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CITY OF PHILADELPHIA EX REL. WARNER CO. v. NATIONA

December 29, 1942

CITY OF PHILADELPHIA, to Use of WARNER CO.,
v.
NATIONAL SURETY CORPORATION et al.



The opinion of the court was delivered by: KALODNER

During the period between June 1927 and June 1931 the City of Philadelphia entered into a number of contracts with the Municipal Construction Company, Incorporated, a Pennsylvania corporation, under the terms of which the latter agreed to furnish and supply labor and material for the paving of a number of streets and highways in the said city. The contracts contained a provision to the effect that the contractor was to keep the paving in good condition and repair for a certain specified time.

Portions of the paving work done by this contractor, as asserted by the city, proved to be defective, and the city was compelled to undergo expenses of $10,661.49 in repair and replacement.

 Meanwhile the said contractor, Municipal Construction Company, Inc., ceased active operation, and the Union Indemnity Company, the surety on the contractor's bond, went into receivership.

 The city instituted suit against the ancillary receivers of the Union Indemnity Company in the Court of Common Pleas of Philadelphia County for the recovery of its expenditures for repair and replacement, and this suit is still pending in the state court.

 Some time during the years 1938 and 1939 the City of Philadelphia advertised for other bids for paving, and awarded four contracts to the Municipal Construction Company, Inc., which had recommenced active operation of its business. In each of these latter contracts the Municipal Construction Company, Inc., furnished the city an "additional bond" for the payment of labor and materials entering into these contracts, as required by statute and ordinance. These bonds were executed by the National Surety Corporation, a New York corporation, the primary defendant herein.

 By reason of the city's claim against the Municipal Construction Company, Inc., in the amount of $10,661.49 for the costs incurred in repairing and replacing the alleged defective paving, of the original contracts abovementioned, the city has retained from the amount due to the Municipal Construction Company, Inc., on account of the last four contracts, the sum of $12,434.79 pending determination of its suit against the Contruction Company and the Union Indemnity Company. (The latter sum apparently includes interest on the city's claim.)

 Subsequently, on October 25, 1941, the Warner Company, a Delaware corporation, instituted a civil action in this court (the action was originally instituted in the Common Pleas Court of Philadelphia County but was transferred to this court) against the National Surety Corporation, the surety on the last four mentioned contracts, for the Municipal Construction Company, to recover the sum of $12,479.94 for material furnished which entered into the paving under the four contracts between the Municipal Construction Company and the City of Philadelphia.

 Thereupon, the National Surety Corporation summoned the City of Philadelphia as a third-party defendant, setting forth the above-recited facts in its complaint, and alleging that the city was liable over to it for the amount of the claim of the Warner Company.

 The City of Philadelphia, without answering the averments, filed an answer to the third-party complaint, raising questions of law. Subsequently, the Warner Company, the use-plaintiff, amended its complaint making its claim in the alternative against the city and the National Surety Corporation.

 The complaint avers the existence of two city ordinances, one approved March 10, 1879, providing that the heads of the several departments of the city award no contract to any party who had previously defaulted in work or materials on any prior contract; the other, dated April 4, 1882, authorizing and directing the heads of the departments of the city not to receive any bid or award any contract to any person who refused to comply with his bid or had defaulted in the performance of his contract with any of the departments of the city (these two ordinances are set forth below). *fn1"

 The basis upon which the National Surety Corporation seeks to impose liability against the city is the failure by the city's officers and employees to carry out the provisions of the aforesaid two city ordinances, which purportedly require the heads of the various departments to "blacklist" the defaulting contractors.

 The enactment and enforcement of ordinances are unquestionably the exercise of a governmental function. Szilagyi v. Bethlehem, 312 Pa. 260, 167 A. 782; Whittaker v. Franklinville, 265 N.Y. 11, 191 N.E. 716, 93 A.L.R. 1351; Gilchrist v. Charleston, 115 S.C. 367, 105 S.E. 741; Jones v. Williamsburg, 97 Va. 722, 34 S.E. 883, 47 L.R.A. 294.


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