Minnesota Session Laws - 1995, Regular Session

                             CHAPTER 31-H.F.No. 367 
                  An act relating to debt; providing for prompt payment 
                  of subcontractors of municipal contractors; modifying 
                  certain provisions relating to liens and performance 
                  bonds; amending Minnesota Statutes 1994, sections 
                  471.425, by adding a subdivision; 514.13; 574.28; 
                  574.30; and 574.31, subdivisions 1 and 2. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 471.425, is 
        amended by adding a subdivision to read: 
           Subd. 4a.  [PROMPT PAYMENT TO SUBCONTRACTORS.] Each 
        contract of a municipality must require the prime contractor to 
        pay any subcontractor within ten days of the prime contractor's 
        receipt of payment from the municipality for undisputed services 
        provided by the subcontractor.  The contract must require the 
        prime contractor to pay interest of 1-1/2 percent per month or 
        any part of a month to the subcontractor on any undisputed 
        amount not paid on time to the subcontractor.  The minimum 
        monthly interest penalty payment for an unpaid balance of $100 
        or more is $10.  For an unpaid balance of less than $100, the 
        prime contractor shall pay the actual penalty due to the 
        subcontractor.  A subcontractor who prevails in a civil action 
        to collect interest penalties from a prime contractor must be 
        awarded its costs and disbursements, including attorney's fees, 
        incurred in bringing the action. 
           Sec. 2.  Minnesota Statutes 1994, section 514.13, is 
        amended to read: 
           514.13 [BILL OF PARTICULARS STATUTORY LIENHOLDER RIGHTS; 
        NONEXCLUSIVE.] 
           Each lienholder shall attach to and file with a complaint 
        or answer a bill of the items of the lienholder's claim, 
        verified by the oath of some person having knowledge thereof, 
        and shall file such further and more particular account, as the 
        court may at any time direct.  Upon failure to file such 
        original or further bill, the lienholder's pleading shall be 
        stricken out and that claim disallowed.  The rights granted by 
        this chapter are nonexclusive.  No failure to comply with any of 
        the provisions of this chapter shall affect the right of any 
        person to recover, in an ordinary civil action, from the party 
        with whom a contract was made.  
           Sec. 3.  Minnesota Statutes 1994, section 574.28, is 
        amended to read: 
           574.28 [APPROVAL AND FILING OF BOND.] 
           Before beginning work on the contract for the public work, 
        the contractor on whose behalf the payment and performance bonds 
        were issued must file both bonds with the treasurer, board, or 
        officer having financial management of the obligee public body 
        named in the bonds.  The payment and performance bonds must list 
        the address of the contractor on whose behalf the bonds were 
        issued and of the surety providing the bonds.  The payment and 
        performance bonds, if acceptable in form and content, must be 
        approved by the board or officer having financial management of 
        the obligee public body, or by the obligee's public body's 
        treasurer.  The public body must make the payment and 
        performance bonds available for inspection and copying upon 
        request.  An assignment, modification, or change of the 
        contract, or change in the work covered by the contract, or an 
        extension of time to complete the contract, does not release the 
        sureties on the bonds. 
           Sec. 4.  Minnesota Statutes 1994, section 574.30, is 
        amended to read: 
           574.30 [INSOLVENT OR INSUFFICIENT SURETIES.] 
           When, in the obligee's public body's judgment, a surety on 
        a bond required by the act is insolvent, or for any cause is no 
        longer a proper or sufficient surety, the obligee public body 
        may require the contractor to furnish a new or additional bond 
        within ten days; and thereupon, if so ordered by the obligee 
        public body, all work on the contract must cease until the new 
        or additional bonds are furnished.  If the bonds are not 
        furnished within the ten days, the obligee public body may, at 
        its option, terminate the contract and complete the same as the 
        agent, and at the expense of the contractor and its sureties.  
           Sec. 5.  Minnesota Statutes 1994, section 574.31, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CLAIMS ON PERFORMANCE BONDS.] In the event 
        of a claim by the public body on a performance bond, no action 
        shall be maintained later than permitted under the statute of 
        limitations applicable to the claim.  As a condition precedent 
        to bringing an action upon a performance bond, the public body 
        must first serve written notice of claim under the contractor's 
        bond personally or by certified mail upon the surety who issued 
        the bond and upon the contractor on whose behalf the bond was 
        issued specifying the nature and amount of the claim and the 
        date of breach or default, and the performance requested of the 
        surety.  Nothing in this subdivision may be construed to 
        otherwise affect the common law or equitable rights of 
        performance bond sureties, principals, or public bodies that are 
        obligees. 
