Top Line Builders Inc., Resp/cross App v. Us Bank, App/cross Resp ( 2014 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
TOP LINE BUILDERS, INC., a
Washington corporation, No. 69225-9-1
Respondent/Cross Appellant, DIVISION ONE
v. PUBLISHED OPINION
FREDERICK W. BOVENKAMP and
SHARON M. BOVENKAMP, husband and
wife, and the marital community composed
thereof, dba BOVENKAMP FAMILY, LLC-
SERIES 8466 CAMAS; AL'S ELECTRIC &
PLUMBING, INC., a Washington
corporation; UPSCALE ENTERPRIZE,
INC., a Washington corporation; DAVID
EVANS & ASSOCIATES, INC., an Oregon
corporation; and ZDS ARCHITECTS, INC.,
a Washington corporation,
Defendants,
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U.S. BANK, N.A., •C- —-* ~
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Appellant/Cross Respondent, •'^-r i ^ _
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OLD REPUBLIC SURETY COMPANY, CO
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Bond No. YLI264739,
Third Party Defendant. FILED: March 10, 2014
Appelwick, J. — Top Line foreclosed on its statutory mechanic's lien and
recovered the unpaid contract price plus sums awarded in quantum meruit for extra
work performed at the owner's request, but without written change orders required by
No. 69225-9-1/2
contract. U.S. Bank argues that its deed of trust, though junior to the mechanic's lien,
should have priority over the amounts awarded in quantum meruit. We affirm.
FACTS
In early 2008, Frederick Bovenkamp asked Top Line Builders, Inc. to construct a
prototype residence on his property in Blaine, Washington. The residence was
designed to meet the gold certification standard of Leadership in Energy and
Environmental Design (LEED)—the standard for green building design.
Top Line began construction on February 10, 2008. Though Top Line believed
the parties agreed to construction on a cost-plus basis, Bovenkamp and Top Line in fact
executed a written fixed price contract for $845,286.80 in February 2008. The contract
required written, signed change orders.1 At the time, Bovenkamp did not have any
financing in place and initially paid Top Line $170,000 from his own funds. As
construction progressed, Top Line submitted monthly invoices to Bovenkamp with
supporting documents detailing costs incurred.
In June 2008, after being denied financing by at least two other lenders,
Bovenkamp met with U.S. Bank (USB) to discuss financing. Bovenkamp presented the
$845,286.80 fixed price contract to USB, and USB approved Bovenkamp's construction
1 The contract further stated:
[W]ork may proceed prior to written authorization, at the Contractor's
discretion, on such work as to not unduly delay the project if the Owner
has verbally authorized such work with the Contractor, project manager or
the onsite superintendant. The Owner may verbally request additional
work and in so doing agrees to pay the contractor for such work. Such
verbal authorization is documented in the owner's construction file as to
the date and persons involved in the discussion. Within the current
month, a written change order shall be provided to the owner for the
owner's signature and returned to the Contractor.
No. 69225-9-1/3
loan for $995,000.00. This additional amount above the fixed price was a contingency
for taxes and cost overruns. To secure the loan, USB filed a deed of trust against
Bovenkamp's property on August 12, 2008.
Bovenkamp, USB, and Top Line signed a residential construction Loan
Procedures Assignment and Consent Agreement (LPA) at USB's request. The LPA
required that Top Line and Bovenkamp execute a written construction contract and
written change orders for any extra work requiring additional funds.2 This reflected the
existing contract between Top Line and Bovenkamp.
Over the course of construction, Bovenkamp requested unforeseen modifications
to the plans and specifications of the residence, which Top Line performed. This extra
work increased the cost of labor and materials for Top Line above the fixed contract
price. Top Line and Bovenkamp usually discussed the changes, and sometimes—but
not always—agreed to the costs associated with those changes. Top Line and
Bovenkamp did not prepare or execute signed, written change orders for this extra
work. Bovenkamp sent draw requests to USB, but neither Bovenkamp nor Top Line
submitted change orders to USB.
2 The LPA also specified that construction could not begin until after the loan
closed, but USB approved the loan knowing that construction had begun months earlier.
