Sime Const. Co., Inc. v. Washington Public Power Supply System

• Court: Washington Court of Appeals
• Writing for the Court: GREEN
• Citation: Sime Const. Co., Inc. v. Washington Public Power Supply System, 621 P.2d 1299, 28 Wn.App. 10 (Wash. App. 1980)
• Decision Date: 18 December 1980
• Docket Number: No. 3357-III-1
• Parties: SIME CONSTRUCTION CO., INC., a Washington Corporation, Appellant, v. WASHINGTON PUBLIC POWER SUPPLY SYSTEM; Ragnar Benson, Inc.; Burns & Roe, Inc.; The Marley Company; and Commercial Union Insurance Company, Respondents.

Page 10

28 Wn.App. 10

621 P.2d 1299

SIME CONSTRUCTION CO., INC., a Washington Corporation, Appellant, v. WASHINGTON PUBLIC POWER SUPPLY SYSTEM; Ragnar Benson, Inc. Burns & Roe, Inc.; The Marley Company; and Commercial Union Insurance Company, Respondents.

No. 3357-III-1.

Court of Appeals of Washington, Division 3, Panel Four.

Dec. 18, 1980.

As Amended on Denial of Reconsideration Feb. 6, 1981.

Dale R. Ulin, Taylor & Ulin, Seattle, for appellant.

Frederic C. Tausend, Schweppe, Doolittle, Krug, Tausend, Beezer & Beierle, Seattle, for Marley & Comm. Ins.

G. E. Doupe, Richland, for Wash. Public Power.

Rembert Ryals, Critchlow & Williams, Richland, for Burns & Roe, Inc. GREEN, Chief Judge.

This action was brought by Sime Construction Co., Inc., (Sime), a second-tier subcontractor, against the Washington Public Power Supply System (WPPSS), the owner; Marley Co. (Marley), the prime contractor; Commercial Union Insurance Co. (Commercial), the bonding company; and Ragnar Benson, Inc., the subcontractor with whom Sime contracted. Sime sought damages for delay in the submission of changes in architectural drawings and for defective concrete supplied to it. Cross claims were filed between the parties and Burns & Roe, the architect, was added as a cross-defendant. Sime recovered damages for the defective concrete, but appeals from the denial of its drawings claim. WPPSS cross-appeals from a judgment in favor of Marley; Marley and Commercial cross-appeal the dismissal of their cross claim against Burns & Roe and from portions of the judgment entered against them. We affirm.

Two basic issues are presented: (1) Did Sime's failure to submit a notice of claim in accordance with the terms of the prime contract bar recovery of its drawings claim? (2) Was Sime entitled to recover attorney fees and prejudgment interest on the concrete claim?

The unchallenged findings of fact ¹ establish that WPPSS entered into a construction contract with Marley to build six nuclear reactor cooling towers at Hanford Project No. 2 at a cost of $7,226,600. Marley awarded a subcontract for earth work, foundations and erection of the super structure to Ragnar Benson, Inc. Ragnar in turn entered into a sub-subcontract with Sime for the excavation and construction of the concrete foundations of the towers for the sum of $350,000. During negotiations, Ragnar approved a proposed construction schedule. It provided that the foundations were to be built sequentially in a clock-wise manner, and the hot water inlets and cold water outlets were to be built in the early stages of construction. This schedule was approved and essentially followed by Sime in the performance of the Ragnar-Sime contract.

In June 1978, when Sime commenced work, certain critical drawings relating to the cold water outlets were not available. Burns & Roe had withheld the drawings because it was initiating a change in a construction joint to improve the design of the outlet structure. Sime, Ragnar and Marley all knew the drawings were delayed. Due to the late delivery of the revised drawings, Sime was unable to begin the outlets until August. Even though the eventual design changes were minor, the sequence of work was seriously disrupted.

After it had completed its work, Sime submitted a claim for damages arising from the late delivery of the revised drawings. The claim was rejected on the ground that Sime had failed to submit a timely notice of claim as required by the prime contract. This action was then filed by Sime. After a 6-week trial to the court, Sime was awarded damages, attorney's fees, and prejudgment interest on the concrete claim but was denied recovery on the drawing claim.

