Recently, the Idaho Supreme Court, in Stonebrook Constr., LLC v. Chase Home Fin., LLC, 277 P.3d 374 (Idaho 2012), decided whether an LLC member’s contractor registration satisfied the registration requirement for the LLC as a whole. The LLC, Stonebrook Construction, LLC, was a general contractor. The court held that an LLC's member’s registration was not sufficient to satisfy the State's registration requirement.
In 2007 and 2008, Stonebrook Construction, LLC, in accordance with an agreement between it and a property owner, built a home. The homeowner never paid the agreed-upon amount for the construction of the residence, and thereafter Stonebrook recorded a claim of lien against the property. When the lien was not satisfied, Stonebrook brought an action to foreclose its lien.
Chase Home Finance held a deed of trust against the property, however, and intervened in the LLC’s foreclosure action. Chase obtained summary judgment on the ground that Stonebrook was barred from claiming a lien on the property because it had not registered as required by the ICRA.
On appeal, Stonebrook argued that it complied with the ICRA because the ICRA applies to any “person,” and “person” is defined as “any individual, firm, partnership, limited liability company, … or any combination thereof acting as a unit.” Idaho Code § 54-5203(6). The Appellate court held that “a plain reading of the statute leads us to conclude that the Act requires the listed entities, including combinations of those entities, to register.” The court pointed out that Stonebrook’s arguments were inconsistent with the separate entity nature of the LLC and the members’ insulation from the LLC’s debts and obligations.