Scarsella Brothers, Inc., App/cr-resp v. Flatiron Constructors Inc., Resp/cr-app

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
SCARSELLA BROTHERS, INC.,
a Washington Corporation, No. 78543-5-I
Appellant/ Cross-Respondent, DIVISION ONE
v. UNPUBLISHED OPINION
FLATIRON CONSTRUCTORS, INC.,
a Delaware Corporation;
WASHINGTON STATE DEPARTMENT
OF TRANSPORTATION;
LIBERTY MUTUAL INSURANCE
COMPANY (Bond No. 015035206);
TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA
(Bond No. 105688202);
FIDELITY AND DEPOSIT COMPANY
OF MARYLAND/ZURICH AMERICAN
INSURANCE COMPANY
(Bond No. 9070286);
FEDERAL INSURANCE COMPANY
(Bond No. 82292503),
THE CONTINENTAL
INSURANCE COMPANY
(Bond No. 929539824), and
XL SPECIALTY INSURANCE
COMPANY (Bond No. SUR7401972),
Respondent/ Cross-Appellant.
LEACH, J. — The Washington State Department of Transportation (WSDOT)
contracted with Flatiron Constructors, Inc. (Flatiron) to be the prime contractor on a
Citations and pin cites are based on the Westlaw online version of the cited material.
No. 78543-5-I/2
“design-build project” known as the I-405 Bellevue to Lynnwood Project. Flatiron
subcontracted with Scarsella Brothers, Inc. (Scarsella) for earthwork. Flatiron and
Scarsella both appeal the trial court’s decision made after a lengthy bench trial.
Scarsella challenges the trial court decisions that the prime contract notice and claim
provisions applied to its claims, the denial of its claims that Flatiron waived enforcement
and is estopped from enforcing the notice and claim provisions, and the denial of its
claims for quantum meruit recovery, foreclosure of its retainage lien, attorney fees and
costs, and for prejudgment interest. Flatiron challenges the trial court’s decision that it
breached the Scarsella subcontract and awarded judgment against its payment bond.
We affirm.
FACTS
The Project and Parties
On January 11, 2012, WSDOT contracted with Flatiron to serve as the prime
contractor on a design-build project to widen and add express toll lanes to a segment of
I-405 from Bellevue to Lynnwood. On July 21, 2012, Flatiron subcontracted with
Scarsella to perform earthwork, retaining wall installation, and drainage construction.
The value of the subcontract was $14,865,476.68. The subcontract identifies three
categories of work: (1) bid item work; (2) extra work; and (3) force account work.
Sureties on Flatiron’s “Contract Bond and Retainage Bond” include Liberty
Mutual Insurance Company, Travelers Casualty and Surety Company of America,
Fidelity and Deposit Company of Maryland/Zurich American Insurance Company,
Federal Insurance Company, The Continental Insurance Company, and XL Specialty
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No. 78543-5-I/3
Insurance Company. Liberty Mutual Insurance Company is the surety on Scarsella’s
“Performance and Payment Bonds.”
Payment Procedures
Flatiron required Scarsella to submit monthly “pay applications” with supporting
documentation showing the work it performed for the month. From August 2012, to
January 2015, Flatiron reviewed each pay application, met with Scarsella to discuss
discrepancies, negotiated payment for quantities and extra work using force account
worksheets, and would issue a determination about Scarsella’s work and payment.
During that time, Flatiron’s engineers reviewed the pay estimates and verified
Scarsella’s work. Flatiron used Scarsella’s pay applications to prepare its own monthly
pay applications to WSDOT. After WSDOT paid Flatiron, Flatiron paid Scarsella a
“progress payment.”
Payment Dispute
In November 2014, Flatiron exercised its subcontract right to withhold Scarsella’s
payment. Flatiron claimed Scarsella did not document its work, follow required
procedures, maintain documentation, substantiate force account billings, and
substantiate pay applications as the subcontract required. Flatiron also claimed
Scarsella caused project delays in breach of the subcontract. Before withholding
payments, Flatiron raised these issues with Scarsella. Scarsella gave Flatiron some of
the required documentation but not all. Flatiron told Scarsella it intended to pursue
damages and intended to withhold payments because Scarsella did not provide full
documentation.
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No. 78543-5-I/4
For Scarsella’s work on the project, Flatiron approved a total value of
$17,788,284.60. Flatiron withheld $1,849,196.55 for bid item work; $194,150.01 for
non-force account extra work, and $709,362.35 for force account work.
Procedural History
On August 14, 2015, Scarsella delivered a “Notice of Claim Lien” to WSDOT,
Flatiron, and the sureties. Scarsella claimed $5,680,598.94 plus fees and costs.
On December 11, 2015, Scarsella sued Flatiron and the sureties. Scarsella
claimed breach of contract, recovery against the payment bond, foreclosure on the lien
against retainage, estoppel and waiver of prime contract provisions, breach of a
covenant of good faith and fair dealing, and violation of RCW 39.76.011. Scarsella
sought $12,135,173 plus prejudgment interest, attorney fees, and costs. Flatiron
counterclaimed arguing Scarsella significantly delayed the completion of the project.
Trial occurred from July 5, 2017 to September 26, 2017. During trial, Flatiron
acknowledged it withheld $2,731,437.97 in earned payments from Scarsella.
Type of Work Amount Withheld
Force account work $709,362.35
Non-force account extra work $194,150.01
Bid item work $1,849,196.55
Minus back charges $(21,270.94)
Total $2,731,437.97
On November 2, 2017, the trial court determined that subcontract section 2.6
authorized Flatiron to withhold payments, and Flatiron acted in good faith when it did so.
