Pennsylvania Common Pleas Court Upholds Payment Bond Contractual Limitation Period

James J. Gory Mechanical Contracting Inc. v. Travelers Casualty & Surety Co.
2010 Phila. Ct. Com. Pl. Lexis 20 (Phila. CCP Feb. 8, 2010)

In February 2005, Surety issued payment bond of over $45 million on behalf of the general contractor for construction of student housing project at Temple University. Under terms of the payment bond, any claim, suit or action had to be brought within two years of bond’s issuance. General contractor entered into plumbing subcontract with Plaintiff, who certified that its work was 100% complete in October 2006. However, general contractor only paid Subcontractor for 95% of the work it completed.

The following year, in November 2007, which was more than two years after Surety issued the payment bond, Subcontractor brought suit to recover the outstanding 5% subcontract balance. At trial, the Court found for Surety. Subcontractor appealed.

On appeal, Subcontractor claimed that it was error for the court to find that the two-year payment bond limitation was enforceable, barring its claims. The court disagreed with Subcontractor’s reasoning and affirmed. In affirming its ruling in favor of Defendant Surety, the court focused on the plain language of the bond that explicitly required suit to be brought within two years of its issuance. Pennsylvania courts have long upheld contractual limits and this court would not deviate from well-established precedent to permit Subcontractor’s claim beyond the two-year limit stated in the contract.   Further, a reasonable time (four months) had elapsed since subcontractor finished work and the limitation period ran.

Subcontractor’s claim was similarly barred when applying the Pennsylvania statute of limitations. The one-year statute of limitation for payment bond claims in Pennsylvania barred any subcontractor claim, which began to accrue when Subcontractor certified 100% project completion and expired one year later.

As a result, under either a contractual or statutory limitation period, Subcontractor’s claims were barred under Pennsylvania law.

Click here to view full text of decision courtesy of LexisNexis.

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