City of Santa Fe v. Travelers Casualty & Surety Co.

Summary

The Supreme Court of New Mexico held that a shorter time-to-sue provision in a performance bond issued under the Little Miller Act is unenforceable against a governmental entity unless the entity directly contracted with the contractor or surety for that limitation. Because Santa Fe was an intended third-party beneficiary of the bond and did not directly agree to the two-year provision, the six-year statute of limitations governing the underlying contract applied. The court reversed the district court and Court of Appeals and remanded for further proceedings.

Holdings

1. Unless the governmental entity directly contracts for a shorter time-to-sue provision with the contractor or surety, a shorter limitations provision contained in a performance bond issued under the Little Miller Act is unenforceable against the governmental entity.
2. Section 13-4-18(A)(1)'s requirement that the performance bond be satisfactory to the governmental entity concerns the surety's qualifications and the amount of the bond; it does not make the governmental entity a party to the bond or impose a duty to negotiate or accept every other bond term.

Questions Presented

1. Whether a two-year time-to-sue provision in a performance bond issued under New Mexico's Little Miller Act is enforceable against a governmental entity when the entity did not directly contract with the contractor or surety for that shortened period.
2. Whether Section 13-4-18(A)(1) requires a governmental entity to review and accept all terms of a performance bond, thereby making the entity a party to the bond.

Disposition

reversed_and_remanded