October 4, 2013
SCUNGIO BORST & ASSOCIATES, Appellants
SHURS LANE DEVELOPERS, LLC AND KENWORTH II, LLC., Appellees
Appeal from the Order Entered September 30, 2010 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): 946 November Term, 2008
BEFORE: BENDER, J., BOWES, J., and STRASSBURGER, J. [*]
Scungio Borst & Associates (SBA) appeals from the September 30, 2010 order that granted summary judgment in favor of Robert DeBolt (DeBolt), a fifty percent shareholder in 410 Shurs Lane Developers, LLC (410 SLD). After review, we vacate the order granting summary judgment and remand the case for further proceedings.
Judge McInerney provided the following factual and procedural history of the case:
[SBA] acted as general contractor on a condominium construction project, which was owned by defendant 410 Shurs Lane Developers, LLC ("410 SLD"). Mr. DeBolt was a principal of 410 SLD. [SBA] performed its construction services pursuant to a written contract between it and 410 SLD. [SBA] also performed $2.6 million in additional work under the contract as directed by 410 SLD and Mr. DeBolt. [SBA] was not paid for approximately $1.5 million in additional work, so it filed this lawsuit against 410 SLD, Mr. DeBolt, and others. 1
1 The claims against the other parties were either dismissed, settled, tried, or discontinued, and they are not at issue in this appeal.
In its Fourth Amended Complaint, [SBA] asserted claims against 410 SLD and Mr. DeBolt for breach of contract, for violation of the Contractor and Subcontractor Payment Act ("CASPA"), [73 Pa.C.S. §§ 501-516, ] and for unjust enrichment. Mr. DeBolt filed a Motion for Summary Judgment as to those claims, which Judge Sheppard granted. The remaining claims against 410 SLD and another defendant 2 were tried before this court, and [SBA] obtained a judgment against both of those defendants for approximately $1.9 million.
2 The other entity is Kenilworth II, LLC, which purchased the condominium property at sheriff's sale. It is also owned by Mr. DeBolt.
Trial Court's Opinion, 12/14/12, at 1-2.
On July 12, 2012, a final order was issued in the case, entering judgment in favor of SBA and against 410 Shurs and Kenworth II, LLC (Kenworth) for $1, 979, 341. SBA's appeal only concerns the court's grant of summary judgment in favor of DeBolt.
In its appeal, SBA raises the following issue for our review:
1. Did the lower court commit an error of law or abuse its discretion in granting summary judgment to DeBolt under CASPA, where:
(a) CASPA makes the owner (410 [SLD]) and the "agent of the owner acting with the owner's authority" (DeBolt) liable to contractors such as SBA,
(b) DeBolt is a fifty percent owner of 410 [SLD],
(c) SBA consistently dealt with DeBolt and received his authorizations for change orders, and
(d) SBA never received payment for the change orders?
SBA's brief at 3.
"Our scope of review of a trial court's order granting or denying summary judgment is plenary, and our standard of review is clear: the trial court's order will be reversed only where it is established that the court committed an error of law or abused its discretion." Universal Health Services, Inc. v. Pennsylvania Property and Casualty Insurance Guaranty Assoc., 884 A.2d 889, 892 (Pa.Super. 2005) (citation omitted).
The entry of summary judgment is proper whenever no genuine issue of any material fact exists as to a necessary element of the cause of action. The moving party's right to summary judgment must be clear and free from doubt. We examine the record, which consists of all pleadings, as well as any depositions, answers to interrogatories, admissions, affidavits, and expert reports, in a light most favorable to the non-moving party, and we resolve all doubts as to the existence of a genuine issue of material fact against the moving party.
LJL Transp., Inc. v. Pilot Air Freight Corp., 599 Pa. 546, 962 A.2d 639, 647 (Pa. 2009) (citations omitted).
Krapf v. St. Luke's Hospital, 4 A.3d 642, 649 (Pa.Super. 2010), appeal denied, 34 A.3d 831 (Pa. 2011).
