Elec. Appliance Co. v. U.S. Fid. & Guar. Co.

Decision Date09 April 1901
Citation85 N.W. 648,110 Wis. 434
CourtWisconsin Supreme Court


Appeal from circuit court, Dodge county; James J. Dicks, Judge.

Action by the Electric Appliance Company against the United States Fidelity & Guaranty Company and others. From an order overruling a demurrer to the complaint, defendant company appeals. Reversed.

The defendant the United States Fidelity & Guaranty Company has appealed from an order overruling a demurrer to the plaintiff's complaint. The complaint was challenged on the ground that there was a defect of parties defendant, and that it did not state facts sufficient to constitute a cause of action. It appears that the city of Waupun was desirous of erecting a municipal lighting plant. Bids were invited, and on September 2, 1899, a contract was entered into between the city and the defendants Rockwell & Snyder to erect the same, and have it fully completed and ready for delivery on or before November 15th of that year. The contract stipulated, among other things, that the plant should be delivered “free and clear of all claims or liens for labor performed or materials furnished or otherwise,” and that, before final payment should be made therefor or be deemed to be due on said contract, the contractors should present to the city receipts in full for all labor performed and materials furnished in and about the construction and installation of the plant. It also provided that the contractors should furnish a bond in the sum of $20,000, conditioned for the faithful performance of the contract on their part, and for the payment by them of all claims for materials and labor. A bond was given by the defendant guaranty company conditioned that the contractors should “well, truly, and faithfully comply with all the terms, covenants, and conditions of said contract on their part to be kept and performed, according to its terms,” subject to certain provisions now to be stated: The city was to notify the surety, in writing, of any act on the part of the contractors under the contract, which might involve a loss for which the surety might become liable, immediately after the occurrence of such act shall have come to the city's knowledge. In the event of a breach of any condition of the bond, the surety was to be subrogated to all rights of the contractors growing out of the contract, and all deferred payments or moneys thereafter to become due were to be cred ited upon any claim the city might make upon the surety because of such breach. Another condition was that the city should give the surety “due notice before the last payment under the contract herein referred to is made to the principal; otherwise, this obligation shall be void as to any liability of the surety hereunder.” The complaint then sets out that, in order to carry out the contract, the contractors purchased merchandise and machinery of the plaintiff amounting to $2,396.79, which were used in the construction and equipment of the plant. The contractors have fully complied with the conditions of the contract on their part, except that they have not paid plaintiff's demands and the claims of others. The city has accepted the plant and paid the contractors therefor. It is further alleged that the surety was duly notified by the city of the failure of the contractors to comply with the conditions of their contract as to the payments of said claim immediately after its breach, and immediately after the occurrence of such breach had come to the knowledge of the city, a copy of such notice being attached to the complaint. The prayer for relief is that plaintiff be subrogated to the rights of the city as against the other defendants, and for judgment against them for the amount of its claim. The bond in question runs to the city of Waupun and the state of Wisconsin, but, inasmuch as it does not appear that the state had any interest in the contract or any interest in the controversy, the case will be considered the same as though the state was not a party to such bond.

Winkler, Flanders, Smith, Bottum & Vilas (Dupee, Judah, Willard & Wolf, of counsel), for appellant.

C. E. Hooker and Ela, Grover & Graves, for respondent.

BARDEEN, J. (after stating the facts).

If any liability exists on the part of the guaranty company, it must rest upon the fact that it has contracted with the city to pay the debt due from the contractors to the plaintiff. The demand to be subrogated to the rights of the city as against the contractors has no foundation to rest upon, because it affirmatively appears that the city has accepted the plant and paid the contractors therefor. The city has no claim against the surety, because it has suffered no loss, and has sustained no injury, by reason of the failure of the contractors to pay the plaintiff's claim. By reference to the contract, it will be seen that the contractors bound themselves to furnish a bond, not only for the faithful performance of the contract, but for the payment of all claims for labor and materials. The bond accepted by the city omitted this latter provision, and was conditioned only for the performance of the contract. The contract was apparently drawn upon the theory that the city might be liable for the claims of laborers and material men. Such, however, is not the fact. In Burnham v. City of Fond du Lac, 15 Wis. 193, approved in Buffham v. City of Racine, 26 Wis. 449, this court held that a municipal corporation was not subject to the process of garnishment. Basing it upon...

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