*1 reassigned September March the decision Argued and submitted part, Appeals judgment reversed the circuit court affirmed Court of August proceedings denied reconsideration circuit court for further and remanded to 29,1988 September ECKLES, R. FRANK Marina, dba Riverview Review, Petitioner on al, et OREGON OF STATE on Review. Respondents S32710) A35776; (TC 143089; SC CA P2d 846 *2 381-a *3 Mix, Corvallis, peti-
Robert the cause filed argued tion review. petitioner on Attorney General, Salem, Deputy argued F. Gary,
William respondent on the cause for review.
LENT, J.
381-b part, J., dissented in Peterson, part C. concurred opinion. and filed concurred
Gillette, J., specially concurred J., Linde, joined. in which opinion filed an part, and *4 LENT, J. constitutionality legislative of a act
At issue is the alia, that, Treasurer to transfer inter directed State $81 (IAF) Accident Fund to the Gen- million from the Industrial (hereinafter 3), (Special Or Laws 1982 Session ch eral Fund. Act”). the transfer breached a the “Transfer We hold state, in a may of the for which the state be liable contract action, or of contract but did not violate the state breach four of the federal constitutions. We also hold that section Act, retroactively Transfer insofar as it amended ORS I, 656.634, section of the Constitu- violated Article tion.1
I. exclusively statutory The IAF is a “trust fund for the 656.794,” purposes declared in ORS 656.001 to uses 656.634(1). compensation. relate to ORS Funds workers’ Corporation received the State Accident Insurance Fund is, turn, (SAIF) IAF, and the IAF become 656.632(2)-(3). payments source for made SAIF. ORS SAIF, by a “independent public corporation” governed an Governor, appointed by provides board of directors work- compensation employers, ers’ insurance to who also self- 656.407(1), insure insure with a insurer. See ORS private 656.751(1), 656.752. 1982, a session of the September special Legisla- “surplus” IAF had a of over Assembly
tive determined that the 1(3). 3), (Special million. Or Laws 1982 Session ch $168 § 1(10), deficit, Facing prospect budget of a state see id. § Legislative Assembly directed the State Treasurer to transfer on June surplus million of the IAF to the General Fund $81 2. The Treasurer transferred the funds on 1983. Id. § appointed date.
Plaintiff, insured thereafter employer declaratory, and other brought injunctive this action for that the Transfer Principally, sought relief.2 he a declaration * * * part, provides, in “No law Constitution impairing passed.” of contracts shall ever be Oregon, the State State Treasurer William Plaintiff named as defendants Director, Anthony Rutherford, Department and its Richard Munn. of Revenue Treasurer, party for substitution under ORAP Meeker is now State but no has moved collectively party. to defendants as “the state.” 12.10. SAIF is not a We will refer *5 “man- and a unconstitutional” “null and void and Act was pay forthwith the defendants to datory directing injunction the IAF suffered equal a sum to all losses” into the [IAF] com- state, in its answer to the The because of the transfer.3 challenged summary judgment, and in a motion for plaint The circuit court to seek this relief. “standing” plaintiffs court, but, following a trial to the state’s motion denied the judgment and entered for defen- complaint “dismissed” decision, the trial opinion explaining In letter dants. a any stated, “I find that Plaintiff has failed to establish judge Act and that Plaintiff has no basis to invalidate the Transfer affirmed Appeals to do so.” The Court of standing herein opinion. without
II.
“standing,”
the issue
plaintiffs
Before we address
distinguished.
be
concepts
“standing”
two distinct
must
Ordinarily,
adjudica
means the
to obtain an
“standing”
right
logically
prior
tion. It is thus
considered
to consideration of
say
plaintiff
standing”
of a claim. To
that a
has “no
merits
have a tribunal
say
plaintiff
right
is to
has no
relief,
defining
requested
decide a claim under the law
regardless
plaintiff
right.
whether another
has
such
When
“standing,”
this court has used the term
the term has for
See,
e.g.,
most
been used in this sense.
v. State
Lipscomb
Ed.,
472, 475-76,
(1988);
Higher
Bd.
305 Or
purpose
compensation
per-
writing
44.5
workers’
insurance a franchise tax of
accumulated,
surplus.
year
be
the calendar
cent of
ending
declared
tax shall
31,1982,
unassigned
computed
funds
December
and shall be
on the basis of
(surplus),
taxpayers’
filed
as reflected
annual audited financial statement
31,1981.”
year ending
with the Insurance Commissioner for the
December
3, 1(1).
3),
(Special
generate a one-time
§
Or Laws 1982
Session
ch
The “tax” would
payment
sought
IAF
a declara
$81
million from the
to the General Fund. Plaintiff
unconstitutional,
it
effect unless and until
tion that this act was
but
does not take
3),
(Special Session
section two of the Transfer Act is declared invalid. Or Laws 1982
two,
infra,
unnecessary
uphold
validity
ch
2. Because we
of section
see
it is
§
note, however,
past
validity
held
“tax.” We
that this court has
decide the
of the
only upon
judicial
provision
declaration of
that a
of law that
takes effect
invalidity
provision
of another
of law violates
Constitution,
provides
passed,
taking
which
that
any authority, except
law
be
“the
effect of
no
shall
provided
depend upon
in this Constitution.”
shall be made to
507, 513, 135
Coffey,
Portland v.
67 Or
P 358
Tanner,
(1987).4
State v.
refer to the existence of a substantive
the merits of a claim.
sense,
is concerned with
“standing”
this
say
right
is to
that no
say
plaintiff
standing”
To
that a
has “no
violated,
whether the conduct of
plaintiff
regardless
was
some
unlawful or unlawful as to
general
defendant was
use of
should be avoided
person.
