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Petrillo v. American Construction Co.

Decided: March 18, 1977.

V. PETRILLO & SON, INC., PLAINTIFF-RESPONDENT,
v.
AMERICAN CONSTRUCTION CO., DEFENDANT, AND ST. PAUL FIRE AND MARINE INSURANCE COMPANY, DEFENDANT-APPELLANT



Bischoff, Morgan and King. The opinion of the court was delivered by King, J.s.c., Temporarily Assigned.

King

[148 NJSuper Page 2] Plaintiff subcontractor sued defendant general contractor for amounts due

for construction work it performed on a moderate-income housing project sponsored by Union Plaza Associates and partially financed by the New Jersey Housing Finance Agency (Agency). Prior to trial defendant American Construction Company (American) was declared bankrupt. Defendant St. Paul Fire and Marine Insurance Company (St. Paul), which issued a labor and materials payment bond, defended on the basis that plaintiff had not complied with the notice requirements of the bond and had not brought suit in a timely fashion.

The bond required that plaintiff give written notice stating the amount claimed to any two of the following: the principal (American), any one of the obligees (one of which was the Agency), or the surety (St. Paul). Such notice must be served by registered mail or by legal process within 90 days after the claimant has last supplied labor or material to the project. The bond also required plaintiff to institute suit against St. Paul within one year after American "ceases work" under the contract.

The bond incorporated the prime construction contract by reference. The contract defined work as the totality of obligations imposed upon the contractor by all contract documents. The contract directed Union Plaza Associates as owner to issue a certificate of final acceptance approved by the Agency after correction of all construction defects. A certificate of final acceptance has never been issued.

The proofs at trial showed that plaintiff last performed, work on the project on August 17, 1972. Within a month thereafter it sent both American and the Agency a statement of amount claimed for work performed. Such notice was not sent by registered mail but was admittedly received. Defendant American last performed work on the project on October 4, 1972. The last work done by any subcontractor was in December 1972. The three apartment buildings comprising the project were occupied by January 1, 1973. Plaintiff instituted suit in May 1974, 18 months after the last subcontractor performed construction work on the project.

Following a nonjury trial the trial judge entered judgment for plaintiff. The judge held that because a certificate of final acceptance had never been issued, American had never "ceased" work within the meaning of the contract. He also ruled that the project was a public work and commencement of suit was therefore not out of time. This conclusion was based on N.J.S.A. 2A:44-146, which permits a subcontractor to institute suit on a bond within one year from the date of acceptance of a public work. Finally, the trial judge found St. Paul estopped from asserting that American had ceased work because in its counterclaim St. Paul alleged that plaintiff had never completed performance of its work on the project. The judge reasoned that St. Paul could not contend American ceased work on the job while at the same time assert that plaintiff had not yet completed work.

St. Paul's principal contention on appeal is that plaintiff is barred from recovery because it did not commence suit within one year of the date on which American ceased work. The bond provided as follows:

4. No suit or action shall be commenced hereunder by a complainant:

(b) After the expiration of one (1) year following the date on which Principle ceases work under the contract. Work under the contract includes work on approved items of delayed completion.

In addition St. Paul urges plaintiff's noncompliance with the bond notice provisions warrants dismissal of the action on the bond, asserts misapplication of the doctrine of estoppel, and denies the applicability of the time limitation contained in N.J.S.A. 2A:44-146.

We agree with St. Paul's contention of untimely commencement of the suit. The trial judge construed the term "ceases work" to mean "completes work." We recognize the principles concerning the construction of surety bonds and ...


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