Washington Public Power Supply System v. General Elec. Co.

• Decision Date: 14 September 1989
• Docket Number: No. 55886-8,55886-8
• Citation: 778 P.2d 1047,113 Wn.2d 288
• Court: Washington Supreme Court
• Parties: . GENERAL ELECTRIC COMPANY, a New York corporation, and Burns & Roe, Inc., a New Jersey corporation, Defendants. Supreme Court of Washington, En Banc

Page 288

113 Wn.2d 288

778 P.2d 1047

Certification From The United States District Court For The Eastern District of Washington In WASHINGTON PUBLIC POWER SUPPLY SYSTEM, a Washington municipal corporation, Plaintiff, v. GENERAL ELECTRIC COMPANY, a New York corporation, and Burns & Roe, Inc., a New Jersey corporation, Defendants.

No. 55886-8.

Supreme Court of Washington En Banc.

Sept. 14, 1989.

Anthony C. Eitreim, Stanley J. Bensussen, Richland, Edwards & Barbieri, Malcolm L. Edwards, Seattle, Miller, Canfield, Paddock & Stone, Wolfgang Hoppe, Thomas J. Heiden, Allyn D. Kantor, Richard A. Gaffin, Grand Rapids, Mich., for plaintiff.

Davis, Wright & Jones, P. Cameron DeVore, Bruce Lamka, R. Bruce Easter, Jr., Seattle, Mayer, Brown & Platt, Wm. Bruce Hoff, Jr., William A. Gordon, Douglas A. Poe, Michael F. Kerr, Gary A. Isaac, Chicago, Ill., for defendants.

DOLLIVER, Justice.

Plaintiff, the Washington Public Power Supply System (Supply System), is a nonprofit municipal corporation under the laws of the state of Washington and a joint operating agency authorized by RCW ch. 43.52. The Supply System was created in 1957. Its members are 19 public utility districts (PUDs), all located in the state of Washington, and the cities of Richland, Seattle, Ellensburg, and Tacoma.

Prior to 1970, the Supply System undertook to construct and operate Washington Nuclear Project No. 2 (WNP-2), a nuclear electric generating station located on the Hanford Nuclear Reservation. Although the members have a statutory preference right to purchase all the electric energy generated by the Supply System, in order to finance the construction, the members sold this right to 94 participants, who in turn sold their capability under net billing agreements to the Bonneville Power Administration (BPA). The participants are statutory preference customers of the BPA and are comprised of 27 municipalities, 22 districts, and 45 cooperatives, located in Washington, Oregon, Idaho, and Montana. The BPA constructs and operates transmission facilities and markets power from federal hydroelectric projects in the Pacific Northwest. The BPA is also authorized to acquire electric resources from nonfederal entities to fulfill its obligation to meet the firm power requirements of all requesting utilities in the Pacific Northwest.

The Supply System, to implement its decision to construct WNP-2, retained Burns & Roe, Inc. (B & R) as the architect-engineer which issued a request for proposals on the design, construction, and installation of the various components. Defendant General Electric Company's (GE) proposal regarding the Nuclear Steam Supply System (NSSS) was accepted, and on April 19, 1971, GE and the Supply System entered into the NSSS contract which is the subject of the underlying dispute in this case.

Under this contract, the Supply System was required to house GE's boiling water reactor in a concrete "pressure containment system" (PCS), which would "provide a leakage barrier to prevent significant fission product release caused by any design basis accident." To be effective, the PCS had to withstand hydrodynamic loads exerted upon the system by the movement of water within the system. In designing the PCS, B & R used load information, containment specifications, and reference drawings provided by GE. The PCS was reviewed and approved by GE, and construction was undertaken in accordance with this design.

In April 1975, when construction of the PCS was more than 80 percent complete, the Nuclear Regulatory Commission required the Supply System to provide information as to the potential magnitude of the hydrodynamic loads and the capability of the PCS to handle these loads. On February 24, 1976, the Supply System responded that the PCS required modification. The Supply System began the modification in March 1977.

In 1982, 7 years after the Supply System was aware of its potential claims, the Supply System informed GE that it might assert claims for the cost of modifying the PCS. At that time, the parties entered into an agreement tolling the statute of limitation. This action was filed in the United States District Court for Eastern Washington in January 1985. The Supply System seeks damages for fraud, breach of contract, and breach of implied warranty caused by GE's conduct in entering and performing the NSSS contract. Specifically, the Supply System alleges that GE knew or should have known the design of the PCS was inadequate and that GE fraudulently concealed this information and induced the Supply System to enter, perform, and agree to modify the PCS. GE denies these allegations and states that the modifications were necessary as a result of changes in regulatory standards.

