Waxman v. Waxman & Associates, Inc.

• Decision Date: 24 December 2008
• Docket Number: 050910112.,A132602.
• Citation: 198 P.3d 445,224 Or. App. 499
• Parties: Loren J. WAXMAN and Pamela J. Vernon, Plaintiffs-Appellants, v. WAXMAN & ASSOCIATES, INC., an Oregon corporation, Defendant-Respondent.
• Court: Oregon Court of Appeals

198 P.3d 445

224 Or. App. 499

Loren J. WAXMAN and Pamela J. Vernon, Plaintiffs-Appellants, v. WAXMAN & ASSOCIATES, INC., an Oregon corporation, Defendant-Respondent.

050910112.

A132602.

Court of Appeals of Oregon.

Argued and Submitted May 16, 2008.

Decided December 24, 2008.

Peter J. Viteznik, Portland, argued the cause for appellants. With him on the briefs were Kyle D. Sciuchetti, Lisa E. Lear, and Bullivant Houser Bailey PC.

Matthew J. Kalmanson argued the cause for respondent. On the brief were Janet M. Schroer, Portland, and Hoffman, Hart & Wagner, LLP.

Before HASELTON, Presiding Judge, and ARMSTRONG, Judge, and ROSENBLUM, Judge.

HASELTON, P.J.

Plaintiffs, who are owners of one of four connected row houses, appeal, challenging the dismissal, on summary judgment, of their tort and contract claims against defendant, the builder/developer, to recover their share of costs associated with the repair of certain construction defects in the common elements of the building. Plaintiffs contend, principally, that the trial court erred (1) in concluding that the "economic loss" doctrine bars plaintiffs' negligence claims, (2) in concluding that plaintiffs' contract claims are barred by the six-year statute of limitations set forth in ORS 12.080(1), and (3) in failing to give preclusive effect in this case to an earlier arbitration award in favor of the owner of another of the row houses. As explained below, we conclude that the trial court erred in determining that the economic loss doctrine bars plaintiffs' negligence claims. However, we also conclude that the court correctly held that plaintiffs' contract claims are barred by the statute of limitations and that the arbitration award cannot be given preclusive effect. Consequently, we affirm the dismissal of the contract claims, reverse the dismissal of the tort claims, and remand for further proceedings.

The material facts are not in dispute. In the mid-1990s, defendant developed and built four row houses.¹ After completing construction defendant sold the row houses to Jean Slyman, Sharolyn Shearer, Julie Bussing, and Ruth and Douglas Menely (referred to collectively as the original purchasers). The Menelys sold their row house to plaintiffs in 2001.

There were significant construction defects in the common elements of the row houses, necessitating extensive repairs. The row houses are subject to covenants, conditions, and restrictions, which give each row house owner a 25 percent ownership interest in and responsibility for the common elements. As a result, the four property owners at the time of the repairs, Slyman, Shearer, Bussing, and plaintiffs, were each responsible for 25 percent of the repair bill.

The purchase agreements between defendant and the original purchasers required that unresolved claims be submitted to arbitration. In October 2004, the row house owners filed an arbitration claim against defendant, seeking damages associated with the construction defects. Defendant filed an answer in the arbitration that, among other things, challenged plaintiffs' eligibility to participate in the arbitration, contending that there was no arbitration agreement between plaintiffs and defendant. After initiation of the arbitration proceeding, the Menelys and plaintiffs executed an agreement captioned "Addendum to Real Estate Sales Agreement" (the assignment) in which the Menelys purported to assign to plaintiffs all claims and causes of action arising from the construction of the row houses.

While the arbitration proceeding was underway, defendant filed suit in circuit court against some of the subcontractors that participated in the building of the row houses. In the context of that action, defendant (as a plaintiff there) sought a declaration that plaintiffs could not participate in the arbitration with the other row house owners because plaintiffs had not been parties to the original purchase agreement, which included the arbitration clause. The circuit court in that action ultimately held that plaintiffs were not eligible to participate in the arbitration. Thereafter, defendant settled with Shearer and Slyman, but Bussing proceeded to arbitration on her claims. In October 2005, following a full evidentiary hearing, the arbitration panel awarded Bussing a money judgment, costs, and attorney fees.

Meanwhile, in September 2005, plaintiffs filed a complaint against defendant in circuit court to recover their portion of the repair costs, asserting claims for negligence and breach of contract. The parties filed cross-motions for summary judgment. Defendant argued that it was entitled to summary judgment on plaintiffs' negligence claims because, among other things, those claims were barred by the economic loss doctrine. With regard to plaintiffs' contract claims, defendant argued that it had no contractual duty to plaintiffs, because the assignment from the Menelys was ineffective. Defendant also argued that, even if the assignment was effective, the applicable statute of limitations barred plaintiffs' contract claims. Plaintiffs, while disputing those arguments, further maintained that they were entitled to partial summary judgment because defendant was "precluded from re-litigating its legal responsibility for the damages" by virtue of the arbitration award.

