Meadows Landing Associates, LP (“MLA”) contracted with Richard Lawson Excavating, Inc. (“Lawson”) for work on MLA’s 200-acre subdivision, including earthwork, grading, excavating and pond construction.  Lawson then contracted with Oakdale Equipment Corporation (“Oakdale”) to rent heavy equipment for the work.  More than one year later, MLA terminated Lawson for failure to achieve substantial completion on time.  Oakdale and Lawson both filed mechanics’ lien claims against MLA.

After Oakdale and Lawson filed complaints to obtain judgments on their mechanics’ liens, MLA filed preliminary objections seeking dismissal alleging that under the Mechanics’ Lien Law (1) Oakdale failed to comply with statutory notice requirements, and (2) Lawson failed to comply with statutory apportionment requirements.  After filing its preliminary objections, MLA paid the disputed sums into court, which discharged the mechanics’ liens.  In both cases, the trial court sustained MLA’s preliminary objections and dismissed the complaint.  Oakdale and Lawson both appealed.

In the appeals, there were three mechanics’ lien issues:

  • whether MLA’s payments into court to discharge the liens resulted in waiver of its right to file preliminary objections;
  • whether Oakdale satisfied the notice requirements for perfecting a mechanics’ lien; and
  • whether Lawson was required to apportion its mechanics’ lien claims.

In its review, the Superior Court of Pennsylvania stated that it was “required to apply the strictures of the Mechanics’ Lien Law rigorously” and that “to secure the benefits of the statute, one must strictly adhere[] to its requirements.”

MLA’s Payments Did Not Result in Waiver of its Right to File Preliminary Objections

Both Oakdale and Lawson argued that the trial court erred in considering MLA’s preliminary objections because MLA’s payments into court to discharge the mechanics’ liens resulted in waiver of MLA’s right to file preliminary objections.  The court rejected this argument because, in both cases, MLA filed timely preliminary objections before it paid the disputed funds into court.

Oakdale Did Not Satisfy the Notice Requirements[i]

Oakdale offered three arguments that the trial court erred in finding that Oakdale did not satisfy the notice requirements for perfecting a mechanics’ lien.  The Superior Court disagreed with each.

First, Oakdale argued that MLA waived its improper notice claim by actively participating in the case.  The Superior Court disagreed, reasoning that to waive an improper notice claim a party must take action on the merits.  MLA only had ruled Oakdale to file a complaint and filed POs related to improper notice, neither of which constituted action on the merits.

Second, Oakdale argued that its complaint and certificate of service satisfied the notice requirements because they put MLA on notice of the mechanics’ lien within the required 20-day period.  The Superior Court disagreed, reasoning that Oakdale did not—in the complaint or in any other filing—“set forth the date and manner of service,” both of which are statutory requirements for perfecting a mechanics’ lien.

Third, Oakdale argued that it was in substantial compliance with the statute and that any procedural defect should be overlooked because MLA had actual notice of the lien so was not prejudiced.  The Superior Court disagreed, repeating that the notice requirements are strictly construed so that failure to comply may result in dismissal.  The court found no authority for introducing concepts of prejudice or liberal construction to the notice requirements.  It also held that the doctrine of substantial compliance applies only to the form of notice and not the strict service-of-notice requirements mandated by the statute.

The Superior Court affirmed the trial court’s order sustaining MLA’s POs and dismissing Oakdale’s complaint based on Oakdale’s failure to comply with proper notice requirements for its mechanics’ lien claim.

Lawson Was Required to Apportion its Claims[ii]

Lawson offered three arguments that the trial court erred in finding that Lawson was required to apportion its mechanics’ liens claims.  The Superior Court disagreed with each.

First, Lawson argued that MLA’s payment of funds into court rendered the issue moot because there is no need for apportionment once a lien has been discharged.  The Superior Court disagreed, reasoning that although discharge of the lien removed the encumbrances—which allowed MLA to sell individual lots—it did not determine the validity of the claim.

Second, Lawson argued that its work did not constitute an “improvement” under the statute so was not subject to apportionment.  The Superior Court rejected this argument by referencing the statutory definition of “improvement”, which includes “any building, structure or other improvement of whatsoever kind or character erected or constructed on land[.]”This includes excavation, grading, filling, paving, and landscaping when such work is incidental to erection, construction, alteration, or repair, even if completed on other property to supply services to the improvement.  For the disputed work, Lawson had furnished labor, materials and related equipment to perform grading, excavating and pond construction; such work falls squarely within the statutory definition of an improvement subject to apportionment.

Third, Lawson argued that it would have been practically impossible to apportion its work among separate lots because the boundaries were not yet defined when Lawson performed its work.  Lawson instead filed two liens for one lump sum: one lien against Harmony Medical Center on one lot, and another lien against MLA on twelve other lots.  The Superior Court held that the statute required Lawson to file a separate claim against each lot at a different docket number.  It reasoned that even when work is integral and necessary to an entire subdivision, the statute provides a mechanism for dividing and asserting individual claims against each lot.

The Superior Court affirmed the trial court’s order sustaining MLA’s preliminary objections and dismissing Lawson’s complaint based on Lawson’s failure to comply with proper apportionment requirements for its mechanics’ lien claims.

To view the full text of the court’s decision, courtesy of Lexis ®, click here.