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Pennsylvania Supreme Court to Tackle Issue of Whether Mechanics' Lien Law Should be Liberally Construed

The Pennsylvania Supreme Court has granted a Petition for Allowance of Appeal in Bricklayers of W. Pa. Combined Funds, Inc., v. Scott's Dev. Co., 2012 Pa. Super 4 (Pa. Super. Ct. 2012) to address several key issues that will have long term effects on the application and disposition of Mechanics' Liens in Pennsylvania:

(1) Whether the Superior Court in Bricklayers erred in concluding that portions of the Mechanics' Lien Law should be liberally construed;

(2) Whether the Superior Court erred in finding that purported contracts implied in fact control the parties' rights under the Mechanics' Lien Law, not the express contract which fails 49 P.S. 1201(5).

(3) Whether even a liberal construction of portions of the Mechanics' Lien Law would permit an employee of a contractor to assert a claim as a "subcontractor."

In Bricklayers, general contractor Pustelak was hired by Scott's to perform work on a project. Pustelak 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 Pustelak 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 Scott's property under the contract with Pustelak, but Pustelak did not pay the Trustee the required contributions under the CBA. Thereafter, the Trustee filed a Mechanics' Lien Claim against Defendant Scott's, 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 Pustelak 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.

Scott's 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. Scott's argued that the Union's members were employees and/or laborers of contractor Pustelak, 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 Pustelak. 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 Scott'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).

The Superior Court has therefore, for the first time, declared that the Mechanics' Lien Law is a remedial statute that should be liberally construed to protect payments for labor and materials, while still holding that the procedural aspects of the law will still be strictly construed. In doing so, the Court found that the relationship between contractor Pustelak and the Union created an implied contract by the Union to perform labor on Scott's property pursuant to the CBA, thus making the Union a "subcontractor." Because the CBA included the trust agreement to fund benefits, the Court reasoned that the Trustee of the benefit plan had standing to assert the claim for payment on behalf of the workers.

The Superior Court's decision in Bricklayers certainly expanded the scope of the Mechanics' Lien Law and jettisoned the "strict compliance" construction that had previously been prevalent in determining issues presented under the law. Judges Olson and Gantman filed dissenting opinions, both finding the majority opinion contrary to the intent of the Mechanics' Lien Law. We expect that the Pennsylvania Supreme Court will issue an Opinion on this appeal in the near future.

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