U.S. Fidelity & Guaranty Co. v. Feibus, 3:CV-95-1925.

• Decision Date: 08 May 1998
• Docket Number: No. 3:CV-95-1925.,3:CV-95-1925.
• Parties: UNITED STATES FIDELITY & GUARANTY CO., Plaintiff, v. Steven J. FEIBUS, Lori M. Feibus, Anthracite Plate Glass Co., Inc., Anthracite Glass Corp., Anthracite Window Corp., Luster-Life, Inc., Shirley S. Feibus, and Robert C. Statsman as Trustee for the Estate of Samuel S. Feibus, Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

Page 579

15 F.Supp.2d 579

UNITED STATES FIDELITY & GUARANTY CO., Plaintiff, v. Steven J. FEIBUS, Lori M. Feibus, Anthracite Plate Glass Co., Inc., Anthracite Glass Corp., Anthracite Window Corp., Luster-Life, Inc., Shirley S. Feibus, and Robert C. Statsman as Trustee for the Estate of Samuel S. Feibus, Defendants.

No. 3:CV-95-1925.

United States District Court, M.D. Pennsylvania.

May 8, 1998.

Ian A.L. Strogatz, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, PA, David I. Bookspan, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, PA, J. William Ernstrom, Ernstrom & Dreste, Rochester, NY, for United States Fidelity & Guaranty Company.

Michael H. Roth, Scranton, PA, for Steven J. Feibus, Lori M. Feibus, Anthracite Window Corp.

Richard S. Bishop, Scranton, PA, for Anthracite Plate Glass Company, Inc., Luster-Life, Inc.

John P. DiIorio, Shapiro & Shapiro, Hackensack, NJ, for Anthracite Glass Corporation.

Sheldon Rosenberg, Scranton, PA, for Shirley S. Feibus.

Sheldon Rosenberg, Scranton, PA, Morey M. Myers, Myers, Brier & Kelly, Scranton, PA, for Robert C. Statsman.

MEMORANDUM

CAPUTO, District Judge.

Presently pending before the court are cross-motions for summary judgment. Plaintiff filed this action for breach of contract alleging that defendants failed to meet their obligations under a Master Surety Agreement signed with the plaintiff. (Compl.¶¶ 1, 5.) Plaintiff filed a motion for summary judgment, seeking a) reimbursement for losses and expenses paid under the Master Surety Agreement, in the amount of $3,751,272.82 plus interest;¹ and b) specific performance for an order compelling defendants to deposit $3,241,592 with plaintiff to protect it against future losses and expenses. (Pl.'s Br. in Supp., Doc. 75 at 28, 32.) Defendants have also filed a motion for summary judgment asking that the court dismiss the complaint. (Defs.' Mot., Doc. 60.) Both motions are fully briefed and ripe for disposition. The court has jurisdiction based on diversity of citizenship. 28 U.S.C. § 1332.

BACKGROUND

On June 25, 1991, Steven J. Feibus, Lori M. Feibus, Anthracite Glass Co., Inc., Anthracite Plate Glass Co., Inc., Anthracite Glass Corp., Anthracite Window Corp., Luster-life, Inc., Shirley S. Feibus, and Samuel S. Feibus ("defendants" or "principals") entered into a Master Surety Agreement ("MSA") with United States Fidelity & Guaranty Co. ("plaintiff" or "surety"). (Compl. ¶ 2.) A suretyship is a three-party relationship where the surety undertakes to perform to an obligee, if the principal fails to do so. Pursuant to the MSA, plaintiff issued certain performance and payment bonds to six different obligees for construction projects to be performed by defendants, Anthracite Glass Company, Inc., Anthracite Plate Glass Company, Inc. Anthracite Glass Corporation, Anthracite Window Corporation, and/or Luster-life, Inc. (the "Anthracite Companies").² Id. ¶ 3. The Anthracite Companies were eventually declared in default on five of the projects for which plaintiff had issued bonds.³ Id. ¶¶ 19-20. In order to fulfill its obligations under the bonds, plaintiff was called upon to complete performance of the jobs under the performance bonds, and to pay numerous claims under the payment bonds.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(c) provides that the moving party is entitled to summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. A fact is "material" if proof of its existence or non-existence might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "Facts that could alter the outcome are material facts." Charlton v. Paramus Bd. of Educ., 25 F.3d 194, 197 (3d Cir.), cert. denied, 513 U.S. 1022, 115 S.Ct. 590, 130 L.Ed.2d 503 (1994). "Summary judgment will not lie if the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.

