American Surety Co. v. Sampsell, 327 U.S. 269 (1946)

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

1. A bankruptcy court has equitable power to subordinate the claim of a surety for subrogation and indemnity for payments under a statutory construction bond to the claims of laborers and materialmen for whose benefit the bond was executed but who failed to file lien claims or notify the surety of their unpaid claims within the time required by the bond and the applicable state statute. P. 271.

2. Federal bankruptcy law, not state law, governs the distribution of a bankrupt’s assets to his creditors. Prudence Realization Corp. v. Geist, 316 U.S. 89. P. 272.

3. Controlling equitable principles forbid a surety from sharing a bankrupt’s assets on equal terms with creditors who are members of the class its bond was given to protect. American Surety Co. v. Westinghouse Electric Co., 296 U.S. 133. P. 272.

4. Failure to give the notice required by state law does not deprive materialmen and laborers of the protection of this rule. P. 273.

148 F.2d 986 affirmed.

A bankruptcy court subordinated the claim of a surety for subrogation and indemnity for amounts paid under a statutory construction bond to the claims of laborers and materialmen who had not filed liens or notified the surety of their unpaid claims within the time specified by the bond and the applicable state statute. 53 F.Supp. 131. The circuit court of appeals affirmed. 148 F.2d 986. This Court granted certiorari. 326 U.S. 699. Affirmed, p. 274.