Heritage at Deer Creek Owners Ass'n v. Kirtley-Cole Assocs.
DO NOT CITE. SEE RAP 10.4(h).
Court of Appeals Division I
State of Washington
Opinion Information Sheet
Docket Number: 53906-0-I
Title of Case: HERITAGE AT DEER CREEK OWNERS ASSOC, ET AL,
APPS VS KIRTLEY-COLE ASSOCIATES, RESP
File Date: 08/08/2005
SOURCE OF APPEAL
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Appeal from Superior Court of Snohomish County
Docket No: 01-2-04604-5
Judgment or order under review
Date filed: 02/04/2004
Judge signing: Hon. Thomas J Wynne
JUDGES
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Authored by William Baker
Concurring: Anne Ellington
C. Kenneth Grosse
COUNSEL OF RECORD
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Counsel for Petitioner(s)
Dennis Gregory Woods
Scheer & Sotirhos LLP
720 Olive Way Ste 1605
Seattle, WA 98101-1895
John E Zehnder Jr
Scheer & Zehnder LLP
720 Olive Way Ste 1605
Seattle, WA 98101-1895
Counsel for Respondent(s)
Francis Stanley Floyd
Floyd & Pflueger PS
2505 3rd Ave Ste 300
Seattle, WA 98121-1445
Kenneth Lederman
Riddell Williams PS
1001 4th Ave Plaza Ste 4500
Seattle, WA 98154-1065
Amber L Pearce
Floyd & Pflueger PS
2505 3rd Ave Ste 300
Seattle, WA 98121-1445
David Jesse Bierman
Alexander & Bierman PS
4800 Aurora Ave N
Seattle, WA 98103-6518
Charles Kenneth Wiggins
Attorney at Law
241 Madison Ave N
Bainbridge Island, WA 98110-1811
Counsel for Other Parties
Deborah Lynn Carstens
Bullivant Houser Bailey PC
1601 5th Ave Ste 2300
Seattle, WA 98101-1618
Jerret E. Sale
Bullivant Houser Bailey PC
1601 5th Ave Ste 2300
Seattle, WA 98101-1618
Toni L. Imfeld
Attorney at Law
3807 29th Ave W
Seattle, WA 98199-1747
Lawrence Ballis Linville
Linville Ursich PLLC
800 5th Ave Ste 3850
Seattle, WA 98104-3101
Mark Augustus Thompson
Todd & Wakefield
1501 4th Ave Ste 1700
Seattle, WA 98101-3660
Stephen Murray Todd
Todd & Wakefield
1501 4th Ave Ste 1700
Seattle, WA 98101-3660
Brett Michael Wieburg
Law Office of James P Richmond
3315 S 23rd St Ste 310
Tacoma, WA 98405
Michael G Howard
Murray Dunham & Murray
2225 4th Ave Ste 200
Seattle, WA 98121-2057
Michael K. Taylor
Attorney at Law
2225 4th Ave Ste 200
Seattle, WA 98121-2034
IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
HERITAGE AT DEER CREEK ASSOCIATES, )
L.L.C., a Washington Limited Liability ) DIVISION ONE
Corporation; TODD R. BENNETT and JANE )
DOE BENNETT, and the marital community ) No. 53906-0-I
comprised thereof, )
)
Appellants, )
)
vs. )
)
KIRTLEY-COLE ASSOCIATES, INC., a ) UNPUBLISHED OPINION
Washington corporation, )
)
Respondent, )
-------------------------------------------------)------------
HERITAGE AT DEER CREEK OWNERS )
ASSOCIATION, a Washington non-profit )
corporation, )
)
Plaintiff, )
)
vs. )
)
HERITAGE AT DEER CREEK ASSOCIATES, )
L.L.C., a Washington Limited Liability ) FILED: August 8, 2005
Corporation, and other TO BE NAMED )
CORPORATE JOHN DOES (1-10); and other )
TO BE NAMED JOHN AND JANE DOES )
(1-10); and other TO BENAMED INSURANCE )
COMPANIES (1-10), )
)
Defendants. )
-------------------------------------------------------------- )
HERITAGE AT DEER CREEK ASSOCIATES, )
L.L.C., a Washington Limited Liability )
Corporation, )
)
Third Party )
Plaintiff, )
)
vs. )
)
MACDONALD MILLER-RESIDENTIAL, INC., )
a Washington corporation; JANES GYPSUM )
FLOORS, INC., a Washington corporation; )
