TUDOR DEVELOPMENT GROUP v. USF & G, CO., 88-0758.

• Decision Date: 03 July 1991
• Docket Number: No. 88-0758.,88-0758.
• Citation: 768 F. Supp. 493
• Parties: TUDOR DEVELOPMENT GROUP, INC., et al. v. UNITED STATES FIDELITY & GUARANTY COMPANY, et al.
• Court: U.S. District Court — Middle District of Pennsylvania

768 F. Supp. 493

TUDOR DEVELOPMENT GROUP, INC., et al. v. UNITED STATES FIDELITY & GUARANTY COMPANY, et al.

No. 88-0758.

United States District Court, M.D. Pennsylvania.

July 3, 1991.

Mitchell R. Leiderman, Media, Pa., for plaintiffs.

Lewis S. Kunkel, Jr., Timothy B. Anderson, Pepper, Hamilton & Scheetz, Harrisburg, Pa., for intervenor Green Hill Project Investors, Inc.

Audrey E. Woloshin, Katherman & Heim, P.C., York, Pa., for intervenor York Excavating Co., Inc.

MEMORANDUM

McCLURE, District Judge.

I. BACKGROUND

Plaintiffs Tudor Development Group, Inc. ("Tudor"), Sidney Cohen, Dorothy Cohen and Marc Cohen, collectively trading as Green Hill Associates ("GH Associates"), initially filed this action against United States Fidelity & Guaranty Corporation (USF & G).¹ USF & G was the performance bond surety for certain phases of a real estate development (the "Green Hill Project"), being constructed for GH Associates by Susquehanna Construction Company ("Susquehanna"). GH Associates settled its claims against USF & G on November 20, 1989 and the settlement proceeds of $594,000.00 were paid into court.²

In this action, four parties associated with the Green Hill Project³ asserted claims against the escrowed funds: GH Associates, Green Hill Project Investors, Inc. ("GHP Investors")⁴, Dauphin Deposit Bank and Trust Company ("Dauphin Deposit"), and York Excavating Company, Inc. ("York").⁵ Summary judgment was entered against Dauphin Deposit on January 7, 1991. York, GH Associates and GHP Investors remain parties to the action.

York's claim stems from work which it performed as a sub-contractor on the Green Hill Project. It contracted with Eastern Consolidated Utilities, Inc., ("ECU"),⁶ the contractor responsible for constructing roads, parking areas, and doing other paving and "site work."⁷ York alleges that it was never paid for work which it performed on a time and materials basis between August, 1987 and November, 1987 and claims that it is owed a balance of $70,962.50.

GHP Investors and GH Associates have filed motions for judgment on the pleadings against York (Record Document Nos. 103 and 106). After considering the arguments raised by the parties, we find that judgment on the pleadings against York is appropriate and will enter an order to that effect.

II. DISCUSSION

A. Motion for judgment on the pleadings standard

Judgment on the pleadings is appropriate only if there is no issue of material fact and if the pleadings demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 12(c). "The trial court is required `to view the facts presented in the pleadings and inferences to be drawn therefrom in the light most favorable to the non-moving party.'" Hayes v. Community General Osteopathic Hospital, 730 F.Supp. 1333, 1334 n. 1 (M.D.Pa.1990), (Caldwell, J.), citing Society Hill Civic Ass'n v. Harris, 632 F.2d 1045, 1058 (3d Cir.1980). This requires the court to accept plaintiff's allegations in the complaint, even if they conflict with the defendant's answer. Hayes, supra, 730 F.Supp. at 1334 n. 1.

B. Laches

GHP Investors and GH Associates (hereafter collectively "movants") contend that York's claim is barred by laches. York asserts a subrogation claim against the escrowed funds. A right of subrogation is one based on considerations of equity and good conscience. Even if it is contractually based, it is, nevertheless, regarded as based upon and governed by equitable principles. Allstate Insurance Co. v. Clarke, 364 Pa.Super. 196, 527 A.2d 1021, 1023-1024 (1987).

Laches is an equitable doctrine which provides that if a plaintiff in equity has failed to exercise due diligence in prosecuting his claim, to the detriment of the other party, the claim is barred. Siegel v. Engstrom, 427 Pa. 381, 385, 235 A.2d 365, 367 (1967) and Hankin v. Mintz, 276 Pa.Super.Ct. 538, 542, 419 A.2d 588, 590 (1980). In determining whether a party exercised due diligence, the focus is on what the party reasonably should have known "`by the use of the means of information within his reach, with the vigilance the law requires'", not on what he or she actually knew. Sprague v. Casey, 520 Pa. 38, 46, 550 A.2d 184, 188 (1988), quoting Taylor v. Coggins, 244 Pa. 228, 231, 90 A. 633, 634 (1914). "What the law requires of ... a claimant is to discover those facts which were discoverable through the exercise of reasonable diligence." Sprague, supra, 550 A.2d at 188. "Laches entails an inquiry into whether the party is deserving of the court's relief." Waddell v. Small Tube Products, Inc., 799 F.2d 69, 76 (3d Cir.1986).

