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CHAPIN & CHAPIN, INC. v. MCSHANE CONTR. CO.

April 4, 1974

CHAPIN & CHAPIN, INC.
v.
McSHANE CONTRACTING CO., INC. COMMONWEALTH to the Use of Chapin & Chapin, Inc. v. UNITED STATES FIDELITY AND GUARANTY COMPANY


Snyder, District Judge.


The opinion of the court was delivered by: SNYDER

Counsel for the Defendant, McShane Contracting Co., Inc. (McShane) and United States Fidelity and Guaranty Company (USF), filed Motions for Stay of Execution under Authority of Rule 60(b) (6) of the Federal Rules of Civil Procedure. *fn1" For the reasons as hereinafter set forth, the Motions will be denied.

 On January 24, 1974, a judgment was entered on a verdict in the amount of $62,448.49 against the Defendant McShane at Civil Action No. 72-862 and by stipulation, depending on the outcome of the trial in the McShane case, the same judgment was also entered against Defendant USF at Civil Action No. 72-972. The actions involved a contract for the installation of concrete paving of a portion of Pennsylvania State Highway, Legislative Route 1074 (Section 2) which McShane was building as part of its prime contract with the Pennsylvania Department of Transportation (Penn Dot). McShane had subcontracted to Chapin part of the project. The subcontract provided inter alia, that the prime contract as applicable was made part of the subcontract; that the subcontract would be performed in strict accordance with Penn Dot's specifications; that the work of the subcontractor was to be performed in a skillful and workmanlike manner; and that the work was subject to inspection and approval by Penn Dot. USF was Chapin's surety on the subcontract and McShane's surety on the prime contract.

 The Complaint filed by Chapin against McShane alleged the Chapin furnished labor and material, and that McShane breached the subcontract with Chapin in failing to prosecute the work in accordance with the schedule established by the Commonwealth in the prime contract and in failing to have the work under the prime contract completed so that Chapin could perform its subcontract. Chapin further alleged that McShane breached its subcontract in failing to make payments to Chapin in the correct amounts or at the proper times; that as a result of the aforesaid breaches of the subcontract the Plaintiff terminated the subcontract on October 9, 1972, and sustained damages by reason of loss of bargaining power and excess costs in the amount of $166,288.07. McShane answered the Complaint denying all breaches of the subcontract and counterclaimed for the sum of $200,000.00 for Chapin's failure to perform the contract, alleging that McShane incurred additional costs over and above the performance costs of the Chapin contract.

 Trial commenced on the morning of January 9, 1974, and concluded January 24, 1974. The Jury answered a set of Special Interrogatories *fn2" finding that McShane had breached its contract by reason of which Chapin was damaged to the extent of $62,448.49. Judgment was entered in favor of Chapin for the aforementioned amount. The Defendants now seek a stay of execution in which they assert a new claim by McShane against Chapin for additional breach of contract.

 As early as May 8, 1973, eight months before trial began and six months after McShane filed its Answer and Counterclaim, McShane notified Chapin by letter that core borings had been done by Penn Dot which indicated a deficiency in the depth of the reinforced concrete in several areas paved by Chapin. The letter further stated that Chapin would be notified of a meeting to be scheduled by Penn Dot to discuss the disposition of this matter. As far as the records here show, Penn Dot did not notify McShane until February 11, 1974, which was after the completion of the trial, that Penn Dot was withholding from McShane the amount of $43,000.00 pending correction of paved areas which were cracked and of deficient depth. *fn3" This pavement work was performed entirely by the subcontractor, Chapin. McShane estimated that the total cost of removing, replacing, or repairing the pavement together with the penalties for delay, would be $91,207.53. McShane then averred in its Motion here that if Penn Dot's claim against it for McShane's defective performance of the prime contract was valid, then this amount would be recoverable from Chapin. McShane also requested leave to proceed forthwith by appropriate action to determine the exact amount of the claim. The Motion on behalf of USF was that it should not be required to pay the judgment of Chapin against it until its liability to McShane as surety for Chapin, under its subcontract performance bond, was finally determined. The Motion asked that an appropriate order for stay of execution be entered in both cases for a period of one year or until further order of the Court. It is appropriate to note that no appeal has been taken from the judgment entered on January 24, 1974.

 Chapin contended contra the Motion that McShane's claim for breach of contract arising out of the concrete pavement condemned by Penn Dot is merged in the judgment or, in any event, the doctrine of collateral estoppel should be applied and bar the present claim. The doctrines of res judicata and collateral estoppel were distinguished by the United States Supreme Court in Lawlor v. National Screen Service Corps., 349 U.S. 322, 75 S. Ct. 865, 99 L. Ed. 1122 (1955). The Court stated: (at 349 U.S. at 326, 75 S. Ct. at 867, 99 L. Ed. at 1126, 1127)

 
"The basic distinction between the doctrines of Res judicata and collateral estoppel, as those terms are used in this case, has frequently been emphasized. Thus, under the doctrine of res judicata, a judgment 'on the merits ' in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action. Under the doctrine of collateral estoppel, on the other hand, such a judgment precludes relitigation of issues actually litigated and determined in the prior suit, regardless of whether it was based on the same cause of action as the second suit."

 This Court is of the opinion that neither the doctrine of res judicata nor collateral estoppel apply here. Res judicata does not apply since the claim now being asserted by McShane, i.e. that Chapin breached its contract in the performance of putting down an insufficient amount of concrete or improper pavement to meet the specifications of Penn Dot, is not the same cause of action litigated in the previous jury trial. *fn4" Neither Counsel contend, nor can the Court find, that this claim was specifically tried or even considered in the first suit. Chapin, however, takes the position that McShane was required to litigate the defective concrete issue and since it did not, the issue is therefore merged.

 The law is that in the absence of a Statute or Rule of Court otherwise providing, the defendant has the option of interposing a counterclaim or bringing a separate action against the Plaintiff. In the situation where the defendant does not interpose a counterclaim, although he is entitled to do so, he is not precluded thereby from subsequently maintaining an action against the Plaintiff on the cause of action which could have been set up as a counterclaim. The American Law Institute, Restatement of the Law of Judgments, Section 58 and Comment A, provide:

 
"Where the defendant does not interpose a counterclaim although he is entitled to do so, he is not precluded thereby from subsequently maintaining an action against the plaintiff on the cause of action which could have been set up as a counterclaim.
 
Comment :
 
a. In the absence of a statute or rule of court otherwise providing * * *, the defendant has the option of interposing a counterclaim or of bringing a separate action against the plaintiff. If he has a claim against the plaintiff, whether or not arising out of the same transaction or occurrence as that on which the plaintiff's claim is based, he is not bound to plead it as a counterclaim, although he is permitted to do so; and his failure to interpose it as a counterclaim will not bar him from maintaining an action upon it. Counterclaims are permissible but not compulsory, unless a statute otherwise provides.
 
In this respect a counterclaim is different from a defense to the plaintiff's claim. As is stated in ยง 47, if the defendant fails to interpose a defense to the plaintiff's claim and judgment is rendered for the plaintiff, the defendant cannot ...

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