Court Opinion

ID: 2765492
Source: CourtListenerOpinion
Date Created: 2014-12-30 21:12:38.435734+00
Date Added: 2024-06-11T11:14:07.744908
License: Public Domain

FILED
                                                                    COURT OF APPEALS
                                                                        DIVISION II

                                                                  2C I[   DEC 30 AM 9   7

                                                                   STATE OF WASHINGTON

                                                                   BY
                                                                             EPI TY

    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                       DIVISION II

TIMOTHY        INGRAM       and   ROSEMARY                       No. 44971 -4 -II
INGRAM, husband and wife, .

                               Appellants,

         v.

AMERICAN        CONTRACTOR INDEMNITY                       UNPUBLISHED OPINION
COMPANY, a California corporation,

                               Respondent,

NORTHWEST SEPTIC 0 & M, INC., a
Washington corporation, MARK WHISNANT
CONSTRUCTION INC., a Washington
corporation, and CALVIN L. ROWAN, an
unmarried individual, d /b /a CAL' S CUSTOM
 CONSTRUCTION, AMERICAN STATES
INSURANCE COMPANY, an Indiana
 corporation, CONTRACTORS BONDING
AND INSURANCE COMPANY, a
 Washington corporation,

                             Defendants.

        BJORGEN, J. —   Timothy and Rosemary Ingram seek discretionary review of a trial court

order   granting summary judgment in favor   of   the American Contractor   Indemnity Company
No. 44971 -4 -II

 ACIC)      and   dismissing it from      a suit    arising    out of construction on    the Ingrams' property.   The

trial    court   concluded     that the Ingrams'        suit was untimely based on the two -year statute of

limitations for suits against a contractor' s surety bond found in RCW 18. 27. 040( 3). 1 The Ingrams

argue that the trial court erred in granting summary judgment because material issues of fact

remain as to whether and when the statute of limitations commenced.

           We hold that under the undisputed facts, construction was not substantially complete and

the     contractor   had   not abandoned      the   project.    For those reasons, the trial court erred in holding

that the Ingrams'          suit was   untimely   under   the     statute of   limitations.   Therefore, we reverse the

order of summary judgment in favor of ACIC.

                                                            FACTS

           In August 2008, the .Ingrams'            septic system     failed. The contractor the Ingrams hired to

replace the system informed them that the project would require the removal of the Ingrams' deck,

which      the   contractor promised     to   rebuild after      replacing the septic    system.   The contractor also

assured the Ingrams that no permits would be required for replacing the septic system and deck.

           After the replacement of the septic system, the Ingrams turned to a second contractor to

rebuild the deck and enclose it with a roof, transforming it into a sun -room. This second contractor

did     not obtain   any    building   permits   for this     work.   The Ingrams terminated the services of this

1 RCW 18. 27. 040( 3) provides, in pertinent part:
           Action upon the bond or deposit brought by a residential homeowner for breach of
           contract by a party to the construction contract shall be commenced by filing the
           summons and complaint with the clerk of the appropriate superior court within two
           years from the date the claimed contract work was substantially completed or
           abandoned, whichever occurredfirst.
 Emphasis added.)

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No. 44971 -4 -II

contractor because he repeatedly showed up for work intoxicated, and, as a result, his workmanship

on the deck and sun -room was poor.

        In June 2009, the Ingrams hired Cal' s Construction to finish the partially completed deck

and   sun -room and     remedy the     second       contractor' s   deficient   performance.       At the time of this

construction contract,      and   during     its   performance,      ACIC bonded Cal'       s    with    a "   Contractor' s

Registration Act" surety bond,         chapter       18. 27 RCW.       Like the earlier contractors, Cal' s never

obtained   any   permits   for the   work.    Cal' s finished performing labor and issued final invoices to

the Ingrams on June 17, 2009, stating that all work was complete. Believing the project finished,

the Ingrams paid Cal' s in full for all work performed. Cal' s never performed any further work at

the Ingrams' property after payment of this invoice.

