Del Guzzi Const. Co., Inc. v. Global Northwest, Ltd., Inc.

• Citation: 105 Wn.2d 878,719 P.2d 120
• Decision Date: 22 May 1986
• Docket Number: No. 52161-1,52161-1
• Parties: DEL GUZZI CONSTRUCTION CO., INC., a Washington corporation, Plaintiff, v. GLOBAL NORTHWEST, LTD., INC., and Balboa Insurance Co., a California corporation, Appellants, Clallam County and Kennedy Engineers, Inc., Respondents.
• Court: United States State Supreme Court of Washington

Page 878

105 Wn.2d 878

719 P.2d 120

DEL GUZZI CONSTRUCTION CO., INC., a Washington corporation, Plaintiff, v. GLOBAL NORTHWEST, LTD., INC., and Balboa Insurance Co., a California corporation, Appellants Clallam County and Kennedy Engineers, Inc., Respondents.

No. 52161-1.

Supreme Court of Washington En Banc.

May 22, 1986.

Weckworth, Barer & Meyer, Charles Meyer, Stephen Rose, Moshe Judah Genauer, Seattle, for appellants.

Schwabe, Williamson, Wyatt, Moore & Roberts, David Antal, Ulin, Dann, Elston & Lambe, Dale Ulin, Seattle, for respondents.

PEARSON, Justice.

In this case, Global Northwest, Ltd., Inc. (Global), a minority subcontractor, challenges a summary judgment entered against it in Clallam County Superior Court. Global brought suit against Clallam County (County) and Kennedy Engineers, Inc. (Kennedy), alleging breach of contract and negligence for cost overruns incurred by Global as a result of its failure to meet soil compaction density specifications during construction of the Sekiu-Clallam Bay sewerage project. The Superior Court concluded that the statute of limitation barred Global's negligence claim and dismissed the contractual claim because Global was not a third party beneficiary. We now affirm the judgment entered against Global.

FACTS

In April 1973, the County retained Kennedy to design, plan, and supervise construction of the Sekiu-Clallam Bay sewerage system for Clallam County Utility Improvement District 73-1. In late 1974, the County contracted with Del Guzzi Construction, Co., Inc. (Del Guzzi) for construction of the project. Seventy-five percent of the funding for construction was obtained from the Environmental Protection Agency (EPA), 15 percent from the Washington Department of Ecology, and the balance was borne by the County.

In the original bidding, Del Guzzi was the low bidder; but due to an error, Del Guzzi subsequently informed the County that an additional $400,000 would be needed for removing trench excavation material and backfilling the trenches with material that would meet compaction density requirements. The County then rejected all bids and rebid the project to include the extra costs for soil removal and compaction. Del Guzzi again was the low bidder.

To obtain federal funding, minority participation was required. Subsequently, in February 1975, Del Guzzi subcontracted with Global. Global began work in March and by September became aware that its compaction effort was unsatisfactory. Global also discovered that Del Guzzi had identical compaction problems prior to the signing of Global's subcontract, and that Del Guzzi knew the native trench material would not compact to the required specifications.

In early 1976, Global began to compile its extra costs for the removal, replacement and recompaction efforts. In the fall of 1976, Global submitted a change order request to the County and Kennedy, pursuant to the contract provisions set forth in the prime contract between the County and Del Guzzi. The subcontract between Global and Del Guzzi provided inter alia, that Global would be bound by all the terms of the prime contract.

The project was completed by December 1976, and in August 1977 the County and Del Guzzi approved Global's change order request, conditioned on the approval of additional funding by the EPA. All of the parties protected themselves by hold harmless agreements, providing that the submission of the change order request was not an acknowledgement of liability or a waiver of any defenses.

In May 1978, the EPA tentatively informed Global it would deny its request. Nevertheless, Global submitted further information to the EPA, and attempted other contact with EPA officials in Washington, D.C. Neither of these efforts proved fruitful.

In November 1978, Del Guzzi filed a complaint for damages against Global in the sum of $77,147.20 for expenses incurred in completing a portion of Global's contract. In April 1979, the EPA formally rejected Global's request and recommended that other means of recovery be instituted.

