Court Opinion

ID: 2715691
Source: CourtListenerOpinion
Date Created: 2014-08-06 17:26:31.814085+00
Date Added: 2024-06-11T12:14:11.652068
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

ADAM ZACKS and LYNN RESNICK-                   No. 70322-6-1
ZACKS, husband and wife, and the
marital community thereof composed,            DIVISION ONE                    r-3
                                                                               C=3

                       Appellants,
                                                                                 1

ARDEN DRYWALL & TEXTURE, INC.,
a Washington corporation,                                                       V?
                                                                                O
                                               UNPUBLISHED OPINION
                       Respondent,

RAINIER ROOFING & REMODELING,
LLC, a Washington limited liability
company; OSSES CONTRACTORS
INC., a Washington corporation;
SKYLINE WINDOWS, INC., a
Washington corporation; and
PANELMASTERS, LLC, a Washington
limited liability company,

                       Defendants.             FILED: August 4, 2014

      Schindler, J. —Adam Zacks and Lynn Resnick-Zacks (the Zackses) appeal

summary judgment dismissal of claims against subcontractor Arden Drywall & Texture

LLC (Arden). The Zackses contend the court erred in ruling that the lawsuit against

Arden was time barred under former RCW 25.15.303 (2006). We reverse.
No. 70322-6-1/2

                                          FACTS

       In 2006, PB Elemental LLC designed a single-family residence to be built at 2441

Queen Anne Avenue North in Seattle. General contractor Lead Construction LLC hired

a number of subcontractors, including Arden Drywall & Texture LLC, to build the

residence. During the summer of 2006, Arden hung, taped, and primed the drywall of

the interior walls and ceilings of the home.

       In June 2010, Adam Zacks and Lynn Resnick-Zacks purchased the Queen Anne

home. Shortly after purchasing the home, the Zackses discovered water damage.

       On March 2, 2012, the Zackses filed a negligence lawsuit against Rainier

Roofing & Remodeling LLC, PB Elemental, Lead Construction, and Christopher Pardo,

the managing member of PB Elemental and Lead Construction. The Zackses alleged

that after purchasing the house, they discovered water intrusion that damaged the roof,

walls, and interior of the home because of latent defects. The Zackses alleged that PB

Elemental negligently inspected the residence and failed to ensure proper construction,

that Lead Construction failed to ensure that subcontractor Rainier Roofing installed the

roof properly, that Rainier Roofing negligently installed the roof, and that Pardo failed to

properly wind up the affairs of PB Elemental and Lead Construction.

       Defendants PB Elemental, Lead Construction, and Pardo filed an answer and

asserted third-party negligence and breach of contract claims against several

subcontractors, including Exterior Stucco Inc., Osses Contractors Inc., Panelmasters

LLC, and Skyline Windows Inc.
No. 70322-6-1/3

       In August 2012, the Zackses reached a settlement agreement with PB

Elemental, Lead Construction, and Pardo. In exchange for dismissal of the claims, PB

Elemental, Lead Construction, and Pardo assigned to the Zackses all their rights at law

and in contract against the third-party subcontractors, including subcontractor Arden

and codefendant Rainier Roofing.1

       The court granted the Zackses' motion to amend the complaint to name Arden as

a defendant and assert breach of contract and negligence claims. On September 17,

2012, the Zackses filed the amended complaint naming Arden as a defendant. The

amended complaint alleged breach of contract and negligence claims against Rainier

Roofing, Osses Contractors, Skyline Windows, Panelmasters, and Arden. As to Arden,

the Zackses alleged that Arden's negligence caused "significant damage to the Zacks

Residence, resulting in water intrusion, potential life safety issues, as well as significant

monetary damages."

       Arden filed a motion for summary judgment dismissal. Arden asserted that

because the secretary of state administratively dissolved Arden on September 2, 2008,

the Zackses' claims were time barred under former RCW 25.15.303 (2006).2 Former

RCW 25.15.303 required that a lawsuit against an LLC be filed within three years of the

effective date of dissolution.