        In late 2011,      the Kitsap County Department of Community Development issued the

Ingrams a notice demanding that they comply with Kitsap County building codes by obtaining the

necessary    building   permits,     inspections,      and   approval     to    use   the deck    and    sun -room.      An

independent inspection of the deck and sun -room resulting from this notice revealed numerous

structural defects and code violations.

        In October 2012, the Ingrams               sued several     defendants,   including     Cal'   s and   ACIC.    The

Ingrams alleged that Cal' s had breached the construction contract between the parties by

performing defective work and that ACIC was Cal' s surety.

        ACIC     moved     for dismissal     under    CR 12( c),     alleging that the Ingrams failed to file their

claims against it within the two year statute of limitations for actions against a contractor' s bond

codified   in RCW 18. 27. 040( 3).     Under that provision, the statute of limitations for claims against

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No. 44971 -4 -II

a surety bond commences at the earlier of a construction project' s substantial completion or

abandonment.         RCW 18. 27. 040( 3).     The Ingrams defended against this dismissal by arguing that

material    issues   of   fact   remained about whether         the   statute of   limitations had   commenced.   The

Ingrams contended that the final invoice, code violations, and lack of approval to use or occupy

the deck and sun -room meant that the construction work was never substantially completed and

that the final invoice showed that          no abandonment          had   occurred.   Because the parties referenced

matters outside the pleadings, the trial court considered ACIC' s motion as one for summary

judgment    under    CR 56( c).     The trial court granted ACIC' s motion, dismissing it from the suit with

prejudice and granting it reasonable attorney fees and costs as the prevailing party under RCW

18. 27. 040( 6).

          The Ingrams appealed the trial court' s order granting summary judgment to ACIC.

Because the trial court had not entered final judgment on all of the Ingrams' claims under CR

54( b),   our commissioner considered the Ingrams' notice of appeal as a motion for discretionary

review and granted the motion.

                                                       ANALYSIS

          RCW 18. 27. 040( 3) states that an action against a contractor' s surety bond must commence

within    two   years of   the   earlier of either   the date   of "substantial complet[     ion]"   or " abandonment"

of a construction contract.          The Ingrams claim that the trial court improperly granted summary

judgment in favor of ACIC because Cal' s never substantially completed or abandoned the

construction contract for their deck and sun -room. We agree.

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No. 44971 -4 -II

                                                    I. STANDARD OF REVIEW

          We review de novo an order of summary judgment, performing the same inquiry as the

trial   court.   Am. States Ins. Co.         v.   Symes of Silverdale, Inc., 150 Wash. 2d 462, 467, 78 P.3d 1266

 2003) ( citing Jones      v.   Allstate Ins. Co., 146 Wash. 2d 291, 300, 45 P.3d 1068 ( 2002)). We consider

the facts and the inferences from those facts in the light most favorable to the Ingrams, the

nonmoving party here.            Jones, 146 Wash. 2d at 300 ( citing Bremerton Pub. Safety Ass 'n v. City of

Bremerton, 104 Wn.         App.    226, 230, 15 P.3d 688 ( 2001)).             Summary judgment is appropriate if the

pleadings, affidavits, and depositions establish that there is no genuine issue of material fact and

that the moving party is          entitled        to judgment        as a matter of   law. Jones, 146 Wash. 2d at 300 -01

 citing Lybbert v. Grant County, 141 Wash. 2d 29, 34, 1 P.3d 1124 ( 2000)).

           We    review   de   novo   the meaning        of a statute.    Dep' t ofEcology v.      Campbell & Gwinn, LLC,

146 Wash. 2d 1, 9, 43 P.3d 4 ( 2002).                  When interpreting a statute, we attempt to discern and give

meaning to the legislature'           s   intent.     Campbell &. Gwinn, 146 Wash. 2d                 at   9 - 10.   We discern the

legislature' s intent through the plain text of the statute, as well as the text of any related provisions.

