Exterra Llc V. Cle Elum Gateway Property Llc Et Al

FILED
November 20, 2014
In the Office of the Clerk of Court
W A State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
EXTERRA, LLC, a Washington Limited 	)
company, 	) 	No. 317S1-0-III
)
Appellant, 	)
)
vs. 	)
) 	UNPUBLISHED OPINION
CLE ELUM GATEWAY PROPERTY, 	)
LLC, a Washington limited liability 	)
company; CORSTONE CONTRACTORS 	)
LLC, a Washington Limited liability 	)
company, 	)
)
Respondents, 	)
)
TRAVELERS CASUALTY & SURETY 	)
COMPANY OF AMERICA, a bonding 	)
company, 	)
)
Defendant. 	)
FEARING, J. - 	Exterra LLC (Exterra) sought to foreclose a materialmen's lien
because, it alleged, Cle Elum Gateway Property LLC (Gateway) and Corstone
Contractors LLC (Corstone) failed to pay for its construction services. Exterra also sued

No.31751-0-III
Exterra, LLC v. Cle Elum Gateway Property, LLC
Corstone for breach of contract. On summary judgment, the trial court dismissed
Exterra's foreclosure claim because it previously released and waived its claim.
On appeal, Exterra argues summary judgment was improper because the waiver
and release documents it signed are ambiguous and create an issue of material fact.
Exterra also argues the court lacked jurisdiction to hear Corstone's summary judgment
motion because it previously dismissed Corstone from the suit and despite Corstone
remaining a defendant by reason of a cross-claim asserted by Gateway. Alternatively,
Exterra argues Corstone waived any affirmative defense, including release and waiver,
because Corstone failed to plead them. 	We affirm the trial court.
FACTS
On September 15, 20 10, Gateway contracted with Corstone to construct a
McDonald's restaurant in Cle Elum, Washington. On September 29, Corstone
subcontracted a portion of that work to Exterra. In exchange for Exterra's excavation and
paving work, Corstone agreed to pay Exterra $48,704.
To receive payment for services, Exterra agreed to:
submit to the CONTRACTOR applications for payment at such
reasonable times as to enable the CONTRACTOR to timely apply for and
obtain payment from OWNER. Each application for payment shall include
appropriate waivers and releasesfrom SUBCONTRACTOR and from its
subcontractor's materialmen, suppliers, and third party independent
contractors, if any, for the period concerning which the
SUBCONTRACTOR is requesting payment.
Clerk's Papers (CP) at 10 (emphasis added). 	If the parties disputed their rights and
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obligations under this contract, they agreed the substantially prevailing party was entitled
to recover its expenses, including attorney fees and costs. Exterra also agreed to defend
and indemnify Corstone from any actions arising out of the services it performed under
the contract.
During the succeeding months, Exterra performed excavating, paving, and grading
for the McDonald's restaurant lot. Corstone made three progress payments: $12,230.55
on November 29,2010, $1,820.66 on January 18,2011, and $264.06 also on January 18.
Total payments were $14,315.27.
In accordance with the contract, Corstone required Exterra to sign waivers. On
November 24,2010, January 14,2011, and February 3,2011, Exterra executed
"Unconditional Waiver and Release of Claims and Lien Upon Progress Payment." CP at
90, 133-34. We reproduce below only the last waiver since all three contain the same
language other than the date covered and the amount Corstone paid. The waivers read:
The undersigned does hereby waive and release any and all claims,
of any type, kind or character, for labor, services, equipment, rented or
supplied, and materials furnished, including any mechanic's or
materialman's lien, equitable lien, stop notice, equitable adjustment, or
bond claim (public or private) that the undersigned has or may ever have in
any manner arising out of work, labor, services, equipment, material or
supplies furnished by or through the undersigned in connection with the
Project or the Contract through the date of 12/31/2010.
The undersigned further warrants and certifies that as of the date of
this waiver it has previously been paid a total of$14,315.27 in connection
with the project.
