Arango Const. Co. v. Success Roofing, Inc.

• Decision Date: 24 December 1986
• Docket Number: No. 15588-4-I,15588-4-I
• Citation: 730 P.2d 720,46 Wn.App. 314
• Parties: , 3 UCC Rep.Serv.2d 20 ARANGO CONSTRUCTION COMPANY, a Washington corporation, Appellant, v. SUCCESS ROOFING, INC., a Washington corporation, and Fidelity Deposit Company of Maryland, an authorized insurance company, Respondents.
• Court: Washington Court of Appeals

Page 314

46 Wn.App. 314

730 P.2d 720, 3 UCC Rep.Serv.2d 20

ARANGO CONSTRUCTION COMPANY, a Washington corporation, Appellant, v. SUCCESS ROOFING, INC., a Washington corporation, and Fidelity Deposit Company of Maryland, an authorized insurance company, Respondents.

No. 15588-4-I.

Court of Appeals of Washington Division 1.

Dec. 24, 1986.

Anna-Marie Weller, Dale R. Ulin, Richard L. Lambe, Ulin, Dann, Elston & Lambe, Seattle, for appellant.

Zanetta L. Fontes, Lawrence J. Warren, Warren & Kellogg, Renton, for respondent Success Roofing, Inc.

COLEMAN, Judge.

Arango Construction Co., a general contractor, appeals a denial of its motion for reconsideration after the trial court granted summary judgment to Success Roofing, Inc., the defendant subcontractor, in a claim for breach of contract. We reverse and remand for entry of judgment in favor of Arango Construction Co.

On December 6, 1983, Success Roofing, Inc. submitted a telephone bid to Arango Construction Co. to install a "built-up" roof on additions to the tactical equipment shops at Fort Lewis, Washington. The bid had been prepared by Estimates, Inc. in the employ of Success. The bid included work in only two sections of the project (7A and 7B) and amounted to $34,659. On December 6, Arango included the Success bid in its prime bid to the United States Army Corps of Engineers for the Fort Lewis project. The Army Corps of Engineers postponed the bid opening until December 21, 1983. On December 8, 1983, Arango informed Success of this delay and asked that their bid be confirmed as accurate and current. Success confirmed the bid made for sections 7A and 7B at $34,659.

Arango had received another bid for sections 7A and 7B of $38,500 from Tin Benders, but that bid was expressly contingent on the award to that subcontractor of sections 7C, 7E, and 7F as well. Arango chose to use the Success bid for 7A and 7B with a bid for work on 7C, 7E, and 7F from Cleo Roofing because these combined subcontracting bids made Arango's bid the lowest price for the roofing work. Thus, Arango resubmitted its prime bid and the bids were opened on December 21, 1983.

On January 12, 1984, the Corps of Engineers awarded the Fort Lewis contract to Arango. Arango notified Success on January 30, 1984 by sending its standard subcontract form for signature. On February 6, 1984, Cleo Roofing's subcontract was fully executed. Upon receipt of Arango's contract, Success requested and received a set of prints and specifications for the project. In reviewing the plans and the bid that had been developed for Success by Estimates, Inc., Success discovered an error in the contract bid amount. The bid suggested by Estimates, Inc. for Success was 50 percent less than it should have been because Estimates, Inc. had failed to note that the drawings and specifications they used to compute the bid were reduced 50 percent. It is undisputed that this error was made by Estimates, Inc. After confirming the mistake with Estimates, Inc., Success phoned Arango on February 13, 1984, informed Arango of the error, and stated that they would not perform at the original bid price. On Feburary 16, 1984, Success wrote Arango, withdrawing its original bid and explaining its error. On May 7, 1984, because Success refused to perform, Arango awarded the contract for sections 7A and 7B to Cleo Roofing (the contractor that was already committed to do the work on sections 7C, 7E, and 7F). The price at which Cleo agreed to perform the work on the two sections was $54,733.

On April 30, 1984, Arango filed this action for breach of contract against Success. On November 5, 1984, Arango filed a motion for summary judgment based on the doctrine of promissory estoppel. Success then moved to add Estimates, Inc. as a third party defendant in the action and filed a cross motion for summary judgment based on application of the Uniform Commercial Code, article 2 statute of frauds, RCW 62A.2-201. The trial court held that the statute of frauds provision (RCW 62A.2-201) applied, rendering the oral bid unenforceable. Arango's complaint was dismissed with prejudice. Following denial of Arango's motion for reconsideration, this appeal was timely filed.

We first determine whether the provisions of RCW 62A.2-201 apply in this case.

Arango contends that since this is not a contract for goods, it is not subject to the provisions of article 2 of the U.C.C. The scope of article 2 is described in RCW 62A.2-102.

