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Township of Berkeley v. Republic Insurance Co.

Decided: October 21, 1983.

TOWNSHIP OF BERKELEY, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
REPUBLIC INSURANCE COMPANY, A TEXAS CORPORATION AND MEYER GOLD, DEFENDANTS-APPELLANTS, AND JACOB BURSTYN, DEFENDANT



On appeal from the Superior Court, Law Division, Ocean County.

Ard, Morton I. Greenberg and Trautwein. The opinion of the court was delivered by Morton I. Greenberg, J.A.D.

Greenberg

For the second time this matter is before this court on appeal. The litigation arises from the failure of Cedar Ridge Corp. (hereinafter called "Cedar Ridge") and its successor in interest, Prel Middle Atlantic, Inc. (hereinafter called "PMA") to satisfy the conditions of three performance bonds posted by Cedar Ridge with plaintiff Township of Berkeley (hereinafter called "Berkeley") pursuant to Berkeley's subdivision ordinance. An understanding of the issues requires that the protracted proceedings be set forth at some length.

In 1970 Cedar Ridge, a corporation in which Meyer Gold and Jacob Burstyn were stockholders, was engaged in the development of a project in Berkeley called Berkeley Pines. Berkeley, on May 22, 1970, enacted ordinance no. 319, a subdivision ordinance, in accordance with N.J.S.A. 40:55-1.1 et seq.*fn1 On August 14, 1970 ordinance no. 319 was amended by ordinance no. 326. The amended subdivision ordinance required a developer to install certain improvements to obtain approval of major subdivisions. In lieu of actual installation of the improvements, the ordinance permitted the subdivider to file a performance bond and cash deposit totaling 110% of the estimated cost of the improvements or uncompleted portions thereof. The ordinance further provided that the township engineer determine the amount of the guarantee. In accordance with the ordinance, the engineer prepared estimates for the bonds and deposits on the Berkeley Pines project.

Cedar Ridge obtained three bonds dated September 24, 1970 from defendant Republic Insurance Company (hereinafter called "Republic") to satisfy the subdivision ordinance. These bonds together with a cash deposit were delivered to Berkeley. Each bond stated that Cedar Ridge was the principal, Gold and Burstyn were co-principals and Republic was surety. Bond numbered 905792 for $118,440.46 covered improvements in sections

D and F of the subdivision. It specified that it was for acceptance by Berkeley in lieu of the principal doing the construction work "As per attached Estimate." The attached estimate showed numerous items of work to be done with a unit price breakdown for them. Bond numbered 905794 for $185,658.71 covered improvements in section H of the subdivision. The bond was for acceptance by Berkeley in lieu of the principal doing the construction work on "items shown in attached Bond Estimate excluding monuments, street signs, shade trees, seeding, and debris clean-up." The attached estimate was similar in form to that attached to bond numbered 905792. The third bond, numbered 905795, for $27,000 also covered improvements in section H of the subdivision. This bond recited that it was for acceptance by plaintiff in lieu of the principal doing the construction work on "Concrete Monuments 39 UNITS[,] Street Signs 14 UNITS[,] Shade Trees 330[,] Seeding 119 LOTS[,] [and] Debris-Clean Up LUMP SUM[,]," the items excluded from bond 905794. There were two bonds on section H, inasmuch as Republic had a policy limiting performance bonds to $200,000 and the estimated cost of improvements in section H exceeded $200,000. Even though the body of bond numbered 905795 made no reference to it, an estimate was attached giving a unit breakdown price for the items mentioned.

The three bonds did not specify that the net obligation in each would be apportioned among the various improvements set forth in the attached estimates. Rather, all included the following provision:

NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH that if the Principal shall, during the term of twenty four (24) months from the date hereof well and truly make and complete said improvements, in accordance with all of the requirements and specifications of the Township of Berkeley, and to the satisfaction of the Township Engineer, then this obligation to be void; otherwise to remain in full force and effect.

On November 30, 1970, following delivery of the bonds and cash deposit, Berkeley granted final approval of Cedar Ridge's subdivision plan for Berkeley Pines. Within the 24 months after execution of the bonds, many of the improvements were

installed. Berkeley, however, did not, in whole or in part, release any of the parties from the obligation of the bonds. Subsequently, Prel Corporation purchased Cedar Ridge's assets. A subsidiary of Prel, PMA, assumed Cedar Ridge's liability on the bonds. In November 1972, after the period for performance specified in the bonds had expired, Berkeley obtained an engineering report showing various deficiencies in the bonded work. Nevertheless, Berkeley did not then take action on the bonds.

On July 21, 1975 PMA filed a petition for reorganization in bankruptcy in the United States District Court for the Southern District of New York. In early 1976 an inspection report on behalf of Berkeley showed that the conditions of the bonds had not yet been satisfied. Thus on April 28, 1976 Berkeley instituted this action in the Superior Court, Law Division, against Republic, Gold and Burstyn ...


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