Purely public purpose exception of the law

Pennsylvania Commonwealth Reports

CARTER-JONES CO. v. NORTH. PA HUMANE, 868 C.D. 2006
(Pa.Commw. 12-29-2006) The Carter-Jones Lumber Company,
Appellant, v. Northwestern PA Humane Society, LGL Animal
Care Products, Inc., Appellant, v. Humane Society of
Northwestern Pennsylvania. Nos. 868 C.D. 2006, 1273 C.D.
2006. Commonwealth Court of Pennsylvania. Argued: October
17, 2006. Filed: December 29, 2006.

BEFORE: HONORABLE ROCHELLE S. FRIEDMAN, Judge, HONORABLE
BONNIE BRIGANCE LEADBETTER, Judge, HONORABLE MARY HANNAH
LEAVITT, Judge.

OPINION BY JUDGE BONNIE BRIGANCE LEADBETTER.

In these consolidated appeals, the court must decide
whether the animal shelter constructed by the Humane
Society of Northwestern Pennsylvania (Humane Society)[fn1]
serves a purely public purpose, thereby rendering the
shelter exempt from mechanics’ liens under Section 303(b)
of the Mechanics’ Lien Law of 1963 (Law),[fn2] 49 P.S.
§ 1303(b). The Carter-Jones Lumber Company
(Carter-Jones) and LGL Animal Care Products, Inc. (LGL)
argue that common pleas erred in finding that the shelter
serves a purely public purpose. We conclude that the Humane
Society’s shelter does serve a purely public purpose and,
therefore, affirm the dismissal of the two complaints based
on preliminary objections in the nature of a demurrer.

In Carter-Jones Lumber Company v. Northwestern PA Humane
Society (Carter-Jones case),[fn3] the Humane Society hired
Barnhart Builders as the general contractor for the
construction of a new animal shelter. Carter-Jones sold
building materials to Barnhart, which in turn used those
materials in the construction of the shelter. When Barnhart
did not pay for the materials, Carter-Jones filed a
mechanics’ lien in the amount of $26,338.29 against the
Humane Society in May of 2004. Carter-Jones subsequently
filed a complaint to enforce the mechanics lien against the
Humane Society in November of 2004.[fn4] Humane Society
thereafter filed a preliminary objection in the nature of a
demurrer to the complaint, arguing that the construction of
the shelter fell within the purely public purpose exception
of the Law, exempting it from a mechanics’ lien claim.[fn5]

In the Carter-Jones case, the uncontradicted testimony of
Joseph Grizanti, the executive director for Humane Society,
established the following facts concerning the Humane
Society. The Humane Society is a private non-profit
organization exempt from taxes under Section 501(c)(3) of
the Internal Revenue Code. 26 I.R.C. § 501(c)(3).
The Humane Society serves as an animal shelter for the
fourteen counties located in northwestern Pennsylvania. Any
member of the public throughout this region can bring an
animal to the shelter for care, certain medical attention,
and possible adoption. The Humane Society requires anyone
who adopts an animal to have it spayed or neutered. As a
result, the Humane Society provides spaying and neutering
services through a voucher system. Through this system, the
Humane Society provides a $30.00 voucher to help defray the
cost of spaying or neutering the adopted animal.

The Humane Society also serves as the primary means of
controlling the pet population in the community. Unwanted
or stray animals carrying diseases that affect humans pose
a risk to the public’s health. The Humane Society provides
a safe place to take unwanted or stray animals that could
carry diseases, posing a risk of infection to humans.
According to Mr. Grizanti, the number of abandoned or stray
animals would greatly increase without the Humane Society’s
shelter.

In addition to providing shelter, adoption, and neutering
services, the Humane Society also houses, operates, and
funds a substantial portion of the Animal Cruelty and
Investigation Unit for Erie County. This unit enforces the
animal cruelty laws of both the Commonwealth and local
government. The Humane Society provides its own officers who
take a sworn oath of office administered by a judge. These
officers are trained by the Commonwealth to work closely
with local law enforcement agencies. They assist in
preventing the abuse, neglect, and cruelty to domestic
animals, including farm animals. In March of 2005, the
Humane Society had two full-time officers and one unfilled
part-time position. According to Mr. Grizanti, if the
Humane Society did not operate this investigatory unit, the
responsibility for enforcing the cruelty laws would be
borne by the Commonwealth and local law enforcement
agencies, which do not have the current resources to
adequately enforce such laws.

