Opinion ID: 2072758
Heading Depth: 1
Heading Rank: 6

Heading: Third-party Claim of Metram

Text: The trial court held Capitol liable to Metram for the amount of all valid liens, based upon the labor and materials bond issued by Capitol. Capitol challenges this finding on a number of grounds regarding the bond itself, and at the same time disputes the validity of the liens themselves. Since the liens have already been dealt with, we proceed directly to the issues surrounding the bond. First, Capitol argues that Metram's suit on the bond was untimely filed. Condition 3 of the labor and materials bond provides that suits by claimants under the bond must be commenced within 1 year following the date on which the Principal [First Minnesota] ceased work. First Minnesota ceased work in early August 1971, while Metram's suit against Capitol was not commenced until March 28, 1974. It is clear, however, that Metram is not a claimant under the bond, which defines claimant in Condition 1 to be one having a direct contract with the Principal or with the Principal or with a subcontractor of the Principal for labor, material, or both. This phrase intends application to those who are to be paid by First Minnesota for work done or materials supplied, i. e., subcontractors, and cannot be construed as covering Metram, whose position is just the reverse. The general limitation statute, Minn.St. 541.05, [3] therefore applies to the bond as a contract between Metram and Capitol; Metram's suit was filed well within the 6-year limit of this provision. Capitol next argues that Metram cannot bring suit solely on the basis of its obligee status under the bond. Capitol cites no authority for this proposition, and in fact the authorities are to the contrary. See, 17 Am.Jur.2d, Contractors' Bonds, § 14; 11 C. J. S., Bonds, § 106a. If the obligee on a bond could not sue to enforce it, and the claimants under the bond choose to lien the obligee's property rather than sue on the bond, the surety's obligation becomes illusory. We hold that an obligee is a proper party to enforce the surety's bond obligation. Capitol asserts that because the liens (except for that of M & N) are for extras, they fall outside the scope of its obligation as surety. The general rule is that where changes merely require the contractor to perform some additional work without materially changing the original plans, the surety is not thereby relieved from liability under the contract. 72 C. J. S., Principal and Surety, § 126b; see also, 74 Am.Jur.2d, Suretyship, § 45; Leslie, Deviations in Re-Let Contract Do Not Discharge Surety Where Right of Change Was Reserved, 10 The Forum, 37, 39. In this case the extra carpet installed by Hayle and the extra drywall work by Stern did not materially deviate from the original contract. The total of both liens approximates $10,000, while the overall contract for the project was about $2,000,000. Further, the carpet and drywall were both items originally in contemplation of the parties, and did not represent unnecessary changes in the overall project. Under these circumstances, the liens for these items cannot be said to fall outside the scope of Capitol's obligation. Capitol contends that should it be required to compensate Metram for valid lien claims, it is entitled to a setoff for retainages of contract moneys by Metram. The evidence indicates that although Metram appears to have retained $8,266.23, only $49.07 of this sum is due Hayle and $4,494.16 is due Schutz. Since we have found the Schutz lien untimely filed, Capitol is entitled only to a $49.07 setoff against the total of the Hayle and Stern lien claims. None of the defenses raised by Capitol is sufficient to relieve it from liability to Metram for the valid lien claims. The district court finding of liability is affirmed, but its judgment on this claim is reduced to $10,257.23 in lien claims, plus $2,392.86 in fees and costs to Hayle and Stern, less a setoff of $49.07 for the contract retainage, for a total of $12,601.02.