Opinion ID: 1945691
Heading Depth: 1
Heading Rank: 6

Heading: was gilbane creditor of amwest?

Text: Gilbane argues that the liquidator sued the wrong entity. It contends that it was not a creditor of Amwest potentially liable for a voidable preference, but was rather a mere conduit through which the payments made by Amwest passed en route to the owner of the construction project. [14] In rejecting this argument, the district court determined that Gilbane was the general contractor on the project and, as such, was responsible to the owner for [its] completion. Gilbane describes its role in the project as a construction manager responsible for managing the project and administering payments on behalf of the owner and subcontractors. [15] Whether Gilbane was the general contractor or construction manager does not matter. The relationship of the parties at the time of the transfers in question was defined by the performance bond, which stated that Crane as principal and Amwest as surety were held and firmly bound unto GILBANE ... as Obligee  (emphasis supplied) in the amount of $2,120,000 for the payment whereof Principal and Surety bind themselves, their heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. The bond further recites that Crane and Gilbane had entered into a contract for certain construction work on the Cambridge project and that the bond was given to secure performance of Crane's contractual obligations to Gilbane. Suretyship is a contractual relation resulting from an agreement whereby one person, the surety, engages to be answerable for the debt, default, or miscarriage of another, the principal. [16] A surety on a performance bond is bound in the manner and to the extent provided in the obligation. [17] The performance bond at issue in this case bound Amwest to fulfill Crane's contractual obligations to Gilbane in the event of Crane's default. When Crane defaulted, Gilbane asserted a claim that Amwest fulfill its obligations under the bond, and Amwest made payments directly to Gilbane pursuant to that obligation. Amwest and Gilbane were the only parties to the agreement to release of the performance bond. These facts are clearly distinguishable from In re FSC Corp., [18] the bankruptcy case upon which Gilbane relies. In that case, a corporation entered into an indenture agreement with a bank which was designated as the indenture trustee. The agreement was intended to facilitate a series of loans to the corporation made by investors who held debentures. The indenture agreement provided that the corporation would send semiannual interest payments to the bank for transmittal to debenture holders. While insolvent, and within 90 days prior to filing its petition in bankruptcy, the corporation made an interest payment to the bank, which transmitted the funds to debenture holders pursuant to the indenture agreement. The bankruptcy court held that while the corporation's transfer constituted a preference, the bank had no liability because it acted solely as the agent for its principals, the debenture holders. In this case, Gilbane was the sole obligee named in the performance bond. It was not identified as an agent for a disclosed principal, as it now contends. The fact that Gilbane used the funds it received from Amwest to pay a replacement subcontractor demonstrates that the transfers were both to and for the benefit of Gilbane, in that they permitted the completion of Crane's original contractual obligation to Gilbane. There is no merit to Gilbane's argument that it was a mere conduit of the funds it received from Amwest.