The opinion of the court was delivered by: NEALON
Plaintiff, Visor Builders, Inc. (Visor) filed this diversity action on December 1, 1976. Named as defendants are Devon E. Tranter, Inc., (Tranter or the prime contractor), Mount Carmel Area School District (School District), and Aetna Casualty and Surety Company (Surety). Visor is basically seeking recovery of monies, including progress payments, reimbursements for material and labor supplied, lost profits, and consequential damages, allegedly due it under its subcontract with Tranter, which was the prime contractor on a written construction agreement with the School District. The School District has asserted cross-claims against both the defendants, stating in essence that it is entitled to indemnification if it is found liable. Tranter did not answer or otherwise respond to the complaint and default judgment was entered against it on July 27, 1978. See document number 52, filed July 27, 1978.
Presently before the court is a motion by the Surety for judgment on the pleadings based on the running of the statute of limitations. Since I am considering material outside the pleadings, this motion will be construed as a motion for summary judgment. Also before the court is a motion for summary judgment filed by the School District. Both motions will be granted.
The material facts in this action are not in dispute.
On or about December 4, 1974, Tranter and the School District entered into a contract, the prime contract, for an addition and alterations to the Kulpmont Elementary School, Kulpmont, Pennsylvania. Prior to the prime contract being signed, on October 24, 1974, a payment bond was issued with Tranter as the principal, defendant Aetna Casualty and Surety Company as the Surety, and defendant School District as the obligee. This payment bond was a necessary prerequisite to the prime contract under the "Public Works Contractor's Bond Law of 1967" (Bond Law), Pa.Stat.Ann. tit. 8 §§ 191 et seq. (Purdon).
On December 18, 1974 plaintiff and Tranter entered into an agreement, hereinafter the subcontract, whereby plaintiff basically agreed to furnish and install certain aluminum windows needed under the prime contract in return for $ 46,000. This $ 46,000 was to be paid in three installments. The first phase of the subcontract was completed and Tranter timely paid plaintiff the first progress payment of $ 23,000. Thereafter, a dispute arose as to whether plaintiff had completed the second phase of the subcontract, See infra, and was, therefore, entitled to the second payment of $ 11,500. However, it is undisputed that the last labor or materials supplied by plaintiff to the prime contractor or the School District was on or before April 22, 1975.
After that date Visor was in effect discharged as the subcontractor and Tranter finished the job.
On September 4, 1975, Robert S. Dubin, Esq., counsel for Visor,
wrote the Surety and presented a formal claim on behalf of Visor for $ 23,000 plus interest from April 22, 1975. The Surety responded to this claim by letter dated October 13, 1975, set out in full infra. Apparently this letter was the last contact plaintiff had with the Surety until the institution of this action on December 1, 1976. Plaintiff, in its opposition brief to the Surety's motion, alleges that in reliance upon this letter its counsel continued to negotiate a settlement in an effort to resolve the matter of whether the work under the subcontract had been completed and whether plaintiff was, therefore, entitled to payment from the prime contractor. Plaintiff alleges that it was not until early 1976 that it became aware that Tranter was in severe financial difficulty and would not be in a position to settle the matter.
Meanwhile, on April 23, 1975, Attorney Dubin forwarded to the School District a "Preliminary Notice of Intention to File a Mechanics Claim" and a "formal Notice of Intention to File a Mechanics Claim". The threatened lien would be filed pursuant to the Mechanics' Lien Law of 1963, Pa.Stat.Ann. tit. 49, § 1101, et seq. (Purdon). According to the formal notice the lien would be in the amount of $ 11,500, would be for work done and material supplied by Visor for Tranter between December 18, 1974 and April 23, 1975, and the property subject to the lien would be the Kulpmont Elementary School. However, it appears that no lien was ever timely filed in order to perfect. See document number 30, Exhibit M in support of the School District's motion, letter from Mr. White, Esq., attorney for Tranter, to Mr. Stanley Zlocki, Esq., solicitor for the Mount Carmel Area School District. It also appears that a no claim agreement was timely filed pursuant to Pa.Stat.Ann. tit. 49, § 1402 (Purdon). See document 32, exhibit Q in support of the School District's motion, affidavit of Stanley Zlocki.
On July 25, 1975, Attorney Duben wrote to Mr. Zlocki and requested that "(he) exercise (his) authority under the mechanics' lien law and withhold from the prime contractor the sum of no less than $ 23,000." See document 30, exhibit F in support of the School District's motion.
On August 22, 1975 Mr. Zlocki wrote to Tranter, with a carbon copy to Mr. Dubin, stating that pursuant to the authority given to the School District under the mechanics' lien law it was withholding from Tranter $ 23,000 of the amount due under the prime contract.
After that August 22nd letter, Mr. White wrote two letters to Mr. Zlocki informing him that a lien in this situation was not possible under the law, see discussion infra, demanded payment, and threatened suit in the event payment was not forthcoming. On November 6, 1975 the School District released the withheld $ 23,000 to Tranter, See document 32, exhibit S, affidavit of Joseph Warner, Superintendent of the Mount Carmel Area School District, and on December 23, 1975, after receiving the necessary documents under the prime contract, see discussion infra, made the final payment to Tranter. See document 32, Exhibit S. Hence, the School District has paid the full amount due under the prime contract.
The motion of defendant Aetna Casualty and Surety Company.
As stated, the Surety has moved for judgment on the pleadings on the grounds that plaintiff is barred by the running of the statute of limitations. In ruling on this motion I will consider the information submitted by plaintiff in opposition to the motion and will construe the motion as one for summary judgment.
The relevant considerations here are: (1) What is the applicable statute of limitations? (2) When did this limitation period begin to run? (3) When was suit filed? and (4) Has anything occurred which would toll the running of the statute or which would estop defendant Surety from asserting it as a defense?
According to both the bond law and the bond itself no action may be instituted for payment under the bond " . . . after the expiration of one year from the day on which the last of the labor was performed and material was supplied for the payment of which such action is brought by the claimant." Pa.Stat.Ann. tit. 8, § 197(b) (Purdon); document 30, exhibit J, Payment Bond, page 3. It is uncontroverted that the last labor performed or material supplied by plaintiff to Tranter for which payment is now being sought under the bond occurred prior to April 23, 1975. However, plaintiff seems to be arguing that since there was a dispute between Visor and Tranter as to whether the second phase of the subcontract had been duly completed and, hence, as to whether Visor was entitled to the second payment, there is, therefore, a genuine issue of material fact as to when the limitation period began to run.
Plaintiff also states that it was not until early 1976 that it discovered that Tranter was in financial difficulty, see supra, and that since it filed within one year of this discovery the filing was timely. Both these contentions are without merit. The relevant consideration is when the last labor or material was supplied, not whether the second payment was in fact due nor when plaintiff became aware of Tranter's financial difficulty. I find that the statute began to run on or about April 22, 1975. Since this action was not filed until December 1, 1976, it is barred by the limitations period unless that period has been tolled or unless the Surety is estopped from asserting it as a defense.
Plaintiff's only argument is that the Surety, because of its actions, namely the letter of October 13, 1975, should be estopped from asserting the statute of limitations as a defense. In full the letter stated: