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FountainCourt Homeowners' Ass'n v. FountainCourt Development, LLC

Court of Appeals of Oregon

August 6, 2014

FOUNTAINCOURT HOMEOWNERS' ASSOCIATION and FOUNTAINCOURT CONDOMINIUM OWNERS' ASSOCIATION, Plaintiffs,
v.
FOUNTAINCOURT DEVELOPMENT, LLC; et al, Defendants. FOUNTAINCOURT DEVELOPMENT, LLC; et al, Third-Party Plaintiffs,
v.
ADVANCED SURFACE INNOVATIONS, INC., an Oregon corporation; et al, Third-Party Defendants. VOSS FRAMING, INC., assignee for FountainCourt Homeowners' Association, assignee for FountainCourt Condominium Owners' Association, on behalf of FountainCourt Development, LLC, on behalf of Matrix Development Corporation, and on behalf of Legend Homes Corporation, Fourth-Party Plaintiff,
v.
DANA CHRISTOPHER; and RED HILLS CONSTRUCTION, INC., Fourth-Party Defendants. FOUNTAINCOURT HOMEOWNERS' ASSOCIATION and FOUNTAINCOURT CONDOMINIUM OWNERS' ASSOCIATION, Garnishors-Respondents,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Garnishee-Appellant

Argued and Submitted November 20, 2012

Page 974

Washington County Circuit Court. C075333CV. Marco Hernandez, Judge. (Supplemental Judgment). D. Charles Bailey, Jr, Judge. (Supplemental Judgment-Attorney Fees).

Todd S. Baran argued the cause and filed the briefs fOre. Appellant.

Anthony L. Rafel argued the cause for respondents. With him on the brief were Rafel Law Group PLLC, and Robert L. O'Halloran, Katie Jo Johnson, and McEwen Gisvold LLP.

Michael E. Farnell, Sean W. Carney, and Parsons Farnell & Grein, LLP, filed the brief amici curiae for Associated General Contractors of America, Oregon-Columbia Chapter; Pacific Northwest Chapter of the Associated Builders and Contractors Inc.; Home Builders Association of Metropolitan Portland; Professional Remodelers Organization of the HBA of Metro Portland; and Independent Electrical Contractors of Oregon, Inc.

Before Armstrong, Presiding Judge, and Duncan, Judge, and Brewer, Judge pro tempore.

OPINION

Page 975

[264 Or.App. 471] ARMSTRONG, P.J.

This appeal arises from a garnishment proceeding in which FountainCourt Homeowners' Association and FountainCourt Condominium Owners' Association (collectively, FountainCourt[1]) alleged that American Family Mutual Insurance Company (American Family) was legally obligated to pay the unsatisfied portion of a judgment that FountainCourt had recovered against Sideco, Inc. (Sideco), American Family's insured. The trial court agreed with FountainCourt, and American Family appeals the resulting supplemental judgment--which awarded FountainCourt $433,958.16 against American Family--and a subsequent supplemental judgment that awarded FountainCourt $68,538 in attorney fees. We conclude that the trial court did not err in entering a judgment against American Family for the unpaid amount of FountainCourt's judgment against Sideco, but that it did err in awarding FountainCourt its attorney fees. Accordingly, we affirm the supplemental judgment resolving the garnishment proceeding and reverse the attorney-fee award.

I. BACKGROUND

The pertinent background facts are not in dispute. The case arises out of the construction of a housing development in Beaverton (the project), which consists of 34 condominium units and 63 townhouse units in 11 two- and three-story buildings. The buildings were constructed in stages between September 2002 and July 2004, with each having a different date of substantial completion as reflected in a certificate of occupancy. In 2007, FountainCourt brought this action against the developers and the general contractor, alleging various claims related to defects and deficiencies in the development and construction of the project. FountainCourt

Page 976

filed a second amended complaint in the action in August 2009, asserting direct negligence claims against several subcontractors that had performed work on the project, including Sideco.

[264 Or.App. 472] As to Sideco, FountainCourt alleged that Sideco had " provided labor and certain materials generally involving installation of exterior siding, weather-resistant barriers, windows, and related caulking and flashing for the FountainCourt buildings," and had breached its duty of care to FountainCourt in performing its work " with the [d]efects and deficiences set forth in paragraphs 17-20" of the second amended complaint. Paragraphs 17 to 20, in turn, alleged " substantial water intrusion" to the FountainCourt buildings causing extensive physical damage as a result of faulty workmanship; use of unsuitable or defective materials; improper installation; noncompliance with the approved construction plans; and failure to comply with applicable building codes, industry standards, and manufacturers' installation requirements.

American Family issued commercial general-liability insurance to Sideco from May 1, 2004, through May 1, 2006, with policy limits of $1 million per occurrence and an aggregate of $2 million for products-completed operations. Section I 1. of the insurance policy, titled " Insuring Agreement," provides, in part:[2]

" a. [American Family] will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. * * *
" * * * *
" b. This insurance applies to 'bodily injury' and 'property damage' only if:
" * * * *
" (2) The 'bodily injury' or 'property damage' occurs during the policy period[.]"

Section I 2. of the policy, titled " Exclusions," then provides that the insurance does not apply to, among other things:

[264 Or.App. 473] " j. Damage to Property

" 'Property damage' to:
" * * * *
" That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations; or
" That particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it.
" * * * *
" Paragraph of this exclusion does not apply to 'property damage' included in the 'products-completed operations hazard
" * * * *
" l. Damage to Your Work

" 'Property Damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard'."

In addition, an endorsement provides that the insurance " does not apply to * * * 'property damage' arising out of" " ['y]our work' in connection with pre-construction, construction, post-construction of any 'multi-unit residential building'[.]"

The policy contains the following definitions, as pertinent:

" 13. 'Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
" * * * *
" 16. 'Products-completed operations hazard':
" a. Includes all * * * 'property damage' occurring away from premises you own or rent and arising out of * * * 'your work' except:

Page 977

" Products that are still in your physical possession; or
[264 Or.App. 474] " Work that has not yet been completed or abandoned. * * *
" * * * *
" 17. 'Property damage' means
" a. Physical injury to tangible property, including all resulting 23 loss of use of that property. All such loss of use shall be deemed to occur at the time of ...

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