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Pennsylvania Supreme Court Decides (and doesn’t) Issue of whether Mechanics Lien Law Should be Liberally Construed.

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In a much awaited opinion, the Pennsylvania Supreme Court on April 17, 2014 issued its decision in Bricklayers of W. Pa. Combined Funds, Inc., v. Scott’s Dev. Co., 2014 Pa. LEXIS 1008 (April 17, 2014), by which it reversed the Superior Court. In its opinion the Court stated that it allowed review to consider: “whether the Superior Court erred in concluding that the 1963 [mechanics lien] Act should be liberally construed; whether even a liberal construction of the act would permit an employee of a contractor to assert a claim as a subcontractor; and whether the Superior court erred in sua sponte finding that implied-in-fact contracts control the parties’ rights under the act.”

It had long been held that the terms of the Pennsylvania Mechanics Lien Law were subject to strict construction as a statute in derogation of common law, until a majority of the Superior Court stated that the decisions so stating improperly relied on case law from the Supreme Court interpreting the 1963 Mechanic Lien Act’s predecessor statute of 1901. Bricklayers of W. Pa. Combined Funds, Inc., v. Scott’s Dev. Co, 41 A 3d at 24. In that Superior Court decision, the judges pointed out that the rule of strict construction was no longer applicable to statutes enacted after 1937 under the Pennsylvania Statutory Construction Act. 1 Pa.C.S. Section 1928(a).

In Bricklayers, the general contractor (“G.C.”) was hired to perform work on a project. The G.C. had previously entered into a collective bargaining agreement (“CBA”) with Bricklayers and Trowel Trades International, Local No. 9 (“Union”). The CBA covered work to be performed within the Union’s jurisdiction as specified in the agreement and sets forth exactly what type of work the Union’s members were authorized to perform. Pursuant to the CBA, contractor was to pay benefits to Bricklayers of Western Pennsylvania Combined Funds, Inc., (“Trustee”) for each hour of labor performed by the Union’s members. The CBA incorporated this trust agreement between the Union and the Trustee, and under the trust agreement the Trustee was the authorized agent to collect the contributions on behalf of the Union members.

The Union members performed work on Defendant property under the contract with the G.C., but the G.C. did not pay the Trustee the required contributions under the CBA. Thereafter, the Trustee filed a Mechanics’ Lien Claim against Defendant, alleging that the Union’s members performed services that were incorporated into or utilized for the improvement of the property. Additionally, the Trustee claimed that the Union’s employees were subcontractors of the G.C. pursuant to the CBA. The main issue, therefore, was whether a Union Trustee has standing to file a mechanics’ lien against a property owner based on a general contractor’s alleged failure to make contributions under a CBA on behalf of his employees to a fund that pays for union workers’ benefits.

Defendant filed preliminary objections in the nature of a demurer, arguing that the Trustee could not assert a mechanics’ lien claim on behalf of the Union’s members because the Union’s members themselves were not “subcontractors” as defined by the Mechanics’ Lien Law. Defendant argued that the Union’s members were employees and/or laborers of the G.C., as opposed to “subcontractors.”

The Court of Common Pleas of Erie County granted the preliminary objections. The trial court found that the Union’s employees were not subcontractors because they were employees of general contractor. Further, collective bargaining agreements were not subcontractor agreements, but employment contracts that were unrelated to “improvements” on real property. The trial court also found that because the Trustee did not perform work on or furnish materials to a project, he lacked standing to bring the claim. In granting Defendant’s preliminary objections, the court strictly interpreted the Mechanics’ Lien Law.

On appeal, the Superior Court ultimately held that the Trustee of a union employee benefit fund had standing to file a mechanics’ lien claim against the property of a developer in order to recoup unpaid benefit contributions by their employer owed to the Union. The Court held that the Union’s employees were subcontractors pursuant to the CBA. The Court reasoned that since the Trustee “stood in the shoes” of the union members, the Trustee could be considered a subcontractor under the mechanics’ Lien Law. The Court stated:

“Although a strict compliance standard may be used to determine certain issues of notice and/or service, a liberal construction of the definition of “subcontractor” is necessary to effectuate the Mechanics’ Lien Law’s remedial purpose of protecting prepayment of labor and materials. 1 Pa. C.S. 1928(c) requires a liberal interpretation, and also the notice and service requirements of the Mechanics’ Lien Law pertain to the creation and perfection of a lien claim (procedural requirements), while the definition of “subcontractor” relates to the substantive scope of the statute. If the Mechanics’ Lien Law is to be construed to advance its remedial purpose, the scope of the statute’s protection should receive a liberal interpretation, especially when it involves defining the class of available lien claimants.” (emphasis added). Bricklayers, (Superior Court opinion).

By its April 17, 2014 decision, the Pennsylvania Supreme Court reversed the Superior Court, which found that the Mechanic’s Lien Act should be liberally construed. However, the Supreme Court took a narrow approach in its opinion. Rather than state that the Superior Court erred in giving a liberal interpretation to the Act, the Supreme Court limited its review to determining whether the term “subcontractor” could reasonably be interpreted to include union employees of the general contractor. In undertaking this review, the Supreme Court engaged in a traditional statutory construction analysis, first examining whether the term “subcontractor” was clear on its face or ambiguous, and then determining what meaning the legislature had in mind when it used the term “subcontractor” in the Mechanic’s Lien Act of 1963.

Although the Pennsylvania Supreme Court reversed the Superior Court, finding that the term “subcontractor” was not subject to the meaning ascribed to it by the Superior Court; nowhere in its opinion does the Supreme Court expressly reaffirm that the Mechanic’s Lien Act must be “strictly construed”.

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