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ALLEGHENY CTY. v. MARYLAND CAS. CO.

April 10, 1940

ALLEGHENY COUNTY, PA.,
v.
MARYLAND CASUALTY CO. et al.



The opinion of the court was delivered by: MCVICAR

This action is before the court now on the first separate defense of The Home Indemnity Company, which avers that the "complaint fails to state a claim against defendant, The Home Indemnity Company, upon which relief can be granted."

Plaintiff, on March 26, 1931, entered into a written contract with the Poole Engineering & Machine Company, whereby said company sold to plaintiff 1,100 voting machines at the price of $1,019 each. The company agreed therein that said machines shall comply with specifications attached thereto and the Pennsylvania Act of Assembly of April 18, 1929, P.L. 549. It was agreed that the County would pay for said machines upon delivery. On the same day said company, as principal, and the Maryland Casualty Company, as surety, executed and delivered to plaintiff a bond in the sum of $200,000 conditioned that the Poole Company would faithfully perform all the obligations required of it under the aforesaid contract. The machines were delivered by the Poole Company, accepted and paid for by the plaintiff.

 On December 18, 1931, the Poole Company, as principal, and The Home Indemnity Company, as surety, executed and delivered a bond to plaintiff in the sum of $425,000. In said bond the aforesaid contract of March 26, 1931, and the aforesaid bond in the sum of $200,000 is recited. It is further recited, that the Poole Company brought a mandamus action against the Controller and Treasurer of Allegheny County, and that before the granting of said writ, the Court of Common Pleas of Allegheny County, in which said action was entered, required the execution of a bond in the sum of $425,000. The condition set forth in said bond is: "Now the Condition of this Bond Is Such, That if the above bounden principal, Poole Engineering & Machine Company shall, on or before April 11th, 1932, well and faithfully do and perform all the duties, obligations and covenants required of it, as provided for in Articles 1 to 10 inclusive in the specifications attached to and made a part of said contract of March 26, 1931, with the said County of Allegtheny, and shall make such changes, improvements, alterations and repairs, if any be needed, to the said Eleven Hundred (1100) voting machines delivered to the said County of Allegheny, so that the same shall fully comply with, conform to and meet all the requirements, convenants, obligations and duties mentioned in the said Articles 1 to 10 inclusive of the said specifications to the said contract of March 26, 1931, so that the said Eleven Hundred (1100) voting machines so delivered to the County of Allegheny shall comply in all respects with the said Articles 1 to 10 inclusive of said specifications, and shall comply with the laws of the Commonwealth of Pennsylvania relating to voting machines in so far as such laws relate to or govern said contract, and to the requirements of the Secretary of the Commonwealth of Pennsylvania as referred to by him in a certain certificate issued under his signature and the seal of his office December 3, 1931, as hereinbefore more specifically mentioned, then this obligation shall be void; otherwise to be and remain in full force, virtue and effect."

 In the paragraph following the condition, the agreement, which reads as follows, was made: "It is specifically understood and agreed that this bond of indemnity does not include Article 12 of the said specifications, covering service and repair, or any other articles of said specifications other than the said Articles 1 to 10 inclusive hereinbefore referred to, and it is understood and agreed further that this bond of indemnity is supplementary to, in addition to, and in excess of the said bond of the Maryland Casualty Company for Two Hundred Thousand ($200,000.00) Dollars hereinbefore referred to, and that, before recourse shall be had against the surety under this bond of indemnity, recourse must first be had against the said Maryland Casualty Company under its said bond of Two Hundred Thousand Dollars ($200,000.00), and that said bond of the Maryland Casualty Company must first have been fully paid to the County of Allegheny or judgment in a Court of competent jurisdiction obtained against the said Maryland Casualty Company for the full amount of its bond of Two Hundred Thousand ($200,000.00) Dollars before any action or proceedings can be commenced against the Surety under this bond of indemnity for any of its obligations hereunder."

 In the paragraph following the foregoing provision of the bond it is set forth that before any action shall lie against the surety or principal, notice of default in writing must be given to the principal and surety on or before December 18, 1932.

 On December 26, 1931, the aforesaid bond was approved by the Court of Common Pleas of Allegheny County.

 On March 23, 1937, plaintiff brought an action against the Maryland Casualty Company only, in the Court of Common Pleas of Allegheny County, to recover damages in the sum of $200,000 by reason of breach of the aforesaid bond on which the Casualty Company was a surety. April 13, 1937, on petition of the Maryland Casualty Company, said action was removed to this court. July 28, 1939, plaintiff filed an amended complaint against and naming the Maryland Casualty Company and The Home Indemnity Company as defendants. The first count therein avers plaintiff's cause of action against the Casualty Company; the second count avers its cause of action against the Indemnity Company. The Indemnity Company filed an answer thereto December 21, 1939, which raised, inter alia, the defense above set forth, that the complaint does not set forth a cause of action upon which relief can be granted against said Indemnity Company.

 The Indemnity Company contends that plaintiff does not have an action against it, nor can it be joined as a party defendant in this action because the bond of the Maryland Casualty Company has not been fully paid to plaintiff, nor has plaintiff procured a judgment against said Casualty Company for the full amount of said bond; that the performance of these covenants in the bond, on which the Indemnity Company is a surety to plaintiff, is a condition precedent to an action against it or to its joinder in the present action; and that the right conferred in its bond, that the bond of the Casualty Company be fully paid to plaintiff or that a judgment be procured against the Casualty Company for the full amount of the bond before any action or proceedings can be commenced against the Indemnity Company, is a substantive right.

 Plaintiff admits that it has not been paid said $200,000 nor has it procured a judgment against said Casualty Company in said amount.

 Plaintiff's position is averred in paragraph (14) of the second count of the complaint and in its prayer for relief as follows:

 "Under the provisions of Rule 18(b) and Rule 20(a) of the Federal Rules of Civil Procedure, the claim stated in this Count is properly joinable in this action with the claim stated in the First Count of this Complaint, notwithstanding the provisions of the uperformed 'condition precedent' recited in Paragraph (13) hereof, all substantive rights of defendant being adequately protected by the terms of said Rule 18(b) and by the nature of the relief demanded by plaintiff in this Count.

 "Wherefore, plaintiff demands judgment against said The Home Indemnity Company, defendant, in the sum of $425,000 in the event that, and in accordance with the substantive rights of said defendant as set forth in its said bond, Exhibit 'C', plaintiff suceeeds in this action in obtaining a judgment against Maryland Casualty Company in the sum of at least $200,000 upon the claim of plaintiff stated in the First Count of this Complaint."

 Plaintiff, in its brief, states: "We do concede, as we or any other reasonably minded advocate or tribunal would be bound to concede, that under all of the circumstances disclosed in the premises recited in the bond, the intention and purpose of the Home bond is to make the first $200,000.00 of damages suffered by Allegheny County from a breach by Poole of the 'condition of the bond' ...


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