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Allied Building Products Corp. v. J. Strober & Sons, LLC

Superior Court of New Jersey, Appellate Division

September 5, 2014

ALLIED BUILDING PRODUCTS CORP., Plaintiff,
v.
J. STROBER & SONS, LLC, SUSAN F. STROBER, Individually, STEVE STROBER, Individually, and ARCH INSURANCE COMPANY, Defendants, and DOBCO, INC., Defendant-Appellant, and COLONIAL SURETY COMPANY, Defendant-Respondent

Argued: September 11, 2013.

Approved for Publication September 5, 2014.

Page 1170

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-601-10.

Christopher Nucifora argued the cause for appellant ( Kaufman, Dolowich & Voluck, LLP, attorneys; Mr. Nucifora and Antonio J. Casas, on the briefs).

Greg Trif argued the cause for respondent ( McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys; Mr. Trif and Adam R. Schwartz, of counsel and on the brief).

Before Judges GRALL, NUGENT and ACCURSO. The opinion of the court was delivered by ACCURSO, J.A.D.

OPINION

Page 1171

[437 N.J.Super. 253] ACCURSO, J.A.D.

In this action on a surety bond, Dobco, Inc. (Dobco) appeals from a September 19, 2012 final judgment denying its motion for partial summary judgment against Colonial Surety Company (Colonial), surety for J. Strober & Sons, LLC (Strober), Dobco's subcontractor, and granting Colonial's motion for summary judgment dismissing Dobco's cross-claims[1] against Colonial. The Law Division dismissed Dobco's claims against Colonial under the bond on the ground that the bond did not name Dobco as the obligee and because Dobco had rejected the bond as not in the form required by its subcontract with Strober. We deem neither of those facts material because we conclude that in entering into its surety contract with Strober, Colonial obligated itself to issue a performance bond to Dobco in the form annexed to the Dobco/Strober subcontract. Accordingly, we reverse.

The facts adduced on the motions establish that Dobco was the general contractor to The William Patterson University (WPU) for a project referred to as the " Science Hall Addition, Renovation, and Greenhouse." Strober bid for and was awarded a subcontract for the roofing work. Dobco and Strober entered into a standard AIA (" American Institute of Architects" ) form of agreement on November 11, 2008. The agreement required Strober to furnish performance and payment bonds in the amount of $890,000, in the [437 N.J.Super. 254] forms annexed to the agreement, prior to commencing work.[2] Strober applied to Colonial, the surety that had furnished Strober's bid bond for the project, for its performance bond.

Colonial is a Pennsylvania company, licensed in New Jersey as a property and casualty insurer. The company specializes in contract surety and fidelity. By its president's account, Colonial does not " write business" in the way other insurers do. Upon establishing a " partnership account" with Colonial, a contractor is provided a " line of surety" with single and aggregate limits, a power of attorney and Colonial's seal. When the contractor wants to obtain a bid bond for a project, it uses its partnership account code to log into Colonial's website, inputs the project information and prints out the bond and consent of surety. The contractor signs the documents on behalf of Colonial using its power of attorney, applies Colonial's seal and submits the bond and consent of surety with its bid.

Page 1172

If the contractor wins the contract, it updates the online information provided previously and requests issuance of the performance bond. Colonial then has one of its bond administrators make inquiries regarding the bid spreads between the top few bidders, the identity of the architect and the engineer's estimate. [3] The [437 N.J.Super. 255] package is then submitted to Colonial's underwriter for his approval. Significantly, however, Colonial does not request or review the actual contract prior to issuing a performance bond. Colonial's president testified at deposition that Colonial's " general policy is not to request a copy of the contract." When asked why, the president responded " General - just don't. Never do." When asked how Colonial " would . . . verify that it is bonding the correct contract, if it never reviews the contract" prior to issuing the performance bond, the president responded " [v]erification, in my opinion, is not necessary. That's why we don't review the contract." Colonial did not review the Strober subcontract before issuing the performance bond at issue here.

The parties agree that Strober submitted a bid bond for the project through Colonial's online system and that Colonial followed its usual procedures in issuing the performance bond on February 26, 2009. The bond provides in pertinent part:

That J Strober & Sons, LLC, Ringoes, NJ as Principal, hereinafter called Contractor, and COLONIAL SURETY COMPANY a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, as Surety, hereinafter called Surety, are held and firmly bound unto
William Patterson University, Wayne, N.J. 07470
as Obligee, hereinafter called the Owner, in the amount of
Eight Hundred Ninety Thousand Dollars and No Cents Dollars ($890,000), for the payment whereof Contractor and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.
WHEREAS, Principal has by written agreement dated November 11, 2008, entered into a contract with the Owner for Science Hall Addition to William Patterson University[.]
In accordance with drawings and specifications prepared by (here insert full name, title and address) Hellmuth, Obata & Kassabaum, 620 Avenue of the Americas, 6th Floor, New York, N.Y. 10011 which contract is by reference made a part hereof, and is hereinafter referred to as the Contract.
NOW THEREFORE, THE CONDITION OF THIS OBLIGATION is such that if Contractor shall promptly and faithfully perform said Contract, then this obligation shall be null and void; ...

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