458 P.3d 678
Or.2020Background
- Tenants rented residential property; they experienced repeated sewer/bathroom drain backups and reported repairs to landlords.
- Tenants intermittently withheld/paid partial rent and requested lower rent; landlords sued for unpaid rent after tenants vacated.
- Tenants counterclaimed in the landlord action under ORS 90.360(2) for diminution in rental value and damages, alleging habitability violations (sewer backups, property damage).
- Trial court dismissed the counterclaim, finding tenants had unclean hands (failed to give written notice and were motivated to avoid paying full rent). Court of Appeals affirmed, concluding tenants lacked "good faith."
- Oregon Supreme Court reversed: it held (1) ORS 90.100(19)/90.130 adopts a subjective "honesty in fact" good-faith standard (not an inquiry into motive or objective reasonableness), and (2) ORS 90.360(2) requires actual notice (which may be verbal or by other means), not necessarily written notice; remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument (Eddy / Landlord) | Defendant's Argument (Anderson / Tenant) | Held |
|---|---|---|---|
| Meaning of "good faith" under ORS 90.130 | Tenants lacked good faith because their withholding/requests for lower rent showed improper motive; motive may bar counterclaim. | "Good faith" means honesty in fact — subjective belief in merit of claim; financial motivation does not automatically negate good faith. | Good faith under ORLTA is the narrow, subjective standard "honesty in fact" (ORS 90.100(19)); courts cannot bar claims based solely on tenant motive. |
| Notice required to recover under ORS 90.360(2) | Landlord/t rial court treated written notice (per ORS 90.365 essential-services rules) as required before withholding rent or pursuing damages. | ORS 90.360(2) requires only actual notice; ORS 90.150 defines actual notice and permits verbal or other methods, not necessarily written notice. | ORS 90.360(2) requires actual notice, not written notice; the trial court erred in treating written notice as prerequisite. |
Key Cases Cited
- L & M Investment Co. v. Morrison, 286 Or 397 (held that a tenant need not give written "fix-or-leave" notice to pursue damages under the predecessor to ORS 90.360)
- Davis v. Campbell, 327 Or 584 (construed ORS 90.360(2) and held tenant need not prove landlord had actual or constructive knowledge under prior wording)
- Napolski v. Champney, 295 Or 408 (discussed rent withholding and observed that statute protects landlords from spurious or improperly motivated counterclaims)
- U.S. National Bank v. Boge, 311 Or 550 (explained UCC-derived definition of "good faith" is subjective—focusing on honesty in fact, not objective reasonableness)
- Community Bank v. Ell, 278 Or 417 (held good-faith standard is subjective, looking to party's intent or state of mind)
- J. M. v. Oregon Youth Authority, 364 Or 232 (remand principle where trial court relied on incorrect legal standard)