Court Opinion

ID: 9583281
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:37:01.926219+00
Date Added: 2024-06-11T13:38:55.274198
License: Public Domain

DOBBERPUHL, Circuit Judge.
PROCEDURAL STATEMENT
Plaintiffs Harvey and Andrea Sheehan (Sheehan) appeal from an order dismissing defendant United Pacific Insurance Company (United Pacific).
FACTS
In 1979, Harvey Sheehan joined with Fred Schafer (Schafer) in a plan to irrigate *570approximately 12,000 acres of land in Sully and Hughes Counties, South Dakota. They contracted with defendants Morris Irrigation and Johnson Brothers Company to build this massive irrigation system (hereinafter the Irrigation Project Contract). Sheehan later purchased Schafer’s interest in this scheme.
The final payment on the Irrigation Project Contract occurred on December 5, 1980. It appears, however, that the irrigation system did not function properly. This prompted the plaintiffs to commence this lawsuit on or about April 8, 1986, approximately five years after final payment.
To assure completion of the project, a performance bond was obtained. Defendant United Pacific was the surety on this performance bond. This performance bond contained the following pertinent condition:
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.
The contract referred to is the Irrigation Project Contract.
The statute of limitations for ordinary contract actions is six years. SDCL § 15-2-13(1). Plaintiff submits that the six year statute controls. Defendant United Pacific asserts that the two year contract provision controls.
ISSUE
WHETHER A SURETY CAN BY CONTRACT FIX A STATUTE OF LIMITATIONS SHORTER THAN OTHERWISE ALLOWED BY LAW (THUS DISREGARDING THE PROVISIONS OF SDCL CH. 53-9)?
DISCUSSION
Plaintiff Sheehan argues that the two year contract limitations period is void, pointing to SDCL § 53-9-6, which reads in part:
Every provision in a contract restricting a party from enforcing his rights under it by usual legal proceedings in ordinary tribunals or limiting his time to do so, is void_ (Emphasis mine).
Since “[suretyship is a contract ...,” SDCL § 56-2-1, plaintiff believes SDCL § 53-9-6 controls.
Defendant United Pacific counters with SDCL § 56-2-12 which 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.
United Pacific asserts that this statute would allow it to provide for a shorter limitations period in its surety contracts. United Pacific, in essence, argues that the following rule applies:
Absent any statute to the contrary, the general rule followed by most courts has been to uphold provisions in private contracts limiting the time to bring suit where the limitation is reasonable, even though the period specified is less than the applicable statute of limitations.
Camelot Excavating, Etc. v. St. Paul Fire & Marine Insurance Co., 410 Mich. 118, 126, 301 N.W.2d 275, 277 (1981). United Pacific then takes the next step and argues that the two year contract limitations period is reasonable.
South Dakota has never adopted this reasonable limitation rule and we decline to do so now. Indeed, we have a statute to the contrary. We believe the proper rule is that the law should set the limitation periods, not private contracts. See Phenix Ins. Co. v. Perkins, 19 S.D. 59, 101 N.W. 1110 (1905), Vesey v. Commercial Union Assur. Co., 18 S.D. 632, 101 N.W. 1074 (1904).
Phenix Insurance, supra, was a case where an insurance company tried to shorten the limitations period. This court, applying Section 1276 of the Revised Civil Code of 1903 (SDCL § 53-9-6’s predecessor), held that such a contractual provision is void. We see no reason to have a different rule for surety contracts. A surety arrangement, after all, is a close relative to an insurance contract.
United Pacific’s reliance on Section 56-2-12 is misplaced. The purpose of § 56-2-12 is to allow a surety flexibility in choosing which specific acts or omissions of *571the principal it will cover.1 A surety can limit the extent of its liability, but not the time for bringing suit.
The contractual two year limitations period is void. The suit against defendant United Pacific was timely begun under the six year statute of limitations for contracts.
Reversed and remanded.
WUEST," C.J., and MORGAN and YOUNG, Circuit Judges, concur.
SABERS, J., dissents.
DOBBERPUHL, Circuit Judge, sitting for HENDERSON, J., disqualified.
YOUNG, Circuit Judge, sitting for MILLER, J., disqualified.

. “[T]he liability of the surety is no greater than that of the principal_” 74 Am.Jur.2d Surety-ship § 24 (1974).