On September 28, 2016, the Pennsylvania Supreme Court affirmed a decision by the Pennsylvania Superior court that held an owner’s agent cannot be individually liable under the Contractor and Subcontractor Payment Act, 73 P.S. §§ 501-516 (“CASPA”), unless the agent’s dealings created a new contract between the contractor and the agent personally. See Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC, No. 28 EAP 2015 (Pa. Sept. 28, 2016).
Under Section 502 of CASPA, “Owner” is defined as a “person who has an interest in 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 P.S. § 502 (emphasis added). In Scungio, the contactor argued “one can read Section 502’s definition of owner — as including ‘agents of the owner acting with their authority’ — to indicate that such agents are equivalent to owners for purposes of the Act,” and can therefore be held personally liable under the Act.
The Supreme Court first acknowledged the text of Section 502 is ambiguous; subject to two conflicting, yet reasonable, interpretations. The Court nevertheless concluded CASPA does not create individual agent liability for three main reasons. First, the Court emphasized CASPA’s purpose is to protect contractors and subcontractors by encouraging fair dealing among parties to construction contracts. Second, an interpretation of Section 502 of CASPA that results in the extension of liability against an owner’s agents would improperly reshape the right to payment beyond that contemplated in other sections of the Act. See 73 P.S. § 504 (“[p]erformance by a contractor . . . in accordance with the provisions of a contract shall entitle the contractor or subcontractor to payment from the party with whom the contractor . . . has contracted,”) (emphasis added); 73 P.S. § 507(a) (providing that a subcontractor is entitled to payment “from the party with whom the subcontractor has contracted“) (emphasis added).
Finally, the contractor’s proffered interpretation “would require that a property owner’s agents personally assume the obligations of the owner’s construction contracts with respect to payments to contractors, contrary to longstanding and fundamental common law agency principles.” If the General Assembly intends to modify the common law, the Court generally expects a clear statement to that effect, rather than the mere insertion of “an ambiguous clause in a definitional provision,” like in Section 502.
As more fully addressed in our previous post reporting on the Superior Court’s decision, the contractor in Sungio did not provide sufficient evidence suggesting the agent’s dealings gave rise to a contractual relationship with the agent personally. Thus, the Supreme Court’s decision does not preclude a contractor from recovering from an agent where that agent either executes a contract in his own name or voluntarily undertakes a personal responsibility for payment under a contract.