Carelessness is Worse Than a Lien Waiver Thief

Carelessness is Worse than a Lien-Waiver-Gauntlet-Throwing-Thief

“Carelessness is worse than a thief.” And, in this case, “Carelessness means mindlessly signing a lien waiver and being unable to collect unpaid monies plus having to pay your debtor’s legal fees.” Not quite as catchy, I know – don’t worry, I will leave the proverbs to the poignant professionals.  Although less eloquent, a subcontractor in Washington discovered the high price of carelessness when the court of appeals honored executed unconditional lien waivers and vacated the sub’s mechanic’s lien.

The Case

Exterra, LLC (Exterra) was hired by Corstone Contractors LLC, (Corstone) to provide excavation and paving work in the amount of $48,704.

Exterra received three progress payments from Corstone, totaling $14,315.27 and Corstone required Exterra to sign lien waivers for each of these payments – the terms of their original contract dictated a waiver to be executed for every payment made by Corstone to Exterra.

Based on the progress payments received, Exterra signed the required waivers; unfortunately, Exterra “misinterpreted” the waiver. See, Exterra argued that they waived rights ONLY to the monies paid, when in fact, the waiver itself indicates rights waived through 12/31/2010 and includes an ACKNOWLEDGMENT that Exterra had received $14,315.27 thus far.

Let’s take a quick look at the waiver verbiage as it appeared in the court opinion:

Actual Waiver

The first paragraph is the actual waiver “The undersigned does hereby waive and release any and all claims of any type…furnished by or through the undersigned in connection with the Project or the Contract through the date of 12/31/2010”

Acknowledgment

The second paragraph is simply an acknowledgment that Exterra received certain monies. “The undersigned further warrants and certifies that as of the date of this waiver it has previously been paid a total of $14,315.27 in connection with the project.”

The court of appeals stated that the “language did not depend on whether Corstone paid amounts owed under the contract. Rather, the release (see: waiver) operated against claims for work performed before an identified date, December 31, 2010”

In other words, by signing this waiver, Exterra waived any and all rights for any work performed through 12/31/2010 and they certified that they received total payments of $14,315.27. Unfortunately, the unpaid monies that Exterra filed a mechanic’s lien for were from furnishings prior to the through date on the waiver (December 31, 2010) – and they waived any right to claim for those unpaid amounts when they executed this unconditional lien waiver.

Exterra pleaded “ambiguity” based on the last line of the waiver, which read “This is a partial Waiver and Release, the total unpaid balance of the Subcontract Agreement will be paid upon final completion…” but the court said the use of the word “partial” directly correlated to everything provided prior to 12/31/2010, not monies already paid:

“… use of the word “partial” was intended to reserve claims for work after an identified date.  The partial waiver language reserved Exterra’s right to the money under the contract notwithstanding its waiver to any lien claim arising out of work performed after December 31, 2010.”

In reading the court opinion, the subsequent waiver also appears to waive Exterra’s rights for the monies owed through December 31, 2010, since Exterra did not list any items in dispute, even though payment had not been received for those items:

“In the conditional waivers, Exterra again agreed to fully waive and release any and all claims arising from the work it performed prior to December 31, 2010, “except for the following items which are in dispute ______.” In other words, the conditional waivers asked Exterra to identify any items it was not releasing. Exterra left both blanks empty.” – excerpt taken from court opinion.

But this is a moot point, since those monies had already been waived with the unconditional waiver previously signed.

Lien-Waiver-Gauntlet

Unfortunately for Exterra, the court of appeals threw down the proverbial lien-waiver-gauntlet.  In the end, not only did Exterra not recover their unpaid monies for the services provided, but they also had to pay over $25,000 in attorney’s fees to Corstone!

Don’t be careless! Review, review & review again, before signing a document that could impact your rights, obtain lien waivers from a reputable source & always seek a legal opinion.

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