The Humane Society sustains its operations through
philanthropic contributions, memorial donations, and
unsolicited contributions from the public. The Humane
Society also receives $40,000.00 from the County of Erie to
supplement the operation of the Animal Cruelty and
Investigation Unit. Pet adoptions and intake fees provide
the only revenue that the Humane Society generates. The
Humane Society charges $50.00 as its adoption fee and
$20.00 as its intake fee. With respect to intake fees, if
the person bringing in the animal cannot afford the intake
fee, the Humane Society waives it. This revenue accounts
for approximately 15% of the annual costs of the shelter’s
operational expenses.

In the Carter-Jones case, after hearing the testimony of
Mr. Grizanti and arguments by both parties, Judge
Cunningham found that the Humane Society serves a purely
public purpose and, consequently, is exempt from mechanics’
liens pursuant to Section 303(b) of the Law. Therefore,
Judge Cunningham issued an order granting the Humane
Society’s preliminary objection. Carter-Jones then filed a
Notice of Appeal and a Statement of Matters Complained of
on Appeal. In June of 2005, Judge Cunningham issued an
opinion in support of his order. In his opinion, Judge
Cunningham concluded that the Humane Society’s shelter was
constructed for a purely public purpose, that the Humane
Society serves a governmental function, and that the Humane
Society provides its public services without profit motive.
He also noted that enforcing Carter-Jones’s mechanics’ lien
“would disrupt an essential public service or function
should it result in the sale of the shelter.” The
Carter-Jones Lumber Company v. Northwestern Pennsylvania
Humane Society (No. 14052 of 2004, C.C.P of Erie County,
filed June 8, 2005), slip op. at 6. Carter-Jones appealed
Judge Cunningham’s order to the Superior Court, which then
transferred the case to this court.

In LGL Animal Care Products, Inc. v. Humane Society of
Northwestern Pennsylvania (LGL case),[fn6] Barnhart
Builders hired LGL as a subcontractor to supply labor and
materials in the construction of new kennels for the new
shelter. Barnhart Builders also failed to pay LGL for its
labor and materials. LGL, therefore, filed a mechanics’ lien
in the amount of $24,816.00 against the Humane Society in
September of 2004. LGL subsequently filed a complaint
against the Humane Society in May of 2005, seeking to
enforce its lien.

In response, the Humane Society filed a preliminary
objection to LGL’s complaint, alleging that LGL’s
mechanics’ lien was invalid because the Humane Society
serves a “purely public purpose” and is consequently exempt
from the mechanics’ lien. In support, the Humane Society
referenced Judge Cunningham’s prior order in the
Carter-Jones case, wherein he concluded that the Humane
Society serves a purely public purpose and, therefore, is
exempt from mechanics’ liens pursuant to Section 303(b) of
the Law. After hearing arguments on the issues presented,
Judge Anthony entered an order in December of 2005,
sustaining Humane Society’s preliminary objection in the
nature of a demurrer and dismissing LGL’s action. In doing
so, Judge Anthony adopted Judge Cunningham’s reasoning in
the Carter-Jones case. LGL subsequently appealed to this
court.

In these appeals, we consider a pure question of law and,
therefore, our review is plenary. Banacol Mktg. Corp. v.
Penn Warehousing & Distrib., Inc., 904 A.2d 1043, 1046 n. 5
(Pa.Cmwlth. 2006). “In ruling on preliminary objections, a
court must accept as true all well-pleaded material
allegations in the [complaint], as well as all inferences
reasonably deduced from them.” Id. at 1046. “Preliminary
objections in the nature of a demurrer should be sustained
only where the pleadings are clearly insufficient to
establish a right to relief; any doubt must be resolved in
favor of overruling the demurrer.” Boyd v. Rockwood Area
Sch. Dist., 907 A.2d 1157, 1163 n. 8 (Pa.Cmwlth. 2006).

As noted above, Section 303(b) of the Law provides that,
“No lien shall be allowed for labor or materials furnished
for a purely public purpose.” We therefore must decide
whether Humane Society’s shelter serves a purely public
purpose so as to qualify for the Section 303(b) exception.
What constitutes a “purely public purpose” is not defined
in the statute,[fn7] and there is very limited caselaw
addressing the subject.