No. 69225-9-1/4
By April 2009, Top Line substantially completed construction on the prototype
residence. Bovenkamp and Top Line did a walk-through and created a punch list of
items for Top Line to address before final completion. Top Line performed all the punch
list items and Bovenkamp did not request any further corrections. At this time,
Bovenkamp still owed Top Line $111,085.29 for work and materials. Approximately
$25,000 was overdue under the fixed price contract. Another $85,507.31 for extra work
and materials exceeding the written contract price was also overdue.
Bovenkamp assured Top Line that it would be paid in full when it sent USB the
certificate of occupancy. Top Line did so on April 30, 2009. Top Line also sent
Bovenkamp and USB a list of changes that occurred during the project, but USB told
Top Line that it could do nothing about the cost overruns. Even after Top Line provided
the certificate of occupancy, Bovenkamp never submitted a final draw request to USB
for the overdue $111,085.29 owed to Top Line and never paid Top Line any of that
remaining amount. On June 9, 2009, Top Line filed an amended mechanic's lien on the
property for $111,085.29.
On January 6, 2010, Top Line filed suit seeking foreclosure of its amended
mechanic's lien. Top Line named USB as a defendant, along with Bovenkamp and
other parties with an interest in the property. Bovenkamp answered, but USB failed to
appear or submit an answer. Top Line obtained a default order against USB. The trial
court also granted Top Line's motion for partial summary judgment establishing that its
mechanic's lien had priority over all other security interests, to the extent that Top Line
prevailed in obtaining a monetary judgment on its lien.
No. 69225-9-1/5
USB subsequently appeared and requested that the trial court set aside the
partial summary judgment order. The court declined to do so, but allowed USB to
answer the complaint and contest at trial the amount of money Top Line could recover.
On August 12, 2011, Top Line moved to amend its complaint to add a cause of
action for quantum meruit, which the trial court granted. Top Line's second amended
complaint requested recovery in quantum meruit for the extra work and materials it
provided above the fixed contract price, as claimed in its lien.
On the eve of trial, Top Line filed a motion in limine arguing that USB did not
have standing to dispute issues related to the construction contract between
Bovenkamp and Top Line—specifically, the change order provision and amount owed.
The court denied Top Line's motion, and trial began on November 1, 2011.
At trial, Top Line's owner, Charles Rohrer, testified that his actual agreement with
Bovenkamp was a verbal cost-plus contract that did not require change orders. Rohrer
explained that when Bovenkamp was unable to secure financing based on this cost-plus
contract, Rohrer drafted a fixed price contract to induce USB into financing the project.
Bovenkamp disputed Rohrer's assertion and testified that he and Rohrer agreed to a
fixed price contract that predated any loan agreement with USB.
At the end of trial, the trial court ruled that the agreement between Top Line and
Bovenkamp was a fixed price contract requiring written, signed change orders. It
concluded that Top Line did not comply with the change order obligations. However, it
also found that "Mr. Bovenkamp is in equity in quantum meruit obligated to [Top Line] in
an amount of an additional $79,731.15. Plus the amount unpaid under the contract of
No. 69225-9-1/6
$25,544.43." The trial court concluded that only the $25,544.43 under the contract
attached to Top Line's mechanic's lien. On January 25, 2012, it entered written findings
of fact and conclusions of law pursuant to its oral ruling.
On Top Line's and Bovenkamp's separate motions for reconsideration, the trial
court entered amended findings of fact and conclusions of law. It concluded that Top
Line and Bovenkamp mutually waived the change order requirement. The trial court
further held that USB did not waive the change order requirement, but because extra
work did not exceed the loan amount, the parties' breach was technical and immaterial.
The trial court ultimately concluded that Top Line's quantum meruit award was secured
by its mechanic's lien with priority over USB's interest. USB appeals from these
amended findings of fact and conclusions of law.
DISCUSSION
USB argues that the trial court erred in reconsidering its original verdict and
including quantum meruit recovery in Top Line's mechanic's lien. USB also argues the
trial court erred in allowing Top Line to amend its complaint to include a claim in
quantum meruit. Further, USB argues that equitable estoppel should bar Top Line from
any recovery impairing USB's lien.
