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PA Superior Court Affirms Decision Limiting Mechanics’ Liens on Multiple Parcels

On January 29, 2016, in a non-precedential opinion, the Pennsylvania Superior Court affirmed a decision by the Lycoming County Court of Common Pleas that limited a contractor’s ability to obtain a Mechanics’ Lien for work performed on multiple parcels of land.  In Linde Corp. v. Black Bear Prop., LP, 2015 Pa. Dist. & Cnty. Dec. LEXIS 389 (Pa. County Ct. 2015), the trial court decided the following issues: (1) who was the true owner of four parcels of land located in Lycoming County for the purposes of filing a Mechanics’ Lien; and (2) whether all four parcels were eligible for inclusion in the Lien.

Black Bear Property and a number of its subsidiaries and/or related entities (collectively “BB”) hired Linde Corporation (“Linde”) to construct a pumping station on three parcels of land in Lycoming County. The pumping station was designed to draw water from the Lycoming Creek for sale to companies involved in hydraulic facturing operations. Electrical wiring providing the completed pumping station with power was routed through an existing structure on a fourth parcel, Parcel 151, which was contiguous to the three parcels on which the pumping station was actually built. Linde sought to impose a Mechanics’ Lien on all four parcels after it completed its work on the pumping station but was only partially paid.

Stewart Dibble was the previous owner of the three parcels on which the pumping station was built, and had apparently agreed to transfer ownership of those parcels to BB for a 25% ownership interest in the BB entities. BB argued at trial that Linde’s Mechanics’ Lien was invalid because Linde’s contract was with BB, a tenant, not the owner, Dibble. See 49 P.S. § 1303 (stating that “[n]o lien shall be allowed against the estate of an owner in fee by reason of any consent given by such owner to a tenant to improve the leased premises unless it shall appear in writing signed by such owner that the erection, construction, alteration or repair was in fact for the immediate use and benefit of the owner”). Dibble never provided such written consent and BB argued that Dibble had an “oral lease” with BB. BB claimed that the final transfer of ownership from Dibble to BB had not occurred (although BB admitted that Dibble did own a 25% interest in the BB entities) because the conveyance was contingent upon the performance of certain occurrences that never transpired. Although a deed memorializing the transfer was executed, it was never recorded or delivered.

The Trial Court ultimately determined that Linde’s Mechanics’ Lien was valid because BB was the constructive owner of the three parcels, but declined to extend the lien to Parcel 151. On appeal, the Superior Court affirmed the Trial Court’s ruling.

Regarding BB’s constructive ownership of the three parcels, the Superior Court confirmed that the Trial Court’s factual findings adequately demonstrated that BB was an owner, not a lessee. Specifically, the Trial Court repeatedly determined that BB’s witnesses lacked credibility and regularly offered contradictory and confusing testimony regarding the terms of Dibble’s supposed “oral lease” to BB. Additionally, the Trial Court noted that, in a companion case filed in Luzerne County, BB specifically asserted that Dibble held no ownership interest in the three parcels. Finding no error of law in the Trial Court’s findings or rationale, the Superior Court affirmed that BB was the constructive owner of the three parcels and that Linde’s Mechanics’ Lien was proper.

Regarding the inclusion of Parcel 151 in the Lien, the Trial Court held that Linde was only entitled to include the value of the work relating to the electrical wiring in the amount of the Lien. Under 49 P.S. § 1201, “improvements” eligible for inclusion in Mechanics’ Liens include work relating to “furnishing, excavating for, laying, relaying, stringing and restringing … wires, whether on the property improved or upon other property, in order to supply services to the improvement.” Yet because the Lien Law draws a distinction between work performed on the property itself and work benefitting “other property,” the wiring was not an improvement to Parcel 151 because the work was performed in order to supply services to the improvement – the pumping station – located on a different parcel.

Furthermore, the wiring work did not rise to the level of an “improvement, substantial additional, or adaptation of an existing improvement” sufficient to justify the inclusion of the entirety of Parcel 151 in the Lien. The wiring providing electricity to the pumping station was run through a junction box that previously existed in the structure on Parcel 151. Therefore, the wiring did not affect a material change to Parcel 151 or the previously existing structure and the work was incidental to the property. After determining that precedent cited by BB did not apply to the instant situation because Parcel 151, while joining the other three parcels, was not directly affected by the improvements at issues and received no demonstrable benefit therefrom, the Superior Court affirmed the Trial Court’s holding.

Points to keep in mind: (1) a party may be deemed the constructive owner of property subject to improvements even in the absence of a recorded or delivered deed; and (2) a parcel of land may only be subjected to a lien if the relevant work and improvements associated convey a demonstrable benefit to that parcel.