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Snohomish School District No. 201 v. Sportec International Inc.

December 2, 1996

SNOHOMISH SCHOOL DISTRICT NO. 201, RESPONDENT,
v.
SPORTEC INTERNATIONAL, INC., A FOREIGN CORPORATION; SPI, INC., A FOREIGN CORPORATION; BALSAM CORPORATION, A FOREIGN CORPORATION; TECSYN INTERNATIONAL, INC., A FOREIGN CORPORATION; APAS, A FOREIGN CORPORATION; ALL PRO INDUSTRIES, A FOREIGN CORPORATION; PLAYFIELD INDUSTRIES, A FOREIGN CORPORATION; ALL-PRO ATHLETIC SURFACES, INC., A FOREIGN CORPORATION; TULLUS GORDON CONSTRUCTION COMPANY, A WASHINGTON CORPORATION; AND SEABOARD SURETY COMPANY, A FOREIGN CORPORATION, APPELLANTS.



Appeal from Superior Court of Snohomish County. Docket No: 91-2-05818-9. Date filed: 07/14/94. Judge signing: Hon. Kathryn E. Trumbull.

Authored by Mary K. Becker. Concurring: H. Joseph Coleman, Susan R. Agid.

The opinion of the court was delivered by: Becker

BECKER, J., -- The Snohomish School District brought this action to recover damages for a faulty artificial turf playing field installed by Sportec International, Inc. Defendants in the action included, among others, Sportec; Sportec's parent company, Tecsyn International, Inc.; and Seaboard Surety Company, which issued the construction bond on behalf of Sportec. The jury awarded the School District $464,178 in damages.

On appeal, Sportec and the other defendants contend the court erred in (1) submitting to the jury claims for breach of contract and breach of express and implied warranties, where Sportec expressly disclaimed such liability; (2) entering a judgment on the jury's verdict in excess of the cost of replacing the turf material; (3) allowing the School District to assert claims on behalf of the general construction contractor; and (4) refusing to dismiss Tecsyn, which was ostensibly not involved in the project. In its cross-appeal, the School District assigns error to (1) a ruling limiting the damages against Seaboard to the amount of its surety bond; and (2) an order dismissing its Consumer Protection Act claim against all defendants.

We hold that the trial court erred in denying Tecsyn's motion to dismiss, as the District's evidence did not justify "piercing the corporate veil" to hold Tecsyn liable on Sportec's contract. We affirm the judgment in all other respects.

FACTS

In 1987, the School District began construction of a multipurpose sports complex at Snohomish High School. The general contractor subcontracted with Sportec to provide and install the centerpiece of the complex, an artificial surface playing field.

In entering the subcontract, Sportec agreed to be bound by the provisions of the contract between the School District and the general contractor. These included a general warranty "that all Work will be of good quality, free from faults and defects in conformance with the Contract Documents." The contract also incorporated detailed specifications for the playing field, including the following:

Contractor warrants to the Owner that its synthetic turf materials shall not fade, fail, shrink, or reflect excessive wear.

Contractor shall, at his sole expense and cost, replace such areas of the synthetic turf system.

The fabric shall adhere firmly and completely to the underpad over the entire warranty period. Fabric seams shall remain attached to the underlying surface over the warranty period and shall not separate or become unglued or unstitched as applicable.

from specified width and location.

Sportec constructed the field in the summer and early fall of 1987. As construction was nearing completion, Sportec submitted its written warranty on the field to the School District. The written warranty purported to limit Sportec's liability to "the original sales price of the Omniturf". The warranty expressly disclaimed any "other warranties or representations, express or implied, whether as to merchantability or fitness for a particular purpose". Sportec also submitted a warranty bond, issued by Seaboard Surety Company. The bond was in the amount of $350,000, as required by the general contract. The School District formally accepted the completed sports complex on June 8, 1988.

From the beginning, the School District experienced problems with the playing field. Some of the field markings, which were manufactured into the turf material, were in the wrong place. Sportec workers had to cut the markings out and relay them elsewhere. The horizontal lines on the field were not straight, and they became more and more squiggly as time went by. The turf buckled in places, and it separated at the seams. The rubber padding underlying the turf material also separated, leaving small "valleys" in the field. At trial, Sportec's expert admitted the field was "notorious" as "the biggest mess in the industry". On appeal, Sportec does not deny that the field needed to be repaired or replaced.

