Westwood Const. Co. v. Hallmark Inns & Resorts

• Decision Date: 17 July 2002
• Citation: 50 P.3d 238,182 Or. App. 624
• Parties: WESTWOOD CONSTRUCTION COMPANY, nka W.C., Inc., an Oregon corporation, Respondent, v. HALLMARK INNS & RESORTS, INC., a foreign corporation, and United States National Bank, a foreign corporation, Appellants, and The Holmes Companies, Inc., dba Siteco-Little Iron Works, an Oregon corporation; Tualatin Electric, Inc., an Oregon corporation; Oceanlake Enterprises, Inc., an Oregon corporation; Allied Building Products, Inc., an Oregon corporation; Bewley Mechanical Systems, Inc., an Oregon corporation; Advanced Fire Protection, Inc., an Oregon corporation; and West Coast Coatings, Inc., an Oregon corporation, Defendants.
• Court: Oregon Court of Appeals

50 P.3d 238

182 Or. App. 624

WESTWOOD CONSTRUCTION COMPANY, nka W.C., Inc., an Oregon corporation, Respondent, v. HALLMARK INNS & RESORTS, INC., a foreign corporation, and United States National Bank, a foreign corporation, Appellants, and The Holmes Companies, Inc., dba Siteco-Little Iron Works, an Oregon corporation; Tualatin Electric, Inc., an Oregon corporation; Oceanlake Enterprises, Inc., an Oregon corporation; Allied Building Products, Inc., an Oregon corporation; Bewley Mechanical Systems, Inc., an Oregon corporation; Advanced Fire Protection, Inc., an Oregon corporation; and West Coast Coatings, Inc., an Oregon corporation, Defendants.

96-2968; A104388.

Court of Appeals of Oregon.

Argued and Submitted May 7, 2001.

Decided July 17, 2002.

Joseph A. Yazbeck, Jr., Portland, argued the cause for appellants. With him on the briefs were Tamara H. Lewis, Allen, Yazbeck, O'Halloran & Hanson, P.C., Ted E. Runstein and Kell Alterman & Runstein LLP, Portland.

Arnold L. Gray, Portland, argued the cause for respondent. With him on the brief were Jeffrey B. Wilkinson and Stewart Sokol & Gray, LLC, Portland.

Before HASELTON, Presiding Judge, and LINDER and WOLLHEIM, Judges.

LINDER, J.

This appeal, which arises from an action to foreclose a construction lien, raises three issues: (1) whether, in a construction lien foreclosure action, preclusive effect should be given to common issues decided in arbitration pursuant to the parties' construction contract; (2) whether evidence that the lien for more than $1.2 million was overstated by more than $400,000 (approximately 34 percent) is sufficient to give rise to a jury question on the validity of the lien; and (3) whether an award of attorney fees pursuant to ORS 87.060(5) may include work performed in arbitration as well as work done at trial in the lien foreclosure action. For the reasons amplified below, we agree with the trial court that the common issues decided in arbitration were binding in the foreclosure action. Contrary to the trial court's determination, however, we conclude that there is a triable issue of fact as to whether the amount of the lien was overstated in such a way as to invalidate it. Finally, because the attorney fees issue is likely to arise on remand, we resolve that issue and conclude that an award of attorney fees to whichever party prevails in this action may include a reasonable amount for work performed in the arbitration proceedings. We therefore reverse and remand. The pertinent facts are largely undisputed. Hallmark Inns & Resorts, Inc. (Hallmark)¹ is a resort developer. Westwood Construction Co. (Westwood) is a company that builds, among other things, resort properties. In September 1994, Hallmark and Westwood entered into a contract for the construction of a multi-unit hotel complex on the Oregon coast. Various disputes arose in the construction of the hotel and, on February 14, 1996, Westwood filed a construction lien on the hotel property pursuant to ORS 87.010(1),² claiming that Hallmark owed Westwood $1.2 million on the contract for the project.³

In June 1996, Westwood filed an action to foreclose the lien and joined with that action claims against Hallmark for breach of contract and quantum meruit. As an affirmative defense to the lien foreclosure, Hallmark asserted that the lien was untimely because it was not filed within 75 days of the date of the substantial completion of the hotel, as required by ORS 87.035.⁴ Pursuant to the parties' contract, the breach of contract and quantum meruit claims were submitted to arbitration. The trial court abated the lien foreclosure action pending the outcome of the arbitration proceeding.

