Lite-Air Products, Inc. v. Fid. & Dep. Co. of Md.

• Decision Date: 11 August 1977
• Docket Number: Civ. A. No. 76-140.
• Citation: 437 F. Supp. 801
• Parties: LITE-AIR PRODUCTS, INC. v. FIDELITY & DEPOSIT CO. OF MARYLAND v. ALLENTOWN SUPPLY CORP.
• Court: U.S. District Court — Eastern District of Pennsylvania

437 F. Supp. 801

LITE-AIR PRODUCTS, INC. v. FIDELITY & DEPOSIT CO. OF MARYLAND v. ALLENTOWN SUPPLY CORP.

Civ. A. No. 76-140.

United States District Court, E. D. Pennsylvania.

August 11, 1977.

Ronald E. Robinson, Lansdale, Pa., for plaintiff.

Christopher K. Walters, Philadelphia, Pa., for Fidelity.

David Freeman, Philadelphia, for Allentown.

MEMORANDUM

NEWCOMER, District Judge.

The plaintiff, Lite-Air Products, Inc. ("Lite-Air") was a subcontractor on an airport project on which Allentown Supply Corporation ("Allentown Supply") was the general contractor. Lite-Air contracted to supply the material and provide installation for hearing, ventilating, and air-conditioning equipment. The defendant Fidelity and Deposit Company of Maryland ("Fidelity") entered into a Payment Bond on behalf of Allentown Supply, as the principal. Lite-Air claims that Allentown Supply did not pay plaintiff for the material and labor supplied, for interest charges on the delay in payment, and for changes and cancellation of orders. Plaintiff brought the original action to recover these unpaid amounts from the defendant surety company, pursuant to the "Public Works Contractor's" Bond Law of 1967, 8 P.S. § 191 et seq. Fidelity subsequently joined Allentown Supply as a third-party defendant. Presently before the Court is a motion, made by Fidelity, for a partial summary judgment against the plaintiff.

In its motion, Fidelity contends that some of the items claimed by Lite-Air are not recoverable under the terms of the payment bond or under the statute. The items in dispute are:

1) the future lost profits totalling $6,485., due to the cancellation of two purchase orders;

2) a "cancellation charge" of $1,102.40 because defendant's principal cancelled a previous order;

3) claims totalling $5,417.68 for alleged damages caused by supposed delay of the prime contractor on others;

4) "finance changes" for items # 1, 2, and 3; and

5) "finance charges" of $5,946.16 for invoices which have been fully paid.

I find that all of these claims should be dismissed and defendant's motion granted.

The issues raised by defendant's motion depend on the scope of the surety's liability under the bond and the statute. The bond is the proper place to start because the true intent and meaning of the instrument are the primary determinants of the extent of liability. Monongahela Street Railway Co. v. Phila. Co., 350 Pa. 603, 39 A.2d 909 (1944). Any interpretation that is required should be done with the purpose of constructing the intent from all of the words and clauses used and taken as a whole, with due regard to the surrounding circumstances. Siata International U.S.A., Inc. v. Insurance Company of North America, 362 F.Supp. 1355 (E.D.Pa.1973), rev'd on other grounds, 498 F.2d 817 (3rd Cir. 1974).

The plaintiff relies on the following language in the surety bond,

"Now, therefore, the terms and conditions of the bond are and shall be that if the principal to whom any portion of the work under this contract shall be subcontracted and if all assignees of the principal and of any such subcontractor promptly shall pay or 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 documents, . . . this bond shall be voided, otherwise this bond shall be and shall remain in full force and effect." (Emphasis supplied in plaintiff's memorandum).

Lite-Air's contention is that through this language Fidelity is liable for all of the monies due from the principal, Allentown Supply. The plaintiff claims that the surety assumed obligations which were co-extensive with those of Allentown Supply. I find that this is an inappropriate interpretation of the bond. First, the plaintiff's interpretation improperly depends on the isolation of one clause from the context of the sentence and paragraph. In fact, a closer look at the paragraph which the plaintiff has relied on reveals that this section only sets out a condition of the surety's liability and not the scope of that liability.

The applicable language in the bond for determining the scope of surety's liability is set out as follows:

". . . the claimant may institute an action upon this Bond, in the name of the claimant, in assumpsit, to recover the amount due the claimant for such labor or material, and may prosecute such action to final judgment and may have execution upon the judgment." (Emphasis added).

The key words show that Fidelity is liable only for the amount due for labor and materials. The issue is focused on what is included in "labor and materials."

The operative language of the bond is very similar to the statutory language which regulates this matter — the Public Works Contractor's Bond Law of 1967.¹ Since the language is similar to the statute, the cases interpreting the requirements under the statute will determine the scope of liability under the bond.

Besides the Pennsylvania court decisions, another supplementary source of interpretation has been the Miller Act. The Miller Act was enacted by Congress to provide protection for those supplying labor and materials for federal government construction. The Pennsylvania courts have found that analogizing and following Miller Act decisions is useful because of the similarity of purpose between that Act and Pennsylvania law. The logic used in interpreting the Miller Act is easily and appropriately transferred to the Pennsylvania statute. Commonwealth to use Walters Tire Service, Inc. v. National Union Fire Insurance Co., 434 Pa. 235, ...