Widmer Engineering, Inc. v. Five-R Excavating, Inc. and The Pennsylvania National Mutual Casualty Ins. Co., Inc.

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Widmer Engineering, Inc., :
Appellant :
:
v. : No. 257 C.D. 2016
: Argued: December 12, 2016
Five-R Excavating, Inc. and The :
Pennsylvania National Mutual :
Casualty Insurance Company, Inc. :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
JUDGE COHN JUBELIRER FILED: March 13, 2017
Widmer Engineering, Inc. (Widmer) appeals from the April 4, 2013 Order of
the Court of Common Pleas of Beaver County (common pleas) that granted the
preliminary objection (PO) filed by The Pennsylvania National Mutual Casualty
Insurance Company, Inc. (Penn National) to Widmer’s Amended Complaint and
dismissed the Amended Complaint as to Penn National based on its prior denial of
Widmer’s Motion for Partial Summary Judgment (Motion).1 In this action,
1
The April 4, 2013 Order did not become a final, appealable order until September 4,
2015, when common pleas entered an order disposing of all of the parties and claims related to
Widmer’s action. Moreover, the April 4, 2013 Order specifically referenced and relied upon
common pleas’ October 5, 2012 Order denying the Motion as being the law-of-the case.
Widmer sought payment under a payment bond (Bond) purchased by Five-R
Excavating, Inc. (Five-R) from Penn National for construction work Five-R
performed for the Commonwealth of Pennsylvania (Commonwealth). On appeal,
Widmer argues that common pleas erred in concluding that neither Section 3(a)(2)
of the Public Works Contractors’ Bond Law of 19672 (Bond Law) nor the language
of the Bond itself entitled Widmer to payment under the Bond for the professional
engineering services it provided to Five-R. Discerning no error of law or abuse of
discretion, we affirm.
2
Act of December 20, 1967, P.L. 869, as amended, 8 P.S. § 193(a)(2). Section 3(a)(2)
requires that:
(a) Before any contract exceeding five thousand dollars ($5,000) for the
construction, reconstruction, alteration or repair of any public building or other
public work or public improvement, including highway work, of any contracting
body is awarded to any prime contractor, such contractor shall furnish to the
contracting body the following bonds, which shall become binding upon the
awarding of said contract to such contractor:
***
(2) A payment bond at one hundred percent of the contract amount. Such
bond shall be solely for the protection of claimants supplying labor or materials to
the prime contractor to whom the contract was awarded, or to any of his
subcontractors, in the prosecution of the work provided for in such contract, and
shall be conditioned for the prompt payment of all such material furnished or
labor supplied or performed in the prosecution of the work. “Labor or materials”
shall include public utility services and reasonable rentals of equipment, but only
for periods when the equipment rented is actually used at the site.
8 P.S. § 193(a)(2). The Bond Law was repealed as to Commonwealth agencies per Section 6(b)
of the Act of May 15, 1998, P.L. 358. The Commonwealth Procurement Code (Procurement
Code), 62 Pa. C.S. §§ 101-2311, as amended, now applies to such contracts, and Section 903(a)
of the Procurement Code contains substantially similar language for the bonds required for
construction contracts with the Commonwealth. 62 Pa. C.S. § 903(a). Nevertheless, the Bond
here directly incorporates the Bond Law as governing its terms.
2
I. Background
The relevant facts are not in dispute. Widmer is a professional engineering
firm. In order to bid for a design/build contract with the Pennsylvania Department
of Transportation (PennDOT) for the replacement of culverts and bridges in
Westmoreland County (Project), Five-R entered into a contract with Widmer for
the engineering services necessary for the Project. PennDOT awarded the
design/build contract to Five-R, who agreed to serve as a general contractor and to
provide and procure all of the necessary design and engineering services for the
Project. As required by PennDOT and the Bond Law,3 Five-R, as principal,
obtained the Bond from Penn National to cover 100% of the contract price of
$3,905,583.21. Widmer began providing services under its contract with Five-R
and billed Five-R for those services. Eventually, Widmer suspended its
performance of that contract due to Five-R’s alleged failure to pay Widmer the
amounts billed.4 Widmer then sought payment from Penn National under the
Bond, but Penn National would not pay.
Widmer filed a complaint against both Five-R and Penn National, alleging
that: (1) Five-R breached its contract with Widmer by failing to pay the amounts
due and owing for Widmer’s professional services; and (2) Penn National breached
its obligations under the Bond by not issuing payment to Widmer when requested.
Widmer filed the Motion, arguing that the professional engineering services it
provided under its contract with Five-R constituted “labor” as used in Section
3(a)(2) of the Bond Law and, thus, were guaranteed by the Bond.
3
Section 903(a) of the Procurement Code also requires a payment bond for certain
construction projects. 62 Pa. C.S. § 903(a).
4
Five-R disputed whether Widmer fully complied with the contract and contended that it
owed Widmer nothing more than that which it had already paid.
