Catagory:The Americas

Chadwick Farms Owners Assoc. v. FHC, LLC, 139 Wash. App. 300, 160 P.3d 1061 (2007)

This case presents a similar set of facts to Maple Court.  Condominium developer FHC, LLC was administratively dissolved on March 24, 2003.  On August 18, 2004, Chadwick Farms Homeowner’s Association filed suit against FHC, alleging construction defects.  Seven months later, on March 24, 2005, FHC was administratively cancelled because it failed to reinstate during the two-year dissolution period.  Two months after cancellation, FHC filed third party claims against its subcontractors, and in August 2005 moved for summary judgment against Chadwick on the ground that it was no longer a legal entity.
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Maple Court Seattle Condo. Assoc. v. Roosevelt, LLC 139 Wash. App. 257, 160 P.3d 1068 (2007)

In June 2007, Division One of the Court of Appeals rendered its decisions in three cases involving the issue of a dissolved limited liability company’s standing to maintain claims.  Maple Court illustrates the adverse impact that administrative dissolution can have on the pending claims of a developer and general contractor.

On September 23, 2002, condominium developer Roosevelt, LLC allowed itself to be administratively dissolved by the Secretary of State.  Fifteen months later, Roosevelt was sued by the condominium homeowners’ association.  In response, Roosevelt filed third party complaints against its construction manager and subcontractors.  During the pending litigation, on September 23, 2004, Roosevelt was administratively "cancelled" pursuant to RCW 25.15.270(6) because it did not reinstate itself following the prior administrative dissolution.
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Floor Express, Inc. v. Daly, 138 Wash. App. 750, 158 P.3d 619 (2007)

In this case, a subcontractor sued a general contractor for failing to make payments on the parties’ contract.  The general contractor asserted a counterclaim against the subcontractor for the cost of removing and replacing the subcontractor’s work.  On the first day of trial, the subcontractor moved to dismiss the counterclaim, arguing that the project owner was a necessary party and that the general contractor had no standing to sue the subcontractor because the alleged defective work injured only the owner.  The trial court granted the motion, but Division Two reversed.

The Court of Appeals noted that, where a subcontractor breaches its agreement with a general contractor by failing to perform the work pursuant to the parties’ agreement, the general contractor has legal exposure to the owner.  The court held that the owner was not a necessary party to the litigation under Civil Rule 19 because the general contractor’s claims were based on the subcontract, to which the owner was not a party.  The court also held it could afford complete relief to the general contractor, and that the owner’s absence did not impede any of the owner’s interests.  Accordingly, the general contractor’s claim against the subcontractor should have been allowed to proceed.

Bd. of Trustees of Cement Masons & Plasterers Health & Welfare Trust v. GBC Northwest, LLC, 2007 WL 1306545 (W.D. Wash. May 3, 2007), reconsid’n denied, 2007 WL 1521220 (W.D. Wash. May 22, 2007)

A split of authority exists between Washington state courts and federal courts regarding whether an employee benefit trust fund can use state lien laws to recover unpaid employee benefit contribution payments.  In 2000, the Washington Supreme Court held that ERISA preempted the state public works lien law.  Int’l Bd. of Elec. Workers v. Trig Elec. Contr. Co., 142 Wash.2d 431, 13 P.3d 622 (2000).  Two years later, however, Judge Coughenour of the U.S. District Court for the Western District of Washington noted that federal law, as determined by federal courts, governs questions of ERISA preemption, and that ERISA does not preempt Washington’s public works lien laws.  Ironworkers Dist. Council of the Pacific Northwest v. George Sollit Corp., M.A., 2002 WL 31545972 (W.D. Wash. Sept. 4, 2002).

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MacLean Townhomes, LLC v. Am. States Ins. Co., 138 Wash. App. 186, 156 P.3d 278 (2007)

In this case, a homeowners association informed its developer about certain construction defects attributable to the building’s siding subcontractor.  The developer was named as an additional insured on the siding subcontractor’s commercial general liability insurance policy.  However, the developer failed to give the insurer notice of the defects and potential claim.  The developer further agreed (again without notice to the insurer) to enter into binding arbitration with the homeowners association.

Division One affirmed summary judgment in favor of the insurer, holding that the developer’s failure to give notice was a violation of the insurance policy, prejudiced the insurer, and was therefore fatal to the developer’s claim.  Acknowledging that prejudice is normally a question of fact, the court held that the developer’s agreement to binding arbitration deprived the insurer of full judicial review of the matter.  This inability to seek review of a decision, for example, in the case of an error of law, necessarily prejudiced the insurer and excused the insurer of its duty to defend the developer. 

Haselwood v. Bremerton Ice Arena, Inc., 137 Wn. App. 872, 155 P.3d 952 (2007)

In this case, Division Two of the Washington Court of Appeals considered whether and to what extent a contractor has lien rights on a private building constructed on public property.  The City of Bremerton entered into a concession agreement with Bremerton Ice Arena, Inc. (“BIA”), under which BIA would construct an ice arena on city property and would own and operate the arena for a specified period of time.  After the expiration of that period of time, ownership of the arena improvements would transfer to the city. 

The excavation and drainage subcontractor on the project claimed it was unpaid for a portion of its work, and filed a lien the project.

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