The trial court decided Scarsella could not recover additional compensation for force
account work and extra work because of its noncompliance with section 1-04.5(1) of the
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Prime Contract. The trial court ordered Flatiron to pay Scarsella $2,731,437.97 for its
work. It denied Scarsella’s claims that Flatiron waived compliance with and was
estopped from enforcing the prime contract notice and claim provisions. It denied
Scarsella’s claims against the retainage as premature. The trial court also found
Scarsella’s documentation inconsistent and unreliable, and that Scarsella did not
substantiate its work and claims. The trial court denied Flatiron’s claim that Scarsella
caused substantial project delays.
On January 19, 2018, Scarsella and Flatiron independently filed requests for
entry of judgment, attorney fees and costs, and prejudgment interest. On May 14,
2018, the trial court partially granted Scarsella’s and Flatiron’s requests.
Scarsella appeals and Flatiron cross-appeals.
STANDARD OF REVIEW
We review a trial court’s decision in a bench trial for whether substantial evidence
supports the trial court’s findings of fact and whether those findings support the court’s
conclusions of law. 1 Substantial evidence is evidence sufficient to persuade a fair-
minded person of its truth. 2 We review questions of law and statutory interpretation de
1
Standing Rock Homeowners Ass’n v. Misich, 106 Wash. App. 231, 243, 23 P.3d
520 (2001); Hegwine v. Longview Fibre Co., Inc., 132 Wash. App. 546, 555-56, 132 P.3d
789 (2006).
2 Hegwine, 132 Wash. App. at 555-56.
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No. 78543-5-I/6
novo. 3 So, we review a trial court’s conclusions of law about contract interpretation de
novo. 4
ANALYSIS
Prime Contract Notice and Claim Provisions
Scarsella argues the prime contract notice and claim provisions do not apply to
its claims for extra work. We disagree.
“If the parties to a contract clearly and unequivocally incorporate by reference
into their contract some other document, that document becomes part of their
contract.”5 A prime contract incorporated by reference in a subcontract is binding on the
subcontractor. 6
The subcontract between Scarsella and Flatiron provides, “Subcontractor
assumes toward Contractor all obligations that Contractor assumes toward Owner,
insofar as applicable to the Work to be performed under this Subcontract.”7 As the
subcontractor, Scarsella assumed toward Flatiron all obligations applicable to its work
that Flatiron assumed under the prime contract toward WSDOT for Scarsella’s work.
3In re Estate of Jones, 152 Wash. 2d 1, 8-9, 93 P.3d 147 (2004); Sunnyside Valley
Irr. Dist. v. Dickie, 149 Wash. 2d 873, 880, 73 P.3d 369 (2003).
4 Viking Bank v. Firgrove Commons 3, LLC, 183 Wash. App. 706, 712, 334 P.3d
116 (2014); Panorama Village Homeowners Ass’n v. Golden Rule Roofing, Inc., 102
Wash. App. 422, 425, 10 P.3d 417 (2000).
5 Satomi Owners Ass’n v. Satomi, LLC, 167 Wash. 2d 781, 801, 225 P.3d 213
(2009).
6 Washington State Major League Baseball Stadium Public Facilities Dist. v.
Huber, Hunt & Nichols-Kiewit Const. Co., 176 Wash. 2d 502, 518, 296 P.3d 821 (2013).
7 Subcontract Attachment B, Art. 1, § 1.6.
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No. 78543-5-I/7
The prime contract also provides procedures for Flatiron to submit notices, claims, and
protests to WSDOT:
If in disagreement with anything required in a Change Order, or any other
written order from the WSDOT Engineer, including any direction,
instruction, interpretation, or determination by WSDOT, the Design-Builder
shall:
1. Immediately give a signed written notice of protest to WSDOT
before doing the Work;
2. Supplement the written protest within 30 Calendar Days with a
written statement and supporting documents [. . .]; and
3. If the protest is continuing, the information required above shall be
supplemented monthly until the protest is resolved.
Because Scarsella assumed these same obligations toward Flatiron, Scarsella was
required to comply with the prime contract’s notice, claim, and protest provisions.
Next, Scarsella argues it did not waive certain claims when it did not follow the
prime contract notice and claim provisions. We disagree.
Section 1-04.5 of the prime contract states, “By not protesting as this section
provides, the Design-Builder also waives any additional entitlement and accepts from
WSDOT any written order (including directions, instructions, interpretations, and
determinations).”
In NOVA Contracting, Inc. v. City of Olympia, the Washington State Supreme
Court upheld an identical protest provision. 8 It determined the phrase “waives any
additional entitlement” applies to “‘all’ claims related to the ‘protested [w]ork’” including
damages. 9
8191 Wash. 2d 854, 865, 426 P.3d 685 (2018) (citing Mike M. Johnson, Inc. v.
County of Spokane, 150 Wash. 2d 375, 391, 78 P.3d 161 (2003)).
9 NOVA Contracting, Inc., 191 Wash. 2d at 866.
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Because the subcontract incorporated the prime contract, Scarsella assumed
toward Flatiron the same procedural obligations Flatiron owed WSDOT. So, under
section 1-04.5 of the prime contract, Scarsella waived its right to protest if it did not
comply with the prime contract’s protest provisions.
Scarsella also argues the plain language of the subcontract replaces the prime
contract notice and claim provisions because the subcontract provides a specific
mechanism for calculating payments including payment for extra work.
The subcontract provides:
Extra work without a Bid Item that is directed by Flatiron will be marked up
cost plus 10%. Extra work directed by WSDOT will be marked up
according to the Contract Documents. Extra work shall be authorized by
Flatiron personnel and quantities shall be mutually agreed to prior to
performing work.
But, this provision does not provide procedures for submitting notices, claims, and
protests or describe the consequences of not following those procedures. It does not
replace or supersede section 1-04.5 of the prime contract.
