CKP, Inc. v. GRS Const. Co.

• Decision Date: 23 December 1991
• Docket Number: Nos. 23681-4,23733-1-I
• Citation: CKP, Inc. v. GRS Const. Co., 821 P.2d 63, 63 Wn.App. 601 (Wash. App. 1991)
• Court: Washington Court of Appeals
• Parties: CKP, INC., a Washington corporation, d/b/a Parsons Construction, Respondent, Cross-Appellant, v. GRS CONSTRUCTION CO., a Washington corporation; Park South Apartments, a Washington limited partnership, Appellants/Cross-Respondents, Gary R. Steinvall, the general partner thereof; Washington Mortgage Corporation, a Washington corporation; Contractors Bonding & Insurance Co., a foreign corporation, Defendants, Gerald W. Harkleroad and Jane Doe Harkleroad; Jack L. McIntosh and Jane Doe McIntosh; M & H Investments, a Washington general partnership, Jack L. McIntosh and Gerald W. Harkleroad, General Partners thereof; United Bank, a Savings Bank, a Washington corporation; Alpine Decking & Roofing, Inc., a Washington corporation, Third-Party Defendants.

Page 601

63 Wn.App. 601

821 P.2d 63

CKP, INC., a Washington corporation, d/b/a Parsons Construction, Respondent, Cross-Appellant, v. GRS CONSTRUCTION CO., a Washington corporation; Park South Apartments, a Washington limited partnership Appellants/Cross-Respondents Gary R. Steinvall, the general partner thereof; Washington Mortgage Corporation, a Washington corporation Contractors Bonding & Insurance Co., a foreign corporation, Defendants Gerald W. Harkleroad and Jane Doe Harkleroad; Jack L. McIntosh and Jane Doe McIntosh; M & H Investments, a Washington general partnership, Jack L. McIntosh and Gerald W. Harkleroad, General Partners thereof; United Bank, a Savings Bank, a Washington corporation; Alpine Decking & Roofing, Inc., a Washington corporation, Third-Party Defendants.

Nos. 23681-4, 23733-1-I.

Court of Appeals of Washington, Division 1.

Dec. 23, 1991.

Reconsiderations Denied Feb. 5 and

Feb. 28, 1992.

Lawrence B. Bailey, Desmond Brown; and C. Nelson Berry, III, Seattle, for appellants/cross-respondents.

Evan E. Inslee and Peter Deming, Bellevue, for respondent, cross-appellant.

BAKER, Judge.

Park South Apartments (Park South), a limited partnership, and GRS Construction Company (GRS) appeal from the trial court's judgment and decree of foreclosure of materialmen's liens in favor of CKP. CKP cross-appeals from the trial court's summary judgment dismissal of its liens pursuant to RCW 60.04.010 and .040, to the extent that they were based on the statutory agency of GRS for Park South. CKP further alleges that its fee award should have been in the form of an in personam rather than an in rem judgment against Park South. We affirm in part and reverse in part.

I. FACTS

CKP entered into a subcontract with GRS, the prime contractor, to do site work and utility installation for the construction of an apartment complex, Park South. CKP commenced work on the Park South site on May 9, 1985. A work schedule of 45 days was contemplated in the original contract, based upon the scope of the work then set forth. For various reasons, delays ensued and disputes arose. In the course of the project, CKP performed certain extra work at the request of GRS prior to the issuance of written change orders authorizing payment for extras.

On July 16, 1985, the grading plans were revised. The new grading plans would have required virtually all of the installed utilities to be adjusted. The parties were unable to agree on a contract modification pertaining to a revised schedule for completion and whether additional change orders were necessary to complete the revised plans. GRS threatened to withhold payment unless CKP agreed to terms it proposed. However, CKP never agreed to the proposed terms and walked off the job on or about September 4, 1985.

CKP filed its lien on October 3, 1985, in the amount of $56,375. CKP mailed Park South the materialmen's notice required by RCW 60.04.020 on October 24, 1985. The notice of lien specifically alleged that additional work in excess of that required by the subcontract had been performed, and the full value of such labor, material and equipment was being calculated. CKP reserved the right to supplement the claim of lien by such additional amounts.

A complaint was subsequently filed for foreclosure of the lien. In the complaint and in an amended complaint, CKP alleged an additional $17,005 was owing, and that as a result of the changes and modifications to the scope of work demanded by GRS, CKP had suffered further damages in an amount to be proven at time of trial. CKP further expressly prayed to be allowed to amend its claim of lien to conform to the proof presented at trial.

GRS, Park South, and other parties involved at the trial level counterclaimed against CKP for damages in the approximate sum of $325,000, with other amounts to be proven at trial.

The parties stipulated that all Park South partners, including limited partners brought into the partnership after the filing of CKP's lien, and United Bank, which provided substitute financing in 1986 after the filing of the lien, were "fully aware of the existence of this lawsuit, the lien foreclosure action, and that a Lis Pendens was against the property."

