Court Opinion

ID: 3681902
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:27:25.668042+00
Date Added: 2024-06-11T15:29:30.878492
License: Public Domain

The majority decision, in my opinion, practically, in many respects, repeals or renders nugatory the specific statutory provision for subrogation in favor of the State Bonding Fund where a judgment has been paid out of the fund.
The primary question, as I see it, is not whether the State Bonding Fund is entitled to the equitable right of subrogation so as to compete with a partially satisfied creditor, namely, its obligee, the county. Rather, the question is presented whether the Bonding Fund, in equity and by force of the statute, shall be represented in the distribution of its principal's assets, so that the claim of its obligee may be fully represented as against other creditors and so that such claim in full may participate with the question of the distribution of the proceeds secured upon such claim from the principal's estate left to principles of equity as between the obligee and the Bonding Fund.
The evident intent and purpose of the statute is at least to preserve the status of a creditor against an insolvent fund and to protect a Bonding Fund that has made a payment in advance as a surety for such insolvent fund. Principles of equity, under the circumstances, should not be employed so as to destroy both the status and the protection intended.
For instance, by way of illustration: — The assets of an insolvent principal are $50,000.00; the claims of creditors are $100,000.00; the claim of the obligee in a bond against the principal is $10,000.00. The bond is for the sum of $5,000.00. The surety in advance of the distribution of the assets of the insolvent fund has paid to the obligee, $5,000.00, in satisfaction of its bond and covenant. Upon distribution of the assets of the insolvent principal, how much then is the claim of the obligee? My answer is $5,000.00; then, it is entitled to receive not 10% but 5% of the insolvent fund by reason of its diminished claim; then, other creditors are entitled to receive not 90% but 95% of the insolvent fund. The above result follows unless some principles of subrogation are employed. Upon such result it would happen that the power of competition, that is, the percentage of competition on the part of the obligee, would be lessened, and, on the part of other creditors, not secured by any bond, increased. On the other hand, if some *Page 8 
principles of subrogation are applied and the claim of the obligee represented fully and the surety subrogated, the competition features, that is, the percentage features between creditors, remain the same; the claim of the obligee will be fully represented; it will participate to the extent of 10%, it will receive out of the insolvent fund $5000.00; if on principles of equity, this fund of $5000.00 so due on the claim of the obligee, thus fully represented is to be distributed between the obligee and its surety who have rights thereto, then equitable distribution may occur so that the rights of the obligee, superior and prior, are fully protected. In other words, if it is necessary to take the entire $5000.00 to satisfy entirely demands of the obligee, then, its priority of right should be recognized and accorded; if, however, there remains a balance after full satisfaction of the demands of the obligee, then that balance should belong to and be distributed to the surety who has already made payment and not to other creditors not entitled thereto. Thus, in my opinion, on principles of equity may both creditor and its surety be protected, and the purpose and intent of the statute made effective.