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Hartford Accident and Indemnity Co. v. Heftler Construction Co.

November 26, 1963

HARTFORD ACCIDENT AND INDEMNITY COMPANY, A CONNECTICUT CORPORATION, PLAINTIFF-APPELLANT,
v.
HEFTLER CONSTRUCTION COMPANY, A CALIFORNIA CORPORATION, DEFENDANT-APPELLEE



Author: Castle

Before SCHNACKENBERG, CASTLE and KILEY, Circuit Judges.

CASTLE, Circuit Judge.

Plaintiff-appellant, hereinafter described as Hartford, as assignee of Paul D. Johnson, filed its complaint against defendant-appellee, hereinafter described as Heftler, on December 27, 1960. The suit was for recovery of sums claimed to be due in the amount of $12,139.70 from Heftler.

Heftler filed a motion to dismiss on the grounds that the filing of the suit was not timely. It asserted that the right to file the action was barred on December 18, 1960 by virtue of the limitation period set forth in the contract upon which Hartford had sued.

The motion to dismiss was sustained by the trial court and the complaint dismissed. This appeal followed.

In the Spring of 1958, Heftler became the general contractor for the construction of four Capehart housing projects under a Housing Contract with the United States Department of the Air Force and with the corporate owner-mortgagors of each of the projects. In accordance with Government regulations, the four owner corporations - Chanute AFB Homes, Inc., Second Chanute AFB Homes, Inc., Third Chanute AFB Homes, Inc., and Fourth Chanute AFB Homes, Inc. - were subsidiaries of Heftler.

Under the Housing Contract, Heftler was required to deposit in escrow, upon the execution of the contract, resignations of the officers and directors of the "Chanute" corporations, together with all the capital stock of such corporations. Upon the issuance, by the Department and by the Federal Housing Commissioner, of a certificate of completion for each of the four housing projects, the resignations and capital stock for the owner of that project were delivered to the Department, whereupon the United States Government took full control and ownership of the project.

Also, in the Spring of 1958, one Paul D. Johnson, subcontractor, entered into a contract with Heftler, as general contractor, under which Johnson was to provide soil stripping, excavation, filling and grading for the Capehart projects. On or about June 3, 1958, Johnson obtained a contract bond from Hartford to secure his performance under his contract with Heftler.

Johnson subsequently defaulted in the performance of his contract with Heftler, and Hartford thereafter succeeded to his interests as his assignee under said contract and commenced this action.

Paragraph 24 of the contract upon which Hartford sued contains the following provision:

"No action or special proceeding, including arbitration, shall lie or be maintained against the Contractor by the Sub-contractor, unless the same shall be commenced within ten months after the date of filing in the office of the Owner of the 'Final Certificate of Completion' as provided for in the general contract."

Appellant claims that under Clause 25 of the general contract there is no provision for a final certificate of completion, no provision for a filing in the office of owners, and that for these reasons paragraph 24 of the contract upon which Hartford sued is of no effect.

Clause 25 is as follows:

"The Commissioner shall issue a Determination of Completion when the project has been acceptably completed in accordance with the determination of the Contracting Officer and Commissioner, and thereafter he shall make his final endorsement of the respective mortgage note for mortgage insurance provided, however, that completion may be considered as acceptably completed if items of delayed completion, ...


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