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December 17, 1959


Appeal, No. 275, Oct. T., 1959, from decree of Court of Common Pleas of Cameron County, May T., 1958, No. 32, in case of Emporium Area Joint School Authority v. Anundson Construction and Building Supply Company. Decree affirmed.


C. Henry Nicholson, for appellant.

Edwin W. Tompkins, with him Tompkins & Tompkins, for appellee.

Before Gunther, Wright, Woodside, Ervin, and Watkins, JJ. (rhodes, P.j., and Hirt, J., absent).

Author: Watkins

[ 191 Pa. Super. Page 375]


The chronology of events leading up to this appeal is as follows: On September 4, 1952, on application of the school districts of the Borough of Emporium and Shippen Township, Cameron County, Pennsylvania, the Emporium Area Joint School Authority, the appellee herein, was incorporated under the Municipal Authorities Act of 1945, P.L. 382, as amended, 53 PS § 301 et seq. Said corporation was enrolled on September 4, 1952 in the office of the Secretary of the Commonwealth, at Harrisburg, Pennsylvania. On January 9, 1953, the Authority and Anundson Construction and Building Supply Company, appellant herein, entered into a contract for the construction of a new school building in the Borough of Emporium, Pennsylvania. Anundson was the general contractor. At the same time other contracts were entered into between the authority and various contractors covering the heating and ventilation, plumbing and drainage, and electric work for the same school building. The contract price was originally $768,000 but due to changes in the work, authorized by the authority, in accordance with the provisions of the contract, costing $27,142.30, the total contract price was $795,142.30.

The contract provided that the company should start work within five days from the date of the signing of the contract and so to proceed that the work would be completed on the whole contract by September 1, 1954. The final completion date was determined by the architect to be February 1, 1955. On this date the balance due the company under the contract was $3,424.76. When the company submitted its final requisition for payment in July 1955, it included in addition to the balance, many items, including foundation wall finish, additional pumping, damage for delays, loss of profits, shifting of mill work program, interest, home office tie ups, telephone and telegraph, salaries,

[ 191 Pa. Super. Page 376]

    travel expense and other accrued losses, totaling $180,731.42. The authority admitted owing $3,424.76 and an additional $500.60 for which it was willing to execute change orders.

Thereafter, on or about August 31, 1955, the company requested that the dispute be submitted to arbitration and hearings by the selected board of arbitrators were held. The procedure followed at these hearings was governed by the Commercial Arbitration Rules of the American Arbitration Association. On November 17, 1957, the arbitration board made an award of $42,095 plus a portion of the costs and expenses of arbitration and witnesses. A signed copy of this award was delivered to each of the parties on December 10, 1957.

On April 11, 1958, the award was filed with the prothonotary and the company filed an application for confirmation of the award of the arbitration board. On July 3, 1958, the authority filed its petition to modify or vacate the award. A rule to show cause was granted thereon, and after argument, the Court of Common Pleas of Cameron County, on March 23, 1959, entered a decree, modifying the award and granting to the company the sum admitted by the authority to be due, of $3,925.36, with interest from February 1, 1955: Together with the sum of $851.94, being one half of the cost of transcribing the hearings which had been previously paid by the appellant. This appeal by the company followed.

Before discussion of the principle issues raised on appeal from the court's order, two questions should be preliminarily settled. The first being whether these proceedings were had under and subject to the arbitration Act of April 25, 1927, P.L. 381, 5 PS § 161. The contract in this case sets forth on page J-16, in Article 41, under Arbitration, the following: "All disputes, claims or questions subject to arbitration under this

[ 191 Pa. Super. Page 377]

    contract shall be submitted to arbitration in accordance with the provisions then obtaining of the standard form of arbitration procedure of the American Institute of Architects, and this agreement shall be specifically enforceable under the prevailing arbitration law, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. It is mutually agreed that the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other."

A reading of this paragraph makes it clear that the parties intended to proceed according to the Arbitration Law of Pennsylvania and that matters of hearing procedure alone would be determined by the American Institute of Architects Arbitration Procedure and both parties in their every action followed the Act as set forth above. Seaboard Surety Co. v. Commonwealth, 345 Pa. 147, 151, 27 A.2d 27 (1942).

The second preliminary question is whether the authority is a municipal corporation, entitled to the same immunities, rights and powers of other municipal corporations. We agree with the opinion of the court below where President Judge TRAMBLEY said, "But regardless of whether the authority here is a municipal corporation we see no reason why the same rules of law which apply to municipal corporations should not apply to authorities. School authorities are created to perform some of the same functions which school districts are authorized to perform. In doing so they perform governmental functions, including the handling of money collected by taxation and, therefore, the same considerations of public policy should apply to an authority as to a school district. The public should, therefore, be given the same protection in the matter of liability under contracts entered into by an authority as is a school district and we so hold." However,

[ 191 Pa. Super. Page 378]

    we find that it is a municipal corporation and that the Municipal Authorities Act of May 2, 1945, P.L. 382, as amended, 53 PS § 301, recognized that this is so. One example of this legislative intent may be found in Sec. 15 of the Act, 53 PS § 318, wherein it states, "The effectuation of the authorized purposes of Authorities created under this act shall and will be in all respects for the benefit of the people of the Commonwealth of Pennsylvania, for the increase of their commerce and prosperity, and for the improvement of their health and living conditions, and since such Authorities will be performing essential governmental functions in effectuating such purposes, such Authorities shall not be required to pay any taxes or assessments...."

It has been judicially determined in various situations that a municipal authority is also a municipal corporation. It follows that a school authority, under the Act in question, is clothed with the powers and rights, charged with the duties and entitled to the immunities of a municipal corporation in its dealings with others except insofar as such powers and duties may be restricted and limited by law. As was said by Judge HIRT in West View Boro. Mun. Auth. Tax Case, 175 Pa. Superior Ct. 641, 644, 107 A.2d 130 (1954), "The Municipal Authority of the Borough of West View is not an agency of the Borough but is a separate municipal corporation 'performing essential governmental functions' in effectuating the purposes of its creation.... It is not the State but is merely an agency of the sovereign 'engaged in the administration of ...

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