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West Bank Oil Inc. v. Hartford Accident & Indemnity Co.

Decided: October 22, 1985.

WEST BANK OIL, INC., PLAINTIFF-APPELLANT,
v.
HARTFORD ACCIDENT & INDEMNITY COMPANY, DEFENDANT-THIRD PARTY PLAINTIFF-RESPONDENT, V. ROBERT R. PERNA AND MARJORIE PERNA, THIRD-PARTY DEFENDANTS



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

King, Simpson and Scalera. The opinion of the court was delivered by King, P.J.A.D.

King

This case involves $418,665 in claims under a performance bond issued on public paving contracts. The claimant, West Bank Oil, Inc. was a supplier of liquid asphalt to Cumberland Asphalt Company (Cumberland) which in turn sold its finished product to the paving contractor, Perna Excavating. West Bank's claim that it sold liquid asphalt to a contractor or subcontractor covered under the New Jersey Public Works' Bond Act, N.J.S.A. 2A:44-143, did not survive a motion for summary judgment. Judge Levy decided that West Bank supplied an ordinary materialman, not a contractor or subcontractor, and thus was not protected by the Bond Act. We agree that West Bank's customer was a material supplier and affirm the judgment in the bonding company's favor.

These are the undisputed facts. West Bank is a corporation whose principal business is selling asphalt. One of West Bank's customers was Cumberland Asphalt Company, a company founded by Bruce Eastmunt with a substantial amount of technical advice from West Bank employees. Cumberland made "hot mix" paving material, buying raw materials such as gravel, sand mix and asphalt from suppliers and then selling the finished "hot mix" to contractors doing paving work.

While Eastmunt ran Cumberland, West Bank supplied asphalt on a cash-on-delivery basis. In early 1981, Robert Perna, the principal of Perna Excavating, bought out Eastmunt. Perna had been buying his asphalt from Cumberland but had been unable to buy sufficient quantities because Cumberland's output was limited by its lack of a line of credit with West Bank. Cumberland received all of its asphalt from West Bank. Perna Excavating agreed to take "full responsibility" for Cumberland's

debts and West Bank agreed to extend credit to Cumberland. West Bank received a corporate guaranty from Perna Excavating, but Perna refused to give West Bank his personal guarantee on Cumberland's behalf.

Cumberland then changed its name to A & P Asphalt when Vincent Archetto joined Perna as a partner. West Bank asserts that Archetto bought into the company by buying out Eastmunt's shares in early 1981; this conflicts with the deposition statements of West Bank employees maintaining that Perna bought Eastmunt's interests and Archetto came along later. The relationship between West Bank and Cumberland, renamed A & P Asphalt,*fn1 however, remained intact. Perna wrote to West Bank and informed it that Perna Excavating was responsible for Cumberland's debts. Perna was quite involved in Cumberland's operations and Cumberland's checks to West Bank were signed by him.

Perna Excavating was obligated to give the public entities it worked for detailed "producer's analysis of materials and job mix formula" information sheets on which Cumberland had to list the ingredients of the hot mix asphalt it supplied. Perna signed these sheets as Cumberland's president; he also signed them as a representative of Perna Excavating, the actual paving contractor.

Dante Finnochi, West Bank's vice-president, said that Perna would request "mix designs" from West Bank when bidding a State or municipal paving contract. A mix design gives a breakdown of the materials found in a paving "mix" and was required by the entity requesting bids as part of a contractor's total bid. Finnochi said that West Bank salesmen would complete the mix designs and give them to Perna to submit with his bid. He said that a contractor engaged in paving work in this State is required to use one of five grades of mix, I-2 through

I-6, on a given stratum of a road. He also said that Cumberland occasionally, though rarely, had one of its own employees on a Perna Excavating jobsite. He noted that Cumberland never delivered its mix to jobsites because it did not own trucks.

Perna Excavating was awarded five paving contracts in Southern New Jersey, which it completed between May 1982 and January 1983. West Bank supplied Cumberland with the "AC-20" asphalt ingredient necessary for the "hot mix" sold to Perna for the five jobs; Cumberland amassed a debt with West Bank of $418,665.66 which remains unpaid. For each of the five projects, defendant Hartford Accident and Indemnity Company (Hartford) issued the bonds required by N.J.S.A. 2A:44-143 guaranteeing Perna Excavating's payment of all its "subcontractors, materialmen, laborers, persons, firms or corporations" for work done and materials supplied.

After the completion of each contract, West Bank wrote to Hartford, advising it of the sums owed by Cumberland, "a subcontractor of Perna under the contract." Hartford ...


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