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Dial Block Co., Inc. v. Mastro Masonry Contractors

December 30, 2004

DIAL BLOCK COMPANY, INC., PLAINTIFF-APPELLANT,
v.
MASTRO MASONRY CONTRACTORS, DEFENDANT, AND ERNEST BOCK & SONS, INC.; XL SPECIALTY INSURANCE COMPANY, DEFENDANTS-RESPONDENTS, AND ERNEST BOCK & SONS, INC., A PENNSYLVANIA CORPORATION, DEFENDANT/THIRD-PARTY PLAINTIFF,
v.
ALFRED LAPUMA, FRANK FALCO AND JOSEPH RUSSO, THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, ATL-163-03.

Before Judges Braithwaite, Lisa and Winkelstein.

The opinion of the court was delivered by: Winkelstein, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 15, 2004

This case arises out of a contract to build the Atlantic County Special Services School and requires an interpretation of the New Jersey Public Works Bond Act, N.J.S.A. 2A:44-143 to -148 (the Bond Act), which protects laborers, subcontractors and material suppliers who work on public construction projects. Plaintiff is a material supplier that is owed money from Mastro Masonry Contractors, the project masonry subcontractor, for materials plaintiff supplied to Mastro for the project. Consequently, plaintiff sued Mastro, Ernest Bock and Sons, the general contractor, and XL Specialty Insurance Company, the company that issued the payment and performance bond for the project. Mastro is out of business and was never served with the complaint.

The primary issue on appeal concerns plaintiff's right to seek payment under the bond. To be so entitled, the Bond Act requires a person to either have a"direct contract" with the general contractor furnishing the bond, or otherwise provide the general contractor with written notice of the person's intent to become a beneficiary under the bond. Plaintiff acknowledges it did not provide Bock with written notice of its intent to become a beneficiary under the bond; but, plaintiff asserts that a joint checking agreement (the Agreement) it entered into with Bock and Mastro serves as the"direct contract" required by the Bond Act to qualify plaintiff as a beneficiary and assert a claim for payment under the bond.

On cross-motions for summary judgment, Judge William Todd found that the Agreement did not constitute a"direct contract" under the Bond Act. The judge also concluded that plaintiff failed to prove its claim for breach of contract against Bock. We agree and affirm.

The facts are not in dispute. In January 2001, Bock and the Atlantic County Special Services School District entered into a contract for the construction of the school. XL Specialty issued the payment and performance bond. In February 2001, Bock and Mastro executed a purchase order; Mastro was to provide labor, material, and equipment"to complete all unit masonry and unit pavers." Mastro, in turn, requested a quote from plaintiff for materials and supplies for the job. As a condition to supplying the materials, plaintiff requested that the parties enter into a joint checking agreement, a"procedure frequently... done... with general contractors... subcontractors, and suppliers." In fact, plaintiff had such an agreement when working with Mastro on at least two previous jobs. A Bock representative prepared the Agreement. It said, in pertinent part:

In consideration that Dial Block Co., Inc (Supplier), will supply material to Mastro Masonry (Subcontractor), for installation at the Atlantic County Special Services School in accordance with the Subcontractor's Contract Agreement, Ernest Bock & Sons, Inc., (General Contractor), hereby agrees that the said materials will be paid for by check(s) made payable jointly to the Supplier and Subcontractor. Total material cost is not to exceed $125,000.00.

Plaintiff's controller, Barry Pflum, understood that the Agreement did not obligate plaintiff to provide Mastro with materials, and neither Mastro nor Bock were required to order"each and every item from [plaintiff]." According to Pflum, the purpose of the $125,000 limit was to protect Bock's"interest and [Bock's] interest alone."

Approximately fourteen months later, Pflum wrote to Bock's vice president, Anthony DePascale, and informed him that the cost of materials supplied by plaintiff had"far exceeded" the $125,000 limit. By that time, plaintiff had already supplied Mastro with more than $300,000 in supplies. Pflum requested that the Agreement be amended to raise the cap to $500,000. DePascale rejected Pflum's request"due to cost overruns by Mastro Masonry on this project." DePascale acknowledged that Bock had"exceeded the initial joint check amount," but explained that Bock had done so because the company"felt it was in all of our best interest[s] to continue joint payments to minimize both our exposure." According to DePascale, Mastro had"committed to [Bock] that they will continue to make payments to their vendors given this circumstance." Finally, DePascale said:"It would be in your best interest to contact Mastro and make the necessary arrangements." Plaintiff continued to supply materials to Mastro.

In response to the letter, Pflum stated that if plaintiff did not receive the sum due under its regular payment schedule, $44,728.86, it would stop supplying materials to Mastro. Pflum also asked DePascale for the name, address, and telephone number of Bock's bonding company. When plaintiff did not receive the payment, it stopped"servicing" Mastro. On August 8, 2002, plaintiff asserted a claim under the bond for $65,840.73.

In total, Bock issued $347,602.53 in joint checks to plaintiff and Mastro. At some point, well after the $125,000 cap was reached, Bock stopped issuing joint checks and paid Mastro directly so Mastro could meet its payroll. Bock paid Mastro in full.

Against this factual background, we turn to whether the Agreement constituted a"direct contract" within the plain meaning of N.J.S.A. 2A:44-145. If it did, plaintiff could seek payment under the bond without otherwise notifying Bock that ...


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