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Recent Rulings Jager Law is Working On |
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Common Law Bars Post-dissolution Claims July 15, 2005 Ballard Square Condo. Owners Ass'n v. Dynasty Constr. Co., (126 Wn. App. 285, 108 P.3d 818, 2005) Short principle:
In Ballard Square, a condominium owners association sued the condominium's developer, a corporation which had been dissolved for seven years, for breach of contract based on alleged construction defects. The trial court dismissed the association's case on summary judgment, and the association appealed. The question presented to Division I of the Court of Appeals was whether Washington's Business Corporation Act permitted the association's post-dissolution claims against the developer. The Court of Appeals affirmed the trial court decision dismissing the association's case, holding that there is no statutory basis on which to allow a post-dissolution claim to proceed. The Court of Appeals reasoned that, at common law, a corporation ceased to exist upon dissolution, and all claims against that corporation were terminated by operation of law. In response to the inequitable results caused by the common law rule, the legislature enacted two statutes: RCW 23B.14.050, which allows a corporation to sue and be sued during its winding up activities and RCW 23B.14.340, also known as a survival statute, which preserves remedies available against corporations for pre-dissolution claims for two years after the date of dissolution. The Court of Appeals looked to the unambiguous language of RCW 23B.14.340 and determined that it applies only to claims existing before a corporation is dissolved. Additionally, the legislature's failure to eliminate the "prior to such dissolution" language of RCW 23B.14.340, combined with its rejection of section 14.07 of the Model Business Corporations Act, compelled the Court of Appeals to conclude that the legislature intended for the survival statute to apply only to claims existing before the corporation dissolved. The Court of Appeals held that claims arising after dissolution are governed by the common law. The Court of Appeals left unanswered the question of what constitutes a "post-dissolution claim." We expect two arguments will likely be made to address this issue (1) that in a construction defect, based on breach of contract, the claim "accrues" or arises at substantial completion or at termination of services, making the claim a pre-dissolution claim, or (2) that a claim arises when a lawsuit was filed or when the plaintiff first had knowledge of the claim. The Ballard Square decision was recently appealed to the Supreme Court of Washington. |
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