Scarsella also argues that Flatiron’s breach of the subcontract bars it from
enforcing its compliance with the prime contract provisions and that Flatiron prevented it
from complying with the prime contract provisions. Scarsella’s briefs do not cite to the
record or otherwise demonstrate that it raised these issues. Because Scarsella did not
raise them below, we do not consider them on appeal. 10
10 RAP 2.5(a).
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Waiver and Estoppel
Scarsella argues that Flatiron waived the prime contract provisions and is
estopped from enforcing those provisions. We disagree. Flatiron did not waive the
prime contract provisions and Scarsella did not establish the elements of estoppel.
Waiver
“A party to a contract may waive a contract provision, which is meant for its
benefit, and may imply waiver through its conduct.” 11 Waiver by conduct “requires
unequivocal acts of conduct evidencing an intent to waive.” 12 We enforce procedural
contract requirements unless the benefiting party waives the contract provision or the
parties agreed to modify the contract. 13
Here, the trial court determined:
55. Under Attachment B, ¶ 2.6 of the Subcontract, Flatiron had
the right to deduct from payment due to Scarsella any amounts owed by
Scarsella to Flatiron, and Flatiron was entitled to withhold payment from
Scarsella in an amount sufficient to protect Flatiron from any actual or
anticipated loss due to Scarsella’s alleged breach of the Subcontract.
56. Scarsella has not proved by a preponderance of the
evidence that Flatiron expressly waived the rights and powers specified
above to deduct amounts paid to which Scarsella was not entitled under
the Subcontract.
Scarsella argues that Flatiron waived compliance when it “(1) directed,
demanded, acknowledged, and approved Scarsella[’s] work, both before and after
11 Mike M. Johnson, Inc., 150 Wash. 2d at 386 (citing Reynolds Metals Co. v.
Electric Smith Const. & Equipment Co., 4 Wash. App. 695, 700, 483 P.2d 880 (1971)).
12 150 Wash. 2d at 386 (citing Absher Const. Co. v. Kent School Dist. No. 415, 77
Wash. App. 137, 143, 890 P.2d 1071 (1995)).
13 150 Wash. 2d at 386-87 (citing American Sheet Metal Works, Inc. v. Haynes, 67
Wash. 2d 153, 157, 407 P.2d 429 (1965)).
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No. 78543-5-I/10
ceasing payment to Scarsella, and (2) continued negotiating and agreeing to bid item
quantities with Scarsella.”
Subcontract section 2.6 permits Flatiron to withhold payments, and prime
contract section 1-04.5(1) requires Flatiron and Scarsella to protest changes using the
notice and claim procedures. The payment and notice and claim provisions are distinct
contract provisions. Here, Flatiron’s continued directions to Scarsella did not waive the
prime contract provisions.
We affirm the trial court’s finding that Flatiron did not waive the prime contract
notice and claim provisions.
Estoppel
Scarsella argues that promissory estoppel prevents Flatiron from enforcing the
prime contract provisions. 14 We disagree.
Promissory estoppel has five elements:
(1) a promise, (2) that promisor should reasonably expect to cause the
promisee to change his position, and (3) actually causes the promisee to
change position, (4) justifiably relying on the promise, (5) in such a
manner that injustice can be avoided only by enforcement of the
promise.[15]
14 Scarsella also argues the trial court improperly shifted the burden of proof from
Flatiron to Scarsella to show that Flatiron was estopped from withholding payment.
Scarsella cites to Conclusion of Law number 56 and subcontract section 2.6 but does
not cite to any legal authority. We decline to address this issue. Palmer v. Jensen, 81
Wash. App. 148, 153, 913 P.2d 413 (1996).
15 McCormick v. Lake Washington School Dist., 99 Wn. App 107, 117, 992 P.2d
511 (1999).
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“A promise is ‘a manifestation of intention to act or refrain from acting in a
specified way, so made as to justify a promisee in understanding that a commitment has
been made.’” 16
The subcontract provides that “[n]o progress payment to Subcontractor shall
operate as an approval or acceptance of Work done,” and “Contractor may deduct from
any amounts due to Subcontractor…any sum or sums owed by Subcontractor to
Contractor under this Subcontract.” The contract also provides, “the parties shall not be
bound by, or be liable for, any statements, representations, promises, or agreements
not specifically set forth in this Subcontract.”
The trial court determined that “Scarsella could not reasonably rely on Flatiron’s
prior progress payments as a promise not to deduct payment from future progress
payments if it discovered that amounts paid were not actually due to Scarsella.” And,
“Scarsella could not justifiably rely on Flatiron’s direction to perform extra work as a
promise not to enforce [the notice and claim] and independent provisions.”
The plain wording of the subcontract defeats Scarsella’s claim that it reasonably
relied on Flatiron’s prior payments or direction to perform extra work as promises not to
deduct payment and not to enforce the contract provisions. Because Flatiron made no
promise, Scarsella’s estoppel claim fails. We affirm the trial court’s determination that
Scarsella could not reasonably rely on Flatiron’s prior progress payments as a promise
16 Havens v. C & D Plastics, Inc., 124 Wash. 2d 158, 172, 876 P.2d 435 (1994)
(citing Restatement (Second) of Contracts § 2(1)).
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No. 78543-5-I/12
not to deduct future progress payments and Flatiron was not estopped from deducting
payments.
Breach of Subcontract
Flatiron argues the trial court should not have found that it breached the
Scarsella subcontract and imposed liability against its payment bond because the trial
court found that Flatiron withheld the payment from Scarsella in good faith. 17 Flatiron
asserts the trial court improperly conflated the issues of (1) who was at fault for delaying
the project and (2) Flatiron’s right to withhold Scarsella’s payments. We disagree.