First, was the drawings claim barred by Simm's failure to give a 15-day notice in accordance with the terms of the prime contract between WPPSS and Marley? It is clear that article 2, section C of the Ragnar-Sime sub-subcontract entitles Sime to damages for delay. ² Marley and Commercial assert the trial court was correct when it held that Sime's failure to give the 15-day notice bars recovery on the drawings claim. On the other hand, Sime contends the court erred because (1) the notice procedures of the prime contract are not incorporated by reference into the sub-subcontract for purposes of the drawings claim; (2) application of the notice procedures contained in the "Change Order" clause of the prime contract created a procedural ambiguity which should have been construed against the drafters, Marley, Ragnar and WPPSS; and (3) the court's interpretation made an agreement which the parties had not made for themselves. We disagree with Sime's contentions.

The sub-subcontract incorporates by reference, without qualification, the terms of the prime contract. McDaniel v. Ashton-Mardian Co., 357 F.2d 511 (9th Cir. 1966); Turner v. Wexler, 14 Wash.App. 143, 538 P.2d 877 (1975). Article 1, section A of the Ragnar/Sime sub-subcontract provides:

A. Subcontract documents include all the below listed items, all of which are incorporated herein and made part hereof by reference thereto.

1. The Contract between the Owner and the Contractor dated and the conditions thereof (general, supplementary and other conditions).

While the date of the prime contract was omitted, WPPSS and Marley are referred to immediately preceding the incorporation clause. ³

Section 3.0 of the WPPSS-Marley prime contract sets forth the procedures for changes in the work. The term "Change Order Work" is broadly defined in section 3.1 as "work not included in the original contract." Section 3.5 provides:

If at any time the Contractor receives any drawings, specification, instruction or request from the Owner or from the Engineer of the Owner with respect to which the Owner does not request a proposal for the doing of the Work and the payment of compensation, but which in the Contractor's opinion entails the performance of Change Order Work for which compensation has not been included in the compensation for the original contract work in the contract price(,) the Contractor shall within fifteen days after such receipt notify the Owner that he considers the item to require the payment of compensation for work in addition to that provided for in the original contract and he shall submit a proposal according to the method outlined above for the doing of the work and the payment of compensation for it ... Failure of the Contractor to give the notice required within fifteen days shall constitute a release and waiver of any claim against the Owner and unless so claimed, no additional compensation shall be considered or paid.

Sime admittedly failed to comply with the notice procedures.

However, Sime argues the notice procedures of the prime contract are not incorporated by reference into the sub-subcontract for purposes of the drawings claim. It relies upon the rule that where one contract is incorporated by reference into another for a special purpose, the incorporation is limited to that purpose. Guerini Stone Co. v. P. J. Carlin Construction Co., 240 U.S. 264, 36 S.Ct. 300, 60 L.Ed. 636 (1915); John W. Johnson, Inc. v. Basic Construction Co., 429 F.2d 764 (D.C. Cir. 1970); United States ex rel. B's Co. v. Cleveland Electric Co., 373 F.2d 585 (4th Cir. 1967). It contends the purpose for the incorporation is to define the scope of the work of subcontractors and to make it clear that the subcontractor must perform its work pursuant to "applicable" specifications. Therefore, Sime asserts the administrative and procedural provisions of the prime contract are not applicable. The cases upon which Sime relies are not controlling. There, the incorporation was for a special purpose. Here, the incorporation clause is general and unlimited. In that situation, both the contract specifications and procedural provisions of the prime contract are incorporated by reference. McDaniel v. Ashton-Mardian Co., supra.

Sime further argues that the "Change Order" clause of the prime contract created a procedural ambiguity which should have been resolved against the drafters, Marley, WPPSS and Ragnar. We disagree. "Change Order Work" is broadly defined as "work not included in the original contract work." Sime submitted a work schedule to Ragnar which was accepted and became a specification of the sub-subcontract. That schedule was disrupted by the late delivery of the revised drawings. As a result, Sime was forced to perform work out of sequence and not included in the contract. The court found Sime, Ragnar and Marley all knew the drawings were delayed because Burns & Roe were initiating an improvement of the design for the outlet structure. The...