Homeworks Const., Inc. v. Wells, 33382-1-II.

• Decision Date: 11 July 2006
• Docket Number: No. 33382-1-II.,33382-1-II.
• Parties: HOMEWORKS CONSTRUCTION, INC., Appellant, v. Dan WELLS and Jane Doe Wells, d/b/a Wells Exterior Walls Systems, and Gary Thompson and Jane Doe Thompson, d/b/a Portland Plastering, Respondents. Dan Wells and Jane Doe Wells, d/b/a Wells Exterior Walls System, Third Party Plaintiffs, v. Dryvit Systems, Inc., a Rhode Island corporation, and Insulation Supply LLC, a Virginia limited liability company formerly known as Oregon Insulation Supply, Inc. dba Insulation Supply, Inc., and Exsys, an Oregon corporation, Third Party Defendants.
• Court: Washington Court of Appeals

Page 654

138 P.3d 654

133 Wn. App. 892

HOMEWORKS CONSTRUCTION, INC., Appellant, v. Dan WELLS and Jane Doe Wells, d/b/a Wells Exterior Walls Systems, and Gary Thompson and Jane Doe Thompson, d/b/a Portland Plastering, Respondents.

Dan Wells and Jane Doe Wells, d/b/a Wells Exterior Walls System, Third Party Plaintiffs, v. Dryvit Systems, Inc., a Rhode Island corporation, and Insulation Supply LLC, a Virginia limited liability company formerly known as Oregon Insulation Supply, Inc. dba Insulation Supply, Inc., and Exsys, an Oregon corporation, Third Party Defendants.

No. 33382-1-II.

Court of Appeals of Washington, Division 2.

July 11, 2006.

Douglas Fredrick Foley, Foley & Buxman PLLC, Steven C. Andersen, Law Office of Steven C. Andersen, Vancouver, WA, Jerret E. Sale, Deborah Lynn Carstens, Bullivant Houser Bailey PC, Seattle, WA, for Appellant.

Mark Edward Mills, Law Offices of William D. Garcia, Seattle, WA, Michael Grant Sullivan, Smith Freed & Eberhard PC, Portland, OR, for Respondent.

Kenneth F. Hobbs, Stafford Frey Cooper, Seattle, WA, for Other Party Dryvit Systems Ins.

Arthur D. Leritz, Gardner Bond Trabolsi PLLC, Seattle, WA, for Other Party Insulation Supply.

BRIDGEWATER, J.

¶ 1 Homeworks Construction, Inc. (Homeworks), a general contractor, appeals a summary judgment order dismissing its contract and indemnity claims against subcontractors, Dan Wells d/b/a Wells Exterior Wall Systems (Wells) and Gary and Jane Doe Thompson d/b/a Portland Plastering (Thompson), who installed synthetic stucco on a house. The trial court granted summary judgment as a sanction for spoliation of evidence because the homeowners repaired the house before Wells and Thompson could inspect the damage. But when State Farm Fire and Casualty Company (State Farm), Homework's insurer, paid the homeowners' claim for damages for faulty installation, State Farm had no duty to notify the subcontractors who installed the stucco that the homeowners might repair the house. It did not control the house and had no access to the premises being repaired. We hold that neither Homeworks nor State Farm was responsible for "spoliation" of the evidence when the homeowners repaired the damage to the house before the subcontractors could hire experts to examine the house. Thus, the trial court abused its discretion by sanctioning Homeworks, and it improperly granted summary judgment in favor of the subcontractors. We reverse and remand for further proceedings.

FACTS

¶ 2 In December 1996, Jim and Serena Lucey hired Homeworks to build a house. Homeworks acted as the general contractor and hired Wells to apply synthetic stucco, called Exterior Insulation Finish System (EIFS), to the house. In November 1997, Homeworks hired Thompson to complete the EIFS application. The house was completed in December 1997.

¶ 3 By October 2000, the Luceys noticed some water damage in the house. They hired Western Architectural (Western) to investigate the cause of the damage. On October 18, 2000, Western reported that the EIFS was improperly installed and recommended a series of repairs. On July 24, 2001, State Farm's internal claims process identified Wells and Thompson as the subcontractors in this case.

¶ 4 State Farm hired an expert, JRP Engineering, Inc. (JRP), to investigate the water damage at the Luceys' house. JRP visited the site in August 2001. In June 2002, almost a year later, JRP issued its report finding that improper installation of the EIFS had caused the water damage. In October 2002, Western issued a second report, presumably on behalf of the Luceys, confirming that the EIFS had been improperly installed.

¶ 5 Nothing in the record indicates that State Farm, Homeworks, or the Luceys notified the subcontractors, Wells and Thompson, of any problems with the EIFS installation during this process.

¶ 6 On June 11, 2003, almost two years after the original inspection indicated that the EIFS was improperly applied, State Farm, acting on behalf of Homeworks, settled the Luceys' claim for $318,812.24. About three weeks later, on July 3, 2003, State Farm referred the case to its subrogation unit. Six days later, State Farm, on behalf of Homeworks, sued Wells, Johnson, and the EIFS manufacturer.¹ The complaint alleged breach of contract, negligence, and indemnity causes of action against Thompson and Wells. Homeworks/State Farm served Wells on July 28, 2003, and Thompson on July 26, 2003. Wells's counsel filed its first appearance on August 21, 2003.

