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decided: February 28, 1972.


Original jurisdiction in cases of Armour Rentals, Inc., Formigli Corporation, H. Perilstein Glass Company, Patent Scaffolding Company and S. A. Lindstrom v. The General State Authority, The Insurance Department and The Insurance Commissioner.


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

Richard D. Holahan, Assistant General Counsel, with him Michael A. Madar, General Counsel, Jack Mulhall, Assistant Attorney General, and Robert A. Miller, Deputy Attorney General, Gerald Gornish, Deputy Attorney General, and J. Shane Creamer, Attorney General, for defendants.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer and Rogers. Opinion by Judge Rogers. Concurring Opinion by Judge Crumlish, Jr. Opinion by Judge Kramer (Concurring in Part and Dissenting in Part).

Author: Rogers

[ 4 Pa. Commw. Page 519]

This is a sequel to the proceedings reported as Armour Rentals, Inc., et al. v. General State Authority, et al., 2 Pa. Commonwealth Ct. 301, 278 A.2d 177 (1971). There we sustained a motion to strike plaintiffs' complaints, one in trespass and the other in assumpsit against the General State Authority (hereinafter called GSA), the Insurance Department and the Insurance Commissioner. The plaintiffs have filed one amended complaint against the same defendants but, upon stipulation and with leave of court, the actions

[ 4 Pa. Commw. Page 520]

    against the Insurance Department and the Insurance Commissioner have been discontinued.

We have now before us preliminary objections of the GSA to plaintiffs' amended complaint. For better understanding we will briefly recite the averments of the complaint although they are essentially the same as those recited in our earlier opinion at 2 Pa. Commonwealth Ct. 301. The plaintiffs are unpaid subcontractors of Cubic Construction Company (Cubic), general contractor for the construction of a field house and classroom building at West Chester State College for the GSA; Cubic as principal and Prudence Mutual Casualty Company (Prudence) as surety delivered to the GSA as obligee a labor and materialmen's bond in the amount of $2,821,000; the delivery of the bond was by state law a condition to the award of the general contract to Cubic; state law further provided that a surety's authority to underwrite bonds was limited to 10 percent of its capital and surplus; Prudence's limitation at the time GSA awarded the contract to Cubic was not in excess of $225,764; thereafter Prudence's limitation declined until it was barred from writing any surety bonds with Commonwealth; Cubic is bankrupt and cannot pay plaintiffs for their work; and Prudence is in liquidation and its contract of surety is worthless.

It is important to here make particular mention of the conceded fact that GSA has paid Cubic in full under its contract and that any recovery by the plaintiffs will constitute pro tanto double payment by the agency.

Count I of the complaint is in trespass and characterizes as negligent the failure of GSA to require good security of Cubic, its acceptance of the insufficient bond without reinsurance and its failure to require Prudence to obtain reinsurance after becoming aware of that company's poor financial condition.

[ 4 Pa. Commw. Page 521]

Count II, also in trespass, claims negligence on the part of GSA in making payments to Cubic at times when it knew or had reason to know that subcontractors were not being paid and that the bond did not provide adequate protection for subcontractors.

Count III is stated to be in assumpsit. It refers to a general condition of the contract between GSA and Cubic requiring the latter to furnish additional security to protect the GSA and subcontractors in the event of the surety's becoming unsatisfactory and avers that this conferred third party beneficiary rights upon subcontractors. It further claims that the whole of the circumstances here present imposed an obligation on GSA, presumably contractual in nature, to require Cubic to furnish additional security.

Count III, also stated to be in assumpsit, simply concludes that by reason of "the aforesaid breaches of the Authority" it is liable to plaintiffs "in quantum meruit" for the reasonable value of the work and materials furnished by the plaintiffs, by which we assume it means that GSA is liable on a contract implied in fact.

GSA's preliminary objections are as follows:

1. A petition raising the question of this court's jurisdiction as to all four counts based upon an assertion that the Board of Arbitration of Claims has exclusive jurisdiction.

2. A demurrer on grounds of sovereign immunity as to the trespass counts and on the ground that the plaintiffs were not parties to the contract between GSA and Cubic as to the counts in assumpsit.

3. A petition raising the defense of lack of capacity to sue because the plaintiffs are not alleged to be parties to the contract sued on.

4. A motion to strike for failure to comply in RCP 1020 (d)(1) requiring trespass and assumpsit claims to be stated in separate counts.

[ 4 Pa. Commw. Page 522]

The objections raising the defense of lack of capacity to sue and the motion to strike must be dismissed, the first grossly misapprehending the nature of the defense sought to be interposed and the second simply ...

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