I. Quantum Meruit and the Statutory Mechanic's Lien
USB agrees that Top Line is entitled to a mechanic's lien for the $25,544.43
unpaid balance under the fixed price contract. It agrees that Top Line's mechanic's lien
has priority over its deed of trust. USB also agrees that Top Line is entitled to recover
the cost of its extra work, $79,731.15, in quantum meruit, but secured only by a
No. 69225-9-1/7
judgment lien against Bovenkamp. USB disagrees with the trial court's conclusion that
the quantum meruit award should attach to Top Line's mechanic's lien and have priority
over USB's deed of trust.
A. Mutual Waiver of Written Change Order Requirement
USB points out that the parties agreed on a fixed price and agreed that written
change orders were the sole method for increasing that fixed price. Because there
were no written change orders modifying the agreed price in the written contract, USB
argues that the mechanic's lien statute limits Top Line's lien claim to the unpaid balance
of the written fixed price contract. USB assigns error to the trial court's finding that Top
Line and Bovenkamp mutually waived the written change order requirement.3
Waiver is the voluntary and intentional relinquishment of a known right. River
House Dev.. Inc. v. Inteqrus Architecture. PS. 167 Wash. App. 221, 237, 272 P.3d 289
(2012). A contract condition requiring that extra work be approved in writing may be
waived by the parties' conduct. Am. Sheet Metal Works. Inc. v. Havnes, 67 Wash. 2d 153,
158-59, 407 P.2d 429 (1965). Such a waiver can be shown by evidence that the owner
authorized, permitted, and/or directed the contractor to perform the work in question, jd.
at 159; CKP, Inc. v. GRS Constr. Co.. 63 Wash. App. 601, 619, 821 P.2d 63 (1991).
When the trial court enters findings of fact and conclusions of law, our review is
limited to determining if the findings of fact are supported by substantial evidence and if
3 USB argues that the trial court erred in reversing its initial verdict based on
contract principles such as material breach and waiver, because contract principles are
inapplicable to equity, and the trial court based its quantum meruit award on equity.
This argument has no merit. Quantum meruit recovery falls under a contract implied in
fact theory. Young v. Young. 164 Wash. 2d 477, 485 n.4, 191 P.3d 1258 (2008).
No. 69225-9-1/8
the findings of fact support the conclusions of law. Douglas v. Visser. 173 Wash. App.
823, 829, 295 P.3d 800 (2013). Substantial evidence is evidence sufficient to persuade
a fair-minded, rational person of the declared premise. ]d. We review all reasonable
inferences in the light most favorable to the prevailing party. Jensen v. Lake Jane
Estates. 165 Wash. App. 100, 104, 267 P.3d 435 (2011). Though the trier of fact is free to
believe or disbelieve any evidence presented at trial, we do not hear or weigh evidence,
find facts, or substitute our opinions for those of the trier of fact. jd. at 105.
Unchallenged findings of fact are verities on appeal, jd.
The following findings of fact (FF) and conclusions of law (CL) are relevant here:
[FF 29 (unchallenged).] During the course of construction, there
were unforeseen modifications and changes to the plans and
specifications of the prototype residence that were requested of
Bovenkamp and performed by Top Line, which consisted of extra work.
[FF 30 (unchallenged).] Top Line and Bovenkamp usually
discussed such changes, sometimes but not always the added costs
associated with such changes and Top Line performed such changes.
This extra work increased the cost of materials and labor incurred by Top
Line in excess of the February 15, 2008 estimate or Contract Sum.
Written and signed change orders, as required by the Contract, were not
prepared or executed.
[CL 10 (challenged).] The Contract had provisions for written
change orders, but Bovenkamp and Top Line mutually waived the
requirement for written change orders,
[CL 12 (unchallenged).] Top Line has established by a
preponderance of the evidence that Bovenkamp requested additions that
were not within the contemplation of the parties, and the changes required
extra work and materials and have caused a substantial loss to the [sic]
Top Line, in the total amount of $79,731.15. The changes were
incorporated into the prototype residence on the Property and Bovenkamp
has enjoyed the use of such changes. Top Line is awarded these
changes in guantum meruit.
No. 69225-9-1/9
USB does not assign error to FF 29 or FF 30, both of which amply support the
trial court's conclusion that Top Line and Bovenkamp waived the change order
provision. These findings are also supported by substantial evidence in the record.
Bovenkamp testified that he agreed to changes done to the project. He acknowledged
that there were no written change orders for this extra work. Bovenkamp further
admitted that he and Top Line did not use written change orders, "because we were
eager to get the job done."
