Plese-Graham, LLC v. Loshbaugh

• Decision Date: 27 October 2011
• Docket Number: No. 29575–3–III.,29575–3–III.
• Citation: 269 P.3d 1038,164 Wash.App. 530
• Court: Washington Court of Appeals
• Parties: PLESE–GRAHAM, LLC, a Washington Limited Liability Company, Respondent, v. Robert LOSHBAUGH and Jane Doe Loshbaugh, husband and wife, Appellants,Edward Loshbaugh, a single man; Ed Loshbaugh & Sons, Inc., a Washington corporation; and Travelers Casualty & Surety Co., a foreign insurance company, Defendants.

164 Wash.App. 530

269 P.3d 1038

PLESE–GRAHAM, LLC, a Washington Limited Liability Company, Respondent,

v.Robert LOSHBAUGH and Jane Doe Loshbaugh, husband and wife, Appellants,Edward Loshbaugh, a single man; Ed Loshbaugh & Sons, Inc., a Washington corporation; and Travelers Casualty & Surety Co., a foreign insurance company, Defendants.

No. 29575–3–III.

Court of Appeals of Washington, Division 3.

Oct. 27, 2011.

Richard Duncan Campbell, Campbell & Bissell, PLLC, Spokane, WA, for Appellants.

Joseph Paul Delay, Delay Curran Thompson Pontarolo & Walker, Spokane, WA, for Respondent.

SIDDOWAY, J.

At issue in this case is the personal liability of Robert Loshbaugh, former president of a now-defunct construction company, for obligations arising out of company business that were discussed and documented with a creditor during a period when the company had ceased operations and was administratively dissolved. The trial court granted summary judgment against Mr. Loshbaugh and his marital community on grounds that he agreed to answer personally for the company's obligation and, alternatively, that his promise that the company would pay could be enforced against him personally because it was made at a time when the corporation was de facto dissolved.

On appeal, Mr. Loshbaugh argues that because of an alleged failure to bring suit in the name of the real party in interest, neither the company's creditor nor its principals can enforce his alleged agreement, a position we reject. But we agree that questions of material fact as to Mr. Loshbaugh's personal liability made summary judgment inappropriate. We reverse the orders granting summary judgment and attorney fees and remand for trial.

FACTS AND PROCEDURAL BACKGROUND

For several years up to and including 2008, Ed Loshbaugh & Sons, Inc., a licensed general contractor, performed construction work for Plese–Graham, LLC, a real estate developer. In 2008, Plese–Graham hired Loshbaugh & Sons to install the water and sewer system for its housing development known as Park Place Addition. In March 2009, after Loshbaugh & Sons underpaid one of its subcontractors, the subcontractor filed a lien against Plese–Graham's property. Failure to pay the subcontractor was symptomatic of Loshbaugh & Sons financial difficulties at the time. After several claims were made against its bond, the bond was cancelled on May 24, the company lost its contractor's license, and it ceased operations.

On June 24, Plese–Graham, which claims its principals were unaware of the extent of Loshbaugh & Sons' financial problems, paid the subcontractor $16,265.12 in exchange for release of its lien. Shortly thereafter, on June 30, Rod Plese, one of two members of Plese–Graham, secured the verbal agreement of Robert Loshbaugh—a Loshbaugh & Sons shareholder and director in addition to being its president—to sign a promissory note reimbursing Plese–Graham's payment to the subcontractor.

Mr. Plese and Mr. Loshbaugh disagree as to the capacity in which Mr. Loshbaugh was asked and agreed to sign. Mr. Plese drafted and sent a proposed promissory note identifying “Bob Loshbaugh” as the payor, which Mr. Loshbaugh rejected, asking that Mr. Plese modify it to substitute the company as payor. Clerk's Papers (CP) at 88. Mr. Plese complied and sent a second note, which, apart from the named payor, was identical to the first. Both notes were payable to “Rod V. Plese and Linda A. Plese, husband and wife.” CP at 91. Following several e-mails sent by Mr. Plese in September and October asking whether Mr. Loshbaugh had signed and returned “the note,” Mr. Loshbaugh indicated in e-mails on October 5 and 19 that he had. CP at 69 (“Yes is on way”), 67 (“I mailed that note but if you haven't received I can mail a copy”). Mr. Plese denies ever receiving any signed note from Mr. Loshbaugh.

Loshbaugh & Sons' corporate license had expired without renewal on June 30, 2009 and the company was administratively dissolved by the Secretary of State on October 1, a few days before Mr. Loshbaugh's written assurances that a note had been signed and returned. Upon dissolution, the company had no assets with which to pay Plese–Graham and other creditors.

In December 2009, Plese–Graham filed a complaint against Loshbaugh & Sons and Robert Loshbaugh and his wife, among others. The complaint alleged that the defendants had been overpaid as a result of Plese–Graham's payment of the construction contract price and the additional cost of removing the lien.

