Court Opinion

ID: 9405446
Source: CourtListenerOpinion
Date Created: 2023-06-28 16:13:07.395003+00
Date Added: 2024-06-11T17:20:22.081338
License: Public Domain

J-A28038-22

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37

 JEFFREY M. BROWN ASSOCIATES,          :   IN THE SUPERIOR COURT OF
 LLC                                   :        PENNSYLVANIA
                                       :
                   Appellant           :
                                       :
                                       :
              v.                       :
                                       :
                                       :   No. 1152 EDA 2022
 MAIN STREET PHASE, II, LP AND         :
 MAIN STREET CINEMA, LP N/K/A          :
 MAIN STREET PHASE II, LP              :

              Appeal from the Order Entered March 30, 2022
  In the Court of Common Pleas of Chester County Civil Division at No(s):
                             2022-00788-ML

 JEFFREY M. BROWN ASSOCIATES,          :   IN THE SUPERIOR COURT OF
 LLC                                   :        PENNSYLVANIA
                                       :
                   Appellant           :
                                       :
                                       :
              v.                       :
                                       :
                                       :   No. 1153 EDA 2022
 MAIN STREET PHASE, II, LP AND         :
 MAIN STREET CINEMA, LP N/K/A          :
 MAIN STREET PHASE II, LP              :

              Appeal from the Order Entered March 29, 2022
  In the Court of Common Pleas of Chester County Civil Division at No(s):
                             2022-00789-ML

 JEFFREY M. BROWN ASSOCIATES,          :   IN THE SUPERIOR COURT OF
 LLC                                   :        PENNSYLVANIA
                                       :
                   Appellant           :
                                       :
                                       :
              v.                       :
                                       :
                                       :   No. 1154 EDA 2022
J-A28038-22

 MAIN STREET PHASE, II, LP AND           :
 MAIN STREET CINEMA, LP N/K/A            :
 MAIN STREET PHASE II, LP                :

              Appeal from the Order Entered March 30, 2022
  In the Court of Common Pleas of Chester County Civil Division at No(s):
                             2022-00790-ML

 JEFFREY M. BROWN ASSOCIATES,            :   IN THE SUPERIOR COURT OF
 LLC                                     :        PENNSYLVANIA
                                         :
                   Appellant             :
                                         :
                                         :
              v.                         :
                                         :
                                         :   No. 1155 EDA 2022
 MAIN STREET PHASE, II, LP AND           :
 MAIN STREET CINEMA, LP N/K/A            :
 MAIN STREET PHASE II, LP                :

              Appeal from the Order Entered March 30, 2022
  In the Court of Common Pleas of Chester County Civil Division at No(s):
                             2022-00791-ML

 JEFFREY M. BROWN ASSOCIATES,            :   IN THE SUPERIOR COURT OF
 LLC                                     :        PENNSYLVANIA
                                         :
                   Appellant             :
                                         :
                                         :
              v.                         :
                                         :
                                         :   No. 1156 EDA 2022
 MAIN STREET PHASE, II, LP AND           :
 MAIN STREET CINEMA, LP N/K/A            :
 MAIN STREET PHASE II, LP                :

              Appeal from the Order Entered March 30, 2022
  In the Court of Common Pleas of Chester County Civil Division at No(s):
                             2022-00792-ML

 JEFFREY M. BROWN ASSOCIATES,            :   IN THE SUPERIOR COURT OF
 LLC                                     :        PENNSYLVANIA
                                         :
                   Appellant             :

                                   -2-
J-A28038-22

                                           :
                                           :
              v.                           :
                                           :
                                           :     No. 1157 EDA 2022
 MAIN STREET PHASE, II, LP AND             :
 MAIN STREET CINEMA, LP N/K/A              :
 MAIN STREET PHASE II, LP                  :

              Appeal from the Order Entered March 30, 2022
  In the Court of Common Pleas of Chester County Civil Division at No(s):
                             2022-00793-ML

BEFORE: PANELLA, P.J., LAZARUS, J., and SULLIVAN, J.

MEMORANDUM BY SULLIVAN, J.:                                    FILED JUNE 28, 2023

      Jeffrey M. Brown Associates, LLC (“JMB”), appeals from the orders

sustaining the preliminary objections filed by Main Street Phase, II, LP, Main

Street Cinema, LP n/k/a/Main Street Phase II, LP (collectively “Main Street”)

and striking JMB’s six mechanics’ lien claims.           We vacate the orders and

remand for further proceedings.

