R. M. Shoemaker Co. v. Southeastern Pennsylvania Economic Development Corp.
| Decision Date | 22 February 1980 |
| Parties | R. M. SHOEMAKER CO., Appellant, v. SOUTHEASTERN PENNSYLVANIA ECONOMIC DEVELOPMENT CORPORATION, the Greater Philadelphia Foundation, and Girard Trust Bank. |
| Court | Pennsylvania Superior Court |
Argued Sept. 10, 1979.
Victor Wright, Philadelphia, for appellant.
Joseph H. Huston, Jr., Philadelphia, will not file a brief on behalf of Southeastern Pennsylvania Economic Development Corp. and The Greater Philadelphia Foundation, appellees.
David P. Bruton, Philadelphia, for Girard Trust Bank appellee.
Before PRICE VAN der VOORT and WIEAND, [*] JJ.
Is a lending institution liable to a general contractor for work done pursuant to contract with an owner where the owner has become insolvent and there are loan proceeds which remain undistributed? This is the issue raised on appeal following the lower court's granting of the lender's motion for summary judgment.
In 1972, when the Ford Motor Company determined to close the old Philco plant at Wissahickon Avenue and Abbottsford Road in Philadelphia, the Greater Philadelphia Chamber of Commerce negotiated an agreement by which Ford conveyed the property to the Greater Philadelphia Foundation (GPF), a nonprofit corporate affiliate of the Chamber. In turn, GPF entered a lease and lease back arrangement with Southeastern Pennsylvania Economic Development Corporation (SPEDCO). Plans were made to renovate the premises and convert the same into a modern industrial complex to be known as the SPEDCO Industrial Mall. It was hoped that by attracting commercial and industrial tenants jobs could be made available to offset the loss of jobs caused by the Philco plant shutdown.
Financing for the project was obtained from three sources. The first was a two million dollar loan from the Pennsylvania Industrial Development Authority (PIDA), an agency of the Commonwealth of Pennsylvania. The second was a working capital loan of $450,000 from a consortium of three banks, Philadelphia National Bank, First Pennsylvania Banking and Trust Company, and Girard Trust Bank. The third source was a one million dollar construction loan from the same three banks. Girard acted as the disbursing institution under the three loans.
R. M. Shoemaker Co., appellant, was the general contractor employed by GPF and SPEDCO to do the work pursuant to a construction agreement executed on September 12, 1972. According to the terms thereof, Shoemaker was to be paid its costs, plus 4% overhead and a profit of 6%. Initial construction costs were paid from the proceeds of the PIDA loan. Appellant's vouchers were submitted for approval to an architect and SPEDCO's construction committee, and funds were disbursed by Girard in accordance therewith.
By March, 1974, only $19,500 of the PIDA loan remained undisbursed. The $450,000 working capital loan had also been paid out. On March 19, 1974, Girard received appellant's voucher No. 11 for $243,595.14; on April 8, 1974, a final voucher for $6,613.20 was also received. The construction loan agreement contained a clause which required that at the time of disbursing loan proceeds "no event of default hereunder shall have occurred and be continuing." An event of default was defined to include the insolvency of GPF. Girard believed that GPF had become insolvent by March 19, 1974 and refused to disburse the proceeds of the construction loan. The remaining PIDA funds were disbursed, however, for all requirements of the loan agreement had been satisfied, and GPF's insolvency was not a basis for refusing disbursement of such funds. This left unpaid a Shoemaker claim for $230,568.02.
Subsequently, the Philco plant property was conveyed to another nonprofit corporation, and the project was developed further.
Appellant filed a petition for declaratory judgment to obtain a judicial determination of its rights and the liabilities of Girard, GPF and SPEDCO under the several agreements. On August 22, 1977, GPF and SPEDCO filed an amended answer admitting liability to Shoemaker for the amount of its claim, and judgment was entered against them. Both are insolvent. Girard filed a motion for summary judgment. This was granted, and an appeal followed.
The law on summary judgments is well settled and was set forth in Husak v. Berkel, Inc., 234 Pa.Super. 452, 458, 341 A.2d 174, 177 (1975), as follows: (Citations omitted). See also: Acker v. Palena, 260 Pa.Super. 214, 218-219, 393 A.2d 1230, 1232 (1978); Amabile v. Auto Kleen Car Wash, 249 Pa.Super. 240, 376 A.2d 247 (1977).
Appellant is unable to show any contract by which Girard agreed to make payments directly to the general contractor. There simply was no contract between Girard and the contractor. Although Girard agreed to advance money as the work of construction progressed, pursuant to vouchers submitted by the general contractor, its contract to do so was with GPF. Thus, only GPF acquired enforceable contractual rights to require disbursement of loan proceeds.
Appellant was not a third party beneficiary to the loan agreement. In order that a third person acquire rights in a contract, both parties to the contract must so intend and must indicate that intention in the contract. A promisor cannot be held liable to an alleged third party beneficiary unless the latter was within his contemplation at the time the contract was entered and such liability was intentionally assumed by him in the undertaking. The obligation to the third party must be created and must affirmatively appear in the contract itself. Spires v. Hanover Fire Ins. Co., 364 Pa. 52, 56-7, 70 A.2d 828, 830-31 (1950); Hillbrook Apartments, Inc. v. Nyce Crete Co., 237 Pa.Super. 565, 571, 352 A.2d 148, 151 (1975).
The terms of the loan agreement between Girard and GPF make it abundantly clear that they did not intent by their contract to confer upon the general contractor independent contractual rights. Cf. Demharter v. First Federal Savings & Loan Ass'n. of Pittsburgh, 412 Pa. 142, 194 A.2d 214 (1963). Thus, their agreement specifically provided in Section 6.1:
Appellant argues that this language is ambiguous and...
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IN RE RIGHT OF WAY FOR RT. 0202, SEC. 701
...third party to have rights in a contract it must be so intended by the parties); R.M. Shoemaker Co. v. Southeastern Pennsylvania Economic Development Corp., 275 Pa.Super. 594, 419 A.2d 60, 62-63 (1980); Forum Insurance Co. v. National Union Fire Insurance Co. of Pittsburgh, 865 F.2d 584, 58......