Montara Owners Ass'n, an Or. Non-Profit Corp. v. La Noue Dev., LLC
| Decision Date | 18 June 2015 |
| Docket Number | CA A140771,SC S062120,No. 22,CC061213628,CC051213487,22 |
| Citation | 357 Or 333 |
| Court | Oregon Supreme Court |
| Parties | MONTARA OWNERS ASSOCIATION, an Oregon non-profit corporation, Plaintiff, v. LA NOUE DEVELOPMENT, LLC, an Oregon limited liability company; et al., Defendants. LA NOUE DEVELOPMENT, LLC, an Oregon limited liability company, Third-Party Plaintiff-Appellant, Respondent on Review, and Mark LA NOUE, an individual, Third-Party Plaintiff, v. SUTTLES CONSTRUCTION, INC., an Oregon corporation; Gordon Harding, an individual, dba Gordon Harding Construction; MCM Architects, PC, an Oregon professional corporation; et al., Third-Party Defendants, and Vasily A. SHARABARIN, an individual, dba Advanced Construction, Third-Party Defendant-Respondent, Petitioner on Review. EVANS CONSTRUCTION SIDING CORPORATION, an Oregon corporation, Fourth-Party Plaintiff, v. DAVE BURGESS CONSTRUCTION, INC., an Oregon corporation; et al, Fourth-Party Defendants. DAVE BURGESS CONSTRUCTION, INC., an Oregon corporation, Fifth-Party Plaintiff, v. Raul HERNANDEZ and Carlos Hernandez, individuals, dba Hernandez Brothers, a partnership; et al, Fifth-Party Defendants. LA NOUE DEVELOPMENT, LLC, an Oregon limited liability company; and Mark La Noue, an individual, Plaintiffs, v. MCM ARCHITECTS, PC, an Oregon professional corporation, Defendant. |
En Banc
On review from the Court of Appeals.*
Thomas M. Christ, Cosgrave Vergeer Kester LLP, Portland, argued the cause and filed the briefs for petitioner Vasily A. Sharabarin. With him on the brief was Julie A. Smith.
Leta E. Gorman, Jordan Ramis PC, Lake Oswego, argued the cause and filed the brief for respondent La Noue Development, LLC.
The decision of the Court of Appeals is affirmed in part and reversed in part. The judgment of the circuit court is affirmed in part and reversed in part, and the case is remanded to the circuit court for further proceedings.
This construction defect case presents three issues on review, following certain rulings by the trial court and an award of damages by the jury. First, we consider the proper application of ORS 30.140, a statute that voids overbroad indemnity provisions in construction contracts. The Court of Appeals held that the trial court had erred by invalidating an indemnity provision in its entirety when the provision was only partially void under ORS 30.140. Montara Owners Assn. v. La Noue Development, LLC, 259 Or App 657, 682-83, 317 P3d 257 (2013). On that issue, we affirm the Court of Appeals and remand to the trial court. Second, we consider whether it was error for the trial court to give an instruction on the economic waste doctrine in the absence of any evidence on the alternative measure of damages, diminution in value. The Court of Appeals found that it was error to give the instruction and that the error was not harmless. Id. at 669-70. As to that issue, we reverse the Court of Appeals, because we conclude that the instructional error was harmless. Third, we consider whether a third-party plaintiff can recover attorney fees as consequential damages for a third-party defendant's breach of contract when the attorney fees were incurred in the first-party litigation in the same action. The Court of Appeals affirmed the trial court's ruling that the general contractor in this case could not recover such attorney fees. Id. at 683. On the issue of the proper procedure to recover those fees, we agree with the Court of Appeals and the trial court. However, we reverse and remand to the trial court to consider the general contractor's substantive right to those fees.
The Montara Owners Association (homeowners) sued the developer and general contractor, La Noue Development, LLC (La Noue), for damages caused by design and construction defects in the building of the Montara town-homes, a complex of 35 separately owned units in multiple buildings. The defects included problems with the framing, siding, decking, and windows, resulting in water intrusion and water damage. La Noue, in turn, filed a third-party complaint against multiple subcontractors, including Vasily A. Sharabarin, dba Advanced Construction (Sharabarin),who provided siding work on four buildings. Before trial, however, La Noue settled with the homeowners for $5 million—eliminating the first-party litigation from the case—and also reached settlements with most of the third-party subcontractors. La Noue did not settle with Sharabarin.
