The Oregon Supreme Court has accepted review in the landmark Brownstone Homes Condo Ass’n v. Brownstone Forest Heights LLC case, on the issue of stipulated judgments. To simplify greatly, the case involves a developer (the LLC) that was sued along with one of its subcontractors, A&T Siding, by the condo association. A&T was denied coverage by its carrier, and so entered into a stipulated covenant judgment with the association in which it assigned its coverage claim against its carrier, Capitol. The condo association then attempted to enforce the judgment as a garnishee on Capitol. The trial court denied recourse, holding that: 1) under the “Stubblefield” rule Capitol had no liability because the covenant did not leave any potential unsatisfied liability; and 2) ORS 31.825 (which permits assignments) did not control because that statute requires that the assignment take place after judgment was entered, and here the assignment and judgment happened at the same time. The Court of Appeals affirmed, holding that a garnishment proceeding by an injured claimant is subject to Stubblefield because of the Reuter decision, which limited the rights of a garnishee to those held by the primary defendant. The court also agreed that ORS 31.825 requires a specific sequence in a stipulated judgment with assignment and that unless the proper sequence is followed, the statute has no application. Finally, the court held that a good-faith-cooperation requirement in the agreement did not make the agreement Stubblefield-compliant with regard to the insured’s continued exposure to liability.
The Oregon Supreme Court identified the following issues for appeal (I’m paraphrasing): 1) does Reuter really mean that Stubblefield applies to garnishment proceedings?; 2) does ORS 31.825 require that judgment-covenant proceed in a specific order; and 3) most tantalizingly, if the Court of Appeals were right on #1 and #2, should Stubblefield be abrogated? The alignment of the parties and interests of the counsel pursuing the appeal are somewhat odd, so amicus participation seems likely. This will be one to watch in the fall as briefing comes in.