“standing”
other
This
easily
right
adjudication
because it
confuses the
obtain
to obtain the relief itself.
right
of a claim for relief with the
treating
other source of confusion is the habit of
One
*6
generic concept
spe
a
unrelated to the
standing as if it were
by
This
has noted on
legal
requested
party.
cific
relief
a
court
person
occasion that whether a
is entitled
more than one
relief
depends upon
type
sought
relief
judicial
seek
E.g.,
specific statutory
a
standard.
commonly
governed
is
County,
79, 82-84,
County v. Friends Benton
Or
Benton
294
(1982).
standing
type
A
with
to seek one
person
[Transfer] provides: 28.020 al., (1943): 256, 261, 130 Cottage Cabell et al. v. Grove et P2d 1013 170 Or Cf. declaratory sufficiency complaint judgment] is not whether for a “The test of of [a rights plaintiff in with declaration of accordance it shows that the is entitled to a though rights theory, all. Even he entitled to a declaration of at his but whether controversy, plaintiff wrong if he the existence of a side of the states is on Declaratory Judgment controversy under the which should be settled court 28.160], he has stated a cause of suit.” Law ORS 28.010 to [now standing standing in argument because he had that he has this case Plaintiffs Woolley, 37, 726 (1986), case, he State ex rel Eckles v. P2d 918 which 302 Or
another statutory challenged legal well taken. That case was a existence of is thus not 30.510(3), quo pursuant warranto proceeding to ORS in the of a action nature private party. upon permits of a the state the relation actions the name of insisted, plaintiff apparently reply Appeals, for before the Court of his brief relief, quoted reasons, sought only injunctive complaint but the tactical that his anything prayer complaint other be characterized as cannot statement from declaratory request relief. than a ** * legal rela- status or other rights, whose
“Any person statute, constitution, municipal char- by a are affected tions ter, ordinance, determined franchise have contract or any such validity arising under question of construction * ** ordinance, charter, statute, con- constitution, municipal rights, status or declaration of and obtain a tract or franchise legal thereunder.” other relations status or other “rights, effect on reference to an
The statute’s
declaratory relief
seeking
plaintiff
a
requires
relations”
legal
recognized
a
impact
legally
on
or other
allege
injury
“some
application
correct
interest
in the
an abstract
beyond
interest
Co.,
v. Multnomah
Budget
a
Rent-A-Car
validity
or the
law.”
most
(1979).
perhaps
The interest
93, 95,
P2d 1232
287 Or
28.020
standing under ORS
as sufficient for
recognized
often
interest, such as that of
financial
present
is a
or foreseeable
Ed.,
Higher
supra, but
v. State Bd.
taxpayer, e.g., Lipscomb
well, including
recognized
interests have been
many other
Dist.
voters, e.g.,
Clatsop
Co. School
the interests of
Webb
road,
(1950),
e.g.,
of a
324, 331,
contract with but those addressed plaintiffs alleged merits of claims. That he has that the trans- from the IAF rights fer of funds affected those is sufficient standing establish his under ORS 28.020. analysis plaintiffs standing injunctive
The
to seek
same, although
relief is much the
there is no
stat-
governing
governmen-
ute. This court has held that
standing
enjoin
requires
allegation
challenged
tal action
action
plaintiff
special
goes beyond
in some
sense that
injures
injury
plaintiff
expect
general
would
as member of
See,
al,
50,
public.
e.g.,
County
Holland et al v. Grant
et
208 Or
Wilson,
54-55,
(1956);
491,
Plaintiff
of the Transfer Act
challenges
grounds.
on a number of state and federal
We must first
262,
Kennedy,
Or
grounds.
address the state
State
(1983).
P2d
Plaintiffs
first claim is that
the Transfer Act is
the IAF is a “trust fund” that
not be
“illegal” because
IAF, though
used
denomi
purposes.
for General Fund
656.634(1),
nated a
fund” in
is nonetheless a stat
“trust
ORS
656.632(1);
Const,
VIII,
Or
Art
utory “trust fund.” ORS
§
cf.
Fund”).
constitu
(establishing a “Common School
Within
limitations,
may dispose of the assets of a
legislature
tional
statutory
any
manner that
it sees fit.7 We therefore
fund
plaintiffs
arguments.
turn to
constitutional
for
Constitution
privileges,
bids
“to
citizen or class of citizens
granting
immunities, which,
terms,
upon
equally
the same
shall
law,”
prevents
process,”
argues that the “common
via “substantive due
Plaintiff
Assembly
transferring
Legislative
IAF
Fund.
funds from the
to the General
law,”
expressly subject
Although
adopted
it is
Constitution
“the common
Hansen,
XVIII,
Const,
7;
State v.
subsequent
legislation.
See Or
§
Art
387 Transfer Act that the argues Plaintiff to all citizens.” belong only from the Act took funds section 20 because violated claimants, insureds and by and its IAF, is used SAIF compensation workers’ private assets of not from the and and insurers essence, private is that argument insurers. In is granted a “class” that claimants are their insureds and and its terms to SAIF on the same immunity not available entity, is not a SAIF, as a state claimants. But insureds and and the “classes” of apply, section 20 could “citizen” to which hand, one and insurers, on the insureds claimants private other, are “classes” that and claimants on the SAIF insureds statutes. compensation only by virtue of the workers’ exist I, 20, is therefore untena- argument section Plaintiffs Article Freeland, P2d Or 375 & n 509 See State v. ble. (1983).8 relies plaintiff principally on which arguments
The provi- and federal constitutional are those based on the state of contracts. forbidding impairing obligation sions laws I, provides: Constitution “No law, of contracts ex-post impairing facto or law * * contracts, passed shall *.” Plaintiff identifies two ever be by the impaired of which he asserts were obligations (1) by legislature granted Transfer Act: “charter (2) the “contract which has arisen between SAIF SAIF” * * * these “contracts” are said and its insureds.” Both of the laws in existence when the “contracts” plaintiff to include were formed. can granted by legislature
The “charter
to SAIF”
characterized as a contract. The “charter” to which
be
SAIF, Oregon
is
act that created
plaintiff
legislative
refers
act,
“indepen
is an
chapter
Laws
829. Under
SAIF
“private investment
public corporation”
dent
without
ex rel Eckles v.
operate
private profit.”
