Urban Development, Inc. v. Evergreen Building Products, LLC

• Decision Date: 16 December 2002
• Docket Number: No. 50137-2-I., No. 49355-8-I
• Court: Washington Court of Appeals
• Parties: URBAN DEVELOPMENT, INC., a Washington corporation, Appellant, v. EVERGREEN BUILDING PRODUCTS, LLC; R & E Enterprises, Inc.; SDS, Inc.; Cox Wrought Iron & Fabrication, Inc.; EDCA Roofing, Inc., all Washington corporations, Respondents. Urban Development, Inc., a Washington corporation, Appellant, v. Dryvit Systems, Inc., a Rhode Island corporation, Respondent.

59 P.3d 112

114 Wn. App. 639

114 Wash. App. 639

URBAN DEVELOPMENT, INC., a Washington corporation, Appellant, v. EVERGREEN BUILDING PRODUCTS, LLC; R & E Enterprises, Inc.; SDS, Inc.; Cox Wrought Iron & Fabrication, Inc.; EDCA Roofing, Inc., all Washington corporations, Respondents.

Urban Development, Inc., a Washington corporation, Appellant, v. Dryvit Systems, Inc., a Rhode Island corporation, Respondent.

Nos. 49355-8-I, 50137-2-I.

Court of Appeals of Washington, Division 1.

December 16, 2002.

As Amended January 17, 2003.

John Patrick Hayes, Devon P. Groves, Forsberg & Umlauf, Seattle, for Urban Development.

Gordon Liu, Bellevue, Jeffrey Frank, Gregory Clark, Seattle, for Fortune Star Development.

Gordon Liu, Seattle, for C-Light, Wu Yi Corp., Chens, John & Mary Does 5-200.

Robert Goff, Seattle, for Forturn View Condominium.

William Allan Linton, Seattle, for Evergreen Building.

Betsy A. Gillaspy, Bellevue, for R & E Enterprises.

Joanne Thomas Blackburn, Elizabeth Kim, Seattle, for SDS, Inc.

Dirk Jonathan Muse, Steven Jager, Seattle, for Cox Wrought Inc.

Sherman Leslie Knight, Kirkland, for EDCA Roofing.

ELLINGTON, J.

Urban Development, a general contractor, filed claims for implied indemnification, breach of warranty, and breach of contract against several subcontractors and a product manufacturer. Because Urban Development was not an intended beneficiary of any warranties made by the subcontractors, there is no basis for the indemnification claims against those parties, and those claims were properly dismissed. Urban Development was, however, entitled to the benefit of representations and warranties in the manufacturer's advertising brochures, and because questions of fact remain as to Urban Development's claims arising from those brochures, we reverse dismissal of the indemnification and breach of warranty claims against Dryvit Systems.

Questions of fact also remain about the breach of contract claims against subcontractors R & E Enterprises, Cox Wrought Iron, and EDCA Roofing, and those claims should not have been dismissed. The breach of contract claim against subcontractor SDS, however, was properly dismissed, as no genuine issues of material fact exist.

FACTS

Urban Development, Inc., a general contractor, was hired by Fortune Star Development Co. to construct the Fortune View Condominiums. Construction was completed on November 22, 1996. The condominium units began to crack and leak, and on October 21, 1999, the Fortune View Condominium Association filed suit against the developer, which filed a third-party claim against Urban Development. On October 3, 2000, Urban Development filed fourth-party claims against most of its subcontractors and product suppliers, alleging breach of contract, breach of warranty, negligent construction,¹ and implied indemnity.

These appeals arise from a series of orders granting summary judgment dismissing Urban Development's claims against the following subcontractors and product suppliers: SDS, Inc., which performed the framing work and window and sliding glass door installation; R & E Enterprises, Inc., which installed the deck waterproofing; Cox Wrought Iron & Fabrication, Inc., which fabricated and installed the handrails and fences; EDCA roofing, Inc., which installed the roofing membrane and metal parapet wall flashing; Dryvit, Inc., which manufactured the "exterior insulation and finish system" that was installed on the exterior of the condominiums; and Evergreen Building Products, L.L.C., the successor-in-interest to Seattle Wall Systems, which sold the Dryvit siding system to the plastering subcontractor.²

The court dismissed Urban Development's implied indemnification claims against all six respondents. The court also dismissed Urban Development's warranty claim against Dryvit, and its breach of contract claims against R & E, Cox, EDCA, and SDS. Urban Development appeals.