SHAKE SPECIALISTS, INC., an inactive )
Washington corporation; FIRST )
CONSTRUCTION, a Washington business; )
KATHOL, INC., a Washington corporation; )
KIRTLEY-COLE ASSOCIATES, INC., a )
Washington corporation; and JANES BROS. )
WATERPROOFING, INC., a Washington )
corporation;
)
Third Party )
Respondents, )
)
and )
)
SKILLINGSTAD CONSTRUCTION CO., INC., )
a Washington corporation; RED SAMM )
CONSTRUCTION, INC./RED SAMM )
CONSTRUCTION, INC. JOINT VENTURE )
d/b/a SRS, a Washington general partnership; )
JEFF SKILLINGSTAD and CHERYL )
SKILLINGSTAD, individually and their marital )
community; GRATEFUL SIDING, INC., a )
Washington corporation; HORVATH )
CONSTRUCTION INCORPORATED, a )
Washington corporation; AMERICA 1ST )
ROOFING & BUILDINGS, INC., a )
Washington corporation; ROBERT BEEVERS )
CONSTRUCTION, a Washington business; )
GUTTER KING, INC., a Washington )
corporation; M.C. PAINTING, INC., a )
Washington corporation; DUNCAN L. MORSE )
d/b/a/ PRADA PAINTING & DRYWALL, a )
Washington business; BAYLIS ARCHITECTS, )
INC., a Washington corporation; TIGHT IS )
RIGHT CONSTRUCTION, INC., a )
Washington corporation, )
)
Third Party Defendants.
------------------------------------------------------------- )
KIRTLEY-COLE ASSOCIATES, INC., a )
Washington corporation, )
)
Fourth Party Plaintiffs, )
)
vs. )
)
JANES BROS. WATERPROOFING, INC., a )
Washington corporation, et al., )
)
Fourth Party Defendants. )
)
)
BAKER, J. Heritage at Deer Creek Associates (Heritage) and Kirtley-Cole
Associates (Kirtley-Cole) are parties to a construction contract that
includes an indemnity agreement. The parties dispute whether the indemnity
agreement requires Kirtley-Cole to indemnify Heritage for Heritage's
Condominium Act violations. We conclude that the agreement does not cover
claims involving harm caused by construction defects, which do not result
in injury or destruction of tangible property, and affirm the superior
court's order granting summary judgment in favor of Kirtley-Cole.
I.
Kirtley-Cole, a general contractor, entered into a contract with Heritage
to develop phase II of the Heritage at Deer Creek Condominiums. The
parties entered into an indemnification agreement, which they attached as
exhibit 'A' to the general conditions contract.
A couple of years after construction on phase II was completed, Heritage at
Deer Creek Owners Association filed suit against Heritage for damages
stemming from construction defects in both phases I and II. The complaint
alleged numerous claims, including Condominium Act violations,1 Consumer
Protection Act violations,2 breach of warranty, breach of contract, and
negligence. Heritage filed a third party complaint against Kirtley-Cole,
as well as the general contractor for phase I and a number of
subcontractors, for negligence, breach of contract, breach of express and
implied warranties, and indemnification.
Subsequently, Heritage settled with the condominium owners association, but
it continued to seek reimbursement from the third party defendants.
Heritage and Kirtley-Cole filed cross motions for summary judgment on
Heritage's claim for indemnity. The superior court granted Kirtley-Cole's
motion for summary judgment, as well as a motion to strike certain
evidence. We granted discretionary review of the superior court's orders.
Heritage's contract and warranty claims are still pending below.
II.