In April 1980, Global answered Del Guzzi's complaint by admitting that Del Guzzi had incurred certain expenses in assisting Global in completion of the contracts in question, but denied that Del Guzzi was damaged in the amount of $77,147.20. Further, Global counter claimed for cost overruns in the amount of $334,799.82, plus 10 percent for profit. Global also commenced a third party action for negligence and breach of contract against the County and Kennedy. Global contended the County knew of Global's lack of experience, and therefore the County owed it a higher degree of duty. Furthermore, Global argued that Kennedy, as the County's agent, drafted specifications that permitted use of native fill material and thereby warranted that such material would be acceptable.

In May 1982, the County and Kennedy moved for summary judgment against Global. On May 26, 1982, Global filed a motion for leave to amend its answer, counterclaim and third party complaint against the County, Kennedy and Del Guzzi.

Following the June 4 summary judgment hearing, the court issued a memorandum opinion dismissing Global's claims. The court dismissed Global's tort claim on the ground Global had failed to toll the applicable statute of limitation. The court dismissed Global's contract claim because Global was not a third party beneficiary of either the contract between Kennedy and the County or the contract between the County and Del Guzzi. ¹ The court also denied Global's motion to amend its pleadings. Global filed a notice of appeal with the Court of Appeals. The case was transferred to this court pursuant to RAP 4.3.

I

Summary judgment is appropriate "if the pleadings, depositions ... and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56(c). Hartley v. State, 103 Wash.2d 768, 774, 698 P.2d 77 (1985).

On review of summary judgment, we place ourselves in the position of the trial court, assuming facts most favorable to the nonmoving party, in this case Global. Hartley, at 774, 698 P.2d 77. Additionally, the burden is on the moving party to prove there is no genuine issue as to a fact which could influence the outcome at trial. Hartley, at 774, 698 P.2d 77. Because the facts of this case are basically undisputed, the question we must determine is whether the County and Kennedy were entitled to judgment as a matter of law.

II

The first issue for the court is whether Global's negligence action against the County and Kennedy is barred by the builder limitation statute, RCW 4.16.310. Initially, we must determine if Global's claim falls within the parameters of RCW 4.16.300, which provides:

RCW 4.16.300 through 4.16.320 shall apply to all claims or causes of action of any kind against any person, arising from such person having constructed, altered or repaired any improvement upon real property, or having performed or furnished any design, planning, surveying, architectural or construction or engineering services, or supervision or observation of construction, or administration of construction contracts for any construction, alteration or repair of any improvement upon real property.

Because Global's negligence claim against the County and Kennedy arose from engineering services performed in the construction of the Sekiu-Clallam Bay sewerage project, its claim clearly is within the activities prescribed by RCW 4.16.300.

We must next determine whether Global's claim for negligence is barred by RCW 4.16.310, which provides in pertinent part:

All claims or causes of action as set forth in RCW 4.16.300 shall accrue, and the applicable statute of limitation shall begin to run only during the period within six years after substantial completion of construction, or during the period within six years after the termination of the services enumerated in RCW 4.16.300, whichever is later.... Any cause of action which has not accrued within six years after such substantial completion of construction, or within six years after such termination of services, whichever is later, shall be barred ...

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. In this case, the 3-year statute of limitation under RCW 4.16.080(2) governs Global's injury suffered as a consequence of alleged negligent engineering services. If the cause of action does not accrue within 6 years of substantial completion, RCW 4.16.310 absolutely bars the commencement of suit. Bellevue Sch. Dist. 405 v. Brazier Constr. Co., 103 Wash.2d 111, 119, 691 P.2d 178 (1984).

In the present case, it is uncontroverted that substantial completion of the project occurred in December 1976. Accordingly, RCW 4.16.310 requires Global's cause of action to have accrued within 6 years of December 1976, and suit to have commenced within 3 years of accrual. The determinative issue is when Global's cause of action in negligence accrued.

We have interpreted "accrue" under RCW 4.16.300 and .310 to mean "discovery". Bellevue, at 119, 691 P.2d 178. Under the discovery rule, "a cause of action accrues at the time the plaintiff knew or should have known all of the essential elements of the cause of action." White v. Johns-Manville Corp., 103 Wash.2d 344, 348, 693 P.2d 687 (1985). "Actual loss or damage" is an essential element in establishing the traditional elements for a cause of action in negligence. Gazija v. Nicholas Jerns Co., 86 Wash.2d 215, 219, 543 P.2d 338 (1975). It is this element of negligence which is presently disputed.

Global...