April 2001

Recently, the Commonwealth Court of Pennsylvania decided that once a contractor has made payment to its subcontractor, future claims for payment against the contractor or its surety by parties owed payment from the subcontractor, are barred. The Court reached this decision in the case of Trumbull Corp. v. Boss Construction, Inc., et al., 747 A.2d 395 (2001), and in doing so, resolved an ongoing conflict which existed between the Public Works Contractors' Bond Law of 1967 ("Bond Law") and the Prompt Pay Act. The Prompt Pay Act was repealed by the Commonwealth Procurement Code; however, the following language existed in both the Prompt Pay Act and the Commonwealth Procurement Code:

Once a contractor has made payment to the subcontractor, according to the provisions of this subchapter, future claims for payment against the contractor or the contractor's surety by parties owed payment from the subcontractor which has been paid shall be barred.

See Commonwealth Procurement Code, 62 Pa. C.S. §3939(b).

In the Trumbull case, the general contractor entered into a contract with PennDOT to provide road resurfacing construction work. The general contractor obtained a labor and material payment bond, and retained Boss Construction, Inc. ("Boss") as a subcontractor for a portion of the work. Thereafter, Boss retained Trumbull to provide road materials which were accepted and incorporated into the project. The general contractor paid Boss, however, Boss failed to pay Trumbull for all of the materials used in the project. Consequently, Trumbull filed a civil complaint against Boss, the general contractor and its surety.

The general contractor and the surety raised the defense that they were protected under the Prompt Pay Act. Trumbull, however, argued that it was entitled to recovery based on the "plain language of the bond" which expressly incorporates the Bond Law. Trumbull argued that the payment bond is "solely for the protection of claimant supplying labor or materials to prime contractor…or any of his subcontractors." The Court, however, held that to the extent that the language in the Bond Law and the Prompt Pay Act conflict, the language of the Prompt Pay Act controls because it was more recently enacted. Accordingly, the Court held that a claim under the bond by Trumbull was barred.

As noted above, while the Prompt Pay Act is no longer in effect, identical language is contained in the Commonwealth Procurement Code. It is reasonable to conclude therefore, that in contracts which are governed by the Commonwealth Procurement Code, contractors and their sureties will be protected from lawsuits once the contractor makes payment in full to its subcontractor.

For additional information or questions, contact Dean Piermattei at (717) 231-6635 or at dpiermattei@rhoads-sinon.com.