Recent Washington Court Decision Examines Lien Claim, Part 1

On Feb. 11, 2019, Division One of the Washington Court of Appeals issued an opinion in the case of Woodley v. Style Corp. d/b/a Servpro of Shoreline/Woodinville, No. 77352-6-I (Wash. Ct. App. Feb. 11, 2019). The case highlights the care that should be exercised in filing a lien claim for services furnished to improve a condominium and the consequences that may befall a claimant under Washington's frivolous lien claim statute, RCW 60.04.081.

The case arose from water intrusion at a unit in the Bellevue Park condominium complex. After discovery of the condition, the condominium's property management company contacted Servpro and executed a work authorization for the contractor to clean up the water and perform restoration work. Servpro was not paid for its work and filed a claim of lien. The lien named the association as the indebted person, recited that it applied to the 20 specific units and a common storage area of the condominium, and named each owner of the 20 units, but did not allocate a specific portion of the total debt to each unit.

One of the unit owners, Denise Woodley, filed a motion to release the lien under RCW 60.04.081. The trial court granted the motion, finding the lien both frivolous and clearly excessive, and released the lien.

On appeal, Division One disagreed with the trial court's ruling and found that the lien, although possibly invalid in a number of respects (e.g., whether (a) the work was authorized by the owner or its agent, (b) the lien was timely filed, and (c) the lien had factual inaccuracies) and subject to debatable legal and factual issues, was not frivolous.

The Court of Appeals next examined whether Servpro's lien claim was "clearly excessive." On appeal, Servpro argued that its lien was not clearly excessive because it was not filed in bad faith or with an intent to defraud, relying on Pacific Industries, Inc. v. Singh, 120 Wn. App. 1, 10, 86 P.3d 778 (2003) (where the court held that "[a] materialman's lien will be declared invalid because it is excessive only if the amount is claimed with an intent to defraud or in bad faith"). The court in Woodley noted that the standard articulated in Singh "relies on cases that predate RCW 60.04.081 and consequently, fail to account for the statute." Id. at 8.

Relying on the plain meaning of the statutory language to give effect to the legislative intent, the court interpreted RCW 60.04.081 to delineate between a frivolous lien (one made "without reasonable cause" and "beyond legitimate dispute") and a clearly excessive lien (where "the face value of the lien is unquestionably far greater than the value of the goods or services provided"). Id. at 15 (emphasis in original). Under the limited summary proceeding authorized by the statute, the only remedy for a frivolous lien, according to the court in Woodley, is release, while the only remedy for a clearly excessive lien is reduction of the lien amount. Id. at 11.

Based on the facts of the case and the "plain meaning" of the statute, the Woodley court could not "read RCW 60.04.081 to allow release of a nonfrivolous, excessive lien even if made in bad faith or with intent to defraud because it would read additional terms into the statute and undermine the statute's mandatory language limiting each remedy to a particular problem." Id. at 12-13.

Reprinted with permission. Part II of this article will be published in next week's eNews, Thursday, March 28.

Bart W. Reed is a partner in the Seattle office of Stoel Rives LLP. Bart focuses his practice on construction and design issues and disputes, representing public agencies, private owners/developers, contractors, design professionals and sureties in diverse matters on both public and private projects.

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Monday, 30 March 2020

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