State
objective
37, 49,
management
Woolley,
Or
exclusively governmental, by the to confirmation subject the Governor appointed corpo Id. This court past in the has characterized Senate. *9 “a contract between corporation and rate charter as First State,” stockholders, also them and and between Bank, 423, 431-32, 170 P State 87 Or Bank v. Multnomah Nat. see corporation, state and the (1918), also between the and 546, 579, P2d 1093 California, 143 Or v. Bank Schramm of all, they if exist at relationships, (1933), these contractual but has no stock corporation to a that respect exist with do not state. entirely controlled and that holders with SAIF. have a contract of insurance Plaintiff did at but then with- into evidence trial this contract He offered that he stipulated the state offer, because perhaps drew the are of the contract The written terms was insured SAIF. rely on them record, plaintiff does not in the but thus not in existence at Instead, the statutes any argues he event. the contract. Transfer Act are the enactment of the 656.634, dates from 1929 relies on ORS particular, he by the its 1982 amendment prior to provided, and which Transfer Act:
“(1) trust fund Accident Fund is a The Industrial purposes in ORS 656.001 exclusively and declared for the uses be 656.794, provision shall not deemed except that this any this state law of impair the force or effect amend or moneys from the authorizing the investment of specifically fund. proprie-
“(2) that it has no Oregon declares The State in the contri- Fund or tary in the Industrial Accident interest prior 1929. state to June fund butions made to the any right those contributions to reclaim disclaims state had any it have right of reclamation and waives fund.”9 the Gen- IAF funds to transfer of contends that
Plaintiff thereby impaired 656.634 and contrary to ORS eral Fund was contract with SAIF. his following by adding the ORS 656.634 Transfer Act amended four of the Section (2): beginning
language subsection to the disposi- legislatively the “Subject right to direct of the State of to the necessary actuarially surplus any surplus deemed reserves and in excess of tion of necessary thereto to principles, in addition according recognized insurance Corpora- Fund Accident Insurance of the State fiscal soundness assure continued * * capital operations needs and for future current tion both for If the Act impaired obligation Transfer contractual 656.634, obligation the Act of the impaired stated ORS obligation rather than an Plaintiff does not state SAIF. has been point obligation SAIF that SAIF excused considering of the before performing by virtue Act. But states a obligation whether ORS 656.634 contractual employers by SAIF, must first state insured we consider I, Article applies whether section to state contracts. many provisions Unlike in Article I of the Constitution, provision in section 21 against impairing of contracts its ultimate has source early not in state colonial but in constitutions States, Constitution of the United clause Northwest Ordinance of Hall v. 1787. See Northwest School, 655, 659, Outward Bound P2d Article II of the provided, part: Northwest Ordinance ought law ever to be made or force in have the said “[N]o
territory,
shall,
any
whatever,
that
in manner
interfere with or
contracts,
private
fide,
engagements,
affect
bona
and with-
previously
(Emphasis
original.)
out fraud
formed.”
(Kurland
1987).
1 The Founders’ Constitution 28
& Lerner ed
Apart from punctuation,
provision
this
adopted
was
verbatim
I,
2,
in Article
of the
section
1845
Law of the
Organic
Provi-
Oregon.
sional Government of
Laws
Oregon
General
of
59
(
390
Oregon
the framers of the
Con-
predecessor of this court that
substance of
federal
incorporate
intended to
the
the
stitution
interpreted by
Supreme
as it
then
Court
provision,
was
States,
Constitution,
though
into
the United
provision.11
the federal
necessarily every case decided under
decisions,
Court
United States
Subsequent Supreme
of section
course,
interpretation
do not control
early history
on
light
those
shed
although
decisions
thereby
Oregon provision.
provision,
the federal
and
on
provision
apply
intended to
probably
The federal
was
prohibition
The
in the
only
private contracts.
similar
to
contracts,
private
limited to
explicitly
Ordinance
Northwest
provision
stimuli for the constitutional
the immediate
laws,
of the framers
many
were
debtor
relief
state
3
the credit of the new nation. See
impairing
believed were
Constitution,
391-402;
The
supra
Wright,
at
Founders’
(1938). But
as
early
Clause of the Constitution 4-5
Contract
Cranch) 87,
(1810),
Peck,
(6
$600,000 of the IAF be used to building construct state office Salem, money plus repaid interest to be to the IAF out of the General Fund period years. over a of several Or Laws 1927, ch 322. Covered employers brought and workers IAF, challenge contending action to this use of the IAF only compensation purposes could be used for workers’ authorizing and that the act the investment of the funds cre- ated state debt excess of constitutional limitations. This court, reversing rehearing, after itself on held that the invest- valid, ment was either the state was “the because absolute state, owner” of the IAF or because the if not “the absolute owner,” authority proper at least had the to determine the Fund, Brooklyn Hosp. Methodist v. State Ins. 64 NY 2d 476 NE2d Cf. (1985) (statutory regarding proper directives uses of insurance fund did not obligation). create a contractual *12 of the IAF. Eastern & Western Lbr. Co. Patter
investment
son,
reh’g
rev’d
(1928),
on
146, 147-48, 264
P
124 Or
112,
In reaction Assembly session enacted what has become ORS at next 1929, act, together ch 172. The with its 656.634. Or Laws preamble, provided: question right over the the state
“Whereas has arisen of Oregon part use of the industrial fund for the of accident constructing purpose building office for the state of of chapter Oregon, Oregon, under General Laws of Oregon any has also as to whether or not the state of and by heretofore made proprietary interest the contributions fund, same, right the to reclaim the said state to said and apprehension questions are said to have caused on the employer employe fund part of the and contributors said as thereof, security protection to the and and have caused support and threats of withdrawal from further contribution thereto; large by and thereto contributors of has not made financial con- “Whereas the state July 1, 1923, to said fund since and the said fund tributions entirely by date has been maintained the contribu- since said employes employ- employers of hazardous tions the and ment, by the state have and all contributions heretofore made expended in of fund or either been the administration said fund, catastrophe of part have become a rehabilitation fund, segregated payment aside for the of fund or accident set act, under said contributions awards of benefits and state identified; longer no be and can security uncertainty protec- any as to the and
