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Eclectic Investment LLC v. Patterson

Supreme Court of Oregon, En Banc

March 19, 2015

ECLECTIC INVESTMENT, LLC, Plaintiff,
v.
Richard PATTERSON, et al., Defendant. JACK SON COUNT Y, Cross-Claim Plaintiff-Appellant, Petitioner on Review,
v.
Byron McALLISTER, Jr., dba Greater Crater Construction Company, Cross-Claim Defendant-Respondent, Respondent on Review.

Argued and submitted November 6, 2014

On review from the Court of Appeals.[*] CC 07019L3; CA A150458

Michael Jewett, Michael Jewett, P.C., Ashland, argued the cause and fled the brief for petitioner on review.

James A. Wallan, Hornecker Cowling, LLP, Medford, argued the cause and fled the brief for respondent on review.

The county, a defendant in a negligence action, sought common-law indemnity from a co-defendant. The trial court denied the common-law indemnity claim, and the Court of Appeals affrmed the trial court's decision. Held: (1) In cases in which Oregon comparative negligence statutes apply, common-law indemnity is not necessary or justifed; (2) Because the trial court applied the Oregon comparative negligence statutes to allocate fault among the parties in the underlying negligence case, and because the jury found plaintiff to be more than 50 percent at fault, the county was neither potentially nor actually liable for the co-defendant's conduct. Therefore, the trial court correctly denied the county's common-law indemnity claim.

WALTERS, J.

Jackson County (the county) is a defendant in this negligence action, in which plaintiff sought damages for damage to its real property. As an affirmative defense, the county alleged that plaintiff was negligent and was itself responsible for the damages that it had suffered. The county also filed a cross-claim against a codefendant (the contractor) seeking common-law indemnity. Plaintiff's negligence claim was tried to a jury, which found that plaintiff was more than 50 percent at fault. Therefore, under ORS 31.600, neither the county nor the contractor were liable to plaintiff. Nevertheless, the county had incurred costs in defending against plaintiff's claim, and it pursued its cross-claim for indemnity to collect those costs from the contractor. The trial court denied the county's indemnity claim, the county appealed, and the Court of Appeals affirmed. Eclectic Investment. LLC v. Patterson. 261 Or.App. 457, 323 P.3d 473 (2014). For the reasons that follow, we also affirm.

The following facts are uncontested. Plaintiff, a property owner, hired the contractor to enlarge plaintiff's parking lot by excavating a slope above the parking lot. The contractor did not apply for an excavation permit before performing its work, as required by county ordinances. However, the contractor later applied for the necessary permit, which the county denied because it lacked sufficient detail. The contractor re-applied, and the county issued a preliminary permit. The county conducted an inspection and noted erosion problems with the slope and concerns about its soil composition and the adequacy of a retaining wall. As a result, the county withheld final approval. After another inspection of the construction site, the county granted final approval. The county did not require the contractor to make any change to the slope, which had a steep 1:1 grade. Roughly a year after the excavation, a rainstorm caused topsoil to wash off the slope onto plaintiff's parking lot and into a building, damaging plaintiff's property.

As relevant here, plaintiff alleged that the contractor had been negligent in its excavation of the slope and that the county had been negligent in approving that excavation without requiring the contractor to make the slope safe.[1]Plaintiff alleged that, as a result of defendants' negligence, the slope had collapsed and damaged plaintiff's property. The county and the contractor both denied negligence. The county also alleged, as an affirmative defense, that plaintiff had been negligent in failing to apply for proper permits before beginning excavation and for failing to consult an engineer about the excavation. The county asked that plaintiffs damages be allocated in accordance with ORS 31.610, which apportions damages based on the comparative fault of all parties.[2] The county also filed a cross-claim for common-law indemnity against the contractor, alleging that "[the county's] negligence, if any, was passive and secondary as compared to the primary and active negligence of [the contractor], " and therefore that the contractor should indemnify the county. The county and the contractor agreed to sever the indemnity claim from the negligence claim for later determination by the trial court.

At trial on plaintiff's negligence claim, the county requested that the jury answer special questions pursuant to ORS 31.605.[3] The jury found that plaintiff had been more than 50 percent at fault, the county had been 7 percent at fault, and the contractor had been 4 percent at fault. Because ORS 31.600 provides that a claimant may not recover if the claimant's fault is greater than the combined fault of the other parties, the trial court entered judgment in favor of defendants.[4]

The county and the contractor then agreed to arbitrate the county's common-law indemnity claim. The county neither owed nor had paid any obligation to plaintiff, but it nevertheless sought to collect from the contractor the legal fees and costs that it had incurred in defending against plaintiff's negligence claim. The arbitrator found against the county, and the county appealed the arbitrator's decision to the trial court.

The case was tried to the court on stipulated facts. The county argued that it was entitled to indemnity under this court's decision in Astoria v. Astoria & Columbia River R. Co., 67 Or 538, 548, 136 P 645 (1913), and that Astoria stands for the proposition that a party that is "actively" negligent must indemnify a party whose negligence is merely "passive." In response to that argument, the trial court remarked that the county "was not completely passive because it inspected the excavation twice." However, court also went on to consider more broadly, whether, in equity, the contractor rather than the county "should have discharged the obligation." (Emphasis in original). With regard to that question, the court observed that the Restatement (Second) of Torts, § 886B (1979), provides that indemnity should be granted where "[t]he indemnitor created a dangerous condition of land or chattels as a result of which both were liable to the third person, and the indemnitee innocently or negligently failed to discover the defect." The court viewed the Restatement as favoring the county's position, but also considered the county's position to be at odds with the fact that "the jury found [the contractor] to be the least at fault of the parties." After considering that "important factor, " the court reached two conclusions: first, that plaintiff's claim against the county was based on the county's independent negligence, not on vicarious liability, and, second, that "[t]he direct fault of the two parties involved in this indemnity action is relatively equal." The trial court therefore denied the county's indemnity claim.

The county appealed, arguing that the trial court had erred in failing to apply the rule articulated in Astoria, 67 Or at 548. The Court of Appeals disagreed and affirmed the decision of the trial court. Eclectic, 261 Or.App. at 465. Relying on cases decided after Astoria, the court concluded that the applicable legal standard is broader than that stated in Astoria. Id. at 463. As the Court of Appeals explained it, although the distinction between active and passive negligence is one factor that a trial court may consider in determining whether indemnity is appropriate, the ultimate question is whether, in equity, and under the totality of the circumstances, the indemnitor rather than the indemnitee "'should have discharged the obligation.'" Id. (quoting the trial court's decision) (emphasis in original). The Court of Appeals decided that the trial court had correctly applied that legal standard and that its conclusions were supported by substantial evidence. Id. at 464-65. Moreover, the Court of Appeals reasoned, even if Astoria alone were controlling, this case is distinguishable. Id. at 465. Unlike the governmental entity in Astoria, the county in this case was aware of the offending condition before it gave its approval. Id.

The county filed a petition for review, which we allowed. In this court, the county argues that the correct legal standard is set out in Astoria-that a passive tortfeasor may recover in indemnity from an active tortfeasor- and that the trial court erred in considering the jury's allocation of fault as a factor in deciding that the county was not entitled to indemnity. The contractor responds that, to the extent that Astoria requires that indemnity be determined based on whether a party's negligence was active or passive, it should be overruled. We begin therefore with a discussion of the legal ...


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