REALM, INC. v. City of Olympia

277 P.3d 679
Court of Appeals of Washington·Decided May 8, 2012·No. 41563-1-II·Published·Cited by 17 cases

Opinion

277 P.3d 679 (2012)

REALM, INC., a Washington corporation, Appellant,
v.
CITY OF OLYMPIA, a municipality, Respondent.

No. 41563-1-II.

Court of Appeals of Washington, Division 2.

March 13, 2012.
Publication Ordered May 8, 2012.

*680 Thomas F. Miller, Jennifer M. Modak, Miller Law Office PS, Tumwater, WA, for Appellant.

William Allen Linton, Inslee, Best, Doezie & Ryder PS, Bellevue, WA, for Respondent.

Michael Porter Grace, Groff Murphy PLLC, Tymon Berger, Ashbaugh Beal LLP, Seattle, WA, Amicus Curiae on behalf of Associated General Contractors O.

WORSWICK, A.C.J.

¶ 1 Realm Inc. entered into a contract with the city of Olympia to build a fish passage tunnel. The city subsequently ordered Realm to stop work and terminated the contract for public convenience. After an audit, the city determined the amount it believed was due to Realm, and Realm accepted payment. Realm then sued the city, seeking additional compensation. The city moved for summary judgment, which the trial court granted. We affirm, holding that Realm waived the right to sue by failing to comply with notice provisions that were, by contract, a precondition to litigation by Realm against the city.

FACTS

¶ 2 On June 18, 2008, the city awarded Realm a contract to build a tunnel that would serve as a fish passage route for salmon. Realm began work on the project, but the city ordered Realm to stop all work on September 9, finding that Realm had failed to *681 maintain the required grade, to retain staff with appropriate expertise, to properly shore the construction, and to achieve adequate progress. On September 30, the city terminated the contract.

¶ 3 On December 29, Realm submitted a claim to the city for work performed on the project, seeking $1,109,418.75. The city employed an auditing firm that determined the city owed Realm $535,852. After Realm refused to sign a change order agreeing to that amount, the city unilaterally issued the change order and issued a check to Realm. Realm cashed the check.

¶ 4 Realm sued the city, alleging breach of contract for the city's failure to pay Realm the full amount Realm had claimed. The city moved for summary judgment, arguing that Realm had waived its claim by failing to comply with the contract's notice provisions and that Realm's acceptance of payment constituted an accord and satisfaction. The trial court granted summary judgment to the city.[1] Realm appeals.

ANALYSIS

I. STANDARD OF REVIEW

¶ 5 Summary judgment is appropriate where, viewing all facts and resulting inferences most favorably to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Briggs v. Nova Servs., 166 Wash.2d 794, 801, 213 P.3d 910 (2009); CR 56(c). "A genuine issue of material fact exists where reasonable minds could differ on the facts controlling the outcome of the litigation." Ranger Ins. Co. v. Pierce County, 164 Wash.2d 545, 552, 192 P.3d 886 (2008). We review a grant of summary judgment de novo. Briggs, 166 Wash.2d at 801, 213 P.3d 910.

II. CONTRACTUAL NOTICE REQUIREMENT

¶ 6 Realm argues that it was not required to comply with contractual notice provisions because its dispute with the city did not arise until after the city terminated the contract. We disagree, holding that Realm was required to comply with the notice provisions even after termination.

¶ 7 The "touchstone of contract interpretation is the parties' intent." Durand v. HIMC Corp., 151 Wash.App. 818, 829, 214 P.3d 189 (2009) (quoting Tanner Elec. Coop. v. Puget Sound Power & Light Co., 128 Wash.2d 656, 674, 911 P.2d 1301 (1996)), review denied, 168 Wash.2d 1020, 231 P.3d 164 (2010). Washington courts follow the objective manifestation theory of contracts, imputing an intention corresponding to the reasonable meaning of the words used. Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wash.2d 493, 503, 115 P.3d 262 (2005). Contract interpretation is a question of law when, as here, the interpretation does not depend on the use of extrinsic evidence. Dice v. City of Montesano, 131 Wash.App. 675, 684, 128 P.3d 1253 (2006) (quoting Tanner Elec. Coop., 128 Wash.2d at 674, 911 P.2d 1301).

¶ 8 When contract provisions seem to conflict, we will harmonize them with the goal of giving effect to all provisions. Nishikawa v. U.S. Eagle High LLC, 138 Wash. App. 841, 849, 158 P.3d 1265 (2007). "Washington law generally requires contractors to follow contractual notice provisions unless those procedures are waived." Mike M. Johnson, Inc. v. Spokane County, 150 Wash.2d 375, 386, 78 P.3d 161 (2003).

¶ 9 The dispositive issue on review is whether Realm was required to comply with the contract's notice provision after the city terminated the contract. The contract between Realm and the city included the "Washington State Department of Transportation Standard Specifications for Road, *682 Bridge, and Municipal Construction" (Standard Specifications), which provided the general terms of the contract.

¶ 10 Section 1-08.10 of the Standard Specifications sets forth the terms relating to termination of the contract. The city terminated the contract under section 1-08.10(2), which authorized it to terminate the contract "for public convenience" if it determined "that such termination is in the best interests of the Contracting Agency." Clerk's Papers (CP) at 209. Under section 1-08.10(3), on termination for public convenience, the contractor shall submit "a request for costs associated with the termination." CP at 209. This request for costs must comply with sections 1-09.11 and 1-09.12.

¶ 11 Section 1-09.12 requires the contractor to comply with audits, while section 1-09.11 instructs the contractor how to file a formal claim under the contract. Section 1-09.11(1) instructs the contractor to first provide notice of disputes under the contract's notice provision, section 1-04.5. A formal claim is authorized only if the issue is not resolved by the formal notice procedures in section 1-04.5.

¶ 12 Furthermore, section 1-08.10(4) provides that upon termination for public convenience, the contractor will be paid for the actual work performed. It further provides that if the parties cannot agree on the amount due, "the matter will be resolved as outlined in Section 1-09.13." CP at 209. Section 1-09.13/headed "Claims Resolution," provides:

Prior to seeking claim resolution through nonbinding alternative dispute resolution processes, binding arbitration, or litigation, the Contractor shall proceed under the administrative procedures in Sections 1-04.5,

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REALM, INC. v. City of Olympia, 277 P.3d 679 (Wash. Ct. App. 2012).

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