer. Id. at 400-01, 517 P.2d 262. See also Lancaster v. Royal Ins. Co. of America, 302 Or. 62, 726 P.2d 371 (1986) (reversing the allowance of summary judgment for the insurer, which had been based on Stubblefield, because ambiguity in the predicate nonexecution covenant gave rise to material issues of fact as to whether the insured remained liable under the agreement); Oregon Mutual Ins. Co. v. Gibson, 88 Or.App. 574, 746 P.2d 245 (1987) (applying Stubblefield, in a declaratory relief action, concluding that the nonexecution covenant unconditionally insulated the assignor insured from liability and, as a result, the insurer was not liable to the assignee).
While forthrightly acknowledging Stubblefield's is reasoning and result, plaintiff first asserts that Stubblefield is not controlling here because its rationale is categorically inapposite to garnishment proceedings. Specifically, plaintiff posits that, because plaintiff may proceed directly against Capitol under ORS 18.352 and ORS 742.031, plaintiff's claim against Capitol is dependent neither on A & T's rights against Capitol nor on the viability of the assignment of those rights to
In Reuter, after concluding that the defendant insured had no enforceable claims under the terms of his insurance policy, the court considered whether the plaintiff in a tort action against the insured would similarly be barred from asserting coverage. 299 Or. at 164, 700 P.2d 236. The court reasoned that, if the plaintiff eventually prevailed in her tort action, "two avenues against [the insurer] would be open to her. She could garnish [the insurer], [former] ORS 23.230 [renumbered as ORS 18.352 (2003)], or she could sue [the insurer] under [former] ORS 736.320 [renumbered as ORS 742.031 (1989)]." Id. The court concluded that "[a] garnishment gives the judgment creditor plaintiff no greater rights against the garnishee than the judgment debtor defendant has." Id. Thus, the court concluded:
Id. at 166, 700 P.2d 236.
We agree with Capitol that Reuter preempts and precludes plaintiff's garnishment-based distinction of Stubblefield. Consistently with Reuter, plaintiff's rights as a garnishor against Capitol are, at most, no greater than those of its judgment debtor, A & T, under the terms of the insurance policy. As noted, under the policy, Capitol is liable to A & T only for "those sums that [A & T] becomes legally obligated to pay" — and, under Stubblefield, Capitol has no enforceable payment obligations to A & T (and, derivatively, plaintiff). Thus, in this circumstance, there is no material functional difference in the relationship between an assignee and an assignor, as in Stubblefield, and between a garnishor and a judgment debtor, as in Reuter. In sum, under Stubblefield and Reuter, plaintiff — "stand[ing] in [A & T's] shoes" — has "no rights which are enforceable by it" against Capitol.
Plaintiff next contends that ORS 31.825 abrogates the operation of the Stubblefield rule ORS 31.825 provides:
The parties' dispute with respect to the applicability of that statute centers on whether the statute requires a particular sequence of events. Specifically, plaintiff argues that "[n]othing in the text of the statute says that any `assignment and any covenant or release' must be executed after the `judgment rendered' for the statute to apply." (Emphasis in original.) Capitol counters that, by its plain language, ORS 31.825 applies only "if the judgment has been entered prior to execution of the Settlement Agreement and its unconditional covenant not to execute." (Emphasis in original.) We agree with Capitol.
ORS 31.825 refers to the judgment using the present perfect verb tense: "[a] defendant in a tort action against whom a judgment has been rendered may assign"; "to the plaintiff in whose favor the judgment has been entered." That tense necessarily connotes that the judgment must be entered before the assignment of rights. We conclude that, by its terms, ORS 31.825 preserves assigned rights against an insurer
That construction of ORS 31.825 comports with the statute's legislative history. For example, and with particular respect to the timing feature, a proponent of the legislation, Steve Piucci of the Oregon Trial Lawyers Association, responded in the affirmative to committee counsel's question regarding whether a judgment must precede an assignment:
Tape Recording, Senate Committee on Judiciary, SB 519, Mar. 27, 1989, Tape 82, Side A.
We note finally that our construction here of the timing feature of ORS 31.825 comports with our prior understanding of the statute's operation, as expressed in Portland School Dist. v. Great American Ins. Co., 241 Or.App. 161, 249 P.3d 148, rev. den., 350 Or. 573, 258 P.3d 1239 (2011). There, the insurer had argued that ORS 31.825 was inapposite "because the assignment and release were agreed to * * * before any suit was filed against the contractor." Id. at 174-75, 249 P.3d 148. We concluded that the timing of the assignment in relation to the entry of judgment did not bar the application of ORS 31.825, because the settlement agreement required a specific sequence of performance that was consistent with ORS 31.825 — viz., the assignment "was conditioned upon the filing of a tort action and entry of judgment against the [defendant]," hence, "until the stipulated judgment was entered, the [plaintiff] had no enforceable right to assignment and the [defendant] had no enforceable right to release from liability to the [plaintiff]." 241 Or.App. at 175, 249 P.3d 148.
We concluded:
241 Or.App. at 174, 249 P.3d 148 (emphasis added).
ORS 31.825 does not apply here, because the order of events in this case does not conform to the statutorily prescribed sequence. Here, the assignment in the March 14, 2008, settlement agreement predated the stipulated judgment that was entered November 13, 2008. Because the judgment had not "been entered" at the time of the assignment, ORS 31.825 does not operate, in contravention of Stubblefield's otherwise controlling principle, to preserve plaintiff's claims against Capitol.
We turn to plaintiff's third and final alternative argument. Plaintiff invokes Lancaster, 302 Or. 62, 726 P.2d 371, for the proposition that a qualified covenant not to execute does not fully extinguish the legal obligation of the insured and, consequently, does not extinguish the liability of the insurer by application of the Stubblefield rule. Plaintiff argues that the nonexecution covenant here was materially qualified by A & T's agreement noted above, 255 Or.App. at 392-95, 298 P.3d 1228 (op. at 1229-30), to "reasonably and in good faith cooperate with [plaintiff] in pursuing the rights and claims assigned."
Id. at 68, 726 P.2d 371 (footnote omitted). The court concluded that that ambiguity created a factual issue, which precluded summary judgment — viz., whether the insured could be legally obligated to the plaintiff under the terms of the nonexecution covenant. Id. at 68-69, 726 P.2d 371.
In the predicate nonexecution covenant here, plaintiff agreed that "in no event will it execute upon or permit the execution of the stipulated judgment against A & T or its assets." (Emphasis added.) Plaintiff's agreement not to execute the judgment against A & T was not conditioned upon A & T's continued cooperation; rather the nonexecution agreement was unqualified.
In sum, the operative nonexecution covenant unconditionally released A & T from any liability to plaintiff. As a result, under the Stubblefield rule, in conjunction with Reuter, plaintiffs have no enforceable claims against Capitol under A & T's insurance policy.
Affirmed.
Id. at 541, 152 P.3d 915.
Here, unlike in Terrain Tamers, A & T did not agree to pursue claims against Capitol; it merely assigned to plaintiff any claims that it might have against Capitol. Even more significantly, in Terrain Tamers, the nonexecution covenant explicitly provided that the plaintiffs would not execute the judgment "only during the pendency of an action against [the insurer] and that a satisfaction of judgment [would] be entered only upon payment of any proceeds from the action against [the insurer]." Id. at 540-41, 152 P.3d 915. Plaintiff here did not similarly condition its covenant not to execute the judgment against A & T.
