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A & P Sheet Metal Co. v. Edward Hansen Inc.

Decided: March 15, 1976.


Gaulkin, J.s.c.


[140 NJSuper Page 568] Plaintiff A & P Sheet Metal Company, Inc. (A & P) brought this action pursuant to the Mechanics Lien Law (N.J.S.A. 2A:44-64 et seq.) to recover certain sums claimed to be due on a subcontract it had with defendant Edward Hansen, Inc. (Hansen), the heating and plumbing contractor for defendant Kearny Post Office Associates (KPOA) in construction of the North Jersey Mail

Handling and General Maintenance Facility (the facility) in Kearny, New Jersey. By order dated July 21, 1975 partial summary judgment as to liability was granted against defendants Travelers Indemnity Company (Travelers) as surety for KPOA and defendant Aetna Casualty and Surety Company (Aetna) as surety for Edward Hansen, Inc. During the subsequent jury trial as to damages only, the two sureties settled the A & P claim for $115,000, leaving for resolution only the cross-claim of Travelers against Aetna which addresses the allocation of this liability as between the two sureties.

Aetna contends that an earlier denial of Travelers' motion for summary judgment on its cross-claim constituted a determination that Travelers and Aetna are cosureties, responsible to share equally in satisfying claimants under their bonds; that such determination constitutes the law of the case and may not now be reconsidered, and that if the substantive issue is to be reached, the same conclusion of cosuretyship should be made. Travelers contends that no law of the case has been determined and that it should be found to be a subsurety, responsible only to the extent that the Aetna bond is insufficient to satisfy claimants.

I. Findings of Fact

On June 19, 1968 KPOA entered into a contract with the United States Post Office Department under which it agreed to build the facility and lease it to the post office. Pursuant to that agreement, Travelers issued its labor and material payment bond in the amount of $2,500,000. That bond, dated June 24, 1968, describes KPOA as principal, Travelers as surety, and the United States of America and the New York Bank for Savings, the mortgagee, as co-obligees.*fn1 The condition of the obligation is stated as follows:

* * * that if the principal shall promptly make payment to all claimants as hereinafter defined, for all labor and material which prior to occupancy by the Government as used or reasonably required for use in the performance of the Agreement, then this obligation shall be void * * *.

The bond defined a claimant as being one "having a direct contract with the principal, with a general contractor of the principal, or with a subcontractor in privity with either the principal or a general contractor"; it was earlier determined that A & P, as a subcontractor in privity with Hansen, was a proper claimant under the Travelers bond.

Thereafter, on April 14, 1969 KPOA entered into a contract under which Hansen was to act as the heating, ventilation, airconditioning and plumbing contractor at a contract price of $2,900,000. Paragraph 8.6 of that agreement provided that

A similar provision was included by KPOA in each agreement which it had with other contractors on the job.

Hansen started to work without complying with the surety bond requirement, and for some months submitted and received

periodic payments on requisitions accompanied by "waiver of lien affidavits," the purpose of which was to assure KPOA that all Hansen creditors were being currently paid. This procedure, however, caused delays in payment of monthly requisitions, and Hansen therefore caused Aetna to issue, at the cost of KPOA, the labor and material and performance bonds required by the contract; those bonds, dated March 11, 1971, and each of $2,900,000, described Hansen as principal and Contractor, Aetna as surety, and KPOA and the New York Bank for Savings as obligees. The condition of the obligation of the labor and material bond, involved here, is stated to be that

A & P fell within the bond definition of claimant and thus had recourse against Aetna as well as Travelers. Neither the Travelers bond nor the Aetna bonds contain provisions concerning other bonds or security, or subrogation, or any other matters bearing on the present issues.

Hansen did not complete the job, but left or was dismissed from the job on or about September 1, 1971 and later was adjudicated bankrupt. The $115,000 settlement was agreed to by both Travelers and Aetna in satisfaction of the claims of A & P for work done for and unpaid by Hansen when Hansen left the job.

II. Law of the Case

On June 13, 1975 Travelers moved for summary judgment "determining the rights as between the sureties, Aetna and Travelers, with respect to the [A & P] claims"; it then took the same position it urges here, that it should be considered a subsurety rather than a cosurety of Aetna. That motion, heard by a judge no longer sitting in this court, was denied;

in his oral opinion he found no issue as to any material fact, but based his denial on his conclusion that the two bonds are "general bonds" and "that there is cosuretyship as to these two companies."

Two orders memorialize that determination. The first, submitted by counsel for A & P and entered June 24, 1975, provides as follows:

Counsel for Aetna apparently objected to that form of order, but did not so advise the judge (R. 4:42-1(b)) until after it had been signed and returned to A & P counsel for filing. At the judge's request A & P counsel withheld filing its order until Aetna counsel submitted its alternative form of order. Aetna did so on July 15, 1975, and that order was also signed, under date of July 21, 1975:

Ordered that the Motion of defendant, Travelers Indemnity Company for Summary Judgment declaring that its bond is secondary to the bond of Aetna Casualty & Surety Company be and is hereby denied on the ground that both of the bonds of the defendant, Travelers Indemnity Company and defendant Aetna Casualty & Surety Company are general bonds and that there is a cosuretyship as to the defendants Travelers Indemnity Company and Aetna Casualty & Surety Company.

It does not appear whether any objections were made to this form of order. Curiously neither of ...

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