DIVISION I OF THE COURT OF APPEALS HOLDS THAT THE PROPERTY OWNER NEED NOT BE JOINED AS A PARTY TO A LIEN FORECLOSURE ACTION

Date: September 28th, 2011

In a surprising decision, the Court of Appeals decided, in the case of Diversified v. Johnson, 161 Wn App 859 (2011), that a lien claimant is not required to join the owner of the property as a party to the claimant’s lien foreclosure action. The Court decision is surprising because RCW 60.04.171 states:

In any action brought to foreclose a lien, the owner shall be joined as a party.

Despite the language of RCW 60.04.171 quoted above, the Court based its decision on a reading of both RCW 60.04.171 and RCW 60.04.141. RCW 60.04.141 requires the following:

No lien created by this chapter binds the property subject to the lien for a longer period than eight calendar months after the claim of lien has been recorded unless an action is filed by the lien claimant within that time in the superior court in the county where the subject property is located to enforce the lien, and service is made upon the owner of the subject property within ninety days of the date of filing the action; … (Emphasis added.)

Even though RCW 60.04.171 states that the owner “shall” be made a party to a lien foreclosure lawsuit and RCW 60.04.141 requires that service of the lawsuit must be “made upon the owner of the subject property within 90 days of the date of filing of the action,” the Court of Appeals still held that joining the owner was not required to avoid dismissal of the lien foreclosure action.

The Court, interpreted the two statutes to mean the following: RCW 60.04.141 does require service of the lawsuit on the owner but does not require the owner to be named as a party to the lawsuit. In other words, the owner must be timely served with a copy of the complaint but not necessarily made a party to the lawsuit.

In interpreting RCW 60.04.171, which states that the owner “shall be joined as a party,” the Court of Appeals found the word “shall” to be permissive, not mandatory. It interpreted this language to mean that it is not mandatory that the owner be joined to avoid dismissal, but simply means that if someone asks the court for permission to join the owner, that the court is required to do so. The court, in coming to this conclusion, stated the following:

“In any lien foreclosure action, the owner “shall be joined” as a party. In view of the use of the passive voice, we do not share Junior’s view that the statute imposes upon the plaintiff a mandatory obligation to “join” the owner or else suffer dismissal. Rather, we read RCW 60.04.171 as giving direction to a trial court when faced with an assembly of persons having interests in the same property, some of them attempting to foreclose on liens and others attempting to stave off foreclosure. The “owner” is the only entity whose joinder the court must permit in any lien foreclosure action.”

The Court of Appeals decision in Diversified also touched on another significant lien issue: the determination as to whether a lien claimant had filed its lien within 90 days of its last day of work. The Court held that the lien claimant’s removal of three loads of tree stumps and slash qualified as the lien claimant’s last day of work, despite the fact that there was no direct communication from the owner requesting the removal of these materials. The materials were removed at the same time an excavator was removed from the site by the lien claimant due to non payment by the owner for the lien claimant’s prior work.

The Court ruled that even though the removal of the tree stumps and slash was done at a time the lien claimant was demobilizing from the site because of non payment, the removal of the materials was still lienable because it was part of the original scope of the contract between the parties. The Court looked past the fact that the lien claimant never invoiced for work done on that date. The Court held that “the statute does not require that there be an explicit request for particular services as rendered as part of a job and it does not require that each service be specifically itemized in a bill.”

In sum, the Diversified decision is an interpretation of this state’s lien statutes by Division I of the Court of Appeals that is very favorable to lien claimants. The Washington Supreme Court also just issued another favorable ruling to lien claimants when it overruled a decision by Division II of the Court of Appeals in an earlier case, Williams v. Athletic Fields, 155 Wn. App 434 (2010). These two decisions signify a pro-lien claimant trend in Washington”s Appelate Courts.

Laws and court decisions regarding liens change frequently. It is always advisable to obtain the advice of an attorney regarding these matters. If you have any questions regarding lien, bond or retainage claims or other construction issues, please contact either me or Tymon Berger.