Two recent opinions from Pennsylvania's Superior Court clarify aspects of the practice and procedure surrounding mechanics' lien claims in the commonwealth—one case addressed whether a subcontractor may serve its formal notice of intent to lien upon an owner via FedEx and the other addressed when, if ever, grounds for statutory preliminary objections to a mechanics' lien claim will be deemed waived.

• Superior Court permits service of subcontractor's formal notice of intent to lien via FedEx.

In American Interior Construction & Blind v. Benjamin's Desk, 206 A.3d 509 (Pa. Super. Ct. 2019), the Superior Court was asked to determine whether the procedural rules of the Mechanics' Lien Law were to be interpreted strictly or whether substantial compliance would suffice.

In American Interior, Benjamin's Desk had retained Brass Castle Building (Brass) as the general contractor for the construction of office space improvements. Brass retained American Interior Construction & Blind  (AICB) as a subcontractor. AICB completed its work in December 2016 and AICB alleged that Brass failed to pay AICB in full.  AICB served a timely notice of its intent to file a mechanics' lien against Benjamin's Desk. However, AICB used FedEx to deliver its notice of intent. AICB then filed its complaint to enforce the lien claim.

Benjamin's Desk filed preliminary objections in the nature of a demurrer alleging AICB failed to comply with the service-of-notice requirements under the Mechanics' Lien Law. In response, AICB filed a response arguing that personal service of the formal notice by FedEx is personal service by an adult in the same manner as a writ of summons in assumpsit and therefore was expressly permitted by section 501(d) of the Pennsylvania's Mechanics' Lien Act of 1963 (Lien Law), 49 P.S. Section 1501(d).

Section 501(d) of the Mechanics' Lien Law of 1963 provides that formal notice of intent to lien "may be served by first class, registered or certified mail on the owner or his agent or by an adult in the same manner as a writ of summons in assumpsit or if service cannot be so made then by posting … the improvement."

The trial court sustained the preliminary objections and struck AICB's complaint for lack of proper notice. AICB timely appealed. The primary issue before the Superior Court was whether a subcontractor may properly serve its formal notice of intent to lien via FedEx.

The Superior Court looked to Pennsylvania Rule of Civil Procedure 400.1, which governs the service of original process for actions commenced in Philadelphia. This rule states in relevant part, "In an action commenced in the first Judicial District, original process may be served … within the county by the sheriff or a competent adult."  The Pennsylvania Supreme Court had previously interpreted Rule 400.1 as it related to the delivery of a praecipe to issue a writ of summons via certified mail. The Supreme Court had held that neither prior Pennsylvania cases nor the rules themselves contemplated punishing a plaintiff for technical missteps "where he has satisfied the purpose of the statute of limitations by supplying a defendant with actual notice." See McCreesh v. City of Philadelphia, 888 A.2d 664 (Pa. 2005). Thus, pursuant to McCreesh as interpreted by the Superior court in American Interior, "technical noncompliance" with the Rules of Civil Procedure for original process may be excused "absent intent to stall the judicial machinery or actual prejudice."

Applying that rule to the record before it, the Superior Court reversed and reinstated AICB's complaint because "even if AICB failed to comply with the service requirements for original process, Benjamin's Desk received actual notice and no party has alleged an intent to stall or actual prejudice." The Superior Court's reliance on McCreesh may implicitly suggest service of formal notice of intent to lien via FedEx is neither acceptable service by mail under Section 501(d) of the Lien Law nor acceptable service by competent adult under Rule 400.1(a)(1). However, the American Interior opinion makes clear that technical compliance with the lien law's service-of-notice requirement will be excused and service of a formal notice of intent to lien will be upheld as long as the owner actually receives the notice, the manner was not intended to stall the judicial machinery, and the owner suffered no prejudice as a result of the technically improper service. Given this standard, service by FedEx was permissible in American Interior and likely will be in all other cases going forward.

• Superior Court declares that grounds for statutory preliminary objections to a mechanics' lien claim are waived if not asserted in (or prior to the filing of) responsive pleading to the complaint to obtain judgment on the lien.

Section 505 of the Lien Law, 49 P.S. Section 1505, provides, "any party may preliminarily object to a mechanics' lien claim upon a showing of an exemption or immunity of the property from lien, or for lack of conformity with this act … Failure to file an objection preliminarily shall not constitute a waiver of the right to raise the same as a defense in subsequent proceedings." Thus, Section 505 seems to suggest that the statutory defenses to a lien claim (i.e., immunity of the property from lien or failure to perfect the lien in accordance with the requirements of the Lien Law) cannot be waived and may be asserted at any time to invalidate a mechanics' lien.  However, in Terra Firma Builders v. King, 215 A.3d 1002 (Pa. Super. Ct. 2019), the Pennsylvania Superior Court expressly rejected this interpretation of Section 505.

In Terra Firma Builders, the mechanics' lien claimant failed to properly perfect its lien because it did not file an affidavit of service for the lien as required by Section 502(a)(2) of the Lien Law, 49 P.S. Section 1502(a)(2). However, the property owners did not file statutory preliminary objections seeking to strike the lien as improperly perfected, nor did they file preliminary objections to the claimant's complaint to obtain judgment on the lien pursuant to the Pennsylvania Rules of Civil Procedure challenging the propriety of service.

After the close of pleadings, the lien action was consolidated with the claimant's civil action for breach of contract and the consolidated cases went to trial. Following trial, judgment was entered in favor of the owners and the parties filed post-trial motions. With those post-trial motions pending, the owners filed a motion to strike the lien for failure to comply with the lien law due to failure to file an affidavit of service.

The trial court interpreted the owners' motion to strike as a preliminary objection under Section 505, read that statutory section to allow an owner to file statutory preliminary objections at any time, even after the enforcement action and trial is over, and struck the lien for failure to comply with the Lien Law's procedural requirements.

On appeal, a divided panel of the Superior Court reversed, with Senior Judge Dan Pellegrini and Judge Deborah A. Kunselman holding that that the word "preliminary" as used in Section 505 of the Lien Law must have some meaning. Thus, according to the majority, Section 505 must be construed as requiring an owner to assert Section 505 defenses "in the enforcement proceeding in accordance with the manner provided for in the applicable rules of civil procedure." The majority went on to conclude that because "the lack of service defense to the claim was not raised by preliminary objection or new matter as required under the Rules of Civil Procedure in the enforcement proceeding," the "owners' motion to strike was untimely and the issue was raised."

In dissent, Judge Mary P. Murray argued that "Section 505 unambiguously places no limit on when a party may raise a defense to the enforcement of the lien" and allows an owner to move to strike a lien at any time, even after the conclusion of enforcement proceedings. On March 10, the Pennsylvania Supreme Court agreed to hear the owners' appeal of the Superior Court's decision. Thus, in the coming months, we should expect more clarity on the proper interpretation of Section 505.

Marc Felezzola is a shareholder in the litigation and construction services groups of Babst Calland Clements & Zomnir. He has extensive experience in cases involving the Pennsylvania's Mechanics' Lien Law, Commonwealth Procurement Code and the Contractor and Subcontractor Payment Act. Contact him at 412-773-8705 or [email protected].

Ben Wright is an associate in the construction and litigation groups of the firm. He has experience in cases involving professional liability claims and has handled a wide range of construction disputes and issues, including disputes regarding delay, payment, change orders, differing site conditions, acceleration and inefficiencies. Contact him at 412-394-6690 or [email protected].