On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.
Michels, Long and Muir, Jr. The opinion of the court was delivered by Michels, P.J.A.D.
Plaintiff Ribeira & Lourenco Concrete Construction, Inc., appeals from a summary judgment of the Law Division entered in favor of defendant Indemnity Insurance Company of North America (North America) in this action to recover under a labor and material payment bond guaranteeing the claims of subcontractors and suppliers employed in the construction of the Jackson Health Care Center in Jackson, New Jersey. The pivotal issue posed by this appeal is whether plaintiff's action was barred by the bond provision that limited the time in which to bring suit on the bond to one year after the principal had ceased work on the project.
The facts essential to the resolution of this issue are uncontroverted. On July 12, 1984, defendant Jackson Health Care Associates (Jackson) and defendant John J. Michaels Developers, Inc. (Michaels), entered into a contract pursuant to which Michaels, as developer and general contractor, would build the Jackson Health Care Center. A rider to the prime contract required that Michaels furnish a performance bond naming Jackson as obligee. On October 9, 1984, Michaels subcontracted the construction of the project to defendant Green Cast Enterprises, Inc. (Green Cast). The subcontract incorporated both the prime contract and the rider to the prime contract. In conjunction with the subcontract, North America, as surety, executed a labor and material payment bond that guaranteed claims for labor and material used in the performance of the subcontract between Michaels and Green Cast. The bond named Green Cast as principal and Jackson as obligee.
Green Cast subcontracted with defendant Condor Company, Inc. (Condor), and its agent, defendant Howard Lowy (Lowy),
as well as various other companies. In turn, Condor and Lowy subcontracted with plaintiff for masonry work. Green Cast guaranteed payment to plaintiff under the subcontract.
Plaintiff commenced its work under the subcontract. By early 1985 plaintiff was experiencing difficulty obtaining payment from either Condor or Green Cast. After repeated requests for payment of sums totalling $77,268.30, plaintiff had received only one payment, totalling $25,000. On January 5, 1985, with approximately 96% of its work completed, plaintiff left the work site.
Michaels scheduled a meeting with all the subcontractors on the project regarding the status of the project. At the meeting on February 13, 1985, Michaels, through its president, defendant Michael Castoro (Castoro), informed the subcontractors that it had "terminated the services of [Green Cast] effective immediately." Green Cast thereupon ceased work and left the project. Michaels negotiated with plaintiff and the other subcontractors that had worked for Green Cast. Plaintiff agreed to return to the job, but did not sign a contract with Michaels. Michaels, however, paid plaintiff $25,000 that had originally been marked for payment to Lowy, leaving plaintiff with an outstanding balance of $27,268.30.
Plaintiff returned to the job and in March 1985 completed its work. Plaintiff thereupon submitted to Michaels a final bill in the sum of $30,768.30, which included $3500 in costs incurred after plaintiff had returned to the project. Michaels referred plaintiff to either Green Cast, Lowy or Condor in order to obtain payment on the final bill. The bill was not paid. The project was completed in early 1986, after Michaels had been replaced as general contractor.
On August 11, 1985, plaintiff instituted this action against Jackson, Michaels, Castoro, Green Cast, Condor and Lowy to recover the unpaid balance due it for services rendered and material furnished in connection with the project. On September 9, 1986, Jackson filed an answer and joined defendant as a
third-party defendant. Shortly thereafter, on October 20, 1986, plaintiff amended its complaint to include a direct claim against defendant as surety for Green Cast on the bond.
Following completion of discovery, North America moved for summary judgment on the ground that the action against it was barred by the bond provision that limited the time in which to bring suit on the bond to one year after the principal had ceased work on the project. Judge Mannion in the Law Division found the time limitation provision of the bond to be valid and enforceable. Since Green Cast, the principal, ceased work on the project on February 13, 1985, and plaintiff did not commence suit against North America, the surety, until October 20, 1986, more than a year later, the trial court held that plaintiff was ...