Valencich v. TMT Homes of Oregon, Inc.

88 P.3d 300, 193 Or. App. 47, 2004 Ore. App. LEXIS 447
CourtCourt of Appeals of Oregon
DecidedApril 14, 2004
DocketC981168CV; A113925; C981167CV; A113927; D983711CV; A113926
StatusPublished
Cited by5 cases

This text of 88 P.3d 300 (Valencich v. TMT Homes of Oregon, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Valencich v. TMT Homes of Oregon, Inc., 88 P.3d 300, 193 Or. App. 47, 2004 Ore. App. LEXIS 447 (Or. Ct. App. 2004).

Opinion

ARMSTRONG, J.

Cumberland Casualty and Surety Company (Cumberland) appeals from a judgment in favor of Valencich, a landscaper, allowing recovery against surety bonds that were filed in three consolidated lien foreclosure actions. Cumberland argues that, because it was not a party in the foreclosure actions, it was not subject to the entry of a judgment against it in those actions and the trial court accordingly erred in entering judgment against it. We affirm.

The facts are undisputed. TMT Homes of Oregon, Inc. (TMT), is a contractor that developed a subdivision in Beaverton, Oregon. It employed Valencich to landscape three properties in the subdivision. TMT did not pay Valencich for his work. Consequently, Valencich perfected construction liens on the three parcels of property on which he had worked and, within the relevant statutory time period, filed actions to foreclose the liens.1

After the actions were filed, TMT obtained “release of lien” bonds from Cumberland pursuant to ORS 87.0762 for each of the three parcels of property to secure the amounts due on the liens. The bonds were identical except in amount. They provided:

“That we, TMT Homes of Oregon, Inc., as Principal, and Cumberland Casualty & Surety Company, * * * are held and firmly bound unto [Valencich] in the sum of [an amount of] lawful money of the United States of America, to the payment of which, well and truly to paid [sic], we bind ourselves, our heirs, executors and successors, jointly and severally, firmly by these presents.
“THE CONDITION OF THE ABOVE OBLIGATION IS SUCH THAT WHEREAS, Obligee is the claimant under a lien * * * filed in the office of the County Recorder of Washington County * * *.
[52]*52“WHEREAS, said Principal disputes the correctness or validity of such claim of lien and desires to execute and record a bond to enable the real property above described to be freed from the effect of said claims and any action to foreclose said liens.
“NOW THEREFORE, the condition of this obligation is such that, if the Principal or owner of said property shall pay any sum which said claimant may recover on said lien claim, together with his costs and attorney fees of suit in the action, if he recovers therein, then this obligation shall be void; otherwise to remain in full force and effect.”

The release of lien bonds were duly recorded, and Valencich filed amended complaints seeking to foreclose the liens against the bonds rather than against the parcels of property. The amended complaints continued to list TMT as the defendant; Valencich neither named Cumberland as a party nor served it. The amended complaints identified the bonds, identified Cumberland as the surety on the bonds, asserted that the construction liens had attached to the bonds, and sought payment from the bonds and foreclosure against them. See ORS 87.083(2). The trial court eventually entered default judgments against TMT in the foreclosure actions.

Valencich submitted the default judgments to Cumberland for payment. Cumberland refused payment, asserting that the underlying liens appeared to be invalid and that Cumberland, never having been named as a party, had not had an opportunity to contest their validity.

Valencich then filed a motion entitled “ORCP 82 B Motion to Recover Against Surety Bond.” At a hearing on the motion, Cumberland argued that, pursuant to ORS 87.060(7), any person not made a party to a construction lien foreclosure action is not bound by the judgment entered in the action.3 It asserted that, because it was not a party to the [53]*53action, it was not required to pay on the bonds. Cumberland further asserted that, had it been made a party, it would have been able to contest the validity of the underlying liens, which it believed were likely invalid.

Valencich, relying on ORCP 82 B and ORS 87.083, argued that a surety on a release of lien bond is not an indispensable party in an action to foreclose the underlying lien. Valencich also asserted that, once a foreclosure judgment is entered, the release of lien surety is required to pay the judgment regardless of whether the surety was joined as a party in the foreclosure action.

The trial court noted that Cumberland had issued its bonds knowing that actions to foreclose the liens that they secured were pending and that it nevertheless had not sought to intervene in the actions. The court also noted that the validity of the liens had been upheld and the liens foreclosed. Therefore, pursuant to ORCP 82 B, the court held that Valencich could collect on the bonds without having to obtain a judgment in an action in which Cumberland was a party.

On appeal, Cumberland renews its arguments. 4 Neither party contests that Oregon’s Construction Lien Law allows a landowner or other interested person to file a bond to secure payment of a construction lien and to free the affected real property from the lien. See ORS 87.076; see also Tualatin Valley Builders Supply v. TMT Homes, 179 Or App 575, 578, 41 P3d 429 (2002) (Tualatin). Further, both parties agree that if, after obtaining the bond, the person notifies the lien claimant (in this case Valencich) that it has secured a bond, then the lien attaches to the bond. See ORS 87.083. Once the lien attaches to the bond, the property is freed from the lien and the claimant can proceed only against the bond. Tualatin, 179 Or App at 581. The parties diverge, however, [54]*54as to how the claimant must proceed in order to obtain payment from the surety on the bond. More specifically, the parties disagree as to whether the surety on a release of lien bond must be made a party in the foreclosure action before it can be required to pay on the bond. Relying primarily on ORS 87.060(7), Cumberland maintains that it had to have been made a party to be liable on the bond.

Before turning to ORS 87.060(7), we note that Cumberland’s argument runs counter to more than a century of Oregon practice. Cumberland argues that imposing liability on a surety not named as a party would “[ignore] the basic due process concepts of notice and an opportunity to be heard; basic [tenets] of our society that both override and underscore all laws.” That argument reflects a fundamental misunderstanding about the purpose of litigation bonds and the nature of the risk that sureties on such undertakings willingly assume. Litigation bonds are intended to contribute to judicial finality by ensuring the payment of adjudicated liabilities.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
88 P.3d 300, 193 Or. App. 47, 2004 Ore. App. LEXIS 447, Counsel Stack Legal Research, https://law.counselstack.com/opinion/valencich-v-tmt-homes-of-oregon-inc-orctapp-2004.