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Axthelm & Swett Construction Inc. v. Caudill

May 12, 1997


Appeal from Superior Court of Skagit County. Docket No: 93-2-00418-7. Date filed: 01/04/95.

Authored by Walter E. Webster. Concurring: Faye C. Kennedy, H. Joseph Coleman.

The opinion of the court was delivered by: Webster

WEBSTER, J. -- The Caudills appeal the trial court's entry of judgment against them for breach of a construction contract. They argue that the trial court improperly determined that (1) a certain document was not part of the contract, (2) the commencement and completion dates were tied to the obtaining of a permit, (3) the contract allowed an extension of time for the contractor when the owner requested additional work, and (4) the contractor was justified in suspending work when Mr. Caudill refused to make a progress payment required under the contract. They also argue that the trial court erred in awarding attorney fees. *fn1 Axthelm & Swett cross-appeals, arguing that the trial court incorrectly calculated the prejudgment interest due. We affirm.


The Caudills entered into an agreement with Axthelm & Swett Construction (A & S) to build a manufacturing building for the Caudills' business, American Eagle. The parties spent almost a year, the major portion of 1992, negotiating about the project. Although Mr. Caudill began negotiating with A & S, he later opened up the project for bids from other contractors. In May 1992, he prepared a project manual for contractors interested in bidding, which included the project specifications, a blank American Institute of Architects (AIA) form construction contract, and an AIA general conditions document. Because all the bids Caudill received, including the one from A & S, were too high, he began negotiating with A & S for a project that would work within his budget.

By August, the parties were close to reaching an agreement. Caudill claimed that A & S was aware at this time that the building needed to be completed by January 1993 when American Eagle's lease expired. He also claimed that he orally agreed with A & S that they would start preliminary work, such as obtaining permits, so they could begin construction when they signed a written agreement. Caudill claims that he agreed to pay A & S $10,000 for that work if they did not ultimately reach an agreement. A & S contended that there was no agreement to begin work without a written contract or that the building would be complete by January.

In September, Caudill signed a written contract prepared by A & S. The contract provided that construction was to commence five days after the receipt of the building permit. A & S obtained the building permit on December 4. Severe winter weather interfered with A & S's progress in December and January. Caudill's request that A & S add a second floor to the office building, which was not part of the original plans, added an additional 21 days.

The contract also provided that Caudill would make monthly progress payments by the fifth of each month. As the building progressed, Caudill made the first several progress payments without comment. American Eagle workers began to occupy parts of the building, which was nearing completion, in early April. Yet Caudill did not make the March 1993 payment of over $235,000 when it was due on April 5. On April 12, he informed A & S that he would not make the payment because A & S was behind schedule, causing damages to American Eagle, and because he had received notice of the right to lien from suppliers and subcontractors. He stated that he had expected A & S to complete the project by January 15 to allow American Eagle to move in when its lease expired. He also disputed whether he should pay for certain change orders. He stated that the total remaining on the contract was $290,376, from which he deducted the "improper" change orders and American Eagle's damages for delayed completion, leaving a balance of $150,739. He stated that he would issue a check for that amount once he received lien releases from all the subcontractors and an occupancy permit.

A & S responded by suspending operations, removing the permits from the premises, and notifying the city and county that American Eagle was conducting work in the building without an occupancy permit or fire system. A & S's counsel informed Caudill that A & S would return to work upon payment of the full amount due, that the project was more than 30 days ahead of schedule, and that hiring a replacement contractor would be a further breach of the contract.

After the Caudills hired a replacement contractor, A & S filed a construction lien on the property and initiated this suit to foreclose it. The Caudills argued that they did not owe for some of the change orders and counterclaimed for their costs in completing A & S's work. American Eagle sought damages for untimely completion, including lost profits on jobs it had to turn down because the facility was not ready.

The court determined that A & S's suspension was justified because of Caudill's refusal to pay, but determined that walking off the job with the permits was improper and awarded Caudill $10,000 in damages for the resulting delay. The court awarded A & S $185,597.61, representing the amount due on the original contract plus change orders and less A & S's cost savings from not completing the job, budget reductions not at issue here, and the $10,000 in damages. The court dismissed American Eagle's claim for damages.


Standard of Review

The appellate court determines whether substantial evidence supports challenged findings of fact, and whether the findings support the Conclusions of law. Willener v. Sweeting, 107 Wash. 2d 388, 393, 730 P.2d 45 (1986). Substantial evidence is evidence sufficient to persuade a fair-minded person of the truth of the matter asserted. Ridgeview Properties v. Starbuck, 96 Wash. 2d 716, 719, 638 P.2d 1231 (1982). We review questions of law de novo. State v. McCormack, 117 Wash. 2d 141, 143, 812 P.2d 483 (1991).

AIA Document

The Caudills first argue that the American Institute of Architects

(AIA) Document A201, General Conditions of the Contract for Construction, is part of the parties' contract. They suggest that the trial court did not address this issue below. The trial court entered the following finding regarding the contract:

The written contract of September 18, 1992 was the contract between Axthelm & Swett and the Caudills for construction of the American Eagle Manufacturing facility. Although this finding does not expressly state whether the AIA document was incorporated in that written contract, the court rejected the Caudills' proposed version of the finding, which included the statement that "the written contract of September 18 included AIA Document A201, General Conditions of the Contract for Construction," suggesting that it did consider and decide the issue.

The interpretation of a contract provision is a question of law only when the interpretation does not depend on extrinsic evidence or when only one reasonable inference can be drawn from the evidence. Scott Galvanizing v. Northwest EnviroServices, 120 Wash. 2d 573, 582, 844 P.2d 428 (1993). Here, where the Caudills insist that extrinsic evidence is necessary to interpret the contract, the interpretation is a question of fact. See id. The court's primary task in contract interpretation is to determine the parties' intent. U.S. Life Credit Life Ins. v. Williams, 129 Wash. 2d 565, 569, 919 P.2d 594 (1996). The parties' intent is determined by considering the contract as a whole, its subject matter and objective, the circumstances ...

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