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Fabcon East, L.L.C. v. The Stegla Group, Inc.

2011 WL 2293454 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

CONTRACTS; STATUTE OF LIMITATIONS; ESTOPPEL — Even though a contract may have a contractual limitation on the time within which claims can be made, the making of assurances or payments acknowledging the continued vitality of the amount owed may work as an estoppel and extend the contractual limitations period.

A subcontractor and a design and construction contractor entered into three separate contracts. The first contract required that the subcontractor furnish and erect insulated wall panels at a Connecticut movie theater. The second contract required that the subcontractor furnish and install precast concrete wall panels at a movie theater in New Jersey. The third contract required that the subcontractor furnish, install, and caulk insulated sandwich panels at a different New Jersey movie theater. The contracts had an agreed-upon claims limitation date. The subcontractor contended that its final invoices for each of the projects were never paid. The general contractor did not dispute the claims. Instead, it argued that the debts were time barred and therefore uncollectable.

The subcontractor sued and the general contractor removed the suit to the United States District Court and asked the Court to dismiss the subcontractor’s claim as untimely. The Court then denied the motion on the grounds that evidence submitted by the subcontractor was sufficient to create a factual dispute as to whether the general contractor’s own conduct was sufficient to defeat the statute of limitations defense by way of waiver, estoppel, or partial payment. On the basis of this evidence, the Court found that the subcontractor might avoid the contractual limitations periods. It specifically instructed the parties to pursue this by way of discovery. In spite of this unambiguous instruction, the subcontractor chose to file its own motion for summary judgment. The general contractor chose not to oppose the motion, though it attempted, in a certification, to reserve the right to appeal the Court’s previous denial of its motion for summary judgment to dismiss the complaint on the grounds that the contractual limitations of action clause barred the action.

Because the general contractor chose not to introduce any evidence supporting its contention that summary judgment was inappropriate, the Court was left with only the undisputed evidence presented by the subcontractor to rely upon in making its decision. It noted that both New Jersey and Connecticut law provide that where a debtor has acknowledged a debt, either through a written instrument or partial payment, the statute of limitations on that debt is tolled. Previously, the subcontractor had submitted certifications from the subcontractor’s project manager and an employee in the accounts receivable department. Both recalled specific conversations with general contractor employees in which they were told that payment would be made on the contracts. The subcontractor also attached faxes from a general contractor employee promising that the final balance would be forwarded upon receipt of the final check from their own client.

Thus, the Court was left with nothing but the unrefuted evidence submitted by the subcontractor that the general contractor repeatedly assured the subcontractor that it would be made whole on the debts and made partial payments on those debts. These assurances and payments both acknowledged the continued vitality of the debt and worked as an estoppel on any effort by the general contractor to avoid payment due to a contractual statute of limitations.

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