SBA argues that the trial court erred in granting summary judgment in favor of DeBolt, because under CASPA the term "owner" is defined to include "agents of the owner acting within their authority." SBA's brief at 10. SBA also argues that with DeBolt being a 50% owner and a key decision maker, DeBolt should be liable for all the unpaid work. Id. As a factual basis for this claim, SBA asserts that the parties entered into the construction contract on September 2, 2005, with SBA to receive $3.8 million dollars for the labor and materials it supplied to the project. SBA claims it was directed to submit all bills to 410 SLD and DeBolt and was paid by Sovereign Bank. However, at the end of June 2006, SBA stopped receiving payments, but was assured by DeBolt that payment would be forthcoming. Based upon these assurances, SBA continued its performance until November 8, 2006, when SBA was informed that the contract was terminated. At that time, SBA was owed $1, 544, 161 plus interest and costs, an amount that related to "change orders" or "cost events" that were authorized by DeBolt. SBA acknowledges that the contract included language, indicating that "[a] Change Order is a written instrument prepared by the Architect and signed by the Owner, Contractor and Architect…." Contract, § 7.2.1. However, contrary to 410 SLD's position that oral change orders were not valid, SBA asserts that it was often the practice that DeBolt would verbally authorize change orders and would not sign them.
We begin by discussing CASPA, which is at the heart of the issue raised on appeal. In Zimmerman v. Harrisburg Fudd I, L.P., 984 A.2d 497 (Pa.Super. 2009), this Court explained that CASPA is:
a comprehensive statute enacted in 1994 to cure abuses within the building industry involving payments due from owners to contractors, contractors to subcontractors, and subcontractors to other subcontractors. "The underlying purpose of [CASPA] is to protect contractors and subcontractors . . . [and] to encourage fair dealing among parties to a construction contract." Ruthrauff, Inc. v. Ravin, Inc., 914 A.2d 880, 890 (Pa.Super. 2006). The statute provides rules and deadlines to ensure prompt payments, to discourage unreasonable withholding of payments, and to address the matter of progress payments and retainages. Under circumstances prescribed in the statute, interest, penalty, attorney fees and litigation expenses may be imposed on an owner, contractor or subcontractor who fails to make payment to a contractor or subcontractor in compliance with the statute.
Id. at 500-01.
In arguing that DeBolt is an "agent of the owner" and thus liable to SBA for the sums due, SBA cites section 502 of CASPA, which defines "owner" 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 Pa.C.S. § 502 (emphasis added). SBA also cites the definition of "construction contract" which provides that it is an agreement, "whether written or oral." Id. Thus, SBA claims that the verbal authorizations for change orders are encompassed in the agreement and that DeBolt is individually liable.
SBA also cites the Wage Payment and Collection Law (WPCL), 43 Pa.C.S. §§ 260.1 et seq., claiming that it is analogous to CASPA and supports SBA's interpretation of the term "agent of the owner." SBA's brief at 12 (stating, "[u]nder the WPCL, an 'agent' of an employer is an individual with decisionmaking authority, and such 'agents' are liable for the employer's unpaid wages. CASPA treats 'agent' in the same manner as the WPCL. Thus, individual 'agents' with decisionmaking authority such as DeBolt are liable under CASPA for a contractor's unpaid work."). In further support of this proposition, SBA quotes Hirsch v. EPL Technologies, Inc., 910 A.2d 84 (Pa.Super. 2006), which states:
"To hold an 'agent or officer' personally liable for unpaid wages, 'evidence of an active role in decision making is required.'" Int'l Ass'n of Theatrical Stage Employees., Local Union No. 3 v. Mid-Atl. Promotions, Inc., 856 A.2d 102, 105 (Pa.Super. 2004) (citing Mohney v. McClure, 390 Pa.Super. 338, 568 A.2d 682 (Pa.Super. 1990), affirmed per curiam[, ] 529 Pa. 430, 604 A.2d 1021 (1992)). In that case, a panel of this Court found that "[t]o sustain its case against Appellee as an "employer" under the WPCL, Appellant had to show Appellee was actively involved in corporate policy-making, such as corporate decision-making or corporate advisement on matters of pay or compensation." Mid-Atl. Int'l Ass'n of Theatrical Stage Employees., Local Union No. 3 v. Promotions, Inc., 856 A.2d at 106.
