1000 Virginia Ltd. Partnership v. Vertecs

Decision Date09 November 2006
Docket NumberNo. 77846-9.,No. 77362-9.,77846-9.,77362-9.
Citation158 Wn.2d 566,146 P.3d 423
Parties1000 VIRGINIA LIMITED PARTNERSHIP, a Washington limited partnership, Respondent, v. VERTECS CORPORATION, a Washington corporation, Petitioner, 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. Carl A. Lombardi, a single individual, Respondent, v. JTE Construction, Inc., a Washington corporation, Petitioner, Ed Heck and Jane Doe Heck and Greg Heck and Jane Doe Heck, d/b/a Advanced Plastering, Inc., a Washington partnership; Michael Atwood and Jane Doe Atwood, d/b/a Atwood Fabricating, a Washington contractor; AAA Electrostatic Refinishing, a Washington corporation; Western Maintenance Services Company, Inc., a Washington corporation; Masonry Construction Company, a Washington corporation; Douglas M. Myall and Jane Doe Myall, d/b/a Douglas F. Myall Construction, a contractor; Douglas Myall Construction, L.L.C., a Washington limited liability corporation, Defendants.
CourtWashington Supreme Court

Jager Law Office, PLLC, Seattle, for Petitioner.

Linda L. Foreman, Jami K. Elison, Marston & Heffernan PLLC, Redmond, J. Robert Leach, Everett, Linda Miller Youngs, Magnus Rune Andersson, Hanson Baker Ludlow Drumheller PS, Bellevue, for Respondent.

Robynne Thaxton Parkinson, Groff & Murphy Trachtenberg & Ever, Douglas R. Roach, Howard S. Wright Construction Company, Seattle, for Amicus Curiae Associated General Contractors of Washington.

Todd Christopher Hayes, Thomas Fitzgerald Ahearne, Foster Pepper PLLC, Seattle, for Amicus Curiae Ballard Square Condominium Owners Association.

Eileen I. McKillop, Oles Morrison Rinker & Baker LLP, Seattle, for Amicus Curiae Dynasty Construction Company.

Bruce Edward Cyra, Adolph Law Group, PLLC, Seattle, for Defendant Douglas Myall.

MADSEN, J.

¶ 1 In these consolidated cases the trial courts dismissed actions for breach of construction contracts as untimely. The Court of Appeals reversed in each case, holding that the discovery rule applies to determine when a cause of action accrues for breach of a construction contract and that material issues of fact exist as to when the plaintiffs discovered their causes of action. The Court of Appeals also held that RCW 4.16.326, which provides an affirmative defense, does not apply retroactively. The defendant construction companies challenge the Court of Appeals' holdings that the discovery rule applies and that RCW 4.16.326 is not retroactive. We affirm the Court of Appeals.

FACTS

¶ 2 In 1000 Virginia Limited Partnership v. Vertecs Corporation, 127 Wash.App. 899, 112 P.3d 1276 (2005), 1000 Virginia, acting as its own general contractor, built an apartment complex. 1000 Virginia hired subcontractor Vertecs Corporation to do the stucco work. Vertecs was not responsible for caulking, flashings, and weather protection. On December 31, 1992, the certificate of substantial completion was issued. Occasional leaks occurred, and in early 1994 1000 Virginia asked for Vertecs' presence during inspection of windows and vents. Following inspection, Vertecs concluded that caulking had failed in several areas and that some dryer vents were not connected to ductwork. Vertecs said these problems were not within the scope of its work. 1000 Virginia repaired the caulking and ductwork. Leaks continued over the next few years and, after a wet winter in 1996, 1000 Virginia noted increased cracks in the stucco and deterioration in drywall under decks. 1000 Virginia took further corrective action. Despite 1000 Virginia's efforts to resolve the problems, by the end of 1998 1000 Virginia knew substantial repairs were required to correct systemic defects that led to structural damage resulting from water intrusion and fungal problems.

¶ 3 On September 3, 2002, 1000 Virginia brought a breach of contract action against several of its subcontractors, including Vertecs, claiming that defective work led to the water intrusion and resulting damage to the apartment complex. A number of motions for summary judgment were subsequently filed, including a motion by Vertecs based on expiration of the statute of limitations. 1000 Virginia maintained, however, that the discovery rule applied under Architechtonics Construction Management, Inc. v. Khorram, 111 Wash.App. 725, 45 P.3d 1142 (2002), review denied, 148 Wash.2d 1005, 60 P.3d 1212 (2003), where the Court of Appeals, Division One, adopted the discovery rule in a construction contract case. Ultimately, although the trial court held that the discovery rule applied, the action against Vertecs was dismissed on the basis that 1000 Virginia had conceded that a shorter limitations period applied under the parties' contract and this period had expired.

