Defense Digest

Pennsylvania Superior Court Expands Scope of Mechanic's Lien Law

In a decision rendered in September of 2004 in Wendt & Sons v. New Hedstrom, Corporation, 2004 Pa. Super. 355, 858, A.2d 631 (Pa. Super. 2004), the Pennsylvania Superior Court addressed the issue of what type of fixture constituted an "improvement" that was "permanent" and "substantial" as defined by the Pennsylvania Mechanic's Lien Law, 49P.S. §1209 (1) and §1301.

This case arose from a situation where a construction company (Wendt & Sons) was a subcontractor on a job for the owner of a plant, New Hedstrom Corporation. The subcontractor delivered and erected a new hydraulic plastics injection system at the owner's plant. After the work was performed, the owner refused to pay, and the subcontractor filed a mechanics lien suit. In response to the mechanic's lien suit, the owner's counsel filed preliminary objections seeking to dismiss the claim because the work was not subject to protection under the Pennsylvania Mechanic's Lien Law. According to the owner, the work performed by the subcontractor was neither "permanent" nor "substantial." The trial court, the Court of Common Pleas of Bedford County, sustained the owner's preliminary objections and dismissed the claim.

On appeal, the Superior Court reversed the trial court, finding that the work performed by the subcontractor did fall within the parameters of the Pennsylvania Mechanic's Lien Law.

The subcontractors' mechanic's lien claim stated the contractor contracted with the owner to purchase and install a hydraulic plastics injection machine at the owner's facility. The subcontractor provided the men and equipment necessary to remove and load the machine from a site in Oklahoma and to transport, unload, and assemble it in Pennsylvania for use at the owner's plant. The Statement of Mechanic's Lien alleged that the subcontractor "erected buildings at the time work was performed at the premises." The subcontractor further asserted it "furnished men, equipment, removal, transportation, unloading, mobilization, and assembly and contracted with (the owner) for removal and unloading of a 225OHPM hydraulic plastics injection machine from Oklahoma City, Oklahoma, for transportation to and unloading and assembly at [the owner's plant] in Bedford, Pennsylvania."

In its preliminary objections to the Mechanic's Lien suit, the owner averred that the work performed by the subcontractor did not meet the requirements of an "improvement" as defined by the Pennsylvania Mechanic's Lien Law because it was not "permanent" and "substantial."

Based upon the preliminary objections filed by the owner and the subcontractor's denial of the allegations contained in the preliminary objections, the trial court ordered the subcontractor to file an amended complaint specifying and describing the exact work performed by the subcontractor, the nature and size of the machine erected, and what specifically was involved in moving and installing the machine.

The subcontractor thereafter filed an amended complaint alleging that the equipment installed at the owner's plant was purchased by the owner, weighed approximately 325,000 pounds, was too large to be moved without being disassembled, and was so heavy that it required loading upon a system of dollies consisting of 21 axles in order to be moved. The subcontractors amended complaint further alleged the subcontractor used its special skills to move the equipment to Bedford, Pennsylvania from Oklahoma and that, upon arrival, a large opening had to be made in the wall of the plant in order to move the equipment into the building. The amended complaint further alleged that a reinforced foundation had to be installed in the building so that the equipment could be set down without sinking into the ground and that a special pit had to be built beneath the equipment in order to receive the product the machine would produce. Finally, the amended complaint alleged the roof of the plant above the equipment had to be reinforced with steel girders to hold a hoist to move molds in and out of the equipment and that the building's electrical and water systems had to be re-worked to provide power to run the equipment and water to cool it, making the equipment as a much a permanent part of the existing building as any other part of the building.

As set forth above, the trial court sustained the owner's preliminary objections, finding the amended complaint did nothing to support the subcontractor's claim that permanent work was done on the property. The Superior Court, however, reversed the trial court, relying upon the following definitional sections of the Pennsylvania Mechanic's Lien Law.

Pennsylvania Mechanic's Lien Law, 49P.S. §1201.

Based upon this language, the court found that the subcontractor's work constituted "the erection and construction of a substantial addition to an existing improvement or any adaptation of an existing improvement rendering the same fit for a new or distinct use and affecting a material change in the anterior or the exterior thereof." As such, the court determined that this work constituted an improvement as defined by the Mechanic's Lien Law.

In rendering this decision, the court placed particular emphasis on the fact that the installation of this equipment at the owner's plant rendered the original building fit for a new or distinct use and affected a material change in the interior of the plant. The court discounted evidence that third party contractors unassociated with the claimant subcontractor performed incidental alterations necessary to accommodate the installation and operation of the machinery at the owner's plant. (Reinforcing the foundation, erecting a special pit to contain the unit and re-enforcing the roof to handle a hoist to move molds in and out of the unit). The court noted the subcontractor's erection of the machinery was the final piece of the puzzle con-comitant with the incidental improvements necessary to allow for the unit to operate. The court also noted in a foot note that the size of the machinery was not dispositive in terms of causing the court to reverse the determination of the trial court. Rather, the court stated, based upon the pleadings of record, there existed certain issues of fact which would not properly be resolved through preliminary objections in the nature of a demurrer but, rather, required exploration through evidentiary presentation.

*Dave and Ted work in our Philadelphia, PA office. Dave, an associate, can be reached at (215) 575-2702 or dmakara@mdwcg.com. Ted, a shareholder, can be reached at (215) 575-2713 or tkobus@mdwcg.com.