Id. at 88. Therefore, relating this concept to the instant case, SBA argues that because DeBolt was in an active role in decision making and authorizing the change orders, he should be considered an agent of the owner and subject to liability pursuant to CASPA.
SBA further contends that a construction contract may be modified orally despite the contract provision that requires change orders to be in writing. To support this contention, SBA relies on Universal Builders, Inc. v. Moon Motor Lodge, Inc., 244 A.2d 10 (Pa. 1968), wherein the Supreme Court stated:
[I]t appears undisputed that the contract can be modified orally although it provides that it can be modified only in writing. E.g., Wagner v. Graziano Construction Co., 390 Pa. 445, 136 A.2d 82 (1957); 4 Williston on Contracts, § 591 (3d ed. 1961); 6 Corbin on Contracts, § 1295 (1962); Restatement, Contracts, § 407 (1932). Construction contracts typically provide that the builder will not be paid for extra work unless it is done pursuant to a written change order, yet courts frequently hold that owners must pay for extra work done at their oral direction. See generally Annot., 2 A.L.R. 3d 620, 648-82 (1965). This liability can be based on several theories. For example, the extra work may be said to have been done under an oral agreement separate from the written contract and not containing the requirement of a written authorization. 3A Corbin on Contracts, § 756 at p. 505 (1960). The requirement of a written authorization may also be considered a condition which has been waived. 5 Williston on Contracts, § 689 (3d ed. 1961).
Id. at 15. The Supreme Court further stated:
[T]he effectiveness of a non-written modification in spite of a contract condition that modifications must be written depends upon whether enforcement of the condition is or is not barred by equitable considerations, not upon the technicality of whether the condition was or was not expressly and separately waived before the non-written modification.
In view of these equitable considerations underlying waiver, it should be obvious that when an owner requests a builder to do extra work, promises to pay for it and watches it performed knowing that it is not authorized in writing, he cannot refuse to pay on the ground that there was no written change order. Focht v. Rosenbaum, 176 Pa. 14, 34 A. 1001 (1896). When Moon directed Universal to "go ahead" and promised to pay for the extras, performance of the condition requiring change orders to be in writing was excused by implication. It would be manifestly unjust to allow Moon, which mislead [sic] Universal into doing extra work without a written authorization, to benefit from non-performance of that condition.
Id. at 16.
Despite the law as outlined above, SBA also references deposition testimony taken during the discovery period, which is most telling. Notably, the two principals of SBA, Scungio and Borst, related what occurred when DeBolt gave verbal instructions directing changes, i.e., cost events or change orders. See Scungio's Deposition, 2/17/10; Borst's Deposition, 3/3/10. Scungio's and Borst's descriptions of conversations directing changes during construction are contrary to DeBolt's statements in his affidavit in support of his summary judgment motion. Specifically, DeBolt averred that "I never approved the work, orally or otherwise, for which [SBA] seeks payment" and "I never executed the change orders upon which [SBA] bases its claims." DeBolt's Affidavit, 3/31/10, ¶¶ 10, 11. Furthermore, the essence of DeBolt's position is that he is not a party to the construction contract and that CASPA does not entitle SBA to recover damages from him individually as an agent of 410 SLD.
After reviewing the record in a light most favorable to the non-moving party, SBA, we conclude that genuine issues of material fact exist. These factual issues necessitate findings as to what actually occurred at the building site or elsewhere concerning DeBolt's directions about change orders, i.e., what a fact finder would find credible regarding the actual communications about DeBolt's directions and the compliance with these directions by SBA despite the lack of written change orders. More importantly, an issue of material fact exists in connection with DeBolt's capacity/authority relating to 410 SLD that compelled SBA's representatives to comply with DeBolt's oral change orders. As a result of the existence of these unanswered questions, we determine that the trial court erred as a matter of law when it granted summary judgment in favor of DeBolt. Noting the law quoted above, we recognize that the existence of these material facts raises doubts that must be resolved against the moving party. Accordingly, we are compelled to vacate the order granting summary judgment in DeBolt's favor and remand the matter to the trial court for further proceedings consistence with this memorandum.