Campbell & Gwinn, 146 Wash. 2d                   at    11 - 12.   Where a provision " remains susceptible to more than

one reasonable meaning" after this textual examination, it is ambiguous and we turn to extrinsic

evidence of legislative intent, such as legislative history, canons of construction, or common law
precedent.       Campbell & Gwinn, 146 Wash. 2d                   at   12 ( citing Cockle   v.   Dep' t   of Labor & Indus., 142
Wash. 2d 801, 808, 16 P.3d 583 ( 2001)).

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No. 44971 -4 -II

                                        II. SUBSTANTIAL COMPLETION

         The Ingrams first argue that the trial court erred in granting ACIC summary judgment

because they introduced evidence showing that it would have been illegal to use or occupy the

deck   and sun -room.       The Ingrams contend that this evidence shows that the deck and sun -room

were not fit for occupancy. ACIC effectively concedes the Ingrams' argument by failing to address

the   substantial completion      issue in its    briefing. State v. E.A.J., 116 Wash. App. 777, 789, 67 P.3d
518 ( 2003).   We accept this concession because we conclude that the absence of legal permission

to use or occupy the deck and sun -room prevented the Ingrams from lawfully using or occupying

those structures and that therefore the structures were not substantially complete.

          Substantial       complet[ ion]"   as    used    in RCW 18. 27. 040( 3)     has the same meaning as

 substantial completion of construction"            as used   in RCW 4. 16. 310. RCW 18. 27. 010( 13).     RCW

4. 16. 310 defines "   substantial    completion of construction"          as "   the state of completion reached

when an improvement upon real property may be used or occupied for its intended use."

 Emphasis added.)

         The texts     of   RCW 4. 16. 310        and    RCW 18. 27. 040( 3) themselves are ambiguous as to

whether legal permission to use or occupy an improvement on real property is necessary to

commence the statute of limitations for suits against contractors' surety bonds. RCW 4. 16. 310' s

use of "may" reasonably could be read to define substantial completion as a state reached where

the construction is sufficiently advanced that an owner could use or occupy the improvement.

1519 -1525 Lakeview Blvd. Condo. Ass ' n            v.   Apartment Sales   Corp., 101 Wash. App. 923, 931, 6 P.3d
74 ( 2000), aff'd 144 Wash. 2d 570, 29 P.3d 1249 ( 2001).             Under this reading, legal permission to use

or occupy the improvement would be irrelevant to determining its completion. Whether the statute

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No. 44971 -4 -II

of limitations for an action against a contractor' s surety bond had commenced would turn purely

on    the   physical state of     the improvement.         But " may"   is also commonly used to mean to have

    permission" to do something, and RCW 4. 16. 310 therefore may also reasonably be read to define

substantial completion as the state reached where the owner has legal permission to use or occupy
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the improvement. WEBSTER' S THIRD NEW INT' L DICTIONARY 1396 ( 2002) ( definition                      of "may.   ").

            The related provisions of chapter 18. 27 RCW do not help us resolve the ambiguity found

in the language        of   RCW 4. 16. 310     and   RCW 18. 27. 040( 3).   The legislature enacted chapter 18. 27

RCW " to afford protection to the public including all persons, firms, and corporations furnishing

labor, materials, or equipment to a contractor from unreliable, fraudulent, financially irresponsible,

or   incompetent       contractors."    RCW 18. 27. 140. On the other hand, RCW 18. 27. 040, which limits

the   liability   of   surety bonds, " prevent[ s] stale claims and place[ s] a reasonable time limitation on

the   personal    liability    exposure" of contractors and        their surety   bonds. 1519 -1525 Lakeview Blvd.

Condo. Ass 'n, 101 Wn.           App.   at   940 ( analyzing RCW 4. 16. 310). We cannot discern which of these

goals the legislature deems more important and therefore cannot resolve the tension between them

in the context presented by this appeal.