      This dispute arises from the construction of the Ashbridge Exton

Apartments,   an   apartment    complex        located    in    Exton,   Pennsylvania

(hereinafter “the Project”).   In 2018, JMB and Main Street entered into a

contract for the construction of the Project, which consists of six multi-story

buildings providing approximately 400 luxury apartment units as well as

amenity and commercial spaces (“the Contract”).                 Fidelity and Deposit

Company of Maryland (“F&D”), acting as surety, issued a performance bond

guaranteeing JMB’s complete and timely work in accordance with the Contract.

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J-A28038-22

      In June 2020, Main Street issued a notice of default to JMB based on its

defective and untimely performance of the Contract. Main Street also asserted

a claim under F&D’s performance bond. In July 2020, F&D began directly

financing JMB’s operations to complete the Project. F&D retained Nicholson

Professional Consulting to administer an escrow account to control funds for

the payment of contract balances. In connection with the notice of default

and the assistance being provided by F&D, the president of JMB executed a

Letter of Direction to Main Street in July 2020.     Therein, JMB irrevocably

directed Main Street to make all subsequent payments for debts due to JMB

under the Contract to an escrow account outside JMB’s control. The Letter of

Direction to Main Street provided, inter alia:

           This is to advise you that [JMB], hereby irrevocably requests
      that any and all payment due or to become due of any kind or
      nature on account of the above[-]described Contract and Project
      be made payable to Nicholson Professional Consulting FBO Jeffrey
      M. Brown Associates, LLC Special Account. . . ..

            Please be advised that this letter of direction is irrevocable
      by [JMB] and that [F&D] agrees to this arrangement.
      Furthermore, there will be no modification or change in these
      instructions without the written authorization and express consent
      of [F&D].

Letter of Direction, 7/2/20, at 1.

      On November 3, 2020, JMB, Main Street, and F&D entered into a

Liquidated Damages Settlement Agreement and Dedication of Contract

Balance (the “Dedication Agreement”). The Dedication Agreement provides

that all balances due and owing from Main Street to JMB under the Contract

                                     -4-
J-A28038-22

must be paid to F&D or into an escrow account controlled by Main Street and

F&D:

              7. [Main Street’s] Collection of Settlement Amount from
       Project Payments: . . . When Final Completion is achieved, [Main
       Street] will either release the Retainage and any unpaid Contract
       Balance to [F&D], or a portion thereof that [Main Street]
       determines is due and owing, and deposit the remaining Retainage
       amount and unpaid Contract Balance, if any, into an escrow
       account maintained by a third party escrow agent selected by the
       parties (“Escrow Account”), such that the full amount of Retainage
       and unpaid Contract Balance has either been paid to [F&D] and/or
       into the Escrow Account.

             8. Escrow Account: The Parties have agreed that the firm of
       Land Services USA will serve as the escrow agent to retain
       escrowed funds, in an interest-bearing account, subject only to
       release by agreement of [Main Street] and [F&D] or by court order
       enforcing an arbitration award as provided in Sections 14 and 15
       below.
                                    ****

             10. Owner Payment of Contract Balance: [Main Street]
       dedicates the unpaid Contract Balance to [F&D] . . . All amounts
       previously held by [Main Street], as listed in Section 5, are
       understood by the parties to be part of the Unpaid Balance payable
       to [F&D] and will be included in the Unpaid Balance for invoicing
       in accordance with the Contract. JMB will void the two (2) joint
       checks payable to Delinco and JMB issued by Main Street on June
       5, 2020 and JMB will consent to the release of the remaining
       amounts withheld previously by [Main Street] which are in a joint
       JMB/[Main Street] checking account.

Dedication Agreement, 11/3/20, at 3.1

____________________________________________

1 The Dedication Agreement further provides that, as of November 2020, F&D
had expended $8,076,113.63 pursuant to the performance bond in order to
finance JMB’s completion of the Project. See Dedication Agreement, 11/3/20,
at 3, ¶ 9.

