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CITY OF PHILADELPHIA v. AMERICAN COASTAL INDUS.

December 14, 1988

CITY OF PHILADELPHIA
v.
AMERICAN COASTAL INDUSTRIES, INC.



The opinion of the court was delivered by: REED, JR.

 LOWELL A. REED, JR., UNITED STATES DISTRICT JUDGE.

 This diversity action *fn1" arises out of a dispute over a public contract which was awarded by the City of Philadelphia (City) to the defendant American Coastal Industries, Inc. (ACI). The City brought this action alleging that ACI breached the contract after it failed to furnish certain performance bonds. Defendant filed a counterclaim against the City asserting that plaintiff could have accepted a letter of credit in lieu of the performance bonds and that the City therefore breached its contract with ACI.

 Presently before the court are the cross motions of the parties for summary judgment. Because the material facts of the case are uncontested, *fn2" the case may properly be disposed of on the motions. Fed. R. Civ. P. 56(c). See Anderson v. Liberty Lobby, 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Celotex v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). For the reasons which follow, the motion of the plaintiff will be granted and the motion of the defendant will be denied.

 I

 Factual Background

 Defendant ACI responded to plaintiff City's invitation to bid on a contract for "Conversion of Two South Broad Cars to Flat Cars for the Broad Street Subway," submitting a bid for $ 230,500.00. Defendant was the low bidder on the contract and, as required by the City's invitation to bid, ACI submitted a surety check of $ 12,275.00 along with its bid. Approximately one month later, the City accepted ACI's bid for the conversion of the cars and awarded the contract to it. Under the terms of the invitation to bid, ACI was required to furnish performance and payment bonds for the full amount of the bid simultaneously with execution and delivery of the contract for conversion of the cars. Part A-3 of the Specifications attached to the "Invitation to Bid" provide, in pertinent part:

 
2. Payment Bonds (Labor and Material Bonds) Simultaneously with the execution and delivery of this Contract, the Contractor shall also furnish properly executed payment bonds, written by a qualified surety or sureties in form acceptable to Purchaser, in the amount of one hundred percent (100%) of the contract price, to secure the payment of all subcontractors and suppliers to the Contractor on this Contract.

 (Emphasis added). Despite ACI's efforts to secure the bonds, ACI was unable to obtain the requisite bonds from its surety, The Travelers Indemnity Company. *fn3" Section 11 of the standard "Conditions of Bidding" states, in pertinent part:

 
11. Execution of Contract. Any bidder not lawfully released from his bid, who refuses to execute a contract in accordance with his bid or who refuses to furnish the required bonds, and insurance, shall be liable to the City in the amount of the check deposited as security for his bid as liquidated damages; or where the damages are readily ascertainable, such bidder shall be liable for the actual loss or damage sustained by the City by the failure of such bidder to enter into the contract.

 (Emphasis added). In lieu of the performance bonds, ACI offered to substitute a letter of credit payable to the City in the full amount of the contract. The City rejected this offer, declared ACI in default of its bid and seized ACI's surety check of $ 12,275.00. After the City declared ACI in default it awarded the contract for conversion of the cars to Delaware Car Corporation, the next lowest and only other bidder, for a contract price of $ 296,210.00. The City calculated its "readily ascertainable" damages at $ 65,710.00, the difference between ACI's bid and that of the next lowest and only bidder, Delaware Car Corporation. Having already seized the $ 12,275.00 surety check from ACI, the City demanded the difference between that surety check and the $ 65,710.00 for a total of $ 53,135.00. *fn4"

 II

 Discussio ...


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