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MARCELLETTI & SON CONSTR. CO. v. MILLCREEK TWP. SE

May 21, 1970

The MARCELLETTI & SON CONSTRUCTION CO., Inc., Plaintiff,
v.
MILLCREEK TOWNSHIP SEWER AUTHORITY, Defendant, v. CONTINENTAL CASUALTY COMPANY, Defendant on Counterclaim, v. CONSOER, TOWNSEND AND ASSOCIATES, Third-Party Defendants. The MARCELLETTI & SON CONSTRUCTION CO., Inc., Plaintiff, v. CONSOER, TOWNSEND AND ASSOCIATES, Third-Party Defendants


Gerald J. Weber, District Judge.


The opinion of the court was delivered by: WEBER

In this case arising out of a sewer construction contract and its termination plaintiff contractor recovered a verdict of $2,900,385.30 and $100,000 jointly against Defendants Millcreek Township Sewer Authority and Consoer, Townsend and Associates, and $254,367.04 against Defendant Millcreek Township Sewer Authority alone. The $254,367.04 represents moneys due plaintiff under the contract, most of which Defendant Authority admitted owing but which it withheld paying as credit against its counterclaim against plaintiff contractor and counterclaim defendant, Continental Casualty Company, the contractor's surety. The jury found against defendant Authority on its counterclaim and also on its cross-claim for indemnity against co-defendant Consoer, Townsend and Associates.

 Motions for New Trial and Judgment N.O.V. were timely filed, and plaintiff began execution proceedings which were stayed without surety pending consideration of objections. Defendant Consoer-Townsend and Associates has posted a surety bond of $3,000,000 which has been accepted and approved. Defendant Authority has produced evidence that it is unable to secure a surety bond pending disposition of the motions or for appeal, but objects to execution for a number of reasons set forth below. The only funds of the Authority available, except for a small uncontrolled administrative expense fund, are held by the Security-Peoples Trust Company, Trustee for the bondholders of the Authority, which has been summoned as garnishee in the execution proceedings. In addition, three banks holding substantial amounts of the bonds of the Authority have moved to intervene in the execution proceedings and have advanced objections to execution against funds in the hands of the Trustee.

 Plaintiff now seeks to pursue execution against the Authority alone, and only to the extent of its $254,367.04 verdict against it alone. Plaintiff seeks execution only against funds held by said Trustee in the Bond Redemption and Improvement Fund, because under the Indenture these funds may be used for construction and other purposes at the discretion of the Authority, and are not subject to any superior lien of the bondholders.

 We have considered the various objections to such execution advanced by the defendant Authority, its Trustee, and the intervening bondholders and do not find them sufficient to prevent execution against the Bond Redemption and Improvement Fund for moneys which have been determined due the Plaintiff under its construction contract.

 Defendant Authority claims exemption from the requirement of a supersedeas bond pending disposition of post trial motions in this Court because it is a "municipal corporation" and the Act of May 19, 1897, [12 P.S. § 1152] provides exemption "when a county, township, or municipal corporation * * * is the appellant."

 Is a municipal authority a "municipal corporation" in the sense of that statute? The statute was enacted long before the concept of a municipal authority was developed in Pennsylvania.

 Municipal authorities have often been called "municipal corporations" by decisions of the appellate courts of Pennsylvania. But we must look at the decisions of those courts to determine the purpose of so holding.

 In Emporium Area Joint School Authority v. Anundson Construction & Building Supply Company, 191 Pa. Super. 372, 156 A. 2d 554 [1959], the court said that a school authority incorporated under the Municipal Authority Act of 1945 [53 P.S. § 301 et seq.] was a municipal corporation but the rationale of its decision was, quoting the lower court, "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." What was actually in issue here was certain claims of a contractor for extra work for which it had no written authorization. The Municipal Authorities Act had a provision, 53 P.S. § 312, requiring public bidding on contracts for construction in excess of $500. This is similar to the public bidding requirements of other municipal corporations. Because the authority was engaged in performance of the same public function as a school district, the court held that the authority was entitled to have the same public policy applied to its contract liability as is applied to municipal corporations.

 In West View Borough Municipal Authority Tax Case, 175 Pa. Super. 641, 107 A. 2d 130 [1954], the Court said that a municipal authority was a municipal corporation, but that has nothing to do with its decision. The Municipal Authorities Act, 53 P.S. § 318, provided that municipal authorities should not be required to pay taxes on property acquired or used by them for the purposes for which they were created. The Pennsylvania Constitution, art. 9, § 1 provided tax exemption for "public property used for public purposes." The Court applied the prior decisions arrived at in municipal corporation cases that the use must be an actual and present use and not one in contemplation to justify exemption from taxation.

 In Southwest Delaware County Municipal Authority v. Aston Township, 413 Pa. 526, 198 A. 2d 867 [1964], the Pennsylvania Supreme Court also said, "An authority is a municipal corporation, entitled to the same immunities, rights and powers of other municipal corporations and 'school authorities are created to perform some of the same functions which school districts are authorized to perform' and 'the same considerations of public policy should apply to an authority as to a school district.'" The holding was that the immunity from improvement assessments granted to school property was not affected by the fact that legal title to the property was in a school authority rather than the school district.

 The appellate courts of Pennsylvania have not been indulging in gross conceptual jurisprudence, as defendant Authority urges, but in each case have looked at the purpose behind the rule to determine if the public policy is applicable as well to an authority.

 
"A municipal corporation is a legal institution formed by charter from sovereign power, erecting a populous community of prescribed area into a body politic and corporate with corporate name and continuous succession and for the purpose, and with the authority, of subordinate self-government and improvement and local administration of affairs of state." 62 C.J.S. Municipal Corporations § 1 [Black type headnote].
 
"The power of local government or self-government has been held to be the essential characteristic, or an essential attribute, or the distinctive purpose and distinguishing feature, of a true municipal corporation * * *." Idem. p. 61-62
 
"A municipal corporation engaged in the business of supplying public utilities and facilities is regarded as a public corporation transacting private business for hire, and, in that respect and to that extent, as a private or ...

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