United States ex rel. Benefit of Walton Technology, Inc. v. Weststar Engineering, Inc.

Opinion by Judge PAEZ; Partial Concurrence and Partial Dissent by Judge TROTT.

OPINION

In this case, Plaintiff Walton Technology, Inc. (“Walton”), a subcontractor on a federal construction project, claims that the prime contractor, Defendant Weststar Engineering, Inc. (“Weststar”), failed to pay Walton rental fees for equipment it rented from Walton for use on the project. Walton filed suit against Weststar and its Miller Act surety, Defendant Reliance Insurance Company (“Reliance”), alleging three causes of action. With respect to Weststar, Walton claimed unjust enrichment and conversion based on its alleged entitlement to a pro rata share of Wests-tar’s recovery from its insurance provider *1202 representing rental fees submitted by Weststar as part of a damage claim associated with the rental equipment. Walton also claimed that Reliance and its principal, Weststar, were liable on the Miller Act payment bond.

The district court granted summary judgment in favor of Weststar on the claims for unjust enrichment and conversion, concluding that Walton was not entitled to a share of Weststar’s insurance proceeds under either theory. The district court also granted summary judgment…

(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,

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 *1210 other act in event that his principal fails therein.... His liability is contingent on the default of…