Construction Law

Contractor Prevails in Lien Claim on Leased Property (Charles and Joanne Haselwood v. Bremerton Ice Arena 2009 WL 1803272)

By John P. Ahlers

In 1971, the United States Secretary of Interior deeded 17.6 acres of land in downtown Bremerton to the City of Bremerton for use as a park and recreation center. The conveyance from the government prohibited the City from leasing the land except to another government agency, but did allow the City to provide recreational facilities and services by entering into private concession agreements.

In 2002, the City of Bremerton and a private entity known as the Bremerton Ice Arena, Inc. (BIA) entered into a concession agreement pursuant to which BIA received a concession to develop, construct, and operate an ice "Arena" on the 17.6 acre plot. The concession agreement specifically provided the City retained ownership of the land, that BIA could not encumber the land, that BIA would build and operate an ice arena on the property, and that after the end of the concession all improvements would revert to the City of Bremerton.

BIA investors borrowed $4 M (Haselwood's) to fund the construction of the arena. The Haselwood's loan was secured by a commercial security interest and deed of trust. The Deed of Trust was secured by the real property at the arena location, the concession agreement, and all improvements.

Before the Deed of Trust was recorded on September 13, 2002, BIA's construction manager obtained a bid from RV Associates, Inc. (RV) to perform the site work and utilities for the Project. RV mobilized equipment to the Project on September 6, 2002 and signed a contract with BIA on September 20, 2002. Haselwood's Deed of Trust was recorded on September 13, 2002 a week after RV first delivered equipment to the site.

RV performed the site work and utility work, some changes were made to the plans and specifications which RV claimed increased the cost of its work. RV was not paid $101,905.30 and recorded a mechanics lien against BIA and the Arena in July of 2003.

BIA defaulted on its promissory note to the Haselwood's in August of 2003 and Haselwood filed a complaint against BIA, RV and other creditors who had an interest in the Arena. Haselwood sought a declaration from the Court that their security interest was prior to all other liens on the property and sought a decree to foreclose on the Deed of Trust. RV's position was that it delivered equipment to the site on September 6, 2002 one week before the Haselwoods recorded their lien and thus RV had priority over the Haselwoods Deed of Trust.

RV moved for summary judgment seeking a decision from the Court that its Deed of Trust was superior to all of their claims in the property that RV's lien claim was inappropriate because the Arena was not "public property". The trial court ruled that the contractor had no claim against the concession agreement or the real property and Haselwood prevailed.

RV appealed, asserting that even though RV recorded its lien nearly 10 months after it had started work on the Project, that its lien claim related back to the first day it had performed work on the Project, and the RV's lien attached to the improvements to the real property under the concessions agreement. The Washington Supreme Court ruled that under the concessions agreement BIA could only own improvements to the land and pursuant to the Washington lien statutes RV had a lien on the improved property to the extent BIA had an interest in the improved property. Since the building on the property belong to BIA (the land belonged to the City) RV's lien claim attached to the improvements on the property (buildings and substructures). The court also ruled that RV's lien related back to the first day it had mobilized equipment to the Project even though the contract was signed after the equipment was mobilized and even though the lien claim was filed 10 months after the equipment was brought to the job. RV's lien had priority over Hazelwood's deed of trust.

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Full post as published by Construction Law Blog on July 06, 2009 (boomark / email).