Opinion
Nos. 32689-2-II; 33821-1-II.
June 20, 2006.
Appeals from judgments of the Superior Court for Clark County, Nos. 03-2-07154-8 and 05-2-00950-4, Roger A. Bennett, J., and Robert A. Lewis, J. Pro Tem., entered December 13, 2004 and September 8, 2005.
Counsel for Appellant(s), Paul Edward Sheely, The Aldrich Law Office PC, 522 SW 5th Ave Ste 1230, Portland, OR 97204-2129.
Counsel for Defendant(s), Kenneth Leigh Walhood, Blunck Walhood LLC, 2350 Willamette Falls Dr, West Linn, OR 97068-4737.
Julie Ann Lucas, Ashcroft Wiles, 1000 SW Broadway Ste 1500, Portland, OR 97205-3081.
Counsel for Respondent(s), Bruce Richard Gilbert, Smith Freed Eberhard, 1001 SW 5th Ave Ste 1700, Portland, OR 97204-1133.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Van Deren, A.C.J., concurred in by Bridgewater and Hunt, JJ.
Hoa Le and Loc Hoang appeal two summary judgments granted in favor of Mark Philip Homes and Mark Philip. In this consolidated appeal, they argue that the trial court erred in its first summary judgment when it ruled that chapter 64.50 RCW barred their claim for defects in the synthetic stucco installed on their new home because they filed the claim 32 days after providing notice to Mark Philip Homes; and that their negligent misrepresentation claim against owner Mark Philip was subject to RCW 64.50.020 notice requirements. They argue that the court erred in its second summary judgment when it ruled that their subsequent filed claim did not relate back to their original and was thus barred by the statute of limitations. Our Supreme Court resolved this issue in Lakemont Ridge Homeowners Ass'n v. Lakemont Ridge Ltd. P'ship,156 Wn.2d 696, 131 P.3d 905 (2006), which the court published on April 6, 2006, the day before oral argument before us on this matter. After considering supplemental briefing by the parties regarding the holding in Lakemont, we reverse the trial court's summary judgment orders in favor of Mark Philip Homes and remand for trial but affirm the trial court's dismissal of the negligent misrepresentation claim against Philip.
FACTS
In January 1997, Hoa Le and Loc Hoang contracted with Mark Philip Homes to construct their home in Camas, Washington. Philip, the owner of the company, suggested that they use a certain synthetic stucco siding or exterior insulation and finish systems (EIFS) instead of traditional stucco. According to Le and Hoang, Philip told them that traditional stucco would not be an appropriate product to use on their home.
Mark Philip Homes completed construction in late 1997, and Le and Hoang took possession on December 2, 1997.
In the summer of 2003, Le and Hoang became concerned about possible defects in the EIFS on their house. They hired Western Architectural and Waterproofing Consultants to inspect the EIFS and prepare a report on any defects. The subsequent report stated that the EIFS had defects and that those defects resulted from improper installation.
On or about September 9, 2003, Le and Hoang sent a letter regarding the report via priority mail to Mark Philip Homes. Also in September 2003, Le and Hoang obtained a second report from Western Architectural and Waterproofing Consultants that updated its initial opinion.
On October 24, 2003, Le and Hoang served a notice of claim letter regarding the EIFS defects, on Mark Philip Homes. Mark Philip Homes did not respond. Thirty two days later, on November 26, 2003, Le and Hoang filed claims against the company for construction defect/breach of contract and against Philip for negligent misrepresentation. Mark Philip Homes and Philip moved for summary judgment, arguing that Le and Hoang failed to comply with the required 45-day notice period in RCW 64.50.020(1).
On November 19, 2004, the trial court heard oral argument on Mark Philip Homes' and Philip's motions for summary judgment. It issued a written ruling granting summary judgment to Mark Philip Homes because Le and Hoang failed to comply with the notice period. The trial court also granted summary judgment to Philip on the negligent misrepresentation claim. The trial court ruled that Le and Hoang:
[A]lleged that Philip conveyed an erroneous opinion as to what siding would be better for [Le and Hoang's] house. [Le and Hoang's] claim really is one for negligent construction . . . The law of the State of Washington does not recognize a `negligent construction' tort claim, as such is subsumed in a breach of contract claim. [Le and Hoang's] negligent misrepresentation claim is no more than a breach of contract claim and is subject to the notice statute applicable to construction defect claims.
Clerk's Papers at 114-15. The trial court entered its summary judgment order on December 8, 2004.
Two days later on December 10, 2004, Le and Hoang again sent notice to Mark Philip Homes of their claims. They waited the required 45 days, and on February 23, 2005, they filed a lawsuit for breach of contract against Mark Philip Homes and for negligent misrepresentation against Philip.
Mark Philip Homes filed a motion for summary judgment, arguing that the statute of limitations barred Le and Hoang's suit because more than six years had passed since they took possession of the home on December 1, 1997. Le and Hoang countered that although their second suit was filed more than six years after they took possession, it related back to their first suit filed on November 26, 2003.
The trial court granted summary judgment to Mark Philip Homes and Philip finding that the claims did not relate back and that the statute of limitations barred them.
Le and Hoang appeal the trial court's summary judgment orders.
