Hunters Ridge Condo. Ass'n v. Sherwood Crossing, LLC

285 Or.App. 416

395 P.3d 892

HUNTERS RIDGE CONDOMINIUM ASSOCIATION, Plaintiff-Appellant,

v.SHERWOOD CROSSING, LLC; and White Construction Co., LLC, Defendants,andAmerican Family Mutual Insurance Company, Garnishee-Respondent.

Hunters Ridge Condominium Association, as Assignee of E.A. White Construction Co., LLC, Plaintiff-Appellant,

v.Walter George Construction, Inc., Defendant,andAmerican Family Mutual Insurance Company, Garnishee-Respondent.

A157014 (Control)

A157016

Court of Appeals of Oregon.

Argued and submitted September 11, 2015.

May 10, 2017

Anthony L. Rafel argued the cause for appellant. With him on the briefs was Rafel Law Group PLLC.

Todd S. Baran argued the cause for respondent. With him on the briefs was Todd S. Baran, PC.

Before Ortega, Presiding Judge, and Lagesen, Judge, and Garrett, Judge.

GARRETT, J.

This appeal arises from a garnishment proceeding which, itself, arose from a construction-defect dispute concerning Hunters Ridge, a condominium development. Plaintiff, the condominium association, brought claims against the developer and general contractor. The developer filed a third-party complaint against various subcontractors, including Walter George Construction (WGC). WGC failed to appear, resulting in the entry of default judgments against it. Plaintiff then instituted garnishment proceedings against garnishee American Family Mutual Insurance Company (AFM), WGC's insurer, to recover the amounts awarded by the default judgments. In the garnishment proceeding, both parties filed summary judgment motions; on appeal, both parties assign error to the trial court's disposition of those motions.

First, plaintiff assigns error to the trial court's grant of summary judgment to AFM. The trial court concluded that AFM's policy does not provide coverage for the default judgments because WGC's work on the condominium project—a mixed-use development with commercial office and retail space on the ground floors and residential units on the upper floors—fell within the policy exclusion for "Multi-Unit New Residential Construction." On appeal, plaintiff argues that the language of the exclusion is ambiguous, that the ambiguity must be resolved against AFM as the drafter, and that the policy exclusion, correctly interpreted, does not preclude coverage. For the reasons explained below, we agree that the trial court erred in granting summary judgment to AFM, and we reverse.

Plaintiff also assigns error to the trial court's denial of its motion for summary judgment, arguing that the undisputed facts show that AFM is liable for the entire sum garnished. In response, AFM relies, as it did below, on the existence of various policy exclusions (other than the "Multi-Unit New Residential Construction" exclusion). We conclude that AFM met its burden to show disputed questions of material fact as to the application of those policy exclusions. Accordingly, the trial court did not err in denying plaintiff's motion for summary judgment.

Below, AFM moved in the alternative for partial summary judgment on the ground that the writs of garnishment improperly included attorney fees and costs awarded in the default judgments—items that, according to AFM, are not covered by its policy. The trial court denied that motion, concluding that the attorney fees and other expenses are covered by the policy. AFM cross-assigns error to that ruling. We conclude that the trial court did not err in denying AFM's alternative motion because attorney fees and other litigation expenses are covered by the policy either as "damages" or "costs taxed against the insured."

Finally, AFM assigns error to the trial court's denial of its motion to conduct a jury trial on the garnishment case, arguing that it had a right to a jury trial on disputed questions of fact. As a preliminary matter, we conclude that the legislature intended that garnishment proceedings conducted under ORS 18.782 be tried without a jury. Having so concluded, we agree with AFM that, to the extent that ORS 18.782 requires parties in an insurance-coverage dispute to litigate factual questions to the court in a garnishment proceeding, the statute is inconsistent with Article I, section 17, of the Oregon Constitution.

STANDARD OF REVIEW

When parties appeal from a judgment involving cross-motions for summary judgment, and the parties assign error to the trial court's rulings on both motions, both rulings are subject to appellate review. Mid-Valley Resources v. Foxglove Properties , 280 Or.App. 784, 789, 381 P.3d 910 (2016). In reviewing cross-motions for summary judgment, we view the record "in the light most favorable to the party opposing [each motion] to determine whether there is a genuine issue of material fact and, if not, whether the moving party is entitled to judgment as a matter of law." Id. (internal quotation marks omitted).

