King County, V. Walsh Construction Company Ii, Llc.

• Court: Court of Appeals of Washington
• Decided: July 3, 2023
• Docket: 83787-7
• Status: Published

Opinion

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

KING COUNTY, No. 83787-7-I Respondent, DIVISION ONE v. PUBLISHED OPINION WALSH CONSTRUCTION COMPANY II, LLC, an Illinois limited liability company; and TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, a foreign insurance corporation,

Appellants.

FELDMAN, J. — This appeal arises out of a public works contract that

required Walsh Construction Company II to construct and install a conveyance

pipeline for King County. After the pipeline broke, the County paid Walsh to

repair it and then sued Walsh for those costs. Relevant here, the trial court

dismissed with prejudice “[a]ny defense based on alleged defective design.”

Because the trial court misinterpreted the pertinent provisions of the parties’

agreement and misapplied controlling precedent, we reverse and remand.

I.

In November 2013, the County solicited bids to construct the South

Magnolia Combined Sewer Overflow Control Project. The purpose of the project For the current opinion, go to https://www.lexisnexis.com/clients/wareports/. No. 83787-7-I/2

was to diverge and limit the discharge of overflow wastewater into Elliott Bay

during significant storm events. After Walsh submitted the lowest bid, the County

awarded Walsh a contract (hereinafter “the Contract”) for the construction of an

underground pipeline to convey overflow wastewater toward a diversion structure

and storage tank. Walsh signed the Contract on April 7, 2014.

The Contract includes a provision entitled “Correction of Work or

Damaged Property,” which states as follows:

If material, equipment, workmanship, or Work proposed for, or incorporated into the Work, does not meet the Contract requirements or fails to perform satisfactorily, the County shall have the right to reject such Work by giving the Contractor written Notice that such Work is either defective or non-conforming. 1. The County, at its option, shall require the Contractor, within a designated time period as set forth by the County, to either a. Promptly repair, replace or correct all Work not performed in accordance with the Contract at no cost to the County; or b. Provide a suitable corrective action plan at no cost to the County.

The Contract defines the term “Work,” listed above, to include “the labor,

materials, equipment, supplies, services, other items, and requirements of the

Contract necessary for the execution, completion and performance of all work

within the Contract by the Contractor to the satisfaction of King County.”

Although Walsh agreed that it would repair, replace, or correct all Work

not performed in accordance with the Contract at no cost to the County if the

material, equipment, workmanship, or Work failed to perform satisfactorily, it was

not responsible for the design of the pipeline. Addressing that issue, section 3.2

of the General Terms and Conditions states that the “Contractor will not be

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required to provide professional services which constitute the practice of

architecture and engineering except to the extent provided for in the technical

specifications and drawings.”

Walsh began installing the pipeline in September 2014. On January 5,

2016, the County issued a Certificate of Substantial Completion. In September

2016, the County discovered that the pipeline was malfunctioning. Following

investigation, the County determined the pipeline had fractured, allowing soil and

other debris into the pipe. On February 8, 2017, the County notified Walsh that

the break in the pipeline was preventing overflows from flowing through the

pipeline to the new storage facility and that the “Work has been found not to

conform to [sic] Contract.”

Having found that the Work did not conform to the Contract, the County

directed Walsh to develop a corrective action plan and submit the plan to the

County as soon as possible. Walsh responded, contrary to the County’s

assertion, that “the root cause of the break is due to a design issue” and refused

to repair the non-functioning pipeline unless the County paid it to do so. To

expedite the repairs, the County agreed to advance funds to Walsh subject to

mutual reservations of rights under which the County could seek reimbursement

from Walsh. Walsh ultimately provided a corrective action plan and performed

the work to replace the broken pipeline with a new pipeline. The County incurred

costs in excess of $20 million to repair and replace the damaged pipeline.

In September 2020, the County sued Walsh alleging breach of contract

and breach of warranty. The County alleged that the “Work failed to perform

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satisfactorily due to the physical and other damage to the Project and to the

Conveyance Pipe” and “Walsh breached the Construction Contract by not

repairing, replacing or correcting the physically damaged Work that failed to

perform satisfactorily at no cost to King County.” Walsh, in turn, denied liability

and asserted as an affirmative defense (among other defenses) that the County’s

“claims are limited or barred by the application of the Spearin doctrine.”

