Is the advance lien-waiver requirement in our subcontract enforceable, and does signing a waiver before payment give up the lien?
The clause is void and the waiver is not. The Court of Appeals in Tri-State Mechanical recorded that Wis. Stat. § 779.135(1) voids a provision that requires a subcontractor to waive its right to a construction lien before it can get paid, and that the policy behind the statute was to ensure that contractors and subcontractors were paid for their work before they were required to produce a lien waiver. But the court held that the waiver the subcontractor actually furnished was not void as a result: Wis. Stat. § 779.05(1) allows a subcontractor who has signed a contract containing a lien waiver provision to refuse to furnish a waiver unless paid in full for the work or material to which the waiver relates, so the legislature gave the subcontractor a choice, and a subcontractor who tenders the waiver before payment has made it. Section 779.05(1) is not only a right to refuse, and the rest of it runs the other way: a waiver binds whether or not consideration was paid and whether it was signed before or after the labour or material was furnished, any ambiguity in it is construed against the person who signed it, and it is deemed to waive all lien rights for all labour and materials furnished at any time for that improvement except to the extent the document specifically and expressly limits the waiver to a particular portion. Those last words are where the drafting lives: the Supreme Court of Wisconsin held in Great Lakes Excavating that a waiver whose face specifically and expressly restricted it to the particular portion of the work the signer had actually been paid for did limit the waiver, and it reversed the court of appeals.
The trap
That is the trap in one sentence: voiding the clause does not undo the waiver. Jones argued that reading § 779.135(1) this way places an unreasonable level of legal sophistication on subcontractors, and the court answered that every person, sophisticated or otherwise, is presumed to know the law. A subcontractor in Wisconsin therefore has to act on the void clause at the moment it is asked for a waiver, not litigate about it afterwards, and the owner's reliance on the waiver is not what the analysis turns on. Two things the void clause does not take away, and one it does not give back. A furnished waiver is a waiver of lien rights only, and not of any contract rights the claimant otherwise has. But the fallback against the owner is narrow: Tri-State Mechanical affirmed the judgment against the subcontractor and held its unjust-enrichment claim failed as a matter of law, because the owner had already paid the prime contractor the contract price in full plus excess costs.
13 authorities
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
We also agree with Jones' assertion that the policy behind the statute was to ensure that contractors and subcontractors were paid for their work before they were required to produce a lien waiver.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
However, we do not agree that the construction lien waiver filed by Jones is consequently void. Wisconsin Stat. § 779.05(1) specifically allows a subcontractor who has signed a contract containing a lien waiver provision to "refuse to furnish a waiver unless paid in full for the work or material to which the waiver relates."
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
However, as a general proposition, every person, sophisticated or otherwise, is presumed to know the law.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Jones correctly indicates that Wis. Stat. § 779.135 (1) voids a provision that requires a subcontractor to waive its right to a construction lien before it *477 can get paid.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Wisconsin Stat. § 779.135 states in relevant part: The following provisions in contracts for the improvement of land in this state are void: (I) Provisions requiring a contractor, subcontractor or material supplier to waive his or her right to a construction hen or to a claim against a payment bond before he or she has been paid for the labor or materials or both that he or she furnished.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Thus, the legislature has provided a subcontractor facing a void construction lien waiver contract provision with a choice: it can either tender a lien *478 waiver prior to being paid or refuse to do so until it is paid. By giving the subcontractor a choice, the legislature has essentially made a policy decision that endorses whatever course of action the subcontractor takes. Here, Jones submitted a construction lien waiver before being paid notwithstanding the void contract waiver provision. In light of § 779.05(1), Jones' construction lien waiver is valid.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Jones argues this conclusion places an unreasonable level of legal sophistication on subcontractors and assumes Jones knew it could refuse to comply with a void contract provision.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
We reject Jones' invitation to supplement the statute with an "innocent party" requirement because this is a matter for legislative action.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Wisconsin Stat. § 779.05(1) reads in full: Any document signed by a lien claimant or potential claimant and purporting to be a waiver of construction lien rights under this subchapter, is valid and binding as a waiver whether or not consideration was paid therefor and whether the document was signed before or after the labor or material was furnished or contracted for. Any ambiguity in such document shall be construed against the person signing it. Any waiver document shall be deemed to waive all lien rights of the signer for all labor and materials furnished or to be furnished by the claimant at any time for the improvement to which the waiver relates, except to the extent that the document specifically and expressly limits the waiver to apply to a particular portion of such labor and materials: A lien claimant or potential lien claimant of whom a waiver is requested is entitled to refuse to furnish a waiver unless paid in full for the work or material to which the waiver relates. A waiver furnished is a waiver of hen rights only, and not of any contract rights of the claimant otherwise existing.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Jones argues the trial court erred by concluding Jones (1) tendered a valid construction lien waiver and (2) could not recover the reasonable value of its services on an unjust enrichment theory. We affirm the judgment.
- case2004 WI App 100Tri-State Mechanical, Inc. v. Northland CollegeWis. Ct. App.decided 2004read it at the source ↗
The words that state the rule
Here, it is unrefuted that Northland paid Tomlinson the contract price plus excess costs. Thus, Northland has fully paid for the benefits it received. Therefore, because Jones' unjust enrichment claim fails as a matter of law, the trial court did not erroneously exercise its discretion by denying Jones equitable relief.
- case2022 WI 44Great Lakes Excavating, Inc. v. Dollar Tree Stores, Inc.Wis.decided 2022read it at the source ↗
The words that state the rule
Construction liens can be waived under Wis. Stat. § 779.05(1). That statute provides in relevant part: Any waiver document shall be deemed to waive all lien rights of the signer for all labor, services, materials, plans, or specifications performed, furnished, or procured, or to be performed, furnished, or procured, by the claimant at any time for the improvement to which the waiver relates, except to the extent that the document specifically and expressly limits the waiver to apply to a particular portion of such labor, services, materials, plans, or specifications. The statute further directs that "[a]ny ambiguity in such document shall be construed against the person signing it.
- case2022 WI 44Great Lakes Excavating, Inc. v. Dollar Tree Stores, Inc.Wis.decided 2022read it at the source ↗
The words that state the rule
The construction lien waiver document on its face satisfies the statutory requirements of Wis. Stat. § 779.05(1) necessary to limit the waiver of Great Lakes' lien rights. The document "specifically and expressly" restricts the lien waiver to "a particular portion of such labor, services, materials, plans, or specifications"——the $33,448 received in consideration of the waiver. By the Court.—The decision of the court of appeals is reversed, and the cause is remanded to the circuit court for further proceedings consistent with this opinion.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.