3
Observing that this involved a matter of contract interpretation, common
pleas first reviewed the Bond’s language, noting that if the language therein was
similar to the language in the Bond Law, the Bond should be interpreted identically
to the Bond Law. (Common pleas op., Oct. 5, 2012 (October 2012 Op.) at 3
(citing Lite-Air Prod., Inc. v. Fid. & Deposit Co. of Maryland, 437 F. Supp. 801,
803 (D.C. Pa. 1977)).) The relevant language of the Bond is as follows:
The conditions of this obligation is [sic] such that if the above
bounden PRINCIPAL (Five-R) shall and will promptly or cause to be
paid in full all sums of money which may be due by contractor or
corporation, for all materials furnished or labor supplied or performed
in the prosecution of the work, whether or not said material or labor
entered into and became component parts of the work or
improvements contemplated . . . then this obligation to be void,
otherwise to remain in full force and effect . . . . The PRINCIPAL
and SURETY hereby, jointly and severally, agree with the obligee
herein that any individual, firm, partnership, association or
corporation, which has performed labor or furnished material in the
prosecution of the work . . . and which has not been paid in full
therefor, may sue in assumpsit on this Payment Bond . . . and may
prosecute the same to final judgement [sic] for such sum or sums.
(R.R. at 23a (emphasis added).) This language, common pleas held, is very similar
to that in Section 3(a)(2) of the Bond Law, with both focusing on the term “labor.”
(October 2012 Op. at 3.) Concluding that there is no controlling Pennsylvania
precedent on the definition of “labor” as used in the Bond Law, common pleas
examined how the term has been interpreted in what it concluded to be analogous
statutes, the Federal Miller Act (Miller Act)5 and Pennsylvania’s Mechanics’ Lien
Law of 19636 (Mechanics’ Lien Law).
5
The Miller Act governs contracts over $100,000 for the construction, alteration or repair
of a public building or public work for the Federal Government, and requires the contractor to
(Footnote continued on next page…)
4
Based on its review of those statutes and various state and federal courts’
interpretations of them, common pleas concluded that Widmer was not entitled to
payment under the Bond Law or the Bond itself for its professional design
services. (Id. at 6.) However, common pleas noted that the Bond was for the
entire amount of Five-R’s contract with PennDOT, which included the design
work, and questioned, therefore, whether Penn National “could have assumed
and/or intended this work to also be guaranteed by its [B]ond” and that an
exception could be made to the interpretation of the term “labor” under the Bond.
(Id. at 6-7.) Notwithstanding its query, common pleas held that it was compelled
to deny the Motion because there was no statutory authority or appellate precedent
for extending the Bond to include professional services as “labor.” (Id. at 7.)
Widmer subsequently filed the Amended Complaint, which, in relevant part,
reiterated the same count against Penn National. Penn National filed a demurrer
based on common pleas’ denial of the Motion, which common pleas granted.
Accordingly, common pleas dismissed Widmer’s breach of the Bond count against
_____________________________
(continued…)
furnish performance and payment bonds to the Government. Section 3131(a) of the Miller Act,
40 U.S.C. § 3131(a). Section 3131(b)(2) requires the following bond to be provided:
A payment bond with a surety satisfactory to the officer for the protection
of all persons supplying labor and material in carrying out the work provided for
in the contract for the use of each person. The amount of the payment bond shall
equal the total amount payable by the terms of the contract unless the officer
awarding the contract determines, in a writing supported by specific findings, that
a payment bond in that amount is impractical, in which case the contracting
officer shall set the amount of the payment bond. The amount of the payment
bond shall not be less than the amount of the performance bond.
40 U.S.C. § 3131(b)(2).
6
Act of August 24, 1963, P.L. 1175, as amended, 49 P.S. §§ 1301-1902.
5
Penn National based on the law-of-the-case doctrine. (Common pleas op. and
order, Apr. 4, 2013.) Widmer now appeals to this Court.7, 8
7
Widmer subsequently moved for summary judgment against Five-R. Common pleas
entered judgment in Widmer’s favor for $872,988.92 in damages. (Common pleas ops. and
orders, Mar. 25, 2015 and Sept. 4, 2015.) Widmer and Five-R appealed to Superior Court from
common pleas’ respective orders against them, which that Court consolidated. On Widmer’s
application, Superior Court transferred the consolidated cross-appeals to this Court, which were
given two docket numbers. The appeal at Docket Number 257 is Widmer’s appeal from
common pleas’ dismissal of the breach of payment bond count against Penn National. A second
appeal, at Docket Number 258, is Five-R’s appeal from common pleas’ judgment in favor of
Widmer. The appeals were consolidated, and Five-R was designated as the appellant pursuant to
Rule 2136 of the Pennsylvania Rules of Appellate Procedure, Pa. R.A.P. 2136. Five-R filed a
suggestion of bankruptcy on May 9, 2016, stating that it filed a petition for bankruptcy under
Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 1101-1174, on February 25, 2016. On May
17, 2016, this Court issued an order, staying the briefing schedule for the consolidated appeals
pending further order. Widmer filed an Application on May 23, 2016, seeking to lift the stay in
its appeal against Penn National. By single judge memorandum opinion and order, this Court
lifted the stay in Widmer’s appeal against Penn National. Widmer Engineering, Inc. v. Five-R
Excavating, Inc. (Pa. Cmwlth., Nos. 257, 258 C.D. 2016, filed Aug. 4, 2016).
