CSI lost out on a lien for their test drilling.
A Washington appellate court has ruled that a contractor’s pre-bid investigatory work cannot form the basis of a lien. The court’s ruling was published today, a day after new legislation was offered to change a portion of the lien law.
The suit is very interesting. The Division III Court of Appeals opines that pre-bid and unauthorized work performed by Colorado Structures, Inc. did not create the basis for a lien against a mall in Walla Walla. The lawsuit is captioned Colorado Structures, Inc. dba CSI Construction Company v. Blue Mountain Plaza, LLC, et al.
If you follow Washington construction law, you probably remember Colorado Structures, Inc (CSI). The firm was involved in at least one other major published opinion, where the Washington Supreme Court decided that a bonding company may be responsible for legal fees in excess of the bond principal.
In this new suit, CSI was contacted by an architectural firm who had been hired to develop a plan to expand a mall in Walla Walla. Prior to bidding, CSI decided to do some drilling to determine the extent of groundwater on the site. After drilling, the holes were filled and CSI never submitted an invoice for the work. The Court denied them the lien for several reasons:
- No Improvement
In its opinion, the court stated that the work failed to the lien statute because it was not an improvement to the land. The requirement is stated in RCW 60.04.011(5).
While preparatory in nature, the drilling did not become part of the final reality of the project.
- No Contract
The court also decided that CSI’s alleged work failed to meet the “contract” requirement under RCW 60.04.021. This statute requires that a claimant “shall have a lien upon the improvement for the contract price of labor…”
Here, CSI failed to illustrate that a contract was in place. The court read the lien statute strictly, carving out a clear rule that a contract must be in place authorizing the work that is the subject of the lien.
- No Authorization
Finally, the lien failed because the subject work had not been authorized. CSI was actually hired through a potential buyer of the property, not the owner itself. The potential buyer had no authority to order improvements for the property.
This last factor is a bit less important, because it involved a unique circumstance where the work had only been authorized by a potential buyer of the property. However, it illustrates another unique “prong” of the lien law.
- Changes to Lien Law in Washington
Recently, we have seen a number of important lien law cases, on the appellate level. Division II ruled on the epic Williams v. Athletic Field case, last year. I discussed the case on this blog a number of times. The case is pending before the Supreme Court after Division 1 offered a perspective (in dicta) that Division II got it wrong.
A Washington legislator has introduced a piece of legislation intended to fix the problems brought on by Williams. HB 1475 would clarify the obligations of both individuals and corporations who file liens, by affixing specific acknowledgments for lien forms.
You can read the bill language by following this link. The bill goes to its first hearing on January 28, 2011, when it will attempt to make it through committee.
