Court Opinion

ID: 4713482
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:39:24.782761+00
Date Added: 2024-06-11T08:07:17.925534
License: Public Domain

J.M. Johnson, J.
(dissenting) — This court has long held that contract actions accrue on breach of the contract, not when the breach is (claimed) discovered. This rule reflects both the legislature’s determinations and our common law of contracts. The rule is reasonable and justified by the uniqueness of contractual settings. Construction contracts provide for inspection by the owner (as well as government inspectors) before acceptance of a project. If a contract has been breached, the owner can ask specific performance — repair—other than damages. The owner, through the contract, can determine the quality and specifics of construction — and pay a higher or lower price.
¶49 Today, the majority wrongly declares a new rule:11 that construction contract actions accrue on discovery of the problem (and accepts incredible claims of years-belated discovery of defects in housing).
*591¶50 In so doing, the majority sets aside our stare decisis rules and disdains legislative intent, while promulgating a new rule of contract law that runs contrary to the background expectations of contracting parties. By imposing a discovery rule sometimes appropriate for torts to these construction contracts, the majority fails to comprehend the bases for this court’s prior respect for distinction between tort and contract. The majority then incorrectly decides that legislation clarifying the rule that contract actions accrue on breach does not apply. The majority finally errs by applying its discovery rule to these two cases of long-belated contract claims.
¶51 While repudiating the decision of Division One of the Court of Appeals in Architechtonics Construction Management, Inc. v. Khorram, 111 Wn. App. 725, 45 P.3d 1142 (2002) , review denied, 148 Wn.2d 1005, 602 P.3d 1212 (2003) as contrary to decisions of this court, the majority adopts its analysis. Both the decision and policy rationale should be rejected.
¶52 I would reverse the Court of Appeals in 1000 Virginia Limited Partnership v. Vertecs Corp., 127 Wn. App. 899, 112 P.3d 1276 (2005) except insofar as that court concluded that genuine issues of material fact preclude summary judgment. I would also reverse the Court of Appeals in Lombardi v. JTE Construction, Inc., noted at 129 Wn. App. 1031, 2005 Wash. App. LEXIS 2424. Both courts below wrongly applied the discovery rule to actions on contracts and allowed claims which the Washington State Legislature has required be filed within specified years of the breach. Therefore, I dissent.
ANALYSIS
Statute of Repose and Statute of Limitations
¶53 Construction contract claims must comply with both the statute of repose and the statute of limitations. A statute of repose terminates a right of action after a specified period of years (often six) after completion of contract performance. *592Rice v. Dow Chem. Co., 124 Wn.2d 205, 211-12, 875 P.2d 1213 (1994). The statute of repose set out in RCW 4.16.310 provides, in pertinent part:
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.
This reflects the fact that six years is sufficient time to find a contract breach, and recognizes that construction deteriorates over years and that proof of construction error becomes speculative after many years.
¶54 Once a contract cause of action accrues, a statute of limitations begins to run, requiring filing of a legal action within a specified period. RCW 4.16.005. Under a statute of limitations, the plaintiff must file suit within the appropriate time frame (often six years for written contracts). RCW 4.16.040. The statute of limitations bars the plaintiff from bringing an action in court after the specified time.
¶55 This court has previously summarized how the statute of repose and statute of limitations interact:
RCW 4.16.310 requires a 2-step analysis for computing the accrual of a cause of action arising from the construction, alteration, or repair of any improvement to real property. First, the cause of action must accrue within 6 years of substantial completion of the improvement; and second, a party then must file suit within the applicable statute of limitation, depending on the type of action.
Del Guzzi Constr. Co. v. Global Nw. Ltd,., 105 Wn.2d 878, 883, 719 P.2d 120 (1986).
*593Contract Actions Accrue on Breach
¶56 Washington’s long-standing rule for contracts is that accrual of an action occurs upon breach of the contract, regardless of when the breach is discovered (hereinafter the “breach rule”). Taylor v. Puget Sound Power & Light Co., 64 Wn.2d 534, 537-38, 392 P.2d 802 (1964). See also N. Coast Enters., Inc. v. Factoria P’ship, 94 Wn. App. 855, 859, 974 P.2d 1257 (“Our courts have consistently held that the statute of limitation in a contract action begins to run when the contract is breached.”), review denied, 138 Wn.2d 1022, 989 P.2d 1137 (1999).
