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United States District Court, Middle District of Pennsylvania

July 3, 1991


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



Plaintiffs Tudor Development Group, Inc. ("Tudor"), Sidney Cohen, Dorothy Cohen and Marc Cohen, collectively trading as Green Hill Associates ("GH Associates"), initially filed this action against United States Fidelity & Guaranty Corporation (USF & G).*fn1 USF & G was the performance bond surety for certain phases of a real estate development (the "Green Hill Project"), being constructed for GH Associates by Susquehanna Construction Company ("Susquehanna"). GH Associates settled its claims against USF & G on November 20, 1989 and the settlement proceeds of $594,000.00 were paid into court.*fn2

In this action, four parties associated with the Green Hill Project*fn3 asserted claims against the escrowed funds: GH Associates, Green Hill Project Investors, Inc. ("GHP Investors")*fn4, Dauphin Deposit Bank and Trust Company ("Dauphin Deposit"), and York Excavating Company, Inc. ("York").*fn5 Summary judgment was entered against Dauphin Deposit on January 7, 1991. York, GH Associates and GHP Investors remain parties to the action.

York's claim stems from work which it performed as a sub-contractor on the Green Hill Project. It contracted with Eastern Consolidated Utilities, Inc., ("ECU"),*fn6 the contractor responsible for constructing roads, parking areas, and doing other paving and "site work."*fn7 York alleges that it was never paid for work which it performed on a time and materials basis between August, 1987 and November, 1987 and claims that it is owed a balance of $70,962.50.

GHP Investors and GH Associates have filed motions for judgment on the pleadings against York (Record Document Nos. 103 and 106). After considering the arguments raised by the parties, we find that judgment on the pleadings against York is appropriate and will enter an order to that effect.


A.  Motion for judgment on the pleadings standard

Judgment on the pleadings is appropriate only if there is no issue of material fact and if the pleadings demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 12(c). "The trial court is required `to view the facts presented in the pleadings and inferences to be drawn therefrom in the light most favorable to the non-moving party.'" Hayes v. Community General Osteopathic Hospital, 730 F. Supp. 1333, 1334 n. 1 (M.D.Pa. 1990), (Caldwell, J.), citing Society Hill Civic Ass'n v. Harris, 632 F.2d 1045, 1058 (3d Cir. 1980). This requires the court to accept plaintiff's allegations in the complaint, even if they conflict with the defendant's answer. Hayes, supra, 730 F. Supp. at 1334 n. 1.

B. Laches

GHP Investors and GH Associates (hereafter collectively "movants") contend that York's claim is barred by laches. York asserts a subrogation claim against the escrowed funds. A right of subrogation is one based on considerations of equity and good conscience. Even if it is contractually based, it is, nevertheless, regarded as based upon and governed by equitable principles. Allstate Insurance Co. v. Clarke, 364 Pa. Super. 196, 527 A.2d 1021, 1023-1024 (1987).

Laches is an equitable doctrine which provides that if a plaintiff in equity has failed to exercise due diligence in prosecuting his claim, to the detriment of the other party, the claim is barred. Siegel v. Engstrom, 427 Pa. 381, 385, 235 A.2d 365, 367 (1967) and Hankin v. Mintz, 276 Pa. Super. 538, 542, 419 A.2d 588, 590 (1980). In determining whether a party exercised due diligence, the focus is on what the party reasonably should have known "`by the use of the means of information within his reach, with the vigilance the law requires'", not on what he or she actually knew. Sprague v. Casey, 520 Pa. 38, 46, 550 A.2d 184, 188 (1988), quoting Taylor v. Coggins, 244 Pa. 228, 231, 90 A. 633, 634 (1914). "What the law requires of . . . [a claimant] is to discover those facts which were discoverable through the exercise of reasonable diligence." Sprague, supra, 550 A.2d at 188. "[L]aches entails an inquiry into whether the party is deserving of the court's relief." Waddell v. Small Tube Products, Inc., 799 F.2d 69, 76 (3d Cir. 1986).

