United States v. Commonwealth of Pa., Dept. of Highways, Civ. A. No. 70-3538.
Decision Date | 03 October 1972 |
Docket Number | Civ. A. No. 70-3538. |
Citation | 349 F. Supp. 1370 |
Parties | UNITED STATES of America v. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF HIGHWAYS, Defendant and Third-Party Plaintiff, v. NATIONAL SURETY CORPORATION, Third-Party Defendant (as to Commonwealth of Pennsylvania), v. SAUL, EWING, REMICK AND SAUL, Third-Party Defendant (as to National Surety Corporation) and the Hanover Insurance Company, Third-Party Defendant (as to National Surety Corporation), et al. and J. Paul Martin, Trustee in Bankruptcy of O'Brien & Redmond, Intervenor. |
Court | U.S. District Court — Eastern District of Pennsylvania |
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John F. Penrose, Asst. U. S. Atty., Philadelphia, Pa., for U. S. A.
Edward A. Hosey, Asst. Atty. Gen., Dept. of Transp., Harrisburg, Pa., for Commonwealth of Pa.
Paul J. Donnelly, Philadelphia, Pa., for National Surety Corp.
Norman R. Bradley, Philadelphia, Pa., for Saul, Ewing, Remick & Saul, third-party defendant.
Melvin Lashner, Adelman & Lavine, Philadelphia, Pa., for J. Paul Martin.
Herbert A. Barton, Swartz, Campbell, & Detweiler, Philadelphia, Pa., for The Hanover Ins. Co.
Presently before this Court are Motions for Summary Judgment filed by all parties in the above-captioned matter pursuant to Rule 56 of the Federal Rules of Civil Procedure. After having fully considered the pleadings, the stipulation of facts of the parties hereto and the memoranda of law in support of these motions, this Court has determined that there is no genuine issue as to any material fact and that certain of the parties are entitled to judgment as a matter of law.
This civil action was commenced on behalf of the United States of America (hereinafter referred to as Federal Government) against the Commonwealth of Pennsylvania, Department of Highways (hereinafter referred to as State) for failure to honor a levy for unpaid taxes. State, in turn, sued the National Surety Corporation (hereinafter referred to as National) because National is the party to which State paid the funds upon which Federal Government now claims a valid levy. National then sued two entities to which a portion of the funds, which it had received from State, had been paid, to wit, a partnership of lawyers, Saul, Ewing, Remick and Saul (hereinafter referred to as Saul, Ewing), and a surety company, Hanover Insurance Company (hereinafter referred to as Hanover). J. Paul Martin (hereinafter Trustee), Trustee in Bankruptcy of James J. O'Brien and Daniel L. Redmond, Jr. Ind. and t/a O'Brien and Redmond (hereinafter referred to as O'Brien and Redmond), then intervened in this action claiming not only title to the fund upon which Federal Government claims a valid levy but also claiming title to all other funds which National received from State as the balance due on certain contracts between State and O'Brien and Redmond.
In essence, this action involves nine contracts between State and O'Brien and Redmond and the issues presented this Court are which entity or entities have the right to the proceeds from these contracts.
During the years of 1958 to 1961, State entered into nine contracts with O'Brien and Redmond for improvement of certain sections of highways and/or bridges. These nine contracts were for Delaware County, Beaver County, Erie County, Wyoming-Susquehanna County, Bradford County, Somerset County-Route 55144, Somerset County-Route 55028, Cambria County and Bedford County. Hanover was the surety on labor and material bonds for the Delaware and Beaver County contracts; Globe Indemnity Co. (hereinafter referred to as Globe) was surety on a labor and material bond for the Erie County contract; and National was surety on labor and material bonds for the remaining six contracts. O'Brien and Redmond completed all of the work which was required to be performed in connection with all of the above-described contracts but failed to pay certain claims for labor and materials in connection with each of the above-described contracts. O'Brien and Redmond were declared bankrupt. The balance due on all nine of the contracts was paid by State to National; Trustee now claims the right to all of these proceeds, while Federal Government claims the right to the proceeds paid by State to National on only the Delaware, Beaver and Erie County contracts.
Each of the contracts entered into between the State and O'Brien and Redmond were identical in form and contained the following provision, as set forth in pertinent part, in respect to payment of labor and material claims by O'Brien and Redmond:
All of the labor and material payment bonds, on which O'Brien and Redmond was the principal, the State was the obligee, and either National, Hanover or Globe were the sureties, furnished in connection with the above-described contracts were identical in form. The labor and material bonds provided in part that:
The bonds of National were executed in reliance on and in consideration of a General Indemnity Agreement executed by O'Brien and Redmond as Indemnitors and delivered to National as Surety on September 26, 1960. The General Indemnity Agreement provides as follows in pertinent part:
National filed Financing Statements on May 17, 1962 and July 9, 1962, under provision of the Uniform Commercial Code ( ), covering the assignments to National of all of the right, title and interest of O'Brien and Redmond in the construction contracts between O'Brien and Redmond and the State dated May 23, 1961 and June 7, 1961, in Somerset, Bedford, Cambria, Susquehanna-Wyoming and Bradford Counties, and all money or payments which might be or become due O'Brien and Redmond at the time of any breach or default of these contracts on account of the contracts or on account of extra work or materials supplied therewith, as more fully set forth in the General Indemnity Agreement dated September 26, 1960.
In an action by O'Brien and Redmond against State before the Board of Arbitration of Claims of the Commonwealth of Pennsylvania (hereinafter referred to as Board of Arbitration) O'Brien and Redmond, on April 19, 1963, set over and assigned to National with National's right to collect same, any award that might be made to O'Brien and Redmond in this action. National then filed Financing Statements under provision of the U.C.C. on May 7, 1963 and May 10, 1963, which covered this Assignment of Claim.
On the Somerset-55144, Somerset-55028, Bedford, Cambria, Wyoming-Susquehanna and Bradford County contracts, the total amounts paid by National for labor and material claims are: (a) Prior to O'Brien and Redmond Bankruptcy: $130,085.10 and (b) To Date: $159,629.54. On the Somerset-55144, Somerset-55028, Bedford, Cambria and Bradford County contracts, the total amount paid by National for labor and material claims...
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