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Sil-Kemp Concrete, Inc. v. Conte & Ricci Construction Company

A-4324-03T3 (N.J. Super. App. Div. 2006) (Unpublished)

CONTRACTORS; SURETIES—Strict compliance with a surety’s undertaking is required and late notice will bar a supplier’s or contractor’s claim.

A landowner and general contractor entered into an agreement to construct a building. The general contractor retained a subcontractor for the concrete work; and the subcontractor hired a materials supplier to provide the concrete. The general contractor obtained a labor and material payment bond where the bond issuer and the general contractor bound themselves to the landowner for the benefit of claimants. The wrong type of concrete was poured for the ground floor. In the suit that followed, the lower court found both the subcontractor and the materials supplier to be equally responsible for the mistake in pouring the wrong type of concrete. The subcontractor repaired and replaced some of the concrete, but then abandoned the work, leaving the general contractor to retain another company to repair and replace the remaining portion of the ground floor. The subcontractor stopped paying the materials supplier. The materials supplier made a claim under the bond. The lower court held that the materials supplier was a “supplier” within the meaning of New Jersey’s Construction Lien Law, and held that the amount of the lien fund was the amount owed by the landowner to the general contractor. Holding that improper notice was provided by the materials supplier of its claim under the bond, and that the lower court miscalculated the amount of the lien fund, the Appellate Division reversed.

The Court held that strict compliance with a surety’s undertaking is required. It found that the bond issuer received the materials supplier’s notice beyond the claim period of the bond. Further, the notice was not sent by certified or registered mail as required. Therefore, the notice sent by the materials supplier to the bond issuer was defective, and, for that reason, the Court dismissed the claims against the bond issuer, leaving only the materials supplier’s claim against the general contractor in quantum meruit (claims involving the subcontractor having been settled prior to trial).

The Appellate Division then calculated the lien fund by comparing the amount due to the subcontractor with the amount due to the materials suppler. It then compared the lesser of those amounts to the amount due to the general contractor, ruling that the lesser of those amounts was the amount of the lien fund.

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