Surety Wearing Multiple Hats Trumps Completing Obligee’s Set-Off Rights

In a very hotly contested matter, the Coastal court, in a 21-page opinion, ruled on cross motions for summary judgment that the surety wearing multiple hats – as a payment bond surety, performance bond surety satisfying outstanding payables that had not matured into payment bond claims, and backdoor financing surety – had priority over a completing obligee’s right of set-off.   The opinion addresses various equitable subrogation principles and multiple claims and defenses asserted by the obligee, such as:

1. competing interests between completing obligee versus payment bond surety;
2. competing interests between completing obligee versus performance bond surety;
3. competing interests between completing obligee versus financing surety;
4. obligee’s right of set-off;
5. distinguishing Munsey and limiting Fortune;
6. lack of breach of performance bond;
7. lack of breach of payment bond; and
8. “relation back” and “no debt due” principles; and
9. obligee as a judgment creditor.   

We trust this decision may prove to be helpful in the future.