8
Our review of common pleas’ “order sustaining [POs] and dismissing a complaint is
limited to a determination of whether that court abused its discretion or committed an error of
law.” Petty v. Hosp. Serv. Ass’n of Ne. Pa., 967 A.2d 439, 443 n.7 (Pa. Cmwlth. 2009). “An
appellate court should affirm an order of [common pleas] . . . sustaining [POs] in the nature of a
demurrer where, when all well-pleaded material facts set forth in the complaint and all inferences
fairly deducible from those facts are accepted as true, the plaintiff is not entitled to relief.” Stilp
v. Gen. Assembly, 940 A.2d 1227, 1232 n.9 (Pa. 2007). Our review of common pleas’ grant or
denial of summary judgment is limited to determining whether the trial court committed an error
of law or abused its discretion. Smith v. Twp. of Richmond, 54 A.3d 404, 407 n.3 (Pa. Cmwlth.
2012). “Summary judgment is appropriate only if ‘there is no genuine issue of any material fact
as to a necessary element of the cause of action.’” Id. (quoting Rule 1035.2(1) of the
Pennsylvania Rules of Civil Procedure, Pa. R.C.P. No. 1035.2(1)). Thus, summary judgment
“may be entered only when, after examining the record in the light most favorable to the non-
moving party and resolving all doubts as to the existence of a genuine issue of material fact
against the moving party, the moving party is clearly entitled to judgment as a matter of law.”
Id.
6
II. Parties’ Arguments on Appeal
A. Whether common pleas erred in holding that Widmer’s professional
engineering services are excluded from coverage under the Bond Law.
Section 3(a)(2) of the Bond Law provides, in relevant part, that the required
payment bond:
shall be solely for the protection of claimants supplying labor or
materials to the prime contractor to whom the contract was awarded,
or to any of his subcontractors, in the prosecution of the work
provided for in such contract, and shall be conditioned for the prompt
payment of all such material furnished or labor supplied or performed
in the prosecution of the work.
8 P.S. § 193(a)(2). Section 4(a) of the Bond Law provides, in pertinent part:
(a) Subject to the provisions of subsection (b) [(related to claimants
who have a contract with a subcontractor of the prime contractor)]
hereof, any claimant who has performed labor or furnished material in
the prosecution of the work provided for in any contract for which a
payment bond has been given pursuant . . . and who has not been paid
in full therefor before the expiration of ninety days after the day on
which such claimant performed the last of such labor or furnished the
last of such materials for which he claims payments, may bring an
action on such payment bond or other financial security in his own
name, in assumpsit, to recover any amount due him for such labor or
material, and may prosecute such action to final judgment and have
execution on the judgment.
8 P.S. § 194(a). The Bond Law does not define the term “labor” but does define a
“claimant” as “includ[ing] any individual, firm, partnership, association or
corporation.” Section 2 of the Bond Law, 8 P.S. § 192. The payment bond must
be “one hundred percent of the contract amount.” 8 P.S. § 193. We note that the
Bond Law was repealed as to Commonwealth agencies per Section 6(b) of the Act
of May 15, 1998, P.L. 358, and was replaced by the Commonwealth Procurement
7
Code9 (Procurement Code). While Section 903(a) of the Procurement Code
contains substantially similar language for the bonds required for construction
contracts with Commonwealth agencies, 62 Pa. C.S. § 903(a), the Bond
specifically provides that “[r]ecovery by any . . . firm . . . hereunder shall be
subject to the provisions of the “Public Works Contractors’ Bond Law of 1967”
. . . which Act shall be incorporated herein and made a part hereof, as fully and
completely as though its provisions were fully and at length herein recited.” (R.R.
064a.) Accordingly, the parties agreed that we apply the Bond Law’s provisions in
this matter.
Widmer first argues that common pleas erred in relying on interpretations of
the Mechanics’ Lien Law and the Miller Act to conclude that the professional
engineering services it provided to Five-R for the Project are not “labor” for the
purposes of Section 3(a)(2) of the Bond Law. In particular, Widmer contends that
there are differences between the language of the Mechanics’ Lien Law and the
Bond Law, which were not considered by common pleas. For example, Widmer
points out that professional engineering services are not excluded from the
Mechanics’ Lien Law under its definition of “labor,” but rather under its definition
of “contractor” and “subcontractor,” Section 201(4), (5), and (9) of the Mechanics’
Lien Law, 49 P.S. § 1201(4), (5), (9), and there is no equivalent exclusion
expressed in the Bond Law. Widmer also asserts that the Bond Law’s definition of
“claimant,” a term used in Section 3(a)(2) of the Bond Law to describe who is
protected by a payment bond, does not exclude architects and engineers. Widmer
further argues that its interpretation of the Bond Law finds support in the
Procurement Code. The Procurement Code, like the Bond Law, does not define
9
62 Pa. C.S. §§ 101-2311, as amended.
8
“labor,” contains similar language requiring payment bonds provide 100%
coverage of the contract price, and does not expressly exclude the professional
services of architects and engineers, despite authorizing Commonwealth agencies
to enter into “design/build” contracts that necessarily require the use of such
services.10 Sections 103, 322(2), and 903(a)(2) of the Procurement Code, 62 Pa.