Order vacated. Case remanded for further proceedings. Jurisdiction relinquished.
Judge Bowes files a dissenting memorandum.
My distinguished colleagues in the majority vacate the order granting summary judgment in favor of Mr. DeBolt, citing genuine issues of material fact. I submit that there can only be genuine issues of material fact if one first concludes that Mr. DeBolt, a non-contracting party, is subject to liability as an "owner" under the Contractor and Subcontractor Payment Act ("CASPA"). Mr. DeBolt contends that Scungio Borst & Associates ("SBA") cannot recover CASPA damages against him as he was not a party to the construction contract and that SBA's interpretation of the statute as imposing liability against agents of owners is "not sustainable" and "would lead to an absurd and unreasonable result." Appellee's brief at 6-7. While the majority accurately summarizes the parties' arguments regarding who is liable as an "owner" for purposes of that statute, it does not resolve that threshold question, which I believe is dispositive of this appeal.
I construe CASPA as providing additional types of remedies for breach of contract enforceable against contracting parties only. Given the trial court's unchallenged finding that Mr. DeBolt was not the alter ego of Shurs Lane Developers, LLC ("SLD"), I do not believe he is subject to CASPA liability, and the genuine issues of fact identified by the majority are immaterial. Thus, I respectfully dissent.
SBA commenced this action seeking to impose liability against SLD, Robert DeBolt, and Kenworth II, LLC ("Kenworth") for, inter alia, breach of contract, unjust enrichment, and violation of CASPA. CASPA liability was premised on their status as "owners." The trial court entered summary judgment in favor of Mr. DeBolt on all three claims. SBA asserts that this was error as Mr. DeBolt was an agent of the owner, SLD, acting with its authority, and an "owner" is subject to liability under CASPA.
It is undisputed that SLD, a limited liability company ("LLC"), as defined in 15 Pa.C.S. § 8903, owned the property and contracted with SBA for construction services. Mr. DeBolt was a member of the LLC who owned fifty percent of its shares and served as its President. Viewing the facts in the light most favorable to the non-moving party, Mr. DeBolt ordered additional work under the contract on behalf of SLD, and thus, for purposes of summary judgment, one can reasonably conclude that he was an authorized agent of SLD.
The controversy stems from the definition of an "owner" as including "agents of the owner acting with their authority, " and the General Assembly's use of both the term "owner" and contracting party in referring to those obligated to pay under CASPA. Prefaced with the caveat that, "[t]he following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise[, ]" an "owner" is defined 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 Pa.C.S. § 502. "Person" is defined as, "A corporation, partnership, business trust, other association, estate, trust foundation or a natural individual." Id. It is undisputed that SLB is a "person" with an interest in the property that ordered the improvements, and thus, an owner for purposes of the statute. SLB is also the contracting party. The question is whether, in enacting CASPA, the General Assembly intended to make an authorized agent like Mr. DeBolt subject to personal liability for failure to pay a contractor pursuant to a construction contract when he was not a contracting party.
In cases previously decided under CASPA, we have focused on the first sentence of the definition. See e.g., Joseph F. Cappelli & Sons v. Keystone Custom Homes, 815 A.2d 643 (Pa.Super. 2003) (The Contractor and Subcontractor Payment Act defines "owner, " in relevant part, as, "A person who has an interest in real property that is improved and who ordered the improvement to be made." 73 P.S. § 502.). I am unaware of any authority construing the import of the "agents of the owner acting with their authority" language.
CASPA provides generally that when a contractor or subcontractor performs in accordance with a contract, he is entitled "to payment from the party with whom the contractor or subcontractor has contracted." 73 Pa.C.S. § 504 (emphasis added). The contractor is entitled to payment from the owner who contracted for his services; the subcontractor looks to the contractor or another subcontractor with whom he contracted for payment. See 73 P.S. § 507 ("Performance by a subcontractor in accordance with the provisions of the contract shall entitle the subcontractor to payment from the party with whom the subcontractor has contracted."). Thus, the plain language of § 504 speaks in terms of the contracting party's liability for payment as either the owner, contractor or subcontractor.
