From the desk of Smith Freed Eberhard: Laws change, which can place companies, insurers and attorneys in a state of uncertainty. In a recent Washington Court of Appeals case, the Court reaffirmed that it will presume statutory amendments are prospective unless there is a legislative intent to apply the statute retroactively or the amendment is clearly curative or remedial.
Claims Pointer: The three-year limitations period governing a home purchasers’ claims against a dissolved builder limited liability company (LLC) for alleged construction defects will begin to run from date that the LLC was administratively dissolved by the secretary of state, and under the statute that was in effect during the time the LLC was dissolved.
Houk v. Best Dev. & Const. Co., Inc., 31163-5-III, 2014 WL 997225 (Wash. Ct. App. Mar. 13, 2014)
In 2004, Plaintiffs Houk moved into a newly constructed home in defendant Nichols & Shahan Development, LLC’s (“NSD”) development. The Houks soon began noticing multiple defects in their home, some of which were serious. In 2006, Washington’s secretary of state administratively dissolved NSD as an LLC. In December 2010, more than four years after NSD was administratively dissolved as an LLC, the Houks sued NSD for damages, alleging breach of contract, breach of implied warranties, breach of express warranties, negligence, and violation of Washington’s Consumer Protection Act. NSD requested summary judgment dismissal, arguing the Houks’ complaint was time-barred because it was filed more than three years after NSD dissolved. The trial court disagreed, concluding the 2010 recently amended statute applied and required an LLC to file a certificate of dissolution; and since NSD did not file the certificate, it was still subject to litigation. NSD appealed.
When NSD dissolved in 2006, no requirement existed for a dissolved LLC to file documentation with the secretary of state before the statute of limitations was triggered. The limitation period began to run on the LLC’s “effective date of dissolution.” Therefore, under the 2006 version of the statute, the Houks were required to commence their lawsuit against NSD no later than October 2, 2009, which is three years from the date that NSD was administratively dissolved. The Houks, however, filed suit on December 16, 2010. Thus, under the 2006 version, their complaint was untimely.
The question before the Court of Appeals was whether the statute applied prospectively (meaning the 2006 version applied) or retroactively (meaning the 2010 version applied) to NSD. The Court noted that it will presume statutory amendments are prospective unless there is a legislative intent to apply the statute retroactively or the amendment is clearly curative or remedial.
An amendment is curative and retroactive if it clarifies or technically corrects an ambiguous statute and the amendment must be “clearly curative” for it to be retroactively applied. If a statute lacks ambiguity, the court will presume that an amendment to the law is not retroactively applied. Thus, ambiguity in the statutory language is a condition precedent to finding that an amendment was “curative.” However, a previous Supreme Court case ruled that the 2006 statute was unambiguous; therefore, the 2010 amendment cannot be curative.
Next, the Court analyzed whether the 2010 amendment was remedial. An amendment is deemed remedial and applied retroactively when it relates to practice, procedure or remedies, and does not affect a substantive or vested right. A “right” is a legal consequence deriving from certain facts, while a remedy is a procedure prescribed by law to enforce a right. A statute which provides a claimant with the right to proceed against persons previously outside the scope of the statute deals with a substantive right, and therefore applies prospectively only. Here, the Houks’ claims against NSD were time-barred by the 2006 statute beginning on October 2, 2009. From that date forward, the Houks no longer had a legal right to proceed with their claims against NSD and NSD had a legal right to assert the statute of limitations as a complete defense. The 2010 amendment created a new substantive remedy that is outside the scope of the former statute that would, if retroactively applied, deny NSD the right to assert the statute of limitations as a complete defense. Accordingly, the Court determined that the 2010 amendments are not remedial.
The Court noted that the Houks failed to show legislative intent to apply the statute retroactively; therefore, the 2010 amendment was clearly not curative or remedial. The Court ruled the Houks’ claims were time-barred by the 2006 statute and granted summary dismissal of the Houks’ suit.
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.