Sportec and several other companies made attempts to repair the field in 1988, 1989, 1990, and twice in 1991. These attempts proved unsuccessful. The School District ultimately sought outside bids to replace the field.

In October, 1991, the School District sued Sportec and others, alleging breach of contract, breach of express and implied warranties, and violation of the Consumer Protection Act. Pre-trial, the District settled with two of the defendants, Tullus Gordon Construction Company and the Balsam Corporation.

The case went to trial in June, 1994. At the end of the School District's case, the court dismissed the District's Consumer Protection Act claims. The remaining claims went to the jury. The jury found for the District and awarded $464,178 in damages. The court reduced the award by $57,000 to reflect the pre-trial money settlement with Balsam. Sportec, Tecsyn and Seaboard appeal the judgment; the District cross-appeals two decisions that limited its recovery.

Breach of Contract and Breach of Warranty Claims

Sportec contends the only claim properly before the jury was a claim for breach of its written warranty, as that document expressly disclaimed any other liability. Sportec also contends it was error to instruct the jury that it could award damages in excess of the original cost of the field, where the written warranty provided that Sportec's liability "shall not exceed the original sales price of the Omniturf". In essence, Sportec's position is that the disclaimers in its written warranty limit its liability as a matter of law.

Warranty disclaimers are not favored by Washington law. Rottinghaus v. Howell, 35 Wash. App. 99, 103, 666 P.2d 899, review denied, 100 Wash. 2d 1016 (1983). In order to be effective, such disclaimers must be explicitly negotiated and agreed to by the parties. Rottinghaus, 35 Wash. App. at 103. "Without negotiation and agreement, no disclaimer . . . can be effective." Hartwig Farms, Inc. v. Pacific Gamble Robinson Co., 28 Wash. App. 539, 545, 625 P.2d 171 (1981). The party seeking to enforce such a disclaimer has the burden of demonstrating that it was known to the buyer and bargained for. Lyall v. DeYoung, 42 Wash. App. 252, 257, 711 P.2d 356, review denied, 105 Wash. 2d 1009 (1985).

Sportec's written warranty was submitted near the end of the construction process. School District officials testified they recalled no negotiation or Discussion concerning the contents of the warranty. In this situation, there was at least an issue of fact as to whether the disclaimers were effective. The trial court properly submitted this issue to the jury.

Sportec next contends that the implied warranties of merchantability and fitness for a particular purpose do not apply in this case because the parties' contract was a "construction contract". Sportec relies on Christiansen Bros., Inc. v. State, 90 Wash. 2d 872, 877, 586 P.2d 840 (1978), and Arango Constr. Co. v. Success Roofing, Inc., 46 Wash. App. 314, 730 P.2d 720 (1986), both holding that construction contracts were not "transactions in goods" subject to the Uniform Commercial Code.

In Tacoma Athletic Club, Inc. v. Indoor Comfort Systems, Inc., 79 Wash. App. 250, 902 P.2d 175, review denied, 128 Wash. 2d 1020, 913 P.2d 816 (1995), Division Two considered the application of Arango and Christiansen in a case involving the installation of a dehumidification system at an indoor pool. The court explained that these two cases do not define a "construction contract". "Both cases interpreted contracts that seemed clearly to be construction contracts; neither case provides an analytical test to classify contracts." Tacoma Athletic, 79 Wash. App. at 256. Following the lead of many other jurisdictions, the court adopted the "predominant factor" test to determine whether a contract calling for both goods and services falls within Article 2 of the UCC.

The test for inclusion or exclusion is not whether they are mixed, but granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved[.] Tacoma Athletic, 79 Wash. App. at 257 (quoting Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir. 1974)). The court concluded the predominant aspect of the contract to install the dehumidification system was "the sale of goods", and that the UCC properly applied. Tacoma Athletic, 79 Wash. App. at 258.

The predominant factor of the parties' contract in this case was the provision of goods, i.e., an artificial surface playing field. The fact that Sportec provided a service in installing the field does not remove the contract from the purview of Article 2. Tacoma Athletic, 79 Wash. App. at 259; see also United States v. City of Twin Falls, 806 F.2d 862, 871 (9th Cir. 1986), cert. denied, 482 U.S. 914, 96 L. Ed. 2d 673, 107 S. Ct. 3184 (1987) (contract to build sewage treatment plant was, as a matter of law, a sale of goods). ...


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