Ballard Square Condominium v. Dynasty

• Decision Date: 09 November 2006
• Docket Number: No. 76938-9.,76938-9.
• Citation: 146 P.3d 914,158 Wn.2d 603
• Court: Washington Supreme Court
• Parties: BALLARD SQUARE CONDOMINIUM OWNERS ASSOCIATION, a Washington nonprofit corporation, Petitioners, v. DYNASTY CONSTRUCTION COMPANY, a Washington corporation; Shin Lu Mark Liu and Jane Doe Liu, and the marital community composed thereof; Yung Pai Shu Liu and John Doe Liu, and the marital community composed thereof, Respondents.

146 P.3d 914

158 Wn.2d 603

BALLARD SQUARE CONDOMINIUM OWNERS ASSOCIATION, a Washington nonprofit corporation, Petitioners, v. DYNASTY CONSTRUCTION COMPANY, a Washington corporation; Shin Lu Mark Liu and Jane Doe Liu, and the marital community composed thereof; Yung Pai Shu Liu and John Doe Liu, and the marital community composed thereof, Respondents.

No. 76938-9.

Supreme Court of Washington, En Banc.

November 9, 2006.

COPYRIGHT MATERIAL OMITTED

Todd Christopher Hayes, Thomas Fitzgerald Ahearne, Foster Pepper Shefelman PLLC, Seattle, for Petitioners.

Eileen I. McKillop, Oles Morrison Rinker & Baker LLP, Seattle, Heather Dawn Shand Perkins, Shand Perkins & Wall PLLC, Mount Vernon, for Respondents.

MADSEN, J.

¶ 1 Petitioner Ballard Square Condominium Owners Association (Association) sued Dynasty Construction Company (Dynasty), the developer and builder of a condominium purchased by members of the Association, claiming that Dynasty breached the homeowners' purchase and sale contracts. At the time the suit was brought, Dynasty was a dissolved corporation. The trial court granted summary judgment in favor of Dynasty, reasoning that suit was barred due to Dynasty's dissolution. The Court of Appeals affirmed. We conclude that under the plain language of former RCW 23B.14.050(2)(e) (1989) as it existed when the Association commenced this suit, postdissolution claims could be brought against a dissolved corporation, subject to the relevant statute of limitations for the type of claim asserted.

¶ 2 However, a 2006 amendment to former RCW 23B.14.340 (1995) applies retroactively and bars this suit.¹ Accordingly, although we disagree with the Court of Appeals' reasoning, we affirm its decision.

FACTS

¶ 3 Ballard Square is a 20-unit condominium in Seattle that was developed, built, and sold by Dynasty. The first condominium unit was sold in May 1992 and the project was completed in December 1992. The Association is a nonprofit corporation comprised of homeowners who own the condominium units and common elements at Ballard Square. The homeowners' individual purchase and sale agreements with Dynasty provided that Dynasty would build each homeowner's unit and the entire Ballard Square project would be "substantially completed in accordance with [the] plans and specifications." See Clerk's Papers (CP) at 246. Soon after the last of these contracts was executed, Dynasty was administratively dissolved effective October 1995.

¶ 4 In November and December 1996, the Association asserts, homeowners began to notice leaks in the above-ground walls of the condominium. The Association says that although some homeowners had found leaks prior to this time in the subterranean garage and the roof, and noticed some window condensation, it is not suing for damage to these components of the condominium, which, the Association maintains, is unrelated to damage to the above-ground structure resulting from defects in the exterior walls and stucco system. Dynasty contends, on the other hand, that homeowners complained to the Association in mid-July 1993 about leaking walls and roof problems, that in December 1993 the Association presented Dynasty with a common element claim for leak repairs, and that in early 1995 the Association was still receiving complaints from the homeowners about leaking walls, roof problems, and cracked plasterboard.

¶ 5 In early 1997, the Association filed a claim with its property insurer. The insurer's investigators found water leaking through the siding but under the applicable policy provisions paid only for repair of that part of the building in an imminent state of collapse. The investigation disclosed additional water damage, however, and the homeowners hired an architect to investigate. He concluded that severe water damage resulted from Dynasty's failure to comply with applicable building laws and its failure to follow sound construction standards and its own plans and specifications. Estimated costs of repair exceed $1.4 million.

¶ 6 On October 8, 2002, the Association brought this breach of contract action.² In December 2003, Dynasty moved for summary judgment, alleging that suit was barred by (1) chapter 23B.14 RCW, the corporate dissolution statutes; (2) RCW 4.16.326(1)(g), providing an affirmative defense to suits on written construction contracts if not brought within six years of substantial completion; and (3) RCW 64.34.452(1), a statute of limitations in the Washington Condominium Act. Dynasty also urged that summary judgment should be granted because the Association itself did not have a contract with Dynasty.³ The trial court granted the motion for summary judgment on the grounds that suit was barred due to Dynasty's dissolution and the statute of limitations had expired.⁴ The Court of Appeals affirmed, reasoning that postdissolution suits against a corporation are not addressed by chapter 23B.14 RCW and therefore the common law applies. At common law all suits against a dissolved corporation are terminated once the corporation has wound up its affairs. Ballard Square Condo. Owners Ass'n v. Dynasty Constr. Co., 126 Wash.App. 285, 108 P.3d 818, review granted, 155 Wash.2d 1024, 126 P.3d 820 (2005).