The trial court's conclusion regarding waiver is supported by Washington case
law. In CKP, the parties agreed to a fixed price contract requiring written change
orders. 63 Wash. App. at 605. Over the course of the construction project, however, the
contractor performed extra work at the owner's request before written change orders
were issued, kt When the owner refused to pay, the contractor filed a mechanic's lien
for the contract price plus extra work performed in excess of the contract price, jd. at
605, 617. The trial court entered judgment for the contract price plus the cost of extra
work and enforced the lien for that full amount. Id. at 606-07.
The appellate court held that the parties mutually waived the written change
order requirement through their actions, jd. at 613. The court then concluded,
The extra work.. . was not reduced to written contract
modifications executed by both parties, but rather was proved by
testimony, job diaries, and other such documents. It therefore falls into
the category described in Modern Builders, Inc.f of Tacomal v. Manke, [27
Wash. App. 86, 88-89, 615 P.2d 1332 (1980),] that is, extra work arising
outside and independent of the contract for which [the contractor] may
recover costs plus a reasonable profit in quantum meruit.
Id at 617. The appellate court upheld foreclosure of the mechanic's lien for the original
contract price, plus the amounts recoverable in quantum meruit. See jd. The court
No. 69225-9-1/10
reversed only the trial court's award of prejudgment interest on unliquidated sums
awarded in quantum meruit, jd
Therefore, where contracting parties mutually waive a written change order
requirement and agree to extra work, the reasonable cost of that extra work is
recoverable in quantum meruit. Such is the case here.
B. No Material Breach of the Loan Procedures Agreement
USB argues that even if Top Line and Bovenkamp waived the change order
provision in their construction contract, USB did not waive its right under the LPA to
enforce the change order requirement and did not consent to the extra work. USB
insists that it is entitled to enforce the unambiguous change order provision, because
Bovenkamp assigned his rights under the contract to USB.4
The trial court made the following relevant findings and conclusions:
[FF 20 (unchallenged).] The fixed price contract was provided to
US Bank that was executed by Bovenkamp and Top Line ("Contract") was
in the amount of $845,286.80. US Bank approved a construction loan for
Bovenkamp in the amount of $995,000,000.
[FF 22 (challenged).] Top Line, U.S Bank and Bovenkamp signed
a residential construction loan procedures assignment and consent
4 In a cross appeal, Top Line argues that the trial court erred in granting USB
standing to dispute the amount owed between Bovenkamp and Top Line. We disagree.
USB contests the priority of Top Line's quantum meruit award, which goes to the heart
of USB's legal rights as a party with a recorded security interest. Moreover, the LPA
assigned Bovenkamp's rights to USB, enabling USB to argue that Top Line breached
the construction contract. Old Nat'l Bank of Wash, v. Arneson. 54 Wash. App. 717, 723,
776 P.2d 145 (1989) (contract rights are assignable in Washington). In disputing this
assignment, Top Line ignores the distinction between assignment of contract rights and
assumption of contract obligations. 25 David K. DeWolf & Keller W. Allen,
Washington Practice: Contract Law and Practice § 13.8, at 320 (2d ed. 2007).
Assignment was automatic under the LPA. USB needed to notify Top Line only when it
assumed Bovenkamp's contract obligations, not when it asserted Bovenkamp's contract
rights.
10
No. 69225-9-1/11
agreement provided by US Bank on June 5, 2008 ("Assignment and
Consent Agreement"), which required, among other things, that Top Line
and Bovenkamp execute a written construction contract and written
change orders for any additional work requiring additional funds. Said
agreement provides in paragraph 16 that the final draw may include the
amounts represented by change orders "if approved by the Lender." Trial
Exhibit 38. The purpose of the clause reguiring Top Line to submit
change orders to US Bank for approval was to protect the bank from
having the cost of construction exceed the amount of the construction
loan. This purpose is evident from the language in the loan agreement
which would reguire Bovenkamp to deposit any additional sums reguired
by change orders with the bank should the change orders result in a
construction cost in excess of the loan amount.