¶57 A contrary rule applies in tort actions; a victim of a violation of a duty owed to him or her may sue after discovery of the injury.
¶58 In 2003, the Court of Appeals decision in Architechtonics, 111 Wn. App. 725, confused the two rules and applied the tort discovery rule to a construction contract action. The decision conflicted with this court’s cases but was not reviewed. Architechtonics, 148 Wn.2d 1005.
¶59 In its next session, the legislature responded to the Court of Appeals’ error by enacting RCW 4.16.326(l)(g). That statute provides, in pertinent part:
(1) Persons engaged in any activity defined in RCW 4.16.300 may be excused, in whole or in part, from any obligation, damage, loss, or liability for those defined activities under the principles of comparative fault for the following affirmative defenses:
(g) To the extent that a cause of action does not accrue within the statute of repose pursuant to RCW 4.16.310 or that an actionable cause as set forth in RCW 4.16.300 is not filed within the applicable statute of limitations. In contract actions the applicable contract statute of limitations expires, regardless of discovery, 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.
*594RCW 4.16.326(l)(g) (emphasis added). Thus, the legislature reiterated and codified its support of this court’s longstanding breach rule for contract actions.
¶60 The majority necessarily admits that “this court has consistently held that accrual of a contract action occurs on breach.” Majority at 576. This widely recognized breach rule was intentionally not followed by the Court of Appeals in Architechtonics. See Architechtonics, 111 Wn. App. at 737 (“The statute of limitation for contract actions begins to run when a party knows or, in the exercise of due diligence should know, of the other party’s breach.”).
¶61 The majority even demonstrates Architechtonics’ flawed reasoning and conclusion (before adopting the same rule). Majority at 577-78. The Court of Appeals clearly exceeded its authority by purporting to adopt a new discovery rule in Architechtonics. See State v. Hairston, 133 Wn.2d 534, 539, 946 P.2d 397 (1997) (holding that the Court of Appeals errs when it departs from the precedent of the Washington Supreme Court). See also Godefroy v. Reilly, 146 Wash. 257, 259, 262 P. 639 (1928) (“When this court has once decided a question of law, that decision, when the question arises again, is not only binding on all inferior courts in this state, but it is binding on this court until that case is overruled.”).
Majority Improperly Legislates the Discovery Rule for Our State
¶62 First reaffirming that this court has long upheld the breach rule for contracts and recognizing that Architechtonics was wrongly decided, the majority proceeds to engage in its own judicial misadventure. The majority legislates into existence the discovery rule for construction contracts.
¶63 This court is vested with the judicial power, not the legislative. Wash. Const, art. IV, § 1; State v. Jackson, 137 Wn.2d 712, 725, 976 P.2d 1229 (1999) (“ ‘[T]he drafting of a statute is a legislative, not a judicial, function.’ ” (quoting State v. Enloe, 47 Wn. App. 165, 170, 734 P.2d 520 (1987))). *595It is a fundamental principle of our constitution that the judiciary does not possess legislative powers.12
¶64 Unfortunately, the majority appears to assume that this court can legislate the discovery rule. Then, taking inspiration from the Architechtonics decision it decried, the majority promulgates the discovery rule “ ‘as a matter of judicial policy.’ ” Majority at 586.
¶65 Despite acknowledgment that the legislature has “the authority to determine whether a discovery rule should apply in a particular context,” the majority makes its determination in place of the legislature. Majority at 582. Without the benefit of hearing and other advantages of legislative process, it asserts that “the benefits of applying the rule outweigh the burdens.” Id. Such balancing of interests is also the hallmark of the legislative process.
¶66 The majority categorically fails to examine this court’s long-standing rule that a contract action accrues upon breach under well-established stare decisis jurisprudence. The majority declines to demonstrate how the rule is both erroneous and harmful — the usual prerequisites to overturning precedent.
¶67 In contrast, this opinion will employ the appropriate stare decisis analysis and show that the rule that contract actions accrue upon breach is reasonable and neither erroneous nor harmful. Thus, there is not justification for overruling our state law and long precedent.