“To prevail on a breach of contract claim, the plaintiff must show an agreement
between the parties, a parties’ duty under the agreement, and a breach of that duty.” 18
First, Flatiron argues substantial evidence does not support the trial court’s
finding that Flatiron breached the subcontract when it caused substantial project delays.
Flatiron also argues it did not have a duty not to delay the project and instead had
unilateral power to alter the project schedule.
Subcontract article 3, section 3.1 provides, “Contractor may at any time by
written order of Contractor’s authorized representative, and without notice to
Subcontractor’s sureties, make changes in, additions to and deletions from the Work,
and Subcontractor shall promptly proceed with the Work so changed.” And, section 3.2
17 Flatiron also agues that even absent the subcontract’s express withholding
clause, it could withhold payments under the common law of contracts. Because
Flatiron’s withholding is separate from the issue of breach of contract, we decline to
address it.
18 Fidelity and Deposit Co. of Maryland v. Dally, 148 Wash. App. 739, 745, 201
P.3d 1040 (2009).
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No. 78543-5-I/13
states that Scarsella waives its rights to assert claims against Flatiron for changes it
makes when it provides Scarsella with five days notice. Under these subcontract
provisions, Flatiron could breach the subcontract even if Scarsella waived its right to
assert a claim for the breach.
The trial court found:
Based on the evidence presented by both parties, the court finds that, to
the extent there were delays, such delays more probably than not were
caused by Flatiron’s failure to prepare timely and accurate construction
plans, and its failure to properly plan, supervise and direct the sequence of
work on the Project, including Scarsella’s work.
In its order granting in part Flatiron’s request for fees and costs, the trial court
clarified, “if it is not clear from the court’s earlier findings and conclusions, the court now
finds and concludes that Flatiron breached the parties’ contract by causing the
substantial project delays that were the factual basis of Flatiron’s counterclaim against
Scarsella.”
Failure to timely and accurately prepare construction plans, supervise, and direct
the project, are not delays permitted under subcontract article 3, section 3.1. So, we
affirm the trial court’s finding that Flatiron breached the subcontract.
Second, Flatiron argues it did not have a duty to pay Scarsella $2,731,437.97.
So, its withholding of that amount was not a contract breach. Flatiron conceded that it
owed Scarsella $2,731,437.97 and the trial court found that Flatiron withheld that
payment in good faith. But, the trial court did not rely on Flatiron’s withholding to
support its finding that Flatiron breached the subcontract. It relied on Flatiron’s failure to
prove at trial the factual basis for the withholding to support its decision that Scarsella
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No. 78543-5-I/14
was entitled to recover the withheld amount. It relied on other conduct described above
to support its finding that Flatiron breached the subcontract. Scarsella’s claims based
on these breaches failed because it did not comply with procedural requirements for
asserting these claims.
Third, Flatiron asserts that “[e]ven if the subcontract authorized Flatiron to
withhold payment only in the event of Scarsella’s actual breach, Flatiron’s withholding
would not constitute breach because Scarsella was in actual breach” when it did not
fulfill its scheduling and documentation obligations. But, the trial court found Flatiron did
not meet its burden of proving Scarsella caused the delays. So, this claim is without
merit. Substantial evidence supports the trial court’s finding that Flatiron breached the
subcontract.
Quantum Meruit Recovery
Scarsella argues the trial court incorrectly denied its claim for quantum meruit
recovery because (1) Flatiron used Scarsella to perform work outside the scope of the
subcontract; (2) the work was not within the method and manner contemplated by the
parties; (3) the trial court incorrectly applied the force majeure standard; and (4) the trial
court incorrectly determined the prime contract notice and claim provisions barred
quantum meruit recovery. We disagree.
“Quantum meruit is an appropriate basis for recovery when substantial changes
occur which are not covered by the contract and are not within the contemplation of the
parties, and the effect of such changes is to require extra work or to cause substantial
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No. 78543-5-I/15
loss to the contractor.” 19 Quantum meruit is a mixed question of fact and law: Does the
contract indicate the parties contemplated the changed conditions? 20 If the “contract
unambiguously contemplates the changed conditions,” the complaining party is not
entitled to any quantum meruit recovery. 21 If the contract is ambiguous, “issues of fact
would exist, and resolution of the question would be for the trier of fact.” 22 Recovery is
available when neither party could have reasonably anticipated the changed condition. 23
In General Construction Company v. Public Utility District No. 2 of Grant County,
we determined for work within the scope of a contract, a party must comply with the
terms of the contract unless there is evidence the complaining party waived compliance
with the contract’s notice and claim requirements. 24 Notice and claim provisions are
valid unless there is “unequivocal evidence of an intent to waive” the protection. 25 “For
work outside of the contract, and changed work within the scope of the contract where
[the party] satisfied the contractual notice and claim provisions, quantum meruit
applies.”26
First, Scarsella argues it is entitled to quantum meruit recovery because Flatiron
directed it to perform work outside the scope of the subcontract. Flatiron argues
19 Hensel Phelps Const. Co. v. King County, 57 Wash. App. 170, 174, 787 P.2d 58
(1990).
20 Hensel, 57 Wash. App. at 175-76.
21 Hensel, 57 Wash. App. at 176.
22 Hensel, 57 Wash. App. at 176.
23 Basin Paving Co. v. Mike M. Johnson, Inc., 107 Wash. App. 61, 65, 27 P.3d 609
(2001), review denied, 145 Wash. 2d 1018 (2002).
24 195 Wash. App. 698, 700, 709-10, 380 P.3d 636 (2016).
25 General Construction Company, 195 Wash. App. at 709 (citing Mike M. Johnson,
Inc. v. County of Spokane, 150 Wash. 2d 375, 391-92, 78 P.3d 161 (2003)).
26 195 Wash. App. at 709-10.
