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YORK EXCAVATING CO. v. EMPLOYERS INS. OF WAUSAU

October 21, 1993

YORK EXCAVATING COMPANY, INC., Plaintiff
v.
EMPLOYERS INSURANCE OF WAUSAU, Defendant v. EASTERN CONSOLIDATED UTILITIES, INC., et al., Defendants



The opinion of the court was delivered by: JAMES F. MCCLURE, JR.

 October 21, 1993

 BACKGROUND

 Plaintiff York Excavating Company, Inc. (York) filed this action to recover on a labor and material payment bond purportedly issued by Employers Insurance of Wausau (Wausau) in connection with an apartment complex construction project known as the Green Hill Project and located in Susquehanna Township, Dauphin County, Pennsylvania. *fn1" Green Hill Associates (GHA) was the project developer and the original owner.

 When problems arose on the Green Hill Project between the developer and the general contractor, Susquehanna Construction Company (Susquehanna), Susquehanna defaulted on its contract with the developer prior to completion of the project. Eastern Consolidated Utilities (Eastern) was then hired to replace Susquehanna and complete the project. Pursuant to a contract with GHA signed July 20, 1987, Eastern agreed to complete the site work (the installation of interior road ways, parking areas and driveways, among other things) and agreed to perform all of the work and furnish all materials, labor, and equipment necessary to complete such work.

 To secure payment of its subcontractors, Eastern obtained a labor and material payment bond (Bond # 1150-13-052625) in the amount of $ 3 million from Wausau as surety naming GHA as owner. *fn2" The bond was signed and purportedly issued under the authority of Wausau's agent, Daniel Culnen as attorney-in-fact. It bore the co-signature of "Adams". Subsequent events revealed that Culnen had issued the bond without authority. Although he was an agent of Wausau, he had no authority to issue the bond shown to York.

 York entered into two written contracts with GHA/Tudor Development Corporation on October 15, 1987 to perform site work at the project. It is suing to recover in this action for work performed under the two written contracts with GHA and under the terms of an alleged oral agreement with GHA and Eastern entered into in August, 1987 to perform repair work and general contractor work on the project on a time and material basis. (Plaintiff's amended complaint, paras. 13-16) (See also: Record document no. 39, exhibit "F", Wausau's Statement of Undisputed Facts, paras. 5-10, and Record document no. 44.)

 York alleges that it is owed $ 8,480.70 for work performed on the interior road ways of the project (under the first written agreement with GHA); $ 1,980.00 for work performed on the interior parking area (under the second written agreement with GHA); and $ 131,424.50 for repair work and general contractor work performed under the alleged oral contracts with Eastern and GHA. (Plaintiff's amended complaint, paras. 18-21 and 26-28) It also seeks to recover lost profits and overhead expenses incurred under the two written agreements with GHA in the amount of $ 76,440.00.

 On April 14, 1988, York submitted a claim to Wausau under the labor and material payment bond issued for the project. Wausau refused payment on the ground that no valid or authorized bond existed for the Green Hill project. *fn3" In a letter dated April 26, 1988, Wausau denied York's claim under the bond on the ground that no valid or authorized bond existed for the Green Hill project. Based on that denial, York made no further effort to recover against Wausau until approximately June, 1991, when it learned that a bond for the project had, in fact, been issued over Culnen's signature.

 York was not paid for all work performed on the project. This action is one of several filed by York to recover for all work performed on the Green Hill Project. York filed this action against Wausau on August 12, 1991 seeking to recover sums allegedly still owed by Eastern for work performed on the project--totalling $ 141,887.20, as well as $ 76,440.00 for lost profits and overhead expenses, a total of $ 218,327.20. York also seeks punitive damages from Wausau for its alleged gross negligence and willful misconduct in denying York's claim under the bond.

