Milwaukee Enforcers, Inc. v. Ball

Decision Date03 February 1976
Docket NumberNo. 547,547
Citation71 Wis.2d 298,237 N.W.2d 715
PartiesMILWAUKEE ENFORCERS, INC., a Domestic Corporation, Plaintiff-Appellant, v. Roger BALL, d/b/a Ball Brothers Contractors, Defendant, and Aetna Casualty & Surety Company, a Foreign Corporation, and City of Milwaukee, a Municipal Corporation, Defendants-Respondents. (1974).
CourtWisconsin Supreme Court

Eisenberg & Kletzke, Milwaukee, for appellant.

Borgelt, Powell, Peterson & Frauen, Milwaukee, and Thomas N. Klug, Milwaukee, of counsel, for defendant-respondent Aetna Casualty & Surety Co.

James B. Brennan, City Atty. and Charles R. Theis, Asst. City Atty., Milwaukee, for defendant-respondent City of Milwaukee.

HANLEY, Justice.

The sole issue presented is whether the City's policy of performance bonding of licensed improvement contractors provides for the payment of bond proceeds to persons harmed by such contractors' defaults.

The dispute here is affected by the determination of the nature of this bond. Appellant has admitted that the purpose of the bond was to deter contractor failures and ordinance violations, but it is also claimed that the bond is an 'automatic source of funds in the event of any damage caused by the contractor's breach of the contract and/or ordinance.'

It has been well summarized in 12 Am.Jur.2d Bonds sec. 1 (1964) that:

'The term bond . . . includes . . . penal bonds conditioned upon the performance of duties of office, or other obligations undertaken by the principal obligor in the bond or collateral things to be done by the principal obligor; and indemnity and fidelity bonds or undertakings to indemnify the obligee against loss from conduct of the principal. . . .

'. . .

'A bond may be either single or conditional; . . . it is conditional when the obligor undertakes for himself, his heirs, administrators, or executors to pay a fixed sum of money upon condition that if he does some particular act, the obligation shall be void, or stipulates that the obligation shall remain in full force in the event the obligor does some particular act or fails to do such an act. The only covenant or promise to pay by the obligor in such bonds is to pay the penalty if the condition is not fulfilled; they are otherwise known as penal bonds.'

The bond here in question has the principal and surety, as well as their 'heirs, executors and administrators,' binding themselves to pay the 'penal sum' of $1,000. This obligation 'shall be void' if the principal fulfills the condition, repeated above, of complete work in accordance with all ordinances; otherwise the obligation remains in full force and effect. It is also provided that the aggregate liability of the surety for all claims shall not exceed the penal sum of $1,000. Its form meets the above description of a conditional, penal bond.

Aetna cites certain features of the bond to support this conclusion. The bond names only the City as obligee and recites that the payment condition is in abeyance as long as the contractor performs so as to 'protect fully health, safety and welfare of the public,' which is the bases for municipal police power. Courtesy Cab Co. v. Johnson (1960), 10 Wis.2d 426, 432, 103 N.W.2d 17. The bond and ordinance also recite that the obligation of the contractor is to comply with ordinances regulating his livelihood. Finally, the absence of any reference to indemnification in the bond and ordinance and the presence of the 'penal sum' language is also cited.

These contentions are not conclusively determinative of the question of whether a bond required in a licensed occupation does not partake of indemnity even if bearing penal characteristics. See Anchor Casualty Co. v. Commissioner of Securities (1961), 259 Minn. 277, 107 N.W.2d 234. The use of the phrase 'penal sum,' for example, has been construed in this state to a refer to a penalty which is invoked to correspond with actual damage, rather than being a liquidated damage upon any breach. City of Madison v. American Sanitary Engineering Co. (1903), 118 Wis. 480, 502--03, 95 N.W. 1097. Also, the ordinance first requires that the contractor 'perform and sufficiently complete all work engaged in' and then 'guarantee that the contractor will perform in accordance with all the provisions' of the section and other ordinances. The bond couples these duties as one without distinction, such that mere default seemingly does not violate the condition. Finally, this court has recognized that bonds may be for the benefit of one other than the named obligee, Fidelity & Deposit Co. of Maryland v. Madson (1930), 202 Wis. 271, 276, 232 N.W. 525, and that the intended beneficiary may maintain an action for the proceeds. Therefore, at best, the form of the bond does not compel that it necessarily be construed as the respondents contend.

Appellant relies heavily on Anchor Casualty, supra, and its forerunner, Graybar Electric Co. v. St. Paul Mercury Indemnity Co. (1940), 208 Minn. 478, 294 N.W. 654. In Graybar, a state statute required master electricians to give bond to the state in the penal sum of $5,000, such bond to be conditioned upon 'the faithful performance of all work entered upon or contracted for by said master.' The immediate predecessor of the law contained the exact same language but also contained a provision allowing a private right of action on the bond to those injured or damaged through want of skill or improper materials used by the electrician. The court in Graybar chose not to view the trimming of a right to sue under certain circumstances as foreclosing the bond from enabling suit by the public for defaults. Other statutes providing specific rights to sue for indemnity were seen as evidence of an overall legislative intent for indemnity rather than merely penal provisions.

Anchor Casualty generally followed the Graybar Case conclusion that

'(w)hen the legislature licenses a particular occupational group under bond as a part of a general statutory enactment to protect the public in its relations with this group, ordinarily, absent clear language to the contrary, the most reasonable inference is that a right of action exists on the bond for those to be protected.' 294 N.W. at 655.

It also characterized such bonds as indemnity bonds rather than penal bonds. The bond there involved licensing of real estate brokers, apparently without a specific default condition being imposed.

The above-quoted rule of Graybar is helpful when legislative intent to that end may be discerned from the whole of the law or from...

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4 cases
  • A.W. Huss Co. v. Continental Cas. Co.
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • May 16, 1984
    ... ...         Howard A. Davis, Habush, Habush & Davis, S.C., Milwaukee, Wis., for plaintiff-appellant ...         Jack R. Wiedabach, ... ...
  • Watson v. Harmon
    • United States
    • South Carolina Court of Appeals
    • January 16, 1984
    ...exists by clear implication. When the legislative intent is discerned from the whole of the law [ cf. Milwaukee Enforcers Inc. v. Ball, 71 Wis.2d 298, 237 N.W.2d 715 (1976) ] and the language of the bond is considered together with the Commission's rule and regulation regarding the revocati......
  • Chromium Indus. v. Milwaukee Boiler Mfg. Co.
    • United States
    • Wisconsin Court of Appeals
    • July 30, 1996
    ...this court reviews de novo. Id. The replevin bond issued by Hartford is a conditional, penal bond. See Milwaukee Enforcers, Inc. v. Ball, 71 Wis.2d 298, 301, 237 N.W.2d 715, 716 (1976). It is similar to the one at issue in Bell Captain North Central, Inc. v. Anderson, 112 Wis.2d at 402, 332......
  • State ex rel. Lynch v. Dancey
    • United States
    • Wisconsin Supreme Court
    • February 3, 1976

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