Bizarre Lien Foreclosure Case May Have Far-Reaching Effects in Washington

A bizarre case from the Washington Division I Court of Appeals in Diversified Wood Recycling, Inc. v. Harold Johnson, et al. may have far-reaching consequences for claimants, property owners and construction attorneys foreclosing mechanic liens.

Until the opinion was published last week, Washington lien law seemed pretty clear on two points:

  1. When you file a lien, you can name the owner or reputed owner; but when you foreclose the lien, the foreclosure must be against the actual owner; and
  2. The owner must be named a party in the foreclosure action.

Division I in Diversified Recycling finds to the contrary on both points, creating a previously non-existing tension between §60.04.141 and §60.04.171.

The decision is discussed in substantial detail on my other blog that focuses on mechanic lien laws, the Lien & Credit Journal (published by zlien).  Read the post here:  Foreclosing A Mechanic’s Lien in Washington Just Got More Confusing.

A lot of the Diversified Case has very limited applicability, as it arises out of a bizarre fact pattern. The trial judge even commented on how the situation would create a “hard to believe” bar exam question.  And because of the unique facts, it feels the trial and appeal court went out of their way to serve the ends of justice rather than allow injustice based on technicalities.

However, it will be very interesting to see what happens with this decision, and whether its appealed to the Washington Supreme Court. While Division I does not comment in their opinion about the liberal construction it affords the lien statutes, they certainly construed §60.04.141 and §60.04.171 liberally, in line with the approach in N. Coast Elect. Co. v. Ariz. Elec. Serv. (Wash. Division I. 8/23/2010) where they stated:

In the lien context…there is a strong statutory directive that “[the lien statutes]…be liberally construed to provide security for all parties intended to be protected by their provisions.” RCW 60.04.900….See, e.g. Northlake Concrete Prods., Inc. v. Wylie, 34 Wn.App. 810, 818, 663 P.2d 1380 (1983) (explaining the Legislature’s intent that “the lien laws shall be liberally construed with the view to effecting their object” meant that “when it has been determined that persons come within the operation of the act it will be liberally applied to them.”

As any student of Washington construction law (and construction lien law) knows, there is a lien law battle being waged in the Washington Supreme Court over whether strict or liberal construction of these statutes should prevail in the controversial Williams v. Athletics’s Field matter.

I’m sure there is more to come on all of this soon.

Ignorance of Law Can Cost You Debarment on Federal and State Construction Projects

I recently came across an interesting blog post on Mike Purdy’s Public Contracting Blog that includes a report by the Washington State Department of Labor & Industries releasing an updated list of debarred contractors in Washington.  The post itself highlights the hugely important issue of contractor debarment that every state or federal contractor should be aware of.

Basically, if you significantly violate certain laws as a contractor on a state or federal construction project (i.e. prevailing wage laws and workers’ compensation laws), you may be debarred and no longer allowed to work on a state or federal construction project. Pretty serious stuff.

Debarment may last until all penalties are paid in full or, if those laws are violated on numerous occasions, a contractor might be debarred for a period of years on top of monetary fines.

The report by the Washington State Department of Labor cited above provides folks with some concrete data on this issue so we can all better understand what most frequently causes debarment. The report includes the names of all Washington State contractors who are debarred, why they were debarred, how long they are debarred for, and whether or not their penalties have been paid.

Though this report only regards debarment by Washington State authorities for Washington State projects, each state has its own annually updated list you can refer to online, as does the federal government. All in all, they look a lot like the Washington list.

So, most importantly, how can public contractors avoid debarment? The answer here I can give you: focus on prevention.

First, be certain that you are not violating any prevailing wage laws, workers’ compensation laws, contractor registration laws, apprenticeship requirements, and/or industrial insurance laws. Read up on the laws yourself if possible (we have some information about state and federal contracting laws on this blog), or hire a lawyer to help you.  In the long run, the money you spend with an attorney to understand and accommodate these legalities will be worth it.

Second, check the relevant state or federal list of debarred contractors to make sure you’re not signing a contract with a debarred contractor or subcontractor.

Finally, keep meticulous records and be extra careful to make sure you are complying with these laws.

Doing whatever it takes to keep your contracting business alive and thriving is key here, so make sure to remain proactive.