Tadych v. Noble Ridge Constr., Inc., 100049-9
| Citation | 519 P.3d 199 |
| Docket Number | 100049-9 |
| Decision Date | 27 October 2022 |
| Parties | Gregory M. TADYCH and R. Sue Tadych, a Married Couple, Petitioners, v. NOBLE RIDGE CONSTRUCTION, INC., a Washington Corporation; and Wesco Insurance Co., a Foreign Surety, Bond No. 46WB025486, Respondents. |
| Court | United States State Supreme Court of Washington |
John Todd Henry, Christopher William Pirnke, Inslee Best Doezie & Ryder, P.S., 10900 Ne. 4th St. Ste. 1500, Bellevue, WA, 98004-8345, Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Ave. Sw., Third Floor Ste. C., Seattle, WA, 98126-2138, for Petitioners.
Ryan Gregory Foltz, Carroll, Biddle, & Bilanko, PLLC, 411 W. Mercer St., Seattle, WA, 98119-3918, Petra Nasreen Ambrose, Chock Barhoum LLP, 121 Sw. Morrison St. Ste. 500, Portland, OR, 97204-3135, Kenneth Wendell Masters, Masters Law Group PLLC, 321 High School Road Ne., D3-#362, Bainbridge Island, WA, 98110-2648, William Thomas Hansen, Attorney at Law, 9920 31st Ave. Sw., Seattle, WA, 98126-4117, for Respondents.
¶1 This case involves a contractual one-year limitation period to bring a construction defect suit. Gregory and Sue Tadych filed suit after the one-year limitation period expired. The trial court entered summary judgment, dismissing the suit and upholding the contractual limitation. The Court of Appeals affirmed. For reasons explained herein, we find this contractual limitation is substantively unconscionable and, therefore, void and unenforceable. We reverse and remand for trial.1
¶2 The Tadychs entered into a written contract with Noble Ridge Construction Inc. to build a custom home. The contract included a "warranty" provision:
1 Clerk's Papers (CP) at 182-83. The Tadychs occupied their new home in April 2014. Under the contract, the Tadychs had until sometime in April 2015 to file any claim arising from the construction project. In February 2015, before filing suit, the Tadychs experienced their home shift and found some unlevel flooring. Concerned about this, the Tadychs hired a construction expert to review the flooring issues and the shift of the house. After reviewing photos and the architectural plans of the house, the expert raised the possibility that the ventilation system did not conform to code. The Tadychs forwarded this concern to the contractor. The contractor responded, 4 CP at 785. The contractor then explained, in detail, how the house was approved by an inspector and is "in [the] top 5% of our region, maybe even 1%, in dealing with moisture/vapor and dew points." 4 CP at 785. He also claimed the house "is on the leading edge of ... science." 4 CP at 785.
¶3 Approximately two weeks later, and within the one-year contract limitation period, the Tadychs met with the contractor, and the construction expert to discuss the unlevel flooring, house shift, and ventilation. The contractor again assured the Tadychs "there were no issues about which [they] ought to be concerned" and promised to repair the unlevel flooring. 4 CP at 767.
¶4 Between 2015 and 2016, additional issues with the house arose and again the Tadychs informed the contractor, and the contractor repeatedly promised to do additional repairs. In December 2016, the contractor made an additional promise to schedule the necessary repairs by January 2017. No repairs were performed.
¶5 In April 2017, after several months of no response from the contractor, the Tadychs hired another construction expert to conduct a thorough inspection of the home, including cutting openings to assess issues within the house's structure. The expert concluded the house suffered from significant construction defects, including (1) water intrusion, (2) code violations, (3) poor structural framing, and (4) poor structure ventilation.
¶6 The Tadychs sued Noble Ridge for breach of contract later that year.2 The trial court granted Noble Ridge's summary judgment based on the one-year contractual limitation period, dismissing the Tadychs’ claim. The trial court also granted Noble Ridge costs and attorney fees. The Court of Appeals affirmed. Tadych v. Noble Ridge Constr., Inc ., No. 81948-8-I, 2021 WL 3030166 (Wash. Ct. App. July 19, 2021) (unpublished), https://www.courts.wa.gov/opinions/pdf/819488.pdf, review granted , 198 Wash.2d 1017, 497 P.3d 389 (2021).
¶7 The unconscionability issue in this case centers on one sentence in a "warranty" paragraph on the 10th page of a 14-page boilerplate contract drafted by the respondent-contractor, which reads:
(b) Warranty . The warranty provided in this section is in lieu of all other warranties, including any express or implied warranties of fitness, merchantability or habitability otherwise provided under the laws of the State of Washington or any other law applicable to the Project or this Agreement. Any claim or cause of action arising under this Agreement, including under this warranty, must be filed in a court of competent jurisdiction within one year (or any longer period stated in any written warranty provided by the Contractor) from the date of Owner's first occupancy of the Project or the date of completion as defined above, whichever comes first. Any claim or cause of action not so filed within this period is conclusively considered waived. This warranty shall be void if a person or firm other than the Contractor performs or reperforms any work within the scope of this Agreement.
CP at 182-83 (emphasis added).
¶8 We review summary judgments de novo. Whether a contract is unconscionable is a question of law reviewed de novo. Adler v. Fred Lind Manor , 153 Wn.2d 331, 344, 103 P.3d 773 (2004). While "[i]t is black letter law of contracts that the parties to a contract shall be bound by its terms," contractual provisions that are unconscionable are not enforceable. Adler , 153 Wash.2d at 344, 103 P.3d 773. In Washington, we have recognized two categories of unconscionability: substantive and procedural. Either substantive or procedural unconscionability is sufficient to void a contract. Gandee v. LDL Freedom Enters., Inc. , 176 Wash2d 598, 603, 293 P.3d 1197 (2013).
¶9 We have defined " ‘substantive’ unconscionability" as an "unfairness of the terms or results." Torgerson v. One Lincoln Tower, LLC , 166 Wash.2d 510, 518, 210 P.3d 318 (2009). A contract term is substantively unconscionable where it is " ‘one-sided or overly harsh,’ " " ‘[s]hocking to the conscience,’ " " ‘monstrously harsh,’ " or " ‘exceedingly calloused.’ " Gandee , 176 Wash.2d at 603, 293 P.3d 1197 (alteration in original) (internal quotation marks omitted) (quoting Adler , 153 Wash.2d at 344-45, 103 P.3d 773 ).
¶10 Our cases analyzing and finding substantive unconscionability focus on the effect the contractual provision has on existing statutorily established rights and the policies underlying those statutory rights. The substantive nature of this analysis requires a determination of what existing rights or policies are being limited or eliminated by the contractual provision. Coupled with the substantive component is an assessment of the term's unconscionability where we consider the unfairness of the contract term or result.
¶11 In Adler , 153 Wash.2d 331, 103 P.3d 773, and Gandee , 176 Wash.2d 598, 293 P.3d 1197, we examined the substantive unconscionability of contract terms that similarly limited existing statutory rights. In Adler , we considered a contractual provision in an employment contract that limited statutorily established rights. In that case, the suit involved an action alleging, among other claims, disability, age, and national origin discrimination under the Washington Law Against Discrimination, ch. 49.60 RCW. Under the employment contract, Adler was required to submit his discrimination claim to arbitration within 180 days and forgo the statutorily established process. In the substantive unconscionability analysis, the shortened contractual limitation period was contrasted with the statutorily provided period of three years under RCW 4.16.080(2). We concluded the 180-day contractual limitation provision unreasonably favored the...
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