Essential Reading: An Important Article Concerning Mechanics’ Liens in Pennsylvania (PA)

I have included an article I co-authored regarding Mechanics’ Liens.

Copyright. ALM. 2013. DO NOT REPRODUCE.

Critical Mechanics’ Lien Appeal Decided 

“Timing is everything,” as the adage goes, especially in the realm of mechanics’ liens claims.  The current incarnation of the Lien Law, more specifically section 1502, calls for filing within six (6) months after the completion of the work.  Hence it should come as no surprise that fixing the completion date is integral in assessing the timeliness of a claim on preliminary objections.  Despite the factual nuances of a recent Cumberland County residential dispute, a well-reasoned opinion just handed down by our Superior Court on December 18, 2012 is illustrative of an issue that might arise, namely how corrective efforts undertaken by a builder figure into such a completion analysis.

The facts in the Neelu Enterprises, Inc. v. Ashok and Asha Agarwal case (2012 PA Super. 276, No. 787 MDA 2012) are fairly straightforward.  A husband and wife (“Owners”) engaged the services of a builder (“Claimant”) a few years back, the parties having entered into a lucrative new home construction contract; the agreement called for approximately $700,000 in payments for a home in Hampden Township.  In December 2010, the consumers, apparently disenchanted with the builder’s efforts, elected to terminate its services and bring in their own subcontractors to finish the project.  At that time, $585,000 already had been tendered toward the contract.  Resultantly, a Termination Agreement (“Termination”) was executed between the parties on December 8, 2010.  Pursuant to that Termination, the Owners remitted an additional $15,000 to Claimant, an amount apparently disbursed to Claimant’s subcontractors on the job.  Critically, Claimant and other subcontractors were at the premises as late as January 7, 2011 “to observe and correct certain deficiencies.”

Alleging non-payment of $76,000 for denied profit outstanding on the underlying contract plus $20,000 for the purchase and installation of additional casement windows, Claimant perfected its Claim on June 23, 2011, within six (6) months of January 7, 2011.  Nevertheless, Owners raised preliminary objections, challenging the subject Claim on two (2) bases, time and waiver.  The trial proceeded to consider evidence concerning the question timeliness, evidence that primarily came in the form of oral testimony.  During the hearing on preliminary objections, Owners elicited evidence from the Claimant as well as its subcontractors.  Owners honed in on the nature of if the services rendered in January 2011, chiefly whether that work was remedial in nature.  The trial court sided with the Owners and sustained their preliminary objections, leading to the instant appeal ensued.  Albeit three (3) issues were properly raised on appeal, the gravamen of the challenge relates to timeliness.  In other words, did the lower court get it wrong on the appropriate date of completion?

The Superior Court began its analysis by identifying the appropriate standard of review, which is as follows:  When reviewing the dismissal of a [mechanics’ lien claim] based upon preliminary objections in the nature of a demurrer, we treat as true all well-pleaded material, factual averments and all inferences fairly deducible therefrom.  Where the preliminary objections will result in the dismissal of the action, the objections may be sustained only in cases that are clear and free from doubt.  To be clear and free from doubt that dismissal is appropriate, it must appear with certainty that the law would not permit recovery by the plaintiff upon the facts averred.  Any doubt should be resolved by a refusal to sustain the objections.  Moreover, we review the trial court’s decision for an abuse of discretion or an error of law.  See Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Co., 41 A.3d 16, 22 (Pa. Super. 2012)(quoting Ira G. Steffy & Son, Inc. v. Citizens Bank of Pennsylvania, 7 A.3d 278, 282 (Pa. Super. 2010)). 

Then, proceeding to treat as true the well-pleaded facts as alleged in the subject Claim, the Superior Court acknowledged that the operative dates were November 8, 2009 and January 10, 2011, as presented by Claimant.  Thus, a Claim filed on June 23, 2011, which was the case here, would appear to be timely (within 6 months of January 10, 2011).  Notably however, the Mechanics’ Lien Law (49 P.S. section 1505) permits the trial court to dig deeper, to take evidence by deposition or otherwise, where an issue of fact is raised via preliminary objection; this procedure clearly differs from preliminary objection analysis in other contexts.  And, the Superior Court found the testimonial evidence and Termination document quite informative.

According to the Superior Court’s, Appellant’s arguments were essentially variations on the same basic theme, mainly that the lower court erred in considering the December 8, 2010 Termination in arriving at the appropriate completion date.  However, without “authority or case law that would prohibit the trial court’s reliance on such documentation in order to establish a completion date,” the Superior Court simply could not overlook it.  Even more damning for the Claimant, were statements made by its owner, which proved that he believed his company had been terminated as early as December 8, 2010.  For example, he had testified that “[he] refused to touch that place after they fired me.”  Coupled with his own subcontractors’ testimony that their presence at the subject property in January 2011 was merely toward the end of rectifying outstanding complaints, the Superior Court accepted the trial court’s rationale.  No evidence had been presented that the January 2011 work represented substituted work under the original contract or that a contractual modification had been in place.  At the end of the day, Claimant’s two (2) week delay was enough to undermine a fairly sizable Claim.   The Mechanics’ Lien Law can be a real trap for the unwary.

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Harper J. Dimmerman is an adjunct professor at Temple University’s Fox School of Business and published novelist. Bradley J. Osborne is formerly an attorney with Mr. Dimmerman’s office. Their firm represents clients in various litigation and real estate law matters.  They may be reached at harper@hjdlaw.net or 215-545-0600.

James M. Lammendola is an Instructor at Temple University’s Fox School of Business who was in private practice for twenty years. He may be reached via e-mail at james.lammendola@temple.edu or telephone 267-254-3324.