[FF 23 (challenged).] Plaintiff's trial exhibit P-28 is an e-mail
communication from Bovenkamp to Top Line's president dated April 14,
2009. In addressing the final draw, Mr. Bovenkamp stated, "Of course the
bank will have to review and approve the cost overruns and will then issue
the final draw at closing." Mr. Bovenkamp's trial testimony, at notes of
testimony pages 233 and 236, is consistent with the provision of the
residential construction loan procedures assignment and consent
agreement that change orders were subject to the bank's approval before
disbursing loan proceeds. Plaintiff introduced no documentation,
testimony or other evidence that Top Line disputed Bovenkamp's
statement, or the reference in paragraph 16 of the assignment and
consent agreement, that change orders were subject to the review and
approval of USB before disbursals for such amounts were made by the
bank.
[FF 33 (challenged).] Top Line did not calculate or have any input
in the draw requests submitted to US Bank. Change orders were not
submitted to the bank by Top Line, but the original fixed price contract
amount plus the value of all changes to the contract made by Bovenkamp
never exceeded the amount the bank had agreed to lend Bovenkamp.
[FF 40 (unchallenged).] In May 2009, because the last invoice from
Top Line amounted to $111,085.29, which exceeded the estimate in the
Contract by $85,507.31, representing the additions requested by
Bovenkamp, Top Line provided Bovenkamp and US Bank a list of the
changes that occurred during the course of construction which allegedly
increased the cost of the project, but did not include, as requested, a
financial accounting with numerical value associated with these changes.
[FF 41 (unchallenged).] US Bank received the list of changes but
reguested that Top Line work through Bovenkamp since US Bank could
11
No. 69225-9-1/12
do nothing about any dispute Top Line and Bovenkamp were having about
cost overruns.
[CL 11 (challenged).] US Bank did not waive the written change
order requirement contained in the construction contract or in the
assignment and consent agreement executed by Top Line, Bovenkamp
and USB. But had change orders been submitted to US Bank as agreed,
the bank would have no right to either object to the change orders or
reguire that Bovenkamp deposit additional funds with the bank since the
total amount owed to Top Line, including change orders never exceeded
the loan commitment made by US Bank to Bovenkamp. Since US Bank
would have had neither of those rights, the fact that the change orders
were not submitted to the bank, while a technical breach of the partiesf]
contract, was wholly immaterial.
[CL 14 (unchallenged).] Since US Bank was presented a fixed
price contract, and since the Consent and Assignment Agreement
specified that US Bank is required to be notified of changes, it was the
intent of US Bank. Bovenkamp and Top Line, to insure that if additional
funds were reguired bv change orders. US Bank would be notified and
Bovenkamp would be reguired to deposit such funds in excess of the loan
amount.
(Emphasis added.) USB argues that the trial court effectively rewrote the contract's
change order provision so it was triggered only after the changes exceeded the total
potential loan commitment.
Extrinsic evidence is admissible as to the entire circumstances under which the
contract was made, as an aid in ascertaining the parties' intent.5 Berg v. Hudesman,
115 Wash. 2d 657, 667, 801 P.2d 222 (1990). Therefore, considering the LPA, as well as
the parties' conduct and communications, is appropriate. Id; see also Rimov v. Schultz,
162 Wash. App. 274, 283 & n.7, 253 P.3d 462 (2011). A material breach is one that
substantially defeats a primary function of the contract. 224 Westlake. LLC v. Engstrom
5 The trial court did not, as USB claims, need to find that the contract was
ambiguous before considering extrinsic evidence.
12
No. 69225-9-1/13
Props.. LLC. 169 Wash. App. 700, 724, 281 P.3d 693 (2012). The materiality of a breach
is a question of fact. |d
Paragraph 6 of the LPA specifies, "Funds in excess of the loan amount needed
to complete construction are to be deposited with the Lender at loan closing as equity
funds." Paragraph 9 further states, "If change orders occur during the course of
construction, requiring additional funds, the Lender must be notified and those monies
deposited with Lender into your construction escrow account." This clause does not
require notice under all circumstances, but rather when change orders require additional
funds. These paragraphs indicate that USB was concerned about cost overruns
exceeding the loan amount ($995,000), not extra work exceeding the contract price
($845,286.80). And, nowhere does the LPA enable USB to approve or veto change
orders within the loan amount. These provisions of the LPA are sufficient to support the
trial court's finding and conclusion that the purpose of USB requiring change orders was
to protect it from cost overruns exceeding the loan amount.