Plese–Graham's claims were subject to mandatory arbitration. In July 2010, an arbitrator found Loshbaugh & Sons, Mr. Loshbaugh, and his marital community jointly and severally liable to Plese–Graham in the amount of $16,265.12, plus interest at 12 percent per annum from June 24, 2009.

Only Mr. Loshbaugh, individually, appealed the arbitrator's ruling to superior court. He, and thereafter Plese–Graham, moved the court for summary judgment. Both parties' motions addressed Mr. Loshbaugh's undisputed promise, although in a disputed capacity, to reimburse Plese–Graham's payment of the subcontractor and to formalize the agreement with a promissory note payable to Mr. and Mrs. Plese. Plese–Graham alleged two theories of recovery against Mr. Loshbaugh personally: (1) breach by Mr. Loshbaugh of a verbal promise to deliver a personal promissory note and (2) even if his promise was to deliver a corporate note, individual liability based on RCW 23B.02.040 or a theory of corporate disregard, where his promise was on behalf of a company that Plese–Graham argued was “ de facto ” dissolved. CP at 102.

Mr. Loshbaugh opposed Plese–Graham's motion with his affidavit disputing that he ever agreed, personally, to reimburse Plese–Graham's payment to the subcontractor. He also argued that enforcement of any such verbal promise, being a promise to answer for the debt of another, was barred by the statute of frauds. He disputed his alleged liability under RCW 23B.02.040 on alternative grounds that (1) Loshbaugh & Sons was not dissolved, de facto or otherwise, at the time he agreed to reimburse Plese–Graham's payment to the subcontractor and (2) in any event, any such agreement was a permitted “winding up” of the corporation's business under RCW 23B.02.050. CP at 114.

At the hearing on the cross motions for summary judgment, Mr. Loshbaugh's lawyer pointed out for the first time that Plese–Graham, the only named plaintiff, was not the payee named by the promissory notes—something he admitted having noticed only that morning. The trial court responded that “I will entertain a motion to join [the Pleses] as parties, if necessary” and the lawyer for Plese–Graham so moved; after hearing Mr. Loshbaugh's objection, the trial court granted the motion. Report of Proceedings (RP) at 22.

The trial court granted Plese–Graham's motion for summary judgment, denied Mr. Loshbaugh's cross motion, entered an order joining the Pleses as parties, and entered judgment, including an award of fees and costs, in favor of Plese–Graham. Mr. Loshbaugh moved for reconsideration and when that was denied, timely appealed. He assigns error to the trial court's (1) granting summary judgment to Rod and Linda Plese, who he argues were improperly joined; (2) granting summary judgment in favor of Plese–Graham, which was not the designated payee of the promise relied upon for the court's decision; (3) entering judgment against Mr. Loshbaugh individually absent a basis therefor; and (4) assessing fees and costs against Mr. Loshbaugh.

ANALYSIS

I

We first address Mr. Loshbaugh's arguments that the trial court erred in recognizing either Plese–Graham or the Pleses as parties entitled to assert claims based on his agreement reached with Mr. Plese in the summer of 2009. He contends that the court's late joinder of the Pleses as plaintiffs prejudiced him, because he was prevented from developing discovery in support of a defense of lack of consideration. Br. of Appellants at 2, 16. He assigns error to the trial court's entry of judgment in favor of Plese–Graham because it was not the payee identified by the promissory note relied upon by the court in entering judgment. We review a trial court's rulings on motions to amend a complaint and its application of civil rules for an abuse of discretion. See Wilson v. Horsley, 137 Wash.2d 500, 505, 974 P.2d 316 (1999); Turner v. Stime, 153 Wash.App. 581, 587–88, 222 P.3d 1243 (2009). These assignments of error are properly considered together where, collectively, they would deprive both Plese–Graham and the Pleses of any claim against Mr. Loshbaugh.

As applicable here, CR 17(a) provides that “[n]o action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ... joinder ... of[ ] the real party in interest; and such ... joinder ... shall have the same effect as if the action had been commenced in the name of the real party in interest.” The purpose of CR 17(a) is to protect a defendant from a subsequent action by the party actually entitled to recover and to expedite litigation by not permitting technical or narrow constructions to interfere with the merits of legitimate controversies. Beal v. City of Seattle, 134 Wash.2d 769, 782–83, 954 P.2d 237 (1998). The rule permits joinder of a real party in interest even after trial for the purpose of receiving judgment, so long as the defendant is not prejudiced by the joinder. Betchard–Clayton, Inc. v. King, 41 Wash.App. 887, 895, 707 P.2d 1361, review denied, 104 Wash.2d 1027, 1985 WL 321060 (1985).

The rule expressly contemplates that a defendant will raise an “objection” that a claim is not being prosecuted in the name of the real party in interest, after which a reasonable time will be allowed for the plaintiff to take action, through joinder or otherwise, that protects the defendant from the risk of a second claim. Washington cases do not address when an...