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Century Surety Co. v. Belmont Seattle, LLC

United States District Court, W.D. Washington, Seattle

November 19, 2014

CENTURY SURETY COMPANY, Plaintiff,
v.
BELMONT SEATTLE, LLC, Defendant.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

MARSHA J. PECHMAN, District Judge.

THIS MATTER comes before the Court on Plaintiff Century Surety Company's motion for summary judgment (Dkt. No. 94) and Defendant Belmont Seattle, LLC's motion for summary judgment (Dkt. No. 91). Having reviewed the motions, the responses (Dkt. Nos. 97, 100), and all related papers, the Court GRANTS Plaintiff's motion for summary judgment and DENIES Defendant's motion for summary judgment.

Background

In 2005, Westmoore Management, LLC ("Westmoore"), Jacqueline and Marwan Bahu, and other investors formed a joint venture to purchase Belmont Place apartments, an apartment building in Seattle, and convert it into condominiums. (Dkt. No. 94 at 6); (Dkt. No. 91 at 3.) In October of 2005, the parties executed the Joint Venture Agreement ("JVA") which provided Westmoore would be the manager of the joint venture. (Dkt. No. 94 at 7.)

Under the JVA, Westmoore's authority encompassed "... all actions and decisions respecting the management, operation and control of the Joint Venture" and its actions were "binding upon the joint venture." (Dkt. No. 94 at 7.) In October 2005, the investors purchased the Belmont Place apartment building. (Dkt. No. 91 at 3.)

Between 2005 and 2007, Westmoore worked to move existing tenants out of the apartment building. (Id.) Westmoore did not renew or enter into any new leases, but continued to collect rents from existing tenants through its property manager Allied Group ("Allied") until all tenants were vacated from the building. (Id.) Allied deposited the rents in Westmoore's account. (Id.)

On March 15, 2007, the Bahus and other investors executed the Belmont Seattle, LLC Operating Agreement ("Operating Agreement"). (Dkt. No. 94 at 7.) Like the JVA, the Operating Agreement designated Westmoore as manager of Belmont Seattle, LLC ("Belmont"). (Id.) Belmont's organization and structure also mirrored that of the joint venture. (Id.)

Belmont took title of the apartment building by quit claim deed in April 2007. (Dkt. No. 94 at 8.) The deed cited, as consideration for the transaction, "mere change in identity or form pursuant to WAC 458-61A-211(a)." (Id.) In May 2007, Belmont began converting the apartment building into condominiums. (Dkt. No. 91 at 5.) Construction was completed in April 2008. (Id.)

Century Surety Company ("Century") issued an insurance policy to the Insurance Program for Association Housing ("IPAH") for the one-year period from December 1, 2006 to December 1, 2007. (Dkt. No. 94 at 3.) Century added Belmont Place apartments to the policy by an endorsement dated April 30, 2007. (Id.) Belmont sold 11 condominium units and remained the owner of 31 units at the end of the coverage period. (Dkt. No. 91 at 8.)

In December 2011, the condominium owners brought suit against Belmont and the Bahus for alleged construction defects. (Dkt. No. 94 at 3.) Century agreed to defend Belmont and the Bahus under a reservation of rights. (Id. at 4.) In May 2012, Century filed a declaratory action seeking a determination from this Court as to whether there was a coverage obligation in the underlying lawsuit. (Dkt. No. 1.) Belmont counter-claimed for coverage. (Dkt. No. 14.)

Century challenged its coverage obligation based on the following exclusionary language in the policy for property damage to:

(1) Property you own, rent, or occupy, including any costs or expenses incurred by you or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property, for any reason, including prevention of injury to a person or damage to another's property; ("owned premises exclusion")
(2) Premises you sell, give away or abandon, if the "property damage" arises out of any of those premises; ("alienated premises exclusion") ***
Paragraph (2) of this exclusion does not apply if the premises are "your work" and were never occupied, rented or held out for rental by you.

(Dkt. No. 95-1 at 8-9.)

On December 19, 2012, this Court issued an Order granting summary judgment in favor of Century on the grounds that both exclusions applied to bar coverage because Westmoore "stood in the shoes of Belmont" in collecting rent. (Dkt. No. 46 at 5.) This Court's ruling was based on language in the quit claim deed, which stated Westmoore "in consideration of mere change in identity and form pursuant to WAC 458-61A-211(a) in hand paid, conveys and quit claims [the property] to Belmont Seattle, LLC." (Id.)

Belmont appealed the Order, and the Ninth Circuit reversed and remanded, finding the record had not been sufficiently developed to impute Westmoore's rent collecting activity to Belmont and grant summary judgment on an alter-ego theory. (Dkt. No. 50.) While the appeal was pending, the underlying lawsuit against the Bahus and Belmont settled, and other insurers paid the settlement. (Dkt. No. 55 at 2.) Century petitioned for panel rehearing en banc, which was denied. (Appellate Dkt. Nos. 26, 30.)

On remand, both parties filed motions for summary judgment. (Dkt. Nos. 55, 57.) Belmont moved for summary judgment arguing that Century's suit was moot in light of the settlement and also for Olympic Steamship attorney's fees on the grounds that it prevailed against Century's claim for declaratory judgment. (Dkt. No. 55.) Century moved for summary judgment on the grounds that the alienated property exclusion bars coverage because Belmont "rented or held out for rental" units through its agent Westmoore. (Dkt. No. 57.)

On April 4, 2014, this Court issued an Order denying both motions for summary judgment. (Dkt. No. 62.) This Court denied Belmont's motion for summary judgment on the grounds that Belmont's request for Olympic Steamship attorney's fees was premature because there had been no final substantive ruling regarding coverage. (Id. at 5.) This Court denied Century's motion for summary judgment because while it was clear "Westmoore was Belmont's agent for conducting Belmont's business, " it was not clear "Belmont's business included collecting rent." (Id. at 8.) This Court noted that Century's exhibits did not demonstrate "that Westmoore was depositing rent money into the Belmont bank accounts." (Id.)

This case is now before the Court on the parties' renewed motions for summary judgment. (Dkt. Nos. 91, 94.) Century argues that summary judgment is appropriate because Belmont "rented" or "held out for rental" the premises at issue and the exception to the alienated premises exclusion, therefore, does not apply. (Dkt. No. 94.) Belmont contends that the exception to the alienated premises ...


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