National Surety Company v. Architectural Decorating Company

• Citation: 226 U.S. 276,33 S.Ct. 17,57 L.Ed. 221
• Decision Date: 02 December 1912
• Docket Number: No. 425,425
• Parties: NATIONAL SURETY COMPANY, Plff. in Err., v. ARCHITECTURAL DECORATING COMPANY
• Court: United States Supreme Court

226 U.S. 276

33 S.Ct. 17

57 L.Ed. 221

NATIONAL SURETY COMPANY, Plff. in Err.,

v ARCHITECTURAL DECORATING COMPANY.

No. 425

Submitted October 28, 1912.

Decided December 2, 1912.

Messrs. Ded L. Washburn, W. D. Bailey, and Oscar Mitchell for plaintiff in error.

[Argument of Counsel from pages 276-278 intentionally omitted] Mr. Arcadius L. Agatin for defendant in error.

Mr Justice Pitney delivered the opinion of the court:

This is an action to recover damages for the breach of a bond made by the plaintiff in error as surety together with one Henricksen as principal, given to a certain school district of the state of Minnesota, conditioned that Henricksen should pay all just claims for work, materials, etc., furnished for the completion of a school building, for the construction of which he had made a contract with the district; the bond being given, according to its own recitals, for the use of the school district and of all persons doing work or furnishing materials under the contract. The contract and bond were made in the year 1908. The bond was executed and delivered pursuant to the provisions of the Minnesota statutes found in Rev. Laws (Minn.) 1905, §§ 4535 to 4539, inclusive, which in effect require every public corporation of the state, on entering into a contract for the doing of any public work, to take a bond for its own use and for the use of all persons furnishing labor or material under or for the purpose of the contract, and which entitle any person so furnishing labor or material to maintain an action upon the bond, under certain conditions.

The defendant in error, during the months of July and August, 1909, performed certain services and furnished certain materials to Henricksen for use in carrying out his contract, for which a sum exceeding $1,000 remained due and unpaid, and to recover the amount so due this action was brought.

By § 4539, above referred to, which was in force at the time the contract for building the school was made and the bond given, it was enacted that—'no action shall be maintained on any such bond unless within ninety days after performing the last item of work, or furnishing the last item of skill, tools, machinery, or material, the plaintiff shall serve upon the principal and his sureties a written notice specifying the nature and amount of his claim and the date of furnishing the last item thereof, nor unless the action is begun within one year after the cause of action accrues.'

On April 22, 1909, this section was amended by chap. 413, Gen. Laws 1909, so as to require the notice of claim to be given within ninety days 'after the completion of the contract and acceptance of the building by the proper public authorities,' instead of within ninety days 'after performing the last item of work or furnishing the last item of skill, tools, machinery, or material,' and further amended by requiring the action to be begun within one year 'after the service of such notice,' instead of within one year 'after the cause of action accrues.'

It will be observed that this change in the law went into effect before the defendant in error performed the services and furnished the materials upon which the present action is based.

Defendant in error did not give notice to plaintiff in error in time to comply with § 4539, Rev. Laws 1905, but did give such notice in time to comply with the amended act, if that be the applicable law.

The supreme court of the state of Minnesota in the present case held that the act of 1909 controlled, although passed after the bond in question was given, overruling the contention of plaintiff in error that the statute as so construed impairs the obligation of the contract contained in the bond, and is therefore contrary to § 10 of art. 1 of the Federal Constitution. 115 Minn 382, 132 N. W. 289.

The only question that need be here considered is whether the act of 1909, as thus construed, does impair the obligation of the contract.

Sections 4535—4539, Rev. Laws 1905, originated in chap. 354 of the General Laws of 1895 and chap. 307 of the General Laws of 1897. Prior to this legislation the supreme court of Minnesota had held in Breen v. Kelly (1891) 45 Minn. 352, 47 N. W. 1067, that although a municipal corporation, having authority to cause certain public work to be done and to make contracts for the doing of it, probably had implied authority to take security for its own protection, it had no authority to take security for third persons, nor capacity to act as trustee in a contract made for their benefit, without express legislative authority; and that such a bond, although voluntarily given, was void. The same principle was adhered to in Park Bros. & Co. v. Sykes (1897) 67 Minn 153, 69 N. W. 712.

By chap. 354 of the Laws of 1895, which first created the statutory right of action in favor of third persons upon such a bond, no notice by the third person to the principal or sureties was required as a condition precedent to his right to sue. He was merely obliged to bring his action within one year after the cause of action accrued. Notice by the plaintiff to the principal and sureties was first required by chap. 307 of the Laws of 1897, the 3d section of which contained the same provisions that were afterwards embodied in the Revision of 1905 as § 4539, above quoted.

The supreme court of Minnesota, in the year 1904, in Grant v. Berrisford, 94 Minn. 45, 49, 101 N. W. 940, 1133, construed Gen. Laws 1897, chap. 307, § 3, as follows: 'The provision in the general law requiring notice within ninety days after the last item of labor or materials is done or performed, before bringing an action on the bond, is not analogous to a statute of limitations, but it is a condition precedent which must be performed before the right to bring an action on the bond accrues. Or, in other words, it is a condition or burden placed upon the beneficiaries of the bond, which they must perform or remove before they can avail themselves of its benefits. It is as much so as would be the case if this provision of the general statute was set out as a proviso in the bond.'

The argument for plaintiff in error is to the effect that since the right of action by a third party upon such a bond is of statutory origin, and since the statute in force at the time the bond in suit was given required a preliminary notice given to the obligors within a certain time, which notice (under Grant v. Berrisford) constituted a condition precedent to the action as much as if it had been set out as a proviso in the bond, a subsequent act of legislation dispensing with such notice, or changing the time within which it was required to be given, impairs the validity of the contract, within the meaning of § 10 of art. 1 of the Constitution

The argument rests at bottom upon the proposition that because it required legislation to...