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Scarsella cannot recover quantum meruit because the subcontract expressly included
provisions for directing, authorizing, and compensating extra work. 27 The trial court
determined the subcontract contemplated “extra work outside the scope of the bid
items” and “specifies the measurement of payment for all such work.” The subcontract
states, “For work outside previously agreed upon the Subcontractor shall notify
Contractor and agree upon quantities and scope before performing work.” The price for
extra work is marked up cost plus 10 percent. Because the contract unambiguously
contemplates additional work, we affirm the trial court’s decision not to award quantum
meruit recovery.
Second, Scarsella argues it is entitled to recovery because the work did not
proceed in the method and manner contemplated by the parties. The trial court
determined Scarsella did not prove there were substantial changes that neither party
could reasonably anticipate. Article 3 of the subcontract discusses changes and delays.
In order to recover for defects in specifications, differing conditions, and delays,
Scarsella was required to provide Flatiron with a written claim or else it would waive
recovery. Because the contract reasonably contemplated changes, we agree with the
trial court that Scarsella did not prove it could not reasonably anticipate the delays that
affected the method and manner of the work.
Third, Scarsella asserts the trial court improperly applied the force majeure
standard rather than the quantum meruit standard. The trial court stated, “I think
27Flatiron argues this court rejected an analogous argument in Hensel Phelps
Const. Co. v. King County, 57 Wash. App. 170, 174, 787 P.2d 58 (1990).
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No. 78543-5-I/17
quantum meruit might be applicable had we, for example, had a giant earthquake that
created crevices and cracks and chasms across the freeway, or if there had been some
totally unforeseen disaster that nobody had planned for.” But, the trial court did not
actually apply a force majeure standard. The trial court continued to explain the
“extraordinary amount of delay” and “huge number of change orders” were not
substantial changes not contemplated by the subcontract. Because the trial court
properly applied the quantum meruit standard, Scarsella’s argument fails.
Fourth, Scarsella asserts the trial court incorrectly determined the prime contract
notice and claim provisions barred quantum meruit recovery. Flatiron asserts the trial
court correctly determined that Scarsella’s non-compliance with the subcontract’s
provisions bars it from quantum meriut recovery. The trial court denied Scarsella’s
request for quantum meruit recovery for work it performed but did not invoice before
January 20, 2015. The trial court determined that when Scarsella did not comply with
the provisions, it waived its rights to bring a claim. And, because it waived its rights, the
trial court determined that Scarsella could not bring a claim for quantum meruit
recovery. We agree and affirm the trial court’s determination that Scarsella was not
entitled to quantum meruit recovery.
Lien on Retainage
Scarsella argues the trial court should have allowed its claim under RCW 60.28
for recovery against the contract retainage held by WSDOT. We disagree.
RCW 60.28.030 provides that after a party files a claim against the reserve fund,
it has four months to bring an action to foreclose a lien on retainage.
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RCW 60.28.011(1)(a) provides that contract retainage may not exceed five percent.
Here, the subcontract’s retainage provision “provides that Flatiron may withhold
5 percent of all progress payments to Scarsella as retainage.” RCW 60.28.011(3)(a)(b)
and the prime contract provide that within 60 days of the project’s final completion, the
public body WSDOT must release the retainage. The subcontract provides that
retainage is due “upon acceptance of the work by WSDOT,” which occurs after the
project’s final completion.
“[P]arties may contractually select as the date of completion of the work either
the date of substantial completion or the date of final completion.”28 “Unless otherwise
defined by the contract to mean ‘final completion[,]’ the date on which the work is
100 [percent] complete ‘completion’ ordinarily is understood to mean ‘substantial
completion’ - the date on which all material elements of the work are sufficiently
complete in conformance with the contract so that the owner can use the work for its
intended purpose.”29
The trial court found the project was substantially completed by October 31,
2015, but the contract date of completion had not arrived by the time of trial. It
determined that “[b]ased on the evidence presented at trial, it [wa]s not possible for the
court to reach a conclusion as to whether or when the retainage will be due to
Scarsella.” It explained,
I’m assuming that the retainage will be paid when the time comes, but I
don’t have enough evidence, and the project had not been completed by
28State Construction, Inc. v. City of Sammamish, 11 Wash. App. 2d 892, 911, 457
P.3d 1194 (2020).
29 State Construction, 11 Wash. App. 2d at 911.
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the time of trial, at least not so far as I was told. So it would have been
premature to rule on the retainage claim.
It determined because the date of completion had not arrived by the time of trial,
Scarsella’s claim for foreclosure of the lien on retainage was premature.
We agree. Because Scarsella prematurely asserted its claim, we affirm the trial
court’s denial of this claim. 30
Prevailing Party
Scarsella and Flatiron request attorney fees and costs under various statutes.31
Their competing claims require determining whether either party is the prevailing party.
None of the statutes relied on define “prevailing party.” So, we must consider “case law
governing the determination of a prevailing party with respect to other statutes
governing attorney fees and costs.”32
“In Washington, the prevailing party is the one who receives judgment in that
party’s favor.” 33 “A party need not recover its entire claim in order to be considered the
prevailing party.” 34 “However. . . where both parties prevail on major issues, neither is
30 Flatiron argues the absence of a finding on the issue of retainage is a
presumptive negative finding on that issue under Taplett v. Khela, 60 Wash. App. 751,
759, 807 P.2d 885 (1991). Because the issue was premature, we do not reach
Flatiron’s claim.
31 RCW 60.28.030, RCW 39.08.030, RCW 39.04.250, RCW 39.76.040,
RCW 39.76.011.
32 In re Marriage of Nelson, 62 Wash. App. 515, 518-19, 814 P.2d 1208, 1211
(1991).
33 Sardam v. Morford, 51 Wash. App. 908, 911, 756 P.2d 174 (1988) (quoting Blair
v. Washington State University, 108 Wash. 2d 558, 571, 740 P.2d 1379 (1987)).
