Reliance Insurance v. U.S. Bank of Washington, N.A.
Opinion
Lead Opinion
Kleinfeld, J.
This is a dispute between a bank and a surety over which of them gets a government payment into a defaulting contractor’s bank account.
FACTS
The case was adjudicated on cross motions for summary judgment. The facts below are those set out in affidavits, stipulations, and other materials as to which there is no dispute.
Kruse Construction got a government contract to improve a Coast Guard station at Cape Disappointment, Washington. Because it was a federal project, laborers and materi-almen were secured by a surety bond pursuant to the Miller Act, 40 U.S.C. § 270a(a)(2), instead of the mechanics liens they would have had if the project had been a private one. Reliance Insurance Company wrote the surety bond. U.S. Bank of Washington provided the construction loan. Pursuant to an approved assignment from the contractor to the bank, the government wired progress payments directly into the contractor’s account at the bank.
The contractor ran into financial difficulties in the spring and early summer of 1992. By the first of June, numerous subcontractors had given notice to the surety of unpaid claims. The contractor’s cash flow problems were severe by mid-June.