The undersigned hereby agrees to Indemnify and hold the Owner
[Gateway] and Corstone Contractors LLC harmless from any claim, cause
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of action or liability, including but not limited to costs, expenses, interest,
and attorneys' fees arising from any claims hereafter made on account of
work, labor, services, equipment, materials or supplies through the date of
12/31/2010. This waiver and release shall also be effective in the event of
any bankruptcy court action that may ultimately deprive the undersigned of
entitlement to the payment hereunder.
This is a partial Waiver and Release, the total unpaid balance of the
Subcontract Agreement will be paid upon. final cometion fo [sic] the
Project.
CP at 90.
In addition to the unconditional waivers, Exterra executed two "Conditional
Waiver and Release of Claims and Lien" on January 14 and February 3,2011. CP at
135-36. In the conditional waivers, Exterra again agreed to fully waive and release any
and all claims arising from the work it performed prior to December 31, 2010, "except
for the following items which are in dispute ____ ." CP 135-36. 	In other words,
the conditional waivers asked Exterra to identify any items it was not releasing. Exterra
left both blanks empty.
Charles Tudor, owner of Exterra, signed a declaration in opposition to Corstone's
summary judgment motion. 	In the affidavit, Tudor testified that Exterra's "last day on
the job was January 4, 2011, however we were [Exterra was] on the job site on
March 29,2011." 	CP at 115.
On January 20, 2011, Exterra filed a claim of lien on the Cle Elum lot with the
Kittitas County Auditor in the principal sum of $47,432.25, for labor, professional
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services, and material. Exterra signed the lien on December 13,2010. The lien identified
January 4, 2011, as the last date that Exterra performed labor, provided services, or
furnished materials.
PROCEDURE
On May 12, 2011, Exterra sued to foreclose on its materialmen's lien and alleged
Gateway and Corstone failed to pay for its construction services. On July 14, 2011,
before Gateway or Corstone filed an answer, Exterra moved under CR 41 to voluntarily
dismiss Corstone from its lien foreclosure suit. During the pendency of the motion,
Gateway answered Exterra's complaint, asserted affirmative defenses, and filed a cross
claim against Corstone. 	Corstone, Gateway alleged, was required to indemnity it from
Exterra's claim. 	On July 28, 2011, the trial court granted Exterra's CR 41 motion and
dismissed Corstone. The order does not mention the cross-claim filed by Gateway.
On September l3, 2011, Corstone filed its answer to Gateway and brought a
counterclaim and third party claim. Corstone asserted the counterclaim against Exterra
for failing to repair defective work. Corstone asserted the third-party claim against
Charles Tudor and his wife because they personally guaranteed Exterra's performance.
On November 15, 2011, Exterra sent an e-mail to Gateway and Corstone
questioning whether Corstone remained a party following Exterra's motion for voluntary
dismissal. In response, Gateway, stated:
In response to your e-mail dated November 15, 2011. 	Our records
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show that our third party complaint against Corstone was filed on our abut
[sic] July 20, 2011. The order dismissing Corstone was entered on July 28,
2011. I believe Corstone is dismissed from your client's claim but was not
dismissed by my client's claims.
As I understand it, Corstone has filed an answer to our complaint
and filed a third party complaint against Chuck Tudor based upon his
personal guarantee of the contract. Again, if I am incorrect please advise.
CP at 156. Corstone responded to the group later that day, stating:
In my review of the file, I agree with the lay of the land described by
Mr. Holt [counsel for Gateway]. Corstone also filed a Cross Claim against
Exterra, which was sent to you in September. Answers are due from both
Chuck Tudor and Exterra.
CP at 156.
Exterra never responded to the e-mails. On April 25, 2012, Exterra filed its
answer to Corstone's cross claim and third-party complaint. In its answer, Exterra
asserted that Corstone is not a party to the lien foreclosure action, although Exterra did
not allege Corstone lacked standing to bring a cross claim against Exterra. On April 25,
2012, Exterra also filed a Note for Trial Setting, listing Corstone as a party.
