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D & K Landscaping Co. v. Great American Insurance Co.

Decided: September 27, 1983.


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

Michels, King and Drier. Dreier, J.A.D.


[191 NJSuper Page 449] Plaintiff appeals from a decision of the Law Division denying its motions for summary judgment and granting those of defendant. The facts are largely undisputed. Plaintiff acted as a landscaping sub-contractor employed by South Jersey Construction Company (South Jersey) on a highway project in which South Jersey was retained by the State of New Jersey and for which defendant Great American Insurance Company (Great American) had posted a payment and performance surety bond. The contract with the state had been entered into in October 1969 and plaintiff was one of several sub-contractors who had made claims on the bond between 1973 and 1980. Plaintiff's final estimate of its claim had been presented to defendant on January 13, 1973, and during that month he also filed a claim with the Department of Transportation for the balance due. On January 26, 1973 defendant acknowledged receipt of plaintiff's claim by a letter that contained a reservation of rights and defenses. In April 1973 plaintiff advised the Department of Transportation that plaintiff had completed all work on the project. Three years later, on April 6, 1976, the Department of

Transportation notified plaintiff that final settlement and disbursement of funds on the projects was pending and requested status of plaintiff's claim, whereupon plaintiff advised the Department of the outstanding balance due.

On June 22, 1977 Superior Court entered a final judgment ordering the Department of Transportation to accept the project. Acceptance was given on November 17, 1977, with notification to plaintiff and others of this acceptance on January 4, 1978. On June 21, 1978 plaintiff wrote to Great American and reminded it that the claim was still unpaid and also requested that the surety "let us know the status of our payment due at your earliest convenience." Defendant responded, reciting the history of its efforts to have the project accepted, and then stated "the State of New Jersey is still holding sufficient monies to satisfy your claim, which they have refused to release to us, therefore, we suggest you present your claim to the State for payment."

On August 1, 1978 plaintiff wrote to the deputy attorney general in charge of the project, enclosing a copy of defendant's response, and requested payment. A week later the State responded that "Great American Insurance Company, which suggested referring this matter to our attention, is the party liable for that amount, if proved, as provided in the [construction] contract." The State noted specifically that "your protection may be under the Bond Act N.J.S.A. 2A:44-143 et seq. and the Trust Act, N.J.S.A. 2A:44-147 [sic]." By letter of even date the State notified Great American that it was obligated to "pay outstanding claims submitted to it pertaining to the above reference construction job", and that upon defendant's submitting the appropriate documents to the State showing that the claims had been satisfied and that the Bankruptcy Court had no interest in the money retained by the State, "the State will rpovide [sic] for the release of monies presently retained to the extent of the surety's payment of claims." The funds were later released to defendant on January 28, 1981.

Plaintiff, on September 28, 1981, alleged in its complaint that Great American was obligated to it on the surety bond, or under the Trust Fund Act. The trial court granted defendant's motion for summary judgment on the surety bond, based upon the statute of limitations governing such actions, and further held that the Trust Fund Act was inapplicable. We agree with the court's determination as to the statute of limitations, but are constrained to reserve and remand as to the trust fund issues raised herein.


Under N.J.S.A. 2A:44-146 an action on a surety bond must be brought within one year of the date of acceptance of the project. Plaintiff failed to do so here and thus is time barred. This was acknowledged by plaintiff in the court below, and this point has not actively been pursued in this court. Suffice it to say defendant is not equitably estopped by its negotiations with plaintiff from raising the bar of this statute. This is not a situation in which a defendant intentionally misled a plaintiff to believe that the claim is being evaluated in good faith. See Tantum v. Binz, 186 N.J. Super. 296, 304 (App.Div.1981), rev'd on dissent 91 N.J. 426 (1982); Highway Trailer Co. v. Donna Motor Lines Inc., 46 N.J. 442, 449, cert. den. 385 U.S. 834, 87 S. Ct. 77, 17 L. Ed. 2d 68 (1966). Plaintiff here was apprised of the bona fide position of defendant and was caught between conflicting interpretations of the surety's and State's duties. It could have brought suit on the bond within the statutory period, but did not; it therefore was properly barred.


Since the contractor was bankrupt, the trustee envisioned by the Trust Fund Act, N.J.S.A. 2A:44-148, could not be forced to make payment. Insofar as the State was holding the funds for the benefit of the contractor, the State might have been found ...

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