                                           -5-
J-A28038-22

        On February 2, 2022, JMB filed six separate mechanics lien claims, each

relating to a different building included in the Project (i.e., buildings A through

F).    In each mechanics’ lien claim, JMB averred that: (1) as the general

contractor on the Project, JMB provided labor, materials, equipment and

services to complete the Project; JMB’s work on the Project was completed in

September 2021; (3) all conditions precedent to JMB’s right to payment have

been satisfied; (4) Main Street has made no payments in support of the

Project’s completion since January 2021; (5) the total amount remaining due

by Main Street for the entire Project is $7,521,422.00. JMB further explained

in each claim that:

              The Dedication Agreement provided for [F&D] to advance
        funds to JMB to assist JMB in fulfilling its obligations under the
        Contract, subject to [Main Street] agreeing to pay the remaining
        [C]ontract balance to [F&D] to be used in support of JMB’s
        completion efforts. The remaining contract balance – in excess of
        $7 million – would be invoiced by JMB on a monthly basis in
        accordance with the Contract. The Dedication Agreement also
        provided that if [Main Street] disputed certain amounts invoiced
        by JMB, it would deposit those amounts into a third-party escrow
        account . . . pending resolution of those disputes.

Mechanics’ Lien Claims, 2/2/22, at unnumbered 3, n.1.

        In each case, Main Street filed preliminary objections on the basis that

the mechanics’ lien claims failed to conform with 49 P.S. § 1301(a)2 because

____________________________________________

2   Section 1301(a) provides, in relevant part, as follows:

        General Rule. Except as provided under subsection (b), every
        improvement and the estate or title of the owner in the property
(Footnote Continued Next Page)

                                           -6-
J-A28038-22

there were no debts due by Main Street to JMB.           JMB filed responses in

opposition, and Main Street filed sur-replies. The trial court thereafter entered

orders, one at each docket, granting Main Street’s preliminary objections and

striking JMB’s mechanics’ lien claims.3 JMB filed timely notices of appeal at

each docket, and in each case, both JMB and the trial court complied with

Pa.R.A.P. 1925.       This Court consolidated the appeals upon uncontested

motions by JMB.

       JMB raises the following issues for our review:

       1. Did the trial court commit reversible error by finding that no
          debt was owed to JMB, when payment was explicitly directed
          to be made into an account “for the benefit of” JMB?

       2. Did the trial court commit reversible error by finding, as a
          matter of law, that the Letter of Direction evidences JMB’s
          “intent” to assign its payment rights to [F&D] (thereby waiving
          its mechanic’s lien right), even though the Letter of Direction
          is not a contract document, but instead, is extrinsic evidence,
          which therefore means that the trial court decided a factual
          question on preliminary objections without hearing all factual
          evidence on the dispute?

       3. Did the trial court commit reversible error by finding that the
          Letter of Direction assigned JMB’s right to payment to [F&D],
____________________________________________

       shall be subject to a lien, to be perfected as herein provided, for
       the payment of all debts due by the owner to the contractor . . .
       for labor or materials furnished in the erection or construction . .
       ..

49 P.S. § 1301(a).

3 On March 29, 2022, the trial court entered an order at docket number 2022-
00789. On March 30, 2022, the trial court entered orders at docket numbers
2022-00788, 2022-00790, 2022-00791, and 2022-00792. On April 5, 2022,
the trial court entered an order at docket 2022-00793.

                                           -7-
J-A28038-22

           even though the Letter of Direction merely changed the payee
           account for [Main Street’s] payments, contains no assignment
           language at all, and provides for [Main Street] to pay contract
           funds into an account “for the benefit of” JMB?

       4. Did the trial court commit reversible error by necessarily
          finding that JMB prospectively waived its statutory right to file
          a mechanics lien, when [Main Street] provided no consideration
          for such waiver and there is no manifestation of a clear and
          unequivocal intent to waive such rights?

       5. Did the trial court commit reversible error by holding that JMB
          lacked standing to file a mechanics lien when JMB was always
          the statutory “contractor” that furnished material and labor to
          the Project, and [Main Street] did not pay JMB for the material
          and labor it provided to the Project?

