Key Agency v. Continental Cas. Co., A--21

• Decision Date: 09 November 1959
• Docket Number: No. A--21,A--21
• Citation: 31 N.J. 98,155 A.2d 547
• Parties: KEY AGENCY, a corporation, Plaintiff-Appellant, v. CONTINENTAL CASUALTY COMPANY, a corporation, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 98

31 N.J. 98

155 A.2d 547

KEY AGENCY, a corporation, Plaintiff-Appellant, v. CONTINENTAL CASUALTY COMPANY, a corporation, Defendant-Respondent.

No. A--21.

Supreme Court of New Jersey.

Argued Oct. 13, 1959.

Decided Nov. 9, 1959.

Daniel G. Gallop, Newark, for plaintiff-appellant.

Louis Auerbacher, Jr., Newark, for defendant-respondent.

The opinion of the court was delivered by

BURLING, J.

Plaintiff instituted this action in the Superior Court, Chancery Division, to compel the defendant to hold in trust for plaintiff money received or to be received by the defendant as an assignee of General Builders Incorporated (hereinafter called the contractor) from the Board of Education of Franklin Township, New Jersey, and the Board of Education of Kinnelon Township, New Jersey. Plaintiff moved for summary judgment and defendant filed a cross-motion for judgment on the pleadings, each party submitting affidavits to support its motion. The trial court granted defendant's motion, 55 N.J.Super. 58, 149 A.2d 797, and thereafter plaintiff prosecuted an appeal to the Superior Court, Appellate Division. While the cause was pending there and prior to argument, we certified it on our own motion.

Plaintiff provided the contractor with workmen's compensation and public liability insurance policies in connection with the performance of three contracts, two between the contractor and the Board of Education of Franklin Township and one between the contractor and the Board of Education of Kinnelon Township. The premiums on these policies, variously disclosed in the record to be between $2,847.15 and $2,848.85, remain unpaid. The contractor defaulted in performance of the contracts and in payment of those having unpaid claims because of the work. The defendant, surety on the payment and performance bonds obtained by the contractor in connection with the three contracts pursuant to N.J.S. 2A:44--143 et seq., N.J.S.A., secured an assignment of funds in the hands of the school boards due or to become due to the contractor on the contracts. To date, the defendant has received $28,258.90 from the Kinnelon school board as a result of these assignments and has paid out $60,207 on its bond to persons having claims because of the Kinnelon school board contract. Although the record is not lucid as to whether the $60,207 was paid for existing unpaid claims or for those necessarily paid in the completion of the contract assumed by the bonding company, it is not necessary for this to be determined, by virtue of the manner of the disposition of this case. Defendant has received nothing from the Franklin Township school board and has paid out $112,850 on its bond on claims arising from the work on the two Franklin Township schools. Likewise in this instance, although it is not clear from the record whether the $112,850 was paid for existing unpaid claims or for those necessarily paid in the completion of the contract assumed by the bonding company, it is not necessary for this to be determined, by virtue of the manner of the disposition of this case.

Plaintiff's theory of recovery is that money paid to the contractor on account of a contract with a public body, as defined in the act, is a trust fund for the payment of all claims for labor, materials and other charges incurred in connection with the performance of the contract, relying on N.J.S. 2A:44--147, N.J.S.A. (apparently erroneously designated as such in the Revision, it should be 2A:44--148). Plaintiff argues that 'other charges' as used in the statute includes within the protection of the trust the type of claim it is making and that since defendant is an assignee of the contractor with notice of the nature of the funds received from the school board, the money which defendant has or will have because of the assignment from the contractor is subject to the trust. Plaintiff also contends that all other persons having claims arising in connection with the performance of the contract were paid because of the defendant's obligation to them arising under the payment bond and that the trust fund remains as yet untouched and available for plaintiff. Defendant attacks this argument on several grounds, but we find it necessary to consider only one of them, namely, whether the type of claim asserted in this matter is included within the purview of the statute.

N.J.S. 2A:44--147(148), N.J.S.A., hereinafter referred to as the Trust Fund Act, provides:

'All money paid by the state of New Jersey or by any agency, commission or department thereof, or by any county, municipality or school district in the state, to any person pursuant to the provisions of any contract for any public improvement made between any such person and the state or any agency, commission or department thereof, or any county, municipality or school district in the state, shall constitute a trust fund in the hands of such person as such contractor, until All claims for labor, materials and other charges incurred in connection with the performance of such contract shall have been fully paid.' (Emphasis supplied.)

