Newcrete Products v. City of Wilkes-Barre
37 A.3d 7
Pa. Commw. Ct.2012Background
- City sought to develop downtown theater and parking garage project with redevelopment authority.
- City guaranteed Authority debt and advanced funds to enable property purchase.
- Authority awarded Newcrete contract for pre-cast concrete; stop-work order issued after injunction in neighboring boundary dispute.
- Commonwealth funding denied in Aug. 2002 due to City’s finances, injunction status, and investigations; Project halted and Newcrete unpaid.
- Newcrete obtained arbitration award; City then obtained a judgment by confession against Authority; Newcrete filed declaratory judgment seeking veil piercing or equitable subordination against City.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Piercing the corporate veil applicable here | Newcrete: City and Authority operate as alter egos; veil piercing should reach City for Authority debts. | City: Section 4 of the Law preserves separate entities; veil piercing not applicable. | Veil piercing inapplicable under the Urban Redevelopment Law. |
| Equitable subordination available to reorder judgments | Newcrete: equitable subordination permits reordering priority due to City's inequitable conduct. | City: Pennsylvania does not recognize equitable subordination outside bankruptcy; not applicable here. | Equitable subordination not recognized; Pennsylvania allows only equitable subrogation in this context. |
Key Cases Cited
- Lumax Indus., Inc. v. Aultman, 543 Pa. 38 (1995) (piercing the corporate veil factors and exceptional circumstances)
- Vill. at Camelback Prop. Owners Ass’n Inc. v. Carr, 538 A.2d 533 (Pa. 1988) (piercing the corporate veil considerations)
- Mosaica Educ., Inc. v. Pa. Prevailing Wage Appeals Bd., 925 A.2d 176 (Pa. Cmwlth. 2007) (veil piercing doctrine scope and equity)
- Herriman v. Carducci, 380 A.2d 761 (Pa. 1977) (separate and distinct entities under law)
- Foster Wheeler Energy Corp. v. Metropolitan Knox Solid Waste Authority, 970 F.2d 199 (6th Cir. 1992) (pervasive influence without ownership not enough for piercing)
- First Commonwealth Bank v. Heller, 863 A.2d 1153 (Pa. Super. Ct. 2004) (equitable subrogation in Pennsylvania lien context)
- In re Winstar Commc’ns, Inc., 554 F.3d 382 (3d Cir. 2009) (equitable subordination in bankruptcy context)