r
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
CANAL STATION NORTH
CONDOMINIUM ASSOCIATION, a No. 69500-2-I
Washington nonprofit corporation,
ORDER GRANTING
Respondent, MOTION TO PUBLISH
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.
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.
DATED this 3 day of -nxJ/luuuU^. , 2014.
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03
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
CANAL STATION NORTH
CONDOMINIUM ASSOCIATION, a No. 69500-2-I
Washington nonprofit corporation,
DIVISION ONE
Respondent,
PUBLISHED OPINION
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 fo ,„°
gd Wo
PRINCIPALS 1-10; DOE DECLARANT CO
O
BOAvRD MEMBERS 1-10; DOE m
CONTRACTORS 1-20; DOE c~> o2
-r; *-«
DECLARANT AGENTS 1-10; DOE CO
TRANSFEREES 1-50; UPONOR, INC., an rEa»
oc _L.->0
Illinois corporation; DAHL BROTHERS .
:srf—
o cat/;
CAMADA, LTD, a Canadian corporation; • *
^o
en
BRASS-CRAFT MANUFACTRUING rv> ."5-<
COMPANY, a Michigan corporation; DOE
MANUFACTURING COMPANIES 1-20;
doe distributing companies 1-20,
Defendants. FILED: December 23, 2013
No. 69500-2-1/2
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
qual ity 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.
No. 69500-2-1/3
The Association named several defendants: Ballard Leary Phase II LP (Ballard
Leary, the statutory declarant1); 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."
1"Declarant" means
(a) Any person who executes as declarant a declaration as defined
in subsection (17) of this section; or (b) Any person who reserves any
special declarant right in the declaration; or
(c) Any person who exercises special declarant rights or to whom
special declarant rights are transferred; or
(d) Any person who is the owner of a fee interest in the real
property which is subjected to the declaration at the time of the recording
of an instrument pursuant to RCW 64.34.316 and who directly or through
one or more affiliates is materially involved in the construction, marketing,
or sale of units in the condominium created by the recording of the
instrument.
RCW 64.34.020(15).
2 All the aforementioned defendants are appellants here. We refer to them
collectively as "Ballard Leary."
No. 69500-2-1/4
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;
No. 69500-2-1/5
(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, would tend to promote improper forum shopping.
Therefore, the trial court concluded "that defendants impliedly waived arbitration by their
conduct, the timing of their motions practice and demand, and their express
representations to the court."
The trial court further found that:
[Djefendants CPI Fund 1, LP; Continental Properties LLC; Claudio
Guincher, Jane Doe Guincher; Don Bowzer and Jane Doe Bowzer are not
alleged or shown to be declarants having a right to invoke arbitration
under RCW 64.55.100, and are not alleged or shown to be subcontractors
or material suppliers who may be brought into a statutory arbitration
proceeding under RCW 64.55.150. Accordingly, it is not proper to refer
cases against them to arbitration.
The court added, "Other manufacturer defendants likewise do not fall within the
statutory reference to 'parties.'"
Ballard Leary moved for reconsideration. In the alternative, Ballard Leary
requested that the trial court certify the issue for immediate appeal. The trial court
deni ed both requests.
Ballard Leary subsequently filed a notice for discretionary review with this court,
requesting review of the order denying its arbitration demand and the order denying its
No. 69500-2-1/6
motion for reconsideration. Our commissioner concluded that the trial court's decision
denying arbitration is appealable as a matter of right under RAP 2.2(a)(3).
DISCUSSION
Ballard Leary argues that the trial court erred in denying its arbitration demand
and finding that it waived the right to arbitrate under RCW 64.55.100 by filing a CR
12(b)(6) motion to dismiss. Ballard Leary also contends that the trial court erred in
ruling that not all the defendants are subject to arbitration under RCW 64.55.100 and
RCW 64.55.150. The Association moved to strike the appendix from Ballard Leary's
reply brief, to which Ballard Leary objected.
RCW 64.55.100(1) provides:
If the declarant, an association, or a party unit owner demands an
arbitration by filing such demand with the court not less than thirty and not
more than ninety days after filing or service of the complaint, whichever is
later, the parties shall participate in a private arbitration hearing. The
declarant, the association, and the party unit owner do not have the right
to compel arbitration without giving timely notice in compliance with this
subsection. Unless otherwise agreed by the parties, the arbitration
hearing shall commence no more than fourteen months from the later of
the filing or service of the complaint.
