Court Declines To Recognize Common-Law Labor And Material Payment Bond Actions And Strictly Construes State's Labor And Material Payment Bond Statute Of Limitations
January, 2010
In a matter of first impression, the Connecticut Supreme Court decided that any claim that may be asserted against a labor and material bond, required by General Statutes § 49-41, must be asserted within the time limit provided by General Statutes § 49-42 (b). See Paradigm Contract Management Co. v. St. Paul Fire & Marine Ins. Co., 293 Conn. 569, 979 A.2d 1041 (2009).
On April 1, 1997, St. Paul Fire and Marine Insurance Company ("St. Paul"), as surety, and Metcalf and Eddy, Inc. (the "Contractor"), as general contractor and principal, executed a $8.9 million labor and material payment bond (the "Bond") pursuant to § 49-41. The Bond was executed in favor of the City of Danbury in connection with a construction project (the "Project"). Under the terms of the Bond, St. Paul and Contractor bound themselves to make payments promptly to all claimants furnishing labor and materials for the Project. The Bond provided in pertinent part that:
[n]o suit or action shall be commenced hereunder by any claimant . . . [a]fter the expiration of one . . . year following the date on which [the Contractor] ceased work on said [c]ontract, it being understood, however, that if any limitation embodied in this bond is prohibited by any law controlling the construction hereof such limitation shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law....
In 1999, the Paradigm Contract Management Company (the "Plaintiff"), a subcontractor to the Contractor, instituted a lawsuit against St. Paul alleging that Plaintiff provided labor and material for the Project for which it had not been paid. As such, Plaintiff sought payment under the Bond. On April 19, 2002, the parties entered into a tolling agreement whereby Plaintiff agreed to withdraw its lawsuit and St. Paul agreed to waive any statute of limitations defenses that may arise. The parties further agreed that the agreement would remain in effect for a period of one year.
On February 26, 2003, Plaintiff brought this action seeking payment under the Bond. St. Paul moved to dismiss on the grounds that the action was barred by the time period set forth in § 49-42. Section 49-42 provides in pertinent part: "[e]very suit instituted under this section shall be brought in the name of the person suing . . . but no such suit may be commenced after the expiration of one year after ... the date such materials were supplied or any work was performed." The Superior Court granted the motion on the ground that Plaintiff commenced the action more than one year after it last performed work on the Project, such that its claim was time barred under § 49-42.
Plaintiff appealed arguing that the Superior Court improperly granted St. Paul's motion to dismiss based upon § 49-42 since it had not brought this action pursuant to a statute, but rather by a common-law action on the Bond. The Supreme Court, citing American Masons' Supply Co. v. F. W. Brown Co., 174 Conn. 219, 223-24, 384 A.2d 378 (1978), reiterated that the General Assembly intended for §§ 49-41 and 49-42 to operate in general conformity with the federal Miller Act (40 U.S.C. §§ 270a-270e) such that § 49-42 sets forth the time limitation within which suit must be commenced under the statute. Thus, § 49-42 is not to be treated as an ordinary statute of limitation, but rather a "jurisdictional requirement establishing a condition precedent to maintaining an action under that section." Id. The Supreme Court, quoting Fisher Skylights, Inc. v. CFC Construction Ltd. Partnership, 79 F.3d 9, 12 (2d Cir. 1996), held that compliance with the limitations period set forth in § 49-42 is a jurisdictional requirement, therefore, "a timely suit is an absolute condition precedent to maintaining an action under that section.... This substantive requirement cannot be avoided by waiver or estoppel." Id. at 576-577 (citation omitted; internal quotation marks omitted).
During the pendency of the appeal, Plaintiff conceded that its claim was barred by § 49-42. Nevertheless, Plaintiff relied upon several decisions which it believed permitted common-law bond actions. The Supreme Court analyzed and distinguished those decisions. In doing so, the Supreme Court concluded that Plaintiff was not entitled to bring a common-law action on the Bond and avoid § 49-41. Further, the Supreme Court concluded that when a surety has executed a bond pursuant to § 49-41, any action on such bond is governed by § 49-42. Therefore, the Superior Court properly dismissed Plaintiff's lawsuit due to the limitations period set forth in § 49-42, notwithstanding the existence of the tolling agreement.
Learning Point: Connecticut does not recognize common-law actions to enforce labor and material bonds. As such, tolling agreements between contractors and bond issuers, related to labor and material bonds, mandated by General Statutes § 49-41, are non-enforceable and do not provide contractors with the right to sue beyond the limitation period set forth in General Statutes § 49-42.
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