Scungio Borst & Assocs. v. 410 Shurs Lane Developers, LLC

• Decision Date: 28 September 2016
• Docket Number: No. 28 EAP 2015,28 EAP 2015
• Citation: 146 A.3d 232
• Court: Pennsylvania Supreme Court
• Parties: Scungio Borst & Associates, Appellant v. 410 Shurs Lane Developers, LLC and Kenworth II, LLC and Robert DeBolt, Appellees

146 A.3d 232

Scungio Borst & Associates, Appellant

v.410 Shurs Lane Developers, LLC and Kenworth II, LLC and Robert DeBolt, Appellees

No. 28 EAP 2015

Supreme Court of Pennsylvania.

ARGUED: May 11, 2016

DECIDED: September 28, 2016

Paul Patrick Padien, Esq., Law Offices of Paul P. Padien, PC, for Appellant.

Evan Barenbaum, Esq., Stern & Eisenberg, PC, for Appellee.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, JJ.

OPINION

JUSTICE TODD

In this appeal, we consider whether a contractor may maintain an action under the Contractor and Subcontractor Payment Act (“CASPA”)¹ against a property owner's agents. After careful review, we hold that a contractor may not do so, and, accordingly, we affirm the order of the Superior Court.

By way of statutory background, CASPA generally provides that a contractor or subcontractor who improves real property pursuant to a contract is entitled to timely payment pursuant to governing contract terms, or, in the absence of such terms, according to a statutorily-specified timetable, on pain of liability in the form of interest payments, and, if litigation is commenced, penalties and reasonable attorneys' fees and expenses. Relevant to the issue herein—i.e. , whom a contractor or subcontractor is entitled to recover from —Section 4 of CASPA provides that a contractor or subcontractor is entitled “to payment from the party with whom the contractor or subcontractor has contracted.” 73 P.S. § 504.² Sections 5 through 12 of CASPA, however, do not use this “contracting party” language and instead describe the relative obligations and rights of “owners,” “contractors,” and “subcontractors.” See 73 P.S. § 505 -512. Most centrally, Section 5, entitled “Owner's payment obligations,” provides that “[t]he owner shall pay the contractor strictly in accordance with terms of the construction contract,” creates a default term for timely payment in the absence of an express term governing the same, and subjects “owners” who do not timely pay contractors to interest payments at a statutorily-provided rate. 73 P.S. § 505.³ Likewise, Section 12 provides that “owners” who fail to comply with CASPA's requirements are subject to “a penalty equal to 1% per month of the amount that was wrongfully withheld,” as well as reasonable attorneys' fees and expenses. 73 P.S. § 512.

Finally, of particular importance herein, Section 2 of CASPA defines “owner,” “unless the context clearly indicates otherwise,” as

[a] person who has an interest in the 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.

Against this legal backdrop, the factual and procedural history of this matter is relatively straightforward. Beginning in 2005, Appellant Scungio Borst & Associates (“SBA”) entered into a series of written and oral construction contracts with Appellee 410 Shurs Lane Developers, LLC (“410 SLD”), which 410 SLD's part-owner and president, Appellee Robert DeBolt (“DeBolt”), executed on 410 SLD's behalf. Therein, SBA agreed to improve real property owned by 410 SLD in connection with the development of a condominium complex, and did so until November 2006, when SBA's contracts were terminated with approximately $1.5 million in outstanding payments due. SBA requested payment, but 410 SLD, again through DeBolt, refused.

Accordingly, SBA filed the instant action against 410 SLD; its alleged successor corporation, Appellee Kenworth II, LLC (“Kenworth”); and DeBolt in his personal capacity. SBA asserted, among other claims, violations of CASPA. Central to this appeal, DeBolt filed a motion for summary judgment with respect to SBA's claim under CASPA, arguing he could not be held liable under CASPA because he was not a party to SBA's contract with 410 SLD, and citing Section 4 for the proposition that CASPA applies solely to parties to a construction contract.⁴ SBA responded that DeBolt was liable under Sections 2 and 5 because he was an agent of 410 SLD who acted with his authority in ordering the subject work.⁵ (The parties do not dispute that DeBolt acted as 410 SLD's agent in this respect.) SBA further claimed that Section 2 was analogous to Section 260.2a of the Wage Payment Collection Law (“WPCL”)⁶ —which defines an employer subject to liability thereunder as including an employer's “agents” or “officers”⁷ and which some courts have interpreted as permitting action against such agents or officers in their personal capacities—and, thus, should be similarly interpreted as permitting actions against property owners' agents in their personal capacities.⁸ The trial court disagreed:

[410 SLD] was the “owner” of the property and ... DeBolt was not. CASPA imposes payment obligations upon the owner of real property, and a contractor may sue the owner if such payments are not made. ... Although the owner's “agents” are included in this definition, the legislature cannot have intended to make every “agent,” including even the lowliest employee, liable for a corporate property owner's debts to its contractors. Instead, the legislature must have intended to hold the principal, i.e. , the owner, liable for its agents' authorized acts in “ordering the improvement to be made.” Such an interpretation comports with general agency law.

