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COMMONWEALTH PENNSYLVANIA v. RAPISTAN (07/26/74)

decided: July 26, 1974.

COMMONWEALTH OF PENNSYLVANIA, PENNSYLVANIA LIQUOR CONTROL BOARD, AND COMMONWEALTH OF PENNSYLVANIA, PENNSYLVANIA LIQUOR CONTROL BOARD, TO USE OF HOLT HAULING AND WAREHOUSING SYSTEMS, INC., PLAINTIFFS,
v.
RAPISTAN, INCORPORATED AND FEDERAL INSURANCE COMPANY, DEFENDANTS



Original jurisdiction in case of Commonwealth of Pennsylvania, Pennsylvania Liquor Control Board and Commonwealth of Pennsylvania, Pennsylvania Liquor Control Board, To Use of Holt Hauling and Warehousing Systems, Inc. v. Rapistan, Incorporated and Federal Insurance Company.

COUNSEL

Robert H. Malis, with him W. William Anderson, Deputy Attorney General, for plaintiffs.

Gordon W. Gerber, with him William A. White and Dechert, Price & Rhoads, for defendants.

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

Author: Blatt

[ 14 Pa. Commw. Page 503]

In 1970 the Liquor Control Board (LCB) and Rapistan, Incorporated (Rapistan) entered into a contract whereby Rapistan agreed to construct and install, in the LCB's Philadelphia warehouse and for the sum of $875,300, a conveyor system capable of handling 25,000 cases of alcoholic beverages during an eight-hour period. Subsequently, the LCB entered into another contract with Holt Hauling and Warehousing Systems, Inc. (Holt) for the operation of the warehouse. That contract provided for Holt to be paid 13.8 cents for each case of alcoholic beverages handled through the warehouse and subsequently delivered to State Liquor Stores.

About October 1, 1970, Holt began using the Rapistan conveyor equipment in its warehouse operations. Almost immediately a dispute arose as to whether or not the equipment met the contract performance specifications, and the LCB refused to pay Rapistan the final $95,315.16 of the contract price, a sum which is still being withheld.*fn1 Because Holt was unable to ship 25,000 cases per eight-hour period, allegedly due to the failings of the Rapistan equipment, the LCB entered into modification agreements of its original contract

[ 14 Pa. Commw. Page 504]

    with Holt, which required the LCB to pay Holt in excess of the contract rates and to reimburse Holt for additional expenses previously incurred. As part of its supplemental agreements, Holt agreed to waive its claims against the LCB and to discontinue an action against the LCB which it had begun before the Board of Arbitration of Claims. Additionally, the LCB agreed to institute this action against Rapistan.

The complaint of the LCB contains six counts seeking damages from Rapistan: (A) costs for the allegedly substantial modifications and upgrading required to make the conveyor system capable of meeting the contract standards; (B) recovery of additional money paid by the LCB to Holt allegedly because of the deficiencies in the equipment installed by Rapistan; (C) damages for breakage of the LCB's products allegedly caused by defects in the conveyor system; (D) the sum of the damages set forth in Counts A-C; (E) recovery from Rapistan's bonding company, the Federal Insurance Company (Federal), of the face amount of its performance bond; and (F) recovery for Holt of Holt's additional costs of operation over and above the amount the LCB has agreed to pay Holt.

Rapistan and Federal have filed preliminary objections to the LCB's complaint: (1) an objection as to jurisdiction and venue claiming that the complaint was not brought by the Commonwealth or an officer thereof acting within his official capacity, and further that the claim asserted in Count F "to the use of" Holt was not brought by the real party in interest and that this Court has no jurisdiction over a suit by Holt against Rapistan; (2) an objection raising the lack of capacity to sue and the pendency of a prior action because the contract at issue provides for the arbitration of all issues and also because the LCB is already engaged in an arbitration proceeding with Rapistan before the Board of Arbitration of Claims; (3) a demurrer to Counts B

[ 14 Pa. Commw. Page 505]

    and F on the basis that they concern only transactions between the LCB and Holt and create no rights, obligations or causes of action for or against Rapistan; (4) a demurrer to Count E on the basis that it fails to set forth any demand by the LCB that Federal perform or complete Rapistan's contract, fails to set forth any basis for calculation of damages and fails to ...


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