 Wausau filed a third party complaint containing five counts on January 29, 1992. *fn4" Counts I and II allege claims for indemnification against a number of individuals and corporations whom Wausau alleges have a contractual and common law obligation to indemnify it for any loss or expense it incurs as a result of this action (Counts I and II). Counts III and IV allege claims of indemnification and fraud against Culnen and the firm of Culnen & Hamilton based on their alleged complicity in issuing an unauthorized bond in Wausau's name. Count V alleges an indemnification claim against Sidney Cohen, Dorothy Cohen, Marc Cohen, and Tudor and GHA on the basis of alleged fraudulent and or negligent misrepresentations made in connection with issuance of the bond.

 Named as third party defendants are: Eastern Consolidated Utilities, Inc. (Eastern); Mid-Atlantic Pipeline, Inc. (Mid-Atlantic); Eastern Excavating, Inc. (Eastern Excavating); John L. Daddona, Sr.; Judy A. Daddona; Eva Daddona; Daniel J. Culnen (Culnen); Culnen & Hamilton, Inc., (Culnen & Hamilton); Green Hill Associates (GHA); Tudor Development Group, Inc., (Tudor);

 The case is before the court on motions for summary judgment filed by the defendant and all third-party defendants. The parties' motions were filed to: 1) Record Document No. 37, by Wausau; 2) Record Document No. 49, by Eastern and other third party defendants; and 3) Record Document No. 43, by third party defendants Culnen and Culnen & Hamilton, who join in Wausau's motion for summary judgment.

 For the reasons discussed below, we will enter an order: 1) granting in part the motion for summary judgment filed by Wausau; and 2) denying as moot the motion for summary judgment filed by Eastern and other third party defendants. Summary judgment will be granted in favor of Wausau and against York on York's claim for sums allegedly owed for work performed and expenses incurred under the two written agreements with GHA and under the alleged oral contract with Eastern and GHA. Defendants' motion is denied in all other respects. York's claim against Wausau for fraud and Wausau's indemnification claims against Culnen and Culnen & Hamilton remain.

 DISCUSSION

 Summary judgment standard

 
. . . The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be 'no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is 'entitled to judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.

 Celotex v. Catrett, 477 U.S. 317, 323-24, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

 The moving party bears the initial responsibility of stating the basis for its motions and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. He or she can discharge that burden by "showing . . . that there is an absence of evidence to support the nonmoving party's case." Celotex, supra, 477 U.S. at 323 and 325.

 Issues of fact are "'genuine' only if a reasonable jury, considering the evidence presented, could find for the non-moving party." Childers v. Joseph, 842 F.2d 689, 693-94 (3rd Cir. 1988), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Material facts are those which will affect the outcome of the trial under governing law. Anderson, supra, 477 U.S. at 248. In determining whether an issue of material fact exists, the court must consider all evidence in the light most favorable to the non-moving party. White v. Westinghouse Electric Company, 862 F.2d 56, 59 (3rd Cir. 1988).

 Statute of limitations

 Wausau seeks summary judgment on York's claims for fraud and payment under the bond on the grounds that both are barred by the applicable state statute of limitations. Pennsylvania law clearly applies.

 Choice-of-law decisions are governed by the choice-of-law rules of the forum state. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). In this instance, Pennsylvania choice-of-law rules require application of Pennsylvania law. The Green Hill project is located in Dauphin County, Pennsylvania. All contractors and entities involved with the project are located here. No other state has significant, relevant ties to the matters giving rise to the cause of action. Although the payment bond was issued in New Jersey, all relevant events, e.g., the work performed, took place in Pennsylvania. No other state has any contact with the events giving rise to either this action or the state court action. Griffith v. United Air Lines, 416 Pa. 1, 203 A.2d 796 (1964).

 Under Pennsylvania law, the statute of limitations for claims based on a payment bond is one year and, for claims of fraud, two years. 42 Pa. Cons. Stat. Ann. § 5523(3) and 5524(7). The limitations period is calculated from the date the cause of action arose. 42 Pa. Cons. Stat. Ann. § 5502(a).

 York's work at the site was concluded by November, 1987 at the latest. When payment was not forthcoming, York contacted Wausau in April, 1988 and demanded payment under the bond signed by Culnen. Wausau refused payment on the ...


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