Better Financial Solutions, Inc. v. Transtech Electric, Inc.

• Decision Date: 29 July 2002
• Docket Number: No. 48782-5-I, No. 48217-3-I.
• Citation: Better Financial Solutions, Inc. v. Transtech Electric, Inc., 51 P.3d 108, 112 Wash.App. 697 (Wash. App. 2002)
• Court: Washington Court of Appeals
• Parties: BETTER FINANCIAL SOLUTIONS, INC., a Washington Corporation, Appellant, v. TRANSTECH ELECTRIC, INC.; Kent School District # 415; United Pacific Insurance Co.; and Contractors Bonding & Insurance Company, Respondents. Breland Enterprises, Inc., Defendant.

51 P.3d 108

112 Wash.App. 697

BETTER FINANCIAL SOLUTIONS, INC., a Washington Corporation, Appellant, v. TRANSTECH ELECTRIC, INC.; Kent School District # 415; United Pacific Insurance Co.; and Contractors Bonding & Insurance Company, Respondents.

Breland Enterprises, Inc., Defendant.

Nos. 48782-5-I, 48217-3-I.

Court of Appeals of Washington, Division 1.

July 29, 2002.

As Amended August 16, 2002.

Howard M. Goodfriend, Brendan P. Finucane, Edwards, Sieh, Smith & Goodfriend, Seattle, WA, Charles M. Greenberg, Edmonds, WA, for Appellant.

Fred S. Finkelstein, Bellevue, WA, for Respondent Contractor's Bonding & Ins. Co.

Robert C. Kelley, Bellevue, WA, for Respondents Transtech Elec. and United Pac. Ins. Co.

Richard O. Prentke, Perkins Coie, Seattle, WA, for Respondent Kent School Dist.

PUBLISHED IN PART OPINION

SCHINDLER, J.

Better Financial Solutions, Inc. ("BFS") appeals the summary judgment dismissal of its claims against Transtech Electric, Inc., a general contractor, ("Transtech"); United Pacific Insurance Co., Transtech's surety ("United Pacific"); and Contractors Bonding & Insurance Co., the surety of the subcontractor Breland Enterprises, Inc. ("CBIC"). The issue presented is whether BFS's role in the Kent School District ("the School District") construction project entitled it to pursue claims against the contractor's and subcontractor's performance and payment bonds furnished pursuant to RCW 39.08.010 and under the public works retainage statute, RCW 60.28.011.¹ The trial court ruled as a matter of law that BFS was not a proper claimant under the bonds or under the public works retainage statute. We agree with the trial court and affirm.

FACTS

Transtech was the general contractor on a public works project for the Kent School District. As required by RCW 39.08.010, it obtained a performance and payment bond from United Pacific. Transtech subcontracted with Breland Enterprises, Inc. to perform the concrete work on the project. Breland obtained a performance and payment bond from CBIC. Pursuant to the public works retainage statute, RCW 60.28.011(1), the School District retained approximately $18,300 from its contract payments to Transtech.

Breland contracted with BFS and entered into an "Agreement to Supply Temporary Labor."² The agreement provides in part:

Whereas Client [Breland] desires to obtain temporary personnel (EMPLOYEES) to augment the CLIENT'S work force, and SUPPLIER [BFS] agrees to supply personnel to work under the CLIENT'S supervision and control ... the parties hereby agree as follows....[³]

Breland was solely responsible for the work on the project. The contract between Breland and BFS made BFS responsible for paying wages, taxes, and insurance and made Breland solely responsible for directing the employees' on-site activities. Breland retained full control over the means and methods of work and procedures to be used on the job site. The contract also required Breland to provide on-site supervisory personnel and to maintain the job site in compliance with Occupational Safety and Health Act ("OSHA") and Washington Industrial Safety and Health Act ("WISHA") rules as well as other applicable regulations. The contract gave Breland the exclusive right to terminate a worker at any time.

All of the persons who worked under the contract between BFS and Breland had previously been Breland employees, and BFS was not involved in hiring any of the people who worked on the concrete project under Breland's subcontract with Transtech. While the contract between BFS and Breland was in effect, Breland's employees filled out BFS's time cards and their paychecks were drawn on BFS's payroll account. BFS paid tax payments to the State as the employer of these workers. BFS wrote the workers' paychecks, withheld and remitted their employment taxes and unemployment insurance, and paid industrial insurance on behalf of the workers. In exchange for these services, BFS charged a 20 percent return on the funds it paid.

