Eastwood v. Horse Harbor Foundation, Inc.
170 Wash. 2d 380
Wash.2010Background
- Eastwood owns a horse farm and leased portion to Horse Harbor with maintenance covenants; rent was below market value in exchange for maintaining the property.
- Horse Harbor allegedly failed to maintain the leasehold, causing manure buildup, health code issues, improper drainage, and physical damage to improvements.
- Board members Warren and the Dalings observed conditions; the board did not take corrective action.
- Eastwood sued for breach of lease, waste, and negligent breach of duty; trial court found waste and breach, and gross negligence by Warren and the Dalings.
- Court of Appeals reversed, applying an economic loss rule to bar tort claims for waste and refused individual liability of directors.
- This Court granted review to determine whether a lessee’s breach permits tort recovery for waste and whether officers/board members bear liability; questions also about costs/fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can lessor recover in tort for waste when lessee breaches lease | Eastwood argues independent duty to avoid waste permits tort damages. | Horse Harbor argues remedies limited to contract; waste is economic loss. | Yes; independent duty doctrine allows tort damages for waste. |
| Are lessee employees liable for waste they cause | Eastwood seeks individual liability for Warren’s gross negligence. | Warren’s conduct within scope of employment should limit liability. | Yes; employees can be personally liable for waste caused, even within employment. |
| Does RCW 4.24.264 insulate nonprofit directors from liability for gross negligence permitting waste | Dalings may be insulated by statute unless gross negligence; liability uncertain. | Statute shields directors from liability for discretionary decisions absent gross negligence. | Dalings not shielded; gross negligence in permitting waste yields personal liability. |
| Is Eastwood entitled to attorney fees | Lease and RCW 64.12.020 authorize fee shifting to recover attorney fees. | No objection raised; question of fee entitlement rests on statutory/contract authority. | Yes; Eastwood awarded reasonable attorney fees. |
Key Cases Cited
- Alejandre v. Bull, 159 Wn.2d 674 (2007) (independent tort duty influences economic loss analysis)
- Atherton Condominium Apartment-Owners Ass’n Bd. of Directors v. Blume Development Co., 115 Wn.2d 506 (1990) (independent duty and construction defect claims; policy concerns)
- Stuart v. Coldwell Banker Commercial Group, Inc., 109 Wn.2d 406 (1987) (risk-of-harm approach; independent duty vs. contract damages)
- East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986) (independent duty concept; product liability and warranty policy)
- Fisher Props., Inc. v. Arden-Mayfair, Inc., 106 Wn.2d 826 (1986) (landlord may recover both breach of lease and waste; independent duty would apply)
- Berschauer/Phillips Construction Co. v. Seattle School Dist. No. 1, 124 Wn.2d 816 (1994) (public policy limits on duties of design professionals; independent duty analysis)
- St. Park Avenue Condominium Owners Ass’n v. Buchan Developments, LLC, 117 Wn. App. 369 (2003) (discussion of how economic loss concept interacts with statutory rights)
- Alejandre v. Bull, 159 Wn.2d 674 (2007) (core articulation of independent duty and economic loss boundaries)