Standard Salt & Cement Co. v. National Surety Co.

• Decision Date: 14 July 1916
• Docket Number: Nos. 19,888, 19,889 - (247, 248).,s. 19,888, 19,889 - (247, 248).
• Citation: 134 Minn. 121
• Parties: STANDARD SALT & CEMENT COMPANY v. NATIONAL SURETY COMPANY. NATIONAL IRON COMPANY v. SAME.<SMALL><SUP>1</SUP></SMALL>
• Court: Minnesota Supreme Court

Page 121

134 Minn. 121

STANDARD SALT & CEMENT COMPANY v. NATIONAL SURETY COMPANY NATIONAL IRON COMPANY v. SAME.¹

Nos. 19,888, 19,889 - (247, 248).

Supreme Court of Minnesota.

July 14, 1916.

Two actions in the district court for St. Louis county, one by the Standard Salt & Cement Company to recover $2,636.54 for materials sold and delivered to P. McDonnell and the other by the National Iron Company to recover $218 for other materials, both actions being upon the bond of defendant surety company in favor of the city of Duluth to secure the performance of a certain contract by defendant McDonnell for the improvement of part of East Fourth street in the city of Duluth. The cases were tried together before Cant, J., who made findings and ordered judgment in favor of each plaintiff for the amount demanded in its complaint.

Defendant's motions for judgment in its favor or for new trials were denied. From the judgments entered pursuant to the orders for judgment, defendant appealed. Affirmed in both cases.

Washburn, Bailey & Mitchell, for appellant.

Alford & Hunt, for respondents.

DIBELL, C.

Two actions on a contractor's bond tried together. There were findings and judgments for the plaintiffs. The defendant surety company appeals from the judgments. The defendant contractor does not appear on this appeal.

Two general questions are presented:

(1) Whether an action on the bond was barred by the provisions of the city charter pursuant to which it was executed, requiring notice to be given the contractor and surety within 90 days after the date of the last item furnished and suit to be brought within a year.

(2) If not, whether an extension to the contractor by the plaintiff of the time of payment, without the consent of the surety, released the surety without a showing that harm resulted; and whether resulting harm was shown.

1. On July 18, 1912, the defendant McDonnell entered into a contract with the city of Duluth for paving a street. On the same day he and the defendant surety company executed to the city a bond, to secure among other things the payment of materialmen. Under the provisions of the charter whoever furnished material upon the contract was a party in interest under the bond and was authorized to maintain an action upon it in his own name without joining the city. The plaintiff Standard Salt & Cement Company and the plaintiff National Iron Company furnished materials. The National Iron Company furnished its last item on December 20, 1912. For the purposes of the case we assume that the Standard Company furnished its last item on the same date, though it claims that it was furnished on June 30, 1913.

The charter provided that no action should be maintained upon the bond, unless the claimant, within 90 days after furnishing the last item, served upon the principal and surety a written notice, specifying the nature and amount of his claim and the date of the last item, nor unless action was commenced within one year after such date. Neither of the plaintiffs gave notice within 90 days nor commenced an action within one year. The surety company claims that their causes of action are barred.

On December 2, 1912, the city ratified a new charter. The Constitution provides that upon its ratification a charter "shall, at the end of thirty days thereafter, become the charter of such city or village as a city, and supersede any existing charter and amendments thereof." Const. art. 4, § 36. The charter became effective and superseded the former charter on January 2, 1913. Woodbridge v. City of Duluth, 121 Minn. 99, 140 N. W. 182. The new charter contained no condition requiring the giving of a notice or limiting the time within which an action might be brought nor any provision relative to bonds.