Successive statutory provisions, however, address the respective duties of the owner to the contractor and the contractor to the subcontractor upon completion of performance. The duty to pay arises and the timetable for payment commences when the contractor submits a final application for payment to the owner. See Boro Constr., Inc. v. Ridley Sch. Dist., 992 A.2d 208 (Pa.Cmwlth. 2010) (holding that contract's provision requiring issuance of final payment certificate by construction manager or architect was condition precedent to payment by owner). Payment to the contractor in turn starts the time running on the contractor's duty to pay the subcontractors.
Section 505 provides that, "The owner shall pay the contractor strictly in accordance with terms of the construction contract." 73 P.S. § 505(a). The owner may also withhold payment for deficiency items according to the terms of the construction contract. Id. That section also provides that "If an owner is not withholding retainage, a contractor may withhold retainage from a subcontractor in accordance with their agreement, but that it shall be paid within 30 days after final acceptance of the work." Id. at § 505(b). The contractor pays its subcontractors, who in turn pay their subcontractors within fourteen days of the receipt of the retainage. Section 512 sets forth penalties for an owner, contractor or subcontractor's failure to comply with the Act, and provides that a court "shall award, in addition to all other damages due, a penalty equal to 1% per month of the amount that was wrongfully withheld." Further, "If an owner, contractor or subcontractor unreasonably withholds acceptance of work or fails to pay retainage as required by this section, the owner, contractor or subcontractor shall be subject to the payment of interest at the rate established in section 5(d) on the balance due and owing on the date acceptance was unreasonably withheld or the date the retainage was due and owing, whichever is applicable." 73 P.S. § 509(d).
In attempting to reconcile the inclusion of agents within the definition of owner, we first assume that the legislature intended to make the statute applicable to parties to a construction contract only. It then further designated those parties as owners, contractors and subcontractors to delineate their duties to each other under the statute. The definition of an owner as an authorized agent may be intended as descriptive of those persons whose acts and omissions should be imputed to the owner. By providing that authorized agents of the owner should be viewed as owners, the legislature was ensuring that they were not deemed "contractors" by virtue of some contractual relationship with the owner. For instance, an architect contracts with an owner. To the extent that he is authorized to act on the owner's behalf, his conduct is imputed to the owner. Given this interpretation, he would fall within the definition of an owner rather than a contractor, and he would not be entitled to avail himself of the remedies afforded to contractors under the statute.
The language could also be construed as holding the contracting party liable for payment pursuant to the construction contract, but expanding liability for CASPA's additional penalties to a broader category of owners that includes authorized agents. This is the construction urged upon us by SBA. A variation on this interpretation is viewing the term "owner" as including those authorized agents who have both an interest in the property and who ordered the improvements, regardless of whether they formally contracted. Arguably Mr. DeBolt, as a fifty percent owner in SLD, the owner of the property, was an authorized agent with an interest in the property who ordered at least some of the improvements.
In construing a statute, the rules set forth in the Statutory Construction Act of 1972, 1 Pa.C.S. § 1501 et seq., guide us. Stivason v. Timberline Post and Beam Structures Co., 947 A.2d 1279, 1281-1282 (Pa.Super. 2008). The object is "to ascertain and effectuate the intention of the General Assembly." 1 Pa.C.S. § 1921. When the words are clear, we apply the plain meaning. It is only when the statute is unclear that we use the rules contained in the Act to ascertain the legislature's intent. Id.
I find CASPA ambiguous due to the legislature's use of the terms "contracting party" and "owner" as including agents of an owner in reference to the duty to pay a contractor. The question is whether the General Assembly intended to subject non-contracting agents of owners to liability as "owners" for the principal's failure to pay. If so, did it envision extending liability to all agents, or only that subset of agents who has an interest in the improved property and who authorized improvements? I agree with Mr. DeBolt that imposing statutory liability for interest, penalties, and attorneys' fees upon non-parties to a contract is contrary to well-established agency and contract principles, and should not be undertaken without evidence of a clear legislative intent to do so.
