EDEN GATE v. D & L EXCAVATING & TRUCKING

• Decision Date: 09 January 2002
• Citation: 178 Or. App. 610,37 P.3d 233
• Parties: EDEN GATE, INC., Respondent, v. D & L EXCAVATING & TRUCKING, INC., Appellant. D & L Excavating & Trucking, Inc., Appellant, v. Eden Gate, Inc., Respondent, and Suzanne R. Hurford, Carolyn J. Hurford, and The Commercial Bank, Defendants.
• Court: Oregon Court of Appeals

37 P.3d 233

178 Or. App. 610

EDEN GATE, INC., Respondent, v. D & L EXCAVATING & TRUCKING, INC., Appellant.

D & L Excavating & Trucking, Inc., Appellant, v. Eden Gate, Inc., Respondent, and Suzanne R. Hurford, Carolyn J. Hurford, and The Commercial Bank, Defendants.

9806-04475 and CV98262; A106227 (Control) and A107375

Court of Appeals of Oregon.

Argued and Submitted August 24, 2001.

Decided January 9, 2002.

Margaret H. Leek Leiberan, Portland, argued the cause and filed the briefs for appellant. With her on the opening brief was Richard A. Weill, Troutdale.

Brian D. Chenoweth, Portland, argued the cause for respondent. With him on the brief were Christopher A. Rycewicz and Rycewicz & Chenoweth, LLP.

Before LANDAU, Presiding Judge, and BREWER and SCHUMAN, Judges.

SCHUMAN, J.

This appeal stems from two cases, consolidated on appeal by stipulation of the parties, concerning a contract between D & L Excavating and Trucking, Inc. (D & L) and Eden Gate, Inc. (Eden Gate). The contract called for D & L to decommission an underground storage tank on Eden Gate's property and to remove nearby contaminated soil. In one case, a Multnomah County court found that D & L had breached the contract. The court entered judgment for damages in Eden Gate's favor. D & L appeals from that judgment. In the other case, a Yamhill County court also entered judgment in favor of Eden Gate, concluding that the Multnomah County court's decision preclusively established that Eden Gate owed no money to D & L and that D & L therefore could not foreclose a lien it held on Eden Gate's property. The Yamhill County court also awarded Eden Gate attorney fees, including fees incurred in the Multnomah County litigation. D & L appeals from those judgments as well. We affirm the Multnomah County court: D & L breached the contract. Because we conclude, however, that the Multnomah County case did not preclude litigation of the claims at issue in the Yamhill County case, we reverse the Yamhill County court insofar as it granted summary judgment to Eden Gate, dismissed the lien against Eden Gate, and awarded Eden Gate attorney fees. We remand to Yamhill County for further proceedings.

Only the Multnomah County court adjudicated the underlying substantive dispute between the parties, and it did not make any findings of fact. However, it did rule that Eden Gate was the prevailing party. We therefore assume that the court found facts consistent with its judgment, Mathews v. Federated Services Ins. Co., 122 Or.App. 124, 132, 857 P.2d 852, rev. den. 318 Or. 25, 862 P.2d 1305 (1993), and we review the evidence in the light most favorable to Eden Gate, Sutherlin School Dist. No. 130 v. Herrera, 120 Or.App. 86, 91, 851 P.2d 1171 (1993). From that evidence, so viewed, the court could have found these facts.

Eden Gate owned a restaurant that was destroyed by fire in 1997. In the process of demolishing the remains and preparing to rebuild, Eden Gate's general contractor discovered a long-unused underground heating oil storage tank and some nearby soil that contained hazardous chemicals. Under the "Recycled Lands Act," now codified as ORS 465.200 et seq., and implementing rules promulgated by the Oregon Department of Environmental Quality (DEQ), the tank and the more seriously contaminated soil had to be removed. Consequently, on December 8, 1997, Eden Gate entered into a written contract with D & L, under which D & L agreed to (1) decommission the underground tank "as per DEQ regulations," (2) excavate and remove "contaminated soil," (3) backfill the area from which that soil had been removed, (4) perform "one soil sample per every 14 tons of contaminated soil to confirm that remaining dirt is clean," (5) supply necessary "paperwork as required by DEQ," and (6) complete all of that work "in substantial and workmanlike manner according to standard practices." For this work, Eden Gate agreed to pay a fee of $500 plus $129.50 for every ton of contaminated soil hauled away.