In arbitration, Hallmark and Westwood submitted the issue of the date of substantial completion to the arbitrators. The parties emphasized to the arbitrators the importance of that date (i.e., that it would determine the timeliness of Hallmark's lien) and they took adverse positions on the issue. In particular, Hallmark argued that substantial completion occurred on November 14, 1995, which was the hotel's grand-opening date. Westwood, on the other hand, argued that substantial completion occurred later because Westwood continued construction work for several months after the grand-opening date. After what the parties mutually characterize as a lengthy and expensive arbitration, the arbitrators rendered an award in which they determined, among other things, that substantial completion occurred on December 7, 1995. That date is within 75 days of the date on which Westwood filed its lien, as required for timely filing under ORS 87.035.

Hallmark sought reconsideration of the arbitrators' award on several issues including the date of substantial completion. Although the arbitrators granted Hallmark's request for reconsideration, they reaffirmed their original conclusion as to the date of substantial completion (i.e., December 7, 1995). The arbitrators' award was entered as a court judgment pursuant to ORS 36.350(1), and Hallmark paid that judgment.

After the arbitration, the lien foreclosure action in circuit court was reactivated and that proceeding resumed. Westwood moved for summary judgment, asserting that it was entitled to foreclosure in the amount of $840,180. In support of its motion, Westwood argued that there was no dispute of fact as to the timeliness of the lien, because the arbitrators had determined the substantial completion date to be December 7, 1995, and that date was binding in the foreclosure action. Westwood acknowledged that the lien could be foreclosed only for the amount that the arbitrators had determined Hallmark owed Westwood under the contract, which was $840,180. Although that amount was considerably less than the amount of the lien filed by Westwood (i.e., $1,268,248), Westwood argued that there was no evidence that the difference represented anything other than a good faith dispute as to the amount owing and that it therefore was entitled to judgment in the amount of $840,180 as a matter of law.

Hallmark cross-moved for summary judgment arguing, among other points, that the lien was time barred as a matter of law. In that regard, Hallmark asserted that the trial court was required independently to decide the date of substantial completion, regardless of what the arbitrators had determined. Hallmark further urged that there was no triable issue of fact as to the date of substantial completion because the only permissible conclusion on the summary judgment record was that construction was substantially complete as of the hotel's grand opening, which occurred more than 75 days before Westwood filed its lien.

In addition to filing a cross-motion for summary judgment, Hallmark responded to Westwood's motion by arguing that a fact question was presented as to whether the lien was overstated in such a way as to invalidate it. Thus, according to Hallmark, even if the arbitrator's determination was binding and the lien must therefore be considered timely filed, there still existed a dispute of material fact that precluded granting judgment in Westwood's favor.

The trial court agreed with Westwood that the arbitrator's determination of the date of substantial completion should be given preclusive effect in the foreclosure action. Because the substantial completion date stated in the arbitrators' award was within 75 days of the date on which Westwood filed its lien, the trial court concluded that the lien was not time barred. The trial court further concluded that there were no disputed issues of material fact. As a result, the trial court determined that Westwood was entitled to judgment as a matter of law and therefore granted Westwood's motion for summary judgment and denied Hallmark's cross-motion. Additionally, the trial court awarded Westwood attorney fees, including an amount for its work during the arbitration.

On appeal, Hallmark first assigns error to the trial court's grant of summary judgment, arguing that the trial court erred in concluding that the arbitrators' determination of the date of substantial completion was binding in the foreclosure action.⁵ In that regard, Hallmark advances two arguments. First, Hallmark relies on our decision in Westwood Corp. v. Bowen, 108 Or.App. 310, 815 P.2d 1282 (1991), rev. dismissed 312 Or. 589, 824 P.2d 418 (1992), as controlling. According to Hallmark, we concluded in Westwood that the trial court in a construction lien foreclosure action is statutorily charged with determining when substantial completion occurs and that principles of issue preclusion are displaced by that requirement. Hallmark argues alternatively that, even if issue preclusion applies, the elements for preclusion are not satisfied in this case, because a determination of the date of substantial completion was not necessary and essential to the arbitration proceeding under the terms of the parties' construction contract.

We begin with Hallmark's reliance on our decision in Westwood Corp. In Westwood Corp., a lien foreclosure action was joined with the parties' contract claims and counterclaims pursuant to a statute that provides for such joinder in a lien foreclosure action. See ORS 87.060(3). The contract claims and counterclaims were tried to a jury at the same time that the lien foreclosure action was tried to the court. Westwood Corp.,108 Or.App. at 313,815 P.2d 1282. The jury and the court reached different conclusions on the amount of damages, and the court entered a judgment on the lien foreclosure consistent with its own determination, which was substantially less than the amount that the jury had awarded on the contract claims. Id. at 314, 815 P.2d 1282. The defendant appealed, challenging the entry of a judgment in the lesser amount. As we described the defendant's arguments, they were a blend of issue preclusion (generically referred to as "res judicata"), law of the case, and constitutional right-to-jury-trial principles. Id. at 313-14, ...