Liquidation of Wisconsin Sur. Corp., Matter of
| Decision Date | 01 March 1983 |
| Docket Number | No. 81-447,81-447 |
| Citation | 330 N.W.2d 768,111 Wis.2d 194 |
| Parties | In the Matter of the LIQUIDATION OF WISCONSIN SURETY CORPORATION, a Wisconsin insurance corporation, A. Roy Anderson, Special Deputy Commissioner of Insurance of the State of Wisconsin, as liquidator. H.L. MUNCH COMPANY, INC., Claimant-Appellant-Petitioner, v. A. Roy ANDERSON, Special Deputy Commissioner of Insurance of State of Wisconsin, as liquidator, Respondent. |
| Court | Wisconsin Supreme Court |
John T. Clark, Milwaukee (argued), for claimant-appellant-petitioner; John T. Clark and Miller, Magyera & Clark, S.C., Milwaukee, on brief.
Christopher J. Wilcox, Madison (argued), for respondent; La Follette, Sinykin, Anderson & Munson, Madison, on brief.
The issue of the case is whether under sec. 779.14(1), Stats., 1 a supplier who provides materials which are used or consumed in the performance of a bonded public improvement contract is entitled to recover against the surety where the materials were provided initially pursuant to a general agreement with the prime contractor without regard to the specific public improvement contract. The circuit court for Dane county, the Honorable William F. Eich, answered "no." The court of appeals affirmed in an unpublished opinion. We reverse, 107 Wis.2d 737, 321 N.W.2d 363.
The H.L. Munch Co., Inc. (Munch Company) and State Sand and Gravel Company (State Sand) had done business together for many years, principally with State Sand being the ready-mix supplier to the Munch Company. In May, 1970, State Sand successfully bid on the Lannon and Menomonee Falls highway projects. Shortly thereafter, Henry Munch, president of the Munch Company, and William Retzlaff, president of State Sand, agreed that State Sand would lease Munch Company equipment for use on the Lannon project for $25,000 and for use on the Menomonee Falls project for an additional $25,000.
Several months later, State Sand was the successful bidder on the Dane and Marathon counties highway projects. Munch agreed with Retzlaff that State Sand would lease Munch Company's equipment for use on the Dane county project for $55,000 and on the Marathon county project for $75,000.
The Munch Company equipment was used on the Lannon and Menomonee Falls projects, and as it was released from those projects, it was sent to the Dane and Marathon Counties projects where it was also used. By the end of the 1970 construction season, approximately 50 percent of the work on the Dane and Marathon Counties projects for which the Munch Company's equipment was needed was completed.
Accordingly, the Munch Company billed State Sand for the equipment listing each project separately as follows:
Lannon $25,000
Menomonee Falls $25,000
Dane County $27,500
Marathon County $37,500
After State Sand failed to pay the Munch Company for the rental value of the equipment used on the four highway projects, the Munch Company commenced suit. Due to the bankruptcy of State Sand and the subsequent liquidation of Wisconsin Surety, the Munch Company presented its claim in the Wisconsin Surety liquidation proceeding. Munch sought recovery of the sum of $129,455.28, representing the rental value of equipment for the four projects, plus $14,455.28 in the amount of alleged damaged and lost equipment attributable to the Dane and Marathon counties projects.
The liquidator issued a determination that the claim of the Munch Company be disallowed in full. The Munch Company filed an objection to the liquidator's determination and, pursuant to sec. 645.62, Stats., 2 a hearing was held before the circuit court for Dane County. The trial judge determined that the Munch Company's claims with respect to two of the projects were barred for failure to comply with the statutory time limit under sec. 289.14(2), Stats. (1971). 3 That part of the trial court's determination was not challenged on appeal, and, accordingly, the amount presently at issue concerns claims on the Marathon and Dane counties projects, which total $79,455.28.
The trial court also held that since there was no separate project billing by Munch Company and that the equipment was furnished on an "as needed" basis pursuant to a pre-existing agreement, Wisconsin Surety could not be held liable under such circumstances.
The court of appeals affirmed, holding that the Munch Company did not intend to provide its equipment on specific projects. The court stated:
"Because Munch supplied the equipment to State Sand pursuant to an agreement other than the specific, public works contracts, it is outside the scope of persons protected by State Sand's bond issued by Wisconsin Surety for the state highway projects, and the circuit court properly denied Munch's claims against Wisconsin Surety."
The intent of the legislature when it enacted the public improvement bond statute was to make contractors, subcontractors and suppliers on public jobs equally protected with those on private jobs. Southern Surety Co. v. Metropolitan S. Comm., 187 Wis. 206, 211, 201 N.W. 980, 204 N.W. 476 (1925). The purpose of the lien statutes is to provide protection for the persons who improve the property of others by their work. City Lumber & Supply Co. v. Fisher, 256 Wis. 402, 406, 41 N.W.2d 285 (1950). Since liens may not be filed against public projects, the bond statute was enacted to protect public project contractors, subcontractors and suppliers.
Sec. 779.14(1), Stats., requires the prime contractor to agree to pay his subs and suppliers who furnish labor or materials used in performing the contract. Since there are no construction lien rights against the property owned by a public body to provide payment security to subs and suppliers, as is true in private construction contracts (sec. 779.01(3)), the statute requires the prime contractor to post a bond, except in specified circumstances where other appropriate guarantees are provided in the contract. The bond shall be in an amount not less than the contract price and:
"[S]hall be conditioned for the faithful performance of the contract and the payment to every person entitled thereto of all the claims for labor performed and materials furnished under the contract, to be used or consumed in making the public improvement or performing the public work as provided in the contract and this subsection." (Emphasis added.)
The underlying issue in this appeal is the meaning of the phrase "under the contract." We hold that this phrase has nothing to do with whether the supplier makes its agreement with the prime contractor before or after the prime contractor receives the contract award from the state, nor whether the agreement between prime contractor and supplier references the specific public improvement contract for which the materials will be provided. "Under the contract" means that the labor or materials was used or consumed on the public improvement project and within the scope of the particular prime contract which the surety company bonded.
In this case, the Munch Company's equipment was rented by State Sand and used by State Sand in performing the specific contracts which Wisconsin Surety bonded. That is all the statute requires. Ozaukee Sand & Gravel Co. v. Milwaukee, 243 Wis. 38, 43, 9 N.W.2d 99 (1943) relied on by the court of appeals is not controlling. In that case the nature of the contract and the type of job being considered did not constitute a contract for public improvement within the meaning of the statute, and, therefore, the then existing trust fund statute did not apply.
Harnischfeger Sales Corp. v. Kehrein Bros., 229 Wis. 225, 281 N.W. 918 (1938) was the other case relied on by the court of appeals but it also is not applicable to this case. In Harnischfeger the claimant had sold the equipment forming the basis for the bond claim to the prime contractor four years prior to the performance of the work. We there held that there was no bondable claim in the seller, since it could not be claimed the seller furnished the machines for the specific public improvements project. That is not the situation in the instant case where Munch Company's equipment, though rented, was used by State Sand in Wisconsin Surety's bonded project. The seller of equipment does not need the protection of the bond statute, since it can secure payment by retaining a lien on the equipment sold or...
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