ANALYSIS

¶ 7 Review of a grant of summary judgment is de novo. Korslund v. Dyncorp Tri-Cities Servs., Inc., 156 Wash.2d 168, 177, ¶ 12, 125 P.3d 119 (2005). Summary judgment is properly granted if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Korslund, 156 Wash.2d at 177, 125 P.3d 119. Facts and reasonable inferences from the facts are construed most favorably to the nonmoving party. Id. Summary judgment is appropriate if reasonable minds could reach only one conclusion from the evidence presented. Id.

¶ 8 The Association maintains that statutes in chapter 23B.14 RCW supplant the common law rule that causes of action terminate upon the dissolution of a corporation and authorize a postdissolution suit against a dissolved corporation. Dynasty maintains that the Court of Appeals correctly held that a postdissolution suit against a dissolved corporation can be brought only during the period when the corporation is winding up and liquidating its business and affairs.

¶ 9 At common law, when a corporation dissolved it ceased to exist for all purposes and therefore could not sue or be sued. 16A William Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 8144 (rev.vol.2003); see Bortle v. Osborne, 155 Wash. 585, 597, 285 P. 425 (1930). The common law rule has been modified by state legislatures, most of which have enacted statutes permitting corporations to sue and be sued as part of their winding up activities, and all of which have enacted statutes that, apart from the winding up process, permit suits by and against corporations for a limited time period. Id. The latter type of statute is generally known as a survival statute. Id. ¶ 10 The Washington legislature enacted a survival statute in 1965 as part of the Washington Business Corporation Act, former Title 23A RCW. Washington's survival statute was virtually identical to section 98 of the 1959 Model Business Corporation Act, ABA-ALI Model Bus. Corp. Act § 98 (1959). Former RCW 23A.28.250, Laws of 1965, ch. 53, § 108 (effective July 1, 1967). The survival statute, like section 98, provided that a corporation's dissolution did not "take away" or "impair" lawsuits based on claims that existed prior to dissolution, provided the plaintiff sued within two years. Former RCW 23A.28.250.

¶ 11 When former Title 23A RCW was replaced in 1989 by Title 23B RCW, the legislature included a new survival statute that in relevant part mirrors former RCW 23A.28.250. RCW 23B.14.340 then provided that dissolution of a corporation "shall not take away or impair any remedy available against such corporation, its directors, officers, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if . . . commenced within two years . . . of such dissolution." (Emphasis added.) Although Dynasty argued to the Court of Appeals that this version of the statute precludes the Association's suit, that court correctly held the statute did not apply by its plain language because the Association's claim did not exist prior to dissolution. Ballard Square, 126 Wash.App. at 291, ¶ 9, 108 P.3d 818; accord Smith v. Sea Ventures, Inc., 93 Wash.App. 613, 618-19, 969 P.2d 1090 (1999); D. Gilbert Friedlander & P. Anthony Lannie, Post-Dissolution Liabilities of Shareholders and Directors for Claims Against Dissolved Corporations, 31 Vand. L.Rev. 1363, 1370 (1978) (the model survival of remedies statute applies by its own terms to predissolution claims only). As the Court of Appeals observed, to hold that the statute applies to postdissolution claims would render the "prior to" language meaningless, in contravention of the principle that a court may not construe a statute in a way that renders statutory language meaningless or superfluous. Ballard Square, 126 Wash. App. at 291-92 n. 22, 108 P.3d 818; see Lakemont Ridge Homeowners Ass'n v. Lakemont Ridge Ltd. P'ship, 156 Wash.2d 696, 698-99, ¶ 5, 131 P.3d 905 (2006); State v. Tandecki, 153 Wash.2d 842, 848, ¶ 13, 109 P.3d 398 (2005).

¶ 12 Dynasty has abandoned the argument that RCW 23B.14.340 bars the Association's suit. Now Dynasty argues that the statutes do not address postdissolution claims, and therefore the common law controls as the Court of Appeals held. However, the Association correctly maintains that the statutes in the Washington Business Corporation Act have replaced the common law rule in its entirety. The statutory scheme shows the legislature's intent that claims arising after dissolution are not absolutely barred, unlike the harsh common law rule.

¶ 13 The enactment of chapter 23B.14 RCW included RCW 23B.14.050(2)(e), which showed the legislature's intent to cut any remaining ties...