I have seen many cases where a lien claimant is threatened by an owner stating it will file a motion to declare the lien clearly excessive or frivolous pursuant to RCW 60.04.081. Presumably, the owner or its respective attorney, believes the threat carries enough risk for the lien claimant to force the lien claimant to accept a discount on the services it provided on the project. However, many times such threats ring hollow. Those threats also tend to expose an owner’s lack of comprehension of Washington’s procedural mechanism to adjudicate a lien prior to foreclosure, including the remedies available to a property owner contesting a lien pursuant to RCW 60.04.081(4). Fortunately, Division One of the Court of Appeals examined the summary proceeding and explained the difference between a “frivolous” lien, a “clearly excessive” lien and the remedies available to the owner for each.
In Woodley v. Style Corp, d/b/a Servpro of Shoreline/Woodinville a condominium’s property management company discovered water intrusion and hired Servpro to remediate the water damage. Servpro claimed it was not fully compensated for its work, so it filed a claim of lien. Servpro’s lien named the condominium association as the indebted person, stated that it applied to twenty units and named each unit owner but failed to allocate the debt owed to each unit.
One of the unit owners responded by filing a motion to release the lien claiming it was frivolous and clearly excessive pursuant to RCW 60.04.081(4) which states:
If, following a hearing on the matter, the court determines that the lien is frivolous and made without reasonable cause, or clearly excessive, the court shall issue an order releasing the lien if frivolous and made without reasonable cause, or reducing the lien if clearly excessive, and awarding costs and reasonable attorneys’ fees to the applicant to be paid by the lien claimant.
The trial court agreed with the unit owner and found the lien both frivolous and clearly excessive and released the lien.
On appeal, Division One of the Court of Appeals first addressed whether the lien was “frivolous” according to the statute and, unfortunately, did not provide a detailed analysis. It disagreed with the trial court and found that the lien was not frivolous despite a number of debatable factual and legal issues (e.g., (a). whether the work was authorized by the owner or agent; (b). whether the lien was timely filed; and (c). whether the lien had factual inaccuracies). The court noted that for a lien to be frivolous, it must be “improperly filed beyond legitimate dispute” and “so devoid of merit that it has no possibility of succeeding.” Even if a lien is invalid, it does not automatically mean the lien is frivolous. The high standard exists in order to ensure contractors and laborers are not deprived of their right to trial on a legitimate lien claim. Thus, a lien is not frivolous if it presents debatable issues of law and fact and in this instance, Servpro’s lien presented such issues.
Next, the court examined whether the lien was “clearly excessive” pursuant to RCW 60.04.081. Servpro argued its lien was not clearly excessive because it did not file the lien in bad faith or with an intent to defraud. The court examined case law and legislative history regarding Washington’s mechanic’s lien statutes and noted that when interpreting a statute, courts rely on the plain meaning of its terms to give effect to the legislative intent. In doing so, the court interpreted RCW 60.04.081 to delineate between a frivolous lien (“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 goods or services provided). Under the “trial by affidavit” proceeding available under RCW 60.04.081, the only remedy for a frivolous lien is release and the only remedy for a clearly excessive lien is reduction of the lien amount. The court also cautioned that the availability of the summary proceeding pursuant to RCW 60.04.081 should never be used “as a substitute for trial where there is a legitimate dispute about the amount of work done and money paid.”
The court then examined the lien itself. The lien purported to encumber 20 units and a common storage area in the condominium complex, however, the lien did not properly delineate between the two legally distinct components of a condominium complex: the units and the common elements. Servpro filed the lien listing the individual units where it worked, naming the individual owners of the units, naming the association as the indebted person and providing a face value that included work benefitting the units individually as well as work benefitting the condominium’s common areas. In other words, Servpro filed a lien for $183,945.09 but failed to provide any information on the face of the lien to let another party know the amount owed by each owner or by the association. The court held the lien clearly excessive as Servpro agreed the value of the services it provided to the unit owner in question was only $6,001.90. The court also awarded attorney fees pursuant to RCW 60.04081(4) which requires a court award fees to the movant if the movant shows the lien is frivolous or clearly excessive.
The Woodley case demonstrates and informs about the intricate issues that can arise from a mechanics lien and the summary proceeding provided to address liens at their infancy. It also provides a cautionary tale for the consequences of incorrect lien claims such as those experienced by Servpro – a reduction of the claim of lien and liability for attorneys’ fees.
The lawyers at Campbell & Bissell, PLLC are experienced and able to help you navigate these issues to avoid the harsh consequences that can be imposed by RCW 60.04.081. We are always happy to assist you and address your needs to protect your right to payment or, on the other hand, your real property.
By Scott Flage
Campbell & Bissell, PLLC