¶ 4 The Court of Appeals reversed, first holding that 1000 Virginia did not concede application of the shorter contractual period and that in any event the contractual limitation period did not apply. Then the Court of Appeals held that the discovery rule applies and that material facts remain as to when 1000 Virginia knew or should have known its injury was connected to Vertecs' work. The court also rejected Vertecs' contention that RCW 4.16.326(1)(g) applies retroactively. This provision sets out an affirmative defense to a breach of construction contract claim, providing that the statute of limitations runs at the expiration of six years from the date of substantial completion or from the termination of services listed in RCW 4.16.300,1 whichever is later, regardless of discovery. The Court of Appeals declined to address Vertecs' claims that 1000 Virginia's action was barred by the equitable doctrines of waiver, estoppel, and laches on the ground that questions of fact precluded summary judgment based on these defenses. 1000 Virginia, 127 Wash.App. 899, 112 P.3d 1276.

¶ 5 In Lombardi v. JTE Construction, Inc., noted at 129 Wash.App. 1031, 2005 WL 2271891, 2005 Wash.App. LEXIS 2424, Carl Lombardi contracted with JTE Construction, Inc., for construction of a residence. The house was substantially complete in August 1995. Thereafter, Lombardi noticed cracks in the siding and leaks in the roof requiring substantial repair work. JTE claims the defects were discovered in 1996, while Lombardi contends he discovered the defects in 1997 or 1998. On July 11, 2003, Lombardi filed suit against JTE, alleging breach of the parties' written construction contract. In August 2004, JTE moved for summary judgment of dismissal. The trial court granted the motion on the ground that RCW 4.16.326(1)(g) applies retroactively and bars Lombardi's suit. The trial court denied JTE's motion for attorney fees pursuant to the parties' contract, which provides for attorney fees and costs to a prevailing party in a breach of contract action.

¶ 6 The Court of Appeals reversed in an unpublished per curiam opinion, basing its decision on its opinions in 1000 Virginia and Architechtonics. The court declined to address Lombardi's claim for attorney fees pursuant to the parties' contract, leaving the question of attorney fees for the trial court pending the outcome of trial.

¶ 7 The defendants' petitions for review were consolidated and granted. The Associated General Contractors of Washington, Dynasty Construction Company, and Ballard Square Condominium Owners Association have filed amici curiae briefs.

ANALYSIS

¶ 8 In addressing whether a statute of limitations has run on an action arising out of construction or repair of an improvement on real property, both the relevant statute of limitations and the statute of repose set out in RCW 4.16.3102 must be considered. RCW 4.16.310 is a six-year statute of repose that applies to actions arising out of the construction of a building.3 As this court has explained, statutes of repose are "of a different nature than statutes of limitation." Rice v. Dow Chem. Co., 124 Wash.2d 205, 211, 875 P.2d 1213 (1994). "A statute of limitation bars plaintiff from bringing an already accrued claim after a specific period of time. A statute of repose terminates a right of action after a specified time, even if the injury has not yet occurred." Id. at 211-12, 875 P.2d 1213 (citations omitted). Accordingly, this court has said, "RCW 4.16.310 requires a 2-step analysis for computing the accrual of a cause of action arising from the construction, alteration, or repair of any improvement to real property. First, the cause of action must accrue within 6 years of substantial completion of the improvement; and second, a party then must file suit within the applicable statute of limitation, depending on the type of action." Del Guzzi Constr. Co. v. Global Nw., Ltd., 105 Wash.2d 878, 883, 719 P.2d 120 (1986).

¶ 9 To illustrate the effect of the statute of repose, if, for example, a negligence claim against a contractor arising out of the construction of a building does not accrue until seven years after substantial completion, it is barred by RCW 4.16.310 because it did not accrue within the six-year period of the statute of repose. On the other hand, if the negligence action accrues five years after substantial completion of construction of a building, and therefore the claim is not barred by the statute of repose, the claim then must be brought within the limitations period for a negligence claim—generally within three years of accrual of the cause of...

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