We review an order on motions for summary judgment de novo.3 Summary
judgment is appropriate only when there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of
law.4
Heritage seeks indemnity from Kirtley-Cole for damages it paid pursuant to
its settlement. It argues that the indemnity agreement reflects the
parties' intent that Kirtley-Cole indemnify Heritage for all claims
stemming from performance of the work. Heritage argues that its settlement
agreement with the owners association only reflects the Washington
Condominium Act claims, and therefore it is only seeking indemnity under
those claims.5 Kirtley-Cole responds that the indemnity agreement only
applies to tort claims, so it has no duty to indemnify Heritage for
Condominium Act violations.
The intention of the parties must be the starting point for interpreting
the indemnity agreement.6 We view ''the contract as a whole, the subject
matter and objective of the contract, all the circumstances surrounding the
making of the contract, the subsequent acts and conduct of the parties to
the contract, and the reasonableness of respective interpretations
advocated by the parties'' in order to ascertain the parties' intent.7
Because contract interpretation is generally a question of fact, we can
interpret an agreement as a matter of law only when the interpretation does
not depend on the use of extrinsic evidence, or when the extrinsic evidence
leads to only one reasonable conclusion.8 Therefore, summary judgment is
appropriate only if the indemnity agreement, viewed in Heritage's favor,
has only one reasonable meaning.9
The indemnity clause reads:
The CONTRACTOR shall indemnify and hold harmless the OWNER and its agents
and employees from and against claims, damages, losses, and expenses,
including but not limited to attorneys' fees, arising out of or resulting
from performance of the Work, provided that such claim, damage, loss or
expense is attributable to bodily injury, sickness, disease or death, or to
injury or destruction of tangible property including economic loss for loss
of use resulting therefrom (collectively the 'Loss'), but subject to the
following limitation.
CONTRACTOR'S duty to indemnify and hold harmless the OWNER and its agents
shall not apply where the Loss was caused or resulted from the sole
negligence of OWNER and its agents and employees. CONTRACTOR'S duty to
indemnify and hold harmless the OWNER and its agents, however, shall apply
where the Loss was caused or resulted from the concurrent negligence of
OWNER and its agents and employees.
Kirtley-Cole has a duty to indemnify Heritage for Condominium Act
violations only if the condominium owners' harm was within the scope of
personal injury, which was clearly not the case, or if the harm was 'injury
or destruction of tangible property.' The owners association's claims
concern the quality of construction, not injury or destruction of property.
The distinction between construction defects and injury to tangible
property turns on the nature of the defect and the manner in which the
damage occurred.10 Injury to tangible property occurs when property is
damaged and thus decreases in value. A construction defect is not
'injury,' but rather poor craftsmanship or design and it occurs during
production, adversely affecting the quality and value when complete. The
harm is inherent in the finished project, rather than caused by subsequent
'destruction.'
Heritage points to extrinsic evidence in support of its position that the
parties intended 'injury or destruction of tangible property' to include
harm caused by construction defects. We must look to the circumstances
surrounding the making of the contract in order to discern the parties'
intent, regardless of whether the language is ambiguous.11
The parties crossed out the standard indemnification clause in their form
contract, and attached the indemnity agreement as exhibit 'A.' Unlike the
parties' indemnity agreement, the form indemnity clause limited the claims
involving tangible property to property 'other than the Work itself.'
Heritage contends that the parties removed this language because they did
not intend to limit the scope of tangible property to property other than
the work itself. While this may be true, there still must be injury or
destruction of tangible property. As discussed above, construction defects
are inherent in the product and not injury or destruction.
Courts may also look to subsequent acts of the parties to discern their
intent at the time the contract was made.12 Heritage points to the fact
that Kirtley-Cole purchased insurance that allegedly covers all of the
claims for which Heritage is seeking indemnity. But a party's decision to
protect itself by purchasing comprehensive insurance coverage does not
cause us to interpret this indemnity agreement other than in accordance
with its clear meaning.