POLICY EXCLUSION FOR "MULTI-UNIT NEW RESIDENTIAL CONSTRUCTION"

Because the underlying facts are complicated, we organize them according to the different issues presented by the parties' respective assignments of error. The first issue that we address is the language of the policy exclusion for "Multi-Unit New Residential Construction." As noted, the trial court concluded that that language is unambiguous and excludes coverage for the work performed by WGC. The court granted summary judgment for AFM on that basis. Plaintiff assigns error to that ruling.

The facts relevant to this assignment of error are undisputed. The Hunters Ridge condominium development was built in 2005 and 2006. The complex consists of three buildings (A, B, and C), each of which contains dedicated commercial office and retail space on the ground floor and residential units on the upper floors. The condominium declaration specifies that each commercial unit "shall be used for commercial office and retail uses only."

The developer, Sherwood Crossing, LLC ("Sherwood"), hired E.A. White Construction Co., LLC ("White") as general contractor. White then hired WGC as a subcontractor to install siding and weatherproofing on Buildings B and C. Building B consists of 25 residential units and three commercial units, and Building C consists of 20 residential units and five commercial units.

In early 2009, plaintiff asserted construction-defect claims against Sherwood and White. Sherwood then named WGC and other subcontractors as third-party defendants. WGC tendered its defense to AFM, which had issued commercial liability insurance policies to WGC. AFM denied any obligation to defend WGC in the lawsuit, citing the following policy exclusion:

"Exclusion—Multi-Unit New Residential Construction (Greater Than Eight Units)

"* * * * *

"This insurance does not apply to 'bodily injury' or 'property damage' arising out of:

"1. 'Your work' in connection with pre-construction, construction, post-construction of any 'multi-unit residential building'; or

"2. Any of 'your products' which will or have become a part of the real property of any 'multi-unit residential building.'"* * * * *

"The following is added to Section V. Definitions, 'Multi-Unit Residential Building' means a condominium, townhouse, apartment or similar structure, each of which has greater than eight units built or used for the purpose of residential occupancy."

After WGC failed to answer or otherwise appear in the lawsuit, the trial court entered an order of default against it. As a result of a settlement agreement and assignments of rights among various parties, plaintiff ultimately obtained two default judgments against WGC. (Those procedural facts are not relevant to this assignment of error, but we address them further below with respect to other assignments of error.)

Plaintiff then issued writs of garnishment against AFM, WGC's insurer, to recover the amounts owed in the two judgments. See ORS 18.352.¹ The trial court held a hearing to resolve the issue of AFM's liability under ORS 18.778(1) (providing that a court may order a garnishee to appear for a hearing to determine the garnishee's liability). The parties filed cross-motions for summary judgment; the trial court granted AFM's motion and denied plaintiff's motion, concluding that AFM was not liable for any damages caused by WGC because the "Multi-Unit New Residential Construction" exclusion "unambiguously excludes coverage."

On appeal, plaintiff assigns error to the trial court's grant of summary judgment to AFM, arguing that the "Multi-Unit New Residential Construction" exclusion is ambiguous as to whether it applies to buildings that contain both residential and commercial units. Given that ambiguity, plaintiff asserts that the exclusion must be construed against AFM as the drafter, and in favor of coverage. According to plaintiff, when the exclusion is so construed, it does not apply to Buildings B and C because those buildings are not exclusively residential structures.

The interpretation of an insurance policy is an issue of law. Hoffman Construction Co. v. Fred S. James & Co. , 313 Or. 464, 469, 836 P.2d 703 (1992). The overriding goal in construing an insurance policy is to "ascertain the intention of the parties." Dewsnup v. Farmers Ins. Co. , 349 Or. 33, 39-40, 239 P.3d 493 (2010) (internal quotation marks omitted). We determine the intention of the parties by analyzing the policy's express terms and conditions. Hoffman , 313 Or. at 469, 836 P.2d 703 ; ORS 742.016(1) (providing that, with some exceptions, "every contract of insurance shall be construed according to the terms and conditions of the policy"); see also Leach v. Scottsdale Indemnity Co. , 261 Or.App. 234, 245, 323 P.3d 337, rev. den. , 356 Or. 400, 339 P.3d 440 (2014) ("[T]he interpretation of an insurance policy is a question of law that is confined to the four corners of the policy without regard to extrinsic evidence." (Internal quotation marks omitted.)). We "interpret the terms of an insurance policy according to what we perceive to be the understanding of the ordinary purchaser of insurance." Congdon v. Berg , 256 Or.App....