"Words and phrases shall be construed according to the rules of grammar and according to their common and approved usage[.]" 1 Pa.C.S.A. § 1903(a). If the General Assembly defines words that are used in a statute, those definitions are binding. Commonwealth v. Kimmel, 523 Pa. 107, 565 A.2d 426, 428 (1989). Under the S[tatutory]C[onstruction] A[ct], a court may presume that in drafting the statute, the General Assembly intended the entire statute to be effective. 1 Pa.C.S.A. § 1922. Thus, when construing one section of a statute, courts must read that section not by itself, but with reference to, and in light of, the other sections. Commonwealth v. Mayhue, 536 Pa. 271, 639 A.2d 421, 439 (1994).
Braun v. Wal-Mart Stores, Inc., 24 A.3d 875 (Pa.Super. 2011), appeal granted in part on other grounds, 47 A.3d 1174 (Pa. 2012).
When the words are not explicit, we discern legislative intent by examining
(1) The occasion and necessity for the statute.
(2) The circumstances under which it was enacted.
(3) The mischief to be remedied.
(4) The object to be attained.
(5) The former law, if any, including other statutes upon the same or similar subjects.
(6) The consequences of a particular interpretation.
(7) The contemporaneous legislative history.
(8) Legislative and administrative interpretations of such statute.
1 Pa.C.S. § 1921(c).
This Court has held that "The underlying purpose of [CASPA] is to protect contractors and subcontractors . . . [and] to encourage fair dealing among parties to a construction contract." Ruthrauff, Inc. v. Ravin, 914 A.2d 880, 890 (Pa.Super. 2006) (emphasis supplied). We explained further that performance by either a contractor or subcontractor pursuant to a contract entitles him to payment from the party with whom he contracted. 73 P.S. § 504. Id. The statute is calculated to ensure prompt payment from owners and contractors by providing additional types of remedies, such as interest, penalty and attorneys' fees, for contractors and subcontractors who are not paid in accordance with the terms of their construction contracts and sub-contracts. Stivason, supra. Consistent with that purpose, our courts have held that in order to proceed under CASPA, one must first establish a contractual right to payment pursuant to either a written or oral contract, and breach of that contract. Thus, the construction contract is the starting point of any CASPA analysis.
SBA maintains that Mr. DeBolt is personally liable under CASPA since as the authorized agent of SLD, he is an "owner" as defined in CASPA, and owners are liable for non-payment. It further argues that CASPA's "agent of the owner" language is analogous to "agent of the employer" language in the Wage Payment and Collection Law ("WPCL") and urges us to interpret CASPA consistently with that statute.
In the WPCL, the General Assembly broadly defined "employer" to include "every person, firm, partnership, association, corporation, receiver or other officer of a court of this Commonwealth and any agent or officer of any of the above-mentioned classes employing any person in this Commonwealth." 43 P.S. § 260.2a. (emphasis added). Despite this broad definition of employer, however, the courts have narrowly construed this provision as imposing liability against agents or officers only in the event the corporation has first defaulted upon its wage payment obligation. See Amalgamated Cotton Garment & Allied Indus. Fund v. Dion, 491 A.2d 123 (Pa.Super. 1985) (construing the WPCL to impose liability on the officer of a delinquent corporation). Furthermore, in Mohney v. McClure, 568 A.2d 682, 685 (Pa.Super. 1990), we declined to impose liability upon an officer of a breaching corporation, concluding he was a "non-functioning" officer of the corporation, and therefore, not included within the class of persons intended to be held liable under the WPCL for nonpayment of wages. Id. Recently, in Int'l Ass'n of Theatrical Stage Employees, Local Union No. 3 v. Mid-Atl. Promotions, Inc., 856 A.2d 102, 105 (Pa.Super. 2004), citing Mohney, supra, this Court held that "To hold an 'agent or officer' personally liable for unpaid wages, 'evidence of an active role in decision making is required.'"