34 Silverdale Hotel Associates v. Lomas & Nettleton Co., 36 Wash. App. 762, 774,
677 P.2d 773 (1984).
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No. 78543-5-I/20
entitled to attorney fees.” 35 And, under RCW 4.84.330, where each party prevails on a
major issue, “there is no ‘prevailing party.’” 36
In re Marriage of Nelson provides that because one party properly received an
award of back child support under RCW 26.18.160, that party prevailed over the other
party. 37 In Sardam v. Morford, the trial court concluded that because neither party was
the prevailing party, it would not award attorney fees under a landlord-tenant statute. 38
Division III of this court affirmed the trial court’s conclusion because it “would be
inequitable to award substantial fees” where both parties successfully defended against
each other’s major claims. 39
In Crest Inc. v. Costco Wholesale Corp., we explained that under a contractual
provision, rather than a statutory provision,
[I]f neither party wholly prevails,. . . then the party who substantially
prevails is the prevailing party. . . When there are several conflicting
claims at issue, a defendant is awarded attorney fees for those claims it
successfully defends, and plaintiff is awarded attorney fees for those
claims upon which it prevails, and the awards should be the offset.[40]
Here, the trial court determined that “Scarsella and Flatiron each prevailed on
major issues,” but “[n]either party prevailed. . . on its own respective claims.” So,
neither was the “prevailing party.”
35 Sardam, 51 Wash. App. at 911.
36 Tallman v. Durussel, 44 Wash. App. 181, 990, 721 P.2d 985 (1986); Rowe v.
Floyd, 29 Wash. App. 532, 535-36, 629 P.2d 925 (1981).
37 62 Wash. App. at 518-19.
38 51 Wash. App. at 910 (citing RCW 59.18.290, RCW 4.84.330).
39 Sardam, 51 Wash. App. at 911.
40 128 Wash. App. 760, 772, 115 P.3d 349 (2005).
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Scarsella argues the trial court incorrectly relied on Sardam in finding it was not
the prevailing party. 41 Flatiron and the sureties argue the trial court properly referenced
Sardam to explain how it would avoid inequitable results by denying attorney fees
where neither party was the prevailing party.
Using the approach where each party prevails on a major issue, “there is no
‘prevailing party,’” 42 neither Scarsella nor Flatiron is the prevailing party. The trial court
determined that Scarsella failed on its claims for breach of contract, additional
compensation, quantum meruit, retainage, waiver and estoppel, breach of good faith
and fair dealing, and violation of payment statutes. It determined Scarsella was entitled
to labor and material payment bonds totaling $2,731,437.97 because of Flatiron’s
concession. It also determined Flatiron failed on its claims for damages for breach of
contract and performance bonds.
Scarsella argues the $2,731,437.97 award against Flatiron’s labor and material
payment bonds make it the “prevailing party.”
The trial court disagreed,
Even though Flatiron conceded at trial that Scarsella had earned
$2,731.437.97 more than Flatiron had paid Scarsella, Flatiron’s
concession does not allow Scarsella to request an award of attorneys’
fees incurred in recovering that amount pursuant to RCW 39.04.250 or
RCW 39.76.040, because Flatiron withheld that sum from Scarsella in
good faith.
Based upon the trial court record, the court finds and concludes
that neither Scarsella nor Flatiron is the “prevailing party.”
4151 Wash. App. 908, 911, 756 P.2d 174 (1988).
42Tallman v. Durussel, 44 Wash. App. 181, 990, 721 P.2d 985 (1986); Rowe v.
Floyd, 29 Wash. App. 532, 535-36, 629 P.2d 925 (1981).
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No. 78543-5-I/22
We agree with the trial court. Because the labor and material payment bonds issue was
not a “major issue” in the case, Scarsella was not the “prevailing party.” Scarsella also
failed on eight out of nine of its claims, and Flatiron failed on both of its claims. So, the
trial court correctly determined neither was the prevailing party.
Attorney Fees and Costs at Trial
Scarsella argues the trial court should have considered whether to award fees
under RCW 60.28.030, RCW 39.08.030, and Olympic S.S. Co., Inc. v. Centenniel Ins.
Co. 43 Flatiron and the sureties argue this court should affirm the trial court’s order
denying Scarsella’s request for attorney fees and costs. Flatiron also argues it is
entitled to reasonable attorney fees and costs it incurred defending itself because it
prevailed under RCW 39.04.250. We disagree. Neither Scarsella nor Flatiron is
entitled to trial fees and costs.
“We apply a two-part standard of review to a trial court’s award or denial of
attorney fees: ‘(1) we review de novo whether there is a legal basis for awarding
attorney fees by statute, under contract, or in equity and (2) we review a discretionary
decision to award or deny attorney fees and the reasonableness of any attorney fee
award for an abuse of discretion.’” 44
First, Scarsella argues the trial court incorrectly denied recovery of attorney fees
under the Prompt Payment Act, RCW 39.04.250, RCW 39.76.040, and in determining
the Prompt Payment Act was an exclusive remedy.
43 117 Wash. 2d 37, 811 P.2d 673 (1991).
44 In re Washington Builders Ben. Trust, 173 Wash. App. 34, 83, 293 P.3d 1206
(2013).
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RCW 39.04.250 provides, “In any action for the collection of funds wrongfully
withheld, the prevailing party shall be entitled to costs of suit and reasonable attorneys’
fees.” RCW 39.76.040 provides, “In any action brought to collect interest due under this
chapter, the prevailing party is entitled to an award of reasonable attorney fees.”
