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Sears, Roebuck and Co. v. Jardel Co.

decided: January 30, 1970.


Hastie, Chief Judge, and McLaughlin and Van Dusen, Circuit Judges.

Author: Van Dusen


VAN DUSEN, Circuit Judge.

This is an appeal from a District Court order entering summary judgment for the third-party defendant, Hirsch, Arkin, Pinehurst, Inc.

John A. Robbins Co., Inc. (Robbins, Inc.) is a Pennsylvania general construction corporation, wholly owned by John A. Robbins (Robbins) and his wife. In 1958 Robbins, Inc. formed Jardel Co., Inc. (Jardel), the appellant in this action, as a wholly owned Delaware subsidiary with principal offices in Pennsylvania. Robbins has at all times been the president and controlling figure in both corporations.

In 1962 Jardel began the development of Price's Corner Shopping Center on land it owned in Delaware. Jardel hired Robbins, Inc. as general contractor under a contract that prevented Robbins, Inc., and apparently its subcontractors, from securing a lien against Jardel's property, thus protecting the mortgagee's interest. Robbins, Inc. in turn subcontracted the plumbing, heating and air-conditioning work to Hirsch, Arkin, Pinehurst, Inc. (Hirsch), a Pennsylvania corporation and appellee in this action. Hirsch agreed to payment on a time and material basis, plus fixed fee.

When Hirsch completed its portion of the construction in the fall of 1963, it was still owed approximately $70,000. by Robbins, Inc. Robbins, Inc. refused to pay, demanding that Hirsch rectify certain errors in the construction. Hirsch made several attempts to correct the problems, but, feeling that it could not satisfy Robbins, finally instituted negotiations for a settlement. As a result of these negotiations, on January 7, 1964, Hirsch agreed to accept $36,000. in full payment of Robbins, Inc.'s obligation to it, in return for which Robbins, Inc. released Hirsch of all liability arising or to arise out of its Price's Corner contract. Jardel was not a party to the release, nor did it participate as a corporation in the negotiations.

On July 9, 1965, a substantial portion of one of the buildings in Price's Corner Shopping Center collapsed. The tenant, Sears, Roebuck and Co., demanded that Jardel rebuild the destroyed portion of the building, which Jardel did as required by the lease. In addition, Sears sued Jardel for $150,000., alleging that its loss of supplies, payroll and other expenses, equipment and profits was due to Jardel's breach of the construction provisions of the contract under which Sears had agreed to rent the building, as well as to Jardel's breach of its duty of maintenance and to negligence.*fn1 Jardel then sued Hirsch in a third-party action, alleging that "Hirsch breached its agreement with the contractor and was negligent" in failing to meet the Sears' specifications which had been incorporated into Hirsch's contract with Robbins, Inc. Judgment was asked against Hirsch to cover any judgment that Sears might recover against Jardel.*fn2

Hirsch filed an answer generally denying the allegations of the third-party complaint. After interrogatories were answered, it amended its answer to plead the release between it and Robbins, Inc. as an affirmative defense against Jardel's claim "because of the relationship between [Jardel] and [Robbins, Inc.]".*fn3 After depositions were taken, Hirsch moved for summary judgment.

The District Court granted the motion, holding*fn4 that (a) the general release was valid to bar Jardel's claim if the release bound Jardel as well as Robbins, Inc., and (b) the release bound Jardel because "justice" required the disregard of the corporate distinction between Jardel and its parent, Robbins, Inc. The appellant, Jardel, challenges both these findings.

It is undisputed that the parties negotiating the release did not specifically mention or consider the leaking pipe causing the collapse of the Sears' building, nor can it be disputed, for the purposes of a motion for summary judgment, that the pipe was not installed in accordance with the contract or that this breach was the cause of the building's collapse.*fn5 Because of these facts, Jardel argues that the release would not be binding even against Robbins, Inc.; it argues that there can never be an enforceable accord and satisfaction to claims that neither party discussed or knew existed at the time of settlement.

We do not believe that the law of Pennsylvania*fn6 goes this far. A general release, by its terms discharging a party of "all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands whatsoever in law or equity arising or to arise from a contract between the parties,"*fn7 will ordinarily be enforced absent a showing that the parties did not intend what they wrote:

"It is well settled that where the terms of a release and the facts and circumstances existing at the time of its execution indicate the parties had in mind a general settlement of accounts, the release will be given effect according to its terms. * * *"

Brill's Estate, 337 Pa. 525, 528, 12 A.2d 50, 52 (1940); see Cockcroft v. Metropolitan Life Ins. Co., 125 Pa.Super. 293, 299, ...

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