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Developers Surety & Indemnity Co. v. Mathias

United States District Court, M.D. Pennsylvania

September 30, 2014

DEVELOPERS SURETY & INDEMNITY CO., Plaintiff,
v.
SHAHNAWAZ MATHIAS, DEBRA MATHIAS, EASTERN DEVELOPMENT & DESIGN, and CHARTER HOMES BUILDING COMPANY, Defendants.

ORDER

CHRISTOPHER C. CONNER, Chief District Judge.

AND NOW, this 30th day of September, 2014, upon consideration of the motion (Doc. 51) of plaintiff Developers Surety & Indemnity Co. ("DSIC") for leave to amend the complaint, wherein DSIC seeks, as assignee of Eastern Development & Design's ("Eastern") rights pursuant to an Indemnity Agreement ("Indemnity Agreement") (Doc. 1-2) in which Eastern agreed to indemnify DSIC from any liability or losses that DSIC sustained in connection with its issuance of a surety bond, and as equitably subrogated to Eastern's rights pursuant to the Indemnity Agreement, to add claims against defendant Charter Homes Building Company ("Charter") for breach of a provision of a March 25, 2004 stipulation ("Bankruptcy Stipulation") (Doc. 1-4) among defendants Charter, Shahnawaz Mathias, Debra Mathias, and Eastern, and nonparties Slater & West, Inc. ("Slater"), Sovereign Bank, and Susquehanna Mortgage Banker Corp., [1] in which Charter agreed to indemnify Eastern from any liability to DSIC under the Indemnity Agreement in the event that York Township demanded that DSIC complete the development improvements as a result of Charter's failure to do so ("indemnification provision") (see Doc. 1-4 ¶ 5(k)), [2] and noting that leave to amend shall be freely given "when justice so requires, " FED. R. CIV. P. 15(a)(2), but that the court may deny amendment if "(1) the moving party has demonstrated undue delay, bad faith or dilatory motives, (2) the amendment would be futile, or (3) the amendment would prejudice the other party, " Fraser v. Nationwide Mut. Ins. Co. , 352 F.3d 107, 116 (3d Cir. 2003), and that amendment is futile when the amended claims would not survive a motion to dismiss, J.B. Hunt Transp., Inc. v. Liverpool Trucking Co., No. 1:11-CV-1751, 2013 WL 3208586, at *3 (M.D. Pa. June 24, 2013) (citing Massarsky v. Gen. Motors Corp. , 706 F.2d 111, 125 (3d Cir. 1983)), [3] and further noting that a claim for indemnification against liability under Pennsylvania law[4] accrues when liability has become "fixed and established, " Coleman v. City of Bradford , 204 A.2d 260, 261 (Pa. 1964), that district courts in this circuit, interpreting Pennsylvania law, have concluded that liability generally does not become fixed and established until either the court has entered a judgment against the indemnitee or a settlement agreement has been reached, Lincoln Gen. Ins. Co. v. Kingsway Am. Agency, Inc., No. 1:11-CV-1127, 2013 WL 458449, at *3 (M.D. Pa. Feb. 6, 2013) (citing Ins. Comm'r of Conn. v. Novotny, No. 07-262 ERIE , 2009 WL 1653553, at *3-4 (W.D. Pa. June 11, 2009)), and that a claim for indemnification against loss under Pennsylvania law generally accrues only when the indemnitee makes an actual payment on behalf of the indemnitor, id. (quoting Novotny , 2009 WL 1653553, at *3), and observing that the court expressly declined to enter default judgments against Shahnawaz Mathias, Debra Mathias, or Eastern[5] in its March 6, 2014 order (Doc. 44) resolving DSIC's motions for default judgment, that DSIC does not aver that Eastern entered into any settlement agreements with respect to the surety bond, and that DSIC does not allege that Eastern indemnified DSIC for any of its losses (see Doc. 1 ¶ 50) or otherwise made any payments in connection with its obligations under the surety bond, and it appearing that DSIC's proposed breach of contract claim against Charter pertains solely to Eastern's potential cause of action for indemnification pursuant to the indemnification provision of the Bankruptcy Stipulation (see Doc. 51-2 ¶¶ 51-60; Doc. 52 at 9 ("[Charter] breached the terms of the Bankruptcy Stipulation when [Charter] failed to indemnify or hold Eastern harmless for Eastern's liability to [DSIC].")), and therefore that DSIC's proposed breach of contract claim against Charter has not yet accrued, [6] and it further appearing that Eastern was not a principal under the Subdivision Bond or otherwise primarily responsible for completion of the development improvements, [7] and finding that DSIC's proposed breach of contract claim against Charter would be futile at this juncture, it is hereby ORDERED that:

1. DSIC's motion (Doc. 51) for leave to amend the complaint is DENIED without prejudice.

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