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PENNSYLVANIA HOUSE, INC. v. BARRETT

March 15, 1991

PENNSYLVANIA HOUSE, INC., A WHOLLY OWNED SUBSIDIARY OF LADD FURNITURE, INC., PLAINTIFF,
v.
EDWARD BARRETT, ET AL., DEFENDANTS.



The opinion of the court was delivered by: McCLURE, District Judge.

MEMORANDUM

1. BACKGROUND

Plaintiff Pennsylvania House, Inc. ("Pennsylvania House") filed this diversity action*fn1 against defendants Nola Barrett, Edward Barrett and Laura Cruickshank to recover sums owed for furniture which it supplied to a retail furniture store, Heritage House Interiors, Inc., d/b/a Heritage House ("Heritage House"). Heritage House was owned and managed by the Barretts and had its principal place of business in Tampa, Florida.*fn2 The furniture was supplied pursuant to a "Gallery Agreement" executed by Pennsylvania House and Heritage House on February 1, 1989.*fn3

All three defendants signed indemnity agreements (and addenda thereto) personally agreeing to indemnify Pennsylvania House against any loss as a consequence of default or failure to pay by Heritage House. Both the indemnity agreement executed by the Barretts and the one executed by Cruickshank contain a forum selection clause which reads:

    This Agreement shall be construed under and in
  accordance with the law of the Commonwealth of
  Pennsylvania and in the event of default of any of
  the parties,

  it is agreed that should either party deem it
  necessary to enforce this Agreement or exercise
  rights under this Agreement through legal remedies,
  that venue will lie in Union County, Pennsylvania.

(Plaintiff's complaint, filed June 4, 1990, Exhibit "C". Emphasis supplied.)

  The indemnity agreement signed by Cruickshank on September
15, 1988 recites her obligations as follows:

    . . THE PARTY OF THE FIRST PART [IDENTIFIED
  ABOVE AS CRUICKSHANK] HEREBY AGREES TO INDEMNIFY
  AND SAVE HARMLESS PENNSYLVANIA HOUSE AGAINST ANY
  ALL LOSS, DAMAGE, COSTS AND EXPENSES WHICH
  PENNSYLVANIA HOUSE MAY HEREINAFTER SUFFER, INCUR
  OR BE PUT TO OR PAY BY REASON OF ANY CREDITS OR
  MONEY OR PROPERTY EXTENDED TO Heritage House Intrs
  d/b/a Heritage House, AND THE PARTY OF THE FIRST
  PARY (SIC) HEREBY AGREES TO PAY AND DISCHARGE
  FORTHWITH ON DEMAND OF PENNSYLVANIA HOUSE, EACH AND
  EVERY DEBT, OBLIGATION, OR CLAIM WHICH SHALL BE
  MADE, ASSIGNED, OR APPORTIONED AGAINST PENNSYLVANIA
  HOUSE BY REASONS OR ACTS OF Heritage House Intrs.
  d/b/a Heritage House.
    The PARTY OF THE FIRST PART [Cruickshank] hereby
  understands and agrees that Heritage House Intrs.
  d/b/a Heritage House obligation shall become
  effective upon the happening of any of the
  following:
    1.1 Upon default in payment of the whole debt
  hereby secured or any part thereof, as the same
  shall become due and payable.

. . . . [Paragraphs 1.2 and 1.3 omitted.]

    The entire debt then secure by this Indemnity
  Agreement shall at the option of PENNSYLVANIA
  HOUSE become immediately due and payable and the
  PARTY OF THE FIRST PART shall henceforth make
  immediate payment upon demand by PENNSYLVANIA
  HOUSE.

(Plaintiff's complaint, filed June 4, 1990, Exhibit "C". Emphasis original.) Directly beneath Cruickshank's signature, the indemnity agreement further states: "THIS AGREEMENT SHALL BE IN EFFECT UNTIL THE GALLERY FINANCING DEBT OBLIGATION, INCLUDING INTEREST, HAS BEEN PAID IN FULL." (Plaintiff's complaint, filed June 4, 1990, Exhibit "C". Emphasis original.)

  The addendum to the indemnity agreement, also signed by
Cruickshank on September 15, 1988, states in relevant part:

      . . This Indemnity Agreement does constitute
  my personal guaranty for payment to Pennsylvania
  House. This guaranty will become effective upon
  the happening of any of the following:
    1. Default of any payment of any obligations by
  Heritage House Intrs. d/b/a Heritage House to
  Pennsylvania House.
    2. The breach of any contract by Heritage House
  Intrs. d/b/a Heritage House with Pennsylvania
  House.

. . . . [Paragraph 3 omitted.]

    4. Or for any of the terms or conditions as set
  forth in the Indemnity Agreement.
    We/I further understand that Pennsylvania House
  can require payment in full, from me/us personally
  and/or attach my/our personal assets in order to
  satisfy any obligations due Pennsylvania House by
  Heritage House Intrs. d/b/a Heritage House.

(Plaintiff's complaint, filed June 4, 1990, Exhibit "C".)

Heritage House subsequently defaulted on its payments and filed bankruptcy proceedings. Pennsylvania House then filed this action against all three indemnors to recover an outstanding balance of $426,505.78. The Barretts did not respond to the complaint, ...


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