Pennsylvania Superior Court Declares that Complaint to Enforce Mechanics’ Lien Claim May Be Filed at Same Docket Number as Mechanics’ Line Claim

Pennsylvania Superior Court Declares that Complaint to Enforce Mechanics’ Lien Claim May Be Filed at Same Docket Number as Mechanics’ Line Claim

On October 1, 2013, the Pennsylvania Superior Court issued a precedential opinion holding that when determining whether to apply the 2007 Amendments to the Mechanics’ Lien Law, the key date is the date upon which the lien is filed, and not the dates on which the work was performed.

In Hogg Construction, Inc. v. YorkTowne Medical Center, L.P., 2013 Pa. Super. 263 (2013), Hogg Construction, Inc. (“Hogg”) performed work necessary to “fit-out” a condominium unit connected to the building of the YorkTowne Medical Center, L.P. Hogg substantially completed its fit out work on the condominium unit in question in September of 2006 and last billed any work to the unit on September 17, 2006. However, on November 30, 2006, Hogg returned to the unit and installed an electrical receptacle and replacement smoke detector. Hogg billed its November 30, 2006 work to the job number associated with the construction of the core and shell of the complex rather than to the unit in question.

On April 30, 2007, Hogg filed a Mechanics’ Lien Clam against the condominium fit-out. In February of 2008, Hogg subsequently filed a Complaint upon Mechanics’ Lien at the same docket number where it filed its Mechanics’ Lien Claim. In response, the condominium owners filed a motion to strike the mechanics’ lien and a motion for summary judgment. The trial court granted those motions, holding that because Hogg completed its work in 2006, the 2007 amendments to the Mechanics’ Lien Law, which extended the time frame within which one must file a mechanics’ lien claim from four months to six months from the date of contract completion, did not apply to Hogg. Thus, the trial court determined that Hogg did not timely file its mechanics’ lien within the requisite four month period. The trial court further held that Hogg failed to properly file its complaint to enforce its mechanics’ lien claim because the complaint “was not docketed to a docket number separate and distinct from that of the mechanics’ lien claim.”

On appeal, the Superior Court reversed both holdings of the trial court. First, the Superior Court concluded that when assessing whether the amendments to the Mechanics’ Lien Law apply to a lien, the relevant date is the date upon which the lien is filed, and not the dates upon which the work is performed. Thus, the court concluded that because Hogg’s lien was filed after the amendments took effect, Hogg had six months within which to file its claim. The court based its conclusion upon the fact that the Mechanics’ Lien Law provides that it applies to any lien filed “as provided in this act”, and as such, it is the Mechanics’ Lien Law as it exists on the date of filing of a mechanics’ lien claim that should govern the claim filed.

The Superior Court then reached the issue of whether a complaint to enforce a mechanics’ lien claim must be docketed at a separate docket number than the mechanics’ lien claim it seeks to enforce and held that regardless of whether or not filing both pleadings at the same docket number constitutes a procedural defect, it had no negative affect on the substantial rights of any of the litigants, and therefore should not serve as a basis for striking Hogg’s mechanics’ lien claim. Thus, while it remains somewhat unclear whether filing a mechanics’ lien claim and a complaint to enforce the same at the same docket number constitutes a procedural defect, a party seeking to use any such defect as grounds for striking the mechanics’ lien claim has the burden of establishing that the procedural defect negatively affected its rights.

Finally, the Superior Court concluded that although the facts demonstrated that Hogg did not bill any work to the condominium unit in question after September 17, 2006, viewing the evidence in the light most favorable to Hogg as the non-moving party, a genuine issue of material fact existed regarding whether Hogg’s November 30, 2006 work on the unit was a part of the work required by Hogg’s contract to perform fit-out work. Thus, the court also reversed the trial court’s grant of summary judgment.

The Hogg case is important for several reasons. First, there are currently proposals for additional amendments to Pennsylvania’s Mechanics’ Lien Law pending before the Pennsylvania General Assembly. Should those amendments pass, the Hogg decision may provide guidance regarding how to determine whether or not the new amendments apply to a mechanics’ lien claim. Additionally, Hogg confirms that the general practice of filing one’s complaint to enforce a mechanics’ lien at the same docket as the mechanics’ lien claim should not create grounds for striking that mechanics’ lien claim. Finally, Hogg indicates that regardless of billing documents, it is for the finder of fact to determine the date upon which a contractor last performs work on a project for mechanics’ lien purposes.

Mechanics’ Liens: Good News for Contractors; Bad News for Construction Lenders

Mechanics’ Liens: Good News for Contractors; Bad News for Construction Lenders

In Commerce Bank/Harrisburg v. Kessler, 46 A.3d 724 (Pa. Super. Ct. 2012), the Superior Court held that a bank’s mortgage is not entitled to “super-priority” under the Mechanics’ Lien law unless all of the proceeds from the mortgage “are used to pay all or part of the cost of completing erection, construction, alteration or repair of the mortgaged premises.” This means that if any proceeds from a mortgage are used for “soft costs” (e.g. – taxes, closing costs, advertising, etc.) of construction, the “super priority” for the entire mortgage will be lost and a contractor’s lien will have priority over a bank’s mortgage if construction started before the mortgage was recorded.

Mechanics’ Liens: Is a Move to the Ohio Model on the Way?

Mechanics’ Liens: Is a Move to the Ohio Model on the Way?

Currently pending before the Pennsylvania Senate Labor and Industry Committee, House Bill No. 1602 (the “Bill”), if and when enacted, would add new notice requirements to the Lien Law. The majority of the Bill focuses on the creation of a new lien notice system for project owners and subcontractors to follow. In order to manage and facilitate the new notice requirements, the Bill calls for the creation of a “State Construction Notices Directory” (“Directory”) website by July 1, 2013. The Pennsylvania Department of Labor and Industry will be responsible for the Directory. The Directory will serve as the database for owners to file a “Notice of Commencement” and subcontractors to file a “Notice of Furnishing.” These two types of notices are critical creations of the Bill, and appear to be modeled after the process that has been in place in Ohio for years.

These new notice requirements seek to address the longstanding problem in Pennsylvania of owners and contractors not knowing the identity of subcontractors or material suppliers furnishing labor or materials for a project. As a result, an owner or contractor often did not even have knowledge of the identity of a potential lien claimant, let alone the fact that they possessed a claim, until receiving a notice of intent to file a lien. The Bill provides the owner with the right to file a Notice of Commencement with the Directory before work on an improvement begins in order to identify all subcontractors and material suppliers that may have lien rights through their subsequent required filing of a Notice of Furnishing.

Mechanics’ Liens: Labor Unions’ Right to File a Lien as a Subcontractor

Mechanics’ Liens: Labor Unions’ Right to File a Lien as a Subcontractor

In Bricklayers of Western Pa. Comb. Funds, Inc. v. Scott’s Development Co., 41 A.3d 16 (Pa. Super. Ct. 2012), the Superior Court held that (1) the substantive provisions of the Lien Law (as opposed to its procedural provisions) must be liberally construed to effect the Lien Law’s remedial purpose and (2) labor unions fell within the definition of “subcontractor” under the Lien Law, and therefore had the right to file a mechanics’ lien claim. On November 28, 2012, the Pennsylvania Supreme Court granted Scott’s Development Company’s petition for allowance of appeal. Therefore, in 2013 the Supreme Court will address whether the Superior Court interpreted the Lien Law too liberally and whether a labor union has the right to file a mechanic’s lien claim under the Lien Law.