On May 21, 1953 Nathan R. Epstein, trading as N.R. Epstein Electric Company, hereinafter called Epstein, and the defendant Board of Education of the City of Plainfield, hereinafter called the board of education, entered into a contract by which Epstein was to do certain work on the electrical system of a certain school (Evergreen) in the City of Plainfield for the sum of $43,940.
The contract, Exhibit A, provides in Article 3 thereof, that the specifications, also Exhibit A, shall form a part of the contract between the parties.
The specifications provide, among other things, as follows:
The Owner will make monthly payments to the contractor based on ninety percent (90%) of the estimated contract cost of completed work at the end of each month, as certified by the Engineer.
Payment of retained percentage will be made sixty (60) days after final date of acceptance."
" LIENS, STOP-PAYMENT NOTICES, AND CLAIMS
Neither the final payment or any part of the retained percentage shall become due until the contractor, if required, shall deliver to the Owner a complete release of all liens or stop-payment notices for claims arising out of this contract, or receipts in full in lieu thereof or if requested a complete release from all parties who furnished labor or material or both under this contract, and if required in either case, an affidavit that so far as he has knowledge or information, the release of receipts include all the labor and material, for which a lien or stop-notice could be filed but if any sub-contractor refuses to furnish a release or receipt in full, the contractor may if agreeable to the Owner, furnish a satisfactory bond to the Owner to indemnify him against any claims by lien or otherwise. All costs to the Owner in connection with liens, stop payment notices, claims of sub-contractors, material dealers, etc., shall be paid by the Contractor or his bond, including any reasonable legal expenses in connection with such liens, claims, stop notices, or legal proceedings arising therefrom, should such be required.
The Owner reserves the right to withhold on account of subsequently discovered evidence, the whole or part of any monthly payment to such extent as may be necessary to protect against loss on account of defective work not remedied or any form of payment claims against the contractor that may subsequently have accrued."
The final acceptance shall not be binding or conclusive upon the Owner should it subsequently develop that the contractor has supplied inferior material or workmanship or has departed from the terms of his contract. Should such a condition appear the Owner shall have the right, notwithstanding, final acceptance and payment to cause the work to be properly done in accordance with the drawings and specifications at the cost and expense of the contractor or his bond."
The plaintiff herein, Manufacturers Casualty Insurance Company, hereinafter called Manufacturers, issued its bond No. 501349 in the amount of $43,940 to defendant board of education. The bond is issued in accordance with the Municipal Mechanics Lien Law, N.J.S. 2 A:44-125 et seq. , and especially section 2 A:44-143. The bond, which has Epstein as principal, is in the statutory form required by section 2 A:44-147.
Epstein completed its work on the job and submitted its invoice (Exhibit B) No. 2906, dated October 7, 1953, to the board, bearing the notation, "All work completed as per plans and specifications." The bill was a final one in amount $6,225.50. The invoice was approved by Vogelbach and Bowman, consulting engineers for the project.
The board of education, at its November 17, 1953 meeting, approved the payment to Epstein (Exhibit C). Thereupon voucher No. 1136, dated November 5, 1953, was delivered. The minutes are silent as to whether or not the board accepted the job or approved the payment as a final one.
On April 7, 1954 the board received a letter from the attorneys for Graybar Electric Co., Inc., a sub-contractor of Epstein, making inquiry as to acceptance of the work.
On May 4, 1954 Epstein filed a voluntary petition and was adjudicated a bankrupt. The board passed the following ...