Articles Posted in Construction Law

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In this appeal, the issue presented for the Supreme Court's review was whether a contractor could maintain an action under the Contractor and Subcontractor Payment Act (CASPA) against a property owner’s agents. 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, 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 sued 410 SLD; its alleged successor corporation, Appellee Kenworth II, LLC; and DeBolt in his personal capacity. SBA asserted, among other claims, violations of CASPA. After careful review, the Supreme Court held that a contractor could not maintain an action under CASPA, and, accordingly, affirmed the order of the Superior Court. View "Scungio Borst & Assoc. v. 410 Shurs Lane Developers, LLC" on Justia Law

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Appellant City of Allentown (City) contracted with appellee A. Scott Enterprises, Inc. (ASE), to construct a new public road. After arsenic-contaminated soil was discovered at the worksite, the City suspended work on the project. Following testing, it was determined construction could resume if precautions were taken. Accordingly, the City instructed ASE to obtain revised permits and proceed with the project. However, the existing contract did not include terms regarding the potential for contaminated soil, despite the fact the City was aware there might be contamination prior to entering into the contract, and ASE declined to proceed, explaining it would incur substantial additional costs due to the contaminated soil. The parties made several attempts to reach an agreement in which ASE would continue the construction, but to no avail. Consequently, ASE sued the City to recover its losses on the project, alleged breach of contract, and sought compensation under theories of quantum meruit and unjust enrichment, as well as interest and a statutory penalty and fee award for violations of the prompt pay provisions of the Procurement Code. After a trial, a jury found the City breached its contract with ASE and also withheld payments in bad faith. In this discretionary appeal, the issue this case presented for the Supreme Court's review was whether an award of a statutory penalty and attorney fees under the prompt payment provisions of the Commonwealth’s Procurement Code was mandatory upon a finding of bad faith, irrespective of the statute’s permissive phrasing. The Court held such an award was not mandatory, and therefore reversed the order of the Commonwealth Court and remanded the case to the trial court for further proceedings. View "A. Scott Enterprises v. City of Allentown" on Justia Law

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In 2010, the United States Department of the Navy entered into an agreement with Contracting Systems, Inc. II ("CSI"), per which CSI served as the general contractor for the construction of an addition to, and renovations of, the Navy/Marine Corps Reserve Training Center in the Lehigh Valley. CSI, in turn, subcontracted with Appellee, Clipper Pipe & Service, Inc. for the performance of mechanical and heating, ventilation, and air conditioning work. Clipper filed suit against CSI and its surety, the Ohio Casualty Insurance Company (collectively "Appellants"), in the United States District Court for the Eastern District of Pennsylvania, asserting that CSI had failed to pay approximately $150,000 to Clipper, per the terms of their agreement. Among other claims, Clipper advanced one under the Contractor and Subcontractor Payment Act (CASPA). Appellants moved for summary judgment, arguing that CASPA did not apply to public works projects, because a governmental entity does not qualify as an "owner" under the statutory definition, as such an entity is neither a "person" nor an "other association." The federal district court denied relief on Appellants' motion. Among other aspects of its holding, the court followed "Scandale Associated Builders & Eng'rs, Ltd. v. Bell" which held that a governmental entity may be an "owner" under CASPA, since the statutory definition of "person" does not exclude the federal government, and the purpose of CASPA is to protect contracting parties. Clipper prevailed at the subsequent jury trial, and the district court awarded interest, penalties, and attorney fees. Appellants appealed to the United States Court of Appeals for the Third Circuit. The Pennsylvania Supreme Court accepted certification from the Third Circuit to determine whether a CASPA applied to the public works project in this case. After review, the Supreme Court concluded that CASPA did not apply to a construction project where the owner was a governmental entity. View "Clipper Pipe v. Ohio Casualty Ins." on Justia Law

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In September 2003, appellant The Cutler Group, Inc. sold a new house in Bucks County to Davey and Holly Fields. After living in the house for three years, the Fields sold the house to appellees Michael and Deborah Conway. In 2008, Appellees discovered water infiltration around some of the windows in the home, and, after consultation with an engineering and architectural firm, concluded that the infiltration was caused by several construction defects. In 2011, Appellees filed a one-count complaint against Appellant, alleging that its manner of construction breached the home builders' implied warranty of habitability. Appellant filed a demurrer, arguing, inter alia, that, as a matter of law, the warranty rextended from the builder only to the first purchaser of a newly constructed home because there was no contractual relationship between the builder and second or subsequent purchasers of the home. Recognizing that courts have traditionally required a showing of privity of contract before permitting a party to proceed with a warranty claim, the trial court concluded that the question presented was "one of policy as to who will bear the burden for damages caused by latent defects [in] relatively new residential dwellings." The trial court sustained Appellant's demurer based on lack of privity, and dismissed Appellees' complaint with prejudice. After an unsuccessful appeal to the Superior Court, appellees petitioned the Supreme Court. Finding no reversible error, the Supreme Court affirmed, holding that a subsequent purchaser of a previously inhabited residence may not recover contract damages for breach of the builder's implied warranty of habitability. View "Conway v. The Cutler Group, Inc." on Justia Law

