United States Supreme Court Cases & Opinions

U.S. Supreme Court

Pealman v. Reliance Ins. Co., 371 U.S. 132 (1962)

Pealman v. Reliance Insurance Co.

No. 78

Argued October 9-10, 1962

Decided December 3, 1962

371 U.S. 132

Syllabus

When, by reason of the contractor's default, a surety on a payment bond given by a contractor under the Miller Act, 49 Stat. 793, has been compelled to pay debts of the contractor for labor and materials, the surety is entitled by subrogation to reimbursement from a fund otherwise due to the contractor but withheld by the Government pursuant to the terms of the contract -- even though the contractor has become bankrupt and the Government has turned the withheld fund over to the contractor's trustee in bankruptcy. Pp. 371 U. S. 133-142.

(a) This fund never became a part of the bankruptcy estate, and its disposition is not controlled by the Bankruptcy Act. Pp. 371 U. S. 135-136.

(b) Prairie State Bank v. United States, 164 U. S. 227, and Henningsen v. United States Fid. & Guar. Co., 208 U. S. 404, followed. Pp. 371 U. S. 137-139.

(c) The Miller Act, which requires separate performance and payment bonds on Government contracts, did not change the law as declared in the Prairie State Bank and Henningsen cases. Pp. 371 U. S. 139-140.

(d) The Prairie State Bank and Henningsen cases were not overruled by United States v. Munsey Trust Co., 332 U. S. 234. Pp. 371 U. S. 140-142.

298 F.2d 655 affirmed.

Page 371 U. S. 133