This provision is part of the WCA and creates the arbitration right in dispute here.
I. Waiver of Arbitration
Ballard Leary contends that it could not waive arbitration as a matter of law,
because RCW 64.55.100 creates a mandatory, unwaivable right to arbitrate. In the
alternative, Ballard Leary argues that even if it could waive arbitration by its conduct, it
did not do so. Specifically, Ballard Leary contends that its CR 12(b)(6) motion to
dismiss was a procedural motion that did not go to the merits of the case. Ballard Leary
emphasizes that it demanded arbitration within 90 days of the service of the complaint
No. 69500-2-1/7
and within a reasonable time after the trial court denied its motion to dismiss. We first
address whether Ballard Leary waived arbitration by its conduct.
We review denial of a motion to compel arbitration de novo. Verbeek Props.,
LLC v. GreenCo Envtl.. Inc.. 159 Wn. App. 82, 86, 246 P.3d 205 (2010). The party
opposing arbitration bears the burden of showing the arbitration clause is inapplicable or
unenforceable. kL at 86-87. Washington has a strong public policy favoring arbitration.
Heights at Issaquah Ridge Owners Ass'n v. Burton Landscape Grp., Inc., 148 Wn. App.
400, 405, 200 P.3d 254 (2009). We must indulge every presumption in favor of
arbitration, whether the issue is construction of an arbitration clause or allegation of
waiver, delay, or another defense to arbitrability. Verbeek Props., 159 Wn. App. at 87.
Waiver is the voluntary and intentional relinquishment of a known right. Id.
Waiver of an arbitration clause may be accomplished expressly or by implication. Lake
Wash. Sch. Dist. No. 414 v. Mobile Modules Nw., Inc., 28 Wn. App. 59, 62, 621 P.2d
791 (1980). However, waiver "cannot be found absent conduct inconsistent with any
other intention but to forego a known right." jd. Put another way, a party waives its right
to arbitrate if it elects to litigate instead of arbitrate. Otis Hous. Ass'n. Inc. v. Ha, 165
Wn.2d 582, 588, 201 P.3d 309 (2009).
The determination of whether a party waived arbitration by conduct depends on
the facts of the particular case and is not susceptible to bright line rules. River House
Dev. Inc. v. Inteqrus Architecture. PS, 167 Wn. App. 221, 237, 272 P.3d 289 (2012). In
Otis Housing, the Washington Supreme Court held that Otis Housing Association (OHA)
waived arbitration by its conduct. 165 Wn.2d at 588. OHA leased a hotel from John
and Min Ha with a purchase option. \± at 584-85. OHA announced its intent to
No. 69500-2-1/8
exercise the option, but no sale closed before the option expired. Id. at 585. Then,
after OHA failed to pay rent for six months, the Has brought an unlawful detainer action,
jd. In a show cause hearing, OHA argued that it timely exercised the purchase option.
Id. at 585-86. Only after the trial court disagreed, did OHA move to compel arbitration.
Id. at 586. The Supreme Court held that OHA's conduct of arguing that it exercised the
option as a defense to the unlawful detainer action was completely inconsistent with its
intent to arbitrate, jd. at 588. "Having lost that issue, [OHA] may not later seek to
relitigate the same issue in a different forum." jd.
Similarly, in River House, the party demanding arbitration already attended an in-
person status conference with the assigned judge, agreed to a trial schedule and date,
exchanged a trial witness list with the opposing party, participated in formal discovery,
and represented to the court that it was preparing for trial. 167 Wn. App. at 238-39.
This amounted to conduct inconsistent with any other intent but to forgo arbitration. Id.
at 239. Conversely, in Verbeek Properties. Verbeek's preliminary attempt to remove a
lien was not an election to litigate instead of arbitrate. 159 Wn. App. at 92. Verbeek's
motion to dismiss the lien as frivolous raised different issues than those it later sought to
arbitrate. Id. at 91-92. In essence, a party to a lawsuit who claims the right to arbitrate
mus ttake some action to enforce that right within a reasonable time. Otis Housing, 165
Wn.2d at 588.
The Washington Supreme Court recently applied this rule in Townsend v.
Quadrant Corp.. 173 Wn.2d 451, 463, 268 P.3d 917 (2012). There, homeowners sued
Qua