Diamond v. Granite Falls School Dist.

• Decision Date: 14 April 2003
• Docket Number: No. 50132-1-I.,50132-1-I.
• Citation: 70 P.3d 966,117 Wash.App. 157
• Parties: DIAMOND "B" CONSTRUCTORS, INC., as assignee for Allied Construction Associates, Inc., Appellant, v. GRANITE FALLS SCHOOL DISTRICT, Respondent.
• Court: Washington Court of Appeals

70 P.3d 966

117 Wash.App. 157

DIAMOND "B" CONSTRUCTORS, INC., as assignee for Allied Construction Associates, Inc., Appellant, v. GRANITE FALLS SCHOOL DISTRICT, Respondent.

No. 50132-1-I.

Court of Appeals of Washington, Division 1.

April 14, 2003.

Publication Ordered May 14, 2003.

Arthur McGarry, Douglas Oles, Oles Morrison Rinker & Baker LLP, Seattle, WA, for Appellant.

Christopher J. Knapp, Megan Otis Masonholder, Everett, WA, for Respondent.

AGID, J.

Diamond "B" Constructors, Inc. (Diamond) appeals from summary judgment dismissal of its complaint, arguing the trial court should have granted summary judgment in its favor because the only reasonable interpretation of the parties' construction contract supports its position that the contract does not require it to use a specific equipment installer. We agree that, although the Granite Falls School District (District) could have specified an installer, it failed to do so. Because its insistence that Diamond use a more expensive installer caused Diamond to lose money on the contract, the District is liable to Diamond for the additional costs it incurred. We therefore reverse and remand with directions to the trial court to enter judgment for Diamond.¹

FACTS

In September 2000, the District received competitive bids for modernization work on two schools (the project). It awarded the general contract to the low bidder, Allied Construction Associates, Inc. (Allied). On October 10, 2000, Allied entered into a subcontract with Diamond to perform mechanical and electrical work for the project.

On behalf of Diamond, Allied submitted a claim for additional compensation that is the subject of this appeal. The basis of the claim is that Diamond had latitude under the contract to use anyone qualified to install Honeywell temperature control equipment and that its bid was properly based on using Sound Energy, an approved Honeywell installer, which quoted an installation price of $212,219. After Allied and Diamond signed a contract based on Diamond's low bid from Sound Energy, the District announced that it would require Diamond to use Honeywell Mercer Island as both manufacturer and installer of the Honeywell equipment, asserting the contract required both. Honeywell Mercer Island charged Diamond $265,000 for installation. Diamond requested compensation from the District for the $52,718 difference plus markups as a change to its subcontract.

The District denied the claim. Allied and Diamond executed a Claim Submission Agreement by which Allied assigned its claim to Diamond and authorized it to prosecute the claim directly against the District. Ruling that the District properly interpreted the contract, the trial court granted summary judgment dismissing Diamond's complaint. This appeal followed.

DISCUSSION

The trial court granted summary judgment because it agreed with the District's interpretation of the contract that only Honeywell Mercer Island could be used to install the Honeywell equipment. Summary judgment is proper when there is no genuine issue about any material fact and the moving party is entitled to judgment as a matter of law.² This court conducts the same inquiry as the trial court in reviewing a summary judgment order, reviewing it de novo and viewing all evidence in the light most favorable to the nonmoving party.³ In the contract interpretation context, summary judgment is improper if the parties' written contract, viewed in light of the parties' other objective manifestations, has two or more reasonable but competing meanings.⁴

"`The cardinal rule with which all interpretation begins is that its purpose is to ascertain the intention of the parties.'"<sup>5</sup> Extrinsic evidence of the circumstances under which a contract was made is admissible to determine that intent.<sup>6</sup> We may discern intent from the actual language of the disputed provisions, the contract as a whole, the subject matter and objective of the contract, the circumstances in which the contract was signed, the later acts and conduct of the parties, and the reasonableness of the parties' interpretations.<sup>7</sup> The court considers the relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made in those negotiations, trade usage, and the course of dealing between the parties.<sup>8</sup> "`[U]nexpressed impressions are meaningless when attempting to ascertain the [parties'] mutual intentions.'"⁹ "[M]utual intent may be established directly or by inference—but any inference must be based exclusively on the parties' objective manifestations."¹⁰