“Whereas rights therein of or doubt as to the of state tion said fund acceptance proper admin- against the fullest and the militates thereof, and it is for the interest of state that istration state in the fullest of the industrial interests confidence fund; therefore measure be maintained said Oregon: by People the State “Be it Enacted Oregon hereby 1. state of does declare “Section workmen’s com- fund created the industrial accident being chapter Laws of Oregon, General pensation act legisla- various sessions Oregon, as amended thereafter, for the uses and the same a trust fund ture be and other, amended, so no and in said and purposes declared act by the fund made to the said heretofore that the contributions integral part state of have become an of said fund and expended catastrophe have either been or allocated fund, fund, segregated fund or rehabilitation accident Oregon hereby proprietary state of does declare that it has no or in interest said fund the contributions thereto heretofore state, hereby any said does right made disclaim use, any reclaim contributions or said thereof its own hereby any reclamation, right any does waive such if it had, ever in or to of said fund. This act shall not be *13 322, impair chapter to deemed amend or the force of said Oregon, 1927, limit, Laws of General or restrict or control $600,000 the investment of the sum of of said accident fund building purposes.” Apart from condensation of the act was incorporated when it Oregon 1953,13 into the in Revised Statutes the only change in the act until it was amended the Transfer Act awas provided amendment that that the act was not intended to ability limit the 1967, the state to invest the IAF. Or Laws ch 55.§ need pursue
We not arguments the extended state plaintiff fund,” and over whether IAF is a “trust as it legislature, is described or a “statutorily dedicated fund,” as the state insists is. can that it There be little doubt purpose that the of ORS was employers 656.634 to assure who SIAC, insured subsequently with and with that state not it precisely would do what did do in the Transfer Act. Moreover, the reason that the state made this assurance was skeptical employers to induce in a insur- participate state is, system was, ance and still in voluntary the sense that private employers compensation need not obtain workers’ from insurance SAIF. We conclude that ORS 656.634 expressed promise to employers contractual state who insured SAIF with that the state would not transfer IAF funds General Fund. question follows from this conclusion is Act, though contrary whether the Transfer to the contract chapter repealed Laws laws then in existence and reenacted made, “Oregon Although changes them as the Statutes.” no Revised textual were Holland, changes in See State substantive the laws were intended. Or 656, 661-65, P2d 656.634, “impairing is a law the obli-
formerly stated in ORS question, To answer we must of that contract. this gation” Act in more detail. first describe the sections, only five sections The Act is divided into but present inquiry.14 Section important two four are to our two, Act, directs the Treasurer to trans- the heart of State from IAF to the General Fund: fer million $81 statute, “(1) Notwithstanding any State Acci- other Corporation reduce its sur- Fund shall excess dent Insurance plus by the $81 in the Industrial Accident Fund amount of provided this Act. million the manner any “(2) 293.115(2)(d), Notwithstanding or other ORS law, provision $81 Treasurer shall transfer million State on Accident Fund into the General Fund Industrial Any necessary liquidation of June 1983. investments orderly accomplish transfer shall be done manner this advantageous terms and at the most obtainable.
“(3) challenge judicial proceeding The initiation implementa- stay Act legality of this shall section, procedures provided in this no of the transfer tion delaying stay restraining prohibiting order or injunction, proceeding unless until transfer shall issue such such finally required Act been the transfer of funds this has *14 be adjudicated to invalid.” agreement stated in four modifies the contractual
Section state use IAF funds permit surplus so as to the to ORS 656.634 now legislature that the directs. ORS 656.634 any purpose for made section four italicized: by with the amendment provides, “(1) Fund is a trust fund The Industrial Accident exclusively purposes in the and declared ORS 656.001 for uses 656.794, except provision not be deemed to to that this shall any of state impair or the force or effect of law this amend moneys from the specifically authorizing the investment of fund. right Oregon to Subject to the State direct “(2) the of of any surplus disposition in excess
legislatively the of of legal legislative findings and Act a statement of one of the Transfer is Section three, emergency which amends ORS five is clause. Section Section conclusions. employers 656.526(2), declaring prohibits to a dividend insured SAIF from surplus by payments funds surplus of authorized funds SAIF has made other IAF until validity of this because the outcome the of this last section law. need not decide We validity payments.” hinges upon these “other case the of actuarially necessary surplus according reserves and deemed recognized principles, necessary to insurance in addition thereto to assure continued soundness State Acci- of fiscal Corporation operations dent Insurance Fund both current needs, capital of State declares that for future in proprietary it has no interest the Industrial Accident Fund prior in the contributions made the fund the state any right June 1929. The state disclaims reclaim those any right contributions and waives of reclamation it have in had fund.”
If section four of the Transfer Act is a constitu- tionally valid modification the state’s contract with employers insured with then section two is valid as well because the transfer made section two is consistent with analyze modified contract. We therefore first whether sec- tion impairs obligation formerly four of the contract stated in ORS 656.634. Supreme
The States, interpret- Court the United ing clause, the federal contracts early distinguished obliga- tion aof contract from the agreement stated a contract. The obligation of a contract was the sum of the contractual duties imposed upon the contracting parties by the operation of law Ogden Saunders, the contract. See upon (12 Wheat) 25 US 213, 256-57, L6 Ed 606 Justice Washington wrote Ogden: constitutionality error those who controvert “[T]he * * * bankrupt law under consideration has arisen from distinguishing accurately impairs between a law which contract, impairs obligation. and one which A contract do, do, agreement defined all to be an or not to some * * act;
particular law, Any then, enlarges, *. abridges, * * * or in changes, [agreement] manner necessarily this * * impairs the contract *. “* * * impairs contracts, It is a law which * * * themselves, and not the contracts which is interdicted. it, then, What is the obligation which constitutes a con- * * * tract? parties is the law which perform binds [I]t law, then, agreement. their binding obliga- which has this tion, govern contract, every shape must control *15 it, upon which it is to intended bear whether it affects its validity, discharge.” construction or (12 Wheat) Ogden, US at 256-57. the Court held that law,
insolvency impaired by which a agreement contractual debt, obligation did not the contractual discharging impair a into of the debtor because the contract was entered after enacted, was insolvency law and thus there had never been any obligation pay the debt in the circumstances in which law insolvency applied.15 with which the Court was obligation
The contractual Ogden a private obligation. was When the concerned obligation is of a applied Court’s definition of contracts laws, state, which makes the the definition becomes circular defines a state’s contractual because contracts clause itself difficulty by tacitly The Court avoided this obligations. assuming general principles applica- that contract law were Thus, Georgia ble the Court held that could to state contracts. not land that had been obtained repeal grant through a bribery legislature: of previous ample legislature may proof original have had that the “[T]he by practices never