USB's communications with Top Line provide further evidence that USB did not
perceive cost overruns below the loan amount to be its concern. In a May 26, 2009 e-
mail, USB told Top Line, "I really would prefer that you work through Fred, there is
nothing I can do about the dispute you are having about cost overruns." To which Top
Line replied, "Fred sent me a message that I need to get you the final inspection
checklist and the final bill. If you don't need those items from me then I guess I don't
need to see you." Then USB acknowledged, "What I need is a copy of occupancy
certificate. If you could fax that to me then we have all we need to finish." This
13
No. 69225-9-1/14
correspondence indicates that even if Bovenkamp or Top Line submitted change orders
to USB, USB believed it could or would do nothing about it.
The trial court correctly concluded that even if change orders were presented to
USB, it had no right to object or require Bovenkamp to deposit additional funds. The
primary function of the contract was to ensure that USB's interest was secured if cost
overruns exceeded the loan amount. Therefore, Bovenkamp's and Top Line's breach
was not material, because it did not substantially defeat a primary function of the
contract.
C. Quantum Meruit
Quantum meruit recovery is proper when there
"is an agreement depending for its existence on some act or conduct of
the party sought to be charged and arising by implication from
circumstances which, according to common understanding, show a mutual
intention on the part of the parties to contract with each other. The
services must be rendered under such circumstances as to indicate that
the person rendering them expected to be paid therefor, and that the
recipient expected, or should have expected, to pay for them."
Young v. Young. 164 Wash. 2d 477, 485-86, 191 P.3d 1258 (2008) (emphasis added)
(quoting Johnson v. Nasi. 50 Wash. 2d 87, 91, 309 P.2d 380 (1957)).
Top Line's quantum meruit recovery and lien claim relies on well-established
case law. In Manke. the contractor gave a fixed bid for a remodeling job. 27 Wash. App.
at 88. Shortly after commencing work, it became clear that conditions required
significant extra work. Id The owner also requested many changes from the original
plans. ]d After completing the job, the contractor submitted a bill for approximately
twice the original bid. ]d at 90. The owner admitted that he orally authorized the extra
work, but maintained that neither party contemplated such a big price increase. ]d The
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No. 69225-9-1/15
appellate court held that the contract was not abandoned, but the costs of extra work
agreed to by the parties plus a reasonable profit may be recovered by the performing
party in quantum meruit, in addition to the contract price. ]d at 93, 95. The contractor
was therefore entitled to recover on its lien for the amount of the contract price plus the
proven costs of extra work.6 ]d at 96
Likewise, in CKP, the contractor performed extra work at the owner's request
before written change orders were issued. 63 Wash. App. at 605. The appellate court
held that the parties mutually waived the change order requirement, so the extra work
requested by the owner was recoverable. See id at 613, 617. Those items for which a
price was agreed or a method of computation agreed were recoverable as contract
modifications. Id at 617. Those items for which no cost was agreed to were
recoverable in quantum meruit. ]d Both types of recovery were secured by the
contractor's mechanic's lien. See jd at 606-07, 617.
Here, the trial court found that Bovenkamp orally requested work in addition to
the original contract, sometimes agreeing upon the price and sometimes not. These
findings are uncontested. The amount is not disputed. The case law supports the
conclusion that Top Line was entitled to a judgment for this extra work, some based on
6 By contrast, in Colorado Structures. Inc. v. Blue Mountain Plaza. LLC, the
contractor performed soil testing that the owner never requested. 159 Wash. App. 654,
664-65, 246 P.3d 835 (2011). In addition, the contractor performed soil testing when
the parties had no contract in place. ]d at 664. The soil testing did not constitute an
improvement upon the land, and it had not been requested by the owner. ]d at 662,
654. Therefore, it did not meet the statutory lien requirements of RCW 60.04.021 and
the cost of soil testing did not attach to the contractor's construction liens, id at 663,
665.
15
No. 69225-9-1/16
the agreed price, some in quantum meruit.7 While these cases allowed a mechanic's
lien for the recovery in quantum meruit, they did not directly analyze the prior
mechanic's lien statute in effect at the time.
