1000 VIRGINIA LP v. Vertecs Corp.

• Citation: 127 Wash. App. 899,112 P.3d 1276
• Decision Date: 06 June 2005
• Docket Number: No. 54485-3-I.,54485-3-I.
• Parties: 1000 VIRGINIA LIMITED PARTNERSHIP, a Washington limited partnership, Appellant/Cross Respondent, v. VERTECS CORPORATION, a Washington corporation, Cross Appellant/Respondent, Arnie Schmidt and Jane Doe Schmidt, a marital community, d/b/a Northern States Construction; Accountable Waterproofing, a Washington corporation; Washington Insulation, Inc., a Washington corporation; KJ Roofing, a Washington corporation; S.Q.I., Inc., a Washington corporation; Evergreen West Wholesale Lumber, Inc., a Washington corporation; Aspen Industries, Inc., a Washington corporation; Fairway Ornamental Iron, Inc., a Washington corporation; and Slawomir Porowski and Jane Doe Porowski, a marital community, Defendants.
• Court: Court of Appeals of Washington

112 P.3d 1276

127 Wash. App. 899

1000 VIRGINIA LIMITED PARTNERSHIP, a Washington limited partnership, Appellant/Cross Respondent, v. VERTECS CORPORATION, a Washington corporation, Cross Appellant/Respondent, Arnie Schmidt and Jane Doe Schmidt, a marital community, d/b/a Northern States Construction; Accountable Waterproofing, a Washington corporation; Washington Insulation, Inc., a Washington corporation; KJ Roofing, a Washington corporation; S.Q.I., Inc., a Washington corporation; Evergreen West Wholesale Lumber, Inc., a Washington corporation; Aspen Industries, Inc., a Washington corporation; Fairway Ornamental Iron, Inc., a Washington corporation; and Slawomir Porowski and Jane Doe Porowski, a marital community, Defendants.

No. 54485-3-I.

Court of Appeals of Washington, Division 1.

June 6, 2005.

Linda Foreman, Jamie K. Elison, Martson Heffernan Foreman, Redmond, WA, for Appellant.

Steven Jager, Lee, Smart, Cook, Seattle, WA, for Respondent.

ELLINGTON, A.C.J.

¶ 1 This is an action arising out of water penetration in a new building. Owner and general contractor 1000 Virginia Limited Partnership sued Vertecs Corporation, alleging Vertecs' installation of stucco siding was defective. The only issue here is whether the claim was timely. The trial court held that questions of fact precluded summary judgment on the six-year contract statute of limitations, but that 1000 Virginia had conceded that its sole remedy was a one-year warranty in its contract with Vertecs. The court therefore dismissed the action against Vertecs as untimely. The record does not, however, reflect such a concession, which would in any event be inconsistent with the pleadings and with the contract itself. Whether the claim was timely filed is a question of fact. We reverse.

FACTS

¶ 2 Acting as its own general contractor, 1000 Virginia built a four-story apartment complex. Vertecs was the stucco subcontractor, providing labor and materials. Excluded from Vertecs' scope of work were caulking, flashing and weather protection.

¶ 3 The certificate of substantial completion was issued on December 31, 1992. Occasional leaks occurred thereafter, and repairs were made to caulking around windows and vents. On January 5, 1994, 1000 Virginia asked Vertecs to inspect and determine whether defects in its work were a source of water intrusion.¹ Vertecs reported its conclusion that caulking had failed at numerous locations, and that some dryer vents were not connected to ductwork. Vertecs pointed out that these problems were not within the scope of Vertecs' work on the building.² 1000 Virginia repaired the caulking and ductwork.

¶ 4 Over the next few years, 1000 Virginia experienced other leaks, often coinciding with extreme weather conditions. 1000 Virginia repaired leaks as they occurred. But after a wet winter in 1996, 1000 Virginia observed increased cracks in the stucco and deteriorating drywall under decks. 1000 Virginia undertook more substantial corrective measures, including awnings to shield windows from the weather and a waterproofing system.

¶ 5 Despite these measures, the leaks increased. By the end of 1998, 1000 Virginia knew there were systemic defects that would require substantial repairs to correct structural damage caused by water intrusion and fungal infestation.

¶ 6 On September 3, 2002, 1000 Virginia filed a breach of contract lawsuit alleging that defective work by several subcontractors led to water intrusion and damage to the building. Defendants included Vertecs, waterproofing contractor Accountable Waterproofing, and framing contractor Northern States Construction.