       In response, the Zackses argued that under the 2010 amendment of RCW

25.15.303, Arden had to file a certificate of dissolution to trigger the three-year statute of

       1 The other subcontractors were Osses Contractors, Exterior Stucco, Skyline Windows, and
Panelmasters.
       2Arden's motion for summary judgment stated four claims but the court only addressed the issue
of RCW 25.15.303.
No. 70322-6-1/4

limitations.3 The Zackses asserted that because Arden did not file a certificate of

dissolution, the lawsuit was not barred. In reply, Arden argued that the 2010

amendment to RCW 25.15.303 did not apply retroactively to Arden.

       The court granted Arden's motion for summary judgment dismissal of the

Zackses' claims. The Zackses filed a motion for discretionary review. We granted the

motion for discretionary review, ruling that under RAP 2.3(b)(2), "it was probable error

for the trial court to dismiss Arden from the suit based on the 2006 version of the

statute."

                                            ANALYSIS

       The parties dispute whether the 2010 amendments to RCW 25.15.303 govern.

The Zackses argue the court erred in granting summary judgment dismissal because

Arden was subject to the 2010 amendments to RCW 25.15.303. RCW 25.15.303

requires LLCs to file a certificate of dissolution to trigger the three-year statute of

limitations. Arden does not dispute that it did not file a certificate of dissolution. Arden

argues the 2010 amendments do not apply retroactively and under the 2006 version of

RCW 25.15.303, the Zackses' lawsuit was time barred. We agree with the Zackses.

       We review summary judgment de novo, engaging in the same inquiry as the trial

court. Lunsford v. Saberhaqen Holdings, Inc., 166 Wash. 2d 264, 270, 208 P.3d 1292

(2009). Summary judgment is appropriate when there is no genuine issue of material

fact and the moving party is entitled to summary judgment as a matter of law. CR 56(c);

Atherton Condo. Apartment-Owners Ass'n Bd. of Dirs. v. Blume Dev. Co., 115Wn.2d

506, 516, 799 P.2d 250 (1990). Statutory interpretation is also a question of law that we

       3 See Laws of 2010. ch. 196. § 11.
No. 70322-6-1/5

review de novo. Dep't of Ecology v. Campbell & Gwinn. L.L.C.. 146 Wash. 2d 1, 9, 43
P.3d 4 (2002). Our goal is to ascertain and give effect to the legislature's intent.

Chadwick Farms Owners Ass'n v. FHC. LLC. 166 Wash. 2d 178, 186, 207 P.3d 1251

(2009).

        Under the Washington Limited Liability Company Act (Act), chapter 25.15 RCW,

the secretary of state may administratively dissolve an LLC if it does not comply with

certain statutory requirements. RCW 25.15.270; RCW25.15.280.4 However, an

administrative dissolution does not terminate the existence of a limited liability company.

Chadwick Farms, 166 Wash. 2d at 188. An administratively dissolved LLC continues to

exist for the purposes of winding up and liquidating its business and affairs. RCW

25.15.285(3); RCW 25.15.295(1). After dissolution, an LLC may prosecute and defend

suits, dispose and convey the property of the LLC, make reasonable provisions for the

liabilities of the LLC, and distribute remaining assets. RCW 25.15.295(2). Further, a

dissolved LLC may apply for reinstatement and, if accepted, conduct business as if the

dissolution never occurred. RCW 25.15.290.

          Here, it is undisputed that on September 8, 2008, the secretary of state

administratively dissolved Arden for failing to file the required annual report and failing

to pay licensing fees.5 Under former RCW 25.15.303, the "effective date of dissolution"

         4Specifically, RCW 25.15.280 provides that the secretary of state may administratively dissolve
an LLC ifthe LLC (1) fails to pay license fees or penalties, (2) fails to deliver an initial report or annual
report, (3) fails to designate a registered agent or office, or (4) fails to notify the secretary of state of any
changes to its registered agent or office.
          5 The "Certificate of Administrative Dissolution" states, in pertinent part:
          In accordance with RCW 23B.14.210, the above corporation is hereby administratively
          dissolved as of September 02, 2008.
          This action was taken due to the failure of the corporation to file an annual list of
          officers/license renewal within the time set forth by law.
No. 70322-6-1/6

is the date of the administrative dissolution. Serrano on Cal. Condo. Homeowners

Ass'n v. First Pac. Dev.. Ltd.. 143 Wash. App. 521, 525, 178 P.3d 1059 (2008). Former

