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decided: August 20, 1982.


Original jurisdiction in case of Pennsylvania Housing Finance Agency, an agency of the Commonwealth of Pennsylvania and Commonwealth of Pennsylvania v. Abreen Corporation, t/a Mahanoy Building Associates and Mahanoy Associates.


John E. Flaherty, Jr., with him, Philip M. Kruger and Harold E. Dunbar, Chief Counsel, for plaintiffs.

Alan B. Rubenstein, Rackemann, Sawyer & Brewster, for defendants.

Judge Craig. Memorandum Opinion by Judge Craig.

Author: Craig

[ 84 Pa. Commw. Page 572]

The Pennsylvania Housing Finance Agency (PHFA) has addressed our original jurisdiction, filing a complaint in equity and a petition for a preliminary injunction, which seek to enjoin the American Arbitration Association (AAA) from hearing a dispute concerning a construction contract and a building loan agreement involving the PHFA, Abreen Corporation (contractor) and Mahanoy Associates

[ 84 Pa. Commw. Page 573]

(owner).*fn1 In response, the contractor has filed preliminary objections.

The PHFA provided construction and permanent financing for a construction contract, in which the contractor agreed to build for the owner an apartment project for the elderly.*fn2 After a lengthy delay in the commencement of construction, the contractor, seeking damages against the owner and PHFA, filed a written demand for arbitration with the AAA, pursuant to contract provisions expressly phrased by the PHFA's own supplementary general conditions, which submit disputes involving the contractor, architect, owner and the PHFA to AAA arbitration.*fn3 The

[ 84 Pa. Commw. Page 574]

AAA has scheduled the matter for hearing on October 5, 1982.

In pursuing this action, the PHFA, seeking to avoid the express contract terms, contends that the Board of Claims is the exclusive forum to hear the contractor's claims against the PHFA, citing the act that created the Board (Board of Claims Act),*fn4 in particular, 72 P.S. § 4651-4, which provides:

The Board of Claims shall have exclusive jurisdiction to hear and determine all claims against the Commonwealth arising from contracts hereafter entered into with the Commonwealth, where the amount in controversy amounts to $300.00 or more . . . .

At issue is whether the PHFA is "the Commonwealth" under the Board of Claims Act. If not, the contractor also contends that the PHFA is not "the Commonwealth" under 42 Pa. C.S. § 761,*fn5 which sets forth our original jurisdiction in civil actions or proceedings by or against "the Commonwealth."

Our Supreme Court, in Specter v. Commonwealth, 462 Pa. 474, 341 A.2d 481 (1975), established the analysis to be used in determining whether the various agencies and authorities created by the Pennsylvania

[ 84 Pa. Commw. Page 575]

General Assembly are to be considered "the Commonwealth." In considering whether the Pennsylvania Turnpike Commission was "the Commonwealth" so as to have sovereign immunity in connection with suits in tort, the court closely examined the commission's enabling act,*fn6 and said:

While [the legislature] provided for close connection between the Commission and the Commonwealth, and particularly the Department of Highways, the legislature has also made a clear distinction between the Commission and the Commonwealth, particularly with regard to financial matters. The statutory scheme was obviously designed to provide for the construction and maintenance of the Turnpike, but explicitly without the assumption by the Commonwealth of any liability or responsibility in connection therewith.

462 Pa. at 482-483, 341 A.2d at 485. The court thus held that the commission was not "the Commonwealth" so as to have sovereign immunity, stating:

The legislature created the separate body and at the same time disclaimed any responsibility on the part of the Commonwealth for liabilities which it, the Commission, might incur. It is clear that the Commission is not an integral part of the Commonwealth, cannot share the attributes of sovereignty which inhere in the state.

Id. at 493, 341 A.2d at 491.