Heritage argues that the superior court erred by excluding additional
evidence it presented in support of its motion for summary judgment. We
review the trial court's evidentiary rulings made in connection with a
summary judgment motion de novo.13 On a motion for summary judgment, we may
only consider evidence that will be admissible at trial.14
Heritage contends that the court should have considered the deposition
testimony of Ralph Kirtley, the President of Kirtley-Cole. Specifically,
Heritage cites to portions of Kirtley's deposition in which he was asked,
'what is your understanding of the term 'performance of the work?'' After
an objection, Heritage rephrased the question as, 'what is the work that is
being referenced there?' Kirtley responded that Kirtley-Cole was
indemnifying Heritage against things that arise out of its performance of
the work.
Kirtley's current and subjective opinion of the agreement's meaning is not
germane to the question before the court concerning the objective
manifestations of intent by the parties at the time the contract was
formed. Additionally, Kirtley's statement does nothing to clarify the
scope of the indemnity agreement because there is no dispute that its duty
arose out of its performance of the work. Thus, this portion of Kirtley's
testimony is not helpful, and Heritage has not pointed to other relevant
portions. The superior court did not err by excluding the deposition for
purposes of the summary judgment motions.
Heritage also challenges the court's decision to exclude its expert
reports on the scope of damage and cost of repair. But these reports were
under a protective order at Heritage's request. Kirtley-Cole did not have
access to the documents through discovery. Out of fairness to the
defendants, the court struck the documents from the record and lifted the
order, but stayed discovery until after this appeal. In light of the
protective order, the court did not err by excluding the evidence for
purposes of the summary judgment motions.
After viewing the extrinsic evidence in Heritage's favor, we conclude that
the indemnity agreement does not cover losses stemming from construction
defects. It is unreasonable to interpret 'injury or destruction to
tangible property' to include claims stemming from poor craftsmanship.
Therefore, we hold that Kirtley-Cole does not have a duty to indemnify
Heritage for its Condominium Act violations.
Heritage is not left without a vehicle for seeking reimbursement.
Heritage's contract and warranty claims against Kirtley-Cole are still
being litigated. If Heritage prevails, it will recover damages caused by
Kirtley-Cole's performance of the work.
AFFIRMED.
WE CONCUR:
1 Ch. 64.34 RCW.
2 Ch. 19.86 RCW.
3 Arctic Stone, Ltd. v. Dadvar, Wn. App. , 112 P.3d 582, 584 (2005).
4 Scott Gavinizing, Inc v. Northwest EnviroServices, Inc., 120 Wn.2d 573,
580, 844 P.2d 428 (1993).
5 Because the condominium owners association dismissed all claims against
Heritage as part of the settlement agreement, we reject Heritage's
contention that the settlement amount is wholly attributable to the
Condominium Act claims. But we are only asked to decide whether the
agreement covers claims arising under the Act.
6 EnviroServices, 120 Wn. 2d at 580; Berg v. Hudesman, 115 Wn.2d 657, 667,
801 P.2d 222 (1990).
7 Berg, 115 Wn.2d at 667 (quoting Stender v. Twin City Foods, Inc., 82
Wn.2d 250, 254, 510 P.2d 221 (1973)).
8 Tanner Elec. Co-op. v. Puget Sound Power & Light Co., 128 Wn.2d 656, 674,
911 P.2d 1301 (1996); EnviroServices, 120 Wn. 2d at 582.
9 Hall v. Custom Craft Fixtures, Inc., 87 Wn. App. 1, 9, 937 P.2d 1143
(1997).
10 See Stuart v. Coldwell Banker Commercial Group, Inc., 109 Wn.2d 406, 420,
745 P.2d 1284 (1987) (distinguishing physical property damage from harm to
a construction project for purposes of the economic loss rule).
11 Berg, 115 Wn.2d at 667.
12 Berg, 115 Wn.2d at 667 (citing Stender v. Twin City Foods, Inc., 82 Wn.2d
250, 254, 510 P.2d 221 (1973)).
13 Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998).
14 King County Fire Prot. Dist. No. 16 v. Hous. Auth. of King County, 123
Wn.2d 819, 826, 872 P.2d 516 (1994).