AHTEN v. Barnes

Citation: 242 P.3d 35Docket: 64345-2-I

Court: Court of Appeals of Washington; November 1, 2010; Washington; State Appellate Court

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The Court of Appeals of Washington addressed the case of Jan Ahten vs. Bradley J. Barnes and Western Surety Company regarding contractor registration and bond recovery. Ahten, having hired Barnes for a remodeling project, sought to recover damages after he moved to Louisiana and allegedly failed to complete the work. Although she served the Department of Labor and Industries as required for bond recovery, she did not serve Barnes directly, resulting in a default judgment of $250,831 against him for breach of contract. The trial court vacated this judgment due to improper service and lack of personal jurisdiction, ruling that Ahten's service under RCW 18.27.040(3) applied only to actions against a contractor and their bond. The facts revealed that Barnes, a licensed contractor with a $12,000 bond, had started work in August 2007 but was dismissed from the project in January 2008 after Ahten's family intervened. The court affirmed the trial court's decision, emphasizing the necessity of proper service on the contractor for maintaining jurisdiction.

On June 19, 2008, Ahten filed a complaint in King County Superior Court against Barnes for breach of contract and against Western Surety Company to recover on a bond, seeking damages of at least $50,000. The complaint lacked specific details on how Barnes breached the contracts. Although Ahten served the summons and complaint on the Department, she did not serve Barnes personally. The surety paid Ahten $12,000 under the bond and is not part of the appeal. After Barnes failed to respond, Ahten sought a default judgment, which was granted on September 4, 2008, for $250,831, based on her claims that Barnes had removed the roof and caused interior damage. Barnes became aware of the lawsuit in October 2008 and moved to set aside the default judgment on August 25, 2009. The trial court partially granted this motion on October 2, 2009, allowing the judgment related to the bond but vacating the excess amount, citing legislative history indicating that personal service on the contractor was not intended for actions against the contractor except for bond-related issues. Ahten appealed, arguing that RCW 18.27.040(3) permits service on the Department alone without requiring personal service on the contractor. Barnes countered that the statute applies only to bond actions and referenced the legislative history to support his position. The decision to vacate a default judgment due to lack of personal jurisdiction is subject to de novo review, as proper service is necessary to establish jurisdiction, and void judgments can be vacated at any time.

Chapter 18.27 RCW establishes the contractor registration statute in Washington, aiming to protect the public from unregistered contractors who pose significant risks and financial losses to the state. The statute mandates that all contractors must register with the Department of Labor and Industries, with violations treated as criminal gross misdemeanors. To combat the issue of unregistered contractors, the law requires coordination between various state departments to identify and enforce compliance against them. 

Key provisions include the establishment of a consumer marketing campaign to raise awareness about the dangers of hiring unregistered contractors, and the creation of an enforcement team to uphold the registration act. 

RCW 18.27.040 specifically addresses bonding requirements for contractors, stipulating that general contractors must secure a surety bond of $12,000 and specialty contractors $6,000. The bond must cover payments to laborers, employee benefits, state taxes, material suppliers, and any breach of contract judgments. Claimants can sue against the bond, and the statute outlines specific filing procedures and limits on the surety's liability. Additionally, the law reserves certain bond amounts for residential homeowners and allows for the suspension or increase of bond amounts for contractors with multiple judgments. The director is granted authority to establish rules for the administration of these security requirements.

Interpreting statutes aims to ascertain and apply the legislature's intent, as established in case law. When statutory language is clear, it must be upheld as reflecting legislative intent. The interpretation process involves examining the entire statute and related provisions to uncover this intent. In cases of ambiguity, legislative history may be consulted for clarity. Specifically, RCW 18.27.040(3) outlines that service of process in actions against contractors and their bonds is exclusive to service upon the department, indicating that such actions are limited to those filed under this chapter. A thorough review of chapter 18.27 RCW reveals that these actions pertain solely to claims against a contractor's bond, supported by various subsections that relate to such suits. Precedent cases, including Mid-City Materials, confirm that the statute applies strictly to actions against a contractor's bond, reinforcing that service provisions are confined to suits based on the bond.

