455 P.3d 541
Or. Ct. App.2019Background
- In summer 2013 a credit union hired CR Services to perform work on a foreclosed house; at minimum CR repaired or replaced some drywall, some of which had prior water damage.
- The credit union sold the house to Lansing in October 2013; Lansing inspected and saw the new drywall and believed any leaks had been fixed before installation.
- Lansing moved in May 2014 and discovered water damage to the new drywall and ceiling; he sued the contractor for negligence, alleging CR failed to ascertain and repair the source of the leak before replacing drywall.
- The trial court dismissed the negligence claim under ORCP 21 A(8), applying the economic loss doctrine and concluding Lansing alleged only purely economic losses and had no special relationship with CR.
- The court entered a general judgment dismissing the claim and a supplemental judgment awarding CR attorney fees under ORS 20.080 based on CR’s counterclaim for fees.
- The Court of Appeals reversed and remanded the general judgment (holding the complaint alleged property damage, not a purely economic loss) and reversed the supplemental judgment because it related to the reversed general judgment.
Issues
| Issue | Plaintiff's Argument (Lansing) | Defendant's Argument (CR Services) | Held |
|---|---|---|---|
| Applicability of the economic loss doctrine to Lansing’s negligence claim | Lansing alleged actual property damage (water damage to new drywall), so the economic loss doctrine does not bar negligence recovery | Lansing’s losses are purely economic; absent a special relationship, negligence claim is barred | Reversed dismissal: complaint alleges property damage, so economic loss doctrine does not apply |
| Whether the complaint sufficiently pleads negligence (failure to repair leak vs negligent installation) | Complaint alleges CR negligently failed to ascertain and repair the leak before replacing drywall, which caused physical damage | Complaint does not allege negligent workmanship—only a failure to exercise judgment to avoid future costs | Court accepts reasonable inferences on a motion to dismiss and finds the complaint sufficiently alleges negligence causing property damage |
| Precedent (Harris, Hettle, Meininger) — do prior cases require dismissal? | Harris and FountainCourt support treating alleged water damage as property damage outside the economic-loss bar | Relies on Hettle and Meininger to argue economic-loss application and dismissal | Harris controls; Hettle is distinguishable (did not decide property vs purely economic loss); court rejects defendant’s reliance on Hettle/Meininger |
| Validity of supplemental attorney-fee award under ORS 20.080 | Fee award is tied to the general judgment and must fall if the general judgment is reversed | Entitled to mandatory fees under ORS 20.080(2) via a counterclaim for fees | Supplemental judgment reversed as it "relates" to the reversed general judgment; court declines to resolve the merits of the fee award |
Key Cases Cited
- Harris v. Suniga, 344 Or 301 (Or. 2008) (economic loss doctrine bars negligence recovery for purely economic loss absent a special relationship)
- FountainCourt Homeowners v. FountainCourt Develop., 264 Or App 468 (Or. App. 2014) (negligence causing water intrusion and physical damage to building components is recoverable as property damage)
- Hettle v. Construction Contractors Board, 260 Or App 135 (Or. App. 2013) (discusses economic loss doctrine in contractor context; did not resolve property v. economic-loss distinction)
- Yanney v. Koehler, 147 Or App 269 (Or. App. 1997) (standard for reviewing ORCP 21 A(8) motions: accept well-pleaded facts and favorable inferences)
- Meininger v. Henris Roofing & Supply, 137 Or App 451 (Or. App. 1995) (illustrative of cases where damages were treated as purely economic in a contractor dispute)