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Lower Salford Township v. International Fidelity Insurance Co.

April 27, 2010

LOWER SALFORD TOWNSHIP, PLAINTIFF,
v.
INTERNATIONAL FIDELITY INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Joyner, J.

MEMORANDUM and ORDER

Before the Court is Defendant's Motion to Dismiss Plaintiff's Complaint pursuant to Federal Rule Civil Procedure 12(b)(6) (Doc. No. 3) and responses thereto (Doc. No. 6, 7). For the reasons set forth in the following Memorandum, we grant Defendant's Motion.

BACKGROUND*fn1

Plaintiff, Lower Salford Township ("Plaintiff" or "the Township"), filed its Complaint against International Fidelity Insurance Company ("Defendant" of "IFIC") on November 4, 2009. Plaintiff seeks to recover damages from a maintenance bond agreement ("the Bond") in the amount of $149,000, insured by Defendant. Plaintiff, Defendant, and T.H. Properties ("the Developer") signed the Bond, but the Developer is not party to this suit. The Developer entered into a maintenance agreement with Plaintiff on October 2, 2007, and was responsible for maintenance and repairs at Brownstone Mill (hereinafter "the Development Project"), located in the Township. Plaintiff, Defendant, and the Developer entered into the Bond pursuant to the maintenance agreement between Plaintiff and the Developer. The Developer was, and is, the principal on the Bond, and Plaintiff was, and is, the obligee on the Bond.

Under the Bond, the Developer guaranteed Plaintiff "against defective materials and workmanship in connection with [the Development Project]." According to the Bond, if Plaintiff discovers defective materials or workmanship, Plaintiff must notify the Developer and Defendant in writing within thirty days of the discovery of the defect. The Bond initially covered the period from October 3, 2007, through April 4, 2009, and was later extended through March 24, 2010.

Before the Bond reached its initial expiration date, Plaintiff's engineer inspected the Development Project for items that needed repair. The Plaintiff's engineer outlined these items in two letters to Plaintiff and copied to the Developer's Vice President. A January 30, 2009, letter outlined certain public improvement maintenance work to be performed by the Developer on the Development Project. A March 23, 2009, letter from Plaintiff's engineer outlined landscaping maintenance also to be performed by the Developer at the Development Project.

In mid-June of that year, the Developer had not completed all of the maintenance items from Plaintiff's engineer's letters. On June 18, 2009, Plaintiff provided written notice to the Developer that it had failed to "maintain certain Improvements (as that term is defined in the Maintenance Agreement)...." The June letter also states, "If you [the Developer] do not correct these conditions within ten days of your receipt of this letter, the Township will have no choice but to notify [Defendant] of the Developer's default under the Maintenance Agreement and will request payment [from the Bond]."*fn2 The Developer did not address the specific maintenance requests. On July 21, 2009, Plaintiff provided Defendant written notice that the Developer was in default under the maintenance agreement because the Developer had not repaired or corrected all of the conditions listed in its June 18, 2009, letter.

Despite the notice that Plaintiff provided to the Developer and Defendant, to this date Defendant has not issued payment to Plaintiff. Therefore, Plaintiff filed its Complaint claiming that Defendant materially breached the terms of the Bond.

Defendant, however, claims that Plaintiff failed to satisfy a condition precedent to asserting a claim under the Bond, and because of this, Plaintiff does not state a claim upon which relief can be granted. Therefore, Defendant asks the Court to dismiss Plaintiff's claim.

STANDARD OF REVIEW

In response to a pleading, under Federal Rule of Civil Procedure 12(b)(6), a defendant may assert by motion that the plaintiff's complaint "[fails] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In analyzing a Rule 12(b)(6) motion to dismiss, we "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citations omitted). "To survive a motion to dismiss, a civil plaintiff must allege facts that 'raise a right to relief above the speculative level....'" Id. at 232 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). In other words, the plaintiff must provide enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary elements of a particular cause of action. Id. at 234. In ruling on a Rule 12(b)(6) motion to dismiss, the court may consider documents integral to or explicitly relied upon in the complaint. In re Rockefeller Sec. Lit., 184 F.3d 280, 287 (3d Cir. 1999).

DISCUSSION

The parties do not dispute that Plaintiff has stated a claim for breach of contract.*fn3 Instead, Defendant claims that relief cannot be granted for breach of contract because Plaintiff failed to provide timely notice to Defendant as required by the Bond. Plaintiff asserts that notice was timely.

Under Pennsylvania law, a surety bond is a contract, and the language of the bond determines the surety's rights and liabilities. Beckwith Mach. Co. v. Nat'l Union Fire Ins. Co., 890 A.2d 403, 406 (Pa. Super. Ct. 2005). While construing the surety agreement's intent from the language taken as a whole, regard should be given to the attendant circumstances. Peter J. Mascaro Co. v. Milonas, 166 A.2d 15, 17 (Pa. 1960). However, the obligation under a bond cannot be interpreted to extend beyond ...


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