GE moved for summary judgment on each of the above claims arguing, inter alia, that the claims were barred by the statutes of limitation. The Supply System countered that it was exempt from the defense of the statutes of limitation because it was bringing the action "for the benefit of the state" within the meaning of RCW 4.16.160. The District Court petitioned the following question for certification pursuant to RCW 2.60.020.

Is this an action "for the benefit of the state" under RCW 4.16.160, which excepts such actions from the provisions of Washington State's statutes of limitation?

We accepted certification and answer the certified question in the negative.

RCW 4.16.160 provides:

The limitations prescribed in this chapter shall apply to actions brought in the name or for the benefit of any county or other municipality or quasi-municipality of the state, in the same manner as to actions brought by private parties: Provided, That ... there shall be no limitation to actions brought in the name or for the benefit of the state ...

In construing a statute, our paramount duty is to ascertain and give effect to the intent of the Legislature. Addleman v. Board of Prison Terms & Paroles, 107 Wash.2d 503, 509, 730 P.2d 1327 (1986). If a statute is subject to more than one reasonable interpretation, we must adopt the interpretation most consistent with the intent of the Legislature as derived from the language of the act as a whole and the previous constructions placed upon the statute by this court. Stewart Carpet Serv., Inc. v. Contractors Bonding & Ins. Co., 105 Wash.2d 353, 358, 715 P.2d 115 (1986).

Initially and significantly, the parties and the District Court misconstrue the nature of the "for the benefit of the state" language in RCW 4.16.160. GE argues that a direct pecuniary benefit must inure to the state as a result of the action, while the Supply System contends, and the District Court agreed, that a much broader nexus is allowed between the action and the resulting benefit to the state. Neither the parties nor the District Court, however, fully appreciate the meaning of "for the benefit of the state", and each treats the language as the needed effect of the municipal conduct rather than a description of the character or nature of that conduct.

Because of this erroneous focus on the effect of the municipal conduct, the parties disagree as to whether the statute sets forth a conjunctive or a disjunctive test for municipal immunity. GE and the District Court interpret the statute to mean that municipalities are exempt from our state's statutes of limitation only if the action is brought for the benefit of the state and the action arose out of municipal conduct of a governmental nature. The Supply System argues the statute states two distinct grounds which may independently exempt a municipality from the provisions of the statutes of limitation. Thus, according to the Supply System, a party is precluded from asserting a statute of limitation defense to an action brought by a municipality if the action is brought for the benefit of the state or the action arose out of governmental rather than proprietary municipal conduct.

The focus of the cases interpreting RCW 4.16.160 has not been upon the effect of the municipal conduct but upon the nature and character of the conduct. We have not used a conjunctive or a disjunctive test in determining municipal immunity. Rather, municipal actions are brought "for the benefit of the state" when those actions arise out of the exercise of powers traceable to the sovereign powers of the state which have been delegated to the municipality. See Bellevue Sch. Dist. 405 v. Brazier Constr. Co., 103 Wash.2d 111, 114, 691 P.2d 178 (1984); Tacoma v. Hyster Co., 93 Wash.2d 815, 613 P.2d 784 (1980); Commercial Waterway Dist. 1 v. King Cy., 10 Wash.2d 474, 479, 117 P.2d 189 (1941); Gustaveson v. Dwyer, 83 Wash. 303, 145 P. 458 (1915). We have never sought to define "benefit of the state" in terms of a beneficial effect.

In the past, this court has looked solely to the nature and character of the power, the exercise of which resulted in the action to determine whether a statute of limitation defense was foreclosed by the statute. In Hyster, the court determined that collecting taxes was the exercise of a sovereign power, thus precluding the city from being subject to the statute of limitation. Hyster Co., 93 Wash.2d at 821, 613 P.2d 784. The court in Gustaveson was faced with the decision whether property purchased by the county at a tax foreclosure sale and held in trust for the political subdivisions entitled to apportionment of the tax on resale was held by the county in its governmental capacity. The court determined that the county's acquiring and holding the land was an exercise of "a right emanating in the power of taxation". Gustaveson, 83 Wash. at 310, 145 P. 458. In doing so, the court stated "the vital question here has relation to the character of the power in the exercise of which the county" acted and "[a]ll of the rights of the county here involved are traceable to and rest in the sovereign power of taxation." Gustaveson, at 310, 145 P. 458. Cited with approval were cases from other jurisdictions to the effect...