Opinion ID: 2809778
Heading Depth: 1
Heading Rank: 1

Heading: indemnity under ors 30.140

Text: We first address whether the trial court erred in granting summary judgment on the issue of contractual indemnification. “In reviewing a trial court’s disposition of a motion for summary judgment, this court determines whether the moving party is entitled to judgment as a matter of law.” PIH Beaverton, LLC v. Super One, Inc., 355 Or 267, 275, 323 P3d 961 (2014) (citing ORCP 47 C). The indemnity provision in the contract between La Noue and Sharabarin provided: “[Sharabarin] specifically and expressly agrees to indemnify and save harmless [La Noue], its officers, agents and employees, from and against any and all suits, claims, actions, losses, costs, penalties and damages, of whatsoever kind or nature, including attorneys’ fees, arising out of, in connection with, or incident to [Sharabarin’s] performance of th[e] subcontract, whether or not caused in part by [La Noue], [its] employees or agents, but excepting that caused by the sole negligence of [La Noue], [its] employees or agents.” (Capitalization omitted.) In a pretrial ruling, the trial court granted Sharabarin’s motion for summary judgment on the issue of contractual indemnity because “this case falls squarely within ORS 30.140 and its interpretation in Walsh [Const. Co. v. Mut. of Enumclaw, 338 Or 1, 104 P3d 1146 Cite as 357 Or 333 (2015) 339 (2005),]” and therefore, the court concluded, the indemnity clause was void. ORS 30.140 provides: “(1) Except to the extent provided under subsection (2) of this section, any provision in a construction agreement that requires a person or that person’s surety or insurer to indemnify another against liability for damage arising out of death or bodily injury to persons or damage to property caused in whole or in part by the negligence of the indemnitee is void. “(2) This section does not affect any provision in a construction agreement that requires a person or that person’s surety or insurer to indemnify another against liability for damage arising out of death or bodily injury to persons or damage to property to the extent that the death or bodily injury to persons or damage to property arises out of the fault of the indemnitor, or the fault of the indemnitor’s agents, representatives or subcontractors.” Because the contract at issue here provided for indemnification “whether or not caused in part by [La Noue] [and only] excepting that caused by the sole negligence of [La Noue],” the parties agree that it violates the prohibition on requiring indemnification “for damage    caused in whole or in part by the negligence of the indemnitee.” ORS 30.140(1) (emphases added). The issue here is the effect of the exception in ORS 30.140(2) on that prohibition. As noted, the Court of Appeals agreed with La Noue that ORS 30.140(2) sets out an exception to ORS 30.140(1) and that the indemnification provision here comes within that exception. Montara, 259 Or App at 682-83. For that reason, it reversed the trial court. On review, Sharabarin argues that ORS 30.140 sets forth two mutually exclusive categories of construction agreement indemnification provisions, one of which is enforceable and the other of which is void. Under his view, if an indemnification provision requires one person (the indemnitor, usually a subcontractor) to indemnify another (the indemnitee, usually a general contractor) 2 for damages 2 Although ORS 30.140 uses the terms “indemnitee” and “indemnitor,” we refer to the general contractor and the subcontractor, respectively, in this opinion where doing so lends clarity to our reasoning. 340 Montara Owners Assn. v. La Noue Development, LLC that arise in whole or in part out of the negligence of the general contractor, the provision is void in its entirety under subsection (1); in contrast, if an indemnification provision requires the subcontractor to indemnify the general contractor for only damages that arise out of the fault of the subcontractor, the provision is enforceable under subsection (2). Sharabarin argues that because the contract provision at issue here requires indemnity to a greater extent than allowed under subsection (2), it falls under subsection (1) and is void in its entirety. La Noue concedes that the provision in the subcontract with Sharabarin partially does what subsection (1) prohibits, but argues that the provision remains enforceable to the extent allowed by subsection (2), because the legislature intended subsection (2) as an exception to subsection (1) and intended such provisions to be partially enforceable. For the reasons set out below, we agree with La Noue that the provision is partially enforceable. This issue presents a question of statutory interpretation to be analyzed using the framework described in State v. Gaines, 346 Or 160, 206 P3d 1042 (2009). We begin by examining the statute’s text and context and then look to legislative history if helpful to determine the legislature’s intent. State v. Klein, 352 Or 302, 309, 283 P3d 350 (2012). Where parts of a statute conflict, we attempt to harmonize them in a way that gives effect to both. Weldon v. Bd. of Lic. Pro. Counselors & Therapists, 353 Or 85, 91-92, 293 P3d 1023 (2012) (citing State v. Guzek, 322 Or 245, 266-68, 906 P2d 272 (1995)). ORS 30.140(1) declares that an indemnity provision of the kind that it describes is void “[e]xcept to the extent provided under subsection (2).” (Emphasis added). That phrase lends support to La Noue’s interpretation—that subsection (2) was intended to carve out an area of indemnification from the general rule voiding indemnification clauses in subsection (1). By including the phrase “[e]xcept to the extent provided under subsection (2)” in subsection (1), the legislature intended that the subsections would overlap rather than be mutually exclusive, as Sharabarin contends. Sharabarin’s interpretation, on the other hand, would make that phrase superfluous. “Except” in that context means Cite as 357 Or 333 (2015) 341 “with the exclusion or exception of” or “other than : BUT.” Webster’s Third New Int’l Dictionary 791 (unabridged ed 2002). “Extent” means “the range (as of inclusiveness or application) over which something extends : SCOPE    ” and “the limit to which something extends .” Webster’s at 805. Thus, ORS 30.140(1) makes certain construction contract provisions void—provisions that require indemnification for damage “caused in whole or in part by the negligence of the indemnitee” general contractors—but excludes from being voided the part of the indemnification agreement that comes within subsection (2)—that is, where the liability “arises out of the fault of the indemnitor” subcontractor. Subsection (2) confirms the legislative intent that the statute “not affect” indemnification for damage which is “the fault of the indemnitor” subcontractor. In arguing for a contrary understanding of the statute, Sharabarin urges this court to give weight to the legislature’s choice of the words “any provision” in subsection (1). Sharabarin argues that the legislature intended the part of the provision that is unenforceable under subsection (1) to void the entire indemnification provision—including the part that otherwise would be enforceable under subsection (2)—and that that legislative intent is evidenced by the language in subsection (1) making void “any provision” requiring what it forbids. We disagree, however, that the statutory phrase “any provision” can be read so broadly. It is true that the contract language at issue in this case is a “provision” requiring, in part, what subsection (1) forbids. However, it does not follow that the entire provision—including the part permitted by subsection (2)—is void. The context for interpreting a statute’s text includes the preexisting common law, and we presume that the legislature was aware of that existing law. Blachana, LLC v. Bureau of Labor and Industries, 354 Or 676, 691, 318 P3d 735 (2014). Under Oregon law, both today and at the time the legislature enacted ORS 30.140, when an “agreement is partly legal and partly illegal, if the legal may be separated from the illegal, the legal part will be enforced.” Eldridge v. Johnston, 195 Or 379, 405, 245 P2d 239 (1952); see also State 342 Montara Owners Assn. v. La Noue Development, LLC v. McDonnell, 310 Or 98, 116, 794 P2d 780 (1990) (Fadeley, J., concurring in part and dissenting in part) (collecting cases supporting the proposition that “Oregon disregards the illegality and enforces the contract”). In Eldridge, the defendant agreed as part of the sale of his interest in the plaintiff’s meat business to not engage in the meat business in “the entire states of Oregon and Washington” for 10 years. 