D. Mechanic's Lien Statute
When interpreting a statute, we first look to its plain language. Estate of
Haselwood v. Bremerton Ice Arena. Inc., 166 Wash. 2d 489, 498, 210 P.3d 308 (2009).
Absent ambiguity or a statutory definition, we give the words in a statute their common
and ordinary meaning. Id If the statute remains subject to multiple interpretations after
analyzing the plain language, it is ambiguous, jd A statute is not ambiguous merely
because different interpretations are conceivable. Id If a statute is susceptible to more
than one reasonable interpretation, then a court may resort to statutory construction,
legislative history, and relevant case law to discern legislative intent, jd
Mechanic's liens are creatures of statute, in derogation of the common law. ]d
They therefore must be strictly construed to determine whether a lien attaches. ]d But,
if we determine that a party's lien is covered by chapter 60.04 RCW, then we liberally
construe the statute to provide security for all parties intended to be protected by its
provisions. Id; see also RCW 60.04.900.
RCW 60.04.021 provides in relevant part:
[A]ny person furnishing labor, professional services, materials, or
equipment for the improvement of real property shall have a lien upon the
improvement for the contract price of labor, professional services,
7 The trial court refers to the entire award for extra work as quantum meruit. The
portion of extra work at an agreed price was more properly a contract modification.
Only the portion of extra work for which a price was not agreed is subject to recovery in
quantum meruit. This mischaracterization has no effect on the result here.
16
No. 69225-9-1/17
materials, or equipment furnished at the instance of the owner, or the
agent or construction agent ofthe owner.[8]
(Emphasis added.)
There is no dispute that Top Line furnished labor, professional services,
materials, or equipment within the scope of the statute. They were clearly furnished for
improvement of real property. They were all furnished at the instance of the owner,9
some pursuant to the initial written contract and some pursuant to later oral requests for
changes. These satisfy the requisites for the lien to attach.
The amount of the lien is determined by the definition of contract price:
"Contract price" means the amount agreed upon by the contracting
parties, or if no amount is agreed upon, then the customary and
reasonable charge therefor.
RCW 60.04.011 (2) (Laws of 1991, ch. 281, § 1).
What is in dispute is whether any amount awarded for extra work is part of the
contract price for purposes of the mechanic's lien statute. The trial court found that the
parties agreed in writing on a fixed price and on a procedure for increasing that price.
USB argues that, because the written change order procedure was never used, the
original agreed price did not increase. And, USB contends, because there was an
amount agreed to by the parties, the "if no amount is agreed upon" clause of the
8 This section was enacted in 1991 in a rewrite of the lien statute. Laws of 1991,
ch. 281, § 2. The words "contract price" were not in the prior version of the mechanic's
lien statute, enacted in 1975. See former RCW 60.04.010, .040 (1975), repealed by
Laws of 1991, ch. 281, §31.
9 The ordinary meaning of "instance" is "instigation, suggestion, [or] request."
Webster's Third International Dictionary 1171 (2002). This language is not
ambiguous. It does not require a written request versus oral request or a combination
of the two. Nor does it require that only a single request, rather than a series, may give
rise to the lien. We will not read words into the statute that are not there. In re Pers.
Restraint of Bovan, 157 Wash. App. 588, 599, 238 P.3d 528 (2010).
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statutory definition of contract price is never triggered. RCW 60.04.011(2). Therefore,
USB argues, the quantum meruit award is neither part of the contract price nor covered
by the lien.
This argument interprets the "or" in the definition of contract price, id, as "either,
but not both." So, under USB's theory, the lien for an entire project must be based
solely on an agreement to price, or solely based on the customary and reasonable
charge language. Literally applied, a clause in a construction contract to pay the
contractor $500 to rent his bulldozer to clear a lot would preclude the contractor from a
lien under a time and materials clause in the same contract for thousands of dollars
spent constructing a building on the lot. This result is absurd. Such a reading is
inconsistent with the requirement that once we determine that a party's lien is covered
by chapter 60.04 RCW, then we liberally construe the statute to provide security for all
parties intended to be protected by its provisions. Haselwood, 166 Wash. 2d at 498. It is
not a reasonable interpretation of the statute.
The mechanic's lien is for the aggregate value of labor, professional services,
materials, and equipment furnished, as measured by contract price. The contract price
of any component of the lien is valued one of two ways: at the agreed price or, if no
agreed price, at the reasonable and customary charge. How one component is valued
does not affect another. The addition of the definition of contract price to the statute
merely codified the treatment recognized under prior case law.
