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ARMOUR RENTALS v. GENERAL STATE AUTHORITY (06/01/71)

decided: June 1, 1971.

ARMOUR RENTALS, INC., FORMIGLI CORP., H. PERILSTEIN GLASS CO., PATENT SCAFFOLDING CO., S.A. LINDSTROM CO.
v.
GENERAL STATE AUTHORITY, THE DEPARTMENT OF INSURANCE AND THE INSURANCE COMMISSIONER



Original jurisdiction.

COUNSEL

Kenneth M. Cushman, with him Robert F. Cushman, J. Anthony Messina, E. Parry Warner, Lewis S. Kunkel, Jr., and Pepper, Hamilton & Scheetz, for plaintiffs.

Frederic G. Antoun, Deputy Attorney General, with him Jack Mulhall, Assistant Attorney General, Robert A. Miller, Assistant Attorney General and J. Shane Creamer, Attorney General, for defendants The Department of Insurance and The Insurance Commissioner.

Richard D. Holahan, Assistant General Counsel, for defendant General State Authority.

President Judge Bowman, and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Manderino, Mencer and Rogers. Opinion by Judge Rogers.

Author: Rogers

[ 2 Pa. Commw. Page 302]

The plaintiffs in these two lawsuits are business corporations who as subcontractors furnished work and materials in the construction of a field house and classroom building at West Chester State College. By reason of the financial collapse not only of the general contractor but of the surety on its bond, the plaintiffs have not been paid claims totaling approximately $81,000.

The three defendants are the Insurance Department, the Insurance Commissioner and the General State Authority of the Commonwealth of Pennsylvania, which last as an instrumentality of the state, contracted for the construction of the school building.

One of the complaints is entitled, "Complaint in Trespass" and the other, "Complaint in Assumpsit"; neither caption contains any reference to nature of the cause, whether assumpsit or trespass. Except that the former omits a claim based upon quantum meruit the allegations of the two complaints are identical. The plaintiffs aver that the defendant, General State Authority (hereinafter called GSA), entered into an agreement with Cubic Construction Company (Cubic) for the construction of the building; that Prudence Mutual Casualty Company (Prudence) became surety on Cubic's contract bond for performance and for payment of labor and materialmen in the penal sum of $2,821,000; that Cubic entered into subcontracts with plaintiffs for portions of the work; that the delivery of said bond was by state law a condition to the award of the contract to Cubic; that at the time Prudence became

[ 2 Pa. Commw. Page 303]

    surety on Cubic's bond in the amount of $2,821,000, it was not authorized by law to write any one bond of a penal sum in excess of $255,764; that Prudence's authorization declined until it was barred from writing further bonds; that Prudence was required to and did file with the defendants annual and monthly reports of its financial condition; that Cubic is bankrupt and cannot pay plaintiffs; and that Prudence is in liquidation and its contract of surety is worthless. Count I in both complaints avers that all defendants were negligent in failing to require Cubic to furnish and maintain good and sufficient surety in accordance with the requirements of law, and Count III in both avers that GSA was negligent in paying money to Cubic knowing plaintiffs were not being paid and that Cubic's bond was deficient. Count II in both complaints avers that by a quoted provision of the contract between GSA and Cubic the plaintiffs derived third party beneficiary rights entitling them to judgment against all defendants. The "Complaint in Assumpsit" contains in addition a Count IV alleging that "because of the aforesaid breaches" all defendants are liable to plaintiffs in quantum meruit.

All defendants have filed preliminary objections to both complaints. GSA moves to strike the complaints on the ground that portions of each sound both in trespass and in assumpsit, contrary to law and the Rules of Civil Procedure. It further demurs to each complaint; to that in trespass on the ground that GSA is not susceptible to suit by reason of the doctrine of sovereign immunity, and to that in assumpsit on the ground that complaints allege no contract between GSA and the plaintiffs.

The Insurance Department and the Insurance Commission have filed a petition raising a question of this court's jurisdiction based upon the contention that the State Board of Arbitration of Claims has exclusive ...


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