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The beneficiaries of a union’s employee benefits trust fund will not be able to pursue a mechanic’s lien claim against the developer of a project that the beneficiaries worked on, the state Supreme Court has ruled.

In the combined cases of Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development and Laborers’ Combined Funds of Western Pennsylvania v. Scott’s Development, the high court unanimously reversed a state Superior Court decision. The Superior Court had held that an implied contract existed between the trustees and the contractor, and, due to a liberal interpretation of “subcontractor” in the Mechanics’ Lien Law of 1963, a mechanic’s lien claim was actionable.

However, writing the majority opinion, Justice Thomas G. Saylor determined that the trustees had waived the issue of an implied contract, and that the General Assembly did not intend for a contractor’s employees to be considered subcontractors under the mechanic’s lien law.

“We conclude that the union workers were not subcontractors, and the trustees, by corollary in their representative capacity, were not entitled [to] file a lien claim on the workers’ behalf,” Saylor said. “Although the 1963 act is intended to protect subcontractors who suffer harm occasioned by the primary contractor’s failure to meet its obligations, we have determined that the legislature did not intend the term ‘subcontractor’ to subsume employees of the primary contractor.”

In the case, developer Scott’s Development Co. retained general contractor J. William Pustelak in 2007 to work on a hotel property. Pustelak had previously entered into collective bargaining agreements with two unions and, pursuant to those agreements, retained members from the unions to perform work on the Scott’s property.

Pustelak, however, subsequently failed to pay the trustees for the benefits that were due to workers from the unions—Bricklayers and Trowel Trades International and the Laborers’ District Council of Western Pennsylvania.

The trustees, in turn, filed statements of mechanic’s lien claims against Scott’s.

While the trial court agreed with the developer, holding that the union members were employees of the contractor, a split en banc panel of the Superior Court reversed, holding that the law should be liberally construed.

The majority noted that the 1963 version of the law was a remedial measure aiming to protect labor and materials a contractor invests in a real estate owner’s property before getting paid, and that a 2006 amendment to the law “dramatically expanded the class of persons” entitled to a mechanic’s lien. The majority further found that the trustees pleaded “sufficient ‘implied contractors,’” and decided to allow the claims to go forward.

On appeal to the high court, the trustees argued that, even if the act were to be strictly construed, the unions, and by extension the trustees, met the statutory definition of “subcontractor” based on the bargaining agreements and the fact that they furnished labor pursuant to a contract with the contractor.

In reviewing the legislative intent, Saylor noted that an apparent discrepancy existed between Section 201(5), which defined “subcontractor” as anyone who furnishes labor under a contract with a contractor, and Section 303(a), which states that no lien is allowed in favor of any person other than a contractor or subcontractor, even if the person furnishes labor.

“If all of a contractor’s employees were automatically deemed to be subcontractors, it is difficult to imagine who this class of persons might be,” Saylor said, referring to the workers indicated in Section 303(a) who provided labor but were not intended to qualify as contractors or subcontractors. “Although the legislative body has thus chosen to permit a property owner to be held responsible to ensure that subcontractors are paid … construing the class of claimants to include all of a contractor’s employees would force private property owners to become guarantors of contractors’ general employment obligations and create an entirely new class of ‘subcontractors,’ thus exposing the subject property to significantly increased liability.”

Saylor additionally determined that the majority of the Superior Court exceeded the scope of review when it found that an implied contract was sufficiently pleaded.

Since the issues stemmed from a motion in the form of a demurrer, Saylor cited the 2005 Supreme Court case Bilt-Rite Contractors v. The Architectural Studio, and said that the review must be limited to the facts that were averred.

“It is thus improper for a reviewing court to overrule a demurrer based on legal theories that are untethered to the factual basis for liability as alleged by the plaintiff,” Saylor said. “Although the rules of civil procedure are to be liberally construed, the complaint must nonetheless apprise the defendant of the claim being asserted and summarize the essential supporting facts.”

Neither Scott’s attorney Bryan G. Baumann of Knox McLaughlin Gornall & Sennett, nor Kenneth Lee of Tucker Arensberg, who represented Bricklayers of Western Pennsylvania Combined Funds Inc., returned a call for comment.

Max Mitchell can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI.

(Copies of the 25-page opinion in Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development and Laborers’ Combined Funds of Western Pennsylvania v. Scott’s Development, PICS No. 14-0611, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •