Statute bars construction-defect claim against defunct corporate developer

By Gregory P. Turner

A condominium association may not sue a corporate developer for construction defects more than two years after the defendant corporation has dissolved, according to the Washington Court of Appeals.

In Ballard Square Condo. Owners v. Dynasty Const., no. 53806-0-I (Mar. 14, 2005), Dynasty was a developer and contractor that built Ballard Square, a 20-unit condominium, in 1992. Dynasty was a corporation and was administratively dissolved in 1995. Soon after construction was completed, homeowners observed water intrusion in many locations. After making an insurance claim in 1997, an architect examined the building and informed the homeowners that the building was suffering severe decay, and parts of it were at risk of imminent collapse. In October 2002, the homeowners sued Dynasty for breach of contract and other claims.

Dynasty moved for summary judgment because the corporate-dissolution statute and common law barred claims brought so late after the corporation had dissolved. The trial court granted the motion.

The homeowners appealed. The Court of Appeals addressed two issues. First, the court agreed that the two-year statute of limitations against dissolved corporations, RCW 23B.14.050, did not bar claims that arise only after dissolution.

Second, however, because that statute of limitations did not apply, the court followed common law in determining what limitation period did apply. The court held that Washington’s common law bars claims against a dissolved corporation once it has wound up its affairs.