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Utica Mutual Insurance Co. v. Didonato

Decided: November 1, 1982.

UTICA MUTUAL INSURANCE COMPANY, A CORPORATION OF THE STATE OF NEW YORK, PLAINTIFF-APPELLANT,
v.
S. LEONARD DIDONATO, AS DIRECTOR, DIVISION OF BUILDING AND CONSTRUCTION, DEPARTMENT OF THE TREASURY OF THE STATE OF NEW JERSEY; DEFENDANT AND THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT



On appeal from the Superior Court of New Jersey, Law Division, Mercer County.

Bischoff, J. H. Coleman and Gaulkin. The opinion of the court was delivered by Bischoff, P.J.A.D.

Bischoff

[187 NJSuper Page 33] Utica Mutual Insurance Company (Utica) instituted this action against the State of New Jersey alleging that Colino Electrical Contractors (Colino) entered into a contract with the State whereby Colino agreed to perform certain electrical work required for the completion of the construction of the Richard Stockton State College for the consideration of $688,000, adjusted to $693,870.62. Pursuant to N.J.S.A. 2A:44-143 et seq., on June 20, 1973 Colino, with Utica as surety, executed a performance and completion bond in the form required for state contracts, conditioned upon completion of the Colino contract and the payment of laborers and materialmen involved. Colino defaulted on the contract on or about December 16, 1974 and Utica was compelled to complete performance of the Colino contract. Utica further alleges that agents and employees of the State had notice of "business improprieties and defaults of Colino" regarding the major services to be performed by Colino. Despite this notice and knowledge, the State, instead of notifying

Utica, reduced the retainages on Colino's payments from 10% to 3% and intentionally, recklessly and in bad faith disbursed payments to Colino for work that was not completed, causing Utica to suffer damages.

Defendant denied liability and in an amended answer asserted a counterclaim seeking liquidated damages for Utica's failure to complete the contract within the time allowed. At the conclusion of a lengthy, nonjury trial a judgment was entered May 6, 1981 dismissing plaintiff's complaint and awarding liquidated damages on the counterclaim in favor of the State of New Jersey and against Utica for $173,720 plus interest of $44,003. Plaintiff appeals.

Colino was one of the several prime contractors (one of whom was referred to as the general contractor) on this project which involved the construction of an academic and recreational complex consisting of eight wings which included classrooms, a gymnasium, a pool, two gallerys (b-level walkways), mechanical facilities and a theater.

Under the general conditions of the contract the general contractor was to be responsible for the formulation of a progress schedule, referred to as a Critical Path Method (CPM). This is a document which integrates the various phases of the work to be performed by all contractors and coordinates these phases into a sequential time outline setting forth the order of the work to be done. See Dobson v. Rutgers, the State University, 157 N.J. Super. 357, 367, n. 3 (Law Div.1978), aff'd sub nom. Broadway Maintenance Corp. v. Rutgers, 180 N.J. Super. 350 (App.Div.1981), aff'd 90 N.J. 253 (1982) (providing a detailed description of the function and usefulness of the CPM). The general contractor was required to formulate the CPM by the time the first requisition was issued. It did not do so and the contractors worked on the project for about seven months without the benefit of a CPM. The work schedule, when finally prepared, did not include the theater and, as prepared, did not conform to the original plans for a CPM as incorporated in the

specifications which called for periodic printouts and updating. The CPM schedule for the theater was not prepared until January 29, 1975.

The adjusted completion date under the contract was Dec. 25, 1974.

The State paid Colino as the work progressed. The procedure used was for Colino to prepare a unit schedule breakdown (USB) showing Colino's price estimate for labor performed and materials delivered to the job site. After the requisition was checked and verified it was cleared for payment subject to retainage. The general conditions of the contract provided for the State to retain 10% of a progress payment until the work was completed and accepted, subject to the proviso that after the work was 50% completed, if it was determined that the contractor's performance and progress was satisfactory, remaining partial payments could be made in full for work subsequently completed.

A series of problems with Colino's work developed around August of 1974 and continued until Colino's contract was terminated on December 16, 1974. The problems included Colino's failure to pay suppliers, its failure to have materials delivered to the construction site and its failure to have sufficient workmen on the job. On December 16, 1974 Utica was notified by the State of the termination of Colino's contract and Utica notified the State that it elected to finish the contract. Utica thereafter engaged a consultant to evaluate the project and he reported:

1. There was a serious discrepancy in the amount of money paid to Colino and the actual amount of work performed. He reported the State paid 84% of the contract price to Colino while only 50% of the work had been performed.

2. Colino had removed tools and materials from the job site.

3. There was a reduction in retainage from 10% to 3%.

4. It would take six to seven months to complete the electrical work, and

5. There would be a deficit after application of the balance of the contract price in the possession of the State of approximately $221,879.

A job progress list prepared by the architect and attached to the minutes of a meeting held at the job site on January 17, 1975 showed the percentage of completion of the electrical work on all segments of the project except the theatre as follows:

JOB PROGRESS

% complete as of 1/17/75

ACTIVITY 41.0 I J K L Gall. E Gall. W

Electrical

a. Primary Service UG vaults and duct 100%

b. Feeder conduit 100 100 100 100 100 100 100

c. Panels -- lighting 100 100 100 20 100 -- --

d. Panels -- power 100 100 100 20 100 -- --

e. Branch circuits, light 95 100 100 0 100 100 100

f. Branch circuits, power 100 100 100 50 100 100 100

g. Wire; power and light 95 100 100 0 100 100 100

h. Fire alarm-feeders 100 100 100 95 100 100 100

i. Fire alarm-branch 95 100 100 50 100 100 100

j. Ceiling drops to SS-4 -- -- 100 -- 100 -- --

k. ATC thermostat wiring 10 100 100 10 ...


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