In determining whether entities are exempt from mechanics’
liens pursuant to Section 303(b), the courts of this
Commonwealth have looked to a number of factors. We first
note that the status of the Humane Society as a private
entity is not dispositive of the issue of whether a
mechanics’ lien may attach. See McNulty Bros. Co. v.
Pennsylvania R.R. Co., 272 Pa. 442, 116 A. 362 (1922)
(holding that the property owned by railroad company, a
public service corporation, was not subject to a mechanics’
lien); Pennsylvania Electric Equipment Co. v. Phoenixville
Hosp., 37 Pa. C.C. 671 (Chester County 1910) (holding that
the hospital served a purely public purpose and, therefore,
was exempt from mechanics’ liens). The factors they have
considered are (1) the public’s access to the services
provided by the entity, (2) whether the entity’s function
with respect to the property is a governmental function or
a proprietary function, (3) whether the entity operates
with the possibility or motive of profit, and (4) whether
allowing execution upon the liens would disrupt an
essential public service.

In Henry Taylor Lumber Company v. Carnegie Institute, 225
Pa. 486, 74 A. 357 (1909), the Pennsylvania Supreme Court
addressed whether a technical school was exempt from
mechanics’ liens. There, the court focused on whether the
public enjoyed the benefits of a technical school by right
in determining whether the school was used for a purely
public purpose. The court noted that the technical school
was not open to everyone, charged tuition, was supported
entirely by private funds, and was managed by a board of
trustees. Discussing the meaning of the phrase “for public
use,” the court stated:

The test whether a use is public or not is whether a
public trust is imposed upon the property, whether the
public has a legal right, which cannot be gainsaid, or
denied, or withdrawn, at the pleasure of the owner. A
particular enterprise, palpably for private advantage,
will not become a public use because of the theoretical
right of the public to use it. The question is whether the
public have a right to the use. The general public must
have a general and fixed use of the property, a use
independent of the will of the private person or
corporation in which the title is vested, a public use
which cannot be defeated by the private owner, but which
is guarded and controlled by the law.

Id. at 490, 74 A. at 358 (quotation omitted). Based upon the
foregoing, the court commented, “Under these circumstances,
it seems to us the public enjoys the benefits of the
school, not by right, as it should if the purpose was
public, but by permission only.” Id. at 490, 74 A. at 358.
As a result, the court concluded that the technical school
did not serve a purely public purpose and consequently was
subject to the mechanics’ lien. See also J.B. Eurell Co. v.
The Philadelphia Electric Co., 5 Phila. Co. Rptr. 230
(1980) (holding that because the public did not enjoy the
benefit of an electric company’s maintenance shop by right,
electric company could not avail itself of the Section
303(b) exception).

In addition, a factor critical to the determination of
whether the Humane Society’s shelter serves a purely public
purpose is the manner in which the Humane Society uses the
property. In American Seating Company v. City of
Philadelphia, 434 Pa. 370, 256 A.2d 599 (1969), the
Pennsylvania Supreme Court considered whether a sports arena
owned by the City of Philadelphia was exempt from a
mechanics’ lien. In that case, the prospective tenant of
the arena and the City had entered into a contract whereby
the tenant agreed to construct the arena, paying the entire
cost of construction. In return, the tenant was to remain
in possession for a term of fifty years with an option to
renew the lease for an additional term of fifty years and
was entrusted with the management and control of the arena.
Title to the land on which the arena was to be built and
the building itself remained with the City. In deciding the
issue, the court stated as follows:

[I]t seems to us that a meaningful ground for distinction
rests in the use to which the municipality puts the
property. Where, as here, the municipality acts as an
absent landlord, entrusting the management and control of
its premises to its tenant; and where the building was
constructed and paid for by the tenant; and further, where
the municipality in owning the building, discharges a
function not governmental in nature, but rather
proprietary and quasi-private; — then an exception
to the general rule that municipal property is exempt
from mechanics’ liens seems proper.

434 Pa. at 375, 256 A.2d at 601. The court concluded that
the City, in its capacity as the owner of the arena, served
a proprietary function rather than a public function. The
court opined, “Since an execution upon the lien would not
disrupt an essential public service or function, no reason
appears for striking the lien down.” Id. Thus, the court
held that the City was not exempt from the mechanics’ lien.