JMB’s Brief at 5-6 (unnecessary capitalization omitted, issues reordered for

ease of disposition).4

       Our standard of review of an order granting preliminary objections is as

follows:

              Our standard of review of an order of the trial court
       overruling or granting preliminary objections is to determine
       whether the trial court committed an error of law.        When
       considering the appropriateness of a ruling on preliminary
       objections, the appellate court must apply the same standard as
       the trial court.
____________________________________________

4 We note with disapproval that, although JMB purports to raise five issues for
our review, the argument section of its brief sets out only three issues which
do not correspond to the issues as set forth in the Statement of Questions
Presented. See Pa.R.A.P. 2119(a) (providing that “[t]he argument shall be
divided into as many parts as there are questions to be argued; and shall have
at the head of each part—in distinctive type or in type distinctively displayed—
the particular point treated therein, followed by such discussion and citation
of authorities as are deemed pertinent”). Moreover, JMB discusses multiple
sub-issues in each of its arguments. However, as these defects do not hinder
our appellate review, we decline to find waiver based on JMB’s failure to
adhere to our Rules of Appellate Procedure.

                                           -8-
J-A28038-22

            Preliminary objections in the nature of a demurrer test the
      legal sufficiency of the complaint. When considering preliminary
      objections, all material facts set forth in the challenged pleadings
      are admitted as true, as well as all inferences reasonably
      deducible therefrom.       Preliminary objections which seek the
      dismissal of a cause of action should be sustained only in cases in
      which it is clear and free from doubt that the pleader will be unable
      to prove facts legally sufficient to establish the right to relief. If
      any doubt exists as to whether a demurrer should be sustained, it
      should be resolved in favor of overruling the preliminary
      objections.

Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011) (citation

omitted).

      A mechanics’ lien is an extraordinary remedy that should only be

afforded to contractors or subcontractors who judiciously adhere to the

requirements of the Mechanics’ Lien Law (“MLL”), 49 P.S. § 1101 et seq. See

Phila. Constr. Servs., LLC v. Domb, 903 A.2d 1262, 1267 (Pa. 2006).

Because the MLL is a creature of statute in derogation of the common law, it

must be given strict construction and any questions of interpretation should

be resolved in favor of a strict, narrow construction.        See Terra Firma

Builders, LLC v. King, 249 A.3 976, 983 (Pa. 2021).

      The MLL provides a right to a mechanics’ lien “for the payment of all

debts due by the owner to the contractor. . . for labor or materials

furnished in the erection or construction. . ..             49 P.S. § 1301(a)

(emphasis added).      Pursuant to the MLL, a “claimant” is defined as “a

contractor or subcontractor who has filed or may file a claim under this act for

a lien against property.” 49 P.S. § 1201(6). The MLL defines “contractor” as

                                      -9-
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“one who, by contract with the owner, express or implied, erects, constructs,

alters or repairs an improvement or any part thereof or furnishes labor, skill

or superintendence thereto; or supplies or hauls materials, fixtures,

machinery or equipment reasonably necessary for and actually used therein;

or any or all of the foregoing, whether as superintendent, builder or

materialman.” Id. § 1201(4).

      Mechanics’ liens are designed to protect persons who improve a piece

of property by giving them a lien against that property for payment for

material and labor independent of contractual remedies. See Bricklayers of

Western Pennsylvania Combined Funds, Inc. v. Scott’s Development

Co., 90 A.3d 682, 690 (Pa. 2014).      A mechanics’ lien proceeding merely

addresses the rights of the parties vis-à-vis a parcel of property.      See

Matternas v. Stehman, 642 A.2d 1120, 1123 (Pa. Super. 1994) (concluding

that a mechanics’ lien proceeding “is essentially an in rem proceeding”). A

mechanics’ lien action is distinct from a breach of contract action and is not

the basis for recovery of unliquidated damages or settlement of the

contractual obligations of the parties. See Wyatt Inc. v. Citizens Bank of

Pennsylvania, 976 A.2d 557, 570 (Pa. Super. 2009); see also Matternas,

642 A.2d at 1124 (explaining that the MLL was merely intended to protect the

prepayment labor and materials that a contractor invests in another’s

property).

                                    - 10 -
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      “Any party may preliminarily object to a [mechanics’ lien] claim upon a

showing of exemption or immunity of the property from lien, or for lack of

conformity with this act.” 49 P.S. § 1505.     If an issue of fact is raised in

preliminary objections to a mechanics’ lien claim, the court may take evidence

by deposition or otherwise. Id.