Initially, the moving party must show the absence of a genuine issue concerning any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 329, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, and the entire record must be examined in the light most favorable to the nonmoving party. White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir.1988); Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir.1982). Once the moving party has satisfied its burden, the nonmoving party "must present affirmative evidence to defeat a properly supported motion for summary judgment." Anderson, 477 U.S. at 256-57, 106 S.Ct. at 2514. Mere conclusory allegations or denials taken from the pleadings are insufficient to withstand a motion for summary judgment once the moving party has presented evidentiary materials. Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). Rule 56 requires the entry of summary judgment, after adequate time for discovery, where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. "The moving party is `entitled to a judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Id. at 323, 106 S.Ct. at 2552.

Furthermore, summary judgment is an appropriate method of resolving disputes concerning indemnification agreements. Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201 (5th Cir.1996); Commercial Ins. Co. of Newark v. Pacific-Peru Constr. Corp., 558 F.2d 948 (9th Cir.1977); Continental Cas. Co. v. American Sec. Corp., 443 F.2d 649 (D.C.Cir.1970).

DISCUSSION

I. PLAINTIFF'S LOSSES AND EXPENSES CLAIM

Plaintiff's case is based on breach of contract, specifically that defendants have breached their obligations under the MSA. We will therefore start with the actual language of the MSA. Under the MSA, the defendants expressly agreed that:

IV(A) the liability of [defendants] hereunder shall extend to and include all amounts paid by [plaintiff] in good faith under the belief that: (1) [plaintiff] was or might be liable therefor; (2) such payments were necessary or advisable to protect any of [plaintiff's] rights or to avoid or lessen [plaintiff's] liability or alleged liability...

(C) the voucher(s) or other evidence of such payment(s) or an itemized statement of payment(s) sworn to by an officer of [plaintiff] shall be prima facie evidence of the fact and extent of the liability of [defendants]. ...

(Compl.Ex.A.)

A. The Prima Facie Evidence Clause

Under the MSA, submission of evidence of payments in the form of vouchers or affidavits shall be prima facie evidence of the fact and amount of liability. These prima facie evidence clauses have been upheld as not against public policy and enforced by the courts. Fidelity & Deposit Co. v. Bristol Steel & Iron Works, Inc. 722 F.2d 1160, 1163. (4th Cir.1983) (applying Pennsylvania law); Transamerica Ins. Co. v. Bloomfield, 401 F.2d 357, 362 (6th Cir.1968); Gundle Lining Constr. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 210 (5th Cir.1996).

Similarly, courts have granted summary judgment in favor of a surety based on such a provision. See Gundle Lining, 85 F.3d at 210; Curtis T. Bedwell & Sons, Inc. v. International Fidelity, Ins., No. 83-5733, 1989 WL 55388 (E.D.Pa. May 23, 1989) (citing Continental Cas. Co. v. American Sec. Corp., 443 F.2d 649 (D.C.Cir.1970)).

Although the M.S.A. § requires either vouchers or affidavits, plaintiff in this case has submitted both forms of evidence detailing its losses and expenses. Plaintiff submitted voluminous documentation of its payments as a result of its obligations under the performance and payment bonds. (Suppl.Decl. of Carl C. Coe, Jr., Doc. No. 89.) Additionally, plaintiff submitted itemized statements of each payment sworn to in Declarations by the three claims specialists responsible for handling these claims. (Decls. of Gary A. Wilson, Carl C. Coe, Elizabeth K. Stosur, Doc. Nos. 76, 77, 78.) The documents establish that plaintiff made payments in the amount of $3,751,272.82.⁴ The evidence provided by plaintiff is more than what the M.S.A. § requires and more than what defendants promised to accept as prima facie evidence of both the fact and extent of liability. (Compl.Ex. A ¶ IV(C)).⁵

Under Rule 56, the moving party has the initial burden of identifying evidence which it believes shows an absence of a genuine issue of material fact. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Childers v. Joseph, 842 F.2d 689, 694 (3d Cir.1988). According to the express language of the MSA, vouchers of payment or sworn declarations constitute prima facie evidence of the fact and amount of liability.

Interpreting identical prima facie evidence clauses, courts have routinely held that once a surety has submitted the required documentation of payments, the burden under Rule 56 shifts to the principal to prove the existence of a genuine issue of material fact for trial. See, e.g., Gundle Lining, 85 F.3d at 210 (payment vouchers evidencing fact and amount of liability shifts burden under Rule 56 to principals); Continental Cas. Co., 443 F.2d at 650-51 (photostats of canceled checks and sworn affidavits alone were sufficient to support the summary judgment granted by the district court); Curtis T. Bedwell & Sons, Inc. v. International Fidelity Ins., No. 83-5733, 1989 WL 55388 at *3 (E.D.Pa. May 23,...