C.S. §§ 103, 322(2), 903(a)(2).11
As for the Miller Act, Widmer argues that the case law interpreting that law
is not binding on this Court and that the language in the Miller Act is narrower
than that in the Bond Law. For example, Widmer asserts that Section 3133(a) of
10
Widmer asserted initially to this Court that this matter was governed by the
Procurement Code, an assertion that Penn National argued Widmer waived, having not raised it
before common pleas. However, Widmer subsequently clarified its position, indicating that it
was relying on the Procurement Code, not to advance a new theory of recovery, but to support
the arguments it made before common pleas that the General Assembly did not intend, in the
Bond Law, to exclude professional engineering services from the protection of payment bonds.
11
Section 103 of the Procurement Code sets forth definitions but does not include a
definition for “labor.” Section 322(2) of the Procurement Code provides that a “department may
. . . enter into a design/build contract in accordance with [S]ection 511 (relating to methods of
source selection).” 62 Pa. C.S. § 322(2). Section 903(a)(2) addresses payment bonds and, in
pertinent part provides:
(a) When required and amounts.-- . . . . When a construction contract is
awarded in excess of $100,000, the following bonds shall be delivered to the
purchasing agency and shall be binding on the parties upon the execution of the
contract:
***
(2) A payment bond, executed by a surety company authorized to do
business in this Commonwealth and made payable to the Commonwealth, in an
amount equal to 100% of the price specified in the contract and conditioned upon
the prompt payment for all materials furnished or labor supplied or performed in
the prosecution of the work. Labor or materials include public utility services and
reasonable rentals of equipment for the periods when the equipment is actually
used at the site.
62 Pa. C.S. § 903(a)(2) (emphasis added).
9
the Miller Act, 40 U.S.C. § 3133(a), appears to limit bond coverage only to those
who have “supplied labor or material for work described in the contract,” but the
Bond Law and the Procurement Code contain broader language indicating that the
payment bond covers work that does not become a part of the final project.
Section 5 of the Bond Law, 8 P.S. § 195; Section 903(b) of the Procurement Code,
62 Pa. C.S. § 903(b).12
Penn National responds that while neither the Bond nor the Bond Law
define the term “labor,” this term has been consistently interpreted in the context of
payment bonds and mechanics’ liens as excluding professional engineering
services like those provided by Widmer to Five-R. Instead, the term “labor” has
been defined to include “[only] physical labor rather than technical and
professional skill and judgment” or a “skilled” professional “who actually
superintends the work as it is done.” United States v. W.H. Cates Constr. Co., 972
F.2d 987, 990 (8th Cir. 1992). Penn National asserts that the scope of the Bond
Law is to be no greater than the Mechanics’ Lien Law, and that engineers are not
entitled to a lien under the latter act for their services unless they have provided
12
Section 5 of the Bond Law provides that the Bond Law “shall apply whether or not the
material furnished or labor performed enters into and becomes a component part of the public
building or other public work or public improvement, including highway work.” 8 P.S. § 195.
Section 903(b) of the Procurement Code, states:
A performance bond shall be solely for the protection of the purchasing
agency which awarded the contract. A payment bond shall be solely for the
protection of claimants supplying labor or materials to the prime contractor to
whom the contract was awarded or to any of its subcontractors in the prosecution
of the work provided for in the contract, whether or not the labor or materials
constitute a component part of the construction.
62 Pa. C.S. § 903(b).
10
superintendent or supervision services.13 Penn National argues that, although
Widmer attempts to support its position by referencing the Procurement Code, the
result is the same under either law because the relevant provisions of the Bond
Law (Sections 3(a)(2), 4) and the Procurement Code (Section 903(a), (d)14) contain
nearly identical language, demonstrating that the General Assembly intended the
payment bond provisions of each law to be the same. Moreover, the Procurement
Code’s authorization of design/build contracts does not extend the scope of the
payment bonds issued under that law, which corresponds with the Bond Law’s
provisions limiting payment to those who furnish materials or provide or supply
labor, but did not expand coverage to professional engineering services.
With regard to the Miller Act, Penn National argues that courts have rejected
the argument that the Miller Act is narrower than the Bond Law and have held that
13
Penn National notes that the General Assembly recognizes that professional design
services of architects and engineers are not covered by the Mechanics’ Lien Law and
amendments to the Mechanics’ Lien Law have been proposed, but not passed, to change this
exclusion. Widmer replies that this supports its position that the definition of “labor” does not
exclude professional design services because the amendments did not attempt to alter that
definition, only the definition of “contractor” and “subcontractor.”
