Legal Updates

Washington Court of Appeals clarifies high standards for summarily invalidating construction liens under RCW 60.04.081.

In the recent case of S.D. Deacon Corp. of Washington v. Gaston Bros. Excavating, Inc. (No. 61702-8-I, May 11, 2009) ("S.D. Deacon"), the Washington Court of Appeals issued a contractor-friendly opinion that should serve to solidify the high standard required for a court to invalidate a construction lien prior to a full trial on the merits. This decision clarifies earlier uncertainty around the summary procedure allowed under RCW 60.04.081 and eases tension between earlier cases siding more on the contractors side, on the one hand, and the proper owner's side, on the other.

RCW 60.04.081 allows an owner of real property subject to a recorded construction lien who believes the lien is frivolous, clearly excessive or made without a reasonable basis to file a motion with the court at any time after the lien is filed (and prior to a full trial) asking the court to remove the lien. This statute has been occasionally over-used by parties, but also provides a useful tool to relieve property owners of clearly frivolous liens on their property. However, the cases interpreting the statute have seen mixed results and the courts have applied different standards for when the statute should be applied.

In the S.D. Deacon case, a subcontractor and contractor disputed the amount of the agreed upon contract price for certain items of work. The subcontractor, Gaston Bros., had submitted two different bids that it understood to be for two separate scopes of work, which bids totaled $112,000. Though the general contractor, S.D. Deacon ("Deacon"), sent a letter accepting the bids, the form subcontract that was later executed only contemplated a contract price matching one of the bid prices, for $63,000. Further complicating matters was that Deacon had approved and paid a pay application referring to a total contract price of $112,000, but Gaston had signed off on a change order that referred only to the $63,000 price.

When Deacon refused to pay later pay applications, Gaston recorded a construction lien against the project property for the balance it claimed was owing. In response (in addition to issuing a unilateral deductive change order), Deacon promptly filed a motion to summarily remove the lien under RCW 60.04.081. Though the trial court granted Deacon's motion, removed the lien, and granted Deacon its attorney fees, the Court of Appeals reversed that decision, reinstated the lien, taking away Deacon's award of attorney fees and awarding attorney fees to Gaston. In doing so, the Court of Appeals was pointed in its clarification of the high standard to be applied to such motions, warning that:

        Trial courts should take care not to let the frivolous lien 
        statute be misused to deprive contractors of their right to a 
        trial on a lien claim. The summary release of a lien under 
        RCW 60.04.081 is not to occur unless the lien is so devoid of 
        merit that the claim has no possibility of succeeding.

The Court of Appeals took several other opportunities to emphasize the point that the frivolous lien statute summary proceeding should be sparingly used, clarifying that though the court may resolve some factual disputes, they "must be confined to the limited group of cases where the lien is clearly meritless" and is "not to be used as a substitute for trial where there is a legitimate dispute about the amount of work done and money paid." The Court also clarified that, though it is the lien claimant who bears the ultimate burden of proving its lien at trial, in a summary proceeding under RCW 60.04.081, it is the party seeking the release of the lien who "must establish beyond legitimate dispute that the lien was improperly filed."

In this case, the Court of Appeals noted the various factual disputes between the parties, summing it up as follows: "[h]ere there is no dispute that the parties had an agreement and that Gaston performed work. The only dispute concerns the amount owed." Unless this decision is reversed by the Washington Supreme Court, it should provide guidance to Washington's trial courts as to the high standard to be employed when motions are filed under RCW 60.04.081 to strike down contractors' construction liens.