            Because the resolution of this ambiguity appears to be a question of first impression in this

state, we may turn to the common law of other states for persuasive authority in resolving the

2
     The    Kitsap County       Code ( KCC) incorporates the International       Building Code ( IBC) ( 2009
edition).      KCC 14. 04. 040A.        IBC section 111. 1 provides that "[n] o building or structure shall be
used or occupied ...            until the building official has issued a certificate of occupancy therefor as
provided       herein." ( Emphasis     A certificate of occupancy only issues after an inspection
                                         omitted.)

of the      building   finds            IBC § 111. 2. Permission to use or occupy the deck and
                               no code violations.

sun -room here thus required a certificate of occupancy, which neither the Ingrams nor any
contractor they hired obtained.

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No. 44971 -4 -II

ambiguity inherent in the legislature'          s use of " may."            In   re   Parentage of L.B., 155 Wash. 2d 679,

702, 122 P.3d 161 ( 2005).             Unfortunately, other states with similar statutory schemes, albeit

slightly      different language,       have split on whether legal permission to use or occupy an

improvement is necessary for its substantial completion.

           For example, Rosso v. Hallmark Homes of Minneapolis, Inc. held that only the physical

state of the construction mattered when examining whether construction was substantially

completed under an analogous Minnesota law that defines substantial completion as occurring

  when construction is sufficiently completed so that the owner or the owner' s representative can

occupy     or use     the improvement     for the intended        purpose. '      843 N.W.2d 798, 802 ( Minn. Ct. App.

2014) ( quoting Minn. Stat. § 541. 051,            subd.    1(   a)) ( emphasis added).      On the other hand, Nolan v.

Paramount Homes, Inc., 135 N.C.               App.       73, 76, 518 S.E.2d 789 ( 1999) ( quoting N.C. G. S. §         1-

50( a)( 5)(   c)),   held that the, date an owner receives legal permission to use or occupy a structure

marks the date of substantial completion under a statute defining substantial completion as " that

degree     of completion of a project,        improvement,            or specified area or portion      thereof ...   upon

attainment of which          the   owner can use   the   same     for the   purpose which     it was intended." N.C. G. S.

   1- 50( a)( 5)(    c).   We therefore turn to other considerations and hold that these speak in favor of

requiring legal permission to use or occupy an improvement on real property as a necessary

condition for its substantial completion within the meaning of RCW 18. 27.040( 3).

           First, public policy considerations strongly suggest that we should read RCW 4. 16. 310 and

RCW 18. 27. 040( 3) to define substantial completion as the state reached when the owners may

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No. 44971 -4 -I1

legally    use   an   improvement      on   their property.        Doing so provides incentives to surety bond

companies to influence the contractors they bond to obtain the necessary permits and to perform

work   that   will    comply   with applicable codes.        Exercising this influence allows the companies to

limit their   exposure    to   liability, the   purpose of   RCW 18. 27. 040( 3),   while remaining faithful to the

overall goal of chapter 18. 27 RCW, where public safety is achieved through safe construction.

           Second, we note that reading the definition of substantial completion as requiring approval

to   use   the improvement benefits judicial economy.                   Basing substantial completion on legal

approval, instead of the more amorphous inquiry into when an improvement can be used for a

purpose, more brightly illuminates when the statute of limitations codified in RCW 18. 27.040( 3)

commences.

           For these reasons, legislative intent is best served by reading RCW 4. 16. 310 and RCW

18. 27. 040( 3) to define substantial completion as the state reached when the owners may legally

use   an   improvement     on    their property.      Because the approvals needed for occupancy were not

obtained, the improvements at issue were not substantially completed for purposes of these

statutes.

                                                   III. ABANDONMENT

           The Ingrams next argue that the trial court erred in dismissing their claims against ACIC

because they         submitted    evidence      that the   construction project   had   not   been   abandoned.   The

Ingrams argue that

            a] bandonment, as that term i[ s] most commonly understood, does not occur in a
           situation where the contractor appears to finish the job and issues a final invoice,
           the owner pays the invoice without protest, and the parties part on amicable terms.

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No. 44971 -4 -II

Reply Br. of Appellant at 7. ACIC, which does contest this issue, argues that Cal' s abandoned the

project because it never returned to complete further work after the Ingrams paid the final invoice.