I. Paragraph 1.06:

The central issue on appeal is whether paragraph 1.06 of the contract allows Diamond to contract with installers other Honeywell Mercer Island to install the Honeywell equipment. The paragraph provides:

1.06 SYSTEM MANUFACTURER

A. System provided by Honeywell (local branch office in Mercer Island) as an extension of the existing system, no substitute.¹¹

The District relies on the contract definition of "provide" to support its position that only Honeywell Mercer Island could install the equipment:

Furnish, Install, Provide: The terms "Furnish" or "Install" or "Provide," unless specifically limited in context mean: furnishing and incorporating a specified item, product or material in the work, including all necessary labor, materials, equipment to perform the work required, ready for use.

It also relies on paragraph 1.01, which provides in part:

Where the word "provide" is used, it means "furnish and install complete and ready for use".

At first reading, these definitions appear to create an ambiguity. While they could be interpreted to require that Honeywell Mercer Island provide and install the equipment, upon closer inspection, the only viable interpretation is that they provide only that a specified item be furnished and installed, not that a specific installer be used. There are many reasons for this conclusion. First, because the broad definition of "provide" depends on the context in which it is used, it is reasonable to interpret its purpose as ensuring that the District receives the specified item, Honeywell temperature control equipment, and that the equipment is installed. Second, paragraph 1.06 states that the equipment be "an extension of the existing system," indicating that the provision pertains only to the equipment, not the installer. Third, the definitions section states that definitions are general and neither complete nor exclusive. Fourth, there is a separate definition for "Installer." Fifth, paragraph 1.06 is titled "SYSTEM MANUFACTURER," not installer. And evidence external to the contract supports our reading. In conversations with Diamond, the District merely said it "preferred" not to use Sound Energy as the installer, not that it required a specific installer. Finally, in an earlier similar contract between the parties, the District allowed Diamond to use Sound Energy as the installer.

II. Definitions are Neither Complete nor Exclusive

The definitions section of the contract provides that

Definitions and explanations contained in this section are not necessarily either complete or exclusive, but are general for the work to the extent they are not stated more explicitly in another element of the contract documents.

As such, the definition of "provide" on which the District relies was a general definition more explicitly defined in paragraph 1.06 and in the specific definition of installer.

III. Definitions are Specifically Limited in Context

The District's reliance on the general definition of "Furnish, Install, Provide" is further undermined by its own language:

Furnish, Install, Provide: The terms "Furnish" or "Install" or "Provide," unless specifically limited in context mean: furnishing and incorporating a specified item, product or material in the work, including all necessary labor, materials, equipment to perform the work required, ready for use.¹²

Diamond contends that paragraph 1.06 is the "context" specifically limiting the definition. We agree.

IV. "SYSTEM MANUFACTURER" Paragraph Title:

Paragraph 1.06 should be construed to allow installers other than Honeywell Mercer Island because the plain language of the paragraph title, "SYSTEM MANUFACTURER," indicates the provision only pertains to the company that manufactures the temperature control equipment, not the installer.

The District asserts the title is meaningless because the contract states that "[t]he section title is descriptive only and not intended to limit the meaning or content of a section or to be completely descriptive of requirements specified therein." It also asserts that Diamond's interpretation of the title is incorrect because Honeywell Mercer Island has never been a "manufacturer" of automatic temperature controls. Neither argument is persuasive.

First, the provision the District relies on provides that the "section title is descriptive only."¹³ It does not state that any other headings in the contract are merely descriptive. The title at issue, "SYSTEM MANUFACTURER," is a paragraph title, not a section title. Paragraph 1.06 falls under section 15900, titled "AUTOMATIC TEMPERATURE CONTROLS." The District's second assertion is equally unpersuasive because Diamond does not argue that Honeywell Mercer Island manufacturers Honeywell equipment. Rather, it contends paragraph 1.06 specifies only that Honeywell equipment be used for compatibility purposes because the school's pre-existing equipment is manufactured by Honeywell.

An examination of the contract as a whole establishes that the District included three separate definitions to insure that it, as the project owner, received complete, installed equipment from its contractors. This is the same concern reflected in the definition of "provide" in paragraph 1.01.¹⁴ This concern has nothing to do with requiring contractors to use the manufacturer's local office to install the equipment....