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On April 17, 2014, the Pennsylvania Supreme Court, [enhanced version available to lexis.com subscribers], issued its long-awaited decision in Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development Co., and reversed the Superior Court decision which held that a union trust fund had mechanics’ lien rights as a subcontractor under the Pennsylvania Lien Law. The Supreme Court indicated that the primary issue presented by this case was weather the union trust fund qualified as a “Subcontractor” under section 201(5) of the Lien Law (which grants lien rights to first and second-tier subcontractors), [enhanced version available to lexis.com subscribers], or is excluded as a Lien Law claimant under section 303(a) of the Lien Law (which states that no lien is allowed in favor of any person other than a contractor or subcontractor (as defined in the Lien Law) regardless of whether such person furnished labor or materials to an improvement), [enhanced version available to lexis.com subscribers].
The Court indicated that the “plain language” of the Lien Law was not clear on this point, so the Court considered the following factors in order to determine that the legislature did not intend to include a union trust fund in the definition of subcontractor: (1) the “most natural meaning” of the word “subcontractor” “simply does not denote employees of a contractor,” (2) at the time the 1963 Lien Law was passed the PA Constitution prohibited statutes authorizing the extension of liens, (3) section 303(a) of Lien Law must be given some meaning, and (4) unintended consequences cut against including employees (or their unions of union trust funds) in the definition of subcontractor. On this last point, the Supreme Court noted that giving union trust funds lien rights would essentially make a property owner the guarantor of its contractor’s general employment obligations, which would expose an owner to a significant increase in liability on a project. This scenario places too significant a burden on property owners, particularly with respect to new construction, which makes such a holding intolerable and impractical. Accordingly, the Supreme Court held that it could not endorse such a dramatic shift in the interpretation of the Lien Law without the General Assembly clearly evincing such an intent.
The Court next considered whether the Trustees had lien rights under an “implied-in-fact contract” theory, and ruled (1) this theory was not pled in the Complaint, therefore should not have been considered by the Superior Court, and (2) “the concept that implied contracts were formed between the Unions and Contractor in relation to the improvement on Developer’s property is too attenuated to withstand scrutiny.” Interestingly, despite the fact that the Supreme Court specifically indicated that one of the questions before the Court was “whether the Superior Court erred in concluding that the 1963 Act should be liberally construed,” the Court did not specifically address this issue. Pennsylvania courts have consistently held over the past century that the Lien Law must be strictly construed because it is a derogation of common law. With the Supreme Court declining to address the Superior Court’s surprising change to the way the Lien Law is interpreted, parties to a mechanics’ lien action will likely argue either way until an appellate court clarifies this issue.
Copyright 2014 • Babst, Calland, Clements and Zomnir, P.C. • Two Gateway Center, Pittsburgh, PA 15222 • 412-394-5400 • Administrative Watch is privately distributed by Babst, Calland, Clements and Zomnir, P.C., for the general information of its clients, friends and readers. It is not designed to be, nor should it be considered or used as, the sole source of analyzing and resolving legal problems. If you have, or think you may have, a legal problem or issue relating to any of the matters discussed in the Administrative Watch, consult legal counsel.
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