195 Or at 400. This court— after assuming that the two-state exclusion was so broad as to be void because of the public policy against restraints on trade—held that a “reasonable territorial area” in Oregon where the plaintiff actually conducted business could be severed from the two-state area and enforced against the defendant. Id. at 409-10. In this case, as in Eldridge, the legal and illegal parts of the provision are intermingled. However, the illegal indemnification in this contract can be severed, and would be under Eldridge, allowing indemnification to the extent permitted by ORS 30.140(2). See Hays v. Centennial Floors, Inc., 133 Or App 689, 695, 893 P2d 564 (1995) (holding that “[former] ORS 30.140(2) voids the clause to the extent that its application would require [the subcontractor] to indemnify [the general contractor] for its own sole negligence” (emphasis added)); accord Richardson v. Howard S. Wright Const. Co., No CV-05-1419-ST, 2007 WL 1467411 at  (D Or, May 18, 2007) (unpublished) (citing Hays for proposition that, if contract is broad enough to violate ORS 30.140(1), “it is only unenforceable in part”). We do not believe that, in adopting ORS 30.140, the legislature intended to create a different system where any imperfection in a contract provision would void the entire provision. Rather, we interpret ORS 30.140 to be consistent with Eldridge and Oregon case law providing for severance of the illegal part of a contract provision and enforcement of the remainder. The legislative hearings on Senate Bill (SB) 788— the 1995 revision to ORS 30.140 in which the first and second subsections took their present form—further reveal that the legislature intended to address an issue of perceived unfairness in the construction business. See Walsh Construction Co. v. Mutual of Enumclaw, 338 Or 1, 7-9, 104 P3d 1146 (2005) (examining in detail the “evolution of ORS 30.140”); Cite as 357 Or 333 (2015) 343 Gaines, 346 Or at 172 (court may consult legislative history to confirm interpretation even where there does not appear to be an ambiguity in the statute’s text). The prior version of the statute “spoke very clearly to [the situation of] sole negligence [of the general contractor], but it le[ft] quiet the question of concurrent negligence.” Tape Recording, Senate Judiciary Committee, SB 788, Apr 3, 1995, Tape 83, Side A (statement of Steve Frey). Because of that ambiguity in the law, general contractors had developed a practice of requiring subcontractors to indemnify them on a take-it-or-leave-it basis for everything except the sole negligence of the general contractor, essentially “shov[ing] the insurance liability down the line to the guy on the bottom, and if he wants the contract he must” accept the provision. Tape Recording, House Commerce Committee, SB 788, May 4, 1995, Tape 33, Side A (statement of Rep Larry Wells). Little was said in the public hearings and work sessions on SB 788 about particular contract wording or provisions. Rather, the legislature appears to have been more concerned about the practical outcome of the contract provisions: essentially, that the “[sub]contractor [should] be responsible for the [sub]contractor’s actions, and the [general contractor should] be responsible for the [general contractor’s actions].” Tape Recording, House Commerce Subcommittee on Business, SB 788, May 2, 1995, Tape 75, Side A (statement of Ruth Spetter). One subcontractor characterized the bill as “essentially    propos[ing] to” “edit out” language in subcontracts requiring that a subcontractor indemnify a general contractor for the general contractor’s own negligence. Tape Recording, Senate Judiciary Committee, SB 788, Apr 3, 1995, Tape 83, Side A (statement of Frank Morse). From that legislative history, we understand that, when the legislature used the phrase “to the extent” in ORS 30.140(1), it intended to refer to the extent of fault described by subsection (2). That is, the legislature intended that a subcontractor remain liable for the subcontractor’s negligence even as subsection (1) protects the subcontractor from having to indemnity a general contractor for the general contractor’s negligence. Given the analysis above, we conclude that the trial court should have severed the unenforceable parts of the 344 Montara Owners Assn. v. La Noue Development, LLC indemnity clause—the parts that violate ORS 30.140(1)— but still allowed La Noue’s claim to go forward to determine if, and to what extent, the “damage to property ar[ose] out of the fault of [Sharabarin], or the fault of [Sharabarin’s] agents, representatives, or subcontractors” under ORS 30.140(2). We agree with the Court of Appeals that the trial court erred in granting Sharabarin’s motion for summary judgment on La Noue’s indemnity claim under ORS 30.140, and we remand that claim to the trial court for further proceedings on that claim.3