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William H. Gordon Associates, Inc. v. Heritage Fellowship

Supreme Court of Virginia

February 12, 2016

WILLIAM H. GORDON ASSOCIATES, INC.
v.
HERITAGE FELLOWSHIP, UNITED CHURCH OF CHRIST, A/K/A HERITAGE FELLOWSHIP CHURCH

          FROM THE CIRCUIT COURT OF FAIRFAX COUNTY. Jane Marum Roush, Judge.

Page 266

         James F. Lee, Jr. (Jonathan C. Shoemaker; Arthur T.K. Norris; Lee & McShane, on briefs), for appellant.

         Thomas R. Folk (S. Miles Dumville; Alison R.W. Toepp; Reed Smith, on brief), for appellee Heritage Fellowship, etc.

         No brief filed by appellee Whitener & Jackson, Inc.

         Amici Curiae: American Council of Engineering Companies of Metropolitan Washington, American Council of Engineering Companies of Virginia, American Council of Engineering Companies of Maryland, American Council of Engineering Companies, American Society of Civil Engineers, National Society of Professional Engineers, Virginia Section of the American Society of Civil Engineers, Virginia Association of Surveyors, Inc., and Engineers and Surveyors Institute (Joseph R. Pope; Williams Mullen, on brief), in support of appellant.

         PRESENT: Lemons, C.J., Goodwyn, Mims, McClanahan, Powell and Kelsey, JJ., and Russell, S.J.

          OPINION

Page 267

          S. BERNARD GOODWYN, JUSTICE.

         In this appeal, we consider when the cause of action for a negligent design claim against an engineer accrues. We also consider whether a construction contract between a contractor and an owner absolves a third-party engineer of liability. Third, we consider the evidence required to establish a breach of the standard of care for a professional engineer. Fourth, we consider whether a co-defendant is entitled to an offset or credit when one defendant settles with the plaintiff for attorneys' fees. Finally, we consider whether extended construction interest payments are an appropriate measure of damages for construction delay when the loan term was not extended or altered by the construction delay.

         Background

         On July 7, 2006, Heritage Fellowship Church (Heritage) entered a contract (Engineering Contract) with William H. Gordon Associates, Inc. (Gordon), an engineering firm, to design " Final Site Plans" for a rain tank system to be installed at a property where Heritage was planning to build a new sanctuary.[1] Per Gordon's plans, the rain tank was to be buried beneath ten feet of dirt

Page 268

cover and paved over for use as a parking lot. Heritage also engaged Gordon to provide " Construction Coordination." The Engineering Contract states in relevant part:

         SCOPE OF SERVICES

Final Site Plan: preparation of final construction documents for site development to include provisions for 221,000 square feet building and an approximate 200 space surface parking on an approximately 5.0 acre site with associated driveways, grading and storm sewer, sanitary sewer, water mains and service connections, and erosion and sedimentation control facilities. Construction documents will include:
o Stormwater Management [RainTank] (SWM)/Best Practices (BMP) plans -- preparation of detailed SWM/BMP computations and final design drawings for detention and water quality facilities adequate to provide the required water quantity and quality abatement of post-developed conditions. [Task 445]
o Site Plan Revisions [Task 442 B] -- given the fact that this site plan is being filed concurrent with the rezoning and special permit, it is inevitable that there will be changes required to the site plan after its first submission. Revisions will be required to the grading plans, horizontal geometry plans, utility plans and erosion and sedimentation control plans or any other plans in the set. This includes changes to the plan in response to county first submission comments.
Optional Services
Construction Coordination [Task 454] -- provide assistance to the Client and/or Client's representative during construction including review of shop drawings and answering questions, as required.

         The Engineering Contract explicitly excluded from Gordon's promised services (1) " Redesign of the site after the layout has been approved by the client or his designated representative" and (2) " Redesign of the site after the layout has been approved by the Client or his designated representative or due to Architect's changes after the site engineering is complete."