ANALYSIS
A. Standard or Review
When reviewing an order of summary judgment, we engage in the same inquiry as the trial court. Grundy v. Thurston County, 155 Wn.2d 1, 6, 117 P.3d 1089 (2005). Summary judgment is appropriate only if the pleadings, affidavits, depositions, and admissions on file demonstrate the absence of any genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. CR 56(c). We consider all facts submitted and all reasonable inferences from them in the light most favorable to the nonmoving party. Grundy, 155 Wn.2d at 6. The trial court should grant a summary judgment motion only if, from all the evidence, reasonable persons could reach but one conclusion. Lilly v. Lynch, 88 Wn. App. 306, 312, 945 P.2d 747 (1997).
B. Notice Period
The trial court dismissed Le and Hoang's claims for failure to timely comply with the notice requirements of chapter 64.50 RCW, the Construction Defect Claims Act which went into effect June 13, 2002.
RCW 64.50.020(1) states:
In every construction defect action brought against a construction professional, the claimant shall, no later than forty-five days before filing an action, serve written notice of claim on the construction professional. The notice of claim shall state that the claimant asserts a construction defect claim against the construction professional and shall describe the claim in reasonable detail sufficient to determine the general nature of the defect.
RCW 64.50.050(1) requires that the construction professional give notice to the homeowner of the prelitigation notice requirement when the parties enter into a contract for sale, construction, or substantial remodel.
Le and Hoang's house was completed in December 1997, well before the statute became effective. And because no statute directed it to, Mark Philip Homes did not give notice to Le and Hoang of the prelitigation notice requirement. Our Supreme Court in Lakemont held that `the prelitigation notice requirement becomes operative only where the construction professionals have given give prior notice to the homeowner of the requirement.' Lakemont, 156 Wn.2d at 698.
Mark Philip Homes argues that we need not abide the court's decision in Lakemont because Le and Hoang did not argue it below. We disagree. This is purely an issue of law, which we review on appeal de novo. Based on Lakemont and RCW 64.50.050(1)'s effective date, we hold that Le and Hoang had the right to file their construction defect lawsuit without giving Mark Philip Homes and Mark Philip prelitigation notice. Thus, the trial court erred when it dismissed Le and Hoang's claims. We vacate the dismissal of the claims for construction defect/breach of contract and remand for trial.
C. Economic Loss Rule
The trial court also dismissed Le's and Hoang's negligent misrepresentation claim against Philip for failure to timely file under RCW 64.50.020(1). Philip argues that even if Le and Hoang's construction defect/breach of contract claims are remanded for trial, the economic loss rule precludes Le and Hoang from bringing a tort claim for negligent misrepresentation against him because the construction contract allocated the risk of future loss. We agree.
Washington has adopted the economic loss rule, which bars claims for negligent misrepresentation when a contract allocates liability. Griffith v. Centex Real Estate Corp., 93 Wn. App. 202, 211, 969 P.2d 486 (1998). The economic loss rule creates a line between tort law, which is meant to protect citizens and their property by imposing a duty of reasonable care, and contract law, which is meant to enforce `expectations created by agreement.' Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1, 124 Wn.2d 816, 821, 881 P.2d 986 (1994). The rule is intended to prevent disproportionate liability and allow the parties to allocate risk through contract. Berschauer/Phillips, 124 Wn.2d at 822.
Washington does not recognize the tort of negligent construction on behalf of individual homeowners because of the `bright line distinction between the remedies offered in contract and tort with respect to economic damages, [which] encourages parties to negotiate toward the risk distribution that is desired or customary.' Griffith, 93 Wn. App. at 212 (quoting Berschauer/Phillips, 124 Wn.2d at 827). In Griffith, the court extended the rule to negligent misrepresentation claims. 93 Wn. App. at 213. It concluded that although Washington law recognizes the tort of negligent misrepresentation, contract principles override tort principles when parties have contracted to protect against potential liability. Griffith, 93 Wn. App. at 212-13. Further, in Griffith, the court determined that the plaintiffs' claim for negligent misrepresentation, based on an allegedly defective stain that caused the siding to mildew, crack and warp was for purely economic damage. Thus, the plaintiffs could recover only in a contract action and not in a tort action. 93 Wn. App. at 213.
In Alejandre v. Bull, relied upon by Le and Hoang, Division Three of this court allowed the Alejandres' claim for negligent misrepresentation when the previous owner of their home did not disclose damage to the home's septic system. 123 Wn. App. 611, 614-15, 98 P.3d 844 (2004), review denied, 154 Wn.2d 1012 (2005). Because the parties' real estate contract did not allocate risk for fraudulent misrepresentation, the economic loss rule did not apply to bar the Alejandres' tort claim. Alejandre, 123 Wn. App. at 615. The court noted that, unlike in a construction contract, a real estate contract does not allocate risk for future liability.
Alejandre, 123 Wn. App. at 628.
Here, the contract between the parties contained an allocation of future liability. It also contained a warranty provision. Thus, the economic loss rule applies and bars the negligent misrepresentation claim against Philip.
Further, Le and Hoang seek tort damages for the purely economic loss they suffered from defective EIFS. Under the economic loss rule, because of the nature of the loss, Le and Hoang are limited to their contract remedies and cannot sustain a claim for negligent misrepresentation for the use of the stucco product on their home.
We reverse the trial court's dismissal of Le and Hoang's claims for construction defects and breach of contract and remand for trial. We affirm the trial court's dismissal of the negligent misrepresentation claim.
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 pursuant to RCW 2.06.040, it is so ordered.
BRIDGEWATER, J. and HUNT, J., concur.