¶ 7 Meanwhile, the Luceys hired J S Frasier Construction and began their house repair on July 23. The Luceys did not notify State Farm, Homeworks, Wells, or Thompson that they were repairing the house. By July 31, 97 percent of the EIFS had been removed. The repair work seems to have been substantially completed by early September. On November 3, Wells learned that the Luceys' house had been repaired and that all of the EIFS had been discarded when Wells's counsel visited the house to take pictures.

¶ 8 Wells hired a construction consultant, Joe Johnson, to review Western's and JRP's reports to give an expert opinion on the cause and extent of the water damage to the Luceys' house. In a letter, Wells notified Johnson that it was going to argue that State Farm spoiled the EIFS evidence and prevented Wells from mounting an adequate defense.

¶ 9 After examining Western's and JRP's reports and the photographs, Johnson concluded that:

Because I was unable to conduct an on-site inspection, and was allowed only to review documentation and photographs produced by others, I am unable to render an opinion on the extent of damages at the [h]ouse.

Clerk's Papers (CP) at 39. In his deposition, Johnson explained that site inspections are integral to determining causation. He also determined that the existing reports failed to fully document the as-built condition of the house or the extent and location of all the damage. He further indicated that the pictures were not sufficient and that he would need hundreds of removal and repair photographs. As a result, he concluded that Homeworks/State Farm possessed an investigative advantage that prejudiced the subcontractors because he could not adequately evaluate the cause or extent of the damages to the Luceys' house.

¶ 10 Relying on Johnson's declaration and deposition, Wells and Thompson filed a motion requesting that the trial court (1) find that Homeworks/State Farm spoiled critical evidence, (2) exclude Homeworks/State Farm's expert's reports, and (3) grant summary judgment because no competent evidence remained to prove that Wells and Thompson breached their contract.

¶ 11 Homeworks/State Farm argued that the Luceys repaired the house without their knowledge, that Wells and Thompson had adequate time to conduct a site visit while the Luceys were repairing the house. They also filed a declaration from James Perrault of JRP concluding that, with all of the information included in the reports, "[A]n expert familiar with EIFS should be able to render an opinion as to liability and damages." CP at 124.

¶ 12 The trial court found that Homeworks/State Farm "spoliated evidence and that no less restrictive remedy was available than to grant summary judgment." CP at 259.

ANALYSIS

¶ 13 Homeworks/State Farm argues that because they did not control the house, the trial court improperly sanctioned them. In the alternative, they suggest that the sanction was too harsh because Wells and Thompson had alternative sources of information and the trial court could have granted relief short of summary judgment. Wells and Thompson acknowledge that, although Homeworks/State Farm did not control the house, both failed to take steps to preserve the EIFS evidence for Wells and Thompson to inspect. They argue that because the EIFS evidence was central to their defense, the sanction was appropriate. We do not address the arguments regarding remedies available for spoliation because we hold that Homeworks/State Farm was not liable for the spoliation.

¶ 14 We review a trial court's decisions regarding sanctions for discovery violations for abuse of discretion. Henderson v. Tyrrell, 80 Wash.App. 592, 604, 910 P.2d 522 (1996). A trial court abuses its discretion when its decision is manifestly unreasonable or based on untenable grounds. State v. Perrett, 86 Wash.App. 312, 319, 936 P.2d 426 (1997) (citing Havens v. C & D Plastics, Inc., 124 Wash.2d 158, 168, 876 P.2d 435 (1994)), review denied, 133 Wash.2d 1019, 948 P.2d 387 (1997).

¶ 15 Washington case law on spoliation is sparse. The leading case is Henderson, a Division Three case in which the plaintiff, Tyrrell, was injured in a single car accident when Tyrrell's car left the road traveling 75 miles per hour. Henderson, 80 Wash.App. at 596, 910 P.2d 522. He alleged that he was the passenger in his car and that Henderson, the defendant, was the driver. Henderson, 80 Wash.App. at 597, 910 P.2d 522. Two years after the accident, but before trial Tyrrell had the car salvaged and destroyed even though the defendant's attorney had requested that Tyrrell preserve the car. Henderson, 80 Wash.App. at 603-04, 910 P.2d 522. The trial court declined to sanction Tyrrell because the real culprit was the passage of time. Henderson, 80 Wash.App. at 604, 910 P.2d 522.

¶ 16 The Henderson court relied on Pier 67, Inc. v. King County, 89 Wash.2d 379, 573 P.2d 2 (1977). In Pier 67, our Supreme Court reaffirmed the evidentiary conclusion that when a party fails to produce relevant evidence without satisfactory explanation, "the only inference which the finder of fact may draw is that such evidence would be unfavorable to him." Henderson, 80 Wash. App. at 606, 910 P.2d 522 (quoting Pier 67, 89 Wash.2d at 385-86, 573 P.2d 2). Division Three interpreted the phrase "satisfactory explanation" to mean that there are some situations in which a party may be excused for not preserving necessary relevant evidence. Henderson, 80 Wash.App. at 607, 910 P.2d 522.

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