In *Subcontractors and Suppliers Collection Services v. McConnachie*, the Washington Court of Appeals addressed personal jurisdiction concerning a collection service's attempt to serve contractor McConnachie for an unpaid materials bill after the statute of limitations had expired against the bonding company. The court examined RCW 18.27.040, concluding that its provisions for service apply specifically to actions against a contractor's bond or deposit, not to personal jurisdiction over the contractor for unrelated debts. 

Subsequently, in *Cosmopolitan v. Ondeo*, the Washington Supreme Court analyzed the attorney fees provision within RCW 18.27.040(6). Cosmopolitan sought fees after prevailing in a suit against both the contractor and the surety bond. While the Court of Appeals granted fees against both, the Supreme Court reversed this decision, asserting that the attorney fees provision was limited to actions against the bond. The court emphasized that the language of the statute, supported by its subsections, indicates a focus solely on actions for recovery against bonds, not contractors directly. The Supreme Court reaffirmed the interpretation from *McConnachie*, noting that the 2001 legislative amendments did not alter this scope.

Ahten contends that the 2007 amendments to RCW 18.27.040 indicate the legislature's intention to permit substituted service in actions against contractors, citing the phrase ‘and confers personal jurisdiction.’ Prior court interpretations in cases such as Mid-City, McConnachie, and Cosmopolitan occurred before these amendments. The amendments clarify that service also confers personal jurisdiction on contractors and their sureties regarding claims against them. However, Cosmopolitan underscores that actions against the bond necessitate establishing the contractor's liability, which aligns with the legislature's language about actions filed against both the contractor and the bond.

Ahten asserts that the 2007 amendments implicitly overrule previous case law, but the court disagrees, emphasizing that the legislature is presumed to be aware of prior judicial interpretations and that new legislation typically aligns with existing common law unless explicitly stated otherwise. The removal of commas in the statute between 'contractor' and 'contractor's bond' further clarifies that both must be involved in a claim under this chapter. The court reasons that if the legislature intended for the substituted service provision to apply to direct actions against contractors, it would have articulated that intention more clearly.

Despite any perceived ambiguity in the statute, the legislative history does not indicate a significant change in scope to support Ahten's interpretation. Given the fundamental due process implications of substituted service, the court declines to interpret the 2007 amendments as expanding the statute to encompass all actions against contractors.

Ahten argues that her interpretation of RCW 18.27.040(3) would further the statute's goals of protecting homeowners, subcontractors, and suppliers from unregistered contractors. However, the context of the statute indicates that the protections should not extend further than what is explicitly outlined. The court agrees with Cosmopolitan's view that while contractor registration and bond requirements aim to safeguard the public from irresponsible contractors, the attorney fee provision in subsection (6) is limited to actions against the bond. Barnes requests attorney fees under this provision, but the claim is for breach of contract, not a suit under the contractor registration act, making the provision inapplicable. Thus, Barnes is not entitled to attorney fees. Ultimately, the court concludes that RCW 18.27.040(3)'s service provision applies solely to actions against a contractor and its bond, affirming the trial court's decision to vacate the default judgment against Barnes.

In 2007, the legislature amended the statute regarding service of process in actions against contractors, stipulating that such service must be made exclusively upon the department, which grants personal jurisdiction over the contractor and the surety for claims against them. Barnes's assertion that the standard of review is an abuse of discretion is rejected; the correct standard for reviewing findings of fact is substantial evidence, as established in Clayton v. Wilson. The use of "and" in the statute conveys a conjunctive meaning, and any interpretation suggesting otherwise would require altering the text, which the court declines to do. Mid-City obtained a default judgment against parents for $15,091.89, while the bond amount was set at $4,000. The court emphasizes that the focus of RCW 18.27.040(3) remains on the contractor's bond and deposit, affirming that Mid-City is still valid law. The current version of RCW 18.27.040 maintains its title without changes, and the attorney fees provision in question parallels the 2007 amendment. RCW 18.27.040(5) stipulates that half of the bond amount is reserved for residential homeowners. During oral arguments, Ahten's counsel conceded that legislative history does not support her interpretation, asserting that the statute is unambiguous and does not require historical context.