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Sunset Presbyterian Church v. Andersen Constr. Co.

Court of Appeals of Oregon

December 31, 2014

SUNSET PRESBYTERIAN CHURCH, an Oregon non-profit corporation, Plaintiff-Appellant Cross-Respondent,
v.
ANDERSEN CONSTRUCTION COMPANY, an Oregon Corporation, et al, Defendant-Cross-Respondent, and B & B TILE AND MASONRY CORPORATION, a foreign corporation, Defendant-Respondent Cross-Appellant, and DELTA DRYWALL, INC., an Oregon corporation, et al, Defendants. ANDERSEN CONSTRUCTION COMPANY, an Oregon corporation, Third-Party Plaintiff,
v.
DELTA DRYWALL, INC., an Oregon Corporation, et al, Third-Party Defendants

Argued and Submitted June 4, 2014.

Page 193

Washington County Circuit Court. C106643CV. D. Charles Bailey, Jr, Judge.

Daniel T. Goldstein argued the cause for appellant-cross-respondent. With him on the briefs were Phillip E. Joseph, James C. Prichard, and Ball Janik LLP.

Thomas M. Christ argued the cause for respondent-cross-appellant. With him on the briefs were Cosgrave Vergeer Kester LLP, Julie L. O'Brien, and Wiles Law Group LLC.

No appearance for cross-respondent Andersen Construction Company.

Before Sercombe, Presiding Judge, and Hadlock, Judge, and Tookey, Judge.

OPINION

Page 194

[268 Or.App. 311] HADLOCK, J.

This construction-defect case began when Sunset Presbyterian Church (Sunset) filed an action against its general contractor, Andersen Construction Company (Andersen). Andersen, in turn, filed a third-party complaint against its subcontractors, including B& B Tile and Masonry Corporation (B& B). Sunset and Andersen settled, and Andersen assigned its third-party claims against the subcontractors to Sunset. The subcontractors other than B& B settled, leaving Sunset (as Andersen's assignee) and B& B as the only litigants. Sunset dismissed all the claims against B& B except one, based on Andersen's subcontract with B& B, for breach of duty to defend Andersen against Sunset's action.

The trial court concluded that B& B had a contractual duty to defend Andersen against Sunset's allegations that might implicate B& B's negligence, but that ORS 30.140[1] voided

Page 195

the subcontract to the extent that it required B& B to defend Andersen against allegations of Andersen's or other subcontractors' negligence. Because Sunset did not prove what portion of Andersen's litigation costs Andersen incurred in defending against only those allegations that might implicate B& B's negligence, the court awarded Sunset zero dollars as damages. The court also declined to award Sunset the attorney fees that it had incurred in prosecuting the duty-to-defend claim. It entered a general judgment that identified Sunset as the prevailing party but that awarded Sunset no damages. Both parties appeal. On Sunset's appeal, we affirm; on B& B's cross-appeal, we reverse and [268 Or.App. 312] remand for entry of a judgment identifying B& B as the prevailing party.

The relevant underlying facts are few and undisputed. Sunset contracted with Andersen for phase-two construction of a church building. Andersen, in turn, entered into a subcontract with B& B under which B& B was to perform masonry. Article 12 of the subcontract, entitled " INDEMNIFICATION," provides, in part, as follows:

" 12.1 SUBCONTRACTOR'S PERFORMANCE. To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Owner, the Architect, the Contractor (including its affiliates, parents and subsidiaries) and other contractors and subcontractors and all of their agents and employees from and against all claims, damages, loss and expenses, including but not limited to attorney's fees, arising out of or resulting from the performance of the Subcontractor's Work provided that (a) any such claim, damage, loss, or expense is attributable to bodily injury, sickness, disease, or death, or to injury to or destruction of tangible property (other than the Subcontractor's Work itself) including the loss of use resulting therefrom, to the extent caused or alleged to be caused in whole or in any part by any negligent act or omission of the Subcontractor or anyone for whose acts the Subcontractor may be liable regardless of whether it is caused in part by a party indemnified hereunder, (b) such obligation shall not be construed to negate, or abridge, or otherwise reduce any other right or obligation of indemnity which would otherwise exist as to any party or person described in this Article 12."

After the work was complete, Sunset brought this action, alleging that Andersen constructed the project and that it hired subcontractors to help with the project. Sunset alleged that it " has discovered new and recurring deficiencies in the work performed by Andersen, which deficiencies have caused and are causing water intrusion and resulting property damage." The specific allegations of deficient work included an allegation that " [a]rchitectural stone has been terminated at the level of the finish grade along the base-of-wall at hard surfaces, contrary to Owens Corning manufacturer installation instructions." Installation of the architectural stone was part of B& B's scope of work under the subcontract.

[268 Or.App. 313] Andersen tendered the defense of Sunset's action to B& B and other subcontractors, all of whose subcontracts contained the same indemnity provision set out above. B& B and the other subcontractors declined Andersen's tender of defense, and Andersen then filed third-party claims against B& B and the other subcontractors.[2] Among other things, the third-party ...


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