RCW 25.15.303 provided that a dissolved LLC remained subject to suit for three years

after the effective date of dissolution. Former RCW 25.15.303 provided, in pertinent

part:

        The dissolution of a limited liability company does not take away or impair
        any remedy available against that limited liability company, its managers,
        or its members for any right or claim existing, or any liability incurred at
        any time, whether prior to or after dissolution, unless an action or other
        proceeding thereon is not commenced within three years after the
        effective date of dissolution.161

        In Chadwick Farms, the Washington Supreme Court held that an LLC can sue or

be sued until the date of cancellation when it ceases to exist as a legal entity. Chadwick

Farms. 166 Wash. 2d at 191. The court specifically addressed the 2006 version of RCW

25.15.303 in reaching the conclusion that there is a clear distinction between

"dissolution" and "cancellation." Chadwick Farms. 166 Wash. 2d at 193-95. Whereas "[a]

dissolved company still exists for the purpose of winding up, during which it can sue or

be sued[,] once a limited liability company's certificate of formation is cancelled, it no

longer exists as a separate legal entity for any purpose." Chadwick Farms. 166 Wash. 2d

at 194. Accordingly, the court concluded:

        On its face, and read in the context of the entire Act, RCW 25.15.303
        means that an action against a limited liability company . . . must be
        brought within three years of dissolution, but an action against a limited
        liability company will abate upon cancellation.

Chadwick Farms. 166 Wash. 2d at 195.

        6 Emphasis added.
No. 70322-6-1/7

        In 2010, the legislature amended the Act to change the method by which a

dissolved LLC can trigger the statute of limitations. Laws of 2010, ch. 196, § 11. The

statute now requires a dissolved LLC, including an administratively dissolved LLC, to file

a certificate of dissolution. RCW 25.15.303. As amended, RCW 25.15.303 states, in

pertinent part:

        [T]he dissolution of a limited liability company does not take away or
        impair any remedy available to or against that limited liability company, its
        managers, or its members for any right or claim existing, or any liability
        incurred at any time, whether prior to or after dissolution, unless the
        limited liability company has filed a certificate of dissolution under RCW
        25.15.273, that has not been revoked under RCW 25.15.293, and an
        action or other proceeding thereon is not commenced within three years
        after the filing of the certificate of dissolution.171

RCW 25.15.303 now provides that the three-year statute of limitations begins to run

from the date of the "filing of the certificate of dissolution" instead of from the "effective

date of dissolution" as stated under former RCW 25.15.303.

        Under the 2006 version of RCW 25.15.303, when the secretary of state

administratively dissolved Arden in 2008, the three-year statute of limitations period

would have expired on September 2, 2011. But as the court held in Chadwick Farms,

until the certificate of formation is canceled, a dissolved LLC continues to exist.

Chadwick Farms. 166 Wash. 2d at 191. There is no evidence that Arden's certificate of

formation has ever been canceled.8 Because Arden was still a legal entity in 2010, the

        7 Emphasis added.
        8 In 2009, the legislature amended the Act to extend the period of time an administratively
dissolved LLC could apply for reinstatement from two years "after the effective date of dissolution" to five
years, and to make cancellation automatic at the end of the period, relieving the secretary of state from
taking action to cancel a certificate of formation. Laws of 2009, ch. 437, § 2; see former RCW
25.15.290(1), (4) (2009). The legislature amended RCW 25.15.290 again in 2010, deleting subsection (4)
entirely that stated an administratively dissolved LLC's "certification of formation is deemed canceled" if
"an application for reinstatement is not made within the five year period." Laws of 2010, ch. 196, § 7.
No. 70322-6-1/8

2010 amendments to RCW 25.15.303 applied to Arden as to any other legally

recognized LLC. Because Arden did not file a certificate of dissolution, the Zackses'

2012 lawsuit against Arden was not barred by the statute of limitations.9

       We reverse.

                                                      ^yGL^g.Of-
WE CONCUR:

 ^.            _S^~~-1S1S>.

       9 Because Arden was still a legal entity at the time of the 2010 amendment, we need not address
whether the amendment was retroactive.

                                                  8