Mechanic’s Lien Attaches to Property despite Defendant’s Contention that No Prior Consent Obtained from Landlord for Improvements, as required by Section 1303(d) of Mechanic’s Lien Law.

Last month, the Court of Common Pleas in Lycoming County issued its opinion in Linde Corp. Black Bear Property L.P. Plaintiff Linde Corp. had filed a mechanics lien on September 6, 2013. Linde had constructed improvements on several parcels owned by, as the Court cryptically states, “by someone” and there was a debt due to Linde for labor and materials.

Linde had contracted with defendant Black Bear to construct certain portions of a water withdrawal facility per an Operation Plan in exchange for payment of approximately $250,000. Black Bear provided a check dated April 12, 2012 to Linde for $25,000 as a down payment. Black Bear paid a subsequent invoice to Linde of $50, 254.32 by check dated June 4, 2012. The parties also agree to change orders increasing the value of the work by approximately $40,000; however, Black Bear made no further payments to Linde and over $216,000.00 remained outstanding pursuant to their agreement. So far so good, but this is where the facts get “murky”.

Black Bear was formed in 2011 for the purpose of acquiring real property for the project. However in 2011, three of the parcels of property necessary for the project were owned by Stewart Dibble. Accordingly, Black Bear and Dibble entered into an agreement dated March 15, 2012 which provided the following:

•1. the Dibble parcels would be transferred to Black Bear;

•2. Black Bear would satisfy approximately $80,000 of liens on the parcels;

•3. Black Bear would grant Dibble a 25% ownership interest in Black Bear;

•4. the parties agreed to promptly complete the agreement and each aspect of the transaction was to be considered “mutually interdependent”.

Dibble acquired his 25% interest in Black Bear on March 15, 2012. On March 31, 2012, Dibble executed a deed purporting to transfer all interest in the parcels in question to Black Bear. However that deed was never recorded. Black Bear subsequently obtained a loan from a bank, representing that the proceeds were to be used to re-finance certain debt, and pay the indebtedness to Linde. As part of the loan process, Black Bear agreed to a mortgage on the parcels (among other properties) and provided a copy of the May 31, 2012 deed to the bank, but never informed the bank that the deed had not been recorded, much less that it was being “held” by Dibble and hadn’t been delivered.

In opposing Linde’s Mechanic’s Lien, defendants Black Bear and Dibble asserted that the contract for improvements was between Linde and Black Bear but that the property was owned by Dibble, who was merely leasing it to Black Bear. Accordingly, defendants contended that Linde was required to obtain a written consent from Dibble to perform the work on the property before commencing work under section 1303(d), had failed to do so and therefore was not entitled to the lien. In support of this argument, defendants asserted that the March 31, 2012 deed was never delivered and the property was never actually transferred to Black Bear.

In analyzing the issue, the Court accepted defendants proposition that delivery is necessary to transfer title and “whether there has been delivery depends on the intention of the grantor as shown by his words and actions and by the circumstances surrounding the transaction.” Based on this proposition, the court found that the evidence established that the transaction had in fact been completed and that the failure to record the deed was not intentional but merely a “fortuitous (for Defendants) oversight.” The court found that based on the totality of the circumstances, Dibble intended to complete the transaction when he executed the deed on March 31, 2012. Accordingly the court found that Linde was entitled to its Mechanic’s Lien because title had transferred to the defendant Black Bear prior to the filing of the claim (although possibly not prior to Linde entering the contract with Black Bear and not prior to Linde beginning work on the project.)

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