Makarios-Oregon, LLC v. Ross Dress-For-Less, Inc.

• Decision Date: 06 September 2018
• Docket Number: A160199
• Citation: 293 Or.App. 732,430 P.3d 142
• Parties: MAKARIOS-OREGON, LLC, an Oregon limited liability company, Plaintiff-Appellant, v. ROSS DRESS-FOR-LESS, INC., a Delaware corporation, Defendant-Respondent.
• Court: Oregon Court of Appeals

293 Or.App. 732

430 P.3d 142

MAKARIOS-OREGON, LLC, an Oregon limited liability company, Plaintiff-Appellant,

v.ROSS DRESS-FOR-LESS, INC., a Delaware corporation, Defendant-Respondent.

A160199

Court of Appeals of Oregon.

Argued and submitted March 7, 2017.

September 6, 2018

Anna M. Joyce, Portland, argued the cause for appellant. On the briefs were Jeffrey M. Edelson, Lisa A. Kaner, Paul Bierly, and Markowitz Herbold PC.

Gregory D. Call, California, argued the cause for respondent. Also on the brief were Thomas V. Dulcich, Sara Kobak, Rebecca Boyette, Schwabe, Williamson & Wyatt, P.C., Tracy E. Reichmuth, California, and Crowell & Moring LLP.

Before DeHoog, Presiding Judge, and Egan, Chief Judge, and Hadlock, Judge.^*

DEHOOG, P. J.

Plaintiff appeals the trial court's dismissal of its forcible entry and detainer (FED) action against defendant. Defendant was a tenant of a building that plaintiff owned in downtown Portland. Plaintiff filed an FED action alleging that defendant had let the building fall into gross disrepair despite defendant's continuing obligation under the lease to maintain the building in good condition. Plaintiff raises six assignments of error, including challenges related to the trial court's interpretation of the lease, its ruling that plaintiff's notice of default was inadequate, the court's admission of a defense witness's testimony, its ruling in favor of defendant's affirmative defenses of laches and waiver, and the court's award of attorney fees to defendant. We affirm the dismissal of plaintiff's FED action based on the equitable defense of laches, because plaintiff failed to preserve its challenge to that ruling for appeal. As a result, it is unnecessary to discuss the trial court's alternative grounds for dismissal.¹ We conclude, however, that the court abused its discretion in awarding the attorney fees ordered in its first supplemental judgment and we therefore vacate and remand that judgment for reconsideration. Further, that disposition requires us to likewise vacate the second supplemental judgment awarding attorney fees and costs in connection with the first supplemental judgment. Accordingly, we vacate and remand both supplemental judgments, but otherwise affirm.

The historical and procedural facts relevant to our decision are undisputed. This FED action involves the Richmond Building in downtown Portland. The lease at issue has been in place since the building's original tenant, J.J. Newberry, Co. (Newberry), built it in 1956. Newberry designed the building for a retail operation that would span across two buildings—the Richmond Building and the adjacent Failing Building. Each building was subject to a separate lease; only the Richmond Building lease is at issue here. Under that lease, the tenant is responsible for separating the two buildings at the expiration of the lease. The lease is "triple-net," meaning that the tenant has agreed to pay all real estate taxes, insure the building, and maintain and repair the building.

After it built the Richmond Building, Newberry sold it to New York Life Insurance Company, which then leased the building back to Newberry. In 1986, the Calomiris family purchased the Richmond Building from New York Life. Newberry continued to lease the building until it filed for bankruptcy in 1996. In the course of its bankruptcy proceedings, Newberry negotiated with defendant, Ross Dress-for-Less, Inc., to take Newberry's position as the building's tenant. Defendant's assumption of the lease coincided with the beginning of a 10-year option period under the lease. The lease provided one additional 10-year option, which defendant exercised in 2006. In 2011, the Calomiris family transferred ownership of the Richmond Building to plaintiff, Makarios-Oregon, LLC, an entity established by three members of the family.

As noted, the lease required the tenant to separate the Richmond Building from the Failing Building at the expiration of the lease in 2016. In December 2014, defendant filed a declaratory judgment action in federal court to determine its obligations under that provision. Shortly thereafter, plaintiff sent defendant a notice of default, alleging that it had failed to comply with its obligation to maintain the building in a good and lawful state of repair. When, in May 2015, it concluded that defendant's response to the notice of default had been inadequate, plaintiff served defendant with a five-day notice to quit and surrender the premises. Plaintiff followed up on that notice by initiating this FED proceeding in Multnomah County Circuit Court on May 26, 2015.

