Tudor Dev. Group v. US Fidelity & Guaranty Co., Civ. A. No. 88-0758.
Decision Date | 25 August 1988 |
Docket Number | Civ. A. No. 88-0758. |
Citation | 692 F. Supp. 461 |
Parties | TUDOR DEVELOPMENT GROUP, INC., Sidney Cohen, Dorothy Cohen, Marc Cohen, t/a Green Hill Associates, Plaintiffs, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant. |
Court | U.S. District Court — Middle District of Pennsylvania |
Mitchell R. Leiderman, Hunn, Shelly & Samel, Lansdale, Pa., for plaintiffs.
R. James Reynolds, Jr., Foulkrod, Reynolds & Havas, Harrisburg, Pa., for U.S. Fidelity & Guar. Co.
Defendant, United States Fidelity and Guaranty Co. (USF & G) has filed a combined motion to dismiss, motion to strike and motion for a more definite statement. Plaintiffs, Tudor Development Group, Inc. and Sidney Cohen, Dorothy Cohen and Marc Cohen, trading as Green Hill Associates, a limited partnership (Green Hill), allege various causes of action against USF & G, the surety for certain phases of a real estate development, (the Green Hill Project or Project), being constructed for Green Hill by Susquehanna Construction Co. (the "Contractor"). Basically, the complaint alleges that the Contractor's performance under its contract with plaintiffs was deficient and that, pursuant to a suretyship agreement and certain performance bonds issued by USF & G, the latter became liable for the Contractor's breach of contract. Direct claims are also made against defendant.
Defendant seeks dismissal of count I of the complaint to the extent it seeks recovery for Phase III of the Project. The complaint alleges that the Project was divided into three phases (¶ 8), and that defendant "agreed to provide performance bonds for the three phases of construction." (¶ 10). USF & G did issue bonds for Phases I and II but "subsequently refused to issue a bond for Phase III of the Project despite verbal and written assurances from its agent ... that such bonding would be issued for all three phases of the Project." (¶ 11). The Contractor's performance was deficient on all three phases (¶¶ 12 and 13) and count I seeks recovery for the entire Project even though performance bonds were issued only for the first two phases. Plaintiff alleges that defendant, through "previous representations and assurances" had "contractually committed" itself to provide a bond for Phase III as well.
Defendant asserts that these allegations are insufficient to assert a claim for Phase III; that Pennsylvania law requires a suretyship contract to be in writing. And, that in the absence of a written agreement, the claim for Phase III must be dismissed. Defendant relies upon the following statutory section, quoted in pertinent part, as follows: "No action shall be brought ... whereby to charge the defendant, upon any special promise, to answer for the debt or default of another, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person by him authorized." 33 P.S. § 3 (Purdon 1967). USF & G also cites Leonard v. Martling, 174 Pa.Super. 206, 100 A.2d 484 (1953) (, )aff'd, 378 Pa. 339, 106 A.3d 585 (1954). In response, plaintiff seems to assert that an oral agreement is sufficient. We disagree and conclude that count I as to Phase III must be dismissed. See generally, Blumer v. Dorfman, 447 Pa. 131, 289 A.2d 463 (1972).
Defendant contends that count II should be dismissed because it is based upon the Contractor's breach of warranties given to Green Hill in the construction contract but the performance bonds do not provide coverage for, nor even mention, breaches of warranties. Defendant cites General State Authority v. Sutter Corp., 44 Pa.Cmwlth. 156, 403 A.2d 1022 (1979) in its support. Defendant's reliance upon General State Authority is misplaced. In that case, the original defendant, Sutter Corporation, attempted to join National Surety Corporation, surety for Certain-Teed Products Corporation, in a suit for damages arising from an alleged defective roof on a Pennsylvania State Hospital. National Surety had issued a bond for the guarantee Certain-Teed had made on its roof membrane for the hospital. USF & G quotes the first and second paragraph of the following portion of the opinion. We will include the middle paragraph as well:
The Commonwealth Court then went on to conclude that Sutter could not sue as a third party beneficiary of the National bond issued to Certain-Teed even to the extent of the amount of the bond.
Defendant would argue that General State Authority supports its position here that, absent language in the performance bonds covering the Contractors' warranties, it has no duty to provide such coverage. But the middle paragraph of the quote makes clear that the Commonwealth Court was not dealing with that issue at all. It was only rejecting an attempt by Sutter to expose National to any and all damages arising from a breach of warranty by Certain-Teed. Thus, the opinion implicitly concedes that National would be liable for a Certain-Teed breach of warranty by mentioning several times National's limit of liability on the bond of $5,196.00. At the same time, however, it rejects any attempt to impose liability for "any warranty made by Certain-Teed"; that is, a warranty for an unlimited amount because the "surety could not be liable to anyone beyond the express limits set forth in its bond." Id., 403 A.2d at 1026. That the above discussion in General State Authority did not deal with the scope of the bond's coverage is made clear from the court's following statement made in connection with the intended beneficiary issue:
The most that can be said about the guaranty has already been said in our prior opinion dealing with the complaint against Certain-Teed. The suretyship agreement, if proven, would remove Dunmore from liability, to the extent of the guarantee, with Certain-Teed incurring the primary liability. General State Authority v. Sutter Corporation, 24 Pa. Comwlth. 391 at 396, 356 A.2d 377 at 381 (1976).
Id. at 165 n. 5, 403 A.2d at 1027 n. 5. (emphasis in original). Thus, National did have an obligation under its bond but it was not in excess of the bond's limit and it was only in favor of Dunmore Roofing and Sheetmetal Co., the roofing subcontractor which had purchased the roof membrane from Certain-Teed.
In the instant case, plaintiffs' position is more akin to Dunmore's than Sutter's. Green Hill is the obligee of the performance bonds and to determine whether a claim can be made under the bonds, we must use the following standard, bearing in mind plaintiffs' pertinent observation that the performance bonds in the instant case incorporate by reference the construction agreement with the Contractor:
Fleck-Atlantic Co. v. Indemnity Insurance Co. of North America, 326 Pa. 15, 19, 191 A. 51, 53. Obligations not imposed by the terms of the bond cannot be created by judicial construction or interpretation which extends the terms beyond their normal meaning. City of Pittsburgh, to Use of H.M. Kamin Agency v. Parkview Construction Co., 344 Pa. 126, 23 A.2d 847, 848.
Commonwealth ex rel. Pennsylvania Manufacturers' Assn' Casualty Ins. Co. v. Fidelity & Deposit Co., 355 Pa. 434, 437, 50 A.2d 211, 212 (1947).
The bonds given in the instant case meet this standard. In Pennsylvania Supply Co. v. National Casualty Co., 152 Pa.Super. 217, 31 A.2d 453 (1943), the plaintiff, a supplier of material for the construction of a house, sued the defendant bonding company for payment. The bond, between the owner of the residence as obligee and the defendant, provided as follows:
The "contract is hereby referred to and made a part hereof as fully and to the same extent as if copied at length herein." The condition of the bond is: "That if the above bounden principal shall well and truly keep, do and perform, each and every, all and singular, the matters and things in said contract set forth and specified to be by the said Principal kept, done and performed at the time and in the manner in said contract specified, and shall pay over, make good and reimburse to the above named Obligee, all loss and...
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