Here, the trial court explained:
It bears repeating that, although Flatiron conceded at trial that it
withheld $2,731,437.97 from Scarsella as an offset against the $8,940,962
counterclaim that Flatiron was pursuing against Scarsella, Flatiron’s
concession does not expose Flatiron to a claim for attorneys’ fees and
costs or interest pursuant to RCW 39.04.250 or RCW 39.76.040, because
Flatiron withheld that sum from Scarsella in good faith.
Because Scarsella was not the prevailing party, it was not entitled to recover fees
under RCW 39.04.250, and RCW 39.76.040. The trial court found Flatiron withheld
payment in “good faith,” so Flatiron’s withholding did not meet the “wrongfully withheld”
requirement of RCW 39.04.250. And, because Scarsella’s claim for prejudgment
interest fails, it is not entitled to an award under RCW 39.76.040.
Second, Scarsella argues the trial court should have awarded it recovery against
the contract retainage and attorney fees under RCW 60.28.030. In its trial complaint,
Scarsella asserted a claim for “the retained percentage fund the principal amount of
$6,564,370.73, plus pre-judgment interest, costs and attorney’s fees, pursuant to
RCW 60.28.” RCW 60.28.030 provides, “In any action brought to enforce the lien, the
claimant, if he or she prevails, is entitled to recover, in addition to all other costs,
attorney fees in such sum as the court finds reasonable.” Because the trial court
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No. 78543-5-I/24
properly denied Scarsella’s claim for recovery against the contract retainage, Scarsella
did not prevail. So, we deny its claim for recovery under RCW 60.28.030.
Third, Scarsella argues the trial court should not have denied it attorney fees and
costs under RCW 39.08.030(1)(b). RCW 39.08.030(1)(b) provides, “in any suit or action
brought against such surety or sureties by any such person or corporation to recover for
any of the items specified in this section, the claimant is entitled to recover in addition to
all other costs, attorneys’ fees in such sum as the court adjudges reasonable.”
“RCW 39.08.030 authorizes attorney fees in an action brought against a performance
bond where the surety contests a right to recover, denies the allegations in a complaint,
and seeks dismissal of an action.”45 “A surety contests a right to recover when it denies
the allegations in a complaint and seeks dismissal of an action.”46 The trial court denied
Scarsella’s claim for attorney fees and costs under RCW 39.08.030(1)(b) because it
determined Scarsella did not have a statutory basis for attorney fees and that Scarsella
was not the prevailing party.
Because Scarsella’s bond claim fails, its claim for attorney fees and costs under
RCW 39.08.030(1)(b) also fails.
Fourth, Scarsella argues the trial court should not have denied it attorney fees
and costs under Olympic Steamship because it was the prevailing party, and to obtain
the benefit of the surety, it had to litigate. In Olympic Steamship, the Washington State
45Campbell Crane & Rigging Services, Inc. v. Dynamic Intern. AK, Inc., 145 Wn.
App. 718, 727, 186 P.3d 1193 (2008) (citing Diamaco, Inc. v. Mettler, 135 Wash. App.
572, 578, 145 P.3d 399 (2006)).
46 Diamaco, 135 Wash. App. at 578.
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No. 78543-5-I/25
Supreme Court explained, “an award of fees is required in any legal action where the
insurer compels the insured to assume the burden of legal action, to obtain the full
benefit of his insurance contract, regardless of whether the insurer’s duty to defend is at
issue.” 47 “An award of attorney fees under Olympic Steamship is restricted to disputes
where the insurer forces the insured to litigate coverage and then loses.” 48 Because we
determined Scarsella is not the prevailing party, it is not entitled to recovery under
Olympic Steamship.
Fifth, Scarsella argues it is entitled to full attorney fees and costs without
segregation. Flatiron asserts the trial court did not decide the issue of segregation
because Scarsella’s claims were unsuccessful. We review a trial court’s determination
of whether segregation is possible for abuse of discretion. 49 “[W]here the ‘plaintiff’s
claims for relief. . . involve a common core of facts or [are] based on related legal
theories,’ a lawsuit cannot be ‘viewed as a series of discrete claims’ and, thus, the
claims should not be segregated in determining an award of fees.” 50 “A trial court need
not segregate attorney fees if it determines that ‘the claims are so related that no
reasonable segregation can be made.’” 51 Here, Scarsella’s claims relied on the same
47 117 Wn.2d, 52, 811 P.2d 673 (1991).
48 King County v. Vinci Construction Grands Projets/Parsons RCI/Frontier-
Kemper, JV, 188 Wash. 2d 618, 630, 398 P.3d 1093 (2017).
49 Vinici Construction Grands Projects, 188 Wash. 2d at 632 (citing Mayer v. Sto
Industries, Inc., 156 Wash. 2d 677, 693, 132 P.3d 115 (2006)).
50 Fiore v. PPG Industries, Inc., 169 Wash. App. 325, 351-52, 279 P.3d 972
(quoting Brand v. Department of Labor and Industries of State of Wash., 139 Wash. 2d
659, 672-73, 989 P.2d 1111 (1999)).
51 Everett Hangar, LLC v. Kilo 6 Owners Association, No. 76949-9-I, 7 Wash. App.
2d 1029 (unpublished).
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No. 78543-5-I/26
“common core of facts.” Scarsella lost its primary claims and was not entitled to fees.
Because Scarsella was not entitled to fees, segregation was not appropriate.
Flatiron asserts the trial court incorrectly denied its claim for attorney fees under
RCW 39.76.040 and RCW 39.04.250(3) because it prevailed against Scarsella’s
RCW 39.04.250 and 39.76.011 claims. Because neither party is the prevailing party,
we deny Flatiron’s claim.
Prejudgment Interest
Scarsella argues the trial court abused its discretion when determining the
amount awarded was unliquidated, and that the trial court should have awarded
prejudgment interest totaling $949,626.03. We disagree.
