State Constr., Inc. v. City of Sammamish

11 Wash.App.2d 892

457 P.3d 1194

STATE CONSTRUCTION, INC., a Washington Corporation, Appellant,

v.CITY OF SAMMAMISH, a governmental entity, Porter Brothers Construction, Inc., a Washington Corporation, Defendants,Hartford Fire Insurance Company, a corporation, Bond No. 52BCSDL1582, Respondent.

No. 78753-5-I

Court of Appeals of Washington, Division 1.

FILED: January 13, 2020

Ordered Published Date February 19, 2020

Morgan John Wais, Rainier Legal Advocates, LLC, 465 Rainier Blvd. N Ste. C, Issaquah, WA, 98027-2826, for Appellant.

Paul Keane Friedrich, Alexander A. Friedrich, Williams Kastner & Gibbs, PLLC, 601 Union St. Ste. 4100, Seattle, WA, 98101-2380, for Respondent.

PUBLISHED OPINION

Andrus, J. ¶1 State Construction, Inc., a subcontractor on a public works project, challenges the dismissal of its lien and bond claims. Because its claims were untimely, we affirm.

FACTS

¶2 In May 2014, Porter Brothers Construction, Inc. contracted with the City of Sammamish (City) to construct the Sammamish Community & Aquatic Center (the Project).¹ The City and Porter Brothers entered into an American Institute of Architects Standard Form Agreement between Owner and Contractor (AIA Agreement). Under this agreement, Porter Brothers invoiced the City monthly, and when the City paid the invoice, it retained five percent of the funds owed to Porter Brothers, as required by RCW 60.28.011.² A retainage fund totaling $1,351,472 is now on deposit in an escrow account at Heritage Bank pursuant to a retainage agreement between Porter Brothers and the City.

¶3 Porter Brothers subcontracted with State Construction on June 10, 2014, to perform certain excavation and utilities work. State Construction began this work shortly thereafter.

¶4 Porter Brothers also obtained a payment and performance bond³ for the value of the Project, $28 million, from Hartford Fire Insurance Company. On October 12, 2015, Hartford filed a Uniform Commercial Code (UCC) financing statement against Porter Brothers, attaching, as collateral for debts owed to Hartford, Porter Brothers' interest in any payments due to the contractor, including monies to which it might be entitled from retainage funds.

¶5 Porter Brothers subsequently executed multiple "Irrevocable Assignment" documents, in which it assigned to Hartford any right to payment it had on several outstanding projects, including this Project. The assignment at issue here, executed November 3, 2015, included the right to receive any portion of the retainage funds held by the City:

FOR VALUE RECEIVED, the undersigned, Porter Brothers Construction, Inc., ... hereby irrevocably assigns, transfers and sets over to Hartford Fire Insurance Company ... all Contract Funds of any nature, including, but not limited to, progress payments, earned or unearned funds, change orders, extras, claims of any nature, retainages, with all the interest accruing thereon, and whether said Contract Funds are due now or in the future under the ... contract [for the Project].

¶6 The City determined that the Project was "substantially complete" on April 1, 2016.⁴ The building was operational at that point and, according to the City, punch list items⁵ were completed thereafter. State Construction completed punch list items in June 2016.

¶7 At some point around this time, Porter Brothers experienced financial difficulty and notified the City it was abandoning the contract because it was unable to complete the work. After Porter Brothers’ voluntary default, Hartford stepped in and paid certain debts, including monies owed to union trust funds for employee fringe benefits and dues, and materials and supplies furnished by various companies.

¶8 The City stated in discovery that landscaping work was completed on August 31, 2016. The landscaping subcontractor testified that it completed its punch list work in November 2016. The City received as-built drawings on January 13, 2017. Porter Brothers indicated that the last subcontractor to perform services on the Project was Milne Electric, which completed its work on January 19, 2017. In discovery, the City stated that "Porter Brothers, by and through its subcontractors, was performing work under the contract through February 2017, of which the City has no[ ] specific knowledge. After February 21, 2017, warranty work was completed."⁶

¶9 On February 21, 2017, the City’s council passed a resolution recognizing the "[P]roject was substantially completed by the contractor on April 1, 2016," accepting the Project as officially complete, and authorizing the contract closure process. The City filed a notice of completion with the state agencies, pursuant to RWC 60.28.051, on April 13, 2017, listing the "Date Work Completed" as "4/1/2016," and the "Date Work Accepted" as "2/21/2017."

