In what was seen as a seismic shift in judicial interpretation of the Pennsylvania Mechanic’s Lien Law of 1963, the Superior Court previously held that the construction trade unions could assert mechanic’s lien claims against property for unpaid health and welfare fund contributions by a contractor. In an opinion issued several days ago, the state’s highest court overturned that decision and reinstated the trial court’s order dismissing liens filed on that basis in Bricklayers’ of Western Pennsylvania Combined Funds, v. Scott’s Development Co.By way of brief background, the underlying mechanic’s lien claims were filed by the trustees for the Bricklayers and Trowel Trades International Local 9 and Laborers District of Western Pennsylvania. These unions claimed unpaid health and welfare benefit fund payments from William Pustelak, Inc., a construction contractor in western Pennsylvania. Union members were working on the subject property as employees of Pustelak – who was the general contractor – pursuant to a collective bargaining agreement entered into between the contractor and the union long before the subject project was started.
The trustees claimed that the union was owed roughly $42,000 in unpaid benefits from the contractor. Based on language in the CBA, the union maintained that the union members were subcontractors that provided labor and materials for the completion of the work. The union, by association, had standing to bring the claim on their behalf. The developer for the project disagreed and said that the CBA was a collateral agreement and made the union members employees of the contractor. The trial court agreed that the statute narrowly defined the term “subcontractor” and that the CBA did not make the union employees of the contractor “subcontractors” under the law.
The Superior Court largely agreed with the trial court; but in an unusual move it found an implied contract between the contractor and the union which it claimed gave the union standing to assert the lien. This was out of the ordinary because neither party had asserted such an argument in its notice of appeal or briefing.
The matter then went to the Supreme Court on appeal. Upon review, the Supreme Court overturned the Superior Court’s decision in what can only be described as a stern warning against such judicial activism. The Supreme Court unanimously stated that the “Superior Court, for its part, simply ‘recast the pleadings in a way not intended by the parties’ “. It went on to say that there was no basis for an implied contract because there was a written contract that clearly outlined the bargain between the union and the contractor.
From a more academic perspective, the issues on appeal were: (1) whether the Mechanic’s Lien Law of 1963 should be liberally construed or not; (2) whether a liberal construction, if adopted, would make an employee of a contractor a subcontractor; and (3)
whether the Superior Court made a mistake finding an implied contract when the argument was not made by any party.
The Supreme Court concluded that the statute should be strictly construed as remedial legislation in derogation of the common law. Nothing in the Statutory Construction Act or the subsequent Constitutional Amendments in Pennsylvania changed that outcome. It has also long been the law that subcontractors are defined as “those who take from the subcontractor” and not employees. This is, in part, why there is a group of people on direct contract with the contractor who can be classified as other than subcontractors. Although not discussed by the Court, another element of this seems to be the fact that employees do not share in any of the risk associated with a typical subcontract agreement either. Finally, the Court chided the Superior Court for introducing the implied contract theory that no party asserted and was unsupported by the facts as plead.
This decision seems in keeping with the intent and structure of the Pennsylvania Mechanic’s Lien Law. To decide otherwise would have fundamentally changed the way in which the Mechanic’s Lien Law could be applied by permitting any employee of a general contractor to assert a mechanic’s lien claim. Were such a decision to stand, it would also create a whole new class of “subcontractors” in the form of anyone with whom the general contractor had a collateral agreement and remained unpaid. As a result, the Supreme Court restored some semblance of order to the mechanic’s lien process with this decision.