14
Subsection (d)(1) of Section 903 of the Procurement Code governs actions on payment
bonds and provides, in relevant part:
(1) Subject to paragraph (2) [(not applicable here)], any claimant who has
performed labor or furnished material in the prosecution of the work provided for
in any contract for which a payment bond has been given under subsection (a) and
who has not been paid in full before the expiration of 90 days after the day on
which the claimant performed the last of the labor or furnished the last of the
materials for which it claims payments may bring an action on the payment bond
in its own name, in assumpsit, to recover any amount due it for the labor or
material and may prosecute the action to final judgment and have execution on
the judgment.
62 Pa. C.S. § 903(d)(1) (emphasis added).
11
the Miller Act serves the same purpose and function as the Bond Law. Nicholson
Constr. Co. v. Standard Fire Ins. Co., 760 F.2d 74, 77 (3d Cir. 1985); Lite-Air
Prods., Inc., 437 F. Supp. at 803. It contends the Pennsylvania Supreme Court has
relied upon interpretations of the Miller Act to determine the proper construction
of the Bond Law, and this Court should do the same. Com. to Use of Walters Tire
Serv., Inc. v. Nat’l Union Fire Ins. Co., 252 A.2d 593, 595 (Pa. 1969).
Having set forth the parties’ arguments, we commence our review. The
Bond Law has been found to serve two main purposes: (1) “it is designed to
protect the contracting body by assuring faithful performance of the contract”; and
(2) it “provides a substitute remedy for subcontractors who supply labor and
materials and who are excluded from the protections afforded by” Section 303 of
the Mechanics’ Lien Law (which does not apply to public projects).15 Berks Prods.
Corp. v. Arch Ins., Co., 72 A.3d 315, 322 (Pa. Cmwlth. 2013); Valley Forge
Indus., Inc. v. Armand Constr., Inc., 374 A.2d 1312, 1315 (Pa. Super. 1977);
Nicholson Constr. Co., 760 F.2d at 77 (the Bond Law is “to provide a substitute
remedy for municipal contractors who are denied the right to impose a mechanic’s
lien”).
There are no cases that have specifically examined what “labor” means in
the Bond Law. Common pleas is correct that, when interpreting the Bond Law,
courts have looked to other comparable statutes for assistance, specifically the
Mechanics’ Lien Law and the federal analogue to the Bond Law, the Miller Act.
See, e.g., Can-Tex Indus. v. Safeco Ins. Co. of America, 460 F. Supp. 1022, 1024-
25 (W.D. Pa. 1978) (citing Valley Forge Indus., Inc., 374 A.2d at 1315) (scope of
15
Pursuant to Section 303(b) of the Mechanics’ Lien Law, no mechanics’ “lien shall be
allowed for labor or materials furnished for a purely public purpose.” 49 P.S. § 1303(b).
12
the Bond Law is “intended to be no greater than that of the Mechanics’ Lien
Law”); Beckwith Mach. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 890 A.2d
403, 407 n.6 (Pa. Super. 2005) (citing Walters Tire Serv., Inc., 252 A.2d at 595)
(Bond Law is Pennsylvania’s version of the Miller Act).
The Mechanics’ Lien Law defines “labor” as “includ[ing] the furnishing of
skill or superintendence” and authorizes, with few exceptions, a subcontractor to
file a lien for labor furnished against “every improvement . . . or title of the owner
in the property . . . for the payment of all debts due by the . . . contractor to any of
his subcontractors . . . .” Sections 201(9), 301(a) of the Mechanics’ Lien Law, 49
P.S. §§ 1201(9), 1301(a). Here, Widmer was a subcontractor of Five-R, and the
Mechanics’ Lien Law defines “subcontractor” specifically not to include “an
architect or engineer who contracts with a contractor or subcontractor.” 49 P.S. §
1201(5) (emphasis added).16 However, the term “contractor” is defined as
“includ[ing] an architect or engineer who, by contract with the owner, express or
implied, in addition to the preparation of drawings, specifications and contract
documents also superintends or supervises any such erection, construction,
16
The full definition of “subcontractor” provides:
one who, by contract with the contractor, or pursuant to a contract with a
subcontractor in direct privity of a contract with a contractor, express or implied,
erects, constructs, alters or repairs an improvement or any part thereof; or
furnishes labor, skill or superintendence thereto; or supplies or hauls materials,
fixtures, machinery or equipment reasonably necessary for and actually used
therein; or any or all of the foregoing, whether as superintendent, builder or
materialman. The term does not include an architect or engineer who contracts
with a contractor or subcontractor, or a person who contracts with a materialman
or a person who contracts with a subcontractor not in direct privity of a contract
with a contractor.
49 P.S. § 1201(5) (emphasis added).
13
alteration or repair.” 49 P.S. § 1201(4) (emphasis added). It is this supervision
that is considered to entail physical labor. Stratford v. Boland, 452 A.2d 824, 825-
26 (Pa. Super. 1982). Therefore, states’ mechanics’ lien statutes, and the Miller
Act, generally used the term “labor” to refer “to physical labor rather than
technical and professional skill and judgment . . . .” W.H. Cates Constr. Co., 972
F.2d at 990.
