Jeffrey M. Brown Assoc. v. Main Street Phase

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT O.P. 65.37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 :
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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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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
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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
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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.
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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
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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)
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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],
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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.
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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.
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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.
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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
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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).
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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
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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
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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”).
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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’
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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).
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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
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7 Given our resolution of JMB’s first issue, we need not address its remaining
issues.
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