grant was which can be too much obtained reprobated, justified abrogation, so and which would have respected imputable. whom crime far as grant, those to was But issued, conveyed fee-simple an estate when grantee, which law clothed with all the solemnities can [sic]; those bestow. This estate was transferable who purchased parts guilt which it were not stained not original Their case is dis- infected the transaction. ordinary purchasers legal case of of a tinguishable from the estate, knowledge might fraud secret without original grant. According to led the emanation of the have equity, rights their could not be the well-known course same, Their was the their by such fraud. situation affected same, every was the with that of other member title community regular conveyances land from the who holds patentee.” original (6 Cranch) Similarly, Peck, 10 US at 134-35. supra,
Fletcher v. Ogden probably perhaps obligation is too definition of broad Court’s every potential It impairing so a contractual defined. law would have the relationships legislation specifically altering at not directed contractual be that clause, scope case but this and the federal contracts outside the Corp Eagerton, Exxon require pursue 462 US matter does further. us Cf. McCarter, 176, 190-92, 103 2296, 76 (1983); Water Co. v. Hudson L Ed 2d 497 S Ct are, 529, 52 (1908) (“One rights, they 349, 357, 28 are Ed 828 whose such US S Ct L restriction, power subject them State cannot remove to state Clause, them.”); Note, Rediscovering Contract L Harv making contract about Rev 1414
397 Hampshire’s the Court held that amendment of a private New unconstitutional, charter was the Court college’s noting: donors, plainly “This is a contract to which the [charter] (to trustees, rights obligations and the crown whose and succeeds), Hampshire original parties. New were the It is a contract made on a valuable is consideration. It a contract for contract, security disposition property. It a is on which, personal conveyed the faith of real and estate has been corporation. is, then, to the the It a contract within the letter of * * constitution, also, spirit and within its College Woodward, (4 Trustees Dartmouth supra, v. 17 US Wheat) 643-44; Jersey Wilson, (7 at see also New v. 11 US Cranch) 164, (1812) (state’s 3 L Ed repeal 303 of a tax exemp tion, which formed of a land claims settlement with the Indians, clause); Delaware violated the contracts cf. (3 Huidekoper’s Douglass, Cranch) 1, Lessee v. US 2 L Ed (1805) (“This [legislative contract; is a although act] state a party, it ought to be construed according to those well-established principles regulate gener contracts ally.”). Court, however, did not treat entirely the states if they were private contracting parties. The Court rela-
tively early developed the rule noted above that a state con-
tract will not be
legislation
inferred from
that does not
unambiguously express an intention to create a contract. See
Charles River Bridge v.
Bridge, supra,
(11 Pet)
Warren
36 US
544;
at
(4 Pet)
Providence Bank Billings,
514, 561,
29 US
7 L
(1830);
Ed 939
accord Campbell
al,
et al. v.
supra,
Aldrich et
Another rule the contracts clause does not limit a state’s power of eminent domain. See Dix, (6 West Bridge How) 507, 12 River Co. v. 47 US L Ed 535 (1848). Co., River Bridge West the Court held that Ver taking, compensation, mont’s with a 100-year toll-bridge granted by franchise legislature years the Vermont before did not violate the contracts clause. The recognized Court the franchise created a contractual obligation that the state
could not but impair property reasoned that the franchise was and thereby subject taking through like other an emi- nent domain proceeding.16
In the late 19th century,
Supreme
Court of the
United States further
limited the
obliga
states’ contractual
tions under the federal
through
constitution
the rule that a
i.e.,
away
“police
state could not contract
that a
power,”
state was under no
to keep agreements that were or
See,
contrary
aspects
public
had become
to certain
welfare.
e.g.,
Stone v.
101 US
L Ed
Mississippi,
recently,
More
employing
“balancing” analysis,
the Court
has stated that the contracts clause “must be accommodated
police power
to the inherent
‘to
the vital
safeguard
State
”
*17
people.’ Energy
interests of its
v.
Group
Reserves
Kansas
400,
Ct 697,
Light,
410, 103
Power &
459 US
We find
in the
of Article
section
early history
clause,
of the federal contracts
including
formerly
from which we could infer that the disclaimer
stated
656.634 did not create a contractual
on the
obligation
ORS
part of the state. A contractual
would exist under
obligation
general principles
law,
special
of contract
and none of the
states,
obligations
limitations on the contractual
discussed
above,
applicable.
are
The need to resolve the financial crisis
Legislative Assembly
pass
induced the
to
the Transfer
Act
as a “vital
interest” of the
perhaps
could
be described
later,
explicitly
power
Years
the Court
held that
of eminent domain was
Pennsylvania
20, 38
35, 62
Hospital
Philadelphia,
L
v.
245 US
S Ct
Ed 124
inalienable.
(1917).
impairs
contractual
Because a state’s self-interest
is at stake when it
its own
impairments
obligations,
willing
the Court has been less
than it has been with
private
impairments
See United States
contracts to conclude that such
are reasonable.
1, 25-26,
1505,
(1977).
Jersey,
v. New
97 S Ct
Section four of the
because
formerly
in ORS 656.634
tion of the contract
stated
respect
with
four would eliminate that
section
IAF funds for
surplus
funds. The state could use
surplus IAF
chose,
liability
contractual
it
without
any purpose
four, then, violates Arti
employers insured
SAIF. Section
insofar as it
Constitution
cle
entered into
with
insurance contracts
employers
affects
SAIF
subsequent
Act. As to
the enactment of the Transfer
before
existence,
then in
contracts,
including renewals of contracts
amended
valid
ORS 656.634 as
section four is
because
define,
the state’s contractual
impair,
section four would
reason of those contracts.18
employers by
obligations
*18
Act does
invalidity
two of the Transfer
of section
18
well,
by
contracts,
protected
private
and federal
the state
Future
are
Saunders,
213,
(1827);
(12 Wheat)
Ogden
L
See
v.
25
6 Ed 606
US
contracts clauses.
Pirie,
457-58,
(1935);
accord
Co. v.
not follow from the of section four.19 Act, Unlike section four of the section two does not purport the terms of the change state’s contract but to mandate a breach of that contract. The analogy distinction has an private contract law in the distinction between a failure or perform refusal to according the terms of a contract and an invalidity assertion of the or nonexistence of the contract performance specified. terms under which that A is failure or perform refusal to a contract recogni- not inconsistent with tion the validity. deciding validity contract’s In the of sec- two, I, tion we decide must whether Article section prohibits is, the from breaching state its contracts. That does oblige specific performance of the state’s only contract or compensation for its breach? Saunders,
Ogden v.
supra,
obliga-
established that the
tion of a contract was to be understood as the
duties
legal
imposed
the
upon
contracting parties by
operation
the
of law
upon
Ordinarily,
parties
contract.
to a contract are not
terms;
obliged
perform
according
the contract
to its
in lieu
performance,
breaching party may compensate
the non-
party
breaching
perform
for the failure to
as directed
said,
Story, supra,
(“[I]t
contract. See also 3
has been
§
of a contract
power
consists
law,
efficacy
to,
applies
performance
and enforces
it,
equivalent
or an
for non-performance.”). Specific per-
formance is
if
only
available
other remedies are deemed to be
protect
inadequate
nonbreaching party’s contractual
(Second)
interests.
