Opinion
No. 48002-2-I, 48002-2-I
Filed: June 24, 2002 UNPUBLISHED OPINION
Appeal from Superior Court of King County, No. 99-2-52566-3, Hon. Peter Jarvis, November 29, 2000, Judgment or order under review.
Counsel for Appellant(s), Mark S. Anderson, Ste 5200, 1201 3rd Ave, Seattle, WA 98101-2945.
Edward F. St.ONGE Jr., Assistant Attorney General, 1201 3rd Ave Ste 5200, Seattle, WA 98101-3071.
Counsel for Respondent(s), Michael J. Bond, 2200 6th Ave Ste 600, Seattle, WA 98121.
William W. Spencer, Murray Dunham Murray, 2225 4th Ave Ste 200, Seattle, WA 98121-2034.
Mark S. Northcraft, Northcraft Woods P.C., 720 Olive Way Ste 1905, Seattle, WA 98101.
Aaron D. Bigby, 720 Olive Way Ste 1905, Seattle, WA 98101.
The Tahoma School District ("the District") sued Burr Lawrence Rising Bates, Architects, P.S., ("Burr Lawrence") and Absher Construction Company ("Absher") for negligence, negligent supervision, breach of contract, and breach of implied warranty arising out of the design and construction of the Rock Creek Elementary School. The trial court granted the defendants' motions for summary judgment on the grounds that the statute of limitations had expired on the contract claims and that the District's tort claims were barred by the economic loss rule. Because the discovery rule applies to the District's breach of contract claim and because the trial court did not apply the discovery rule to Tahoma's breach of contract claim, we reverse the summary judgment and remand for further proceedings.
FACTS
Because this is an appeal from an order granting summary judgment, we consider the facts and all reasonable inferences from the facts in the light most favorable to Tahoma, the nonmoving party.
See Sabey v. Howard Johnson Co., 101 Wn. App. 575, 582, 5 P.3d 730 (2000).
In 1989, the District contracted with Burr Lawrence to design the Rock Creek Elementary School and to provide construction administration services. Absher was the general contractor for the project.
Construction of the school was substantially completed on September 3, 1992. In January 1997, a teacher at the school discovered water seeping through the carpet in her classroom along a wall. The exterior of this wall was the exterior of the building. A planter constructed of concrete masonry blocks was located on the exterior of the wall. The back wall of the planter is the outside wall of the building.
The District retained an independent architect, Thomas D. Harader, to investigate the cause of the water seepage. Harader's opinion was that the architect's design of the planters contained errors that constituted professional malpractice. Specifically, the design called for the planters to be damp-proofed, not waterproofed. In Harader's opinion, damp-proofing was inadequate and directly caused the water seepage. According to him, the design should have called for waterproofing to prevent any seepage.
Harader listed the following as the damages caused by the design of the planters: mold and fungal growth in the wall cavity; decayed sheathing, framing, beams, and wood studs; rotted framing, sheathing, plates, and studs; molding sheathing; and saturated insulation. He listed the following as the replacements and construction required at the school following the water seepage: framing, insulation, sheet rock, siding, drywall, wallpaper, masonry, carpet, and planters.
On December 23, 1999, the District filed an action against Burr Lawrence and Absher. The District alleged causes of action for negligence, negligent supervision, breach of contract, and breach of implied warranty against Burr Lawrence. It alleged causes of action for breach of contract and negligence against Absher.
Both defendants moved for summary judgment on the ground that the District's contract claims were barred by the statute of limitations and its tort claims were barred by the economic loss rule. The trial court granted the defendants' motions for summary judgment.
DISCUSSION
In reviewing an order granting summary judgment, we review the facts and law de novo and engage in the same inquiry as the trial court. Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
St. John Medical Center v. Dep't of Social and Health Services, 110 Wn. App. 51, 64, 38 P.3d 383 (2002).
Sabey v. Howard Johnson Co., 101 Wn. App. 575, 582, 5 P.3d 730 (2000).
CP 56(c).
In Architechtonics Const. Management, Inc. v. Khorram, we held that the discovery rule applies to a breach of contract claim. In that case, the Khorrams contracted with Kensington Homes, Inc., to construct their home. Construction was substantially completed in June 1993. In late 1998, the Khorrams noticed paint bubbling and peeling on the side of the house and garage and found a piece of molding that had rotted and fallen from the eaves. The Khorrams contracted with Architechtonics Construction Management, Inc., (ACM) to make the repairs. ACM discovered dry rot in the walls of the house. In June 2000, ACM recorded a lien against the Khorrans' home and filed and action for foreclosure. The Khorrams brought a third-party action against Kensington alleging breach of contract and breach of express and implied warranties. Kensington moved for summary judgment, arguing that the Khorrams' claims were barred by the statute of limitations and the construction statute of repose. The trial court granted the motion.