SBA cites no authority or legislative history in support of its contention that CASPA and the WPCL were intended to be parallel provisions, and that the terms "agent of owner" and "agent or officer" of employer should be similarly construed. However, in Oberneder v. Link Computer Corp., 696 A.2d 148 (Pa. 1997), our High Court construed the WPCL as providing employees with a statutory remedy against their employers and managing agents or officers to recover wages and other benefits that are contractually due to them. I find that indicative of the General Assembly's willingness to disregard the corporate entity and subject agents or officers with decision-making authority to personal liability in certain situations to protect employees.
This Court stated in Thomas Jefferson Univ. v. Wapner, 903 A.2d 565, 574 (Pa.Super. 2006) (citing Hartman v. Baker, 766 A.2d 347, 352 (Pa.Super. 2000), that
Pennsylvania enacted the WPCL to provide a vehicle for employees to enforce payment of their wages and compensation held by their employers. The underlying purpose of the WPCL is to remove some of the obstacles employees face in litigation by providing them with a statutory remedy when an employer breaches its contractual obligation to pay wages. The WPCL does not create an employee's substantive right to compensation; rather, it only establishes an employee's right to enforce payment of wages and compensation to which an employee is otherwise entitled by the terms of an agreement.
In Belcufine v. Aloe, 112 F.3d 633 (3d Cir. 1997), and more recently in Stoe v. Flaherty, 436 F.3d 209 (3d Cir. 2006), the Court of Appeals for the Third Circuit, applying Pennsylvania law, stated that, "the purpose of the rule is to give top corporate managers an incentive to use available corporate funds for the payment of wages and benefits rather than for some other purpose. Carpenters Health [and Welfare Fund v. Ambrose, Inc.], 727 F.2d 279, 282-83 (3d Cir. 1983)]. Holding the managers personally liable serves to give them an incentive not to divert funds away from the payments owed to employees."
CASPA, in contrast to the WPCL, does not supplant the traditional breach of contract action between contracting parties; it merely supplements breach of contract remedies available to contractors and subcontractors with interest, penalties, and attorneys' fees. This is an important distinction between the two statutes, and one that I believe is most indicative of the legislature's intent to impose liability against contracting parties only. The purpose of the statute is to provide an incentive to contracting parties to make timely contractual payments and the breach of the contract provides the underlying basis for the CASPA damages.
Given the statute's deference to the construction contract, I do not believe the General Assembly intended to make every authorized agent of a property owner, or even corporate decision-makers, subject to liability under CASPA as owners. Liability lies against contracting parties only. The reference to authorized agents in the definition of owner merely reinforces that such agents bind the owner and their conduct is imputed to the owner. Furthermore, it clarifies that agents acting on behalf of and with the authority of the owner are not contractors within the meaning of the statute entitled to avail themselves of the additional remedies afforded under CASPA when in a dispute with their principals. Such a construction gives effect to all contractual provisions. It is consistent with the statute's proviso that a contractor or subcontractor who performs in accordance with a contract is entitled "to payment from the party with whom the contractor or subcontractor has contracted." 73 P.S. § 504.
This interpretation is also in accord with well-settled contract and agency law, while still achieving its purpose of protecting construction contractors and subcontractors. Notably, it leaves intact a party's ability to pierce the corporate veil and hold shareholders and members of corporate entities personally liable for the debts of the corporation where the facts warrant. It is consistent with the principle that in the absence of a clear statement, the law presumes that a statute did not intend to make any change in the common law. In re Rodriguez, 900 A.2d 341, 345 (Pa. 2010). "Based on this principle of law, we must assume that the General Assembly understands the legal landscape upon which it toils, and we therefore expect the General Assembly to state clearly any intent to redesign that landscape." Id. In this case, the trial court found no evidence of the factors that would permit SBA to pierce the corporate veil and subject Mr. DeBolt to liability as SLD's alter ego. SBA has not challenged that finding on appeal.
Since Mr. DeBolt is not a contracting party, he is not subject to liability under CASPA, and there are no genuine issues of material fact. Thus, I would affirm the trial court's grant of summary judgment in favor of Mr. DeBolt on the CASPA claim.