MB Construction Co. v. O'Brien Commerce Center Associates , 63 Wash. App. 151 ( 1991 )

Per Curiam.

MB Construction Company (MB) filed a motion for discretionary review of an order of partial summary judgment dismissing with prejudice its hen foreclosure action against respondents. We grant discretionary review, accelerate review, and reverse and remand.

In January 1989, MB entered into a construction contract with respondent O'Brien Commerce Center Associates, a joint venture. MB furnished labor and materials for the construction of a project known as the O'Brien Commerce Center. In November 1989, and again in February 1990, MB recorded hens against the subject property pursuant to RCW 60.04.

On April 26, 1990, MB commenced a hen foreclosure action against respondents seeking to foreclose on the abovementioned liens and alleging breach of contract. One of the named defendants in that action, US Bancorp Mortgage Company, holds a deed of trust encumbering the subject property. The trial court dismissed MB's foreclosure action as against US Bancorp for lack of proper service on US Bancorp. The remaining defendants (respondents herein) then moved for partial summary judgment dismissing the foreclosure action against them. They argued that US Bancorp was a necessary party under RCW 60.04.100, and that its dismissal from the foreclosure action rendered the action void as to all parties. The court granted partial summary judgment dismissing the remainder of the foreclosure action, and later awarded respondents attorney's fees. MB then filed a motion for discretionary review in this court.

The sole issue raised in the motion for discretionary review is whether the trial court erred in dismissing the hen action as against all of the respondents. MB concedes, for purposes of this motion, that the dismissal of US Ban-corp for lack of proper service under RCW 60.04.100 was appropriate, but contends that the trial court erred in concluding that US Bancorp was a necessary party to the foreclosure action and that its dismissal rendered the foreclosure action void as to the remaining defendants.

Under RCW 60.04.100,¹ a hen claimant can enforce a mechanics' hen only if all "necessary parties" are served with process within 90 days of the filing of the summons and complaint. RCW 60.04.100; Queen Anne Painting Co. v. Olney & Assocs., Inc., 57 Wn. App. 389, 788 P.2d 580 (1990). Failure to properly serve a "necessary" party renders the hen foreclosure action void as against all parties, whereas failure to serve a "proper" party merely renders the action void as to the proper party. Kinskie v. Capstin, 44 Wn. App. 462, 466, 722 P.2d 876 (1986); Queen Anne Painting, at 393; see Galvanizer's Co. v. State Hwy. Comm'n, 8 Wn. App. 804, 807-08, 509 P.2d 73 (1973). While RCW 60.04.100 does not define the term "necessary party", another statute in the same chapter, RCW 60.04.120,² mandates the joinder of parties who have prior recorded "claims of hens" against the same property. This latter statute does not resolve the issue presented here, however, because a mortgage is not a hen or claim of hen provided by RCW 60.04 (which provides hens only for mechanics and materialmen), and therefore a mortgagee such as US Bancorp is not a party who must be joined under RCW 60.04.120. See Nason v. Northwestern Milling & Power Co., 17 Wash. 142, 147, 49 P. 235 (1897); Davis v. Bartz, 65 Wash. 395, 401, 118 P. 334 (1911); see generally RCW 60.04.060 (setting forth requirements for claims of hen of mechanics and materialmen); RCW 60.04-.200(4). Furthermore, RCW 60.04.120 was not intended to designate generally all the parties who are "necessary" to a hen foreclosure action. In construing a former version of RCW 60.04.120, our Supreme Court observed:

It is obvious that the only purpose of the section is to authorize the foreclosure of all hens on the same property in one action and to avoid a multiplicity of suits; not to designate generally who are proper or necessary parties to such suits. These, aside from the hen claimants designated, are to be determined as in other actions.

(Italics ours.) Davis v. Bartz, supra at 401. Thus, since the term "necessary parties" in RCW 60.04.100 is not statutorily defined, the determination of who is a "necessary" party should be made by reference to the common law. Northern Pac. R.R. v. Henneford, 9 Wn.2d 18, 113 P.2d 545 (1941) (where Legislature uses term without defining it and such term has a well-known meaning at common law, it will be presumed that Legislature used the word in the sense in which it was understood at common law); Ludwig v. Mutual Real Estate Investors, 18 Wn. App. 33, 40, 567 P.2d 658 (1977).