         Additionally, the Engineering Contract contained a rider of Gordon's " Standard Terms and Conditions" with the following relevant provisions:

3. In performing its services, Gordon shall be entitled to rely on the accuracy and completeness of work and information supplied by third parties, the Client and his authorized representative and the public record.
. . . .
7. Gordon will perform its services using that degree of care and skill ordinarily exercised under similar conditions by reputable members of our profession practicing in the same or similar locality and in compliance with any applicable codes, statutes and/or regulations.
. . . .
10. Causes of action between the parties to this Agreement pertaining to acts or failures to act shall be deemed to have accrued and the applicable statute of limitations shall commence to run not later than either the date of Substantial Completion for acts or failures to act occurring prior to Substantial Completion, or the date of the final Certificate for Payment for acts or failures to act occurring after Substantial Completion.

         On December 27, 2006, a Heritage representative signed Gordon's rain tank design plan. On January 2, 2007, Gordon's engineer signed and sealed it, and on January 9, 2007, it was submitted to Fairfax County for approval. Following the County's review, the plan was ultimately approved by the county on August 5, 2009.

         The rain tank design plan was provided to Heritage's architect, LeMay Erickson Willcox, on June 9, 2009 for incorporation into the full site plan, and in November 2009, Heritage entered into a contract with general contractor Whitener & Jackson, Inc. (W& J) for the construction of the sanctuary and parking lot (Construction Contract), including the rain tank designed by Gordon.

Page 269

         The Construction Contract provided in relevant part:

§ 3.1.3 The Contractor shall not be relieved of obligations to perform the Work in accordance with the Contract Documents either by activities or duties of the Architect in the Architect's administration of the Contract, or by tests, inspections or approvals required or performed by persons or entities other than the Contractor.

. . . .
§ 3.12.7 The Contractor shall perform no portion of the Work for which the Contract Documents require submittal and review of Shop Drawings, Product Data, Samples, or similar submittals until the respective submittal has been approved by the Architect.
. . . .
§ 3.12.8 The work shall be in accordance with approved submittals except that the Contractor shall not be relieved of responsibilities for deviations from requirements of the contract Documents by the Architect's approval of Shop Drawings, Product Data, Samples or similar submittals unless the Contractor has specifically informed the Architect in writing of such deviation at the time of submittal and (1) the Architect has given written approval to the specific deviation as a minor change in the Work, or (2) a Change Order or Construction change Directive has been issued authorizing the deviation. The Contractor shall not be relieved of responsibility for errors or omissions in Shop Drawings, Product Data, Samples or similar submittals by the Architect's approval thereof.
. . . .
§ 12.2.1 The Contractor shall promptly correct Work rejected by the Architect or failing to conform to the requirements of the Contract Documents, whether discovered before or after Substantial Completion and whether or not fabricated, installed or completed. Costs of correcting such rejected Work . . . shall be at the Contractor's expense.

         Heritage also contracted with Professional Service Industries (PSI), a third-party inspector, to oversee W& J's installation of the rain tank.

         On December 15, 2009, Heritage entered into a loan agreement for an $11.5 million, six-percent interest rate construction loan to pay for the construction of the church, including the parking lot and rain tank. The loan had two phases: (1) the " construction term" was 24 months ending on December 15, 2011, during which time monthly payments consisted of interest only; and (2) the " permanent phase" began on January 15, 2012, consisted of monthly payments of principal and interest, and the loan repayment was due in full on the maturity date of December 15, 2014.

         On October 14, 2010, W& J raised concerns about the suitability of the rain tank for the location, given the high water table, including questions about installation and performance, and submitted a " Request for Information" (RFI) to Gordon for guidance. In response, Gordon did not address the installation issues, and it addressed the performance issues by referring to information in the manufacturer's drawings to assure W& J that their ground water concerns would not impact the functional design of the rain tank; Gordon did not reevaluate the choice of the rain tank system in light of the concerns raised by W& J.

         W& J installed the rain tank between April and May 2011. The completed rain tank and the parking lot above it collapsed in August 2011, delaying the scheduled December 5, 2011 occupancy of the church by several months.

         Gordon designed and W& J installed a different stormwater management system in January 2012. The Church gained partial occupancy in May 2012, but was unable to use two wings of the church and had to hold additional services each Sunday because the incomplete parking lot could not accommodate the full congregation at the normal service. The parking lot was completed and full occupancy granted in August 2012.

         Heritage refused to pay W& J for installing the new stormwater system, and also kept the retainer owed to W& J under the Construction Contract. On January 16, 2013, W& J sued Heritage for payment, and on April 29, 2013, Heritage filed a counterclaim against W& J for breach of contract on the ...


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