The trial court granted defendant's motion for summary judgment and denied plaintiffs' cross-motion for partial summary judgment. The court concluded that plaintiffs' negligence claims were barred by the economic loss doctrine and that their contract claims were barred by the statute of limitations. In denying plaintiffs' cross-motion for partial summary judgment, the trial court refused to give preclusive effect to the arbitration award, stating that it could not determine on what basis-contract or tort-the panel had awarded Bussing damages.

We review a grant of summary judgment "to determine whether any genuine issue of material fact exists and whether defendant is entitled to judgment as a matter of law." Herman v. Valley Ins. Co., 145 Or.App. 124, 127-28, 928 P.2d 985 (1996), rev. den., 325 Or. 438, 939 P.2d 621 (1997). Because the material facts are undisputed, this appeal presents only legal issues, which we review for errors of law. Bunnell v. Dalton Construction, Inc., 210 Or.App. 138, 142, 149 P.3d 1240 (2006), rev. den., 344 Or. 558, 187 P.3d 219 (2008).

For the reasons that follow, we reverse the allowance of summary judgment in part and affirm in part. We also affirm the trial court's denial of plaintiffs' cross-motion for partial summary judgment. In particular, we conclude that the trial court erred in determining that the economic loss doctrine bars plaintiffs' negligence claims. However, the court correctly concluded that plaintiffs' contract claims are barred by the statute of limitations and that the arbitration award cannot be given preclusive effect vis-à-vis plaintiffs' tort claims, which are the only viable claims remaining.

We turn to the trial court's application of the economic loss doctrine to plaintiffs' tort claims. That doctrine provides that, in the absence of a special relationship, a party that has suffered purely economic loss may not bring a negligence action against the party that caused such loss. See e.g., Onita Pacific Corp. v. Trustees of Bronson, 315 Or. 149, 159, 843 P.2d 890 (1992). After the trial court's decision in this case, the Supreme Court issued its decision in Harris v. Suniga, 344 Or. 301, 180 P.3d 12 (2008). In Harris, the court held that a claim against a contractor for physical damage to property caused by allegedly negligent construction is not barred by the economic loss doctrine, because such damage does not constitute a purely economic loss. 344 Or. at 310-11, 180 P.3d 12.

On this record, the facts of Harris are materially indistinguishable from those in this case. Consequently, we reverse the trial court's dismissal of plaintiffs' tort claims and remand for further consideration of those claims.²

We proceed to the propriety of allowing summary judgment against plaintiffs' breach of contract claims. The trial court, as noted, concluded that those claims were barred by the six-year statute of limitations set forth in ORS 12.080(1), rejecting plaintiffs' argument that a 10-year statute of limitations applies under ORS 12.135.³ The trial court also rejected plaintiffs' alternate argument that ORS 12.080(1) is subject to a discovery rule. For the following reasons, we agree with the trial court in both respects.

We first consider the question of the applicable statute of limitations—viz., the proper relationship between ORS 12.080(1) and ORS 12.135. Our task in interpreting a statute is to discern the intent of the legislature. PGE v. Bureau of Labor and Industries, 317 Or. 606, 610, 859 P.2d 1143 (1993).

"In [the] first level of analysis, the text of the statutory provision itself is the starting point for interpretation and is the best evidence of the legislature's intent."

Id. However, the text of a statute should not be read in isolation. We must also, in the first level of analysis, consider the statutory context. Id. at 611, 859 P.2d 1143. "If the legislature's intent is clear from the * * * inquiry into text and context, further inquiry is unnecessary." Id. However, if legislative intent remains unclear, we move to the second level of analysis, in which we examine legislative history. Id. at 611-12, 859 P.2d 1143. A statute is ambiguous if it is susceptible to more than one reasonable interpretation. State v. Cooper, 319 Or. 162, 167, 874 P.2d 822 (1994). A reasonable interpretation is one that is not "wholly implausible." Owens v. MVD, 319 Or. 259, 268, 875 P.2d 463 (1994); Filipetti v. Dept. of Fish and Wildlife, 224 Or.App. 122, 130, 197 P.3d 535 (2008).

ORS 12.080(1) provides:

"An action upon a contract or liability, express or implied, excepting those mentioned in ORS 12.070, 12.110 and 12.135 and except as...