Because of various pretrial rulings, the only claims submitted to the jury were La Noue's breach of contract claims against Sharabarin and two other subcontractors.1 Before trial, the trial court granted summary judgment in favor of Sharabarin on La Noue's claim for contractual indemnity, on the ground that the indemnification provision on which La Noue had relied was void under ORS 30.140. The trial court also held that the court—not the jury—would decide whether La Noue could recover the attorney fees that it had incurred in defending against the homeowners' claims as consequential damages for Sharabarin's breach of contract and that the court would resolve that issue after trial. In its post-trial ruling on the attorney fee issue, the court ultimately held that La Noue could not recover attorney fees as consequential damages in the case, even after trial, and denied La Noue's claim for those attorney fees.
La Noue tried its breach of contract claim to the jury. La Noue generally contended that Sharabarin's work in siding the townhouses had deviated from the plans and specifications in the contract and had damaged the buildings that Sharabarin had worked on. Through an expert witness, La Noue presented evidence that it would cost just under $2 million to repair the damage caused by Sharabarin's breach. In contrast, Sharabarin's expert witness testified that the cost to repair all of the damage caused by various subcontractors to the four buildings Sharabarin worked on would be only around $1 million. He further stated that only five percent of that $1 million repair cost involved areas where Sharabarin had performed work, and concluded that the resulting amount (about $50,000) represented the cost of repairing any damages caused by Sharabarin's breach.
The jury found that Sharabarin had breached his contract with La Noue and awarded $43,711 in total damages, significantly less than La Noue had sought. La Noue appealed. The Court of Appeals reversed the summary judgment in favor of Sharabarin on the contractual indemnity claim, held that the trial court erred in giving one of Sharabarin's requested jury instructions and that the error was prejudicial, and affirmed the trial court's denial of La Noue's claim for attorney fees. Montara, 259 Or App at 670. Sharabarin petitioned this court for review of the Court of Appeals' rulings on the jury instruction and contractual indemnity issues. La Noue opposed review but requested contingent review of the Court of Appeals' ruling on attorney fees and another aspect of the Court of Appeals' ruling on the jury instruction issue.
We first address whether the trial court erred in granting summary judgment on the issue of contractual indemnification. "In reviewing a trial court's disposition of a motion for summary judgment, this court determines whether the moving party is entitled to judgment as a matter of law." PIH Beaverton, LLC v. Super One, Inc., 355 Or 267, 275, 323 P3d 961 (2014) (citing ORCP 47 C). The indemnity provision in the contract between La Noue and Sharabarin provided:
"[Sharabarin] specifically and expressly agrees to indemnify and save harmless [La Noue], its officers, agents and employees, from and against any and all suits, claims, actions, losses, costs, penalties and damages, of whatsoever kind or nature, including attorneys' fees, arising out of, in connection with, or incident to [Sharabarin's] performance of th[e] subcontract, whether or not caused in part by [La Noue], [its] employees or agents, but excepting that caused by the sole negligence of [La Noue], [its] employees or agents."
(Capitalization omitted.) In a pretrial ruling, the trial court granted Sharabarin's motion for summary judgment on the issue of contractual indemnity because "this case falls squarely within ORS 30.140 and its interpretation in Walsh [Const. Co. v. Mut. of Enumclaw, 338 Or 1, 104 P3d 1146(2005),]" and therefore, the court concluded, the indemnity clause was void.
ORS 30.140 provides:
Because the contract at issue here provided for indemnification "whether or not caused in part by [La Noue] [and only] excepting that caused by the sole negligence of [La Noue]," the parties agree that it violates the prohibition on requiring indemnification "for damage * * * caused in whole or in part by the negligence of the indemnitee." ORS 30.140(1) (emphases added). The issue here is the effect of the exception in ORS 30.140(2) on that prohibition. As noted, the Court of Appeals agreed with La Noue that ORS 30.140(2) sets out an exception to ORS 30.140(1) and that the indemnification provision here comes within that exception. Montara, 259 Or App at 682-83....
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