The City of Rye (Rye) (plaintiff) hired Public Service Mutual Insurance Company (Public Service) (defendant), developers, to construct six luxury apartment buildings. The contract between Rye and Public Service required Public Service to post a $100,000 bond and to pay $200 per day for each day after April 1, 1971 that the six buildings were not completed. Rye had no statutory authority for imposing this bond on Public Service. Due to changes in the market, Public Service was unable to obtain the necessary financing to complete the buildings on time. After the buildings were 500 days late, Rye brought suit in New York state court against Public Service seeking the full value of the bond. The trial court denied Rye’s motion for summary judgment, and the appellate court affirmed. The appellate court concluded that the bond was penal in nature and thus was unenforceable. Rye appealed.