      In support of its first issue, JMB contends that the trial court conflated

the scope of a mechanics’ lien claim allowed by law with the right to bring a

mechanics’ lien claim. JMB argues that, although both the trial court and Main

Street relied on section 1301 for the determination of who may bring a

mechanics’ lien, “[section] 1301 does not determine who is a proper lien

claimant, but only what types of damage may be included within the lien.”

JMB’s Brief at 19-20. JMB further maintains that the trial court conflated the

question of what debts are due by Main Street to JMB with the separate

question of how the debt is to be satisfied. JMB argues that the Dedication

Agreement and the Nicholson FBO Account merely provide a procedure and a

financial account for Main Street to satisfy its payment obligations under the

Contract, but do not erase Main Street’s debt to JMB.

      The trial court determined that “by virtue of the Letter of Direction and

Dedication Agreement, [Main Street] owe[s] no debt to [JMB].” Trial Court

                                    - 11 -
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Opinions, 6/17/22, at 3.5 The court further determined that JMB did not retain

any right to receive payment from Main Street. Id. at 2.

       As explained above, when presented with Main Street’s preliminary

objections, the trial court was required to accept as true all material facts set

forth in the mechanics’ lien claims, as well as all inferences reasonably

deducible therefrom. See Hendrzak, 15 A.3d at 941. Thus, the trial court

was required to accept as true that Main Street, as owner of the Project, failed

to pay its general contractor, JMB, amounts due under the Contract for labor

and materials expended by JMB to complete the construction of Project. Id.

       The fact that the mechanics’ lien claims also indicated that the parties

made alternate arrangements as to the manner and means by which Main

Street was to discharge its debt to JMB does not alter or negate the fact that,

pursuant to the express terms of the Contract, a debt is still owed to JMB,

as the general contractor. See 49 P.S. § 1301(a). At no point did the parties

agree to wholly discharge Main Street’s remaining payment obligations under

the Contract or relieve Main Street of the responsibility for satisfying the

unpaid balances due for labor and construction of buildings A through F, which

____________________________________________

5 Contrary to JMB’s assertions otherwise, the trial court did not specifically
determine that JMB lacked standing to bring a mechanics’ lien claim or find
that JMB waived it rights to assert a mechanics’ lien claim. Rather, the trial
court simply concluded that no debt was owed by Main Street to JMB. See
Trial Court Opinions, 6/17/22, at 3; see also Orders, 3/29/22-4/5/22, at 1
n.1 (concluding that “the intent to [the Dedication Agreement and the Letter
of Direction] was to assign [JMB’s] right to payment to its surety”).

                                          - 12 -
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purportedly total $7,521,422.00.6          Indeed, when the parties executed the

Letter of Direction, they specifically contemplated that Main Street still owed

debts to JMB under the Contract; however, they merely agreed that Main

Street would discharge its debts to JMB by paying those debts into a special

account:

            This is to advise you that [JMB], hereby irrevocably requests
       that any and all payment due or to become due of any kind
       or nature on account of the above[-]described Contract and
       Project be made payable to Nicholson Professional Consulting
       FBO Jeffrey M. Brown Associates, LLC Special Account. . . ..

Letter of Direction, 7/2/20, at 1 (emphasis added). By executing the Letter

of Direction and the Dedication Agreement, the parties merely agreed that

Main Street would discharge the debts it still owed to JMB by directing

payment for those debts to the Nicholson Professional Consulting FBO Jeffrey

M. Brown Associates, LLC Special Account.

       Accordingly, we are constrained to conclude that the trial court erred by

determining that Main Street owed no debt to JMB and granting Main Street’s

preliminary objections on this basis.          Accordingly, we vacate the orders

sustaining Main Street’s preliminary objections and striking JMB’s mechanics’

____________________________________________

6 To the extent that Main Street contests the amount of its unpaid debts due
under the Contract or its payment obligations under the Letter of Direction or
the Dedication Agreement, Main Street is not barred from bringing suit on
those agreements to determine the rights and obligations of the parties vis-
à-vis each other. See Matternas, 642 A.2d at 1124 (holding that a lien
proceeding is not intended to settle the contractual obligations of the parties).

                                          - 13 -
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lien claims, and remand for reinstatement of the mechanics’ lien claims and

further proceedings in these matters.7

       Orders vacated. Cases remanded. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 6/28/2023

____________________________________________

7 Given our resolution of JMB’s first issue, we need not address its remaining
issues.

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