N.J.S. 2A:102--12, N.J.S.A., an act approved the same day as the Trust Fund Act and obviously intended to implement it, provides:

'All moneys paid by the state, or an agency, commission or department thereof, or by a county, municipality or school district, or by a public authority, to any person pursuant to the provisions of a contract for the making of any public improvement, shall constitute a trust fund in the hands of such contractor. Any such person who shall use any of the money so received for a purpose other than the payment of claims For labor or materials and such other proper charges as are incurred in connection with the contract, is guilty of a misdemeanor.' (Emphasis supplied.)

Plaintiff argues that the Legislature, by adding the words 'other charges' after 'labor' and 'materials' in the Trust Fund Act, intended to include all persons with claims incurred in connection with the performance of the contract within the protection of that act. We find that this is not the effect of the quoted words and that the Legislature's intention including 'other charges' in the Trust Fund Act was only to give that act the same scope as N.J.S. 2A:44--143, N.J.S.A., hereinafter referred to as the Bond Act.

In attempting to discover legislative intention in any law, it is proper to consider other laws which pertain to a similar subject matter and especially those which were enacted during the same legislative session as the law in question. Hudson v. Brooks, 62 Ariz. 505, 158 P.2d 661 (Sup.Ct.1945); Davis v. Browder, 231 Ala. 332, 165 So. 89 (Sup.Ct.1935); 2 Sutherland, Statutory Construction, § 5002, p. 484 (3d ed. 1943). It is also appropriate to consider the history of a statute prior to its enactment. Id. at § 5003.

Such a study indicates that the phrase 'other charges' was included in the Trust Fund Act to give that act the same scope as N.J.S. 2A:44--143, N.J.S.A. N.J.S. 2A:44--143, N.J.S.A., the Bond Act, originated at L.1918, c. 75. In its original version, it required a bond to guarantee payment only of claims arising because of 'labor performed or material furnished' in connection with a public improvement. On February 1, 1932, however, a bill was introduced in the New Jersey Senate to extend the Bond Act to include 'labor performed or materials, provisions, provender or other supplies, teams, fuels, oils, implements or machinery used or consumed in, upon, for or about' the public improvement. In part at least, the motivation for this amendment would appear to alter the result of a series of cases narrowly construing the Bond Act's original language. See, e.g., West Jersey & Seashore R. Co. v. County of Cape May, 105 N.J.Eq. 457, 148 A. 401 (Ch.1929); Stein v. J. T. Stout Co., 9 N.J.Misc. 685, 155 a. 457 (Sup.Ct.1931). On February 8, 1932, seven days after the above amendment to the Bond Act was offered, the Trust Fund bill was introduced in the Assembly. The original Trust Fund bill included 'all the claims for labor and/or material which shall have been incurred in the performance' of the public improvement. Later, on February 29, 1932, the amendment to the Bond Act was reported back from the Senate Committee to which it had been referred. On the same date, the Trust Fund Act was amended in the Assembly on the motion of its introducer to extend its coverage to 'all claims for labor and/or material And such other proper charges which shall have been incurred' in connection with such contract. (Emphasis supplied.) Senate amendments prior to passage made minor verbal changes in the Trust Fund Act, leaving the pertinent language to read 'all claims for labor, materials and other charges incurred in connection with the performance of such contract * * *.'

It has since been said that the Trust Fund Act and the Bond Act along with the Municipal Mechanics' Lien Law, N.J.S. 2A:44--125 et seq., N.J.S.A., are in Pari materia and hence must be construed together. Wilson v. Robert A. Stretch, Inc., 44 N.J.Super. 52, 129 A.2d 599 (Ch.Div.1957); Fidelity & Deposit Co. of Maryland v. McClintic-Marshall Corp., 115 N.J.Eq. 470, 171 A. 382 (Ch.1934) affirmed 117 N.J.Eq. 440, 176 A. 341 (E. & A.1935). This obvious relationship most likely suggested to the Legislature that the Trust Fund Act should include the same claims as the Bond Act. This, then, would appear to be the reason why the 'other charges' phrase was inserted into the Trust Fund Act at the time it was. Nor is this likelihood in any way diminished because the exact language of the Bond Act amendment was not inserted into the Trust Fund Act. At first glance, it would appear that, because the Bond Act amendment used specific terms whereas the Trust Fund Act was expanded by a general phrase, it was intended to give the Trust Fund Act a broader meaning than the Bond Act, rather than, as suggested above, to give the two acts an identical coverage. Yet...