Restatement
Contracts
359-60
§§
Cf.
(1979).20
Moreover,
long
it has
been established that a state
may, through
proceedings,
eminent domain
violate or abro-
gate
impairing
obliga-
its contracts without
its contractual
Dix,
Bridge
tions. See
Co. v.
supra.
West River
West River
Co.,
Bridge
plaintiffs’
Vermont’s
condemnation
severability provision
Act,
Although
legislature
there is
no
the Transfer
contingent upon
could not have intended to make the enactment of section two
validity
of section four. The transfer of funds mandated
section two was the raison
174.040; City
provisions
d’etre
Act. We conclude that the
are severable. See ORS
Dollarhide,
490, 503-05,
Portland
Given law contractual ability through the state’s undoubted its contracts breach domain, power the use of its of eminent we conclude that the 21, obliged by I, perform state is not Article section contracts, at least according contracts to the terms of those case, where, parties as in this the contractual interests of the property financial or with whom the state has contracted are cases, I, con protects interests.21 In such Article section compensate the state to for its obliging tractual interests I, section respect, breach of those contracts.22 In this Article I, Article section is consistent with Constitution, taking private prohibits the state from whether, are at where other contractual interests We need not and do not decide I, stake, perform obliged its contracts the state would be accordance with the contract terms. Venice, IV, Complete Shakespeare, in The The Merchant Act Scene Cf. 1936). performance required, Shakespeare (Kittredge specific ed Were Works of position state, bargain, might in the if an unwise or unfortunate find itself it made repay Antonio, who, pound upon having agreed of his flesh failure to to forfeit repay ducats, mercy Shylock though friends offered to could not obtain even Shylock prove many Obligees point than would times with less of a debt over. position from the state. in a to extract an onerous settlement nonetheless be payment “just compensa- public use without
property tion.”23 mil the State Treasurer to transfer
By directing
$81
Fund, section two of the
the IAF to the General
lion from
*20
employers
the state’s contract with
Transfer Act breached
Act, however,
four of the
SAIF. Unlike section
insured with
retroactively the terms of that con
section two does not alter
contract,
breached the state’s
the
Though the transfer
tract.
is to com
obligation
contract remains. That
obligation of that
neither sec
the breach. It is true that
employers for
pensate
of the Transfer Act makes
any
two nor
other section
tion
would not
compensation,
such
but section two
provision for
prop
“taking”
private
As with a
of
compensation.
preclude
not unconstitutional
by
of contract
the state is
erty, a breach
legislation
the
is not offered in
simply
compensation
because
Beaverton,
City
Suess Builders v.
the breach.
mandating
of
Cf.
(1982) (describing “inverse
254,
3,n
Plaintiff neither damaged by the state’s that he had been breach evidence that declaratory judgment a sought contract.24 He a and unconstitutional” Act was “null and void Transfer IAF of the funds for the return to the “mandatory injunction” clause, argues author, writing that a on the federal contracts At least one conceptual “takings” analysis vehicle Fifth Amendment would be “a better under the approaching government under contract clause actions now dealt with certain for analysis.” Takings Approach Note, Takings Law the Contract Clause: A Law and 1447,1449 (1984). Contracts, Legislative L “As Public 36 Stan Rev Modifications cases, expectations protecting party’s private goal while should be each contract (footnotes superior enabling parties Id. omit transactions.” at to enter into ted). by employers insured SAIF were infer the statutes alone that We cannot from employers Nothing liable to in the statutes makes transfer of funds. harmed 656.018(1)(a) liability provides injured that in the IAF. ORS workers for shortfalls compensation maintaining employers injured employees workers’ is limited to compensation ex rel. coverage Moran v.State laws. in accordance with workers’ Cf. 1975) (because 1282, 1286-88(Okla employers Derryberry, insured were liable 534 P2d fund, compensation funds violated Oklahoma transfer of in workers’ for shortfalls contracts). impairing prohibition Insured on laws Constitution’s surplus premium from employers and dividends drawn reductions benefit “discretion” of are set and 656.526. These benefits IAF funds. See ORS 656.508 employers preclude showing insured id. That “discretion” does not SAIF. See presumed. transfer, cannot be existence of that harm but the were harmed obliged I, state is not Article section transferred. The IAF, the funds to the but the circuit court erred in not return awarding plaintiff declaratory judgment that section four the Transfer Act is unconstitutional insofar as it affects employers SAIF insurance contracts that were in exis- with tence on or before the date of the enactment of the Transfer Act. respect plaintiffs Oregon claims, other his
With
damaged by
prove
failure to
that he was
the transfer of funds
“takings”
I,
defeats his
Oregon
claim under Article
deprives
Constitution. His claim that the Transfer Act
process”
him of “due
under Article section
provision.
Wagner,
Constitution
305 Or
294 Or
misconceives
State v.
(1988);
Dept.
115, 145-46,
Rev.,
Having decided that section four of the Transfer
Oregon Constitution,
Act is unconstitutional under the
we
*21
only
plaintiffs
respect
need
address
federal claims with
essentially
section two of the Act. These claims fail for
same reasons as do his claims under
analogous provisions
equal protection
prem
Constitution. His
claim is
upon
equality
private
ised
an
between SAIF and
insurers that
“takings”
process arguments
does not exist. His
and due
fail
showing any “taking”
“deprivation.”
for the absence of a
His contract claim under Article
clause of the
Constitution of the United States also cannot be sustained
showing
without
tion two caused some harm to his contractual interests. See
that the transfer of funds mandated
sec
Texaco,
Short,
516, 531, 102
Inc. v.
