Court Opinion

ID: 8802546
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:37:30.403868+00
Date Added: 2024-06-11T17:03:57.759182
License: Public Domain

KOHLSAAT, Circuit Judge
(after stating the facts as above). The act requiring the giving of a bond by the contractor is entitled “An act for the protection of persons furnishing material and labor for the construction of public works.” Page 2523, Compiled Statutes 1901. One of the purposes of this act, it was held by the court in United States v. National Surety Co., 92 Fed, 549, 34 C. C. A. 526, and also *402in United States v. Rundle, 100 Fed. 400, 40 C. C. A. 450, was to afford full protection to all persons who supplied material or labor in the construction of public buildings or other public works. In the Hen-ningsen Case it was held by the Circuit Court of Appeals for the Ninth Circuit (143 Fed. 810, 74 C. C. A. 484), that the bond required by the statute was “intended to perform a double function, in the first place to secure to the government, as before, the faithful performance of all obligations which a contractor might assume towards it; and in the second place to protect third persons from whom the contractor obtained materials or labor.”
The $2,000 fund in the hands of the trustee in bankruptcy stands charged with the same equities as to -the materialmen and the surety upon the bond who had paid the materialmen as it was bound to do, as when it was undistributed in the hands of the United States. Whatever rights were acquired by reason of the contractor’s assignment and payment thereon by the United States, were subject to the right of the materialmen and' surety on the bond to have their claims paid in full. Henningsen v. United States Fidelity & Guaranty Co., 208 U. S. 404, 410, 28 Sup. Ct. 389, 52 L. Ed. 547. “It was,” says the court in Greenville Savings Bank v. Lawrence, 76 Fed. 545, 22 C. C. A. 646, “a fund withheld under the stipulation of'the contract for a particular class of creditors, to which mere assignees of the fund do not belong, and the rights of such assignees, if they have any, must be postponed until the creditors who have a special equity are paid.”
In Re Scofield Company, 215 Fed. 45, 131 C. C. A. 353, which was a case in which the special reference to laborers and materialmen was contained in the bond exacted as here and not in the contract proper, the court, having reference to that fact, says:
“Nevertheless, when the contract 5s construed in its entirety and in connection with the obligations imposed by the bond, it will be found that an equity was created in favor of the surety in the reserved fund to which it is the duty of this court to give effect.” '
That the surety, on payment of labor and material claims, was sub-rogated and that its equity attached as of the date of the bond, and that a mere volunteer’s rights' would be subject to those of the surety who pays the labor and material bills, was clearly laid down in Prairie State Bank v. United States, 164 U. S. 227, 240, 17 Sup. Ct. 142, 41 L. Ed. 412. This was approved in Henningsen v. United States, supra.
In the case at bar, the assignee of the contractor stands in the position of a mere volunteer and is not therefore entitled to the benefit of the doctrine of subrogation. Under the authorities quoted, the materi-almen and the surety in the case at bar have a prior right to the extent of their claims in the fund so in the hands of the trustee, in the nature of an equitable lien. It precedes the rights of assignees of the contractor and also those of the general creditors.
There can be no doubt but that the trustee in bankruptcy took the fund, as above stated, charged with the payment of claims of the ma-terialmen and of the surety on the bond as prior liens thereon and with the duty of making distribution of said several sums so due thereon. Cleminshaw v. International Shirt and Collar Co. (D. C.) 165 Fed. 797; *403Whitney v. Wenman, 198 U. S. 539, 25 Sup. Ct. 778, 49 L. Ed. 1157; United States Fidelity & Guaranty Co. v. Bray, 225 U. S. 205, 32 Sup. Ct. 620, 56 L. Ed. 1055.
The judgment, of the District Court is reversed, .with direction to proceed further in accordance herewith.