Court Opinion

ID: 4260984
Source: CourtListenerOpinion
Date Created: 2018-04-04 06:03:02.889996+00
Date Added: 2024-06-11T14:03:29.387309
License: Public Domain

FILED
                                                                        APRIL 3, 2018
                                                                In the Office of the Clerk of Court
                                                               WA State Court of Appeals, Division III

         IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                            DIVISION THREE

 HNS, INC., an Oregon Corporation,             )
                                               )        No. 34695-1-III
                      Appellant,               )
                                               )
        v.                                     )
                                               )
 EAGLE ROCK QUARRY, a Washington               )        UNPUBLISHED OPINION
 Business; CACTUS QUARRY, a                    )
 Washington Business; EAGLE ROCK               )
 QUARRY, INC., a Washington                    )
 Corporation; EAGLE ROCK, LLC, a               )
 Washington Limited Liability Company;         )
 and PAUL RIEDINGER and TINA                   )
 MURPHY, husband and wife, and the             )
 marital community composed thereof; and       )
 LEXON INSURANCE COMPANY,                      )
                                               )
                      Respondents.             )

       SIDDOWAY, J. — HNS, Inc.’s collection action was dismissed on the basis that it

had not substantially complied with the requirements of Washington’s contractor

registration act, chapter 18.27 RCW, a prerequisite for a contractor who wants to be able

to invoke the aid of Washington courts. Because HNS had not caused its surety bonding

to be extended to Washington claims and did not demonstrate that its general liability

insurance coverage applied to its operations for Eagle Rock Quarry, Inc., the trial court

correctly refused to find substantial compliance with the act. We affirm.
No. 34695-1-III
HNS, Inc. v. Eagle Rock Quarry, et al.

                     FACTS AND PROCEDURAL BACKGROUND

       HNS, Inc., an Oregon corporation with its principal place of business in La

Grande, Oregon, agreed to blast, crush, and stockpile gravel for Eagle Rock Quarry, Inc.

at a quarry in Mesa, Washington. HNS presented a proposed written contract to Eagle

Rock that was never signed. Instead, the parties proceeded based on an oral agreement to

the price to be paid per ton and to monthly invoicing by HNS. HNS claims to have

blasted and crushed more than 200,000 tons of rock for Eagle Rock.

       Although Eagle Rock made a number of payments, it stopped paying in September

2015. In January 2016, HNS sued Eagle Rock and its principals for the amount owed

under the parties’ agreement. By the time of an amended complaint filed by HNS in

March 2016, Eagle Rock is alleged to have owed HNS $241,372.88.

       Eagle Rock moved the trial court to dismiss HNS’s complaint on the basis that

HNS was a contractor doing business in Washington but was not registered under RCW

18.27.080—a prerequisite for filing suit. Eagle Rock supported its motion with

information it had obtained from the Washington State Department of Labor and

Industries in response to a contractor verification search. The Department’s information

indicated that HNS was a construction contractor and had formerly been licensed in

Washington for 11 years, but had not renewed its license in 2010. HNS had been in

suspended status since July 28, 2010, the date its certificate of general liability insurance

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No. 34695-1-III
HNS, Inc. v. Eagle Rock Quarry, et al.

expired or was cancelled. The Department’s information indicated that HNS had no

current surety bond or insurance account.

       HNS resisted the dismissal, arguing it had substantially complied with

Washington’s financial responsibility requirements and that substantial compliance is

sufficient under RCW 18.27.080. It pointed out that the Department still had accurate

corporate information based on its registration years earlier. It provided the court with

evidence that for purposes of its Oregon licensing, it had maintained a surety bond and

commercial general liability coverage during all relevant periods in amounts that

exceeded Washington’s requirements.