The trial court properly applied the contract price definition. It used the agreed
price for agreed extras and the reasonable value for extras where price was not agreed.
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The trial court properly aggregated these amounts with the unpaid balance of the
original contract in Top Line's mechanic's lien. All of the work and materials were
furnished for improvement of real property at the instance of the owner. They are
clearly within the scope of the mechanic's lien statute. We therefore affirm the trial
court's award and the lien in favor of Top Line, as having priority over the USB lien.
II. Top Line's Motion to Amend Its Complaint
USB argues that the trial court should not have permitted Top Line to amend its
complaint to add a quantum meruit claim, because it adversely affected USB's rights
under RCW 60.04.091(2). RCW 60.04.091(2) provides, "Where an action to foreclose
the lien has been commenced such notice of claim of lien may be amended as
pleadings may be by order of the court insofar as the interests of third parties are not
adversely affected by such amendment." We review a trial court's decision to allow a
party to amend pleadings for abuse of discretion. CKP, 63 Wash. App. at 610.
On June 9, 2009, Top Line filed an amended mechanic's lien for $111,085.29,
which included the amount it later recovered in quantum meruit. Top Line's original
complaint, filed on January 6, 2010, likewise requested a $111,085.24 judgment. Top
Line did not thereafter move to amend its mechanic's lien. Rather, Top Line's amended
complaint simply asserted an alternative cause of action (quantum meruit) to recover
the full lien amount already filed. RCW 60.04.091(2) is therefore not triggered.
Further, even if it had been triggered, USB was not adversely affected. USB had
notice from Top Line's amended mechanic's lien and original complaint that Top Line's
entire lien amount may have priority. See CKP. 63 Wash. App. at 610 (holding that
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No. 69225-9-1/20
secured lender's interests were not adversely affected when the trial court amended a
mechanic's lien at trial, because lender had notice that the lien amount could increase).
The trial court did not abuse its discretion in allowing Top Line to amend its complaint to
add a claim for quantum meruit in support of foreclosure of the existing statutory lien.
III. Equitable Estoppel
USB argues that Top Line should be estopped from recovering on any claims
against USB, because Top Line told the court that it created a written contract for the
sole purpose of deceiving USB into financing the project. Equitable estoppel precludes
a party from claiming the benefits of a contract while simultaneously attempting to avoid
the burdens that contract imposes. Townsend v. Quadrant Corp.. 173 Wash. 2d 451, 461,
268 P.3d 917 (2012). However, the trial court found that Top Line and Bovenkamp
never executed a cost-plus contract, as Top Line claimed, but were rather bound by the
fixed price contract. Because of this adverse finding, Top Line did not benefit from a
cost-plus contract. It gained nothing inequitably that needs to be stripped away.
Moreover, a party with unclean hands may not assert equitable estoppel. See
Retail Clerks Health & Welfare Trust Funds v. Shopland Supermarket. Inc., 96 Wash. 2d
939, 949, 640 P.2d 1051 (1982). USB failed to follow some of its own loan procedures
in the LPA, but now attempts to enforce other provisions of the contract to its benefit.
For instance, the LPA specified, "Construction cannot begin until after the loan closes
and our mortgage is of record and/or lien priority has been established." But, USB knew
that construction was already underway when Bovenkamp secured the loan. Likewise,
when presented with a list of changes, USB told Top Line to work directly with
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Bovenkamp, because it could do nothing about cost overruns. This conflicts with USB's
later assertion that Top Line and Bovenkamp needed to seek USB's approval for all
extra work. Because USB attempts to enforce provisions of the LPA and fixed price
contract while skirting others, equitable estoppel is not an available remedy.
IV. Attorney Fees
Top Line requests attorney fees pursuant to RCW 60.04.181, the written
contract, and RAP 18.1. RCW 60.04.181 provides for an award of attorney fees and
costs to the prevailing party in securing a mechanic's lien, and "[s]uch costs shall have
the priority of the class of lien to which they are related." As the prevailing party, Top
Line is entitled to its reasonable attorney fees on appeal.
We affirm.
WE CONCUR:
Jlte/y^g^H. CJT daM
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