The suggestion is made that the bond was not effective after the repeal of the statute which authorized and required it. Under our decisions a municipal corporation has no authority without a legislative grant of power to take contractors' bonds for the benefit of those furnishing material, and contracts taken without authority are void. Breen v. Kelly, 45 Minn. 352, 47 N. W. 1067; Park Bros. & Co. v. Sykes, 67 Minn. 153, 69 N. W. 712; Eidsvik v. Foley, 99 Minn. 468, 109 N. W. 993. This holding is upon the ground of the legal incapacity of the city to act as trustee for the beneficiaries. The bond was a valid obligation when executed, and under it rights arose. The adoption of the new charter did not affect its validity or obligation. It has been held that the repeal of a statute giving a mechanic's lien destroys the right of lien though it had accrued. Bailey v. Mason, 4 Minn. 430 (546); Dunwell v. Bidwell, 8 Minn. 18 (34); Wilson v. Simon, 91 Md. 1, 45 Atl. 1022, 80 Am. St. 427. The theory of these cases is that the right does not arise from contract, but is dependent upon the statute and falls within it. The bond is in no such sense dependent upon the statute. It is a contract. The surety and his principal need no authority to bind themselves by it. The only office of the statute is to authorize the municipality to assume in the bond the position of a trustee for the materialmen. It was valid when made and when the materials were furnished by the plaintiffs. Its obligation comes from contract and not from the statute and survives its repeal.

The defendant contends that if the obligation of the bond survives the repeal of the charter the provision as to the 90-days' notice and the bringing of an action within a year follows as a part of it, and applies when its enforcement is sought. If so, the plaintiffs are barred. Grant v. Berrisford, 94 Minn. 45, 101 N. W. 940, 1113, involved the St. Paul home rule charter which did not contain a provision like that now under consideration. The general statute contained a provision of like purpose but of different requirements. The question was whether a complaint on the bond must allege notice and the answer depended upon whether the charter or statute controlled. The court said: "The provision in the general law requiring notice within 90 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 direct holding was that the charter provision was exclusive. The statute in its present form is found in G. S. 1913, § 8249 (R. L. 1905, § 4539, as amended by Laws 1909, p. 501, c. 413, § 1). It provides that notice must be served within 90 days after the completion and acceptance of the contract and suit within one year after the notice. This statute was under consideration in Architectural Decorating Co. v. National Surety Co. 115 Minn. 382, 132 N. W. 289. Prior to its amendment it provided that notice must be given within 90 days after the last item and suit brought within one year after the accrual of the cause of action. The amendment provided for notice within 90 days after the completion of the contract and acceptance of the building and suit within a year after the notice. Notice was given within the time required by the amendment, but not within the time required by the original act. The bond was given prior to the amendment. The plaintiff furnished the material and the default occurred subsequent to it. The court held that the amendment affected the remedy and not the obligation of the contract. It said: "The provision requiring notice to be given to the company does not create or enlarge this obligation. It is simply an essential step in the enforcement of an existing obligation, and clearly affects the remedy, and not the substantive rights, of the parties under the bond. The fact that this statute must be construed as if it were a part of the written bond, and that it places a condition or burden upon the beneficiaries of the bond which they must perform before they can avail themselves of its benefits, does not indicate that the giving of the notice is a condition to the creation of the obligation. It is a condition precedent to the bringing of the action — a necessary step in the enforcement of the remedy." This case was before the Supreme Court of the United States on writ of error in National Surety Co. v. Architectural Decorating Co. 226 U. S. 276, 33 Sup. Ct. 17, 57 L. ed. 221. It was affirmed and the same view was taken. The court said: "In the case now before us, we agree with the Minnesota Supreme Court in the view that the requirement of a preliminary notice to the obligors as a condition precedent of an action upon the bond, affects the remedy and not the substantive agreement of the parties. And although the statute as it stood when the bond was given * * * must, under Grant v. Berrisford, be treated as if written into the contract, it still imposed a condition not upon the obligation, but only upon the remedy for breach of the obligation. Therefore, the subsequent statute * * * effected merely a change in the remedy, without substantial modification of the obligation of the contract." These two cases determine that the provision for a notice concerns the remedy only, and does not affect the obligation of the contract within Const. (U. S.) art. 1, § 10. We have not overlooked State v. Smith, 62 Minn. 540, 64 N. W. 1022, cited by appellant, which involved a saving clause continuing rights accrued under a repealed statute.

The provision as to bringing an action within a year gives no trouble. It is a statute of limitation. A statute of limitation affects the remedy and not the right. 2 Dunnell, Minn. Dig. § 5587, and cases cited. The repeal of the...