Stare Decisis Supports the Rule that Contract Action Accrues on Breach
¶68 Stare decisis means, literally, “to stand by things decided.” Black’s Law Dictionary 1443 (8th ed. 2004). This cornerstone of the common law assures that citizens can rely on the rule of law in decision making. It is especially important in contracting where the parties allocate risks *596and costs. By virtue of stare decisis, courts follow rules laid down in previous judicial decisions unless they contravene principles of justice. See Windust v. Dep’t of Labor & Indus., 52 Wn.2d 33, 35-36, 323 P.2d 241 (1958). Stare decisis helps make the system of justice one of unity, assuring that the decisions of courts of last resort are reliable and binding. State v. Ray, 130 Wn.2d 673, 677, 926 P.2d 904 (1996); State ex rel. Wash. State Fin. Comm. v. Martin, 62 Wn.2d 645, 665, 384 P.2d 833 (1963).
¶69 Continued adherence to legal principle established in precedent allows citizens to choose courses of action with a reasonable expectation of legal consequences. Crown Controls, Inc. v. Smiley, 110 Wn.2d 695, 704, 756 P.2d 717 (1988). Without the stabilizing effect of this doctrine, law becomes subject to the whims of current holders of judicial office. In re Rights to Waters of Stranger Creek, 77 Wn.2d 649, 653, 466 P.2d 508 (1970).
¶70 Thus, stare decisis serves both as a protector of common-law liberty and as a restraint upon judicial discretion. The Supreme Court of another state ably expressed the important concerns that underlie adherence to stare decisis:
It is often the function of the courts by their judgments to establish public policy where none on the subject exists. But overthrow by the courts of existing public policy is quite another matter. That its establishment may have resulted from decisional, rather than statutory, law, is in our opinion, immaterial. Once firmly rooted, such policy becomes in effect a rule of conduct or of property within the state. In the exercise of proper judicial self-restraint, the courts should leave it to the people, through their elected representatives in the General Assembly, to say whether or not it should be revised or discarded.
Rogers v. Florence Printing Co., 233 S.C. 567, 574, 106 S.E.2d 258 (1958).
¶71 Where this court has been urged to abandon a long-established Washington doctrine and to adopt a new rule, we have repeatedly recognized that stare decisis “ ‘requires a *597clear showing that an established rule is incorrect and harmful before it is abandoned.’ ” Riehl v. Foodmaker, Inc., 152 Wn.2d 138, 147, 94 P.3d 930 (2004) (quoting In re Rights to Waters of Stranger Creek, 77 Wn.2d at 653).
¶72 Here, the majority never even attempts to show how that this court’s long-standing breach rule is erroneous and harmful under our well-established stare decisis jurisprudence.
The Breach Rule Is Not Incorrect
¶73 It is difficult to conjure a rationale for declaring incorrect the rule that contract actions accrue on breach. The majority attempts no such demonstration. That is sufficient to end the inquiry. Nonetheless, we shall go on to demonstrate the correctness of the rule.
¶74 Statutes of limitation and accrual of actions at the time of contractual breach are a central part of contract law. They are the background expectations on which all contracting parties rely. The expectation that a contract cause of action will not accrue until breach is a factor influencing risk calculations of contracting parties. The rule impacts the prices that contracting parties agree to in allocating risks. The ability of a contracting party to check for breach or to assure compliance with the contract, through inspection, before acceptance of the project is part of most construction contracts.
¶75 The breach rule brings greater certainty to contracts and the scope of potential liability arising therefrom. Assignment of potential liability at the outset of the bargain offers an important certainty that is lacking where the discovery rule is employed, and courts must make post hoc, hypothetical determinations about when breach could have been discovered. The present cases illustrate this problem, with claims of construction defects discovered years after each project was accepted.
¶76 Contracting parties have particularized knowledge of facts and circumstances surrounding their contracts, and *598judgments of contracting parties in this state are premised upon the breach rule. For example, a party may inspect before acceptance of a project, a practice further supported by multiple government inspections. A change in established accrual rules undermines the contracting parties’ bargain. It was legitimate for those parties to contract according to our long-standing breach rule; it is also beneficial to allow such contract allocation of risk and inspection and acceptance. The owner gets what he contracted for and may sue to enforce.
The Breach Rule Is Not Shown Harmful
¶77 There is no basis for concluding that the breach rule is affirmatively harmful, and the majority failed to make such demonstration. For that reason alone, there is no warrant for this court’s reversal of the long-standing rule. However, there is also ample reason for concluding that the breach rule is beneficial and that the majority’s imposition of a discovery rule is harmful. In particular, imposition of the discovery rule in the context of construction contract disregards the important distinction between contract and tort.
