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Mechanic’s liens not enforceable against landlord

Where a lessee allegedly failed to pay for construction of a solar farm on real property it had leased, mechanic’s liens filed against the landlord were dismissed because the landlord had no property interest in the portion of the property it leased away.

Background

TPE Virginia Land Holdings LLC leased property in Pittsylvania County to TPE Kentuck Solar LLC for the purposes of constructing and operating a solar farm. Kentuck hired McCarthy Building Companies LLC to build it. When some of its invoices allegedly went unpaid, McCarthy filed the instant suit, seeking compensation. TPE Virginia asserts that it carries no possible liability as it is only a disinterested landlord and a legal—and factual— stranger to the relationship between McCarthy and Kentuck.

Mechanic’s liens

Under the mechanic’s lien statute, “if the person who shall cause a building or structure to be erected or repaired owns less than a fee simple estate in the last, then only his interest therein shall be subject to liens created under this subchapter.” The question, therefore, is not who has an interest in the land generally; rather, the court must ask who has an interest in the “part” of the land that Kentuck possesses. Specifically: Who has an interest in Kentuck’s leasehold interest? McCarthy concedes that this is the controlling question in footnote four of its brief.

Under that standard, it is clear that only Kentuck is a necessary party. TPE Virginia has no “property interest” in the portion of the property it has leased away. Although TPE Virginia has an interest in the land that is leased, it has no “real or property interest” in the leasehold estate; only Kentuck does.

And nothing can happen to the leasehold interest in this litigation that would “defeat or diminish” TPE Virginia’s title to the property. Under the “worst-case” scenario, McCarthy could foreclose on the leasehold interest and another tenant would take over the lease. TPE Virginia would have the same rights and obligations under the lease, and the new tenant would have the same rights and obligations that Kentuck currently possesses.

TPE Virginia’s property interest would also not be diminished if, as a result of Kentuck’s leasehold interest being sold to satisfy McCarthy’s liens, it was forced into a relationship with a less desirable tenant—that is, a “lesser” lessor. That outcome would not affect TPE Virginia’s interest in the property, only the ease of enforcing its lease. Because no outcome in a mechanic’s lien suit can affect the legal title that TPE Virginia holds, it is not a necessary party to enforce McCarthy’s mechanic’s lien against Kentuck.

Unjust enrichment

McCarthy claims its site improvements increased the value of the lease, and thus conferred a benefit on TPE Virginia. On the facts alleged, however, and considering the lease at issue, McCarthy has not reasonably alleged that TPE Virginia received a benefit from its work. According to the terms of the lease, both the terms and payments were fixed long before McCarthy performed any work. The plain terms of the lease thus establish that the value of the lease to TPE Virginia is the same now as it was before McCarthy became involved.

And even if there was a “benefit” to TPE Virginia, McCarthy has not sufficiently alleged that TPE Virginia “reasonably expected” to pay for it. McCarthy did not allege in its amended complaint what additional work TPE Virginia was aware of, or facts that permit an inference that TPE Virginia would reasonably have expected to pay for that work.

At oral argument, McCarthy posited—for the first time—that the site work it performed was required by local governmental authorities because runoff from TPE Virginia’s property was damaging adjacent property. But these facts were not alleged in the complaint. Accordingly, TPE Virginia’s motion to dismiss will be granted as to this count, but McCarthy will be granted leave to amend.

TPE Virginia’s motion to dismiss granted.

McCarthy Building Companies Inc. v. TPE Virginia Land Holdings LLC, Case No. 4:20-cv-00057, March 9, 2021. WDVA at Danville (Cullen). VLW 021-3-095. 10 pp.