The Pennsylvania courts have held that a claim is barred by laches if the following conditions exist:

  The party asserting laches must show, first, a
  delay arising from the other party's failure to
  exercise due diligence, and second, prejudice
  from the delay. . . . It is not enough to show
  delay arising from failure to exercise due
  diligence; for `laches will not be imputed where
  no injury has resulted to the other party by
  reason of the delay.'. . . . (Citations
  omitted.). . . . Laches requires not only a
  passage of time, but also a resultant prejudice
  to the party asserting the doctrine. . . .
  (Citations omitted.). . . . [and] is based on
  `some change in the condition or relations of the
  parties which occurs during the period the
  complainant unreasonably failed to act.'. . . .
  (Citations omitted.). . . . `[T]he burden of
  proof with respect to the doctrine [of laches] is
  upon the party asserting the defense; in order to
  meet this burden, the party alleging the delay
  must demonstrate prejudice.' . . . (Citations
  omitted.). . . . `[D]elay alone, no matter how
  long, does not itself establish laches.'. . . .
  (Citation omitted.)

Patten v. Vose, ___ Pa.Super. ___, 590 A.2d 1307 (1991).

Prejudice may, for example, be shown if relevant records have disappeared, if a key witness is now deceased, or cannot be located, or if the defendant changed his position based on the expectation that plaintiff did not intend to pursue the claim. See: Del-Val Electrical Inspection Service, Inc. v. Stroudsburg-East Stroudsburg Zoning and Codes Office, 100 Pa. Commw. 429, 515 A.2d 75, 76 (1986), citing Class of Two Hundred Administrative Faculty Members v. Scanlon, 502 Pa. 275, 466 A.2d 103 (1983).

The burden of establishing laches is on the party asserting it as a defense, unless the analogous statute of limitations has expired. In that case, the burden is on the claimant to show why his claim should not be barred by laches. Wheeler v. Nationwide Mutual Insurance Co., 749 F. Supp. 660, 662 (E.D.Pa. 1990).

Whether laches applies is a factual question, making it an inappropriate basis for summary judgment or judgment on the pleadings, unless the relevant facts are not in dispute. See generally: Waddell, supra, 799 F.2d 69, 74 n. 2 and Sandvik v. Alaska Packers Ass'n, 609 F.2d 969, 974 (9th Cir. 1979). Additionally, "even if the . . . court finds that the elements of laches have been proven, . . . in the exercise of its discretion [it] `must take into account whether or not a less drastic form of equitable relief than a complete dismissal of the action' would be appropriate." Waddell, supra, 799 F.2d at 79, quoting E.E.O.C. v. Great Atlantic & Pacific Tea Co., 735 F.2d 69, 81 (3d Cir. 1984).

Returning to the case before us, we find that none of the relevant facts are in dispute. The relevant dates, listed chronologically, are as follows.*fn8 The general construction contract between Susquehanna and Green Hill Associates terminated in August, 1987 due to a disagreement between the parties. If the contract had not been terminated, Susquehanna was scheduled to complete work on the project by December 31, 1987. York performed corrective work at the project site from August 13, 1987 through November 5, 1987 for which it has not been paid.

Green Hill Associates filed this action on May 15, 1988 against Susquehanna's surety, USF & G. Thereafter, Dauphin Bank and Deposit and GHP Investors filed petitions to intervene. Both parties' petitions were granted. Dauphin Deposit filed a complaint on February 10, 1989, and GHP Investors filed a complaint on March 13, 1989. The claim against USF & G was settled on November 20, 1989, leaving GH Associates, Dauphin Deposit and GHP Investors as competing claimants for the settlement proceeds which were paid into court.

York filed a petition to intervene in this action on May 23, 1990. Leave was granted, and its complaint was filed January 28, 1991.*fn9 Summary judgment was entered against Dauphin Deposit on January 7, 1991.