In May 2012, Exterra responded to interrogatories and requests for production sent
by Corstone. In an answer to one interrogatory, Exterra declared that Corstone owed
$47,432.25. In another interrogatory, Corstone requested that Exterra state with
particularity and describe in detail how it calculated its claim of lien. Exterra responded:
"See the attached invoices and change orders." CP at 83. The attached invoices and
change orders showed the last date of work to be November 16,2010.
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On June 27, 2012, Corstone sent Exterra a letter requesting Exterra file a release of
lien and dismiss its lien foreclosure action based on the waivers Exterra previously
signed. A month later, on July 24, 2012, Corstone again asked Exterra to voluntarily
dismiss its lawsuit given the unconditional waiver it signed. Exterra never responded to
either letter .
.Based on the unconditional waivers Exterra signed, Corstone moved for summary
judgment and Gateway joined. Exterra resisted the motion by arguing an ambiguity in
the language of the waivers prevented the court from dismissing its lien foreclosure
action. Its owner, Charles Tudor testified by declaration:
In support of its motion for summary judgment, Corstone produces a
copy of the Unconditional Waiver and Release of Claims and Lien Upon
Progress Payment that I signed on February 3, 2011. That document was
prepared by Corstone. My understanding of that document was that Exterra
was waiving its right to claim a lien as to the monies that it had been paid
on the project. However, Exterra was not waiving any such rights as to
monies it had not been paid, but were due. That is evidenced by the
statement.
"This is a partial Waiver and Release, the total unpaid balance
of the Subcontract Agreement will be paid upon final
comletion fo [sic] the Project."
CP at 115.
Exterra also argued, in opposition to the defense summary judgment motion, that
Corstone lacked standing since Exterra previously dismissed it from the complaint. The
court postponed deciding Corstone and Gateway's summary judgment motion pending
resolution of the standing issue.
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In a supplemental brief to the court, Corstone argued it gained standing through
the cross claim Gateway filed. 	The court agreed with Corstone and Gateway in a
memorandum decision dated March 13,2013. The court found Corstone had standing
and dismissed Exterra's lien foreclosure action based on the waivers it executed.
On April 5, 2013, Exterra moved the court to reconsider its order. 	In its motion to
reconsider Exterra argued for the first time Corstone could not bring a summary
judgment motion because it did not raise release as a defense in its answer. Corstone
argued it provided Exterra sufficient notice of its release defense in its June and July
2012 letters requesting Exterra dismiss its suit. On April 17, 2013, the court denied
Exterra's motion to reconsider its order. Pursuant to the parties' contract, the trial court
awarded Corstone reasonable attorney fees and costs in the sum of $25,607.74.
LA W AND ANALYSIS
Jurisdiction
Exterra first argues the trial court lacked jurisdiction to hear Corstone's summary
judgment motion because Exterra previously dismissed Corstone from its lien foreclosure
action. 	We question whether "jurisdiction" is the correct term to use in this context.
Jurisdiction traditionally consists of two concepts. Subject matter jurisdiction governs
the court's authority to hear a particular type of controversy, not a particular case.
Dougherty v. Dep't a/Labor & Indus., 150 Wn.2d 310,317,76 P.3d 1183 (2003);
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No. 31751-0-II1
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Ralph v. Dep 't a/Natural Res., 171 Wn. App. 262, 267-68, 286 P.3d 992 (2012),
review granted, 176 Wn.2d 1024,301 P.3d 1047 (2013). Personal jurisdiction is
jurisdiction over the parties by reason of consent, domicile, residence, presence,
appearance in an action, or doing business in a state. 	SCM Grp. USA, Inc. v.
Protek Machinery Co., 136 Wn. App. 569, 574, 150 P.3d 141 (2007). The trial
court held subject matter jurisdiction over a lien foreclosure on property within its
county. The court held personal jurisdiction over the parties by reason of
conducting business in the county. Rather than addressing jurisdiction, we review
our civil rules to determine if the trial court had authority to entertain Corstone's
summary judgment motion.
Voluntary dismissal is governed by CR 41. Under CR 41, a party has a
mandatory, absolute right to dismissal of its action without prejudice, fixed on the day of
the filing of the motion. 	Calvert v. Berg, 177 Wn. App. 466,472, 312 P.3d 683 (2013).
