Court Opinion

ID: 7011266
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:07:02.892179+00
Date Added: 2024-06-11T16:10:13.980786
License: Public Domain

TROTT, Circuit Judge
(Concurring and Dissenting).
This case stands for the peculiar proposition that a Miller Act surety is liable to a subcontractor on a Miller Act payment bond even though the bonded principal owes nothing to that subcontractor. Although Judge Paez makes a good case for this result, the holding here appears to stand the general rule of suretyship law on its head. It is a cardinal rule of the surety/principal relationship that a surety occupies the shoes of its principal and “may avail himself of any defense” available to the principal other than those that are purely personal, such as bankruptcy or infancy. 72 C.J.S. Principal and Surety § 189 at 318-19 (1987). The Fourth Circuit dealt with an issue similar to the one we decide here and said,
When the parties agree that a subcontractor’s compensation shall be contingent on the existence of profits, the surety, of course, is not hable to the subcontractor if the undertaking is unprofitable.
United States ex rel. Woodington Elec. Co. v. United Pac. Ins. Co., 545 F.2d 1381, 1383 (4th Cir.1976). In the main, if the principal is not liable to a subcontractor, the surety isn’t either. This concept is the very essence of suretyship. As Black’s Law Dictionary explains, a surety is “[o]ne who undertakes to pay money or to do any *1210other act in event that his principal fails therein.... His liability is contingent on the default of his principal.” Black’s Law Dictionary 1441 (6th ed.1990). I believe my colleagues may have unintentionally confused a surety with a guarantor, which Reliance is not.
Here, it is as clear as the difference between chalk and cheese that Weststar is not liable to Walton for the disputed sum. Why? Because Walton expressly agreed for good and sufficient consideration' — • $62,000 — m a written and signed settlement and release agreement that “any further payment to Walton for the framing and fabric rental shall only be made when and if paid by the Navy and only to the extent paid by the Navy.” Thus, we are not faced so much with a waiver of Miller Act rights as we are with a simple question of what the surety must stand behind. As to the explicit condition precedent, the Navy did not pay, period. Therefore, Weststar, the principal, is off the hook to Walton and so is Reliance, the surety.
As to the issue of waiver, the settlement agreement is also informative. It says,
The parties, and each of them, expressly waive any benefit, statutory or otherwise, which would prevent a general release from extending to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which, if known by him would have materially affected his decision to enter into the settlement and to execute the release.
This language makes the settlement and release utterly final as to Weststar’s liability.
If Walton had wanted it otherwise, it should not have signed the settlement agreement and accepted the $62,000, or, in the alternative, it should have covered itself with respect to the surety Reliance. I conclude, therefore, that the district court’s understanding of this relationship was correct; and I therefore respectfully dissent from this aspect of the majority’s decision. As to the other issues, I concur in Judge Paez’s excellent opinion.