This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The City of Santa Fe contracted Lone Mountain Contracting, Inc. to repair a water tank, requiring the contractor to post a performance bond issued by Travelers Casualty & Surety Co. The City later determined the work was substandard. The bond included a two-year time-to-sue provision, while the statutory limitation for claims under bonds is six years.
Procedural History
- District Court of Santa Fe County: Granted summary judgment in favor of Travelers Casualty & Surety Co., holding that the two-year time-to-sue provision in the bond applied.
Parties' Submissions
- Appellant (City of Santa Fe): Argued that the two-year time-to-sue provision violated public policy and that the six-year statutory limitation should apply. Claimed it was not a party to the bond and did not negotiate its terms.
- Appellee (Travelers Casualty & Surety Co.): Contended that the City was bound by the bond's terms, including the two-year limitation, as the bond was part of the construction contract. Asserted that public policy did not preclude enforcement of the time-to-sue provision.
Legal Issues
- Whether the two-year time-to-sue provision in the performance bond is enforceable despite the six-year statutory limitation.
- Whether the City of Santa Fe, as a party to the construction contract, is bound by the terms of the performance bond.
Disposition
- The Court of Appeals of New Mexico affirmed the District Court's decision, holding that the two-year time-to-sue provision in the bond was enforceable and binding on the City of Santa Fe.
Reasons
Per Castillo J. (Sutin C.J. and Wechsler J. concurring):
The Court held that the two-year time-to-sue provision in the bond was enforceable and binding on the City of Santa Fe. It relied on the precedent set in State ex rel. Udall v. Colonial Penn Ins. Co., which upheld similar contractual limitations, emphasizing that parties are free to contract and are bound by clearly expressed terms. The Court rejected the City's public policy argument, noting that the protection of the public fisc was insufficient to override the contractual provision.
The Court also determined that the City was a party to the bond, as it required the bond as part of the construction contract and had the opportunity to review its terms. The City's argument that it did not negotiate the bond terms was dismissed, as the precedent in Udall established that active negotiation is not necessary for a party to be bound by a contract.
The Court found no genuine issues of material fact that would preclude summary judgment. The City's claims about the review process and execution of the bond were deemed immaterial, as the City had the opportunity to review the bond and was bound by its terms upon execution of the contract.