FRIVOLOUS LIEN PROCEDURE WAS MISUSED
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S. D. Deacon Corporation
of Washington
v. Gaston Brothers Excavating, Inc.
No. 61702-8-1
May 11, 2009
Overview
A Washington court has ruled that a "frivolous lien" procedure should not be used to defeat a contractor's claim without a hearing on the merits. The summary release of a mechanic's lien should be granted only when there is no possibility of sustaining the lien.
Background
S. D. Deacon Corporation of Washington was the general contractor for construction of a fitness center in Seattle. Deacon requested quotations for site work from Gaston Brothers Excavating Inc., which submitted a bid of $49,000 for the footing work. Three days later, Gaston submitted a bid of $63,000 for a crushed glass moisture barrier.
Deacon sent a letter to Gaston agreeing to award a subcontract for $112,000. Gaston started work. The subcontractor submitted a progress payment request, which reflected a total subcontract price of $112,000. Deacon paid the requested amount, less 10 percent retainage. Deacon then sent Gaston a written subcontract agreement indicating a fixed price of $63,000.
Gaston continued work despite the disagreement over price. Deacon made another payment of $9,891 to the subcontractor. Deacon then issued a unilateral, deductive change order reducing the subcontract price to $54,100, the precise amount Deacon had already paid to Gaston. Deacon refused to make further payment.
Gaston filed a timely mechanic's lien on the project property for $43,191. Deacon filed a motion for the summary removal of a frivolous lien, a procedure authorized by the Washington lien statutes, RCW 60.04.081. Deacon contended the lien was frivolous because Gaston had been paid in full. A trial court agreed and released the lien. Gaston appealed.
The Ruling
The Court of Appeals of Washington said the frivolous lien procedure should not be misused to deprive a lien claimant of a hearing on the merits of its claim. A lien should be removed as frivolous only after a factual finding that it is devoid of merit and there is no possibility of sustaining the lien. No such finding existed in this case. And, said the court, there was ample evidence to the contrary.
To begin, the parties had a legitimate dispute regarding the subcontract price. Deacon now said that the second quotation of $63,000 covered all subcontract work; its earlier reference to an $112,000 subcontract was an error. Gaston pointed out that each of its two price quotations expressly referred to separate, discrete portions of the work.
Additionally, there were no invoices or other documentation supporting Deacon's deductive change order reducing the price to the precise amount paid to Gaston. And, there was no accounting for the 10 percent retainage Deacon withheld from the first progress payment. These factual disputes should have been given a full hearing. The lien should not have been removed in summary fashion.
Conclusion
Many state lien statutes include procedures for removal of a frivolous lien. The procedures are most commonly, and appropriately, used in situations in which the lienor has clearly failed to comply with the statutory requirements for maintaining a mechanic's lien. Removal does not address the merits of the underlying claim, only statutory compliance and the right to secure a potential obligation with a lien on the property.
Case participants: For S. D. Deacon Corp. of Washington: John Todd Henry.
For Gaston Brothers Excavating, Inc.: Sage Andrew Linn.
Before: Judges Becker, Dwyer and Grosse.
Opinion by: Judge Becker.
Outcome: Summary removal of mechanic's lien reversed. Case remanded.
No. 61702-8-1
May 11, 2009
Overview
A Washington court has ruled that a "frivolous lien" procedure should not be used to defeat a contractor's claim without a hearing on the merits. The summary release of a mechanic's lien should be granted only when there is no possibility of sustaining the lien.
Background
S. D. Deacon Corporation of Washington was the general contractor for construction of a fitness center in Seattle. Deacon requested quotations for site work from Gaston Brothers Excavating Inc., which submitted a bid of $49,000 for the footing work. Three days later, Gaston submitted a bid of $63,000 for a crushed glass moisture barrier.
Deacon sent a letter to Gaston agreeing to award a subcontract for $112,000. Gaston started work. The subcontractor submitted a progress payment request, which reflected a total subcontract price of $112,000. Deacon paid the requested amount, less 10 percent retainage. Deacon then sent Gaston a written subcontract agreement indicating a fixed price of $63,000.
Gaston continued work despite the disagreement over price. Deacon made another payment of $9,891 to the subcontractor. Deacon then issued a unilateral, deductive change order reducing the subcontract price to $54,100, the precise amount Deacon had already paid to Gaston. Deacon refused to make further payment.
Gaston filed a timely mechanic's lien on the project property for $43,191. Deacon filed a motion for the summary removal of a frivolous lien, a procedure authorized by the Washington lien statutes, RCW 60.04.081. Deacon contended the lien was frivolous because Gaston had been paid in full. A trial court agreed and released the lien. Gaston appealed.
The Ruling
The Court of Appeals of Washington said the frivolous lien procedure should not be misused to deprive a lien claimant of a hearing on the merits of its claim. A lien should be removed as frivolous only after a factual finding that it is devoid of merit and there is no possibility of sustaining the lien. No such finding existed in this case. And, said the court, there was ample evidence to the contrary.
To begin, the parties had a legitimate dispute regarding the subcontract price. Deacon now said that the second quotation of $63,000 covered all subcontract work; its earlier reference to an $112,000 subcontract was an error. Gaston pointed out that each of its two price quotations expressly referred to separate, discrete portions of the work.
Additionally, there were no invoices or other documentation supporting Deacon's deductive change order reducing the price to the precise amount paid to Gaston. And, there was no accounting for the 10 percent retainage Deacon withheld from the first progress payment. These factual disputes should have been given a full hearing. The lien should not have been removed in summary fashion.
Conclusion
Many state lien statutes include procedures for removal of a frivolous lien. The procedures are most commonly, and appropriately, used in situations in which the lienor has clearly failed to comply with the statutory requirements for maintaining a mechanic's lien. Removal does not address the merits of the underlying claim, only statutory compliance and the right to secure a potential obligation with a lien on the property.
Case participants: For S. D. Deacon Corp. of Washington: John Todd Henry.
For Gaston Brothers Excavating, Inc.: Sage Andrew Linn.
Before: Judges Becker, Dwyer and Grosse.
Opinion by: Judge Becker.
Outcome: Summary removal of mechanic's lien reversed. Case remanded.