On September 28, 2016, the Pennsylvania Supreme Court affirmed a decision by the Pennsylvania Superior court that held an owner’s agent cannot be individually liable under the Contractor and Subcontractor Payment Act, 73 P.S. §§ 501-516 (“CASPA”), unless the agent’s dealings created a new contract between the contractor and the agent personally. See Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC, No. 28 EAP 2015 (Pa. Sept. 28, 2016).
Under Section 502 of CASPA, “Owner” is defined as a “person who has an interest in real property that is improved and who ordered the improvement to be made. The term includes successors in interest of the owner and agents of the owner acting with their authority.” 73 P.S. § 502 (emphasis added). In Scungio, the contactor argued “one can read Section 502’s definition of owner — as including ‘agents of the owner acting with their authority’ — to indicate that such agents are equivalent to owners for purposes of the Act,” and can therefore be held personally liable under the Act.
The Supreme Court first acknowledged the text of Section 502 is ambiguous; subject to two conflicting, yet reasonable, interpretations. The Court nevertheless concluded CASPA does not create individual agent liability for three main reasons. First, the Court emphasized CASPA’s purpose is to protect contractors and subcontractors by encouraging fair dealing among parties to construction contracts. Second, an interpretation of Section 502 of CASPA that results in the extension of liability against an owner’s agents would improperly reshape the right to payment beyond that contemplated in other sections of the Act. See 73 P.S. § 504 (“[p]erformance by a contractor . . . in accordance with the provisions of a contract shall entitle the contractor or subcontractor to payment from the party with whom the contractor . . . has contracted,”) (emphasis added); 73 P.S. § 507(a) (providing that a subcontractor is entitled to payment “from the party with whom the subcontractor has contracted“) (emphasis added).
Finally, the contractor’s proffered interpretation “would require that a property owner’s agents personally assume the obligations of the owner’s construction contracts with respect to payments to contractors, contrary to longstanding and fundamental common law agency principles.” If the General Assembly intends to modify the common law, the Court generally expects a clear statement to that effect, rather than the mere insertion of “an ambiguous clause in a definitional provision,” like in Section 502.
As more fully addressed in our previous post reporting on the Superior Court’s decision, the contractor in Sungio did not provide sufficient evidence suggesting the agent’s dealings gave rise to a contractual relationship with the agent personally. Thus, the Supreme Court’s decision does not preclude a contractor from recovering from an agent where that agent either executes a contract in his own name or voluntarily undertakes a personal responsibility for payment under a contract.
In a case probably anticipated more by construction attorneys than their clients, the Pennsylvania Supreme Court in Terra Technical Servs., LLC v. River Station Land, L.P., 2015 WL 5703011 (Pa. Sept. 29, 2015), reviewed the procedural issue of whether a complaint for judgment on mechanics’ lien claim must be filed at a different docket number than the mechanics’ lien claim that initiated the mechanics’ lien action.
While the issue seems minor and a mere technicality on its face, it posed a significant problem across the Commonwealth because a customary practice is to file the complaint at the same docket as the lien claim to save the client from paying an additional filing fee and to confine the entire case record to a single docket. The lower courts in this case, however, held that this practice was improper and warranted dismissing the mechanics’ lien complaint. This decision came as a surprise to many construction law practitioners. Although dismissal in many instances would just lead to the filing of the complaint at a different docket, it would prove fatal to the mechanics’ lien claim if the two-year period for filing a complaint for judgment on the mechanics’ lien claim, 49 P.S. 1701(b), had passed prior to the dismissal.
The Pennsylvania Supreme Court avoided this potentially significant procedural dilemma when it reversed the lower court’s order, holding that neither the Pennsylvania Mechanics’ Lien Law nor Pennsylvania Rules of Civil Procedure 1651–1661 related to mechanics’ lien actions require filing a complaint for judgment on a mechanics’ lien claim at a separate docket number than the mechanics’ lien claim. Specifically, the Court stated “we conclude there is no support for the proposition that because actions upon mechanics’ liens are comprised of two separate phases it follows that [the Lien Claimant’s] claims and its subsequent actions to obtain judgment upon them must have been entered at separate dockets, maintained in separate files, and identified with separate court terms and numbers.”
The Supreme Court of Pennsylvania issued a decision earlier this week reaffirming the distinction between the words “gas” and “minerals” as those words are used in private conveyances of land. In Butler v. Powers, the Court made clear a reservation of “minerals” does not include the right to natural gas, unless the word “gas” was expressly stated in the reservation. The practical effect of the Court’s decision is Marcellus Shale development will continue, i.e., the decision did not unravel the plethora of leases pursuant to which natural gas is being developed in the region. Babst Calland has more on the decision here.
In the recent Pennsylvania case, Scientific Games Int’l, Inc. v. Commonwealth, the plaintiff filed its Complaint with the Commonwealth Court and sought an injunction to prevent DGS from cancelling a contract that the plaintiff claimed it had entered into with DGS. In response, DGS argued that this case involved either (1) the cancellation of a procurement, in which case DGS was afforded sovereign immunity can could not be sued anywhere, or (2) a breach of contract claim for which the Board of Claims has exclusive jurisdiction. On appellate review, the Supreme Court agreed with DGS, and indicated that in the event of a cancellation of a solicitation under Section 521 of the Procurement Code, an aggrieved bidder or offeror has no available remedy based on the sovereign immunity granted to Commonwealth agencies. The practical effect of this ruling will be that there is now no judicial oversight to a Commonwealth agency’s decision to cancel a solicitation under the Procurement Code.