Pennsylvania Superior Court Prohibits Mechanics’ Liens In Connection With Heavy Equipment Rentals
November 12, 2024
By Carl L. Engel
The Pennsylvania Superior Court, in the case Cleveland Brothers Equipment Company, Inc. v. Arcadia North Land, has just reversed a judgment in favor of a rental company on a mechanics-lien claim against a general contractor that had failed to pay for the use of an excavator on a construction project. After the rental was not paid for, the rental company filed a mechanics’ lien against the property where the project was located, to secure payment while the court addressed its claim. The trial court entered judgment in its favor, finding that the rental company had supplied “materials” used in construction and, therefore, was entitled to a mechanics lien on the property until it was paid. Last week, however, the Superior Court reversed the decision, finding that only materials which had been incorporated into the project itself, such as wires and pipes in the walls, could be subject to mechanics’ liens, and not rental equipment. The difference is important, because filing a mechanics’ lien without being entitled to do so can expose the filer to liability for “slandering the title” of the property owner.
In the fall of 2020, Arcadia North Land LLC (“Arcadia”) hired Blue Rock Construction, Inc. (“Blue Rock”) to manage the development of an industrial park. Blue Rock hired Dobrinksi Brothers to prepare the site for construction. To perform this work, Dobrinski Brothers leased an excavator from Cleveland Brothers Equipment Company, Inc. (“Cleveland Bros”). From October 2020 through July 2021, Dobrinski Brothers used the excavator to excavate and grade the site.
Dobrinski Brothers, however, failed to pay Cleveland Bros $158,998.94 owed under the lease for the use of the excavator. On November 15, 2021, Cleveland Bros filed a mechanics-lien claim and placed a lien on Arcadia’s property. In January 2022, Blue Rock intervened in the lawsuit and agreed to post a bond of $317,997.88 (twice the amount owed) in exchange for Cleveland Bros releasing the lien.
On March 22, 2022, Cleveland Bros filed a complaint against Arcadia and Blue Rock to obtain judgment on its mechanics-lien claim. On July 18, 2023, the trial court entered summary judgment in Cleveland Bros’s favor, finding that it had satisfied the requirements of the Pennsylvania Mechanics’ Lien Law because it had “supplied machinery reasonably necessary for and actually used to excavate the owner’s site.” The judgment was for the entire amount owed, i.e., $158,998.94, to be paid by Blue Rock. Blue Rock appealed to the Superior Court.
On November 4, 2024, the Superior Court reversed. The court observed that a mechanics’ lien “is an extraordinary remedy that provides the subcontractor with a priority lien on property,” in addition to its contractual remedies. The right to a mechanics’ lien is available to “subcontractors for labor or materials furnished in the erection or construction” of a building, and provides the subcontractor with security for their payment at the beginning of its lawsuit. With a lien in place, the property owner is prohibited from selling the property until the subcontractor’s claim is paid or otherwise resolved.
While the Superior Court agreed with the trial court that Cleveland Bros was a subcontractor, as it had a contract with Blue Rock for its work at the site, it disagreed that the excavator constituted “materials” for the purpose of the Mechanics’ Lien Law. As the Superior Court explained, to constitute “materials” within the meaning of the statute, the equipment must be “incorporated into the improvement.” In other words, the equipment must be “actually used in the building structure.” Because the excavator did not become a part of the building constructed at the site, it was not a “material” that could support a mechanics’ lien. Cleveland Bros, therefore, was not entitled to file one.
This distinction between “materials” which can support a lien and those which are not is critical, because filing a lien improperly could expose the filer to liability for “slander of title.” Specifically, if a mechanics’ lien is filed “falsely and maliciously,” the filer may be required to pay the property owner’s costs to defend against the claim and remove the lien, as well as any consequential damages that may have arisen because the property could not be sold while the lien was in place. Therefore, to avoid penalties for “slander of title,” subcontractors should not file liens in connection with rental equipment, as the Superior Court has now made it clear that it is not “material” that can support a mechanics’ lien.