Kniess v. Am. Sur. Co. of N.Y.

• Decision Date: 02 December 1941
• Citation: 239 Wis. 261,300 N.W. 913
• Parties: KNIESS et ux. v. AMERICAN SURETY CO. OF NEW YORK et al.
• Court: Wisconsin Supreme Court

239 Wis. 261

300 N.W. 913

KNIESS et ux.

v.AMERICAN SURETY CO. OF NEW YORK et al.

Supreme Court of Wisconsin.

Dec. 2, 1941.

Appeal from an Order of the Circuit Court for Marathon County; George J. Leicht, Judge.

Affirmed.

Action by Charles W. Kniess and Frieda Kniess, his wife, plaintiffs, v. American Surety Company of New York, a foreign corporation, and New York Casualty Company, a foreign corporation, defendants, to recover the amount of a judgment against the Jefferson Construction Company arising out of blasting damage to plaintiffs' property. The blasting was done in connection with a contract for the laying of a sewer. Defendants had executed a bond to the city of Wausau to secure the performance of this contract. A demurrer to plaintiffs' complaint was sustained, whereupon plaintiffs pleaded over and defendants answered. Plaintiffs demurred to defendants' answer and the court overruled the demurrer. Plaintiffs appeal, both from the order sustaining the demurrer to the first complaint and from the order overruling the demurrer to defendants' answer. The material facts as set forth in the pleadings will be stated in the opinion.

Genrich & Genrich, of Wausau (Herbert L. Terwilliger, James A. Fitzpatrick, and William J. Hoffmann, all of Wausau, of counsel), for appellants.

North, Bie, Duquaine, Welsh & Trowbridge, of Green Bay, for respondents.

WICKHEM, Justice.

No particular significance appears to attach to the fact that this is an appeal from two separate orders. It is assumed by the parties that there are now before the court on the basis of a complaint and answer enough facts upon which to determine the question of law argued upon this appeal; hence the facts will merely be stated without reference to the pleadings.

[1][2] During the years 1939 and 1940 Jefferson Construction Company as principal contractor built an interceptor sewer in the city of Wausau. The contract price was approximately $201,000. The contract required that before work was commenced the contractor obtain compensation insurance, public liability and property damage insurance. Riders or separate policies covering the special hazards arising from the operation of trucks, the undermining of adjacent structures or blasting operations were also required. The contract was specific as to the amount of coverage for public liability and property damage insurance. While blasting rock the contractor negligently damaged plaintiffs' property. Plaintiff sued the contractor and recovered judgment in the sum of $3,577.19. This judgment was affirmed upon appeal to this court. The Wisconsin Mutual Insurance Company assumed defense of the action under its policy but before paying the judgment got into financial difficulties and is in the hands of the State Insurance Commissioner for liquidation. Defendants sustained large losses by reason of contributions to the cost of completing the project and the payment of valid claims for labor and materials. The contract of guaranty upon which defendants are sued was given in compliance with section 289.16(1) which provides in substance that all contracts for the performance of labor or furnishing of materials involving $100 or more and having to do with public work of any kind shall contain a provision for the payment by the contractor of all claims for labor performed and materials furnished including fuel, lumber, building materials, machinery, vehicles, motor oil, premiums for workmen's compensation insurance, etc. It is further provided that no such contract shall be made unless the contractor shall give a bond, the penalty of which shall not be less than the contract price, conditioned for the faithful performance of the contract and payment to each person entitled thereto of all claims for labor performed, materials furnished, etc. There is no doubt upon the record that the bond was furnished to comply with this statutory requirement. The conditions of the bond are that the principal shall well and truly perform and fulfill all the undertakings, covenants, terms and conditions of the proposal and agreement and that the principal shall promptly the principal to all persons supplying the principal with labor and materials in the prosecution of the work. The bond is no broader than the calls of the statute. To engage that the principal will well and truly perform and fulfill all of the undertakings, covenants, terms and conditions of the proposal and agreement is nothing more than an agreement that he will faithfully perform his contract and the detail in which the bond is stated does not in any way enlarge the duties of the principal. The contract executed in this case contains internal evidence that the bond required by it and actually executed was intended simply to be a compliance with section 289.16. Section (1) of the general conditions of the contract which by the express terms of the contract prevails over and supersedes any other provisions in the contract provides as follows:

“The contractor shall furnish a surety bond (form attached) in an amount at least equal to 100 per cent of the contract price as security for the faithful performance of this contract and for the payment of all persons performing labor and furnishing materials in connection with this contract.”

This is nothing more than the requirement of an ordinary performance bond.

In addition, the contract contains the following rules relating to the performance bond:

“1. Exhibit 1 is a Performance Bond to be used in those cases when an executed contract and bond for 100 per cent of the bid price is submitted with the bid. (See Sections 62.15 and 40.54 Wisconsin Statutes, 1935, which apply to Cities and City School Boards). This form must be fully executed when submitted with a bid.

“2. Exhibit 2 is a form of bond to be used in all cases where a certified check, cash or government bond is submitted as a bid guarantee. This form of bond is executed by the successful bidder only after the award of a contract.

“3. Care should be observed to execute bonds fully and properly. Approval by the Owner is required. (Section 289.16, Wisconsin Statutes, 1935).”

Exhibit 1 which was the bond used in this case contains the following note:

“(Note: This is not a Bid Bond Form. It Is for Use in Those Cases Where a Signed Contract and 100% Performance Bond Are Submitted with the Proposal).”

Following the signature is the following note: “(Note: The bond must be approved and the approval date in every case; refer to section 289.16 Wisconsin Statutes 1935. The title of the person signing must be indicated.)”

These notations fortify the conclusion that nothing more than a conventional performance bond was contemplated and executed. Under the decisions in this state the bond given under the terms of section 289.16 has for its...