¶10 On March 27, 2017, State Construction filed with the City a notice of a lien claim against the retainage fund and notified Hartford of its claim against the bond for $250,462.27. State Construction later amended its claim against the retainage fund to $199,205.66 and claimed to be owed another $7,295.16 on unpaid invoices.

¶11 On April 28, 2017, State Construction filed suit against the City, Porter Brothers, and Hartford. State Construction sought to foreclose on its lien against the retainage fund, to collect the amounts it was owed from Hartford’s bond or from the City, and to obtain a judgment against Porter Brothers for the amount owed under its subcontract.

¶12 In March 2018, Porter Brothers stipulated to the entry of judgment against it in favor of State Construction, in the amount of $199,205,66.⁷

¶13 In May 2018, State Construction and Hartford filed cross-motions for summary judgment. State Construction sought judgment against Hartford and the City for $199,205.66, or an order requiring Hartford to pay State Construction’s lien from the retainage fund. Hartford contended the claims were time barred under RCW 39.08.030 and RCW 60.28.011 (2).

¶14 The trial court dismissed State Construction’s claims against the City. It further granted summary judgment for Hartford, concluding that while the retainage fund "is a statutorily authorized trust and may not be assigned to the general contractor’s creditors," State Construction’s lien claim was not timely filed and, as a result, was not enforceable against the retainage fund. The order did not separately address State Construction’s claim against Hartford’s bond but dismissed all claims against Hartford.

¶15 The trial court awarded $20,012.21 in attorney fees to Hartford under RCW 39.04.240. State Construction appeals.

ANALYSIS

¶16 State Construction contends the trial court erred in concluding that its lien claims against Hartford’s bond and the retainage fund were time barred. State Construction also maintains that if the notices were untimely, it resulted from the City’s failure to notify it of the date of substantial completion, in violation of due process.

¶17 State Construction alternatively argues that even if its lien claims are untimely, it is still entitled to be paid out of the retainage fund because Porter Brothers unlawfully assigned the retainage funds to Hartford, and its stipulated judgment against Porter Brothers is a valid lien against any funds to which Porter Brothers is otherwise entitled. Finally, State Construction contends the trial court erred by awarding Hartford attorney fees.

A. Standard of Review

¶18 We review summary judgment orders de novo, performing the same inquiry as the trial court. Hisle v. Todd Pac. Shipyards Corp., 151 Wash.2d 853, 860, 93 P.3d 108 (2004). A court may grant summary judgment if the evidence, viewed in a light most favorable to the nonmoving party, establishes there is no genuine issue of any material fact, and the moving party is entitled to judgment as a matter of law. CR 56(c) ; Hisle, 151 Wash.2d at 861, 93 P.3d 108.

B. State Construction’s Bond and Retainage Claims

1. RCW 39.08.030 —Performance Bond

¶19 State Construction first contends the trial court erred in dismissing its claim against Hartford’s performance bond. It argues that its notice was timely under RCW 39.08.030(1)(a). We disagree.

¶20 Subcontractors may bring a claim against a performance bond for any completed work, but

such persons do not have any right of action on such bond for any sum whatever, unless within [30] days from and after the completion of the contract with an acceptance of the work by the affirmative action of the ... city ..., the ... subcontractor ... must present to and file with such ... city ... a notice in writing [in a form set out in the statute],

RCW 39.08.030(1)(a).

¶21 The City passed a resolution on February 21, 2017, accepting the Project as complete as of that date. State Construction concedes that the City "accept[ed] the Project as complete," as required by the statute, on February 21, 2017. It further concedes that it filed its lien claim notice with the City 34 days after the date of acceptance. It argues, however, that its notice should be considered timely because the statute requires both "completion of the contract" and "acceptance of the work" to occur before the 30-day deadline is triggered. It contends there are questions of fact as to whether contract completion occurred before or after February 21, 2017.

¶22 Hartford contends that the City’s certification of the date of completion and acceptance is legally conclusive and that State Construction cannot factually challenge the certification.⁸ When a subcontractor initiates a lien foreclosure action, rather than file an answer, a public owner certifies

the name of the contractor; the work contracted to be done; the date of the contract; the date of completion and final acceptance of the work; the amount retained; the amount of taxes certified due or to become due to the state; and all claims filed with it showing respectively the dates of filing, the names of claimants, and amounts claimed.

RCW 60.28.030 (emphasis added).

¶23 The City initially certified the date of...