Pennsylvania Court Holds Payment Bond Claim Is Barred By Prompt Payment Act Defense

Trumbull Corp. v. Boss Constr., Inc. et al.
768 A.2d 369 (Pa. Commw. Ct. 2001)

The Pennsylvania Department of Transportation (“PennDot”) entered into a contract with A&L, Inc. (“A&L”) pursuant to which A&L agreed to serve as general contractor for a road resurfacing project. A&L obtained a labor and material payment bond from Safeco Insurance Company of America (“Safeco”). A&L also retained Boss Construction, Inc. (“Boss”) to serve as subcontractor for a portion of the work.

Boss purchased materials for its work from Trumbull Corporation (“Trumbull”). After Boss failed to make payments on the invoices submitted by Trumbull, Trumbull turned to the payment bond for relief.

At trial, Trumbull claimed that, as a claimant supplying materials, Safeco was obligated to compensate Trumbull under the bond based on the plain language of the Public Works Contractors Bond Law of 1967 (the “Bond Law”). A&L and Safeco did not dispute this assertion. Nevertheless, they claimed that recovery was not warranted in light of the recent 1994 amendment to the Prompt Payment Act. Pursuant to the Prompt Payment Act, parties owed payment by a subcontractor cannot recover payment from the contractor or the contractor’s surety where the contractor has already made payment to the subcontractor. Here, A&L had made payment to Boss during the time Trumble supplied materials to Boss. Therefore, according to A&L and Safeco, the Payment Act precluded Trumble’s current claim.

Both the trial court and the Commonwealth Court agreed that the Prompt Payment Act’s provisions controlled. Pennsylvania rules of statutory construction require that when the provisions of two statutes are irreconcilable, the statute latest in date of final enactment shall prevail. Here, the amendment to the Prompt Payment Act was enacted subsequent to the Bond Law. Accordingly, its provisions controlled the outcome of the current dispute, and Trumble was not entitled to payment under the bond.

Despite affirming the trial court’s holding which barred Trumble’s claim under the bond, the Commonwealth Court disagreed with the trial court’s decision to exclude evidence of an alleged oral agreement pursuant to which A&L promised Trumble it would pay Boss’s debt in full. Accordingly, the Commonwealth Court remanded the matter for a new trial limited to determining whether Trumble could establish an exception to the Statute of Frauds, and thus pursue a claim against A&L based on the alleged oral agreement.

 

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