A defendant is not thereafter entitled to claim a setoff or seek affirmative relief so as to
prevent the granting of a nonsuit. Krause v. Borjessan, 55 Wn.2d 284,285,347 P.2d 893
(1959). Entry of a judgment after the order of dismissal exceeds the jurisdiction of the
court. Cork Insulation Sales Co. v. Torgeson, 54 Wn. App. 702, 705, 775 P.2d 970
(1989). Because Corstone filed its cross claim after Exterra dismissed it from the suit,
Exterra argues the court lacked jurisdiction to grant Corstone summary judgment.
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No. 31751-0-111
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If Corstone was the only other party, Exterra would be correct. But Exterra also
sued Gateway. Gateway, in tum, filed a cross claim against Corstone. Although Exterra
filed its motion to dismiss before Gateway filed its cross claim and Corstone may have
been dismissed upon the filing of the motion, Gateway could have joined Exterra as a
third party defendant anyway. Exterra never objected to Corstone remaining a party to
the suit as a result of the cross claim.
Gateway had the right to challenge the lien and to bring a summary judgment
motion to dismiss the lien. In fact, Gateway joined Corstone's summary judgment
motion and thus the motion could proceed as Gateway being the movant.
We find no Washington decision directly on point. But logic and economy
compels our ruling. The trial court held authority to entertain the summary judgment
motion.
Failure to File Answer
Exterra next argues Cor stone could not raise release or waiver as an affirmative
defense because Corstone failed to plead the defenses. Under CR 8( c) a party "shall set
forth affirmatively. . . release ... and any other matter constituting an avoidance or
affirmative defense." Generally, affirmative defenses are waived unless they are (1)
affirmatively pled, (2) asserted in a motion under CR 12(b), or (3) tried by the express or
implied consent of the parties. Bickford v. City of Seattle, 104 Wn. App. 809, 8l3, 17
P.3d 1240 (2001). A party does not waive its affirmative defense merely because it fails
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to plead it. Where the party fulfills the policy goal animating the rule-to avoid
surprise-courts will permit the affirmative defense. Henderson v. Tyrrell, 80 Wn. App.
592,624,910 P.2d 522 (1996).
It is to avoid surprise that certain defenses are required by CR 8(c) to
be pleaded affirmatively. In light of that policy, federal courts have
determined that the affirmative defense requirement is not absolute. 	Where
a failure to plead a defense affirmatively does not affect the substantial
rights of the parties, the noncompliance will be considered harmless.
Tillman v. National City Bank, 118 F.2d 631,635 (2d Cir.l941). Also,
objection to a failure to comply with the rule is waived where there is
written and oral argument to the court without objection on the legal issues
raised in connection with the defense. Joyce v. L.P. Steuart, Inc., 227 F.2d
407 (D.C. Cir. 1955). There is a need for such flexibility in procedural
rules.
Mahoney v. Tingley, 85 Wn.2d 95, 100,529 P.2d 1068 (1975).
We recognize that Corstone failed to plead release as an affirmative defense.
Nevertheless, Corstone notified Exterra of its defense by letters on June 27 and July 24,
2012, before it filed the summary judgment motion. In its motion opposing summary
jUdgment, Exterra did not object to Corstone's defense. Exterra did not raise CR 8 as a
bar to Corstone's defense until after it lost the summary judgment motion and moved for
reconsideration. Exterra waived any objection to the failure to plead release as an
affirmative defense when it preceded with written and oral argument on the issue.
Summary Judgment Motion Merits
Exterra contends summary judgment was improper because language in the
waivers is ambiguous and required extrinsic evidence to ascertain its meaning. This court
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reviews summary judgment motions de novo, engaging in the same inquiry as the trial
court. A/oa v. Port a/Seattle, 176 Wn.2d 460,466,296 P.3d 800 (2013). 	Summary
judgment is appropriate ifthere are no genuine issues of material fact and the moving
party is entitled to judgment as a matter of law. A/oa, 176 Wn.2d at 466. The
interpretation of a contract can be a mixed question of law and fact. 	Rekhter v. Dep 't 0/
Soc. & Health Servs., 180 Wn.2d 102,134,323 P.3d 1036 (2014). When the contract
presents no ambiguity and no extrinsic evidence is required to make sense of the contract
terms, contract interpretation is a question oflaw. Rekhter, 180 Wn.2d at 134.
