Kenco Constr., Inc. v. Porter Bros. Constr., Inc.
| Decision Date | 11 June 2018 |
| Docket Number | No. 74069-5-I,74069-5-I |
| Court | Washington Court of Appeals |
| Parties | KENCO CONSTRUCTION, INC., a Washington Corporation, Respondents, v. PORTER BROTHERS CONSTRUCTION, INC., a Washington Corporation; Appellant. BEMO USA CORPORATION, Plaintiff, v. KENCO CONSTRUCTION, INC., a Washington Corporation; RLI INSURANCE COMPANY (Bond No. SSB397726), Respondents, PORTER BROTHERS CONSTRUCTION, INC., a Washington Corporation; HARTFORD FIRE INSURANCE COMPANY (Bond No. 52BCSD1578), a foreign corporation; Appellants, HIGHLINE PUBLIC SCHOOL DISTRICT NO. 401, a public school district; Defendant. KENCO CONSTRUCTION, INC., a Washington Corporation, Respondent, v. HARTFORD FIRE INSURANCE COMPANY (Bond No. 52BCSD1578), a foreign corporation; Appellant, HIGHLINE PUBLIC SCHOOL DISTRICT NO. 401, a public school district; Defendant. TOTEM ELECTRIC OF TACOMA, INC., a Washington Corporation, Respondent, v. PORTER BROTHERS CONSTRUCTION, INC., a Washington Corporation; HARTFORD FIRE INSURANCE COMPANY (Bond No. 52BCSD1578), a foreign corporation; Appellants, HIGHLINE PUBLIC SCHOOL DISTRICT NO. 401, a public school district; Defendant. |
UNPUBLISHED OPINION
APPELWICK, C.J. — General contractor, Porter, appeals from jury verdicts in favor of subcontractors, Kenco and Totem, and from summary judgmentdismissing its claims against surety, RLI. We reverse the award of expert fees to Kenco and Totem. We affirm in all other respects.
FACTS
The Highline School District No. 401 (District) entered into a contract (the "prime contract") with Porter Brothers Construction Inc., to serve as the general contractor to construct Raisbeck Aviation High School.
Porter entered into a subcontract agreement with Kenco Construction Inc., to perform roofing and paneling for $1,509,745.00. It entered into a second subcontract with Kenco to perform window, door, and curtain installation for $979,897.00. As part of these contracts, Kenco selected BEMO USA Corporation as its supplier for the roofing system and related products for waterproofing. Kenco also obtained surety bonds for each of these subcontracts from RLI Insurance Company. The two surety bonds incorporated the subcontracts (which themselves incorporated the prime contract).
Porter also entered into a subcontract with Totem Electric of Tacoma Inc., to perform electrical work for $2,862,980.00.
The project encountered numerous problems affecting both Kenco's and Totem's work. At the start of the project, Totem discovered an undisclosed underground power line. It needed to be rerouted to allow pilings to be inserted. This required coordination with Seattle City Light. On October 6, 2011, the architect provided supplemental instructions to address the issue. Rerouting of the line was complete by December 23, 2011. This set the project back more than 60 days.
In an effort to accelerate the project, the steel erector's work was expedited, and made up 31 days of time. But, after the expedited steel erection, the structural steel was outside of the project's specifications. Kenco was asked to complete extra work to rectify the steel issue. Kenco was required to adapt to the out-of-tolerance substrates.
However, one of the problems associated with the project was the suitability of a building product used by Kenco. That product, a roofing underlayment supplied by BEMO, did not work as intended. It did not properly adhere to the structure, and therefore caused leaks. The underlayment had to be installed three successive times to seal the building.
As Kenco was completing its work, it submitted applications to Porter for progress payments. Kenco's President testified that Porter began withholding progress payment funds owed to Kenco, starting on August 12, 2012.1 Problems also arose affecting Totem. Predecessor work was not ready, the job site was not properly prepared, and Totem was frequently forced to start and stop its work. Totem also did not receive scheduling updates that should have been provided. Totem sent numerous letters to Porter expressing concern over predecessor work, the project schedule, and impacts on cost. As a result, Totem sent a number of change order requests (CORs) to Porter.
As with Kenco, Porter made only limited progress payments to Totem. Both subcontractors demanded arbitration as provided in the contract, but Porter refused.
Kenco filed suit against Porter for breach of contract and to compel arbitration, as provided for in the contract.2 Porter counterclaimed for breach of contract, brought claims against RLI on the bond, and later amended its answer to include bad faith claims against RLI. Totem filed a separate complaint for breach of contract and quantum meruit, among other claims. The lawsuits were consolidated.
