Graybar Electric Co. v. New Amsterdam Casualty Co.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Plaintiff supplied to a contractor materials for the performance of public work at Knoxville, Tennessee, and upon default in payment therefor began this action on a performance bond whereby the defendant surety company undertook with the local public authorities to make good the claims of laborers and materialmen. The answer of the surety company sets forth provisions of a Tennessee statute which authorizes a bond of that type. The substance of the several defenses is that the plaintiff failed to comply with conditions laid down by this statute as necessary to the recovery demanded in the complaint.

On motion by the plaintiff, Special Term held the defenses to be invalid and awarded to the plaintiff a summary judgment for the price of the materials in question — $39,889.23. A cross motion by the defendant for summary dismissal of the complaint was denied. The Appellate Division affirmed and granted leave to the defendant to present the case to this court for review.

The ground of the decision at Special Term was that the bond in suit is a common-law bond. After that decision had been affirmed at the Appellate Division, the highest court of Tennessee in the case of City of Knoxville v. Melvin F. Burgess (175 S.W.2d 548 [Tenn.]) pronounced this same bond to be a statutory bond insofar as the rights of laborers and materialmen are concerned. The bond was made and delivered in Tennessee and was there to be performed. Hence the character of the obligation of the instrument is to be determined in accordance with the relevant law of that State whether declared as common law or by statute. (Teel v. Yost, 128 N.Y. 387, 394.) We have been licensed to take judicial notice of foreign law (Civ. Prac. Act, § 344-a). Accordingly, we now acknowledge the authority of City ofKnoxville v. Melvin F. Burgess (supra) and we recognize the statutory nature of the bond in suit. (Whether section 344-a is to be applied in cases triable as of right by jury we need not now consider.)

The statute of Tennessee on which the surety company relies for its defenses makes these provisions: "Such furnisher of labor or material, or such laborer, to secure the advantage of the two foregoing sections [permitting them to sue on the statutory bond] shall, after such labor or material is furnished, or such labor is done, and within ninety days after the completion of such public work, give written notice by return-receipt registered mail, or by personal delivery, either to the contractor who executed the bond, or to the public official who had charge of the letting or awarding of the contract; such written notice to set forth the nature, and itemized account of the material furnished or labor done, and balance due therefor; and a description of the property improved; provided, that in the case of public work undertaken by a municipality, or any of its commissions, notice, or statement herein required, so mailed or delivered to the mayor thereof, shall be deemed sufficient * * *". (Tennessee Code, § 7956.) "Several persons entitled may join in one suit on such bond, or one may file a bill in equity in behalf of all such, who may, upon execution of a bond for costs, by petition assert their rights in the proceeding; provided, that action shall be brought or claims so filed within six months following the completion of such public work, or of the furnishing of such labor or materials." (Tennessee Code, § 7959.)

Inasmuch as the bond in suit was given pursuant to this statute, the statutory text is to be read into the instrument. The notice so prescribed was never served by this plaintiff-materialman nor was this action commenced within the six months period so defined. In that state of the controversy, the decision now to be passed will determine this question: Do the provisions of the Tennessee statute pertain to the substance of the obligation of the bond in suit, with the result that the plaintiff has no case; or do these provisions go merely to the remedy for a breach of that obligation, with the result that they are immaterial, since the law that governs the remedy is the law of New York. (See Reilly v. Steinhart, 217 N.Y. 549.)

In City of Knoxville v. Melvin F. Burgess (supra, pp. 551-552), the highest Court of Tennessee said: "The statute does not prescribe any form in which the bond for the protection of laborers and materialmen is to follow. If this bond had contained a provision for notice and a provision limiting the time for suit, such provisions would only be effective in so far as they coincided with the statutory requirements as to notice and time of suit. It has been held in a number of cases where the statute was silent as to the terms of the bond, that in case of a conflict between provisions of the bond and provisions of the statute as to the time limits prescribed by the statute, the statutory limits would prevail. Smith W. Co. v. Carlsted,165 Minn. 313; Lawson v. County Board of Pub. Instruction,118 Fla. 246; United States Fidelity G. Co. v. TafelElectric Co., 262 Ky. 792. The Kentucky case grew out of a Tennessee contract. The court held that it was governed by the Tennessee statute and that although the bond provided a longer time in which suit might be brought than did the statute, nevertheless the short limitation of the Tennessee statute controlled and barred the suit."

To our minds, these words mean that the provisions of the statute of Tennessee were limitations of the liability undertaken upon the bond in suit and not limitations of the rights of action thereby conferred upon laborers and materialmen. (Cf. NationalSurety Co. v. Architectural Co., 226 U.S. 276; Home Ins. Co. v. Dick, 281 U.S. 397, 407; Clark Plastering Co. v. SeaboardSurety Co., 259 N.Y. 424.) The Tennessee statute (as so construed by the highest court of that State) must here be accorded the full faith and credit which is enjoined by the Federal Constitution in respect of the "public acts" of a sister State. (John Hancock Ins. Co. v. Yates, 299 U.S. 178.)

It follows that the judgments should be reversed and the motion of the defendant for dismissal of the complaint granted, with costs in all courts. (See 292 N.Y. 643.)

LEHMAN, Ch. J., LEWIS, CONWAY, DESMOND and THACHER, JJ., concur; RIPPEY, J., dissents and votes to affirm.

Judgments reversed, etc.