D & L began by taking one soil sample from near the tank and having it tested in a lab. The results showed 570 parts per million (ppm) total petroleum hydrocarbons (PTH). Whether DEQ regulations require soil with that level of contamination to be removed depends on whether the site is a "Level III" or a "Level II" site. A site's level depends, in turn, on certain of its features, for example whether it is near groundwater and what kind of soil predominates there. A Level III site can tolerate up to 1,000 ppm of PTH. A Level II site, however, can tolerate up to only 500. See OAR 340-122-0335. D & L, as the subcontractor in charge of removal, had the responsibility to determine the appropriate level. It classified the predominate soil type as "silts and fine sands," which, when factored in to the appropriate scoring grid, yielded a determination that the site was Level II. In fact, the predominate soil type was "dense clay," which would have yielded a determination that the site was Level III. In short, D & L's error led it to conclude that the soil immediately surrounding the oil tank needed to be removed under DEQ regulations, when in fact it did not. Indeed, some expert testimony at trial indicated that DEQ would not have required removal of soil with a PTH level of 570 even if the site were Level II. See generally OAR ch. 340, div. 122.

D & L then removed 450 tons of soil, considerably more than it had informally estimated would be necessary. It did not have any of this soil tested by a laboratory. Instead, in order to determine whether to continue removing soil after the first test, D & L had employees look at samples with the naked eye, smell them, and submerge them in water; if they saw or smelled evidence of oil, they kept digging and hauling. The project was completed in March 1998. By that time, D & L had removed approximately 1,100 tons of soil, some of which had PTH levels above 1,000 ppm. Eden Gate made partial payment, but at completion, D & L claimed that Eden Gate still owed the balance, $29,158.32, and, in May 1998, filed a construction lien in Yamhill County.

In June 1998, Eden Gate filed a complaint against D & L in Multnomah County alleging, among other things, breach of contract and seeking damages of $150,000 in addition to a declaratory judgment that it did not owe D & L the $29,173.32 underlying D & L's construction lien in Yamhill County (the outstanding debt plus the $15 lien filing fee).

D & L, for its part, after unsuccessfully moving to change the venue of Eden Gate's suit to Yamhill County, in August 1998 filed its own claim against Eden Gate in Yamhill County, alleging, among other things, breach of contract and seeking to foreclose on its construction lien. Still in Yamhill County, Eden Gate filed a counterclaim asserting 10 affirmative defenses and seeking attorney fees under ORS 87.060(5), the statute governing construction liens. The parties then stipulated to hold the Yamhill County case in abeyance while the Multnomah County case was tried.

That Multnomah County trial occurred on March 17, 1999. Two days later, the court issued a letter opinion stating, without explanation or detail:

"The Court finds for the plaintiff on the breach of contract claim in the amount of $29,173.32. The Court finds for the defendant on all the remaining claims."

Judgment was entered on April 1. D & L filed a notice of appeal on April 30. On June 4, the Multnomah County court issued a letter announcing that Eden Gate was the prevailing party and was entitled to costs. Because one of the "remaining claims" on which D & L had prevailed was Eden Gate's claim for a declaratory judgment that it no longer owed D & L money, and D & L believed that this result implied that Eden Gate did owe D & L money, the parties asked the court to "clarify" its earlier letter opinion. It attempted to do so by adding the following to its letter opinion on the issue of attorney fees and costs:

"The plaintiff prevailed on its first claim for relief (Breach of Contract). * * * The plaintiff's fourth claim for relief sought a declaratory judgment regarding the Yamhill County lien for debts outstanding. The court did not reach the validity of the lien."

Back in Yamhill County, both parties filed summary judgment motions based on the outcome of the Multnomah County case. D & L argued that, in finding against Eden Gate on its claim for a declaratory judgment that the lien should be dismissed, the Multnomah County court had necessarily decided that, in fact, the lien should not be dismissed; Eden Gate, therefore, was precluded from now arguing that it should be. Eden Gate, on the other hand, argued that, in finding for Eden Gate on the breach of contract claim, the Multnomah County court had necessarily decided that Eden Gate did not owe D & L any money and that D & L, therefore, was precluded from now arguing that the lien was still valid. The issue was complicated by the fact that the Multnomah County court had awarded Eden Gate damages in the exact amount, to the penny, that D & L claimed under the lien, leading D & L to the conclusion that the Multnomah County court was attempting to create a "wash" by offsetting the amount Eden Gate owed D & L on the contract by the amount of damages Eden Gate had suffered by virtue of D & L's breach—and failing, because the ruling both deprived D & L of the amount of the lien plus made it liable for the amount of damages D & L had to pay Eden Gate.

Basing its decision at least partly on the Multnomah County court's "clarification," the Yamhill County court concluded that when the Multnomah County court

"found D & L owed Eden Gate money on the breach of contract claim, this had the effect of saying the balance was not due to D & L. This is the very issue in the case before this court. Further, with no money due D & L, there is no basis for a lien. There are no issues in this case, then, that were not litigated and decided in the Multnomah County case. D & L is

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