The U.S. Supreme Court recognized the Spearin doctrine in United States

v. Spearin, 248 U.S. 132, 54 Ct.Cl. 187, 39 S. Ct. 59 (1918). Succinctly stated,

the doctrine holds that where “‘[A] contractor is required to build in accordance

with plans and specifications furnished by the owner, the [owner] impliedly

guarantees that the plans are workable and sufficient.’” Lake Hills Investments,

LLC v. Rushforth Construction Co., Inc. 198 Wn.2d 209, 218, 494 P.3d 410

(2021) (quoting Ericksen v. Edmonds School Dist. No. 15, 13 Wn.2d 398, 408,

125 P.2d 275 (1942)). The Spearin doctrine “has [since] been adopted in nearly

all jurisdictions,” including Washington. Id. (internal quotation marks omitted).

The County filed a motion for summary judgment seeking (among other

relief) dismissal of Walsh’s Spearin defense. The County asserted that any

implied warranty of design adequacy was displaced by the Correction of Work or

Damaged Property provision in the Contract. The trial court granted the County’s

motion and dismissed with prejudice “[a]ny defense based on alleged defective

design.” Walsh moved for reconsideration, which the trial court denied. The

court subsequently granted Walsh’s motion to certify the summary judgment

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ruling for discretionary review under RAP 2.3(b). This court granted Walsh’s

motion for discretionary review.

II.

The question presented here is whether the Correction of Work or

Damaged Property provision in the Contract (quoted above) displaces “[a]ny

defense based on alleged defective design,” including Walsh’s Spearin defense,

as the trial court ruled. Our Supreme Court squarely addressed a similar issue in

Shopping Center Management Company v. Rupp, 54 Wn.2d 624, 343 P.2d 877

(1959) (hereinafter Rupp), which the County cites in support of its argument. The

court there held that “in the absence of an express warranty, a contractor is not

liable for the loss or damage resulting from the defective plans and specifications

prepared by the other party to the contract.” Id. at 631. The court explained that

where the language of an express warranty goes beyond warranting the work

and also warrants that the materials and equipment installed by the contractor

will “operate satisfactorily under the plans and specifications of the owner,” the

contractor’s express warranty of satisfactory operation displaces the owner’s

implied warranty of design adequacy. Id. at 632-33.

In so holding, the court in Rupp compared the express warranty at issue

there to the contractual guarantee in Port of Seattle v. Puget Sound Sheet Metal

Works, 124 Wash. 10, 213 P. 467 (1923). In Port of Seattle, the contractor’s

guarantee stated: “We hereby guarantee to keep the roof installed by us . . . in

perfect condition for a term of ten years from this date.” Id. at 11. Given this

broad language, the court in Port of Seattle held that the contractor was “bound

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by the . . . guaranty, and must maintain and keep in repair the work, no matter

whether the imperfect condition arose from his failure to comply with the plans

and specifications or may have arisen by reason of a defect in the very plan of

construction itself, independent of any other cause.” Id. at 13.

Applying this central holding of Port of Seattle to the facts at issue in

Rupp, the court in Rupp held that Rupp’s express warranty was “as broad as that

in the Port of Seattle case” because Rupp had agreed “to do more than merely

repair or replace any defective material, equipment, or workmanship,” it had also

agreed to “guarantee the satisfactory operation of all materials and equipment

installed under this contract,” which the court in Rupp expressly held “includes

the plans and specifications.” 54 Wn.2d at 632. Emphasizing this point, the

court held: “Therefore, [Rupp] must be deemed to have guaranteed that the

materials and equipment installed by him would operate satisfactorily under the

plans and specifications of the owner.” Id. at 632-33 (emphasis added).

Here, in contrast to Rupp, Walsh did not agree that the materials and

equipment “would operate satisfactorily under the plans and specifications of the

owner.” Id. To the contrary, section 3.2 of the General Terms and Conditions

states that the “Contractor will not be required to provide professional services

which constitute the practice of architecture and engineering except to the extent

provided for in the technical specifications and drawings.” Nor did Walsh agree

to maintain the pipeline in perfect condition for a specified period of time (as the

contractor did in Port of Seattle). As a result, this case does not involve the sort

of “‘wider guaranty’” that would necessarily displace the implied warranty of

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design adequacy under Rupp. 54 Wn.2d 632 (quoting Port of Seattle, 124 Wash.

at 13).

