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FINANCEAMERICA CREDIT CORP. v. KRUSE CLASSIC AUCTI

March 7, 1977

FINANCEAMERICA CREDIT CORPORATION
v.
KRUSE CLASSIC AUCTION COMPANY, INC.



The opinion of the court was delivered by: TROUTMAN

 TROUTMAN, J.

 Plaintiff is a Pennsylvania resident corporation and defendant is an Indiana corporation. The amount in controversy exceeds $10,000 and, therefore, jurisdiction is based upon 28 U.S.C. ยง 1332.

 In this diversity action plaintiff, FinanceAmerica Credit Corporation (FinanceAmerica) seeks to recover for an alleged breach of a guaranty contract by defendant, Kruse Classic Auction Company, Inc. (Kruse). FinanceAmerica charges that Kruse agreed to guarantee payment of a debt owed by Roy Egidi Motor Cars, Inc. (Egidi) and that upon Egidi's default Kruse refused to perform on the guaranty contract.

 Kruse has moved to dismiss for failure to join an indispensable party, namely Egidi. Subsequent to that motion, Kruse moved to transfer this action to the Middle District of Florida or, in the alternative to stay proceedings pending the outcome of an action commenced by Kruse in that District. *fn1"

 DISCUSSION

 Motion to Dismiss

 F.R.C.P. 19(a) defines what types of persons are needed for a just adjudication: persons in whose absence complete relief cannot be accorded to the parties in the action; or persons whose interests in the controversy may be impaired; or persons whose absence could expose a party to double liability. Concerning the absent party's interest, the Court in Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 125, n.22, 88 S. Ct. 733, 19 L. Ed. 2d 936 (1968) said:

 
"* * * To be sure, state-law questions may arise in determining what interest the outsider actually has * * * (citations omitted) but the ultimate question whether, given those state-defined interests, a federal court may proceed without the outsider is a federal matter."

  Concerning which state law to use, the Third Circuit has said that in a diversity action "the applicable law is the law, including the choice of law rules, of the forum state. (Citations omitted) Pennsylvania courts apply the law of the place where a contract is made and where it is to be performed." Craftmark Homes, Inc. v. Nanticoke Construction Company, 526 F.2d 790, 792, n.2 (3d Cir. 1975). In this case, the guaranty contract was admittedly signed and executed in Allentown, Pennsylvania. Furthermore, FinanceAmerica's main office is in Pennsylvania. Pennsylvania law has held that a cause of action arises where payment is to be made. Alpha Claude Neon Corporation v. Pennsylvania Distilling Company, Inc., 325 Pa. 140, 188 A. 825 (1936), and the place of payment is the creditor's residence or headquarters. Wiener v. American Insurance Company of Boston, 73 A. 443, 224 Pa. 292 (1909).

 Therefore, because the guaranty contract was made in Pennsylvania and was to be performed in Pennsylvania, Pennsylvania law applies to the interests of the parties. The Third Circuit has held that a surety can be sued separately from the principal and that the principal is not an indispensable party in a diversity action. In Downer v. United States Fidelity & Guaranty Co., 46 F.2d 733, 734 (3d Cir. 1931) the Court said:

 
"* * * It is no answer or defense that the plaintiff has not chosen to pursue the principal first, if he is following a remedy given him by the bond. * * * '* * * Their (the surety's and the principal's) liability is direct and not collateral, their bond is joint and several and all that is necessary to obtain a judgment against them is to show a breach by the principal of the condition of the bond, for their undertaking is that such a breach should not occur, and it is immaterial whether the principal is before the Court or not.'
 
* * *
 
"* * * The common-law rule is that the plaintiff may sue the surety without first suing the principal, and the surety must pay and seek ...

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