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Lien Claimant’s Right to Execute Against Bond Upheld in Court of Appeals

 

Court upholds lien enforcement and execution against bond.

 

Stonewood v. Infinity Homes is a simple construction dispute over a matter of about $9,000.00. But sometimes these tiny little disputes turn into expensive legal battles over mere procedural quivering. In Stonewood, a small subcontractor won a big victory yesterday when the Divison 1 Court of Appeals upheld its judgment against a lien release bond posted by an owner.

 

Infinity Homes contracted with Stonewood Design to lay tile in one of its customer’s homes. Stonewood did the work, but Infinity withheld roughly $9,000.00 of the contract sums for what it alleged were trade damages left on the tile. The two parties were unable to come to an agreement over payment and Stonewood proceeded with a lien under RCW 60.04. It then filed an action to enforce the lien against the homeowner, Infinity and its bonding company.

 

The homeowners later posted a bond for the lien, and obtained its release. Stonewood was successful in its action to enforce the lien claim and was awarded judgment for its damages, plus interest and attorneys’ fees, as well as execution against the lien release bond. The defendants decided to appeal.

 

A release of lien bond is authorized by RCW 60.04.161. Under that statute, the posting of a release of lien bond releases the property from both the lien and any action brought to recover the claimed amount. Instead, the claimant must seek judgment on its lien claim and then is entitled to execution against the release of lien bond.

 

The defendants in this case argued that Stonewood had failed to obtain judgment on the lien claim. By picking through the language of the judgment, Infinity argued that the document failed to specifically mention “foreclosure of the lien claim,” and therefore did not entitle the claimant to pursue the bond.

 

Infinity’s argument is based on the ruling in DBM Consulting Engineers, Inc. v. United States Fidelity & Guaranty Co., a wonderful case that punished a claimant for failing to understand the difference between the underlying contract claim and the statutory lien claim.  In DBM, the claimant filed a new action against the bonding company after the lien release bond was posted and failed to pursue foreclosure. The bonding company defendant then argued that under RCW 60.04.161, a release of lien bond guarantees payment only where there is a “judgment upon the lien,” not merely a judgment on the underlying claim.

 

The court rightly opined that judgment on the claim “was important because payment on the bond is dependent upon the propriety of the lien, and not all services qualify for mechanics’ liens under the statute. Obtaining a judgment on the claim giving rise to the lien does not necessarily establish the validity of the lien.”

 

In Stonewood v. Infinity, the court pointed out that the lien claim was actively disputed in trial court and that the jury decided that it was valid. Just because the order of judgment did not specifically state “foreclosure of lien” did not mean that it had not been done. The court dismissed the appeal and awarded legal fees to Stonewood.

 

In my opinion, the court hit the nail right on the head.  Lien claims are creatures of statute and demand additional procedural debate than the simple underlying claim. If the lien is invalid, the underlying claim might not be. But, the claimant is stuck going after the defendant and not the surety. Good call by the court of appeals on this case.

 


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