Several principles of contract construction support our conclusion. First,

“[o]ur goal is to interpret the agreement in a manner that gives effect to all the

contract’s provisions” and “harmonize clauses that seem to conflict.” Nishikawa

v. U.S. Eagle High, LLC., 138 Wn. App. 841, 849, 158 P.3d 1265 (2007). The

Correction of Work or Damaged Property provision allows the County to reject

the Work by giving Walsh notice that the Work “is either defective or

nonconforming” and require Walsh to “[p]romptly repair, replace or correct all

Work not performed in accordance with the Contract.” (emphasis added). And

section 3.2 of the General Terms and Conditions, as noted previously, relieves

Walsh of the requirement to verify the adequacy of the plans and specifications

as an architect or engineer presumably would. These provisions reinforce our

conclusion that the Correction of Work or Damaged Property provision does not

guarantee that the pipeline will operate satisfactorily under the County’s plans

and specifications as required to displace the implied warranty of design

adequacy under Rupp.

Second, “courts must avoid construing contracts in a way that leads to

absurd results.” Grant County Port Dist. No. 9 v. Wash. Tire Corp., 187 Wn. App.

222, 236, 349 P.3d 889 (2015). The Contract includes a “Warranty and

Guaranty” provision, which warrants that “all Work conforms to the requirements

of the Contract and is free from any defect in equipment, material, design, or

workmanship performed by Contractor” and limits the warranty period to “the

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longer period of . . . one year from the date of Substantial Completion of the

entire Project or the duration of any special extended warranty offered by a

supplier or common to the trade.” The County initially gave notice under this

provision. But if the County’s interpretation of the Correction of Work or

Damaged Property provision were accepted, this express warranty and its one-

year limitation period would be meaningless because Walsh would be deemed to

have guaranteed that the pipeline will operate satisfactorily and that it will provide

any repairs or corrective action plan at no cost to the County regardless of what

or who caused the pipeline to fail and regardless of when that occurs. For

example, if the County’s construction activities above the pipeline caused the

pipeline to fail, if the equipment was improperly maintained by the County, or if

the County’s design was inadequate or defective, the County’s interpretation

would allow it to demand repairs or a corrective action at no cost to the County

without regard to the one-year limitation period in the “Warranty and Guaranty”

provision, in the absence of any non-conforming work, and despite its agreement

that Walsh was not required to provide architectural or engineering services on

the project. Such an absurd interpretation should be avoided.

Lastly, “where a contract is susceptible of more than one construction, this

court should construe it against the drafter.” Joinette v. Local 20, Hotel & Motel

Rest. Emps. & Bartenders Union, 106 Wn.2d 355, 364, 722 P.2d 83 (1986). If

and to the extent the Correction of Work or Damaged Property provision is

susceptible of more than one construction, it should properly be interpreted to

mean that the Work will conform to the Contract and that the distinct items

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incorporated into the Work will perform satisfactorily (in other words, that a

fusible polyvinyl chloride pipe installed under the Contract will perform as a

fusible polyvinyl chloride pipe reasonably should) and not that the pipeline will

operate satisfactorily under the plans and specifications as required to displace

the implied warranty of design adequacy under Rupp.

Contrary to the County’s argument, Lake Hills does not require a different

result. In Lake Hills, the Supreme Court stated that to successfully assert a

Spearin defense “the contractor must establish that . . . its obligations went no

further than to conform with the plans and specifications prescribed by the owner

as part of the contract. . . .” 198 Wn.2d at 218. Here, with regard to the

performance of the conveyance pipeline—as opposed to the distinct items

incorporated into the Work—Walsh’s obligations went no further than to conform

with the plans and specifications prescribed by the County as part of the

Contract. The County’s reliance on the foregoing portion of Lake Hills is

therefore misplaced.

Indeed, elsewhere in its opinion, the Supreme Court expressly reiterated

in Lake Hills that “[i]f the owner provides a defective design, then the contractor

should not be responsible for the damage caused by following the design

because [they were] not the source of the defects.” 198 Wn.2d at 224. Here, for

example, Walsh’s expert opined that the design provided by King County was

defective. Consistent with Lake Hills, Walsh should not be responsible for

damage caused by following the design because it was not the source of any

alleged defect. Instead, Walsh is liable if its Work does not meet the Contract

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requirements or if the distinct items incorporated into the Work fail to perform

satisfactorily.

III.

The trial court erred in dismissing with prejudice “[a]ny defense based on

alleged defective design.” We reverse and remand for further proceedings

consistent with this opinion.

WE CONCUR:

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