Subsequently, in Yancoskie v. Delaware Port Authority, 478 Pa. 396, 387 A.2d 41 (1978), our Supreme Court relied on Specter in concluding that the Delaware River Port Authority was not immune from suit in trespass in the courts of this state, explaining:

[ 84 Pa. Commw. Page 576]

In one critical particular, however, the [Turnpike] Commission and the [Port] Authority possess precisely the same status, viz., both are financially independent of the Commonwealth of Pennsylvania. The Authority, like the Commission, raises revenue by means of bonds and satisfies these obligations by toll and other user charges. Moreover, and again like the Commission, the Authority's debts are not Commonwealth obligations.

Id. at 401-402, 387 A.2d at 45. Accord, Transamerica Insurance Co. v. Judie, Inc., 30 Pa. Commonwealth Ct. 259, 373 A.2d 478 (1977) (Bureau of State Lotteries held to be "the Commonwealth" because it receives financial support from the legislature); United Brokers Mortgage Co. v. Fidelity Philadelphia Trust Co., 26 Pa. Commonwealth Ct. 260, 363 A.2d 817 (1976).

This court employed the "financial independence" test in Delaware River Port Authority v. Board of Arbitration of Claims, 45 Pa. Commonwealth Ct. 281, 405 A.2d 600 (1979), in determining that a port authority was not to be considered "the Commonwealth" under the Board of Claims Act, saying:

We find substantial merit in affirming the classification scheme developed in Yancoskie and conclude that the Port Authority is not within the ambit of "Commonwealth" as required for the invocation of the [Board of Claim's] jurisdiction.

Id. at 283-284, 405 A.2d at 601. Furthermore, we concluded that the port authority was not within the statutory perimeters of the original jurisdiction of this court, noting that, "we enjoy no jurisdiction over causes asserted in contract against the Commonwealth broader than that enjoyed by the Board [of Claims]." Id. at 285, 405 A.2d at 602.

[ 84 Pa. Commw. Page 577]

Relying on this line of decisions, it is clear that the financial relationship between the Commonwealth and the PHFA is the "primary factor"*fn7 to assist in our determination.

The financial independence of the PHFA was emphasized by our Supreme Court in Johnson v. Pennsylvania Housing Finance Agency, 453 Pa. 329, 309 A.2d 528 (1973), when it upheld the constitutionality of the enabling legislation that created the PHFA.*fn8 The court said:

In order to finance the above programs, the General Assembly has empowered the [PHFA] to issue bonds and notes, which are to be payable out of the [PHFA's] revenue, including the proceeds of its mortgage loan . . . . the notes and bonds issued by the [PHFA] do not constitute "a debt of the Commonwealth or of any political subdivision thereof" and "that neither the faith and credit nor the taxing power . . . is pledged to the payment of the principal or of the interest on such bonds." (Citation omitted.) Furthermore, the [PHFA] is required to establish and maintain a "Capital Reserve Fund" in an amount equal to the entire principal and interest due on its outstanding bonds and notes during the succeeding calendar year.

453 Pa. at 355-356, 309 A.2d at 532.

[ 84 Pa. Commw. Page 578]

Furthermore, the financial independence of the PHFA from the Commonwealth is underscored in Section 1680.504(a)(c) of the Housing Finance Agency Law,*fn9 which provides that in the event the PHFA receives an appropriation of funds from the legislature to avoid defaulting on payments to be made on its notes and bonds, "[s]uch appropriations, if any, shall be repaid to the Commonwealth as soon as possible by the agency in excess of the amount required to make and keep the agency self-supporting." Thus the financial relationship between the PHFA and the Commonwealth is similar to that considered in Specter. Therefore, the PHFA cannot be considered "the Commonwealth" for purposes of jurisdiction of the Board of Claims or of this court's original jurisdiction.*fn10

Accordingly, the preliminary objections are sustained, the complaint in equity is dismissed and the petition for a preliminary injunction is denied.


Now, August 20, 1982, the preliminary objections are sustained, the complaint in equity is dismissed and the petition for a preliminary injunction is denied.


Preliminary objections sustained. Complaint in equity dismissed. Petition for preliminary injunction denied.

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