Opinion
No. 53906-0-I
Filed: August 8, 2005 UNPUBLISHED OPINION
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.
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.
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, Consumer Protection Act violations, 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.
Ch. 64.34 RCW.
Ch. 19.86 RCW.
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. 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.
Arctic Stone, Ltd. v. Dadvar, ___ Wn. App. ___, 112 P.3d 582, 584 (2005).
Scott Gavinizing, Inc v. Northwest EnviroServices, Inc., 120 Wn.2d 573, 580, 844 P.2d 428 (1993).
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. Kirtley-Cole responds that the indemnity agreement only applies to tort claims, so it has no duty to indemnify Heritage for Condominium Act violations.
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.
The intention of the parties must be the starting point for interpreting the indemnity agreement. 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. 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. Therefore, summary judgment is appropriate only if the indemnity agreement, viewed in Heritage's favor, has only one reasonable meaning.
EnviroServices, 120 Wn. 2d at 580; Berg v. Hudesman, 115 Wn.2d 657, 667, 801 P.2d 222 (1990).
Berg, 115 Wn.2d at 667 (quoting Stender v. Twin City Foods, Inc., 82 Wn.2d 250, 254, 510 P.2d 221 (1973)).
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.
Hall v. Custom Craft Fixtures, Inc., 87 Wn. App. 1, 9, 937 P.2d 1143 (1997).
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. 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.'
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).
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.
Berg, 115 Wn.2d at 667.
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. 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.
Berg, 115 Wn.2d at 667 (citing Stender v. Twin City Foods, Inc., 82 Wn.2d 250, 254, 510 P.2d 221 (1973)).
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. On a motion for summary judgment, we may only consider evidence that will be admissible at trial.
Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998).
King County Fire Prot. Dist. No. 16 v. Hous. Auth. of King County, 123 Wn.2d 819, 826, 872 P.2d 516 (1994).
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.
ELLINGTON and GROSSE, JJ., Concur.