Similar interpretations have been applied since at least 1860, when the
Pennsylvania Supreme Court in The Bank of Pennsylvania v. Gries, 35 Pa. 423,
425 (1860) (emphasis added), considered “not only who are entitled to the benefits
of [a mechanics’ lien], but what kind of services are within its protection.” In
Gries, the plaintiff was designated in a construction contract as an architect, but
also was “a mechanic” as “eviden[ced] from the requirement not only to draw the
plans of the work to be done, but the duty of explaining and directing its proper
execution.” Id. The Court explained that:
This [supervisory] . . . work [is] often done by the master-mechanic,
and is as essential to the due construction of a building as is the purely
mechanical part; for without it, shape, symmetry, and proportion
would be wanting: elements, not of beauty alone, but of strength and
convenience, in every superstructure. To preserve these elements,
some architectural skill is required, but is generally exercised, in
ordinary buildings, by a mere mechanic by occupation. This would
certainly not impair his right to a lien as such mechanic. A mere
naked architect, . . . who may be such without being an operative
mechanic, who draws plans in anticipation of buildings usually, to
enable the builder to determine the kind he will erect, could hardly be
supposed to be within the act which provides a lien for work “done
for or about the erection or construction of the building.” But very
distinguishable from this, is the case of a party employed to devote his
entire time to a building, and who draws the plans for every part of the
work, and directs its execution according to such plans and
specifications. This is labo[]r--mechanical labo[]r of a high order--
14
contributing its proportionate value to the beauty, strength, and
convenience of the edifice.
Id. at 425-26 (emphasis added). Thus, the Court concluded,
where a party, although denominated an architect, as here, is under
employment by the owner or contractor of a building, and devotes his
time in making plans and drawings of the work to be done, and in
directing and overseeing its execution in accordance therewith, he is
within the statute, and entitled to file a lien for his labo[]r . . . .
Id. at 426 (emphasis added). See also Alan Porter Lee, Inc. v. Du-Rite Prods. Co.,
79 A.2d 218, 219 (Pa. 1951) (concluding that architects were prohibited from
maintaining a lien for “drawing plans and specifications for the [project]”); Dyer v.
Wallace, 107 A. 754, 755 (Pa. 1919) (holding that “[t]he services of an architect in
preparing plans cannot be made the subject of a mechanic’s lien . . . except in
connection with other services rendered in the construction of the building”); Price
v. Kirk, 90 Pa. 47, 48 (Pa. 1879) (concluding that an architect’s “labor and
services” that went into making the drawings, plans, specification and in directing
and overseeing that work did not entitle the architect to a mechanics’ lien).
Similar to the Bond Law, the Miller Act authorizes a person who “has
furnished labor . . . in carrying out work” on a public construction contract to
“bring a civil action on the payment bond for [an] amount unpaid at the time the
civil action is brought.” 40 U.S.C. § 3133(b). In United States v. Butt & Head,
Inc., 535 F. Supp. 1155, 1157 (S.D. Oh. 1982),17 the Southern District Court of
Ohio observed that the Miller Act was “designed to provide an analogue to
mechanic’s liens utilized in private construction projects.” It further held that
17
We are not bound by decisions of lower federal courts, but such decisions may be
given persuasive effect. In re Stevenson, 40 A.3d 1212, 1221 (Pa. 2012).
15
“[a]lthough intended to be remedial in nature and liberally construed, the [Miller]
Act is not to be applied so as to impose wholesale liability on payment bonds.” Id.
at 1157-58 (citations omitted). The Miller Act does not define labor; however, the
phrase “furnish[ing] labor,” 40 U.S.C. §§ 3131, 3133(b), has been construed to
“refer[] to physical labor rather than technical and professional skill and judgment”
although it may include an “architect or other skilled man who actually
superintends the work as it is done.” W.H. Cates Constr. Co., 972 F.2d at 990
(quoting United States v. Shea-Adamson Co., 21 F. Supp. 831, 837 (D. Minn.
1937) (interpreting the predecessor to the Miller Act) (internal quotations
omitted)); see also Tri-State Employ. Servs., Inc. v. Mountbatten Sur. Co., Inc.,
295 F.3d 256, 266 (2d Cir. 2002) (stating that “only those providing physical labor,
rather than technical and professional skill, are intended beneficiaries of payment
bonds”) (emphasis added); Butt & Head, Inc., 535 F. Supp. at 1158 (stating that
“labor” includes “physical toil, but not work by a professional, such as an architect
or engineer” unless that professional “actually superintends the work as it is done
on the job site”); Nat’l State Bank of Newark v. Terminal Constr. Corp., 217 F.
Supp. 341, 361 (D. N.J. 1963) (quoting Shea-Adamson Co. for the same
proposition as W.H. Cates Constr. Co.), aff’d, 328 F.2d 315 (3d Cir. 1964) (per
curiam).
Widmer raises some interesting questions regarding the interpretation of the
Bond Law, particularly because the Bond Law does not expressly exclude
architects and engineers from recovering against a payment bond, does not define
the term “labor,” and requires a bond in the amount of 100% of the contract.