¶ 7 During 2003, the various defendants filed motions seeking summary judgment. Vertecs filed a motion contending the six-year statute of limitations began to run on December 31, 1992, when the certificate of substantial completion was issued. 1000 Virginia contended its action was timely filed within six years of discovery of the elements of its cause of action, under Architechtonics Constr. Management, Inc. v. Khorram³ (applying the discovery rule to actions for breach of contract). Vertecs responded that the discovery rule should not apply because the alleged defects were observable at all times after construction was complete, and in the alternative, that even if the discovery rule applied, the limitations period began to run when 1000 Virginia became aware of leaks and water damage in the building in 1994. Accountable Waterproofing joined Vertecs' motion to the extent that Vertecs argued the discovery rule did not apply. The court denied the motion "with prejudice,"⁴ and clarified its ruling as follows:

1. The Court rules as a matter of law that for this case, the discovery rule is applicable to the statute of limitations defense.

2. There is a genuine issue of material fact regarding when the Plaintiffs discovered or should have discovered evidence sufficient to commence the statute of limitations.⁵

¶ 8 Thereafter, Accountable Waterproofing filed a motion for summary judgment, arguing first that even if the discovery rule applied, 1000 Virginia's claims accrued more than six years before suit was filed, and in the alternative, that the discovery rule did not apply because a recently enacted statute abrogates the rule in construction cases and applies retroactively. Accountable Waterproofing also argued that if 1000 Virginia's cause of action did not accrue until a specific defect was actually detected, the claims against Accountable Waterproofing were barred by the six-year statute of repose. Vertecs joined in the motion, which was denied.

¶ 9 Accountable Waterproofing then filed a second motion for summary judgment, arguing the two-year warranty provision in its contract with 1000 Virginia was the exclusive remedy for defective construction. The court denied this motion also.

¶ 10 In late 2003, the lawsuit was assigned to a different judge. In early 2004, Vertecs filed a motion for summary judgment contending the one-year guarantee in Vertecs' contract was 1000 Virginia's sole remedy, and that the claim was barred by the doctrines of waiver, estoppel and/or laches. Northern States filed its own motion, asserting the same equitable defenses and arguing that the only conclusion a reasonable juror could make is that 1000 Virginia should have discovered the defects giving rise to claims against Northern States in 1993. Accountable Waterproofing joined in the motions on grounds of laches, waiver and estoppel.

¶ 11 The court ruled the equitable defenses did not apply, and that a question of fact existed as to when 1000 Virginia should have known its damages were connected to each defendant. The court thus denied the motions, except as to Vertecs, which the court ruled had made fatal concessions in oral argument:

Plaintiff conceded during argument that the breach of warranty applied to defendant Vertecs Corporation, thereby limiting any claim to one year after completion of the project. Further, plaintiff concedes that it sent a letter complaining of the damages specific to Vertecs Corporation in 1994, thereby limiting any claim to within one-year of the letter's date. Therefore, the claim against Vertecs Corporation is barred by the terms of the contract and the one-year limitation.⁶

The court dismissed 1000 Virginia's claims against Vertecs, and denied its motion for reconsideration.⁷

¶ 12 1000 Virginia appeals. Vertecs cross-appeals,⁸ contending that the court should have dismissed the action as barred by the statute of limitations or equitable defenses, and that either ground provides an independent basis to affirm dismissal.

ANALYSIS

¶ 13 We apply the usual standard of review on summary judgment.⁹

¶ 14 In granting Vertecs' motion,¹⁰ the court relied on two "concessions" made by 1000 Virginia in oral argument: first, that a one-year limited guarantee provision in the subcontract constituted 1000 Virginia's sole remedy, and second, that the 1994 letter was a complaint about Vertecs' work. The court concluded the one-year limitation period began to run when the letter was sent, and dismissed the action against Vertecs.

¶ 15 The court misinterpreted counsel's comments, which must be understood in the context of the parties' contracts. In its contract to do the stucco work, Vertecs guaranteed its material and workmanship for one year from date of final completion: "[D]efects directly attributable to this Subcontractor... shall be removed and replaced solely at Subcontractor's own expense."¹¹ Vertecs also agreed to "warrant his materials and workmanship for a period of one year from the date of completion and acceptance of the entire work or such longer period of time as may be required by the MAIN CONTRACT."¹² The "main contract" between the parties contained a general warranty of quality work free from defects. This warranty had no time limitation.¹³ The main contract also contained a correction of work provision, under which Vertecs agreed to correct any defects discovered within one year.

¶ 16 These are separate undertakings. Confusion arises because of the common tendency to use the term "warranty" to refer both to contractual obligations and to the separate promise represented by the guarantee. 1000 Virginia sued only on the general warranty of work free of defects, and did not (for obvious reasons) assert a breach of the one-year guarantee, which Vertecs could not have breached because Vertecs was not asked to make repairs within the year following completion.

¶ 17 In oral argument on the summary judgment motion, in answer to the court's query as to why 1000 Virginia had not asked Vertecs to repair the problem in 1998, counsel pointed out that after the one-year guarantee period had passed, 1000 Virginia had no right to demand that Vertecs return and make repairs: "They are past the warranty period. They have no obligation to come out."¹⁴

¶ 18 Further, counsel acknowledged that a problem with dryer vents was discovered in 1994, but...