Superior Court Of Pennsylvania Holds That CASPA Does Not Allow For Individual Claims Against A Property Owner’s Principals Or Shareholders
In Scungio Borst Assocs. v. 410 Shurs Lane Developers, LLC, the Superior Court of Pennsylvania held that an individual principal/shareholder of a property owner could not be held personally liable as an “agent of the owner” for unpaid invoices, penalties, and attorneys fees under the Pennsylvania Contractor and Subcontractor Payment Act (CASPA), 73 P.S. §§ 501-516, even though the property owner itself had failed to make payments allegedly due under a construction contract.
CASPA is a Pennsylvania statute which is designed to protect contractors and subcontractors from nonpayment and which, to that end, establishes rules and deadlines for payment under construction contracts between property owners, contractors, and subcontractors. An owner or contractor who does not adhere to the Act’s payment requirements is subject to the imposition of interest, penalties, and attorneys’ fees. In this recent case, the property owner, a limited liability company, had retained the plaintiff contractor to perform construction services on a condominium project. Upon completion of the work, the contractor was not paid approximately $1.5 million that it was owed under the contract. The contractor filed suit under CASPA to obtain the payment it was owed plus interest, penalties and fees, and named both the property owner and its individual principal as defendants. The trial court granted summary judgment to the individual principal on all claims asserted against him, and the contractor appealed, arguing that CASPA allows for claims against both a property owner and its principal when the principal is an “agent of the owner acting with the owner’s authority.”
The contractor/plaintiff argued that CASPA allowed for a cause of action against both the property owner and the property owner’s principal because the Act defines the term “owner” to include “successors in interest of the owner and agents of the owner acting with their authority.” 73 P.S. § 502. The contractor argued that under the plain language of this definition, the principal could be held personally liable as an “agent of the owner.”
The Superior Court disagreed. While CASPA provides that when a contractor or subcontractor performs under a construction contract, it is entitled “to payment from the party with whom the contractor or subcontractor has contracted,” 73 P.S. §§504, 507(a), the court noted that in some places the Act refers to the party with an obligation to pay as the “owner” while at other times it is referred to as the party “with whom the contractor or subcontractor has contracted.” Therefore, the court found, the statute was ambiguous in its use of both the term “contracting party” and “owner” in referencing the obligation to pay under a construction contract.
However, the Superior Court rejected the contractor’s argument that the ambiguity should be resolved in its favor because CASPA should be construed consistently with the Pennsylvania Wage Payment Collection Law (WPCL), which has been construed to include an “agent or officer” of an employer as personally liable for unpaid wages to an employee. The Court found that there was no authority or legislatively history to suggest that the statutes were intended to be parallel provisions and construed in tandem. Instead, the Court found that because CASPA expressly applies to construction contracts, the existence of such a contract was the starting point for any CASPA analysis. The Court held that “CASPA does not supplant the traditional breach of contract action..…..it merely makes additional remedies available to contractors and subcontractors when they are not promptly paid by the party with which they contracted.” Thus, the Court reasoned, there can be no CASPA remedy for a contractor or subcontractor in the absence of an underlying breach of contract with the defendant. Because the contractor’s agreement in this case was made solely with the property owner (i.e., the limited liability company), the contractor could not bring a CASPA claim against the owner’s principal as an individual because there was no separate contract with the owner’s principal. The Court held that “CASPA liability lies against contracting parties only,” and therefore the trial court’s summary judgment ruling was upheld.
The White and Williams Construction and Surety Practices Group is well versed in real world construction problems such as the one reflected in this case. Frequently, disputes arise on the job about who should be paid and when they should be paid for work performed during the course of a construction project. If you find yourself in a dispute with another contractor regarding payment issues, please consider contacting us for advice and how to proceed. If you wish to discuss the Scungio Borst case, or would like more information about the Construction and Surety Practices Group, please contact the group’s co-chairs, Jerrold P. Anders, at 215-864-7003, firstname.lastname@example.org or Bill Taylor at 215-864-6305, email@example.com.