An ambiguity exists if the language is susceptible to more than one reasonable
interpretation. Holden v. Farmers Ins. Co. a/Wash., 169 Wn.2d 750, 756,239 P.3d 344
(2010). A contract is not ambiguous simply because the parties suggest opposing
meanings. Martinez v. Kitsap Pub. Servs., 94 Wn. App. 935, 944, 974 P.2d 1261 (1999).
An ambiguity will not be read into a contract where it can reasonably be avoided by
reading the contract as a whole. McGary v. Westlake Investors, 99 Wn.2d 280, 285, 661
P.2d 971 (1983).
The release and waiver Exterra signed is a contract and its construction is
governed by contract principles. Barton v. Dep't o/Transp., 178 Wn.2d 193,208,308
P.3d 597 (2013). To interpret such a release, courts looks to the parties' intent. 	Us. Life
Credit Life Ins. Co. v. Williams, 129 Wn.2d 565, 569, 919 P.2d 594 (1996).
Determination of the intent of the contracting parties is to be
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No. 31751-0-II1
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accomplished by viewing the contract as a whole, the subject matter and
objective of the contract, all the circumstances surrounding the making of
the contract, the subsequent acts and conduct of the parties to the contract,
and the reasonableness of respective interpretations advocated by the
parties.
Berg v. Hudesman, 115 Wn.2d 657,667, 801 P.2d 222 (1990) (quoting Stender v. Twin
City Foods, Inc., 82 Wn.2d 250,254,510 P.2d 221 (1973». A court may consider
extrinsic evidence to ascertain the parties' intent, but unilateral or subjective purposes
and intentions about the meanings of what is written do not constitute evidence of the
parties'intentions. Lynott v. Nat'l Union Fire Ins. Co., 123 Wn.2d 678,684,871 P.2d
146 (1994); Wm. Dickson Co. v. Pierce County, 128 Wn. App. 488, 493, 116 P.3d 409
(2005). Extrinsic evidence is admissible as an aid to ascertain the parties' intent when it
describes the circumstances under which the contract was made. Berg, 115 Wn.2d at
667.
Exterra argues the declaration of its managing member, Charles Tudor, created an
ambiguity as to the intent of the parties. Tudor testified to his "understanding" that the
release only waived Exterra's right to claim a lien as to monies already paid on the
project, not any rights to monies it had not been paid, but were due. Tudor emphasizes
the last sentence in the unconditional waiver: "[t]his is a partial Waiver and Release, the
total unpaid balance of the Subcontract Agreement will be paid upon final comletion fo
[sic] the Project." CP at 115.
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No. 31751-0-III
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Charles Tudor did not testify as to the circumstances under which the parties
signed the release. Tudor's declaration testimony details his subjective belief as to the
parties' intent. Subjective beliefs do not constitute evidence when construing and
applying a contract.
Charles Tudor's testimony contradicts the plain language of the release. The
release provided:
The undersigned does hereby waive and release any and all claims,
of any type ... for labor ... arising out of work ... furnished by or through
the undersigned in connection with the Project or the Contract through the
date of 12/3112010.
CP at 90. Contrary to Tudor's belief, the release language did not depend on whether
Corstone paid amounts owed under the contract. Rather, the releases operated against
claims for work performed before an identified date, December 31, 20 I O.
Exterra acknowledges the "releases appear to be absolute," but argues the last
sentence describing the waiver and release as "partial" creates an ambiguity. Br. of
Appellant at 11. Exterra avers the trial court ignored this language when it determined no
ambiguity exists. Nevertheless, as already stated, use of the word "partial" was intended
to reserve claims for work after an identified date. The partial waiver language reserved
Exterra's right to the money under the contract notwithstanding its waiver to any lien
claim arising out of work performed after December 31, 2010.
