Opinion ID: 2593436
Heading Depth: 1
Heading Rank: 2

Heading: Chadwick Farms

Text: ¶ 3 On December 23, 1999, FHC, LLC (FHC) formed as a limited liability company under the Act for the purpose of constructing the Chadwick Farms condominiums. After the project was completed, FHC ceased active operations and did not pay license fees or file reports as required by statute. On March 24, 2003, the secretary of state administratively dissolved FHC, as provided for by RCW 25.15.280 if a limited liability company fails to pay fees or file reports. On August 18, 2004, the Chadwick Farms Owners Association (Owners Association) sued FHC for alleged construction defects. On March 24, 2005, pursuant to RCW 25.15.290(4) the secretary of state canceled FHC's certificate of formation because FHC did not apply for reinstatement as a limited liability company within two years after dissolution as permitted under RCW 25.15.290(1). ¶ 4 Although FHC's certificate of formation had been administratively canceled, on May 11, 2005, FHC filed third-party complaints against subcontractors and design professionals. Then, on August 24, 2005, FHC moved for summary judgment dismissing all of the Owners Association's claims on the basis that FHC ceased to exist upon cancellation of its certificate of formation and all claims against it therefore abated. The third-party contractors and design professionals moved for summary judgment, too, on the basis that as a canceled limited liability company FHC was a legal nonentity that could not pursue third-party claims against them. On September 30, 2005, the trial court granted the motions for summary judgment. ¶ 5 The Owners Association appealed. The Court of Appeals reversed summary judgment in favor of FHC. The court held that RCW 25.15.303, which was enacted while the appeal was pending and had an effective date of June 6, 2006, applied retroactively and permitted the Owners Association's suit against FHC. Chadwick Farms Owners Ass'n v. FHC, LLC, 139 Wash.App. 300, 160 P.3d 1061 (2007), review granted, 163 Wash.2d 1021, 185 P.3d 1194 (2008). As to the third-party claims brought by FHC, the court determined that RCW 25.15.303 does not apply to actions brought by a limited liability company. The court reasoned that FHC's failure to seek reinstatement within two years of dissolution was fatal to its pursuit of any claim against the subcontractors. Chadwick Farms, 139 Wash.App. at 312, 160 P.3d 1061. Once the secretary of state canceled FHC's certificate of formation, the Court of Appeals reasoned, FHC lacked standing to pursue a third-party claim. Id. Finally, the Court of Appeals held that the trial court should grant the Owners Association's motion to amend the complaint to add individuals who allegedly failed to properly wind up the affairs of FHC, and in particular, failed to pay or make provision to pay known claims against the company. ¶ 6 FHC sought discretionary review of both holdings, and the Owners Association sought discretionary review of the Court of Appeals' determination that FHC could not pursue third-party claims.