           Sec. 6.  Minnesota Statutes 1994, section 574.31, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CLAIMS ON PAYMENT BONDS.] (a) In the event of a 
        claim on a payment bond by a person furnishing labor and 
        materials, no action shall be maintained on the payment bond 
        unless, within 120 days after completion, delivery, or provision 
        by the person of its last item of labor and materials, for the 
        public work, the person serves written notice of claim under the 
        payment bond personally or by certified mail upon the surety 
        that issued the bond and the contractor on whose behalf the bond 
        was issued at their addresses as stated in the bond specifying 
        the nature and amount of the claim and the date the claimant 
        furnished its last item of labor and materials for the public 
        work.  For the purpose of this section, notice is sufficient if 
        served personally or via certified mail to the addresses of the 
        contractor and surety listed on the bond.  The form of notice is 
        sufficient if it is substantially as follows: 
                NOTICE OF CLAIM ON PAYMENT BOND FOR PUBLIC WORK
              TO:  ...................................................
                        (Surety that issued payment bond)
              and ....................................................
                  (The contractor on whose behalf the bond was issued)
                 NOTICE IS HEREBY GIVEN that the undersigned claimant
              has a claim against the above named surety for labor and
              materials furnished by the undersigned for the public
              work described as follows:  ............................
              ........................................................
                        (Description of the public work)
              The labor and materials were furnished under a
              contract or agreement with .............................
              ........................................................
              (Name and address of contractor or supplier requesting
                   labor and materials from the claimant)
              The nature of the labor and materials furnished is as
              follows:  ..............................................
              ........................................................
              The amount of the claim is:  ...........................
              The date the claimant last furnished labor and materials
              to this public work is the ... day of ..........., 19...
              Claimant seeks payment of the claim according to the
              law.
                                                  ....................
                                                  Claimant
                                                  ....................
                                                  Address
                                                  ....................
             STATE OF ...............
                                  ss.
             COUNTY OF ..............
                  .................... being duly sworn on oath says
             that ... is .............. of the claimant named above and
             has knowledge of the claim and that the claim is correct,
             and no part of the claim has been paid.
                                             ......................
             Signed and sworn to before me
             on .............., 19..,
             by .......................          (Notary Seal)
             ..........................
                    Notary Public
           (b) If the contractor providing the payment bond fails to 
        comply with the filing requirements of section 574.28 by failing 
        to state its address or the address of the surety providing the 
        bond, then a claimant under the bond need not provide the surety 
        or the contractor written notice of its claim under paragraph 
        (a).  
           (c) An action to enforce a claim against the surety under 
        the bond must be commenced within one year from the date of 
        completion, delivery, or provision by the claimant of its last 
        item of labor and materials for the public work stated in its 
        notice of claim.  If no notice of claim was required because the 
        contractor providing the bond failed to comply with the 
        requirements of section 574.28, then any action under the bond 
        must be commenced within one year from the actual date of 
        completion, delivery, or provision by the claimant of its last 
        item of labor and materials for the public work.  Any other 
        person having a cause of action on a payment bond may be 
        admitted, on motion, as a party to the action, and the court 
        shall determine the rights of all parties.  If the amount 
        realized on the bond is insufficient to discharge all the claims 
        in full, the amount must be prorated among the parties.  
           (d) The claimant can extend the time within which to bring 
        an action to enforce a claim under the bond to beyond that 
        specified in paragraph (c) either by:  (1) written stipulation 
        between the claimant and surety stating the extended deadline 
        and executed by both parties before the expiration of one year 
        from the actual date of completion, delivery, or provision by 
        the claimant of its last item of labor and materials for the 
        public work; or (2) written notice extending by one year the 
        deadline specified in paragraph (c) sent by the claimant to the 
        surety via certified mail 90 days before the expiration of the 
        deadline specified in paragraph (c), which notice is not 
        objected to in a return written notice sent by the surety to the 
        claimant via certified mail with 30 days after the surety's 
        receipt of claimant's notice.  If a claimant's payment is not 
        yet contractually due within one year from the actual date of 
        completion, delivery, or provision by the claimant of its last 
        item of labor and materials, the court shall continue and not 
        dismiss the action until the payment is due. 
           Sec. 7.  [EFFECTIVE DATE.] 
           Sections 1 to 5 are effective August 1, 1995.  Section 1 
        applies to contracts for which notice of invitations for bids or 
        requests for proposals are issued after July 31, 1995.  Section 
        6 takes effect retroactively, beginning August 1, 1994. 
           Presented to the governor April 4, 1995 
           Signed by the governor April 5, 1995, 10:00 a.m.