In re Dutcher

• Decision Date: 20 May 1914
• Docket Number: 917.
• Citation: 213 F. 908
• Parties: In re DUTCHER.
• Court: U.S. District Court — Western District of Washington

213 F. 908

In re DUTCHER.

No. 917.

United States District Court, W.D. Washington, Northern Division.

May 20, 1914

James P. H. Callahan, of Hoquiam, Wash., for trustee.

T. H McKay, of Aberdeen, Wash., for petitioning creditors.

Frank Beam, of Aberdeen, Wash., for respondent.

NETERER District Judge.

A petition has been filed by the trustee and general creditors for a review of the order of the referee granting priority of payment to the assignee of claims of workmen over the general creditors. Prior to June 8, 1911, the bankrupt was engaged in grading certain streets in Aberdeen, Wash., under a contract with the city. The Title Guaranty & Surety Company was surety on the bond given by him to the city, one of the conditions of which was that the wages of workmen should be paid. On said date the bankrupt abandoned the contract, with the work on three streets designated therein not yet completed, and the surety company was required to and did complete the work under the contract. The order of adjudication was entered June 8, 1911. Although assignments of the workmen's claims were made in the name of Frank Beam, it is conceded that the money to pay them was furnished by and the assignments were for the benefit of the surety company. The trustee now has $3,611.45, which was derived from the sale of the bankrupt's property; the amount realized from the contract with the city having been paid out by the trustee on order of the referee. The assigned claims here in question amount to $3,035.02.

Under section 64b (4) of the Bankruptcy Act, wages, due to workmen clerks, and servants, not exceeding $300 to each claimant earned within three months prior to the commencement of the bankruptcy proceedings, are entitled to priority of payment over general debts, after the payment of taxes, expenses of administration, etc. It has been held that the assignee of such workmen is entitled to the same priority of payment. Shropshire, Woodliff & Co. v. Bush, 204 U.S. 186, 27 Sup.Ct. 178, 51 L.Ed. 436; In re Fuller & Bennett (D.C.) 152 F. 538; Remington on Bankruptcy, Secs. 2135, 3183.

The petitioners contend, however, that the surety company, being primarily liable for the payment of these claims, could not obtain the benefit of the workmen's right to preference, either by virtue of the assignment or by operation of the doctrine of subrogation. I do not see any merit in this contention. The contract of suretyship makes a surety primarily liable to the creditor, but as to the principal he is only collaterally liable. 32 Cyc. 20. The fact that a surety is primarily liable to the obligee does not rob him of the right of subrogation.

'A surety who has paid the debt of the principal is at once subrogated to all the rights, remedies, securities, liens, and equities of the creditor, for the purpose of obtaining reimbursement from the principal debtor.' 37 Cyc. 402.

The authorities cited by petitioners in this connection are to the effect that the surety on a bond such as the one here in question is liable primarily, not only to the...