A significant number of motions were heard prior to trial. Porter again opposed arbitration, and the trial court found that arbitration was not proper due to the presence of nonparties to the contract.3 .
The trial was bifurcated, with the contract dispute between Porter, Kenco, and Totem, tried first. Porter's bad faith and Insurance Fair Conduct Act (IFCA), RCW 48.30.010-.015, claims against RLI were to be tried separately.
Kenco and Totem's theory of the case was that they were not properly compensated for work that they dutifully performed in response to problems with the project that were attributable to Porter. Porter's theory was that it properly withheld progress payments, that the subcontractors failed to give proper notice of their claims for extra compensation as required by the subcontracts, and thatKenco caused delays. The trial court denied Porter's midtrial and posttrial motions for judgment as a matter of law based on inadequate notice as to both Kenco and Totem.
The jury found in favor of Kenco and Totem. It awarded $1,815,914.49 to Kenco, and $1,124,095.06 to Totem. And, because the jury found Porter liable, it dismissed Porter's claims against RLI on summary judgment. Therefore, no trial on the bad faith and IFCA claims was held. The trial court awarded fees including expert witness fees to Kenco, Totem, and RLI.
Porter appeals.
DISCUSSION
Porter seeks reversal of the entire judgment, because the trial court erred by instructing the jury that the subcontractors need only to substantially comply with the subcontracts' notice of claim provisions. Porter contends that the proper standard is strict compliance with the notice requirements. And, it argues that this instructional error "infects every aspect of the judgment." (Capitalization omitted.)
As a result, it argues that we should reverse the jury's award in its entirety. First, the jury awarded Kenco $1,487,205.67 in payments that Porter withheld. Porter contends that this withholding was justified, because Kenco was not timely performing the work and delay damages were triggered. Second, the jury also awarded $328,708.82 in extra work that Kenco performed. Porter alleges Kenco did not give proper notice of this extra work as required by the contract. Finally, Porter argues that the verdict in favor of Totem must also be reversed under the same affirmative defense: lack of notice.
In response, Kenco argues that Porter's conduct excused strict compliance with the notice requirements. And, Totem claims that it gave proper notice, but even if it did not, Porter's own conduct made full notice, as required by the contract, impossible. .
Porter presents numerous other arguments: that the trial court erred by entering inconsistent orders, by allowing the subcontractors to recover certain types of damages, by excluding certain forms of evidence, by imposing prejudgment interest, and by preventing Porter from recovering for concurrent delay caused by Kenco.
Porter also argues that the trial court erred in dismissing its bad faith and IFCA claims against Kenco's surety, RLI.
Porter, the subcontractors, and RLI all seek attorney fees. Porter also specifically argues that the trial court erred in awarding expert fees to the subcontractors.
We first address the jury's award of $1,487,205.67 of withheld payments to Kenco. Porter concedes that it stopped paying Kenco, because it believed Kenco's work was not satisfactory.4 Kenco argued below that this constituted a material breach of the contract. Under the subcontract, Porter was required to disburse to Kenco payments that it received from Highline, within 10 days of receiving thatmoney from Highline. Kenco argues that Porter failed to do so, and thus was in material breach of the contract for withholding those payments.
The jury heard testimony from Kenco's president that Porter began withholding payments on August 12, 2012, only four days after CCD (construction change directive) 053 was issued. Any billed payment due on August 12 would logically have been for work performed in previous months. For these withheld payments, Kenco asked the jury for $1,487,205.67. The jury awarded Kenco that full amount.5 Thus, the jury fully adopted Kenco's arguments that a breach of contract occurred and that the withheld payments began on August 12, 2012.
Porter contends that even if the jury did find that it was in breach of contract, the trial court erred by instructing the jury that Porter could not recover for concurrent delay caused by Kenco. But, question 13 of the verdict form asked the jury to determine whether "Kenco breached its subcontracts by causing delays to the project." The jury found in favor of Kenco on this question. This means that the jury found Kenco did not breach by causing delays. Because the jury found that Kenco did not breach, it necessarily would not have apportioned any responsibility for the delay or any damages to Kenco. A jury instruction error is reversible error only if it prejudices a party. Anfinson v. FedEx Ground Package Sys., Inc., 174 Wn.2d 851, 860, 281 P.3d 289 (2012). Thus, regardless of whether the instruction should have been given, the jury instruction could not have prejudiced Porter, and is not...
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