Fortune View Condo. Ass'n v. Fortune Star Development Co., 73543-3.

• Citation: 151 Wash.2d 534,90 P.3d 1062
• Decision Date: 27 May 2004
• Docket Number: No. 73543-3.,73543-3.
• Court: United States State Supreme Court of Washington
• Parties: FORTUNE VIEW CONDOMINIUM ASSOCIATION, Plaintiff, v. FORTUNE STAR DEVELOPMENT COMPANY, a Washington general partnership; C-Light, Inc., a Washington corporation; Wu Yi (U.S.A.) Corp., aka Wa Yi (U.S.A.) Corp., a Washington corporation; Davis Chen and Jane Doe Chen, husband and wife, and their marital community; and John and Mary Does five through two hundred, Defendants, Urban Development, Inc., a Washington corporation, Respondent, Dryvit Systems, Inc., a Rhode Island corporation, Petitioner, Wall Finishers, Inc., a Washington corporation; Evergreen Building Products LLC, a Washington limited liability company; R & E Enterprises, Inc., a Washington corporation; SDS, Inc., a Washington corporation; Riverside Fire Protection, Inc., a Washington corporation; Cox Wrought Iron & Fabrication, Inc., a Washington corporation; RD Construction, Inc., a Washington corporation; EDCA Roofing, Inc., a Washington corporation, Defendants.

90 P.3d 1062

151 Wash.2d 534

FORTUNE VIEW CONDOMINIUM ASSOCIATION, Plaintiff, v. FORTUNE STAR DEVELOPMENT COMPANY, a Washington general partnership; C-Light, Inc., a Washington corporation; Wu Yi (U.S.A.) Corp., aka Wa Yi (U.S.A.) Corp., a Washington corporation; Davis Chen and Jane Doe Chen, husband and wife, and their marital community; and John and Mary Does five through two hundred, Defendants, Urban Development, Inc., a Washington corporation, Respondent, Dryvit Systems, Inc., a Rhode Island corporation, Petitioner, Wall Finishers, Inc., a Washington corporation; Evergreen Building Products LLC, a Washington limited liability company; R & E Enterprises, Inc., a Washington corporation; SDS, Inc., a Washington corporation; Riverside Fire Protection, Inc., a Washington corporation; Cox Wrought Iron & Fabrication, Inc., a Washington corporation; RD Construction, Inc., a Washington corporation; EDCA Roofing, Inc., a Washington corporation, Defendants.

No. 73543-3.

Supreme Court of Washington, En Banc.

Argued November 18, 2003.

Decided May 27, 2004.

Bradley L. Fisher, Davis Wright Tremaine, Norm Maleng, King County Prosecutor, William Sherman, Deputy, for petitioner.

David Stephen Cottnair, Garvey, Schubert & Barer, Dirk Jonathan Muse, Lee, Smart, Cook, Martin, Patterson, John Patrick Hayes, William Allen Linton, Joanne Thomas Blackburn, Devon P. Groves, Forsberg & Umlauf PS, Seattle, Sherman Leslie Knight, Law Offices of Sherman Knight, Kirkland, for Respondent.

FAIRHURST, J.

A general contractor brought breach of warranty (express and implied) and implied indemnity claims against the manufacturer of an allegedly defective siding system used in the construction of a condominium project. The Court of Appeals held that express warranties made through advertising can form the basis of an implied indemnity claim. We affirm.

I. STATEMENT OF THE CASE

Urban Development, Inc., a general contractor, was hired by Fortune Star Development Company to construct the Fortune View Condominiums. Soon after the condominiums were completed, they began to crack and leak resulting in serious water damage. The condominium homeowners association sued Fortune Star, and Fortune Star sued Urban Development. Urban Development counterclaimed and brought fourth-party claims, including breach of warranty and implied indemnity, against several subcontractors. Many of Urban Development's claims against the subcontractors were denied by the trial court, and some were reinstated by the Court of Appeals. Although Urban Development cross-petitioned for review of certain claims against the subcontractors, we denied Urban Development's cross-petition for review.

In addition to the subcontractor claims, Urban Development filed claims against Dryvit Systems, Inc., the manufacturer of an allegedly defective siding system used in the condominium project, and Evergreen Building Products, LLC,¹ the distributor that sold the Dryvit siding system to the siding subcontractor.² The Dryvit siding system is sold through exclusive Dryvit distributors and installed by subcontractors trained or approved by Dryvit. Evergreen was the exclusive distributor for Dryvit materials in Washington, Northern Idaho and Alaska, and sold the Dryvit siding system to the siding subcontractor hired by Urban Development.

