On February 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 non-frivolous, 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.

Without a solid explanation of how a lien might actually be considered “frivolous” under the statute, the court focused its examination on whether the lien claim in Woodley was “clearly excessive.”  For this analysis, the court considered the dictionary definition of the operative terms of the statute, ruling that a “clearly excessive” lien “must be unquestionably characterized by being far above the usual or agreed amount.” Id. at 14.  This definition comports with RCW 60.04.021, which authorizes a lien only “for the contract price”—defined as “‘the amount agreed upon by the contracting parties, or if no amount is agreed upon, then the customary and reasonable charge therefor.’” Id. (quoting RCW 60.04.011(2)).

Based on this construction of the statute, the court then turned its attention to Servpro’s lien claim against the condominium. In Woodley, the lien encumbered 20 specific units and a common storage area of the condominium complex.  “This approach,” ruled the court, “failed to properly account for how lien statutes and condominium statutes interact.” Id. at 15.

The court distinguished between a condominium’s common elements (all parts of a condominium other than the units) and the individual units (subject to individual ownership and separately owned, taxed, and financed) and the approaches available to an unpaid contractor for improvements furnished to a condominium complex.

On the one hand, a contractor may file a lien claim against the entire complex, just as it could against an individual property, by naming an owner’s association as the indebted person (since it has authority to maintain and repair, but not typically own, the condominium property) and listing the whole condominium as the property subject to the lien. In that instance, any judgment enforcing the lien extends to all units in the condominium and each owner’s interest in the common elements.  The collective lien is released if the association pays the total balance due or an individual unit is released if that unit owner pays the lien claimant his or her proportionate share of the total amount owed by the association.  This proportionate share, the court noted, “is not based on the value of the benefit to a unit but on the ‘fractional and proportionate amounts attributable to each of the [units] affected,’” which are based on “the unit owner’s ownership percentage of the entire condominium ‘appearing on the declaration.’” Id. at 18 (brackets in original) (quoting RCW 64.32.070(2)).

On the other hand, a contractor can also file a lien against an individual unit to the extent the unit owner authorized or “‘expressly consented’” to the services. Id. (quoting RCW 64.32.070(1)).

The court found that Servpro in this case improperly conflated these two approaches. Servpro’s lien listed the individual units where it performed services, named the individual owners of the 20 units, and provided a value of work benefitting the individual units and the common elements. Id.  The face value of the lien was $183,945.09, but Servpro conceded that the maximum value of the services provided to Ms. Woodley’s unit was only $6,001.90 and the lien claim was unclear regarding the amount owed by each individual owner or by the association.  Accordingly, the court ruled that the lien was clearly excessive, awarded attorneys’ fees to the movant as mandated by statute (RCW 60.04.081(4)), and remanded the case for further proceedings on the factual issues and reduction of the lien amount.

The Woodley case informs—and cautions—practitioners on the scope of Washington’s frivolous lien statute and the nuances associated with preparing and filing lien claims against condominiums.  Incorrect lien claims—including those characterized as “clearly excessive” under the statute—may result in harsh consequences, like those that befell the lien claimant in the Woodley case (i.e., a reduction in the lien claim and liability for attorneys’ fees).