One Washington court has held that a mortgagee such as US Bancorp is a necessary party in a hen foreclosure action. Curtis Lumber Co. v. Sortor, 9 Wn. App. 762, 515 P.2d 554, (1973) , rev'd on other grounds, 83 Wn.2d 764, 522 P.2d 822 (1974) . In that case, the court cited Davis v. Bartz, supra, for the proposition that "a mortgagee is a necessary party to a hen foreclosure action" under the hen foreclosure statute. Curtis Lumber, at 765. That proposition is, however, contrary to a plain reading of Davis.

In Davis, a hen claimant seeking foreclosure of his hen failed to timely serve a mortgagee. After the statutory service period had expired, the mortgagee commenced its own foreclosure proceedings. The hen claimant filed a cross complaint, contending that his hen was prior to the mortgagee's interest. The Davis court held that the mortgagee's interest was superior to the lien claimant's since the hen claimant had failed to serve the mortgagee within the statutory period, and therefore the hen had expired as to the mortgagee. The court held that the hen claimant's hen was, however, preserved as against the validly served owner of the property. In reaching its decision, the Davis court stated that "the only distinction between an owner and a mortgagee as a party to the hen foreclosure is that the owner is a necessary party to any valid foreclosure, while a mortgagee is a proper party." Davis, at 400. The court then stated that "[t]he only distinction, so far as here material, between a necessary party and a proper party is that a foreclosure of the hen without the one is absolutely void, while a foreclosure without the other is void only as to him." Davis, at 400. Thus, contrary to the statement in Curtis Lumber, Davis clearly stands for the proposition that a mortgagee is not a necessary party to a hen foreclosure action, and that a foreclosure action which omits a mortgagee is void only as to the mortgagee.

This interpretation of Davis is supported by the Supreme Court's decision in Washington Asphalt Co. v. Boyd, 63 Wn.2d 690, 388 P.2d 965 (1964). There, the court rejected the argument that mortgagees are indispensable or necessary parties, as opposed to proper parties, in a hen foreclosure action. The court cited Davis, among other authorities, and stated that "[m]ortgagees, prior or subsequent, being considered only as proper parties, it was not incumbent upon plaintiff to join them, and plaintiffs failure to join them was not fatal to its foreclosure action." Washington Asphalt, at 696; see also Cathcart-Maltby-Clearview Comm'ty Coun. v. Snohomish Cy., 96 Wn.2d 201, 206, 634 P.2d 853 (1981) (citing Washington Asphalt for the proposition that mortgagees are not necessary parties); Queen Anne Painting, supra at 395-96 (noting that, under Washington Asphalt, a mortgagee is not a necessary party). Thus, it appears to us that Curtis Lumber incorrectly states the law in Washington regarding necessary parties in hen foreclosure actions.³

Respondents apparently concede that mortgagees are normally only proper, not necessary, parties. They argue, however, that Curtis Lumber can be read for a different proposition, i.e., that once a hen claimant names , a mortgagee as a defendant and seeks to foreclose against that mortgagee's interest, the mortgagee is a necessary party without whom the foreclosure action is absolutely void as to all parties. This argument is not persuasive and is not supported by Curtis Lumber or respondents' other authorities.

Whether US Bancorp was a named defendant or not is irrelevant to the question of whether it is a "necessary" party to the foreclosure action under RCW 60.04.100. Under the aforementioned cases, a "necessary" party is a party without whom the foreclosure action cannot proceed. A hen foreclosure action can proceed without a mortgagee, Davis; Washington Asphalt, and therefore, naming a mortgagee as a defendant in the foreclosure complaint does not suddenly make them "necessary" to the prosecution of the foreclosure action under RCW 60.04.100.

Furthermore, respondents' authorities do not support their argument. Nothing in Curtis Lumber supports respondents' argument except perhaps the statement that "a mortgagee is a necessary party to a hen foreclosure action . . .". As noted above, that statement of the law is based on a misreading of Davis and is not correct. More importantly, the Curtis Lumber court did not predicate its holding on, and said nothing about, the fact that the party foreclosing the hen in that case had named the mortgagee as a defendant in the complaint and sought foreclosure of the mortgagee's interest. Rather, the court found the mortgagee was a necessary party because the court mistakenly thought that Davis held that a mortgagee is a necessary party to a hen foreclosure action.

Respondents' reliance on 57 C.J.S. Mechanics' Liens § 284(e) (1948) is also misplaced. That reference states in part:

In the absence of a statute to the contrary, a mortgagee is a proper, but not a necessary, party to a proceeding to enforce a mechanic's Hen unless it is sought to subject his interest to the lien.

(Italics ours.) However, the reference goes on to explain the emphasized portion of the above-quoted language, stating that

a mortgagee is not a necessary party to a proceeding to enforce a mechanic's lien, but one seeking to establish a mechanic's lien must make a mortgagee of the premises a party if he desires to bind the interest of the mortgagee.