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No. 31751-0-111
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Viewing the waiver and releases as a whole, its subject matter, and objective, no
ambiguity exists. 	In the unconditional waiver and release, Exterra "waive[ d] and
releaser d] any and all claims, of any type, kind or character ... including any mechanic's
or materialman's lien ... that [Exterra] has ... arising out of work, labor, services,
equipment, material or supplies furnished by or through [Exterra] in connection with the
Project or the Contract through the date of 12/3112010." CP at 90. The conditional
waiver and release contained a space for Exterra to list any outstanding claims it retained.
Exterra did not list any.
Because no ambiguity exists, the trial court properly granted summary judgment
for Corstone and Gateway.
We note that Charles Tudor testified that Exterra did not complete its work on the
project until, at the earliest January 4, 2011, or at the latest, spring 2011. 	The releases
signed by Exterra waived claims for work only before December 31, 2010. If Exterra
had not provided discovery responses to the contrary, we would remand the case because
of a question of fact as to whether Exterra's lien should remain an encumbrance because
of work performed after December 31, 2010.
Exterra responded to an interrogatory as to the basis of the amount claimed by
referring Corstone to invoices. The invoices showed the last date of work to be
November 16, 20 I O. Exterra supplied no explanation as to the contradiction between its
owner's declaration and its interrogatory answer. Out of fairness to its opponents,
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Exterra may not respond to discovery with one version of facts and then testify, in
response to a summary judgment motion, with contradictory facts.
Self-serving affidavits contradicting prior depositions cannot be used to create an
issue of material fact. Davis v. Fred's Appliance, Inc., 171 Wn. App. 348, 357, 287 P.3d
51 (2012); McCormickv. Lake Wash. Sch. Dist., 99 Wn. App. 107, 111,992 P.2d 511
(1999). When a party has given clear answers to unambiguous deposition questions
which negate the existence of any genuine issue of material fact, the party cannot
thereafter create such an issue with an affidavit that merely contradicts, without
explanation, previously given clear testimony. Klontz v. Puget Sound Power & Light
Co., 90 Wn. App. 186, 192, 951 P .2d 280 (1998).
The cited opinions concern incongruous deposition testimony, not interrogatory
answers. We discern no relevant difference between the two, however. Interrogatory
answers are also given under oath and may be used to impeach. CR 33(a) and (b). More
reason exists to apply the incongruous testimony rule to interrogatory answers. In a
deposition, the party has scant time to respond to a question. A party has at least 30 days
to reflect on an interrogatory question before answering.
Reasonable Attorney Fees
Exterra argues Corstone was not entitled to attorney fees and costs because it was
not a party to the litigation. For the reasons previously declared, Corstone was a party.
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No. 31751~0-III
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Corstone held a duty to Gateway to remove the lien. The lien suit arises out of
Corstone's and Exterra's contract, which contained a fee shifting clause.
Exterra does not challenge the trial court's actual award of attorney fees, or the
reasonableness of it. As such, Corstone's award of attorney fees, and the reasonableness
of it, are verities on appeal. See Regan v. McLachlan, 163 Wn. App. 171, 17S, 257 P.3d
1122 (2011). The trial court did not err in granting Corstone attorney fees.
Corstone raises four bases for awarding it attorney fees and costs on appeal.
Because its request goes unchallenged and has merit, this court need address only the
first. 	Corstone requests attorney fees under RAP lS.1. RAP lS.l(a) permits an award of
attorney fees and costs on appeal if granted by applicable law. Corstone is entitled to
reasonable attorney fees under the terms of the waiver and release documents signed by
Exterra. Thus, Corstone may recover attorney fees on appeal.
CONCLUSION
We affirm the trial court's grant of summary judgment to Corstone dismissing the
lien foreclosure action and granting Corstone attorney fees and costs. We award
Corstone reasonable attorney fees and costs on appeal and direct that a court
commissioner determine the amount of the award.
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A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
WE CONCUR:
~I 	C!;t
~(\
Lawrence-Serr y, J.
18