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Hartford Fire Ins. Co. v. Columbia State Bank

Court of Appeals of Washington, Division 2

September 9, 2014

The Hartford Fire Insurance Company, Appellant ,
v.
Columbia State Bank, Respondent

Reconsideration denied October 29, 2014.

Page 88

Appeal from Pierce County Superior Court. Docket No: 13-2-05483-9. Judge signing: Honorable Garold E Johnson. Judgment or order under review. Date filed: 08/09/2013.

Todd W. Blischke (of Williams Kastner & Gibbs PLLC ), for appellant.

Alexander S. Kleinberg (of Eisenhower & Carlson PLLC ), for respondent.

Authored by Rich Melnick. Concurring: Bradley A. Maxa, Jill M Johanson.

OPINION

Page 89

[183 Wn.App. 601] Melnick, J.

¶ 1 Hartford Fire Insurance Company appeals from the superior court's grant of summary judgment dismissal of Hartford's claims against Columbia State Bank and the superior court's denial of Hartford's summary judgment motion. Hartford had issued bonds for Waka Group Inc., a general contractor, and made payments under one bond when Waka defaulted on a project. Hartford argues that it was entitled to recover progress payment funds Columbia removed from Waka's collateral control account because Waka had a contractual obligation to hold progress payments in trust for Hartford's benefit to provide reimbursement for bond payments, and that Columbia knew or should have known the funds were held in trust. In the alternative, Hartford argues that it had an equitable lien on the progress payment funds that was superior to Columbia's right to the funds.

[183 Wn.App. 602] ¶ 2 We hold that the contract between Hartford and Waka did not create an express trust and that Hartford did not possess an equitable lien on the progress payment funds. As a result, we hold that Hartford is not entitled to recover the funds from Columbia. We affirm the superior court's summary judgment dismissal of Hartford's claims.

FACTS

¶ 3 Hartford issued performance and payment bonds as surety for Waka's construction contracts. On June 13, 2011, as partial consideration for this arrangement, Hartford and Waka executed a general indemnity agreement (Indemnity Agreement). The Indemnity Agreement included a " Trust Fund" provision, which stated:

If a Bond is Underwritten in connection with the performance of any contract, the entire contract price shall be dedicated to the satisfaction of the obligations of the Bond and this Agreement. All money paid or any securities, warrants, checks or evidences of debt given under contracts relating to or for which a Bond has been issued shall be impressed with a trust for the purpose of satisfying the obligations of the Bond Underwritten for said contract and this Agreement and shall be used for no other purpose until all such obligations have been fully satisfied.

Clerk's Papers (CP) at 13 (emphasis added).

¶ 4 Waka needed to obtain working capital to complete its projects. On June 14, 2011, Waka executed and delivered a commercial line of credit agreement and note (Note) along with a business loan agreement to Columbia. An addendum to the business loan agreement, titled " Control Account," stated that Waka

shall deposit all cash, instruments and other proceeds received from the operation of [Waka's] business into an account established with [Columbia] within two (2) business days after receipt of such amounts (the " Control Account" ). [Columbia] is authorized to pay down the unpaid ...

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