(Footnote omitted. Italics ours.) Thus, the reference only stands for the proposition, recognized by Washington decisions such as Davis, that the mortgagee's interest cannot be affected by a hen foreclosure unless the foreclosing party joins the mortgagee as a party to the foreclosure action.

Respondents also cite Queen Anne Painting for the proposition that the words "all necessary parties" in RCW 60.04.100 include all parties with recorded interests, including lenders who hold deeds of trust recorded prior to the hen claimant commencing work on the project. That proposition is not supported by Queen Anne Painting. In that case, the party foreclosing a mechanics' hen had not timely served or joined another party who had a separate mechanics' lien on the property, and had also failed to serve a bank holding a deed of trust on the home. After noting that the hen claimant must, under RCW 60.04.120, join ah parties who have hens against the same property, the court held that the failure to join the party holding the other mechanics' hen against the property rendered the foreclosure action void. The court did not reach the question of whether the failure to serve the bank was fatal to the action. However, the court did note that, under Washington Asphalt, a mortgagee is merely a proper party, not a necessary party to a foreclosure action. Queen Anne Painting, at 395-96. Therefore, contrary to respondents' assertions, it appears that the Queen Anne court would have followed the Washington Asphalt holding (i.e., that mortgagees are not necessary parties) had it been necessary for the court to reach that issue.

In short, respondents' argument and the trial court's decision are directly contrary to the decisions of our State Supreme Court in Davis and Washington Asphalt, and the trial court should have only dismissed the foreclosure action as to US Bancorp.

The order of partial summary judgment and the award of $2,212.50 in costs and attorney's fees to respondents under RCW 60.04.130 are reversed. MB's request for attorney's fees on appeal is denied without prejudice to request such fees below should it emerge as the "prevailing party" on remand.

1 RCW 60.04.100 currently provides:

No lien created by this chapter binds the property subject to the hen for a longer period than eight calendar months after the claim has been filed unless an action be commenced in the proper court within that time to enforce such hen; or, if credit be given and the terms thereof be stated in the claim of hen, then eight calendar months after the expiration of such credit; and in case such action be not prosecuted to judgment within two years after the commencement thereof, the court, in its discretion, may dismiss the same for want of prosecution, and the dismissal of such action or a judgment rendered therein, that no hen exists, shah constitute a cancellation of the hen: Provided, That, for the purposes of this chapter, an action to enforce such hen shall not be timely commenced unless the filing of summons and complaint in a court of competent jurisdiction shah be made prior to the expiration of the eight month period, and service of the summons and complaint shall he made upon all necessary parties personally, or by commencement of service by publication, not later than ninety days after the filing of the summons and complaint.

(Italics ours.)

Effective April 1, 1992, this section will be repealed and replaced with a substantially different section. Laws of 1991, ch. 281, § 14, p. 1440. The new section deletes the term "necessary parties" and requires service only upon "the owner of the subject property . . .."

2 RCW 60.04.120 currently provides:

"The liens provided by this chapter, for which claims have been filed, may be foreclosed and enforced by a civil action in the court having jurisdiction; in any action brought to foreclose a hen, all persons who, prior to the commencement of such action, have legally filed claims of liens against the same property, or any part thereof shall be joined as parties, either plaintiff or defendant; and no person shall begin an action to foreclose a hen upon any property while a prior action begun to foreclose another hen on the same property is pending, but if not made a party plaintiff or defendant to such prior action, he may apply to the court to be joined as a party thereto, and his hen may be foreclosed in such action; and no action to foreclose a hen shah be dismissed at the instance of a plaintiff therein to the prejudice of another party to the suit who claims a hen."

Effective April 1, 1992, this section will be repealed and replaced with a substantially different section.

3 We note that Curtis Lumber has been cited by one commentator for the proposition that a mortgagee is a necessary party in an action to enforce a mechanics' lien. 3A L. Orland, Wash. Prac. § 5223, at 366 (3d ed. 1980). Two other commentators have cited Davis (which is cited in Curtis Lumber) for the same proposition. 3 Wash. State Bar Ass'n, Real Property Deskbook § 65.8, at 65-12 (1986); 1A B. Barker & I. Scharf, Wash. Prac., Methods of Practice § 35.9 (3d ed. 1989). The conflict between Curtis Lumber and Washington Asphalt is noted in Trautman, Joinder of Claims and Parties in Washington, 14 Gonz. L. Rev. 103, 116 n.56 (1978-1979).