¶78 In Berschauer/Phillips Construction Co. v. Seattle School District No. 1, 124 Wn.2d 816, 826, 881 P.2d 986 (1994), this court reaffirmed “the fundamental boundaries of tort and contract law.” This court rightly recognized that it is of the utmost importance “to ensure that the allocation of risk and the determination of potential future liability is based on what the parties bargained for in the contract.” Id.
¶79 It may be sensible to apply the discovery rule in situations where the parties have not entered into close contractual relations for a particular undertaking. See U.S. Oil & Ref. Co. v. Dep’t of Ecology, 96 Wn.2d 85, 633 P.2d 1329 (1981) (applying the discovery rule in an action involving illegal discharge of pollutants); Ruth v. Dight, 75 Wn.2d 660, 453 P.2d 631 (1969) (applying the discovery rule in a medical malpractice claim), superseded by statute, *599RCW 4.16.360, as recognized in Teeter v. Lawson, 25 Wn. App. 560, 563, 610 P.2d 925 (1980).
¶80 The majority’s decision to impose the discovery rule into the contractual setting extends tort principles beyond their rightful boundaries. The result is an infringement of contract obligations freely consented to by autonomous parties. Wash. Const, art. I, § 23 (“No . . . law impairing the obligations of contracts shall ever be passed.”). See also U.S. Const, art. I, § 10, para. 1.
¶81 In Stuart v. Coldwell Banker Commercial Group, Inc., 109 Wn.2d 406, 420, 745 P.2d 1284 (1987), this court observed that “[t]ort law is concerned with the obligations imposed by law, rather than by bargain.” “In contrast, contract law protects expectation interests, and provides an appropriate set of rules when an individual bargains for a product of particular quality or for a particular use.” Id.
¶82 The distinction between remedies in tort and contract liability “encourages parties to negotiate toward the risk distribution that is desired or customary.” Berschauer, 124 Wn.2d at 827. Berschauer reflected the need to “preserve the incentive to adequately self-protect during the bargaining process.” Id. Unfortunately, the majority’s imposition of the discovery rule disregards the bargaining process in allocating risk and liability.
¶83 The majority’s proffered justification for imposing the discovery rule is flimsy. It contends that application of the discovery rule in this construction contract setting “is a logical and desirable expansion of the discovery rule.” Majority at 579. Bootstrapping is no substitute for reasoning. The majority’s policy preference for the discovery rule does not satisfy the requirements for overruling longstanding precedent. Nor does the mere fact that the discovery rule is given application in other contexts justify this extension.
¶84 The majority’s contention that “it is unfair to permit a defendant to escape responsibility for shoddy construction simply because the cause of action is based on contract *600rather than a tort theory,” id. at 580, disregards the importance of private party contracting and calculated risk-allocation that this court has long respected. See Berschauer, 124 Wn.2d 816 (tort law is imposed by law, rather than by bargain). There is absolutely nothing fair in judicially second-guessing private, contractual decisions premised on a well-understood rule about when contract claims become stale. Further, contractors already have incentive to avoid breaching their contracts. Contractees also benefit from the certainty of the prevailing breach rule in the form of reduced prices.
¶85 Faced with the greater uncertainty as to construction liability that comes with the discovery rule, contractors will ask a higher price to compensate. Courts should not use their coercive powers to artificially increase contract prices where autonomous parties can consent to the price-level and risk-level they find optimal. For an obvious example, the contractee may determine whether a foundation or a window will be standard (up to building “code”) or will be built to a higher, more expensive standard, e.g., to withstand flood or heavy rains or to last longer. Each change will result in an agreed price difference.
Breach Rule Applies to All Washington Cases
¶86 It should not be necessary for this court to reach the issue of whether RCW 4.16.326(l)(g) should be given retroactive effect. See, e.g., McGee Guest Home, Inc. v. Dep’t of Soc. & Health Servs., 142 Wn.2d 316, 324, 12 P.3d 144 (2000). Properly considered, the breach rule for contract actions remained the law of this state regardless of Architechtonics (and until changed by the majority). The breach rule should apply to all contract cases in this state, including both of the cases decided here.
¶87 Strictly speaking, the legislature through RCW 4.16.326(l)(g) codified (clarified) existing law. Even if the legislature had not enacted RCW 4.16.326(l)(g), the breach rule would apply in this state. RCW 4.16.326(l)(g) simply *601punctuates the preexisting breach rule and should apply to the respective cases being decided on this appeal.
