by Mark Bauman | Mar 16, 2023 | Legal News, Other News
In June 2006, Governor Rendell signed into law amendments to the Pennsylvania Mechanics’ Lien Law of 1963. While these amendments change several aspects of the 1963 law, the most significant changes were made with regard to waivers of mechanics’ liens. Specifically, the amendments slightly change the technical requirements for filing and perfecting a mechanics’ lien, and extend the right to file a mechanics’ lien to sub-contractors. More importantly, the amendments render a mechanics’ lien waiver, given in advance of receipt of actual payment for work, unenforceable in non-residential construction projects.
However, certain exceptions do apply. For example, the “residential project exception” allows contractors and subcontractors to waive their lien rights on a residential project if the total contract price between the owner and the contractor is less than $1 million. A second exception, the “payment bond exception,” allows a subcontractor to waive its lien rights on all nonresidential projects and on residential projects of $1 million or more, if the contractor posts a payment bond for labor and materials.
Overall, the amendments are “contractor-oriented.” However, protection to certain lenders are also provided by amendments that grant purchase money mortgages and certain open-end mortgages “super-priority” over mechanics’ lien claims. The amendments to the Pennsylvania Mechanics’ Lien Law of 1963 will take effect January 1, 2007.
For more information, see the Mechanics’ Lien Law of 1963, 49 P.S. § 1101, et. seq.
by Mark Bauman | Mar 14, 2023 | Commercial Litigation & Corporate Law, Legal News
Recently, in Carter-Jones Lumber Co. v. Northwestern PA Humane Society, 913 A.2d 1002 (Pa.Cmwlth. 2006), the Court found that an animal shelter served a purely public purpose and thus rendered it exempt from mechanics’ liens under Section 1303(b) of the PA Mechanics’ Lien Law of 1963 (49 P.S. §1101, et seq.). In rendering its decision, the Court reviewed case law and determined that Courts have evaluated four factors in considering whether the purely public purpose exception applies. Those four factors are: (1) the public’s access to the services provided by the entity; (2) whether the entity’s function with respect to the property is a governmental function or a propriety function, (3) whether the entity operates with the possibility or motive of profit, and (4) whether allowing execution upon the liens would disrupt an essential public service.
However, the Court failed to address how, if at all, the “substitute remedy” provision of the PA Public Works Contractors’ Bond Law of 1967 (8 P.S. §191, et seq.) interplays with this purely public purpose exemption. Specifically, the Public Works Contractors’ Bond Law was designed to, among other things, provide substitute remedies for subcontractors who are excluded from the protections afforded by Mechanics’ Lien Law of 1963. However, the Bond law only applies in certain circumstances and has specific definitions. It is unlikely that a nonprofit or its property will fall within the applicable definitions. Thus, given the decision in Carter-Jones, in a purely public purpose project, the subcontractors are left without the mechanics lien remedy or the substitute remedies.
by Mark Bauman | Mar 14, 2023 | Legal News, Other News
Rule 238 of the Pennsylvania Rules of Civil Procedure concerning delay damages was amended recently to incorporate the Superior Court’s requirements in Sonlin v. Abington Memorial Hospital, 748 A.2d 213 (Pa. Super. 2000).
The new rule incorporates three requirements established by the Sonlin case to bring an offer of settlement within the exclusion of the rule concerning the calculation of delay damages. Specifically, for the exclusion to apply, the offer of settlement must be in writing and must contain an express clause validating the offer for 90 days or until the commencement of trial, whichever occurs first. If the offer is a structured settlement, the terms of payment underwritten by a financially responsible entity, the underwriter and the cost must be disclosed.
by Mark Bauman | Mar 13, 2023 | Commercial Litigation & Corporate Law, Legal News
The first, and most important, issue is to know the limit of your liability and to protect yourself and your investment in your company by incorporating your business. In order to do this, it is important to consult with an attorney and disclose everything about your proposed business venture and past business experiences, both positive and negative. Your attorney can help outline the advantages and disadvantages of the various forms of business entities. Together, you should review all of the “corporate formalities” to which you must adhere in order to preserve the limited liability afforded to you by virtue of having incorporated your business.
As you get to know your customers and suppliers, your attorney can create contracts that suit your specific needs with each of them. Discuss with your attorney the need for a written employee handbook and written employment agreements containing confidentiality and non-competition obligations if necessary.
If you intend to enter into a partnership, you must discuss with your attorney the need for a detailed written buy-sell agreement with your business partners. If you and your partners do not spell out your rights and responsibilities in a written partnership agreement, disputes could end up being a “free for all” and create nothing but additional work and expense if conflicts arise. In addition, without a written agreement saying otherwise, your state’s law will control many aspects of your business. A partnership agreement allows you to structure your relationship with your partners in a way that suits your business. It outlines the shares of profits or losses for each partner, the responsibilities of each partner, and what will happen to the business if a partner decides to no longer be a part of the business.
This process must be carefully considered and outlined. As such, it is important to consult the proper professionals who can help you make the right decisions.
by Mark Bauman | Mar 13, 2023 | Commercial Litigation & Corporate Law, Legal News
The United States District Court for the Eastern District of Pennsylvania, in a memorandum opinion denying a bank’s request to dismiss a complaint, found that a bank violated the Deficiency Judgment Act when it received payment from the sale of a residential property on which it held a second mortgage as payment towards an earlier deficiency judgment obtained after it foreclosed on the debtor’s commercial property. Munoz v. Sovereign Bank, 06-2876 (September 18, 2006).
The Munoz’s borrowed money from Sovereign Bank to purchase a commercial property and business but they subsequently defaulted on the loan. The bank foreclosed and obtained a judgment for $1.14 million. It then executed on the property and purchased it at Sheriff’s sale for $31,000. The Munoz’s residential property was then sold pursuant to a judicial sale. Sovereign bank, which also held a second mortgage on the residential property, received $587,000 toward the satisfaction of its judgment obtained relative to the commercial property. The Munoz’s sued claiming that the bank failed to comply with Pennsylvania’s Deficiency Judgment Act, 42 Pa. C.S. § 8103.
The Deficiency Judgment Act prevents creditors from purchasing a debtor’s real property, often below fair market value, and continuing to execute on the debtor’s other property to satisfy the judgment without first considering the fair market value of the property it executed on. In other words, the bank must determine the balance due on the judgment by subtracting the property’s fair market value, not the price it paid to purchase the property, from the amount of the deficiency judgment. A creditor has six months to petition the court to fix the fair market value. If the creditor fails to do so, the court, upon petition of the debtor, may mark the entire judgment satisfied.
The bank argued that it had not violated the statute because, among other things, it did not execute against the residential property and the time in which it was required to fix the fair market value of the commercial property had not expired. The district court disagreed. It stated that the Deficiency Judgment Act requires the creditor to fix the fair market value by petitioning the court before “seeking to collect the balance due . . .” not before executing against the second property. Thus, Sovereign Bank’s obligations under the statute arose at the time it received the deed to the commercial property and it violated the act when it continued to collect the debt on the commercial property without first having determined the property’s fair market value. The district court also stated that the sixth month period in which a creditor has to fix the fair market value does not give a creditor a six month window in which to undermine the protection that the Deficiency Judgment Act gives the debtor.