BFS did not, however, go to the job site and did not supervise the work, nor did it supply tools, equipment, or materials for the job. Jeff Breland, the owner of Breland Enterprises, testified in a deposition that his understanding of his company's arrangement with BFS was that BFS would "front the money for our payroll, take care of our payroll,"⁴ and that as a condition, Mr. Breland had to sign his employees over to BFS. Mr. Breland viewed the arrangement as that of a loan.

In a letter to the Department of Labor and Industries, Michael McMahan, General Manager of BFS, described BFS as follows:

We are a combination of financial services and a specialized temporary employment service. We temporarily place our client's permanent employees on our payroll. We provide this service to aid the client financially while they are working on a construction contract and awaiting progress payments. This helps the client with his cash flow and money management.[⁵]

BFS characterizes itself as a "supplier" in the Agreement with Breland and characterized itself as a "supplier of labor" in the application for contractor registration it filed with the Department as a "specialty contractor."⁶

When Breland's work on the Transtech project was completed, Breland owed BFS $84,411. BFS brought an action against Breland, and the trial court entered judgment against Breland for that amount. Breland did not appeal that judgment. BFS then filed a claim against United Pacific's bond, the School District's retention fund, and CBIC's bond for the $84,411 Breland owed BFS. It filed a motion for summary judgment against all parties except CBIC. The trial court denied BFS's motion. CBIC then filed a motion for summary judgment in which United Pacific and Transtech joined. They argued that BFS was not a proper claimant under the contractor's bond or the retainage statute or the terms of CBIC's non-statutory bond. The trial court granted this motion as to all claims except BFS's unjust enrichment claim. BFS, Transtech, and United Pacific stipulated to the dismissal of the unjust enrichment claim with prejudice. BFS appeals.

DISCUSSION

Standard of Review

We review summary judgments de novo.⁷ Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."⁸ We view the evidence in the light most favorable to the nonmoving party and will affirm the grant of summary judgment "only if reasonable persons could reach but one conclusion."⁹

Construction of Lien Statutes

BFS's right to obtain payment under the contractor and subcontractor bonds, RCW 39.08.010, and the retainage statute, RCW 60.28.011, depends on whether BFS qualifies as a claimant under these public works lien statutes. "Lien statutes are in derogation of the common law and should be strictly construed."¹⁰ "Statutory benefits are extended only to those who clearly come within the statute's terms."¹¹ Once it is determined, however, that a party comes within the statute's terms, "the statute is liberally construed to provide security for all parties intended to be protected by it."¹²

RCW 39.08.010

The bond requirement statute for contractors on public works projects provides in part:

Whenever any board, council, commission, trustees, or body acting for the state or any county or municipality or any public body shall contract with any person or corporation to do any work for the state, county, or municipality, or other public body, city, town, or district, such board, council, commission, trustees, or body shall require the person or persons with whom such contract is made to make, execute, and deliver to such board, council, commission, trustees, or body a good and sufficient bond, with a surety company as surety, conditioned that such person or persons shall faithfully perform all the provisions of such contract and pay all laborers, mechanics, and subcontractors and materialmen, and all persons who supply such person or persons, or subcontractors, with provisions and supplies for the carrying on of such work, which bond in cases of cities and towns shall be filed with the clerk or comptroller thereof, and any person or persons performing such services or furnishing material to any subcontractor shall have the same right under the provisions of such bond as if such work, services or material was furnished to the original subcontractor[.]¹³

The statute specifically does not apply to money loaned or advanced to a contractor, subcontractor, or any other person on a public works project.¹⁴

Under the statute, those persons and entities entitled to recover under Transtech's bond are: laborers, mechanics, subcontractors, materialmen, persons who supply such entities with provisions and supplies for carrying on the work, and any person performing such services or furnishing material to a subcontractor. As stated, in order to recover under Transtech's bond, BFS must clearly come within the class protected by the statute.¹⁵ BFS contends it is a proper claimant because it supplied labor to Breland.¹⁶

In determining whether BFS clearly comes within the protected class, we view the facts and reasonable inferences in the light most favorable to BFS.¹⁷ The evidence in the record, so viewed, shows that BFS is not within the protected class. The statute does not specifically include suppliers of labor, as BFS has characterized itself. Nor can suppliers of labor be included within the persons specifically identified in the statute as being within the protected class. That is, suppliers of labor do not supply provisions, supplies, or material.¹⁸ Suppliers of labor are not mechanics or materialmen.¹⁹ Suppliers of labor are not subcontractors.²⁰ Suppliers of labor are not, and cannot logically be, laborers as well. Laborers are the individuals who...