The court in Empire Excavating Company v. Luzerne County
Housing Authority, 449 A.2d 60 (Pa.Super. 1982), also found
the function for which the property was used, and the
presence of a profit motive, to be dispositive. That case
involved a mechanics’ lien filed against low income housing
units constructed by a housing authority, and the
Pennsylvania Superior Court examined whether the authority’s
function with respect to the construction of the low income
housing was a governmental function or a proprietary
function. In making this determination, the court focused
on whether the services the authority provided served the
public and whether the authority operated without a profit
motive. The court noted that it is “clear that the providing
of safe and sanitary dwelling accommodations for persons of
low income through new construction or the reconstruction,
restoration, reconditioning, remodeling or repair of
existing structures by public housing authorities are
public purposes.” Id. at 61. The court also observed that,
“Municipal Authorities are public bodies created without
any motive or possibility of private profit. Any rentals of
a public housing authority are fixed so as to cover the
expense of the Authorit[y’s] bonds, operations and
administration. As such they are created with no motive of
private, economic gain.” Id. Based on the foregoing, the
court distinguished that case from American Seating,
stating, in pertinent part:

In American Seating, the court held that the City of
Philadelphia was involved in a proprietary function in its
leasing of the Philadelphia Spectrum, a sports and
entertainment complex, to a private developer. Under the
terms of the lease potential profit could inure to the
City. In our case no such circumstances exist.

Id. Thus, the court held that the housing authority’s use of
the property to provide low income housing constituted a
public use of that property and, therefore, a mechanics’
lien filed against a housing authority would be
invalid.[fn8]

In the present case, the Humane Society provides the
primary means for controlling the animal population by
sheltering, adopting, and spaying and neutering animals.
All members of the public can avail themselves of these
services. The Humane Society’s control of the animal
population serves to keep stray and unwanted animals, which
could potentially carry disease and pose a risk to the
public’s health, off the streets. If the Humane Society did
not provide these services, then the Commonwealth, Erie
County, or some municipality would be forced to provide
similar, if not identical, services to protect the health,
safety, and general welfare of the public.

In addition, the Humane Society houses, operates, and funds
a substantial portion of the Animal Cruelty and
Investigation Unit for Erie County. This unit enforces the
animal cruelty laws of Pennsylvania, as well as local
ordinances. It is undisputed that Erie County has delegated
the duty of enforcing the animal cruelty laws to the Humane
Society. The Humane Society receives $40,000.00 from the
County of Erie to supplement operation of the unit.
Clearly, the public has an absolute right to the Humane
Society’s law enforcement services. If the Humane Society
did not provide such services, then the burden and
responsibility for enforcing the cruelty laws would fall
upon the Commonwealth and local law enforcement agencies.

Furthermore, the Humane Society operates without any motive
of private, economic gain. Rather, the Humane Society is a
non-profit organization that sustains its operations
through government subsidy, philanthropic contributions,
memorial donations, and unsolicited contributions from the
public. The limited revenues that the Humane Society
generates cover only 15% of its operating expenses.

Finally, allowing execution upon the liens would disrupt
the essential public services that the Humane Society
provides. After weighing the four relevant factors —
public access, governmental/proprietary function, profit
motive, and disruption of essential services — we
conclude that the Humane Society’s shelter serves a purely
public purpose pursuant to Section 303(b) and, as a result,
is exempt from the mechanics’ liens filed by Carter-Jones
and LGL. Accordingly, we affirm the dismissal of the two
complaints based on preliminary objections in the nature of
a demurrer.

ORDER

AND NOW, this 29th day of December, 2006, the orders of the
Court of Common Pleas of Erie County in the above captioned
cases are hereby AFFIRMED.

BONNIE BRIGANCE LEADBETTER, Judge

[fn1] The Northwestern PA Humane Society and the Humane
Society of Northwestern Pennsylvania is the same entity.

[fn2] Act of August 24, 1963, P.L. 1175, as amended. Section
303(b) provides as follows: “No lien shall be allowed for
labor or materials furnished for a purely public purpose.”

[fn3] The Carter-Jones case, No. 14052 of 2004 in the Court
of Common Pleas of Erie County, is docketed in this court
at No. 868 C.D. 2006.

[fn4] The amount of the lien was later reduced to
$14,686.58.

[fn5] Humane Society also raised an objection based upon
lack of specificity.

[fn6] The LGL case, No. 13331 of 2004 in the Court of Common
Pleas of Erie County, is docketed in this court at 1273
C.D. 2006.

[fn7] Section 303(b) appeared in Section 2 of the prior
Mechanics’ Lien Law, the Act of June 4, 1901, P.L. 431, 49
P.S. § 22. That act was repealed by the Act of
August 24, 1963, P.L. 1175. Neither the legislative history
of the Law, nor the legislative history of the prior
Mechanics’ Lien Law, provides guidance into the meaning of
“purely public purpose.”

[fn8] The mechanics’ lien against the authority was held
valid for a different reason, however. At the time the lien
was filed, title to the property was still in the
contractor’s name. Thus, although the authority qualified
for the Section 303(b) exception, it ultimately did not
benefit from that exception.