Trial Court Opinion, 12/14/2012, at 3 (citations omitted). Accordingly, the trial court granted DeBolt's motion for summary judgment.

SBA ultimately obtained a default judgment in the amount of $1.9 million against 410 SLD and Kenworth. SBA then appealed the trial court's order granting DeBolt's motion for summary judgment to the Superior Court.⁹

In a scholarly and comprehensive published opinion authored by Judge Mary Jane Bowes, an en banc panel of the Superior Court affirmed. Scungio Borst & Assocs. v. 410 Shurs Lane Developers, LLC, 106 A.3d 103 (Pa.Super.2014) (en banc ). The court first rejected SBA's primary argument that Section 2's definition of “owner” clearly and unambiguously permitted it to recover from DeBolt. Preliminarily, the court noted that Section 2 contains a caveat that its definitions apply “unless the context clearly indicates otherwise,” id. at 106 (quoting Section 2), and added that, pursuant to its own precedent, CASPA applies only in the context of a construction contract, id.(citing, inter alia , Prieto Corp. v. Gambone Constr. Co., 100 A.3d 602 (Pa.Super.2014) ). The court then found tension between Section 4's language that a contractor is entitled to payment from “the party with whom the contractor ... has contracted” and the ensuing sections' description of a contractor's right to payment from an “owner,” finding that such tension rendered the statute's language ambiguous as to whether a contractor could recover from an owner's agent, in a personal capacity. Accordingly, the court held that Section 2 did not clearly and unambiguously permit SBA's claim against DeBolt in his personal capacity.

Turning to SBA's contention that Section 2 was an analogue to Section 260.2a of the WPCL, the court noted that SBA cited no legislative history or authority suggesting that Section 2 was modeled after Section 260.2a, and remarked that the provisions' language was materially different. The court further noted that, while the WPCL was intended to provide employees a mechanism to disgorge wrongfully withheld wages from their employers, and while imposing personal liability for employers' agents gave “top corporate managers an incentive to use available corporate funds for the payment of wages and benefits rather than for some other purpose,” id. at 108 (citing Carpenters Health and Welfare Fund of Phila. and Vicinity by Gray v. Ambrose, Inc., 727 F.2d 279, 282–83 (3d Cir.1983) ), CASPA was intended “to protect contractors and subcontractors [and] to encourage fair dealing among parties to a construction contract ,” id. at 109 (quoting Ruth r auff, Inc. v. Ravin, 914 A.2d 880, 890 (Pa.Super.2006) ) (emphasis in Scungio Borst & Assocs). Bearing that distinction in mind, and reiterating CASPA's dependence upon the existence of a construction contract, the court concluded:

[T]he construction contract is the starting point of any CASPA analysis. CASPA does not supplant the traditional breach of contract action between contracting parties; it merely makes additional remedies available to contractors and subcontractors when they are not promptly paid by the party with which they contracted.

Id. at 109.

Finally, the court rejected SBA's interpretation of Section 2 as imposing liability on owners' agents on the basis that it would run contrary to the longstanding principles that non-parties to a contract may not be held liable thereunder and that an agent of a disclosed principal is not personally liable for contracts entered into in the scope of his agency on the principal's behalf. The court reasoned that, if the General Assembly had sought to abrogate such bedrock principles of contract and agency law, it would have done so more expressly. Id.(citing In re Estate of Duran, 692 A.2d 176, 179 (Pa.Super.1997) ; Buradus v. General Cement Prods. Co., 159 Pa.Super. 501, 48 A.2d 883, 886 (1946), aff'd per curiam , 356 Pa. 349, 52 A.2d 205 (1947) ).

Given the foregoing, the court concluded that Section 2's definition of owner did not impose personal liability on property owners' agents; instead, the court reasoned:

The reference to authorized agents in the definition of owner merely reinforces that their conduct is imputed to and binding upon the owner. Since the term “agent” is not defined in the statute, conceivably that term could include architects, project managers, and designated representatives who are acting on behalf of the owner in dealing with the contractor. “Contractor” is defined as “[a] person authorized or engaged by an owner to improve real property.” 73 P.S. § 502. That definition is arguably broad enough to encompass agents of the owner. ... The “agent of owner”

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