In a pretrial motion for summary judgment, the trial court ruled that CKP was not required to send a materialmen's notice if GRS was acting as an actual agent for Park South, but that a question of fact remained as to whether GRS was acting in such a capacity. The court further ruled that CKP's lien authorized by RCW 60.04.040 could not be created through a statutory agent. It dismissed CKP's cause of action for foreclosure of its lien pursuant to RCW 60.04.010 for materials furnished prior to August 24, 1985 (60 days preceding notice) and its lien pursuant to RCW 60.04.040 pursuant to RCW 60.04.040 for labor, materials or equipment furnished in the clearing, grading or filling of the subject property pursuant to RCW 60.04.040, to the extent that GRS ordered the work solely in its capacity as a statutory agent for Park South.

A 6-week bench trial ensued. The court held that the threats by GRS to withhold payment for completed work and the refusal to allow further change orders for the revised plans constituted a substantial breach of the contract by GRS and justified CKP's termination of the work. The court further concluded that because GRS was Park South's actual agent, CKP was not required to give a materialmen's notice to Park South or GRS and that CKP's lien was valid. The court allowed the lien to be amended in the full amount of the judgment. Judgment was awarded in the amount of $102,670.50, plus prejudgment interest from September 15, 1985, in the amount of $40,167.63, together with attorney fees in the amount of $89,500, for a total judgment of $232,338.13 against GRS, secured by the real property owned by Park South.

Further recitation of the facts will follow as necessary for resolution of the issues herein.

II. PARK SOUTH APPEAL

A. Actual Agency of GRS for Park South

Park South seeks dismissal of CKP's lien, claiming that GRS was not its actual agent. It argues that GRS retained the right to control the manner and method in which its work was done, a characteristic of an independent contractor as opposed to an agent. CKP responds that GRS was the actual agent of Park South for the limited purpose of subjecting Park South's property to liens. CKP asserts that Park South gave GRS that authority and consented to a limited agency for the purpose of establishing liens under RCW 60.04.010 and .040.

RCW 60.04.040 authorizes a lien against real property for labor, materials and equipment furnished in the clearing, grading and filling of such property where such work is "at the request of the owner of any real property, or his agent". RCW 60.04.010 authorizes a lien against real property for labor, materials, and equipment furnished at the instance of the owner of the property or his agent. The section further provides:

and every registered or licensed contractor, registered or licensed subcontractor, architect, or person having charge, of the construction, alteration or repair of any property subject to the lien as aforesaid, shall be held to be the agent of the owner for the purposes of the establishment of the lien created by this chapter[.]

An express or implied agency relationship may exist when one party acts at the instance of and, in some material degree, under the direction and control of another. Hewson Constr., Inc. v. Reintree Corp., 101 Wash.2d 819, 823, 685 P.2d 1062 (1984). An agent is distinguished from an independent contractor who is not subject to control as to the means employed to perform a job. Freeman v. Navarre 47 Wash.2d 760, 767, 289 P.2d 1015 (1955); see also Patent Scaffolding Co. v. Roosevelt Apartments, 171 Wash. 507, 510, 18 P.2d 857 (1933), abrogated on other grounds in Crown Controls, Inc. v. Smiley, 110 Wash.2d 695, 700, 706, 756 P.2d 717 (1988).

The agency concept is flexible. The relation may be established for a limited purpose, or it may be broad. The relationship may be express or arise by inference from the relation of the parties. Whether one is the agent of another for a specific purpose depends in part upon whether that person has power to act with reference to that purpose. Freeman, 47 Wash.2d at 768, 289 P.2d 1015. Under lien statutes such as RCW 60.04.010 and .040, which require work to be done at the request of the owner or his agent, very clear proof of strong circumstances showing an intimate relationship between the owner and the making of the improvement is required to give rise to an implied agency. See Hewson, 01 Wash.2d at 824, 685 P.2d 1062. The burden of establishing the agency relationship is on the party asserting it. Hewson, 101 Wash.2d at 823, 685 P.2d 1062.

Gary R. Steinvall was the key decisionmaker for both GRS and Park South. He attended the weekly development meetings, acting in both capacities. He signed the contract between GRS and Park South in both capacities. The parties stipulated that information known to Steinvall in any capacity was simultaneously imputed to GRS and Park South. Thus, we conclude that CKP has shown a sufficiently intimate relationship between Park South and the making of improvements to its property by GRS to give rise to an implied agency. We further conclude that the evidence supports the trial court's determination that GRS was acting as Park South's actual agent for the purpose of incurring liens against the Park South property. ¹

Finally, where materials are furnished to an owner's actual agent, it is not necessary to give the owner written notice thereof pursuant to RCW 60.04.020. R.H. Freitag Mfg. Co. v. Boeing Airplane Co., 55 Wash.2d 334, 340, 347 P.2d 1074 (1959). Nor is notice under RCW 60.04.020 a prerequisite to claiming a lien for labor. See Neil F. Lampson Equip. Rental & Sales, Inc. v. West Pasco Water Sys., Inc., 68 Wash.2d 172, 173-75, 412...