Opinion ID: 1207008
Heading Depth: 3
Heading Rank: 2

Heading: Is Bayshore an Intended Beneficiary of AS 08.18?

Text: The Industrial Power opinion indicated that an important step in analysis focused on the intended beneficiaries of the AS 08.18 registration requirements. The majority rejected the dissent's contractual commitment standard because such a standard would exclude contracts between builders and suppliers which do not commit a professional builder to build anything, and would deny suppliers the protection afforded by the bond requirement of AS 08.18. 623 P.2d at 296-97. Under the terms of the Gross/Bayshore contract, Bayshore was a subordinated seller who had the value of its lots and its surrounding lots in the subdivision at risk. [5] As a subordinated seller, Bayshore had an interest in Gross' construction skills and the houses which would ultimately stand in the Bayshore subdivision. Bayshore expressed this interest by requiring that Gross meet certain conditions precedent to the purchase agreement: (1) that Gross begin construction by July 1, 1982, and complete construction within three years; and (2) that Gross present house plans to Bayshore for approval. Furthermore, as Bayshore points out, land holding companies like Bayshore are very often the only entities which, as a practical matter, can exact compliance with the statutory registration requirement. Where a land holding company subordinates its lien to allow the contractor to obtain construction financing, the contractor may build on speculation and without a contract with a buyer. Thus, the ultimate home sale would not involve a contract for construction. Bayshore concludes that in this situation a contractor need never register since no penalty can be incurred either deriving from the contractor's dealing with the land supplier or the ultimate home buyer. Bayshore asserts that by contracting with Gross, in reliance upon his representation that he was a registered contractor, Bayshore was protecting its own interests as well as those of the ultimate home buyer. If Gross were to build defectively on one or more of the lots he purchased from Bayshore and then default in the real estate contract to Bayshore before selling the property in question to a third person, he might be liable to Bayshore if his improper work was so defective as to impair the original value of the property. See, e.g., Cousineau v. Walker, 613 P.2d 608 (Alaska 1980) (where a real estate sale is rescinded, and the vendee has damaged the building on the property and removed large amounts of gravel, the vendee is liable). Morris v. Weigle, 270 Ind. 121, 383 N.E.2d 341, 344 (1978) (where a vendee defaults, the vendee is liable to the extent that waste impairs the vendor's security in the property); Robison v. Katz, 94 N.M. 314, 610 P.2d 201, 207 (N.M.App. 1980) (where a real estate sale is rescinded, the vendee must account for any waste). Such liability would be covered by the bond required under AS 08.18.071. We agree with Bayshore that it falls within the class of intended beneficiaries of the statute. Therefore, we hold that Gross was a contractor within the meaning of AS 08.18.171(2), and that he was required to comply with the registration requirements of AS 08.18.011.