The Pennsylvania courts have held that a claim is barred by laches if the following conditions exist:

The party asserting laches must show, first, a delay arising from the other party's failure to exercise due diligence, and second, prejudice from the delay.... It is not enough to show delay arising from failure to exercise due diligence; for `laches will not be imputed where no injury has resulted to the other party by reason of the delay.' .... (Citations omitted.).... Laches requires not only a passage of time, but also a resultant prejudice to the party asserting the doctrine. ... (Citations omitted.).... and is based on `some change in the condition or relations of the parties which occurs during the period the complainant unreasonably failed to act.' .... (Citations omitted.).... `The burden of proof with respect to the doctrine of laches is upon the party asserting the defense; in order to meet this burden, the party alleging the delay must demonstrate prejudice.' ... (Citations omitted.).... `Delay alone, no matter how long, does not itself establish laches.'.... (Citation omitted.)

Patten v. Vose, ___ Pa.Super. ____, 590 A.2d 1307 (1991).

Prejudice may, for example, be shown if relevant records have disappeared, if a key witness is now deceased, or cannot be located, or if the defendant changed his position based on the expectation that plaintiff did not intend to pursue the claim. See: Del-Val Electrical Inspection Service, Inc. v. Stroudsburg-East Stroudsburg Zoning and Codes Office, 100 Pa.Commonwealth Ct. 429, 515 A.2d 75, 76 (1986), citing Class of Two Hundred Administrative Faculty Members v. Scanlon, 502 Pa. 275, 466 A.2d 103 (1983).

The burden of establishing laches is on the party asserting it as a defense, unless the analogous statute of limitations has expired. In that case, the burden is on the claimant to show why his claim should not be barred by laches. Wheeler v. Nationwide Mutual Insurance Co., 749 F.Supp. 660, 662 (E.D.Pa.1990).

Whether laches applies is a factual question, making it an inappropriate basis for summary judgment or judgment on the pleadings, unless the relevant facts are not in dispute. See generally: Waddell, supra, 799 F.2d 69, 74 n. 2 and Sandvik v. Alaska Packers Ass'n, 609 F.2d 969, 974 (9th Cir.1979). Additionally, "even if the ... court finds that the elements of laches have been proven, ... in the exercise of its discretion it `must take into account whether or not a less drastic form of equitable relief than a complete dismissal of the action' would be appropriate." Waddell, supra, 799 F.2d at 79, quoting E.E.O.C. v. Great Atlantic & Pacific Tea Co., 735 F.2d 69, 81 (3d Cir.1984).

Returning to the case before us, we find that none of the relevant facts are in dispute. The relevant dates, listed chronologically, are as follows.⁸ The general construction contract between Susquehanna and Green Hill Associates terminated in August, 1987 due to a disagreement between the parties. If the contract had not been terminated, Susquehanna was scheduled to complete work on the project by December 31, 1987. York performed corrective work at the project site from August 13, 1987 thorough November 5, 1987 for which it has not been paid.

Green Hill Associates filed this action on May 15, 1988 against Susquehanna's surety, USF & G. Thereafter, Dauphin Bank and Deposit and GHP Investors filed petitions to intervene. Both parties' petitions were granted. Dauphin Deposit filed a complaint on February 10, 1989, and GHP Investors filed a complaint on March 13, 1989. The claim against USF & G was settled on November 20, 1989, leaving GH Associates, Dauphin Deposit and GHP Investors as competing claimants for the settlement proceeds which were paid into court.

York filed a petition to intervene in this action on May 23, 1990. Leave was granted, and its complaint was filed January 28, 1991.⁹ Summary judgment was entered against Dauphin Deposit on January 7, 1991.

Because York's petition to intervene was not filed until after expiration of the analogous statute of limitation,¹⁰ it bears the burden of proving that laches does not apply, i.e., that there was no delay arising from its failure to exercise due diligence, and that movants were not prejudiced by any delay.¹¹Patten v. Vose, supra.

In determining whether York's filing was timely, we can look to the analogous statute of limitations as a guide, although it is not an absolute standard. Kay v. Kay, 460 Pa. 680, 334 A.2d 585, 587 (1975). The statute of limitations expired a year and one-half before York filed its petition to intervene. The two year claims-filing period established by the surety bond had also expired by the time York's petition was filed. Thus under either standard, York's petition to intervene was filed beyond the relevant statutory/contractual deadline.

Additionally, there is no question but that movants were prejudiced by York's delay in filing. It did not file its petition to intervene until months after movants had settled with USF & G, and the claims against USF & G had been dismissed with prejudice—until it was too late for movants to take York's claim into account in negotiating the settlement. They settled with the expectation that the settlement proceeds would be distributed among the three competing claimants who had asserted claims as of the date of settlement:¹²...