       At the hearing on the motion, the trial court noted that “the purpose of the statute

is to protect against damage claims . . . . [for p]eople that work here. People that have

accidents that occur here.” Clerk’s Papers (CP) at 192-93 (emphasis added). The trial

court construed the terms of HNS’s surety bond as ensuring payment of only Oregon

claims and stated “a worker here or a party injured here shouldn’t have to go to Oregon to

argue that the bond in Oregon covers—or argue that the liability policy issued in Oregon

to meet Oregon law [provides] coverage.” CP at 194. Although expressing some

sympathy for HNS, the court concluded that HNS had not substantially complied with the

law’s requirements and granted the motion to dismiss. HNS appeals.

                                             3
No. 34695-1-III
HNS, Inc. v. Eagle Rock Quarry, et al.

                                         ANALYSIS

       Chapter 18.27 RCW requires every contractor engaging or offering to engage in

services in Washington to register with the Department of Labor and Industries. It closes

the doors of Washington courts to those who fail to register by providing that in any

action to collect compensation for work or to enforce a contract, a contractor must

“alleg[e] and prov[e] that he or she was a duly registered contractor and held a current

and valid certificate of registration at the time he or she contracted for the performance of

such work or entered into such contract.” RCW 18.27.080. The provision recognizes the

possibility of substantial compliance with the registration requirement, but defines the

compliance that courts may treat as substantial:

       For the purposes of this section, the court shall not find a contractor in
       substantial compliance with the registration requirements of this chapter
       unless: (1) The department has on file the information required by RCW
       18.27.030; (2) the contractor has at all times had in force a current bond or
       other security as required by RCW 18.27.040; and (3) the contractor has at
       all times had in force current insurance as required by RCW 18.27.050.

Id. The court is also to take into consideration the length of time during which the

contractor did not hold a valid certificate of registration. See id.

       Whether RCW 18.27.080 bars HNS’s claim is a question of law, which this court

reviews de novo. Rawe v. Bosnar, 167 Wash. App. 509, 511, 273 P.3d 488 (2012).

       By virtue of its registration in Washington from 1999 to 2010, HNS could

demonstrate that the Department had on file much, but not all, of the information required

                                               4
No. 34695-1-III
HNS, Inc. v. Eagle Rock Quarry, et al.

by RCW 18.27.030. And in resisting dismissal, HNS presented a $75,000 commercial

surety bond issued by Western Surety Company that was in place at relevant times and

some evidence of commercial general liability insurance issued from Western National

Assurance Company with aggregate limits of $2 million and per occurrence limits of $1

million.

       The surety bond presented was not a “bond or other security as required by RCW

18.27.040,” however, because it provides that Western Surety “binds itself . . . to pay to

the State of Oregon” the penalty amount, and states that it is “for the exclusive purpose of

ensuring payment of final orders of the Construction Contractors Board in accordance

with ORS [Oregon Revised Statutes] Chapter 701.” CP at 134. RCW 18.27.040(1)

provides that a contractor’s bond “shall have the state of Washington named as obligee.”

       It did not demonstrate that its insurance was “insurance as required by RCW

18.27.050” because it provided only premium notices rather than a copy of the policy or

other evidence that insurance was in force and covered its operations in Mesa.

       Like the trial court, we have some sympathy for HNS because it does not appear it

is an “unreliable, fraudulent, financially irresponsible, or incompetent contractor[ ],” the

concern that is the purpose for the law’s registration requirement. RCW 18.27.140;

Williamson, Inc. v. Calibre Homes, Inc., 147 Wash. 2d 394, 400, 54 P.3d 1186 (2002).

Nonetheless, “[a]nyone engaged in the activities of a contractor is presumed to know the

                                              5
No. 34695-1-111
HNS, Inc. v. Eagle Rock Quarry, et al.

requirements of [chapter 18.27 RCW]." RCW 18.27.005. HNS did not substantially

comply in the manner required to enjoy access to Washington courts.

      Affirmed.

      A majority of the panel has determined this opinion will not be printed in the

Washington Appellate Reports, but it will be filed for public record pursuant to RCW

2.06.040.

                                                   21 (!UU)
                                                Siddoway, J.
                                                                   a)~ I~·

WE CONCUR:

                                            6