We agree with the Ingrams that Cal' s never abandoned work on the Ingrams' deck and sun -room.

Summary judgment was inappropriate.

          In   contrast   to "   substantial   completion,"     the   legislature   did   not define   the   term

 abandonment" in chapter 18. 27 RCW. Where the legislature does not define a term, we may turn

to the   common      law for the term' s meaning. State v. Garcia, 179 Wash. 2d 828, 837, 318 P.3d 266

 2014).    The common law defines abandonment as the indefinite cessation of work prior to the

completion of a construction project.          E. &W. Lumber Co. v. Williams, 129 Or. 1, 7 -8, 276 P. 257

 1929); Chicago Lumber Co.            v.   Merrimack River Say. Bank, 52 Kan. 410, 34 P. 1045 ( 1893).

Courts have split on whether abandonment is measured purely objectively or whether it has both

objective and subjective components.            Langford Tool & Drill Co. v. Phenix Biocomposites, LLC,

668 N.W.2d 438, 443 -44 ( Minn. Ct. App. 2003) (         collecting cases and analyzing the issue).

          We need not decide the extent to which abandonment is measured objectively or

subjectively as the evidence here indicates that Cal' s never abandoned the actual work under either

measure.       Cal' s final invoice and the Ingrams' payment of that invoice is objective evidence that

Cal'   s was   not   ceasing   work   before the   completion    of   that work.    Instead, Cal' s ceased work

because the construction itself had ended, even though occupancy approvals had not been

obtained. This same evidence indicates no subjective intent on Cal' s part to cease work before the

completion of the actual construction.

          ACIC contends that, whether characterized as " cessation of work, termination of services,

or abandonment, the end result is the same" and that the statute of limitations commenced when

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No. 44971 -4 -II

Cal'   s   issued the final invoices. Br.         of   Resp' t   at   9.   Cal' s obviously terminated its services within

the meaning          of     RCW 4. 16. 310.       RCW 18. 27. 040( 3),           however, provides that the statute of

limitations for surety bonds commences not with the termination of services, but with the

 abandonment"             of a project.      Under the authority above, abandonment occurs where work on a

project ceases for an indefinite period of time prior to its completion. With the issuance of Cal' s

final invoice and the Ingrams' payment of that invoice, it cannot reasonably be said that Cal' s

abandoned the project. Summary judgment, therefore, was inappropriate.

                                                       IV. ATTORNEY FEES

            The Ingrams do        not request appellate          attorney fees.      ACIC requests reasonable attorney

fees   under    RCW 4. 84. 250      and . 290, under       RCW 18. 27. 040( 6), and under the stipulated judgment

entered on July 2, 2013, which authorizes an award of attorney fees and costs incurred enforcing

and /or executing on ACIC' s judgment. We decline to award ACIC attorney fees.

            Under RAP 18. 1, we may award reasonable attorney fees on appeal where authorized by

 applicable         law."    RCW 4. 84. 250 and . 290 allow for an award of reasonable attorney fees on

appeal to a prevailing party. RCW 18. 27. 040( 6) likewise allows for an award of reasonable fees

on appeal to a prevailing party. See Cosmo. Eng 'g Grp., Inc. v. Ondeo Degremont, Inc., 159 Wash. 2d
292, 307, 149 P.3d 666 ( 2006).                 ACIC, however, has             not prevailed on      appeal.    An award of

reasonable appellate attorney fees under these provisions is therefore not appropriate.

            An award of fees is also inappropriate under the terms of the stipulated judgment, which

reserved      the   Ingrams'    right   to   appeal    the order      of   summary judgment. Our opinion reverses the

order of     summary judgment, meaning that ACIC                       no   longer has   a   judgment to   enforce.
No. 44971 -4 -II

                                         CONCLUSION

        The trial court' s order granting summary judgment in favor of ACIC is reversed.

        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW 2. 06. 040,

it is so ordered.

 We concur:

  chanson, C. J.

 Melnick, J.          J
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