454 US
S Ct
70 L Ed
(1982);
Jersey, supra,
2d 738
United States Trust Co. v. New
The decision of the Court of and the part ment in in of the circuit court are affirmed and reversed part. The case is remanded to the circuit court for further proceedings opinion. with this consistent concurring part
PETERSON, J., and dissent- C. ing part. large part, agree majority. majority I with the The
is correct that purpose of ORS 656.634 little doubt that the can be “[t]here SIAC, and subse- employers who insured with assure
was to
precisely
not do
what
that the state would
quently with
* * *”
in the Transfer Act.
it did do
promise of the state to
expressed a contractual
656.634
“ORS
would not
with SAIF that
the state
employers who insured
The amendments, provided ORS 656.6341 Before the 1982 fund “(1) Fund is trust The Industrial Accident in ORS 656.001 purposes declared exclusively for the uses * * it “(2) Oregon declares that *,” and The State of 656.794 Accident Fund in the Industrial proprietary no interest has ” * * * employers the state and who “contract” between 656.526(1) and in ORS by SAIF is found
were insured amendments, provided ORS 656.526 Before the part: relevant Fund
“(1) Periodically, Accident Insurance the State liability existing against total Corporation shall determine the Fund. Industrial Accident required by “(2) If, subsection determination after the section, Corpo- (1) Insurance Fund the State Accident of this Fund, aside from the Accident ration finds the Industrial recognized actuarially necessary according to reserves deemed *22 surplus, Accident principles, the State contains insurance may declare a Corporation in its discretion Insurance Fund of, to, employ- the accounts paid or credited to dividend to be Insurance Fund State Accident were insured ers who part period for which the during or Corporation all stated, in effect before the 1982 are to the statutes all references Unless otherwise amendments. Any give dividend is declared. dividend so declared shall due Fund, solvency consideration to of the Industrial Accident unfairly discriminatory promised not be and not be of such advance declaration.” government SAIF company. insurance This is —
apparent from its name State Accident Fund Insurance — (ORS Corporation 656.751); its “is purpose SAIF created for the purpose transacting compensation workers’ (ORS 656.752); and insurance reinsurance business” and from — its 656.752 any ORS “functions” those of workers’ compen- sation insurer: employers,” premiums to “solicit to collect the employers, process insured to and “receive handle and workers,” claims of advice, to “furnish and services excess workers’ compensation employer liability insurance,” “provide (ORS reinsurance coverage Oregon employers” 656.752).
The source of the (through contract between the state SAIF) and its acutely insureds that is relevant herein is ORS 656.526(1) (2), set forth above. statute sets forth the financial arrangements SAIF between and its insureds and workers. SAIF premiums receives from its Those insureds. premium dollars are to be handled as moneys such are required to be handled generally. Apart insurers from its operation, costs of requires ORS 656.526 SAIF to conduct affairs as follows:
First, SAIF must “determine liability the total exist- ing against 656.526(1). Second, ORS SAIF is [IAF].” required to actuarially determine necessary reserves “deemed according recognized insurance principles.” ORS 656.526(2). steps designed These two are pay- assure the ment of benefits to workers before dividends are declared. Third, from the “surplus,” steps the amount after remaining * * * two, one and SAIF “in its discretion declare a divi- to, paid of, dend to employers be credited to the accounts during who were period insured all or [SAIF] 656.526(2). which the dividend is declared.” ORS The contract between SAIF and its insureds is essen- tially payment this: return for the SAIF is to premiums, use the premiums pay operations, including its costs of claims; payment to set up appropriate reserves for claims *23 its “according recognized principles”; to insurance and “in (cid:127)
discretion,” surplus.2 to declare dividends from 656.526(2) expressly that SAIF ORS does state deciding to “declare a divi- good will exercise faith whether dend,” improper it for but I have little doubt that would be fact, unreasonably surplus. to amass an the 1982 large SAIF very point. unreasonably law that proposition makes this The large surpluses by cannot be retained is driven home 1(8) law, provides: of the 1982 chapter corporation, independent public inappropriate
“As it is contrary public policy to Insurance for the State Accident surplus a so Corporation Fund to continue to maintain far necessary statutory purposes.” its exceeding the amount for 2, 1(8). (3d Session), Special Or Laws 1982 § ch in the 1982 law Although paragraph likely that was included transfer, sup- as justification paragraph well as for discharging its proposition ports 656.526(1), ORS cannot “maintain to its insureds under * * * its necessary statutory for surplus exceeding the amount 2, 1(8). (3d Session), Special ch purposes.” Or Laws 1982 § such distribu- Moreover, the 1982 law confirms that 1(4) expressly prac- to SAIF’s refers tions were made. Section It “Dividends for calendar paying dividends. states: tice of already and paid.” been declared years 1981 and 1982 have above, government insurance SAIF is a As stated in the IAF. “no interest” company. proprietary The state has operation is 656.634(2). its method of respects, In some ORS insureds company. insurance Its a mutual akin to to claims and costs of pay of a fund to creation contribute funds Ultimately, surplus to establish reserves. operation, by. payment of dividends. the insureds among are divided 656.526(2). goal of ORS seems to be the That companies is involving mutual insurance The law surplus of a mutual rule is that general The analogous. with distribu- company belongs policyholders, insurance statutes, according governing See be made to the tion to concerning reserve accounts include ORS 656.635 SAIF’s The statutes by governed paying 656.636. benefits are ORS awards and 656.644. Reserves ** * necessary” governed ORS 656.640. as are deemed of “other reserves Creation employers required “surplus statutory as of the fund for disbursement source is ORS 646.642. ORS 656.526” (rev 1984). Often, Couch on Insurance 2d 19:24 ed § here, are concerning decisions dividends left the “discre- tion” of the board. appears general
ORS 656.526 to enact for SAIF the rule concerning declaration dividends insurers. The surplus board determines how much should be retained security pay claims, to insure the policyholders, then, It contingencies. discretion, to cover in its how decides much policyholders. should be distributed to The exercise *24 by courts, of this discretion is reviewable the usual referents faith, being fraud, bad of on abuse discretion. See 6 Couch (rev 971-74, 1985); Insurance 2d 34:121-22 ed see also §§ Fund, Gilmore State Compensation App Insurance 23 Cal 2d 325, 328, (1937) 73 P2d (premium paid to California Compensation State Fund compensation “in excess of neces- sarily paid, and the of creating fund, cost the maintaining * * is to be refunded dividends or credited on the renewal petition failed allege duty facts a of showing breach the fund).