DISCUSSION

Implied Indemnification

Urban Development alleges it is entitled to indemnification³ from all six respondents. A right of implied contractual indemnity arises when one party incurs a liability the other party should discharge by virtue of the nature of the relationship between the parties.⁴ Although the right to indemnity is not implicit in every contractual relationship,⁵ a contract governed by the UCC, with its warranties, provides a sufficient basis for an implied indemnity claim.⁶ Likewise, a relationship where one party has expressly warranted its goods to another party provides a sufficient basis for an implied indemnity claim.⁷

R & E Enterprises, Cox Wrought Iron, and EDCA Roofing. Urban Development's contracts with R & E, Cox, and EDCA were construction contracts for work, labor, and materials. Urban Development had direct relationships with R & E, Cox, and EDCA, and contends these relationships support its indemnification claims against them. But Urban Development's claims against these parties are founded upon a theory of UCC warranties. Construction contracts are not governed by the UCC.⁸

Even if RCW 62A.2 applied, there is no evidence in the record that these respondents breached any UCC warranties. Urban Development contends an architect's report describing damage to the condominiums raises questions of fact on this issue. The report does not allege, however, that any of the materials installed by R & E, Cox, or EDCA were defective. Rather, the authors opine that deck coating, guardrails, and metal flashing on the roof parapet were "improperly installed[.]"⁹ Any implied UCC warranties on the sale of goods are therefore irrelevant, and cannot support Urban Development's indemnification claims against R & E, Cox, and EDCA. The trial court properly dismissed those claims on summary judgment.

SDS, Inc. It is undisputed that SDS provided only services to Urban Development. The UCC therefore does not apply to their contract, and UCC implied warranties cannot serve as the basis for an indemnification claim. Urban Development nevertheless contends it had a sufficient relationship with SDS to create such a warranty on the ground that all subcontractors "impliedly warrant that their work will be done in a workmanlike manner in accordance with industry standards."¹⁰

Urban Development relies entirely upon Eastlake Construction Co., Inc. v. Hess.¹¹ The issue in Eastlake was whether a contractor's misrepresentations in a bid had an impact upon the public interest for purposes of the Consumer Protection Act (CPA).¹² In holding that misleading bids amounted to an unfair or deceptive act under the CPA, the Supreme Court noted that when a contractor submits a bid, "he is, in effect, representing that he will perform that job in a workmanlike manner[.]"¹³

Nothing in that case, or in any other Washington case, suggests that the warranty sought by Urban Development is implicit in construction contracts. Contracting parties have their remedies for breach and can negotiate for warranties if they so choose. An action for implied warranty of workmanlike performance in construction contracts would be strikingly similar to a cause of action for negligent construction, which is not recognized in Washington.¹⁴ We hold that such warranties are not implicit in construction contracts, and cannot support Urban Development's indemnification claim against SDS.¹⁵ The trial court properly dismissed the claim on summary judgment.

Evergreen & Dryvit. Urban Development had contracts with each of the subcontractors discussed above. In contrast, it had no contract with either Evergreen Building Products or Dryvit. Evergreen sold the Dryvit siding system to the plastering subcontractor, Wall Finishes (which has settled with Urban Development). Only Wall Finishes had a contract with Urban Development. Urban Development nevertheless contends it had a sufficient relationship with Evergreen and Dryvit to support indemnification claims against them based on warranties implied under the UCC. Urban Development also contends that it is the beneficiary of express warranties made in Dryvit's advertising materials, and that those express warranties are sufficient to support its indemnification claim against Dryvit.

Urban Development first asserts that "direct privity is not required ... to be a beneficiary of the UCC implied warranties."¹⁶ For this proposition, Urban Development relies on Central Washington Refrigeration v. Barbee. There, a Yakima orchard contracted with Central Washington Refrigeration to install a set of refrigerated rooms for apple storage. Central in turn contracted with an engineering company to specially manufacture coils for the refrigeration units. When the cold rooms failed, the orchard sued Central, and Central filed a third-party indemnification claim against the engineering company, alleging the coils were defective. The court held that a UCC contract for the sale of goods can support an indemnity claim. The parties in Barbee were in direct privity, and the court thus did not address whether direct privity is required. Barbee offers no illumination of the issue here.

Urban Development next argues that vertical privity is sufficient, relying upon Touchet Valley Grain Growers, Inc. v. Opp & Seibold General Construction.¹⁷ Urban Development is correct that vertical privity may be sufficient to support implied warranty liability under certain circumstances, but those circumstances are not present here. For vertical privity to be sufficient to create an implied warranty, the claimant must essentially occupy the position of an intended third party beneficiary.¹⁸ In Touchet Valley, the Supreme Court applied the "sum of the interactions" test set forth in Kadiak Fisheries Co. v. Murphy Diesel Co.,¹⁹ and held that Touchet Valley was the intended beneficiary of Truss-T's warranties to Opp & Seibold:

Applying the Kadiak analysis to the facts before us, we note that Truss-T knew Touchet Valley's identity, its purpose, and its requirements for the grain storage building.

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