Court Opinion

ID: 9583282
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:37:01.930792+00
Date Added: 2024-06-11T13:38:55.275728
License: Public Domain

SABERS, Justice
(dissenting).
I dissent.
The performance bond provided to Shee-han by United Pacific contained the following express suit limitation provision:
Any suit under this bond must be instituted before the expiration of two (2) years from the date on which final payment under the contract falls due.
Sheehan paid for the bond on this basis and got exactly what he paid for. The construction contract was completed and final payment fell due in November of 1980. On November 21, 1980, Engineer Gellhaus certified to and Sheehan signed a final pay request. On December 5, 1980, Chemical Bank, the project lender, acting upon the engineer’s and owner’s request made final payment under the contract in the amount of $161,766.56, for total payment of $6,646,353.00. Consequently, not only did final payment fall due in November of 1980, but said payment was actually made as of December 5, 1980.
Claiming a variety of defects in the irrigation system, Sheehan brought suit against United Pacific on April 8, 1986, nearly five and one-half years after the final payment date — and nearly three and one-half years after the express language in the surety bond permitted suit to be commenced.
SDCL 56-2-12 states: “A surety cannot be held beyond the express terms of his contract, and if such contract prescribes a penalty for its breach, he cannot in any case be liable for more than the penalty.” Contrary to the statement in the majority opinion, there is nothing in the statute’s language to suggest it is limited to only those express terms in a surety contract relating to the kinds of obligations (e.g., bid bonds, performance bonds or bail bonds, etc.) to be undertaken. The statute clearly states that the surety cannot be held beyond the express terms of its contract— whatever the nature or subject matter of those terms. Statutes cannot be interpreted in such a manner so as to do violence to their plain language. Simpson v. Tobin, 367 N.W.2d 757 (S.D.1985); Burns v. Kurtenbach, 327 N.W.2d 636 (S.D.1982).
Every detailed treatment of surety law contains statements to the effect that a significant risk factor is the duration of the surety’s exposure to liability under the bond. The importance of the length of time a surety is open to suit upon its bond was recently discussed in Concrete Structures v. Firemen’s Ins. Co. of Newark, N.J., 790 F.2d 41 (7th Cir.1986). The court held that Illinois’ six month contractor’s bond statute of limitations barred a payment bond claimant’s suit against the surety-
If the majority opinion is sustained, and not altered by the legislature, it will not only heap havoc upon the construction bonding industry but make the cost of construction (payment and performance) bonds in South Dakota prohibitive to customers, farmers, businessmen, and other owners.
The majority decision and reasoning even draws into question the constitutionality of South Dakota’s Public Contractors’ Bond statutes. In addition, South Dakota requires a performance bond before any contract is entered into for the construction, repair or improvement of any public high*572way within the state. SDCL 31-28-1. Claimants must commence suit on bonds provided in connection with South Dakota highway work within one year after the date of final settlement of such contract. SDCL 31-23-4. Because in most construction projects the date of “final settlement” follows shortly after the date “final payment under the contract falls due,” United Pacific’s bond gives claimants nearly double the time within which to commence an action.
The two-year suit limitation provision did not affect the tort or contract statute of limitations between Sheehan and the contractors. Sheehan’s suit against them was not dismissed by the trial court and remains in existence. The two-year suit limitation provision only governed the period of time during which Sheehan could recover from United Pacific for the contractor’s acts or inactions.
Among the breaches of contract alleged by Sheehan is the faulty design of the water service system. The problems resulting from these allegations of improper design would have existed at the very beginning when the irrigation system was placed into operation. In fact, Sheehan’s complaint seeks significant damages for crop loss beginning in the year 1980. Therefore, Sheehan claims he actually suffered injury prior to final payment being made in December of 1980. Sheehan was neither surprised nor damaged by the two-year suit limitation. He had two years to seek redress from the surety for his injuries.
For these reasons, United Pacific’s suit limitation provision is not violative of South Dakota law and actually affords more protection than South Dakota's Public Contractor Bond statute. The personal injury/tort situation addressed in Daugaard v. Baltic Co-op. Bldg. Supply Ass’n., 349 N.W.2d 419 (S.D.1984), simply has no application to this case.