Lobak Partitions, Inc. v. Atlas Construction Co.

Citations: 749 P.2d 716; 50 Wash. App. 493Docket: 18035-5-I

Court: Court of Appeals of Washington; February 1, 1988; Washington; State Appellate Court

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Lobak Partitions, Inc. appeals the dismissal of its claims against Atlas Construction Company, Industrial Indemnity, and the City of Seattle related to the construction of the Bagley Wright Theater. The appellate court reverses in part and affirms in part. Lobak entered into a subcontract with Tuffey and O'Malley for drywall work but was not a registered contractor under RCW 18.27 at the time. In May 1984, Lobak filed suit claiming approximately $58,000 owed under the subcontract and damages of about $371,000 against the contractor's bond due to delays and other issues. Lobak's complaint included a claim against the bond with proper notice and a breach of contract claim against Tuffey and O'Malley, attributing liability to other defendants.

Atlas filed counterclaims against Lobak for failing to pay creditors and complete work, resulting in damages. After counsel for Lobak withdrew in November 1984, a trial date was set for January 9, 1986. Tuffey and O'Malley sought partial summary judgment to limit their liability to Lobak, which the court granted, determining their liability would only cover claims passed on to Atlas. Lobak did not respond to this motion. Both Atlas and the City subsequently filed motions for judgment on the pleadings or summary judgment, arguing a lack of contractual privity with Lobak and asserting Lobak's unregistered status should bar their claims. A hearing on these motions was scheduled for January 3, 1986, with Lobak submitting a memorandum in opposition on January 2, 1986.

Lobak obtained a renewal bond on February 23, 1982, valid until December 20, 1982, complying with RCW 18.27.040, despite not being listed as a contractor in 1982. The trial court dismissed all of Lobak's claims against the City with prejudice and without costs, ignoring Lobak's late memorandum and affidavit. It also granted summary judgment for Atlas and Industrial Indemnity, dismissing all of Lobak's claims against them and his claim regarding project retainage. Lobak's motions for reconsideration were denied after the court reviewed all submitted materials. He filed a notice of appeal on March 5, 1986, which later clarified that it did not include the retainage fund issue.

Lobak's standing to sue was limited due to a lack of privity of contract, as a stranger to a contract generally cannot enforce it unless intended benefits were secured for them. Evidence did not support that Lobak was an intended beneficiary of the contracts between the City and Atlas or between Atlas and T.O. While Lobak claimed a tort action, the complaint primarily focused on breach of contract and did not sufficiently allege negligence. However, lack of privity does not bar Lobak from suing on Atlas' contractor's bond, as subcontractors, laborers, and materialmen may recover under such bonds if statutory conditions are met.

RCW 39.08.010 mandates that general contractors provide a bond to ensure payment to laborers, subcontractors, and material suppliers. Under RCW 39.08.030, individuals mentioned in RCW 39.08.010 have the right to sue on this bond for unpaid work or materials. Lobak, as a subcontractor on the Bagley Wright theater project, is entitled to sue on the contractor's bond.

Regarding contractor registration, former RCW 18.27.020 prohibits any person from bidding or working as a contractor without a valid registration certificate from the state’s Department of Labor and Industries. This statute categorizes partnerships or joint ventures as registered if any partner is registered. Violating this requirement is a misdemeanor. Furthermore, RCW 18.27.080 states that a contractor must demonstrate valid registration to maintain any legal action for payment or contract breaches related to registered work.

The legislative intent of the registration statutes, as outlined in former RCW 18.27.140, is to protect the public from unreliable contractors. This definition was expanded in 1983 to include all individuals and entities providing labor or materials to contractors. 

The Washington Supreme Court's decisions in cases such as Murphy v. Campbell Inv. Co. and Northwest Cascade Constr. Inc. v. Custom Component Structures, Inc. emphasize that the registration requirements should be interpreted to ensure consumer protection, permitting "substantial compliance" to uphold the statute's objectives. In Bremmeyer v. Peter Kiewit Sons Co., the court addressed claims by an unregistered subcontractor, reinforcing the registration requirement established under RCW 18.27.

The subcontractor contended substantial compliance with statutory requirements (bond, insurance certificate), claimed loggers were exempt from registration, and argued the statute didn’t apply to disputes between subcontractors and prime contractors. The trial court favored the prime contractor with a summary judgment. On appeal, the Washington Supreme Court referenced its earlier ruling in Jeanneret v. Rees, which indicated RCW 18.27 barred unregistered contractors from suing prime contractors. However, the Bremmeyer court noted a 1973 amendment emphasizing the statute's purpose to protect the public, concluding that the Legislature did not intend to shield prime contractors from actions by unregistered subcontractors, thus overruling Jeanneret to that extent. An amendment in 1983 further broadened the definition of "public" to potentially include subcontractors needing protection. The court reaffirmed this stance in Frank v. Fischer, asserting the contractor registration statutes primarily protect the public, not contractors from each other. Atlas argued that Bremmeyer was irrelevant as Lobak's bond action was not a contractor dispute, but failed to provide sufficient authority to distinguish it. The Alaska Supreme Court's ruling in State ex rel. Smith v. Tyonek Timber, which barred unregistered contractors from suing on construction bonds, was noted; however, the Washington court emphasized a fundamental policy divergence, with Washington prioritizing consumer protection over general contractor responsibility. Consequently, the court ruled that Lobak's failure to register did not preclude his suit, also affirming that substantial compliance with registration requirements allows a contractor to pursue compensation for work performed.

The affidavit of Jeff Baker, presented by Lobak in a motion for reconsideration, raised factual questions regarding Lobak's adherence to registration requirements, suggesting potential substantial compliance. As a result, the trial court's summary judgment in favor of the defendants based solely on Lobak's registration status was deemed inappropriate. Under CR 12(c), if the court considers external matters, the motion for judgment on the pleadings is treated as a summary judgment motion per CR 56, which necessitates that the evidence is viewed favorably for the nonmoving party. A party seeking summary judgment must first demonstrate undisputed facts warranting judgment as a matter of law; failure to do so precludes summary judgment. To counter a motion for summary judgment, the opposing party must provide specific facts indicating a genuine issue for trial, rather than merely relying on allegations. The trial court, having reviewed matters outside the pleadings, must treat the motions by the City and Atlas as motions for summary judgment. Atlas argued for summary judgment based on a lack of contractual privity and Lobak's inability to claim under RCW 39.08.010. However, since the court reversed the dismissal of Lobak's bond claim, Lobak can pursue it if it presents specific facts demonstrating a genuine issue for trial. Although the trial court initially rejected Lobak's late affidavit, it was later accepted for reconsideration. Baker's affidavit detailed construction delays attributed to Atlas's design errors and scheduling failures, which raised triable issues. The appellate court did not address Atlas's request for attorney's fees following the trial court's ruling, affirming all other judgments while reversing the dismissal of Lobak's claim against the contractor's bond.