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In August, 2010, Appellants, Washington County residents Raymond and Donna Mantia, hired Appellee, West Virginia contractor Shafer Electric & Construction, to build a 34 foot by 24 foot, two-car garage addition onto their house. The proposals for the garage did not comply with several requirements of Section 517.7 of the Home Improvement Consumer Protection Act. Specifically, any home improvement contract, in order to be valid and enforceable against the owner of real property, had to be legible, in writing, and contain thirteen other specific requirements. Despite the detail in the specifications for the work to be completed, the contract here only complied with subsections (5), (7), and (8) of Section 517.7(a). Notwithstanding these deficiencies, work on the project began in October, 2010, when Appellants, who owned their own excavation business, began the foundation excavation. When Appellee commenced construction of the addition, it contended that problems surfaced because of Appellants' failure to complete the excavation work properly. During the subsequent months, Appellants eventually reexcavated the foundation area for the addition and, in the process (according to Appellee), changed the design of the addition several times. Negotiations into these design changes and other necessary alterations as a result of the excavation problems occurred, but ultimately failed when Appellants apparently refused to enter into a new contract with Appellee. Upon the breakdown of the negotiations, the parties mutually agreed that Appellee would invoice Appellants for the work completed, and that Appellee would discontinue efforts on the project. Appellants refused to pay the bill. Appellee responded by filing a mechanic's lien in the Washington County Court of Common Pleas. When Appellants still had failed to satisfy the outstanding balance, Appellee filed a civil action in the common pleas court, alleging both breach of contract and quantum meruit causes of action. The Supreme Court granted allowance of appeal in this matter to determine whether the Act barred a contractor from recovery under a theory of quantum meruit in the absence of a valid and enforceable home improvement contract as defined by the Act. The Superior Court held that the Act did not bar a cause of action sounding in quantum meruit and, for slightly different reasons, the Supreme Court affirmed. View "Shafer Electric & Construction v. Mantia" on Justia Law

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The issue before the Supreme Court in this case was whether the Mechanics' Lien Law of 1963 authorized a union employee benefit trust to file a lien on behalf of union members who performed work for a construction contractor. Developer raised a preliminary objection in the nature of a demurrer as to each complaint, alleging that the Trustees lacked standing to assert a mechanics' lien claim on behalf of the unionized workers because such workers were employees of Contractor and, as such, were neither "contractors" nor "subcontractors." The Supreme Court concluded that the union workers were not subcontractors, and the Trustees, by corollary in their representative capacity, were not entitled file a lien claim on the workers' behalf. Although the 1963 Act was 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. Furthermore, the Superior Court erred in overturning the demurrers based on an implied-in-fact contract theory. The order of the Superior Court was reversed, and the case is remanded for reinstatement of the county court’s order. View "Bricklayers of Western PA v. Scott's" on Justia Law

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In 2006, Developer-Appellee 500 James Hance Court, LP entered into a construction management agreement with Contractor Gorman Construction Company, Inc., pertaining to the erection of a building at 500 James Hance Court, situated within the Oaklands Corporate Center in Exton, Chester County. According to the agreement, the contemplated, 68,000-square-foot structure was to be used as an elementary charter school, and the project was denominated "Collegium Charter School." Soon after the lease and related contracts were executed, the Bureau of Labor Law Compliance notified the School that it was investigating the project to determine whether prevailing wages were required. In this regard, the Bureau explained that charter school construction was treated the same as a traditional school project (re: public works project) for prevailing wage purposes. If the project's phases could be bifurcated, both the school and Appellee would be responsible. The issue between the parties centered on who was ultimately responsible for compliance with the prevailing wage law: the contractor or the school. The Commonwealth Court had found no evidence that the charter school had any role in determining space and performance goals for the project, and therefore the school was responsible for compliance. But upon review, the Supreme Court concluded that the Board’s determination that the lease was a disguised construction contract for the building as a whole, was based on legal error and essential findings which lacked substantial evidentiary support. Facially, the project was rationally divisible according to major phases of shell and fit-out construction. As to the shell, Appellees established the private character of the funding. Furthermore, in terms of economic reality, Appellees presented a prima facie case that Developer's only relationship with the School was per a bona fide pre-development lease. The Bureau failed to go forward with sufficient evidence to the contrary to overcome this prima facie case, and as such, affirmed the Commonwealth Court. View "500 James Hance Ct. v. Pa. Prevailing Wage Appeals Bd." on Justia Law