However, our Supreme Court has observed that “[t]he largest single body of law
on th[e] subject” of what is covered by payment bonds “is found in federal court
16
decisions interpreting the Miller Act” and then applied an interpretation of the
Miller Act to the Bond Law. Walters Tire Serv., Inc., 252 A.2d at 595; see also
Jacobs v. Ne. Corp., 206 A.2d 49, 52-54 (Pa. 1965) (applying federal court
interpretations of provisions of the Miller Act to “substantially identical”
provisions of the Bond Law). Moreover, as noted above, numerous courts have
held that the Bond Law, or similar bond laws like the Miller Act, were meant to
replace mechanics’ lien laws for public contracts and were intended to have the
same scope as the mechanics’ lien laws. Berks Prods. Corp., 72 A.3d at 322;
Valley Forge Indus., Inc., 374 A.2d at 1315; Nicholson Constr. Co., 760 F.2d at
77; Can-Tex Indus., 460 F. Supp. at 1024-25. Widmer’s professional engineering
work, which common pleas found did not include “physical labor or participat[ion]
in onsite activities rising to the level of supervising or superintending,” (October
2012 Op. at 6), would not be covered under either the Mechanics’ Lien Law or the
Miller Act, the latter of which, like the Bond Law, does not define “labor” or
expressly exclude architects and engineers from its term.
Additionally, although Widmer asserts that the Miller Act is narrower than
the Bond Law, both laws provide protections for “persons” (Miller Act) or
“claimants” (Bond Law) “supplying labor or materials” (Bond Law) or “supplying
labor and material” (Miller Act) for the public project. 8 P.S. § 193(a)(2); 40
U.S.C. § 3131(b)(2). Moreover, to the extent that Widmer argues that there is no
protection under the Miller Act for materials or labor that do not become a part of
the project, the Miller Act’s protection may extend to items such as materials, like
tires, that are “consumed” or that do not constitute capital equipment for the
claimant, even though they do not become a part of the project. See Walters Tire
Serv., Inc., 252 A.2d at 595 (holding tires that are consumed in the course of
17
construction are included as “material” for purposes of a payment bond, even
though they do not become a part of the project, but that capital equipment that can
be reused on future work is not covered) (citing United States for Use of Tom P.
McDermott, Inc. v. Woods Constr. Co., 224 F. Supp. 406, 409 (N.D. Okla. 1963));
United States for the Use of Sunbelt Pipe Corp. v. United States Fid. and Guar.
Co., 785 F.2d 468, 470-71 (4th Cir. 1986) (stating that “the reasonable good faith
belief and expectation of the supplier” that the material furnished is to be
consumed on the bonded project results in the supplier being protected by the
bond, but if the material supplied usually is not consumed then it is considered
capital equipment and no protection is available under the bond).
Finally, we address the fact that the Bond here was for 100% of the contract
price, which includes the professional engineering services Widmer provided.
Both the Bond Law and the Miller Act require, in most instances, a payment bond
for the entire amount of the contract. 8 P.S. § 193(a)(2); 40 U.S.C. § 3131(b)(2)
(Section 3131(b)(2) does allow for the contract officer to permit a lesser amount if
the total amount would be “impractical”). We agree it is troubling that, although
the Bond was required to be in an amount that would include the professional
engineering services Widmer provided and for which it was not paid, Widmer
would not receive any funds from the Bond. However, this disparity is not
determinative. Given the longstanding and consistent interpretations of the term
“labor” as excluding the type of professional services Widmer provided to Five-R
in this matter, common pleas did not err or abuse its discretion in concluding that
Widmer’s professional engineering services are not covered under the Bond Law.
18
B. Whether common pleas erred in holding that the Bond’s language does
not require payment to Widmer for its professional engineering services.
Widmer next argues that common pleas erred in concluding that the
language of the Bond itself, which was for 100% of the amount of the PennDOT
design/build contract with Five-R ($3,905,583.21), did not require payment to
Widmer. It asserts that the “[i]nterpretation of a surety’s liability under a bond
should be undertaken with the purpose of constructing the intent from all of the
words and clauses used and taken as a whole, with due regard to the surrounding
circumstances,” Downingtown Area School District v. International Fidelity
Insurance Co., 671 A.2d 782, 786 (Pa. Cmwlth. 1996) (emphasis omitted), and that
the facts and surrounding circumstances here warrant payment to Widmer under
the Bond. Widmer contends that the language of the Bond is to be interpreted
liberally in favor of the third parties to the bonds. Berks Prods. Corp., 72 A.3d at
319.
Penn National responds that the Bond’s language, which provides coverage
for an individual or entity that has supplied labor or “has performed labor or
furnished material in the prosecution of the work,” (R.R. at 23a), is the same
language used in Sections 3(a)(2) and 4 of the Bond Law. It further argues that the
Bond specifically makes recovery by a claimant subject to the Bond Law, and the
fact that the Bond was for 100% of the contract is a statutory requirement and not
intended to expand what types of services are covered. Finally, Penn National
asserts that Widmer misreads Downingtown Area School District because the
language Widmer relies upon relates to performance bonds and this Court
distinguished those bonds from payment bonds, which this Court described as
being “extremely narrow.” Downingtown Area Sch. Dist., 671 A.2d at 786.