I have no opinion and the record does not show
whether the SAIF board would have
a
declared
dividend but
(As
stated,
the
million transfer.
$81
we
that
do know
SAIF
a
1(4)
declared
dividend
and 1982. Section
of the 1982
law states: “Dividends for calendar years 1981 and 1982 have
already been declared and paid.”) If the facts would warrant
distribution, presumably
it,
such a
SAIF’s board would order
general
for the
rule
that
is
directors of a mutual
insurance
company cannot withhold a dividend that should be declared.
Co.,
Rhine v. New York
Ins.
NY
its employees, policyholders in violation of and covered tion’s contracts with its I, , United Oregon § cl. of the 21 of Constitution and Article § the Constitution. States «* * [*] * * arbitrarily expectations of HB with the settled “HB interfere 3324 and employees. Corporation, policyholders Those con- and covered statutes SAIF deprivation property rights impermissible Due in violation of the
stitute an Constitution.” Amendment to the United States Process Clause of the Fourteenth Frohnmayer responded filing separate Attorney for action General Dave Attorney general alleged declaratory judgment “has General in which he the * * * may Oregon supervision be a the State of and of all civil actions control Oregon” party,” and that “SAIF an institution of the State of that SAIF “is * * attorney employ represented at law or be other counsel SAIF, Frohnmayer Attorney upheld the General This court the assertion of County Circuit Court The records the Marion 660 P2d January Corporation action was dismissed the SAIF v. State show that prosecution. 1985 for lack of position gives very as an insured that him is the standing right his they reason for to dividends as and when are The entirely declared. state’s breach of contract has this taken away, the at least to extent of his “share” the million. $81 damage sufficiently This substantial to accord relief to plaintiff.
Second, this although damage is less substantial and immediate, policyholders less including plaintiff, passage very likely have, before of the 1982 laws would contract, an in the surplus interest as beneficial owners. companies mutual insurance policyholders are to said be surplus. legislature the owners of the Were the to dissolve get business, compensation SAIF and out worker's’ surplus likely would be persons distributable to the entitled surplus, plaintiff likely herein would be entitled any event, to his rata share. In pro as between State insureds, and SAIF’s under the contract between the insureds, state and SAIF’s a greater right insureds have surplus million than Oregon. $81 does the State of beyond Without evidence the statutes them- selves, plaintiff right has established a to relief. In his complaint he moneys asks return of the to the fund. That simple would, measure stroke, of relief in one return the con- parties cerned to the existing status before the 1982 laws were passed. That is what should be done. only effective rem- edy is to order the State of Oregon repay million $81 SAIF. then, then, SAIF’s board of only directors could exercise its discretion to decide whether a dividend should be declared. opinion
The concurring suggests that relief be might available if a suit resembling a shareholder’s derivative suit is filed and SAIF I party. is made a See ORCP 29. would not require indispensable that. I do not SAIF see party, view 29, simply entry ORCP would remand for of a decree the return of the requiring $81 million to SAIF.
The transfer of the million from SAIF $81 pol- General Fund breached the contract with SAIF’s *26 impaired, icyholders permanently irrevocably, and and the ability perform of SAIF to its its contractual — ‘for insureds to consider the million distribution to $81 private permit do not insurer to
SAIF’s insureds. We would
permit
that;
not
the state to do it.
we should
remedy illusory.
appar-
majority’s
is
It
I fear that the
(1)
(2)
ently
contract,
there was a breach
holds that
open
ques-
unconstitutional,
but it leaves
that section is
tion of what should be
million. I confess a
done with
$81
ultimate result. On the one
with this
measure bewilderment
hand,
“compensate
majority
that the state must
holds
away
employers
at
But it turns
for
breach.”
I doubt damage apparently wanting, type majority finds that the million, it can never exercise SAIF is returned the $81 until paid to, or a dividend to be credited discretion “declare during employers of, [SAIF] who were insured the accounts part period dividend is declared.” all or for which the 656.526(2). gone plaintiff as about I believe that the has ORS go. million, in the can He has an interest $81 far as he interest that recognized unless the return of never be is million ordered. $81 agree part. I I add that should
I therefore dissent paragraphs Gillette’s third Justice with the second and opinion. separate specially concurring
GILLETTE, J., concurring part. fully opinion join unconstitu-
I in the court’s tionality of contract 4 of the Act the breach of section only respect separately with to the write created section 2.1 remedy. question of regrettable collection of issues the entire
It including appropriate litigation, remedies raised this participating could be resolved insured and for the in some form come to us Had the matter in this one case. *27 been made a could have party1 perhaps they which SAIF had way, been. In that SAIF would have a and the party been — — to SAIF remedy repayment obvious million $81 today, In might have been ordered. the wake of our decision very such a well be brought case now. myself,
For I readily do not assume as does as majority remedy that consideration this or a similar kind of is simply foreclosed in this case. Rather than declare that employer damage individual has not made out his individual case, does, I as the majority preferred should have that we ask supplemental the parties briefing on question of rem- edy. procedural If insurmountable prohibit difficulties us from resolving controversy, the entire it be enough would time say so full on briefing after the issue.
I agree also with much of said separate what is in the opinion Peterson, J. However, C. I cannot in that join opinion for these reasons:
1. I am more separate troubled than is opinion a the absence of SAIF as party. 2. I believe that the a analogy to mutual insurance company suggested by separate attractive, opinion, while is necessarily complete as that opinion would have it. For example, I would not foreclose the possibility restored, once its funds are legally could choose to lower future portions rates instead of rebating past premiums.
3. which, I do not know the today’s extent after decision, yet may 1(1) the state assert that section Act, separate Tax provision, the “franchise tax” Or Laws 1982 (Special 3), Session ch light valid. footnote 3 of the opinion, (if made) majority 306 Or at such argument an may turn out to be slender reed. But majority neither the nor the separate opinion validity has answered the question 1(1) and, answer, directing without repayment premature. SAIF is provides, pertinent part: ORCP 29A person subject process joined party “A iswho to service of be as a in the shall (1) person’s complete among if action absence relief cannot be accorded * * already parties person join plaintiff those are *. If who should as a but refuses so, person defendant, being such do shall be made a the reason stated in complaint.” specially concurring joins con- J.,
Linde, in this curring opinion.