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Newark Laborers'' Pension-Welfare Funds v. Commercial Union Insurance Co.

Decided: November 27, 1973.

NEWARK LABORERS' PENSION-WELFARE FUNDS, PLAINTIFF-APPELLANT,
v.
COMMERCIAL UNION INSURANCE COMPANY OF NEW YORK, DEFENDANT-RESPONDENT



Carton, Seidman and Goldmann. The opinion of the Court was delivered by Seidman, J.A.D.

Seidman

The issue in this appeal is whether, in an action to collect an employer's delinquent contributions to the welfare and pension fund of a laborers' union, costs and reasonable attorney's fees are recoverable from a surety company on payment bonds furnished in connection with the construction of two housing projects for which financing was provided by the New Jersey Housing Agency.

The trial judge held that they were not and entered judgment in favor of defendant surety. Plaintiff appeals.

Novel questions are involved. Counsel have cited no New Jersey cases dealing with the problem and our own research has disclosed none.

The basic facts were stipulated below. In 1968 and 1969 Mid Center Development Corp. entered into construction contracts for two moderate-income housing projects in Newark, financed in part by loans from the New Jersey Housing Finance Agency.

To assure payment in full to all parties furnishing labor and materials for the projects, Mid Center Development Corp. as principal and defendant as surety made and executed "dual obligee" payment bonds to the Housing Finance Agency as lender-obligee and, respectively, to Zion Towers and 440 Elizabeth Avenue Corp. as owner-obligee.

Subsequently, Mid Center Development Corp. subcontracted to Arthur H. Padula Construction Corp. (Padula) a portion of the work to be performed on the contracts. Laborers were made available to Padula from local unions pursuant to a collective bargaining agreement which provided, among other things, that all employers should contribute for every hour of work performed by laborers the sum of 20 cents to the Newark Laborers' Welfare Fund and a like sum to the Newark Laborers' Pension Fund. The sums were later

increased to 40 cents and 30 cents per hour, respectively. Provision was also made for a contribution of 5 cents per hour to an Industry Advancement Program.

The agreement further provided that when an employer became delinquent in the payment of contributions to the funds such employer could be assessed for costs, attorney's fees and other expenses incurred in endeavoring to collect the delinquent payments, such costs and expenses to be payable irrespective of whether litigation was commenced.

Padula became delinquent in the payment of contributions in the amount of $53,695.03, and plaintiff referred the matter to its attorneys for collection. Only partial payment was made and Padula was sued for the balance due, plus collection costs and expenses. A voluntary petition in bankruptcy resulted in an order restraining suits by creditors. Plaintiff then filed notices of claim under defendant's bonds for the sums of $17,935.78 and $19,048.09 due on the respective projects. After the institution of this suit defendant paid plaintiff $25,128.88 for the delinquent contributions but refused to pay the attorney's fees, plus interest and costs, in the claimed sum of $12,403.14.

Defendant maintains, as it did below, that its bonds provided for the payment of labor and material furnished in the prosecution of the work and that the claim for legal fees and expenses is not encompassed within such labor and materials. In addition, it contends that the bond excludes the payment of any costs and expenses of a suit on the bonds.

It is plaintiff's position that all labor furnished for the project is governed by the New Jersey Prevailing Wage Act, N.J.S.A. 34:11-56.25 et seq., and that the fees and expenses sought constitute part of the labor furnished for the projects. Plaintiff contends, further, that the fees and expenses were incurred in connection with the suit against Padula and not the one against defendant; and that, ...


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