We review prejudgment interest decisions for abuse of discretion. 52 A court may
award prejudgment interest (1) for liquidated damages 53 or (2) “when the amount of an
‘unliquidated’ claim is for an amount due upon a specific contract for the payment of
money and the amount due is determinable by computation with reference to a fixed
standard contained in the contract, without reliance on opinion or discretion.” 54 “Where,
however, the demand is for something which requires evidence to establish the quantity
or amount of the thing furnished, or the value of the services rendered, interest will not
be allowed prior to the judgment.” 55
52Scoccolo Const., Inc. ex rel. Curb One, Inc. v. City of Renton, 158 Wash. 2d 506,
519, 145 P.3d 371 (2006).
53 Scoccolo Const., 158 Wash. 2d at 519.
54 Prier v. Refrigeration Engineering Co., 74 Wash. 2d 25, 32, 442 P.2d 621 (1968).
55 Wright v. City of Tacoma, 87 Wash. 334, 353-54, 151 P. 837 (1915).
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No. 78543-5-I/27
A claim is liquidated “where the evidence furnishes data which, if believed,
makes it possible to compute the amount with exactness, without reliance on opinion or
discretion.”56 A claim is “ ‘unliquidated’ where the exact amount of the sum to be
allowed cannot be definitely fixed from the facts proved, . . . but must in the last analysis
depend upon the opinion or discretion of the judge or jury as to whether a larger or a
smaller amount should be allowed.” 57
In Prier, the Washington State Supreme Court explained, “the existence of a
dispute over part or all of a claim does not change the claim from a liquidated to an
unliquidated one. It is the character of the claim and not of the defense that determines
the question.”58 There, the court determined there was data available to compute the
exact costs of repairs, so the plaintiff’s claims were for a liquidated sum on which
interest would be allowed. 59
Here, the trial court determined, “Scarsella’s request for an award of prejudgment
interest cannot be granted because Scarsella is not a prevailing party against Flatiron,
and because the principal judgment amount is not based upon a liquidated sum.” The
trial court compared this case to Wright v. City of Tacoma where the court permitted
prejudgment interest on a sum that was not in dispute but denied prejudgment interest
where “the items which made up this amount were in dispute.” 60 In Wright, the court
explained, “It being necessary to establish by evidence the amount of the services
56 Prier, 74 Wash. 2d at 32.
57 Prier, 74 Wash. 2d at 33.
58 Prier, 74 Wash. 2d at 35.
59 Prier, 74 Wash. 2d at 34-35.
60 87 Wash. at 354.
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No. 78543-5-I/28
furnished, or the quantity of material supplied, and not being able to establish these
either by computation or by reference to a known standard, interest prior to the date of
the judgment was improperly allowed.” 61
Here, Flatiron calculated it owed Scarsella approximately $2,731,437.97. But,
the trial court determined the amount Flatiron owed Scarsella was not, and could not be,
calculated “with any certainty from the evidence, and thus it is not possible to compute
prejudgment interest on that sum.”
We agree the amount of Scarsella’s recovery is an unliquidated sum that is not
“determinable by computation with reference to a fixed standard contained in the
contract.” For this reason, the trial court did not abuse its discretion in denying
prejudgment interest.
Scarsella also argues it is entitled to prejudgment interest because
RCW 39.04.250 and RCW 39.76.011 did not supersede common law rules for
prejudgment. 62 “Where. . . the provisions of a later statute are so inconsistent with and
repugnant to the prior common law that both cannot simultaneously be in force, the
statute will be deemed to abrogate the common law.” 63
RCW 39.04.250(3) provides a party may recover interest where a party
wrongfully withheld the sum. Scarsella cannot recover under RCW 39.04.250(3)
61 87 Wash. at 354.
62 Scarsella also argues the trial court improperly determined RCW 39.04.250
and RCW 39.76.011 to be the exclusive remedy. This claim is without merit because
the trial court did not state that RCW 39.04.250 and RCW 39.76.011 were exclusive
remedies.
63 State ex rel. Madden v. Public Utility Dist. No. 1 of Douglas County., 83 Wash. 2d
219, 222, 517 P.2d 585 (1973).
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No. 78543-5-I/29
because Flatiron withheld payment in good faith. Because it cannot recover under
RCW 39.04.250(3), Scarsella is not entitled to interest under that statute. The good
faith safe harbor provided by the parties’ contract and RCW 39.04.250(3)’s requirement
that a withholding be wrongful abrogate any previous inconsistent common law right of
recovery. And, because the date of completion had not arrived by the time of trial, the
retainage issue was premature and Scarsella is not entitled to interest on the retained
sum under RCW 39.76.011.
The trial court did not abuse its discretion in denying prejudgment interest. So,
we affirm.
Attorney Fees on Appeal
Both Scarsella and Flatiron request attorney fees and costs on appeal. But,
neither is the prevailing party on appeal. Each has prevailed on one or more major
issues. So we deny both requests.
CONCLUSION
We affirm. The prime contract notice and claim provisions apply to Scarsella’s
claim for extra work because the subcontract broadly incorporated the prime contract,
Flatiron did not waive the prime contract provisions, and Scarsella’s claim for estoppel
fails. Because Scarsella did not comply with the notice and claims requirements, it
waived its right to recovery and quantum meruit is unavailable. Scarsella’s claim for
foreclosure of the lien on retainage was premature because the prime contract date of
completion had not arrived by the time of trial. Neither Scarsella nor Flatiron is the
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No. 78543-5-I/30
prevailing party, and neither party is entitled to trial fees and costs. Scarsella did not
prevail on a liquidated claim, and the trial court did not abuse its discretion in denying
prejudgment interest. Flatiron breached the subcontract “by causing the substantial
project delays.” We deny Scarsella and Flatiron’s requests for attorney fees and costs
on appeal.
WE CONCUR:
30