Wn. App., 45 P.3d 1142 (2002).
This court reversed, concluding that the reasons for applying the discovery rule in tort claims apply equally in contract actions: "When one of the parties is in a poor position to know of the other party's breach, the discovery rule is the only means of ensuring the wronged party is not denied a warranted cause of action."
Id., 45 P.3d at 1149.
The builder in Architectonics relied on North Coast Enterprises, Inc. v. Factoria Partnership for the proposition that the statute of limitations in contract actions runs from the time of the breach and that the discovery rule did not apply to the Khorrams' breach of contract claim. Burr Lawrence also relies on North Coast to argue that the discovery rule does not apply to Tahoma's breach of contract claim. As did the court in Architectonics, we reject these arguments. Although the court in North Coast had the opportunity to apply the discovery rule to breach of contract actions, it declined to do so. But, the court was careful to point out that its decision to not apply the discovery rule to the breach of contract claim before it in that case was based on the particular facts and circumstances of that case. The court's opinion in North Coast does not stand for the proposition that the discovery rule does not apply to any breach of contract claim.
94 Wn. App. 855, 974 P.2d 1257 (1999).
In Architectonics, the court had another opportunity to decide whether the discovery rule should apply to breach of contract claims. After a careful and comprehensive analysis of the case law and the reasons and policies in support of applying the discovery rule to tort claims, the court found no reason not to apply the discovery rule to breach of contract claims as well. Accordingly, the court held that the discovery rule applies in contract cases `and that the statute of limitation for an action for breach of contract begins to run when a party knows or, in the exercise of due diligence should know, of the breach.
Architectonics, 45 P.3d at 1143.
The court in Architectonics noted that the construction statute of repose, RCW 4.16.310, restricts the applicability of the discovery rule in construction cases by barring claims that do not accrue within six years of substantial completion of construction. Thus, the statute of limitations and the construction statute of repose together create a two-tiered analysis for breach of contract actions involving claims arising from the construction of an improvement on real property, the provision of architectural or construction services, or the supervision of construction services: first, the cause of action must accrue within six years of substantial completion of construction, and second, suit must be filed within the six-year statute of limitations, which begins to run when a party knows or, in the exercise of due diligence should know, of the other party's breach.
Id., 45 P.3d at 1144. The construction statute of repose provides:
All claims or causes of action as set forth in RCW 4.16.300 shall accrue, and the applicable statute of limitation shall begin to run only during the period within six years after substantial completion of construction, or during the period within six years after the termination of the services enumerated in RCW 4.16.300, whichever is later. . . . Any cause of action which has not accrued within six years after such substantial completion of construction, or within six years after such termination of services, whichever is later, shall be barred: PROVIDED, That this limitation shall not be asserted as a defense by any owner, tenant or other person in possession and control of the improvement at the time such cause of action accrues.
RCW 4.16.310. The claims or causes of action to which the construction statute of repose applies are:
[A]ll claims or causes of action of any kind against any person, arising from such person having constructed, altered or repaired any improvement upon real property, or having performed or furnished any design, planning, surveying, architectural or construction or engineering services, or supervision or observation of construction, or administration of construction contracts for any construction, alteration or repair of any improvement upon real property.
RCW 4.16.300.
See Architectonics, 45 P.3d at 1144-45.
Based on Architechtonics, the statute of limitations on the District's breach of contract claim began to run when it knew or, in the exercise of due diligence should have known, of the defendants' breach. Because the trial court did not apply the discovery rule to Tahoma's breach of contract claim, the matter must be reversed and remanded for further proceedings.
In light of our disposition of the statute of limitations issue, the posture of the case is different on remand than it was when the trial court ruled on the defendants' motions for summary judgment. The parties should have the opportunity to engage in further discovery and ascertain when Tahoma knew, or in the exercise of reasonable diligence should have known, of the alleged breach of the contract; the cause of the alleged defect; and the damages Tahoma incurred. Burr Lawrence incorrectly argues that application of the discovery rule will change Tahoma's entitlement to damages. If it is determined that Tahoma's breach of contract claim is not time-barred, Tahoma will have the right to recover all damages that accrue naturally from the breach, including any incidental or consequential losses caused by the breach. Tahoma will remain barred by the economic loss rule from recovering purely economic damages in tort.
See Panorama Village Homeowners Ass'n v. Golden Rule Roofing, Inc., 102 Wn. App. 422, 430, 10 P.3d 417 (2000), review denied, 142 Wn.2d 1018 (2001).
Berschauer/Phillips Const. Co. v. Seattle School Dist., 124 Wn.2d 816, 821, 881 P.2d 986 (1994).
We reverse the summary judgment and remand for further proceedings.
BAKER and APPELWICK, JJ., concur.