Unless the context otherwise requires, this Article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

RCW 62A.2-102.

The comments to RCW 62A.2-102 indicate that construction contracts are not within the scope of this statute: "This section rephrases the coverage stated in USA 75 (RCW 63.04.750), implicitly continuing exclusion of construction, service and real property transactions." RCWA 62A.2-102, at 95.

In interpreting this statute, Washington courts have held in accordance with the comment. In Crystal Rec., Inc. v. Seattle Ass'n of Credit Men, 34 Wash.2d 553, 209 P.2d 358 (1949), the court stated that the Uniform Sales Act (precursor of RCW 62A.2) did not apply to a contract for work, labor, and materials.

[W]e must first determine whether the agreement was a contract for the sale of goods to be manufactured or a contract for the manufacture of goods. If it be held the former, then the various provisions of the uniform sales act will apply in construing this contract. If it be held the latter, then it is in the nature of the common-law contract for work, labor, and materials, and the uniform sales act will not be applicable. In such a case, we must interpret the agreement according to the general principles of the law of contracts.

Crystal, at 558, 209 P.2d 358.

The principle that contracts for work, labor, and materials are governed by common law principles of contract, while contracts for goods are governed by the Uniform Sales Act, was again stated in Whatcom Builders Supply Co. v. H.D. Fowler, Inc., 1 Wash.App. 665, 463 P.2d 232 (1969). There, Whatcom Builders had a construction contract with the City of Blaine to construct a sewage treatment plant. Whatcom also had a subcontract with Fowler to supply a pump for the plant. Whatcom, at 666, 463 P.2d 232. The court held that the Whatcom/Fowler contract was a contract for the sale of goods to be manufactured; therefore, that contract was within the scope of the Uniform Sales Act. The Whatcom/Blaine contract, however, was a contract for work, labor, and materials. Therefore, the general principles of contract law, not the Uniform Sales Act, applied to that contract. Whatcom, at 668, 463 P.2d 232.

In a dispute regarding damages for delay in completion of buildings at Washington State University, our Supreme Court held that construction contracts are not governed by RCW 62A.2. Christiansen Bros., Inc. v. State, 90 Wash.2d 872, 586 P.2d 840 (1978). Further, the court found no evidence of any legislative intent to apply RCW 62A.2 to construction contracts. Christiansen, at 877, 586 P.2d 840.

Success attempts to distinguish Crystal because the agreement in dispute there was written; therefore it was not subject to nullification under the article 2 statute of frauds. The threshold question, however, of whether article 2 (RCW 62A.2) applies, must be answered before the statute of frauds issue is relevant. Since the rule in Washington is that bids for construction or construction contracts are not governed by article 2 of the U.C.C. (RCW 62A.2), the statute of frauds in that section is not applicable.

Success further argues that the holding in Christiansen does not encompass contracts for labor and materials where materials are a substantial portion of the contract. Success argues that the contract in this case involves predominantly materials and only incidentally labor and work. Our cases, however, do not distinguish contracts for work, labor, and materials in which the materials were a substantial part of the contract. Further, the record in this case does not indicate that the materials involved in this contract were a substantial portion of the contract. The record merely states that in this $34,659 contract, the cost of the materials would be greater than $500.

Success cites two cases for the proposition that RCW 62A.2 applies to the contract in this case. In Lige Dickson Co. v. Union Oil Co., 96 Wash.2d 291, 300, 635 P.2d 103 (1981), our Supreme Court held that the doctrine of promissory estoppel could not be used to render enforceable a contract that violates RCW 62A.2-201. The contract in dispute, however, was for the supply of liquid asphalt. Lige Dickson, at 292, 635 P.2d 103. No work or labor was involved in that contract; therefore, RCW 62A.2 applied.

Success also cites Lakeside Pump & Equip., Inc. v. Austin Constr. Co., 89 Wash.2d 839, 576 P.2d 392 (1978), for the proposition that RCW 62A.2 applies to contracts in which a subcontractor supplies materials to a general contractor. The contract at issue was an oral bid for supplying two pump stations to a general contractor. Lakeside, at 841, 576 P.2d 392. The general contractor had changed the engineering specifications for the pumps after Lakeside had submitted a bid. Thus, Lakeside refused to sign a contract agreeing to meet the new specifications at the original bid price. Lakeside, at 842, 576 P.2d 392. The Lakeside court held that no contract had been formulated because there was never a meeting of the minds. Even though this was a transaction in goods to which RCW 62A.2 applied, the common law principle that contract formation requires a meeting of the minds was not precluded by the statute. Lakeside, at 845, 576 P.2d...