Because York's petition to intervene was not filed until after expiration of the analogous statute of limitation,*fn10 it bears the burden of proving that laches does not apply, i.e., that there was no delay arising from its failure to exercise due diligence, and that movants were not prejudiced by any delay.*fn11 Patten v. Vose, supra.

In determining whether York's filing was timely, we can look to the analogous statute of limitations as a guide, although it is not an absolute standard. Kay v. Kay, 460 Pa. 680, 334 A.2d 585, 587 (1975). The statute of limitations expired a year and one-half before York filed its petition to intervene. The two year claims-filing period established by the surety bond had also expired by the time York's petition was filed. Thus under either standard, York's petition to intervene was filed beyond the relevant statutory/contractual deadline.

Additionally, there is no question but that movants were prejudiced by York's delay in filing. It did not file its petition to intervene until months after movants had settled with USF & G, and the claims against USF & G had been dismissed with prejudice — until it was too late for movants to take York's claim into account in negotiating the settlement. They settled with the expectation that the settlement proceeds would be distributed among the three competing claimants who had asserted claims as of the date of settlement:*fn12 Dauphin Deposit, GH Associates, and GHP Investors. They had no reason to anticipate that additional claimants, such as York, would seek a share of the settlement proceeds at a later date. Because movants changed their position by settling with USF & G and reasonably relied on the assumption that no additional claims would be asserted, they were prejudiced by York's delay in filing its petition to intervene. Cf. Associated Hospital Services of Philadelphia v. Pustilnik, 262 Pa. Super. 600, 396 A.2d 1332, 1335 n. 1 (1979), vacated on other grounds, 497 Pa. 221, 439 A.2d 1149 (1981). Based on that finding, we conclude that York's claim is clearly barred by laches.

Finally, contrary to York's contentions, our prior order granting York leave to intervene did not encompass a finding that its claim is not time-barred. We considered the timeliness of the petition in terms of the procedural posture of the case,*fn13 not, as York seems to argue, in anticipation that York's opponents would raise the defense of laches. We did not rule at that time on the merits of York's claim (such a ruling would have been improper), but merely that York would be afforded an opportunity to plead the claim.

Our ruling that York's claim is barred by laches obviates the need to consider the other arguments raised by the movants.


For the reasons set forth in the accompanying opinion, IT IS ORDERED THAT:

1. The motion for judgment on the pleadings filed February 28, 1991 by Intervenor Green Hill Project Investors against York Excavating Company, Inc. ("York"), (Record Document No. 103) is granted.

2. The motion for judgment on the pleadings filed March 22, 1991 by plaintiff Green Hill Associates ("GH Associates"), (Record Document No. 106) is granted.

3. The motion for judgment on the pleadings filed March 12, 1991 by plaintiff GH Associates (Record Document No. 105) is deemed withdrawn pursuant to Local Rule 401.5 for failure to file a supporting brief.

4. The Clerk of Court is directed to defer entry of judgment against York until disposition of the entire case.

5. The case is placed on the September, 1991 Williamsport jury trial list.[fn1a]

6. A settlement conference will be held on August 1, 1991, at a time to be announced, in Room 409, Federal Building, 240 West Third Street, Williamsport, Pennsylvania.

7. All motions in limine shall be filed on or before August 16, 1991, with supporting briefs attached. All opposing briefs shall be filed on or before August 26, 1991.

8. A final pre-trial conference will be held on August 30, 1991, at a time to be announced, in Room 409, Federal Building, 240 West Third Street, Williamsport, Pennsylvania.

9. Jury selection will be September 3, 1991 at 9:30 a.m., in Courtroom No. 1, Federal Building, 240 West Third Street, Williamsport, Pennsylvania.

10. A status conference by telephone conference call will be held on July 18, 1991 at 4:30 p.m. Plaintiffs' counsel shall arrange for the conference call. Counsel shall be ready to proceed when my office is contacted.

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