Century Surety Company v. Belmont Seattle, LLC

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT OCT 25 2013

MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

CENTURY SURETY COMPANY, an No. 13-35039
Ohio corporation,
D.C. No. 2:12-cv-00823-MJP
Plaintiff - Appellee,

v. MEMORANDUM*

BELMONT SEATTLE, LLC, a California
limited liability company, and MARWAN
and JACQUELINE F. BAHU, husband
and wife, and their marital community,

Defendants - Appellants.

Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, Chief District Judge, Presiding

Argued and Submitted October 8, 2013
Seattle, Washington

Before: TASHIMA, GRABER, and MURGUIA, Circuit Judges.

Century Surety Company (“Century”) sued Belmont Seattle, LLC

(“Belmont”), and two of its partners, Marwan and Jacqueline F. Bahu, seeking a

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
declaration that it had no duty to defend Belmont and the Bahus in a civil suit

alleging construction defects in condominium units Belmont had converted from

rental units and subsequently sold. Century had issued a liability insurance policy

that Belmont asserts covered the units it sold. Whether any of the units were

covered by the policy – and whether Century had a duty to defend – depends on

whether Belmont had ever “rented” any of the units or “held [them] for rental”

while the policy was in effect. The district court determined that Westmoore

Management, LLC (“Westmoore”), a partner in Belmont that was also responsible

for managing the rental tenancies of units prior to their conversion and sale, “stood

in the shoes of Belmont.” On this basis it found that Belmont had “rented” the

units or “held [them] for rental,” and so granted summary judgment to Century.

However, on this record, at the summary judgment stage, it was not appropriate to

reach the conclusion that Westmoore “stood in the shoes of Belmont.”

There is no dispute that Belmont and Westmoore have always been legally

distinct entities; what is disputed is whether the district court should have

disregarded that distinction. Under governing California law,1 “‘the corporate

1
Because Belmont is a California limited liability company, Washington
state law requires courts to apply California law with regard to “its organization
and internal affairs and the liability of its members and managers.” Wash. Rev.
Code § 25.15.310(1)(a).

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form will be disregarded only in narrowly defined circumstances and only when

the ends of justice so require.’” Zoran Corp. v. Chen, 110 Cal. Rptr. 3d 597, 606

(Ct. App. 2010) (quoting Mesler v. Bragg Mgmt. Co., 702 P.2d 601, 607 (Cal.

1985)). Summary judgment based on disregard of the corporate form is typically

not appropriate, because “[w]hether a party is liable under an alter-ego theory is

normally a question of fact.” Id. (citing Las Palmas Assocs. v. Las Palmas Ctr.

Assocs., 1 Cal. Rptr. 2d 301, 317 (Ct. App. 1991)). Depending on the

circumstances, many factors may potentially be considered, and “‘[n]o single

factor is determinative.’” Id. at 607 (quoting Virtualmagic Asia, Inc. v.

Fil-Cartoons, Inc., 121 Cal. Rptr. 2d 1, 13 (Ct. App. 2002)). The district court

based its conclusion seemingly exclusively on language in a deed transferring the

property at issue to Belmont from a joint venture that included Westmoore as a

member. The deed states that a “mere change in identity or form” distinguishes

Belmont from the joint venture it succeeded. This single document by itself is not

sufficient to prove that Belmont is Westmoore’s alter ego, and the record is unclear

as to whether other potentially relevant factors would support or undermine the

district court’s conclusion. See id. at 606-07. Because it may not be possible to

impute Westmoore’s activity to Belmont, it is not an indisputable fact that Belmont

“rented” the condominium units it later sold or “held them for rental.” Summary

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judgment may very well be appropriate on a more developed record, but it was not

appropriate on this one.

Both Belmont and the Bahus noticed appeal, but the Bahus failed to file any

briefing, nor did they join Belmont’s briefing. Consequently, their appeal is not

properly before this court. See General Order 2.3(a).

We REVERSE the district court’s order granting summary judgment to

Century as to Belmont and REMAND for further proceedings. We DISMISS the

Bahus’ appeal.

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