The trial court held a six-and-a-half day bench trial. Ultimately, the trial court dismissed plaintiff's FED complaint, relying on several alternative grounds raised by defendant. The court ruled from the bench that defendant's affirmative defenses of laches, waiver, and estoppel barred plaintiff's claims. The court further ruled that, even if plaintiff's claims were not otherwise barred, defendant was entitled to prevail on the ground that plaintiff's notice of default had been inadequate. Finally, the court ruled that the parties' course of conduct demonstrated that defendant had not violated the lease's continuing maintenance obligation. The trial court explained that each ruling was an alternative ground on which to find in defendant's favor.²

As the prevailing party, defendant then petitioned the trial court for costs and attorney fees as authorized under the lease and by statute. Plaintiff moved to stay the determination of attorney fees pending this appeal, but the trial court denied plaintiff's motion. Plaintiff then filed written objections to defendant's request for fees, and both plaintiff and defendant submitted written expert testimony regarding the reasonableness of defendant's request. Following a hearing on defendant's petition, the court entered a supplemental judgment awarding defendant attorney fees and costs. Defendant subsequently filed a supplemental petition to recover the fees and costs it had incurred in filing the fee petition and responding to plaintiff's motion to stay. Both parties waived oral argument regarding defendant's supplemental petition and relied solely on their written submissions. The court entered a second supplemental judgment awarding defendant its additional attorney fees and costs and explained that award in a brief letter opinion. All told, the court awarded defendant $657,166.45 in attorney fees and $82,752.62 in costs.

In multiple assignments of error, plaintiff challenges each of the trial court's alternative bases for dismissing the FED action; however, because it is dispositive, we address only plaintiff's challenge to the court's reliance on laches as a basis to dismiss plaintiff's action. Plaintiff's argument on appeal is that laches is inapplicable to continuing covenants, as plaintiff characterizes defendant's obligation under the lease to maintain and repair the Richmond Building. As a result, plaintiff contends, the court erred in concluding that laches barred its claim. Plaintiff did not, however, make that argument to the trial court. And because, as we explain below, plaintiff's challenge to that independent basis for the court's ruling is therefore not preserved for appeal, we affirm the judgment dismissing plaintiff's complaint on that ground.

Our decision rests on the principle that we generally will not consider claims of error that were not raised in the trial court. State v. Walker , 350 Or. 540, 548, 258 P.3d 1228 (2011) ; see also John Hyland Const., Inc. v. Williamsen & Bleid, Inc. , 287 Or. App. 466, 471, 402 P.3d 719 (2017) ("In our system of justice, the purpose of an appeal is not to give the appellant an opportunity to pursue a new theory that it did not rely on below. Rather, ‘the function of appellate review’ is ‘to correct errors of the trial court.’ " (Quoting Falk v. Amsberry , 290 Or. 839, 843, 626 P.2d 362 (1981).) ). " ‘[T] he preservation rule is a practical one, and close calls * * * inevitably will turn on whether, given the particular record of a case, the court concludes that the policies underlying the rule have been sufficiently served.’ " Walker , 350 Or. at 548, 258 P.3d 1228 (quoting State v. Parkins , 346 Or. 333, 341, 211 P.3d 262 (2009) ). The policies underlying the rule of preservation include giving the trial court a chance to consider and rule on an issue, thereby possibly avoiding an error altogether and obviating the need for an appeal. Id. The rule also promotes fairness to opposing parties so that they are not taken by surprise or denied opportunities to meet an argument. Id. ; see also John Hyland Const., Inc. , 287 Or. App. at 472, 402 P.3d 719 (the preservation requirement is "a fundamental principle of appellate jurisprudence, serving the important policy goals of fairness to the parties and the efficient administration of justice").

Those policies were not served here. It is true that, in the trial court, plaintiff argued as a general matter that laches did not apply. Plaintiff's argument, however, was that the defense of laches did not apply because the evidence did not support it. Specifically, plaintiff argued as a factual matter that it had not unreasonably delayed serving defendant with notice of default. For example, in its trial brief, plaintiff argued that laches did not bar its claim because it had "acted promptly" and there was no basis on which to find "any substantial delay" that had worked to defendant's detriment. And, in closing, plaintiff argued in conjunction with both its statute of limitations and laches defenses that "there's no unreasonable delay here." But that is substantively different from the argument that plaintiff seeks to advance on appeal. Plaintiff's argument to us is not that laches does not apply because there is insufficient evidence of unreasonable delay; rather, plaintiff argues that laches does not apply as a matter of law. And, as we have recently...