Can-Tex Industries v. Safeco Ins. Co. of America

• Citation: 460 F. Supp. 1022
• Decision Date: 08 November 1978
• Docket Number: Civ. A. No. 78-1004.
• Parties: CAN-TEX INDUSTRIES, a division of Harsco Corporation, Plaintiff, v. SAFECO INSURANCE COMPANY OF AMERICA, General Insurance Company of America, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

460 F. Supp. 1022

CAN-TEX INDUSTRIES, a division of Harsco Corporation, Plaintiff, v. SAFECO INSURANCE COMPANY OF AMERICA, General Insurance Company of America, Defendants.

Civ. A. No. 78-1004.

United States District Court, W. D. Pennsylvania.

November 8, 1978.

Clarence A. Crumrine, McCreight, Marriner & McCreight, Washington, Pa., for plaintiff.

Michael D. McDowell, Plowman & Spiegel, Pittsburgh, Pa., for defendants.

OPINION

SNYDER, District Judge.

Sureties on a construction contract file a Motion for Partial Judgment On The Pleadings under Rule 12(c) Fed.R.Civ.P.¹ and seek a determination that finance charges and attorney's fees claimed by a creditor of the general contractor-principal are not recoverable under their bond. The bond was executed in accordance with the requirement of the Public Works Contractors Bond Law of 1967, 8 P.S. § 191 et seq., that the general contractor provide a payment bond for the protection of subcontractors on any public works project.

For the purposes of Defendants' Motion, we take as true all well pleaded material allegations of the Complaint. Art Metal Construction Co. v. Lehigh Structural Steel Co., 116 F.2d 57 (3rd Cir. 1940), cert. denied 316 U.S. 694, 62 S.Ct. 1296, 86 L.Ed. 1764 (1942). Conclusions of law, however, are not deemed admitted. Rosenhan v. United States, 131 F.2d 932 (10th Cir. 1942), cert. denied 318 U.S. 790, 63 S.Ct. 993, 87 L.Ed. 1156 (1943). Judgment on the pleadings may be granted only if on the facts so admitted, the moving party is clearly entitled to judgment. Huntt v. Government of Virgin Islands, 339 F.2d 309 (3rd Cir. 1964).

The Complaint alleges that:

1. The Ernest Renda Contracting Company, general contractor on a work site owned by the Carroll Township Authority, is indebted to Plaintiff in the amount of $79,263.63 for a quantity of vitrified clay pipe sold and delivered to the contractor at that site, pursuant to a contract between the parties.

2. The Renda Company is also indebted to the Plaintiff in the amount of $10,245.93, representing a finance charge of 1½% per month on the overdue account, as authorized by the subcontract.

3. The Renda Company is also indebted to the Plaintiff in the amount of $29,835.10 for attorney's fees, computed at 33 1/3 % of the balance due, also authorized by the subcontract.

4. The Plaintiff is entitled to recover the amount of $119,349.66 from the Surety, representing the balance, finance charges and attorney's fees as provided for in the subcontract.

The Defendants deny any obligation as to the fourth allegation as a matter of law.

The Public Works Contractors Bond Law of 1967 provides in pertinent part that:

"(a) Before any contract exceeding five thousand dollars ($5000) 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.

The Payment Bond at issue here expressly provides, at Paragraph 5, that:

"The terms and conditions of this Bond are and shall be that if the Principal and any subcontractor of the Principal to whom any portion of the work under the Contract shall be subcontracted, and if all assignees of the Principal and of any subcontractor, promptly shall pay or shall cause to be paid, in full, all money which may be due any claimant supplying labor or materials in the prosecution and performance of the work in accordance with the Contract and in accordance with the Contract Documents, including any amendment, extension or addition to the Contract and/or to the Contract Documents, for material furnished or labor supplied or labor performed, then this Bond shall be void; otherwise, this Bond shall be and shall remain in force and effect." Emphasis added.

Paragraph 6 of the Payment Bond states that:

"This Bond, as provided by the Act, shall be solely for the protection of claimants supplying labor or materials to the Principal or to any subcontractor of the Principal . . . The phrase `labor or materials', when used herein and as required by the Act, shall include public utility services and reasonable rentals of equipment, but only for periods when the equipment rented is actually used at the site of the work covered by the Contract."

Plaintiff's Complaint alleges that the Defendants are indebted to the Plaintiff for the alleged sums "by reason of the aforesaid Pennsylvania statute (8 P.S. § 191 et seq.) and contractual relationships." We must look therefore to state decisions for interpretation of Pennsylvania law.

The Superior Court of Pennsylvania has recently had occasion to discuss the purposes of the Public Works Contractors Bond Act. Valley Forge Industries, Inc. v. Armand Construction, Inc., 248 Pa.Super. 53, 374 A.2d 1312 (1977). That case involved the interpretation and application of the statute of limitations of the Act, and was transferred to the jurisdiction of the Commonwealth Court for reasons of state procedural law. Before the transfer, however, the Court commented on the Act, saying:

"First, it is designed to protect the contracting body by assuring faithful performance of the contract. Second, the law provides a substitute remedy for subcontractors who supply labor and materials and who are excluded from the protections afforded by the Mechanics' Lien Law of 1963."

Id. at 1315.

No state court has yet addressed itself to the scope of liability of the surety under the phrase "labor and materials" and the statute does not itself contain a definitional section. In light of the Superior Court's Opinion in Valley Forge Industries, however, this Court must conclude that the scope of the Public Works Contractors Bond Act is intended to be...