The opinion of the court was delivered by: HENRY KENNEDY, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs, an estate and eight individuals, seek to hold
defendant, The Hartford Financial Services Group, Inc.
("Hartford"), an investment and insurance company, liable for
$200,000 on a bond Hartford issued to cover liability imposed on
First Government Mortgage and Investors Corp. ("First
Government"), a mortgage lender against which plaintiffs hold a
judgment in excess of $4 million. Before the court are the
parties' cross motions for summary judgment. Upon consideration
of the motions, the oppositions thereto, and the record of this
case, the court concludes that both motions must be granted in
part and denied in part.
In 1996, First Government applied for a mortgage license. In
order to satisfy licensing requirements and the District of
Columbia Mortgage Lender and Broker Act of 1996, D.C. Code §
26-1101 et seq., ("MLBA"), First Government purchased a bond
from Hartford in the amount of $50,000. Thereafter, in exchange
for an annual payment of $500, Hartford re-issued the bond each year for the next four years until First Government ceased
doing business in 2001.*fn1 Compl. ¶ 17.
In 2000, plaintiffs sued First Government alleging that it had
violated various federal and District of Columbia consumer
protection laws that govern mortgage lenders.*fn2 They
succeeded in winning a jury verdict against First Government in
the amount of $4.125 million in punitive damages, $543,734.25 in
attorneys' fees, and compensatory and statutory damages in
varying amounts for each plaintiff.*fn3 Plaintiffs now seek
to recover $200,000 on Hartford's bond.
As plaintiffs point out, the resolution of this case turns on
"whether Hartford is liable for $50,000 in each of the four years
covered by [the bond it issued to First Mortgage] or whether its
liability is limited to the amount in the bond for a single
year. . . ." Pls.' Mot. at 1. The court's resolution of the
issue, in turn, depends on whether the bond issued by Hartford,
along with its subsequent renewals, is a "continuous bond" or a "cumulative
bond." If the bond is continuous, Hartford's liability is only
the face value of the original bond, $50,000, regardless of how
many years the bond was in effect. If, on the other hand, the
bond is cumulative, Hartford is liable for up to $50,000 for each
year the bond was in effect and plaintiffs can demonstrate they
Plaintiffs' primary argument is that because the bond at issue
is "statutory," one required by law for the protection of the
public, it must be construed to be cumulative.*fn5 Hartford
disagrees, contending that even though its bond is "statutory,"
the language of the bond itself and the text of the MLBA show that it is continuous. Plaintiffs' have
the better argument.*fn6
A bond is a contract and is to be interpreted in accordance
with established rules of contract construction. United States
v. Insurance Company of North America, 131 F.3d 1037, 1041-42
(D.C. Cir. 1997). In instances where a bond is mandated by
statute, the provisions of the statute are to be read into the
bond. Speir v. United States, 31 App. D.C. 476, 483 (D.C. Cir.
1908) ("the statutory condition must be considered as read into
and made a part of the bond"). In addition, the bond must be
construed in light of the purpose of the statute. United States
v. American Surety Co., 200 U.S. 197, 205 (1906) (holding that
the bond must be read in light of "the declared purpose of the
statute"). Hence, whether a statutory bond is continuous or
cumulative is determined by whether the statute and the bond,
construed as a whole, indicate an intention that liability should
be limited to the amount of the original bond or extended each
time the bond is renewed.
1. The Language of the Hartford bond
Hartford contends that the language of its bond indicates that
it is continuous.*fn7 For example, Hartford points to a provision that states, "[t]his
obligation may be continued by an appropriate renewal certificate
in support of licenses issued for subsequent years." Pls.' Ex. 4;
Def.'s Ex. B. Hartford argues that "this" means that it is a
single obligation intended to extend for multiple years and
"continued" demonstrates the D.C. Council's intention for the
bond to be continuous. Def.'s Opp'n at 7. Hartford's argument is
unpersuasive for two reasons. First, as Hartford has conceded,
statutory bonds must be read in light of the governing statute.
When so read, "this obligation" refers simply to the general
requirement in the MLBA for all licensees to have a bond, D.C.
Code § 26-1103(a), and "continued" indicates only that the bond
may be renewed, id. § 26-1103(i), not that it is a continuous
Second, and more important, Hartford's bond states "[t]his
obligation is issued under and is governed by District of
Columbia Code 26-1003(i) and the obligations of the surety shall
be those therein set forth."*fn8 Pls.' Ex. 4. In cases
involving statutory bonds, courts have determined that "the
obligation of a bonding company is determined by the statute, and
not by the wording of the bond." Royal Indemnity,
393 P.2d at 262. This is particularly the case when, as here, the precise
language of the bond expressly states that the terms of the
statute control. Accordingly, the court now turns to the MLBA. 2. The MLBA
The MLBA was enacted to protect D.C. homeowners from "abuses in
the mortgage industry." Council of the District of Columbia
Report on Bill 11-637, "The District of Columbia Mortgage Lender
and Broker Act of 1996," May 31, 1996, at 1-2 ("Leg. Hist.").
Anyone engaging in business as a mortgage lender or broker must
be licensed under the MLBA, D.C. Code § 26-1103(a), and
applicants must post a surety bond as a condition to obtaining or
renewing a license, id. § 26-1103(i). The original draft of the
legislation called for a $5,000 bonding requirement, but this was
ultimately replaced with a sliding schedule because the D.C.
Council was concerned that the amount of the bond be "an adequate
amount to protect the interests of injured borrowers." Leg. Hist.
at 7. Now, the amount of the bond is ...