¶88 The majority’s conclusion that RCW 4.16.326(l)(g) does not apply retroactively is plagued by logical inconsistency. For the majority to deny RCW 4.16.326(l)(g) effect, it must assume that the breach rule was changed by the Court of Appeals in Architechtonics and that the statute restored the status quo ex ante. But the majority concedes that Court of Appeals decisions cannot contravene decisions of this court. Majority at 578 (citing State v. Gore, 101 Wn.2d 481, 487, 681 P.2d 227 (1984)). The majority likewise concedes that the Court of Appeals had no authority to impose the discovery rule in Architechtonics. Id. Thus, because the discovery rule was never the law of this state, the legislature cannot be said to have “retroactively” overturned the discovery rule through RCW 4.16.326(l)(g). At most, the majority decision creates an aberrant “window” of bad law, closed by the legislature.
RCW 4.16.326(l)(g) Limits the Majority’s Holding
¶89 Despite the majority’s efforts to replace the breach rule with the discovery rule, the majority acknowledges that its holding is subject to RCW 4.16.326(l)(g). Thus, prospectively contracting parties may plead RCW 4.16-.326(l)(g) as an affirmative defense to preclude application of the newly adopted (but short-lived) discovery rule. Majority at 582. Unfortunately, under the majority’s decision, only those few contract actions filed between the decision in Architechtonics and the adoption of RCW 4.16-.326(l)(g) will apply the discovery rule (and presumably only in Division One of the Court of Appeals). This is a strange result that this court could have avoided by proper analysis. Nonetheless, there is consolation in the fact that the discovery rule will find application only in future cases where RCW 4.16.326(l)(g) may not be pleaded as an affirmative defense.
*602Disposition of Cases

1000 Virginia Limited Partnership v. Vertecs Corp.

¶90 Unlike the majority, I would reverse the Court of Appeals ruling that the discovery rule applies in 1000 Virginia, 127 Wn. App. 899.1 would also reverse the Court of Appeals ruling that RCW 4.16.326(l)(g) does not control.
f91 However, I do also conclude that issues of material fact preclude summary judgment and require remand. The record indicates that the trial court did not squarely address whether 1000 Virginia’s contract claims were barred by laches, estoppel, and waiver, or whether the case presented issues of fact regarding when 1000 Virginia knew or should have known its injury. A factual inquiry is warranted in light of this court’s standard of review for summary judgment. Lamon v. McDonnell Douglas Corp., 91 Wn.2d 345, 349, 588 P.2d 1346 (1979) (holding that evidence and inferences are viewed in favor of the nonmoving party). See also Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998) (“The de novo standard of review is used by an appellate court when reviewing all trial court rulings made in conjunction with a summary judgment motion.”). Issues of material fact remain to be resolved.

Lombardi v. JTE Construction, Inc.

¶92 Contrary to the majority, I would also reverse the Court of Appeals ruling in Lombardi, noted at 29 Wn. App. 1031, 2005 Wash. App. LEXIS 2424, which overturned the trial court’s summary judgment order. The trial court correctly concluded that Lombardi’s claim was time-barred.
¶93 Unlike the Court of Appeals in Lombardi, I therefore would reach the issue of JTE Construction, Inc.’s request for attorney fees raised on cross-appeal. I would conclude that JTE is entitled to attorney fees as the prevailing party under the terms of its contract and paragraph 9 of the addendum. The relevant contractual provision is expressly enforceable under RCW 4.84.330. Con*603trary to the majority, I would award JTE attorney fees and costs.
CONCLUSION
¶94 Today’s majority decision departs from separation of powers principles, fails to follow this court’s usual adherence to stare decisis, and disregards crucial distinctions between contract and tort. The majority’s adoption of this discovery rule directly conflicts with the legislature’s latest enactment to the contrary. RCW 4.16.326(l)(g) (Laws op 2003, ch. 80, § 1). There is consolation in the majority’s concession that parties in the future may raise RCW 4.16.326(l)(g) as an affirmative defense, precluding application of this discovery rule in most future construction contract actions. The majority decision will have the short life it deserves.
¶95 I dissent.
Alexander, C.J., concurs in the result of the dissent.

 As noted below, this rule is temporary, as the legislature has confirmed the old rule.

 The Federalist No. 47 (James Madison) (“The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.”).