Supreme Court Sides with Subcontractor in Washington Case

Subcontractor Complied with Washington Statute, according to the Supreme Court

A little over a year ago we reviewed a case before a Washington Appeals Court, where the subcontractor’s right to recover its claim was hinging on whether the subcontractor named the correct parties in the foreclosure action. This case made it to the Washington Supreme Court and the decision stands: when a lien is bonded off, the only required party in the foreclosure action is the surety.

The subcontractor can recover its claim!

The Case: Inland Empire Dry Wall Supply Co., v. Western Surety Company

You can read our earlier post here, but here’s the recap.

The Supreme Court’s decision? The subcontractor complied with statutory requirements & the surety was the only required party in the foreclosure action.

subcontractor filed a lien, general contractor obtained a bond to release the lien, subcontractor proceeded with suit & named the surety in the foreclosure action, the surety objected, saying the owner should have also been named, trial court agreed with surety, appeals court agreed with sub, case went to supreme court, supreme court decided...

But why doesn’t the owner have to be included? In her article, Washington Supreme Court Upholds Rule That Property Owner and General Contractor Are Not Indispensable Parties in a Lien Foreclosure Action Against the Surety of the Lien Release Bond, author Jennifer Beyerlein explains.

“When a lien release bond is obtained…the real property is released from the lien and becomes “unreachable” and the bond becomes the security for enforcement of payment… [T]he Court found that neither the real property owner nor the entity who purchased the lien release bond are necessary parties in any action to enforce the lien against the surety who posted the lien release bond… because the surety is substituted for the real property owner in the eyes of the mechanic’s lien statutes for purposes of enforcement.”

Recovery of Claim + Legal Fees = Happy Subcontractor

Within its decision, the Supreme Court awarded fees to the subcontractor –

“Pursuant to RAP 18.1(i) and RCW 60.04.181(3), if on remand the trial court determines Inland Empire to be the prevailing party in the lien foreclosure action and upon submission of satisfactory proof of the claimed amount due, judgment against the bond should be entered. Reasonable attorney fees and expenses, including statutory fees and costs on appeal, are also recoverable.”

What this all Necessary?

Truthfully, litigation, regardless of circumstance, is never pleasant. It is quite possible this could have been avoided, had the subcontractor named the other parties in the initial foreclosure action. But, without a crystal ball, no one could have known for sure.

The best advice I can offer when foreclosure actions are imminent? Ensure your legal counsel is well-versed in construction law.

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