Dryvit provided Evergreen with sales brochures that were used to convince Urban Development to incorporate the Dryvit siding system into the Fortune View condominium project. The Dryvit sales brochure contained a section specifying the physical properties of the system, including water penetration and water resistance test results. This section of the brochure also specified that the Dryvit materials come with a five-year limited warranty. Clerk's Papers at 713 ("WARRANTY Dryvit offers a five-year limited warranty on Dryvit materials. Contact Dryvit Systems, Inc. for further details"). The brochure also represented that the Dryvit siding system was "designed and engineered specifically for the residential and light commercial market," and listed the use of "warranted materials" as an advantage for builders. Id. at 711. In an affidavit, Urban Development's president asserted that the company relied on the warranties in the brochure when submitting its bid for the Fortune View condominium project and understood that the Dryvit materials were supposed to be good for at least five years. Urban Development obtained the Dryvit siding system for use in the Fortune View condominium project through Dryvit's normal distribution chain. Thus, while Urban Development entered into a contract with the Dryvit-approved installer (the siding subcontractor), it did not have contracts with Evergreen or Dryvit. Nevertheless, Urban Development claimed it was entitled to both implied and express warranties and implied indemnity from Evergreen and Dryvit. The trial court granted summary judgment against Urban Development and in favor of Evergreen and Dryvit.

The Court of Appeals agreed that Urban Development was not entitled to the benefits of implied warranties for the sale of goods found in the Uniform Commercial Code (UCC) because there was no privity of contract between Urban Development and Evergreen or Dryvit. Urban Dev., Inc. v. Evergreen Bldg. Prods., LLC, 114 Wash.App. 639, 647, 59 P.3d 112 (2002). The Court of Appeals also agreed that vertical privity was not sufficient to provide Urban Development the benefit of any warranties made by Evergreen or Dryvit to the siding subcontractor because Urban Development was not an intended third-party beneficiary of those warranties. Id. at 649, 59 P.3d 112. Urban Development cross-petitioned for review of these implied warranty claims against Evergreen and Dryvit, but we did not accept review.

Although the Court of Appeals agreed that Urban Development did not benefit from implied warranties under the UCC and was not a third-party beneficiary of any warranties made to the siding subcontractor, the Court of Appeals determined that factual issues remain regarding whether Urban Development is entitled to the benefit of express warranties made in Dryvit's advertising. Id. Accordingly, the Court of Appeals reversed the entry of summary judgment in favor of Dryvit and reinstated Urban Development's claims for breach of express warranties and implied indemnity (based on breach of express warranties). Id. at 649-50, 59 P.3d 112. The Court of Appeals affirmed the dismissal of claims against Evergreen. Id. at 650, 59 P.3d 112.

Dryvit did not petition for review of the Court of Appeals' decision to reinstate Urban Development's express warranty claim but did seek review of the court's holding that the express warranties in advertising can support an implied indemnity claim. We granted Dryvit's petition for review. Urban Dev., Inc. v. Evergreen Bldg. Prods., LLC, 149 Wash.2d 1027, 78 P.3d 657 (2003).

II. ISSUE

Can express warranties made in advertising support an implied indemnity claim?

III. ANALYSIS

A. Express Warranties in Advertising

As noted above, the issue of whether Dryvit's advertising creates express warranties is not before us because Dryvit has petitioned for review of only the Court of Appeals' decision to revive Urban Development's claim for implied indemnity.³ Accordingly, for purposes of reviewing the summary judgment order dismissing Urban Development's implied indemnity claim, we assume that Urban Development benefits from express warranties in Dryvit's advertising. Tex Enters., Inc. v. Brockway Standard, Inc., 149 Wash.2d 204, 208, 66 P.3d 625 (2003) ("The facts and reasonable inferences from the facts must be considered in the light most favorable to ... the nonmoving party.").

B. Implied Indemnity Claims

We established the availability of implied indemnity claims in Central Washington Refrigeration, Inc. v. Barbee, 133 Wash.2d 509, 946 P.2d 760 (1997). As Barbee explains, "[w]hile indemnity sounds in contract and tort it is a separate equitable cause of action." 133 Wash.2d at 513, 946 P.2d 760 (footnote omitted). A cause of action for implied indemnity "arises when one party incurs a liability the other party should discharge by virtue of the nature of the relationship between the two parties." Id. The implied indemnity action in Barbee was based on the existence of implied warranties. Id. at 516, 946 P.2d 760 ("a contractual relationship under the U.C.C., with its implied warranties, provides sufficient basis for an implied indemnity claim").

While the implied indemnity claim in Barbee was supported by implied warranties, the issue in this case is whether an implied indemnity claim can go forward on the basis of express warranties. The Court of Appeals held that an implied indemnity claim can be supported by an express warranty. Urban Dev., 114 Wash.App. at 649-50, 59 P.3d 112 ("Because a relationship involving express warranties provides a sufficient basis for an implied indemnity claim, the trial court also erred in dismissing the indemnity claim against Dryvit."). We agree.

Dryvit argues that the Court of Appeals' holding conflicts with our decision in Barbee because the express warranty in this case arose through representations made in advertising and did not involve a contractual relationship. As noted above, Barbee states that "a contractual relationship under the U.C.C., with its implied warranties, provides sufficient basis for an implied indemnity claim...." Barbee, 133 Wash.2d at 516, 946 P.2d 760. From this statement, Dryvit concludes implied indemnity claims must be based on an underlying contract. According to Dryvit, Barbee creates a distinction between express warranties that arise through contract and express warranties that arise through direct representations in advertising.

Dryvit's position that an implied indemnity may be supported only by an express warranty contained in a contract is a misreading of Barbee. Barbee specifically identifies implied indemnity as a separate equi...