When Joe Wilson was hired to work on a Ridgefield construction project two years ago, he thought he had a good opportunity for his two subcontracting businesses.
But the work is done, and Wilson says he is still owed $300,000 even though parts of the property have been sold off. He is one of 29 companies and individuals hoping to reclaim $7.5 million they say the project’s developer and private lender owe them. In an increasingly common scenario, these small businesses’ efforts to get paid have been snarled by litigation, foreclosures and bankruptcy.
As they’ve learned, subcontractors can be the last ones paid when a property goes through foreclosure.
The project, developed by Vancouver-based Moonlight Meadows LLC, was an industrial warehouse building with 24 spaces for manufacturing and light industry firms to operate. Moonlight Meadows hired Ridgefield-based DesignWest Builders Inc. as general contractor to build the project, located in Ridgefield’s Union Ridge business park next door to DollarTree’s giant distribution center.
To pay for the work, Moonlight Meadows took out a loan from the Coppedge Family Trust.
But backers of the project did not anticipate the drastic drop in real estate values.
In 2010, Moonlight Meadows declared bankruptcy — presumably because it was unable to sell warehouse spaces at the prices it had expected, though managing member John Morris did not return calls for this story. Morris is also a real estate agent with Coldwell Banker Barbara Sue Seal.
Then the Coppedge Family Trust foreclosed.
Plenty of targets
That chain of events left subcontractors with plenty of targets as they sought compensation for their work. Some are mad at DesignWest Builders, the general contractor, which they believe should have passed along payments. Others blame Moonlight Meadows. Still others are angry with the Coppedge Family Trust, overseen by Gerry M. Coppedge and Barbara Coppedge of Washougal, which has sold three bays in the Ridgefield building for more than $1.06 million since foreclosing on the property.
“All I know is I done a job and didn’t get paid for it,” said Wilson, 64, who is suing Moonlight Meadows and the Coppedge Family Trust for payment on work done by his two companies, Town & Country Heating Inc. and Vanport Fire Sprinklers.
Bankrupt developments are common these days, according to construction attorneys, who say subcontractors often get squeezed as unpaid victims. Low demand for the commercial spaces they were contracted to build drags down the value of projects that used to gain worth as they were being built, said Albert Schlotfeldt, an attorney with Duggan Schlotfeldt & Welch PLLC in Vancouver.
“It wasn’t as much of a problem (during the construction boom times) when the values were going up,” he said.
Today, Schlotfeldt said, developers are finding it harder to refinance or get more funding to finish projects, and those miscalculations ultimately cut off the money promised to subs.
Roger Burton, owner of Vancouver-based Aloha Electric, said it seems unreasonable that the Coppedges are able to sell property he worked on without paying him what is owed for that work.
He and his crew of four electricians started work on the Ridgefield project in January 2009, digging trenches and laying the primary conduit for the utilities, phone, cable and gas lines.
“It was pretty cold out there wallowing around in mud,” Burton said.
Burton said he is still owed $182,000 for the work and materials.
He managed to pay his employees after the job, then filed personal bankruptcy.
“Now, my house is in the foreclosure process,” said Burton, 71. “I’ve never been in this kind of trouble in my whole life.”
“This has put a lot of guys in a bind,” said Wilson, who has filed a lawsuit to recover his money from Vancouver-based Moonlight Meadow LLC.
At the height of construction, Wilson said the project’s general contractor promised each week that Wilson would receive his past-due payment on the following Friday.
Nevertheless, DesignWest is the entity that still owes subcontractors’ payments, according to Zachary Stoumbos, a Vancouver attorney defending the Coppedge Family Trust against the subcontractors’ lawsuit.
“Each of those contractors had a contract. They signed a contract with DesignWest Builders and that’s who owes them the money,” said Stoumbos, of Landerholm, Memovich, Lansverk and Whitesides P.S.
Stoumbos said the developer Moonlight Meadows also was supposed to cough up at least $900,000 from the project’s sold units to pay the subcontractors. Unluckily, the slumping real estate market continues to challenge sales in the project.
“It’s an unfortunate situation, but my client was just the lender,” Stoumbos said. And as such, the Coppedges foreclosed to recover money they had spent on the project.
The foreclosure superseded the property liens subcontractors filed, a mechanism that usually ensures payment.
“In Washington, the lender is going to be in first position over the subcontractors,” Schlotfeldt said.
Now, it is unclear whether the subcontractors will ever be paid, said Tim Blaker of DesignWest.
“These are great guys and I felt really bad they didn’t get paid,” said Blaker, who now operates a company that makes cabinets.
Blaker has leased space for his cabinet business inside the Ridgefield industrial building.
Wilson’s case against Moonlight Meadow LLC is expected to go to trial in April.