19
A payment bond may provide greater protections than the Bond Law if the
bond language so provides, but “[t]he obligation of a bond cannot be extended
beyond the plain import of the words used . . . . Obligations not imposed by the
terms of the bond cannot be created by judicial construction or interpretation which
extend the terms beyond their normal meaning.” R.R. Wilmot, Inc. v. American
Ins. Co., Inc., 642 A.2d 584, 586 (Pa. Cmwlth. 1994) (internal quotations omitted);
see also Redevelopment Auth. of the City of Phila. v. Fid. and Deposit Co. of
Maryland, 665 F.2d 470, 472 (3d Cir. 1981) (payment bond’s language provided
for a longer limitation period than that set forth in the statute). Where the payment
bond’s language is very similar to that used in the Bond Law, the payment bond
should be interpreted in the same way as the Bond Law. Salvino Steel & Iron
Works, Inc. v. Fletcher & Sons, Inc., 580 A.2d 853, 856 (Pa. Super. 1990); Lite-
Air Prods., Inc., 437 F. Supp. at 803.
The language of the Bond here is very similar to the language used in
Sections 3(a)(2) and 4(a) of the Bond Law. The Bond states that:
. . . PRINCIPAL [Five-R] shall and will promptly or cause to be paid
in full all sums of money which may be due by contractor or
corporation, for all materials furnished or labor supplied or performed
in the prosecution of the work, whether or not the said material or
labor entered into or became component parts of the work or
improvement contemplated . . . .
The PRINCIPAL and [the] SURETY hereby, jointly and severally,
agree with the obligee herein that any individual, firm, partnership,
association or corporation, which has performed labor or furnished
material in the prosecution of the work as provided . . . and which has
not been paid in full therefor[e], may sue [in] assumpsit on this
Payment Bond . . . .
20
(R.R. at 23a (emphasis added).) The italicized language tracks that used in
Sections 3(a)(2) and 4(a) of the Bond Law to address what is covered by a payment
bond. Section 3(a)(2) of the Bond Law states that the “bond shall be . . . for the
protection of claimants supplying labor . . . in the prosecution of the work provided
for in such contract” and that there should be prompt payment for “labor supplied
or performed in the prosecution of the work.” 8 P.S. § 193(a)(2). Section 4(a) of
the Bond Law provides that “any claimant who has performed labor or furnished
material in the prosecution of the work . . . who has not been paid in full
therefor[e] . . . may bring an action on such payment bond . . . in assumpsit . . . .” 8
P.S. § 194(a). Because the language in the Bond is nearly identical as that in the
Bond Law, we interpret the Bond’s language as we would the Bond Law, which
we have held does not cover the professional services Widmer provided here.
Moreover, as discussed in our analysis of the application of the Bond Law, the fact
that the Bond was for 100% of the contract price is not determinative. The Miller
Act also requires, generally, that a 100% payment bond be posted and still
excludes from recovery the professional design services of architects and engineers
absent some on-site supervision and manual labor.
Because the language in the Bond is nearly identical to the language in the
Bond Law, and no broader, Berks Products Corporation does not apply. In Berks
Products Corporation, this Court considered whether a surety waived certain
protections under the Bond Law and the Procurement Code based on language in
the payment bond that was broader than that found in either of those laws.
Concluding that the surety did waive the statutory protections by agreeing to the
broader language, we held that the material supplier in that case could recover
against the payment bond. Berks Prod. Corp., 72 A.3d at 322. However, the Bond
21
here does not use broader language and does not provide more protection than that
given by the Bond Law. Because the language is nearly identical to the Bond Law,
it should be interpreted in the same way. Salvino Steel & Iron Works, Inc., 580
A.2d at 856; Lite-Air Prods., Inc., 437 F. Supp. at 803. Similarly, Widmer’s
reliance on Downingtown Area School District is misplaced because the bond
involved in that case was a performance bond issued under Section 3(a)(1) and not
a payment bond. Downingtown Area Sch. Dist., 671 A.2d at 785. We
distinguished between performance bonds and payment bonds, noting that the
latter were based on Section 3(a)(2), which was extremely narrow. Id. at 785-86.
Thus, Downingtown Area School District is inapplicable here.
III. Conclusion
For the foregoing reasons, common pleas did not err in interpreting the Bond
Law and the Bond as not covering the professional engineering services Widmer
provided to Five-R. Therefore, we affirm common pleas’ denial of the Motion,
and dismissing the Amended Complaint against Penn National.
_____________________________________
RENÉE COHN JUBELIRER, Judge
22
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Widmer Engineering, Inc., :
Appellant :
:
v. : No. 257 C.D. 2016
:
Five-R Excavating, Inc. and The :
Pennsylvania National Mutual :
Casualty Insurance Company, Inc. :
ORDER
NOW, March 13, 2017, the April 4, 2013 Order of the Court of Common
Pleas of Beaver County, entered in the above-captioned matter, is hereby
AFFIRMED.
_____________________________________
RENÉE COHN JUBELIRER, Judge