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Canal Station North Condominium Association v. Ballard Leary Phase II, LP

Court of Appeals of Washington, Division 1

December 23, 2013

CANAL STATION NORTH CONDOMINIUM ASSOCIATION, a Washington nonprofit corporation, Respondent,
v.
BALLARD LEARY PHASE II, LP, a Washington limited partnership; BRCP/CPI PHASE II, LLC, a Washington limited liability company; CONTINENTAL PACIFIC INVESTMENTS REAL ESTATE FUND 1, LP, a Washington limited partnership; CPI FUND 1, LLC, a Washington liability company; CONTINENTAL PROPERTIES, LLC, a Washington limited liability company; CLAUDIO GUINCHER and JANE DOE GUINCHER, individually and the marital community comprised thereof; and DON BOWZER and JANE DOE BOWZER, individually and the marital community compromised thereof, Appellants, DOE AFFILIATES 1-50; DOE PRINCIPALS 1-10; DOE DECLARANT BOARD MEMBERS 1-10; DOE CONTRACTORS 1-20; DOE DECLARANT AGENTS 1-10; DOE TRANSFEREES 1-50; UPONOR, INC., an Illinois corporation; DAHL BROTHERS CANADA, LTD, a Canadian corporation; BRASS-CRAFT MANUFACTRUING COMPANY, a Michigan corporation; DOE MANUFACTURING COMPANIES 1-20; doe distributing companies 1-20, Defendants.

Order Filed Date: January 3, 2014.

ORDER GRANTING MOTION TO PUBLISH

The appellants, Ballard Leary Phase II LP, BRCP/CPI Phase II LLC, Continental Pacific Investments Realestate Fund I LP, CPI Fund I LP, Continenttal Properties LLC, Claudio Guincher, Jane Doe Guincher, Don Bowzer, and Jane Doe Bowzer, have filed a motion to publish. The respondent, Canal Station North Condominium Association, has filed a response. A panel of the court has reconsidered its prior determination not to publish the opinion filed for the above entitled matter on December 23, 2013, and has found that it is of precedential value and should be published. Now, therefore it is hereby

ORDERED that the written opinion filed December 23, 2013, shall be published and printed in the Washington Appellate Reports.

Appelwick, J.

The Association sued Ballard Leary and several other defendants for alleged construction defects. Before filing an answer, Ballard Leary filed a CR 12(b)(6) motion to dismiss two of the Association's claims for lack of standing and two other claims as premature. When the trial court denied the motion, Ballard Leary moved to compel arbitration pursuant to RCW 64.55.100 of the Washington Condominium Act. The trial court issued an order striking Ballard Leary's arbitration demand, finding that Ballard Leary waived arbitration. We hold that the motion under CR 12(b)(6) did not constitute a waiver of the right to arbitrate and that arbitration was timely demanded as to the claims against the statutory declarants. Arbitration was properly denied as to the remaining claims and parties to the lawsuit. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

FACTS

This lawsuit arises from alleged construction defects in the Canal Station North Condominium development at 5450 Leary Avenue in Seattle, Washington. The Canal Station North Condominium Association (Association) filed its first amended complaint on May 15, 2012, alleging several causes of action: (1) breach of implied warranty of quality under the Washington Condominium Act (WCA), chapter 64.34 RCW; (2) breach of implied warranty of habitability; (3) breach of express warranty and contract;(4) negligent misrepresentations; (5) breach of fiduciary duty; (6) violation of the Washington Consumer Protection Act (CPA), chapter 19.86 RCW; (7) and disgorgement of fraudulent transfers.

The Association named several defendants: Ballard Leary Phase II LP (Ballard Leary, the statutory declarant[1]); BRCP/CPI Phase II LLC (general partner of the declarant); Continental Pacific Investments Real Estate Fund I LP (managing partner of BRCP/CPI); CPI Fund I LLC (general partner of Continental Pacific); Continental Properties LLC (manager of CPI Fund); Claudio Guincher (served on Association board of directors) and Jane Doe Guincher; Don Bowzer (same) and Jane Doe Bowzer;[2] as well as other unidentified alter egos, unknown affiliates, and asset transferees of the declarant. The Association referred to BRCP/CPI, Continental Pacific Investments, CPI Fund, and Continental Properties collectively as "Continental."

The Association also alleged that three out-of-state corporations-Uponor Inc., Dahl Brothers Canada LTD, and Masco Corp.-"designed, manufactured, supplied, and/or distributed defective component parts of plumbing systems installed" at Canal Station. The Association referred to these three corporations collectively as "manufacturer defendants."

Ballard Leary filed a notice of appearance, but did not file an answer. Nor did any party conduct discovery. Instead, on July 6, 2012 Ballard Leary filed a CR 12(b)(6) motion to dismiss four of the Association's claims: violation of the CPA, negligent misrepresentation, alter ego liability, and disgorgement of fraudulent transfers. Ballard Leary claimed that the Association lacked standing to assert CPA violations and negligent misrepresentation. Ballard Leary also argued that the Association's alter ego liability and fraudulent transfer claims were premature and should be dismissed without prejudice unless and until the Association prevailed on its claim for damages. In the alternative, Ballard Leary requested that the trial court bifurcate the case and stay the premature issues until the Association established liability and damages.

On August 3, 2012, the trial court denied Ballard Leary's CR 12(b)(6) motion. Four days later, on August 7, 2012, Ballard Leary and the Continental defendants filed a demand for arbitration pursuant to RCW 64.55.100. The demand encompassed "any and all claims related to all of the above-captioned parties (plaintiff and defendants)." The Association moved to strike the arbitration demand, arguing that Ballard Leary waived arbitration by demonstrating intent to litigate. The Association also asserted that certain defendants were not entitled to demand arbitration.

On August 21, 2012, the trial court issued an order denying Ballard Leary's arbitration demand. The court found that the defendants "evidenced a clear intent to litigate the claims herein, rather than arbitrate them under RCW 64.55.100." The court entered specific findings:

(1) defendants' CR 12(b)(6) motion sought to narrow specific liability issues for trial while expressly leaving others for determination by the trier of fact;
(2) defendants' motion sought to stage the litigation in an alternative motion for bifurcating the trial of liability and damages from the trial of alter ego and Uniform Fraudulent Transfers Act[, chapter 19.40 RCW, ] claims;
(3) prior to losing those motions, defendants made no effort to invoke or preserve the arbitration forum;
(4) defendants' briefing references "jury confusion" as a basis for bifurcating or dismissing specific claims; and
(5)granting the defendants' demand for arbitration, coming as it did only after defendants lost a motion intended to shape the posture of the litigation at trial, ...

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