Based on the principles described above, plaintiffs contend that "[c]ourts have consistently and broadly" held that assignees and subrogees of the contractor have standing to sue the government in this court. Pls.' Resp. to First Mot. 7; see also id. (citing the following cases: Pearlman v. Reliance Ins. Co., 371 U.S. 132, 138 (1962); Prairie State Nat'l Bank of Chicago v. United States, 164 U.S. 227, 231 (1896); Aetna Cas. Sur. Co. v. United States, 845 F.2d 971, 974 (Fed. Cir. 1988); Balboa Ins. Co. v. United States, 775 F.2d 1158, 1161 (Fed. Cir. 1985); ICW, 55 Fed. Cl. at 533; Transamerica Ins. Co. v. United States, 31 Fed. Cl. 532, 535 (1994); and Westech Corp. v. United States, 20 Cl. Ct. 745, 749 (1990)). To bolster their argument, plaintiffs assert that "for jurisdictional purposes, the focus is on the claim, not the claimant."
It may provide funds to an insolvent contractor to complete performance, the course which was followed here. See Aetna Cas. Sur. Co. v. United States, 845 F.2d 971, 975 (Fed. Cir. 1988). A surety bond creates a three-party relationship, in which the surety becomes liable for the principal's debt or duty to the third party obligee (here, the government).
See 40 U.S.C. § 270a et seq. Under a performance bond, a surety guarantees that the project will be completed if a contractor defaults. See Aetna Casualty Sur. Co. v. United States, 845 F.2d 971, 973 (Fed. Cir. 1988). It is designed to ensure "that [the government] is not left with a partially completed project because of an insolvent contractor." Morrison Assurance Co. v. United States, 3 Cl.Ct. 626, 632 (1983); see also United States v. Ardelt-HornConstr. Co., 446 F.2d 820, 821 (8th Cir. 1971).
. . . They look first to the prime contractor for payment. If, however, the prime contractor fails to pay any of them, then the surety is obligated to pay them.'" Aetna Casualty Sur. Co. v. United States, 845 F.2d 971, 973 (Fed. Cir. 1988) (citation omitted). By filing a declaratory action, USF G seeks the Court's declaration of its liability to Ernest on the payment bond.
In addition, performance bonds are usually construed to give a surety such as plaintiff a number of choices upon a principal's default, including the option to refuse financing for the principal. See Granite Computer Leasing Corp. v. Travelers Indemnity Co., 894 F.2d 547, 551 (2d Cir. 1990); Aetna Casualty Surety Co. v. United States, 845 F.2d 971, 975 (Fed. Cir. 1988); United States v. Seaboard Surety Co., 817 F.2d 956, 959 (2d Cir.), cert. denied 484 U.S. 855, 108 S.Ct. 161, 98 L.Ed.2d 115 (1987). Similarly, payment bonds are usually construed to require that the surety make payments directly to the unpaid subcontractors, materialmen and laborers, rather than to the defaulted principal.
In the event the district court determines that the liens had attached to Cosmos's interest in the future progress payments, we leave it to the district court to address any remaining arguments the parties may have in regard to the funds earned after September 1, 2015. Aetna Casualty and Surety Co. v. United States, 845 F.2d 971 (Fed. Cir. 1988), which the district court relied on to conclude that Fidelity had a right to the funds even though it had not officially defaulted Cosmos, does not change this result. There, the surety (Aetna) sought retained funds on three construction projects for which it had issued performance bonds.
It is designed to ensure 'that [the government] is not left with a partially completed project because of an insolvent contractor.'" Dependable Ins. Co. v. United States, 846 F.2d 65, 66 (Fed. Cir. 1988) (citing Aetna Casualty & Sur. Co. v. United States, 845 F.2d 971, 973 (Fed. Cir. 1988); Morrison Assurance Co. v. United States, 3 Cl. Ct. 626, 632 (1983)). And payment bonds are designed to protect people who have contractual relationships with the prime contractor or a subcontractor.
"Under a performance bond, a surety guarantees that the project will be completed if a contractor defaults." Dependable Ins. Co. v. United States, 846 F.2d 65, 66 (Fed. Cir. 1988) (citing Aetna Cas. Sur. Co. v. United States, 845 F.2d 971, 973 (Fed. Cir. 1988)). The bond "is designed to ensure `that the government is not left with a partially completed project because of an insolvent contractor.'"
Furthermore, the purpose of a performance bond is to guarantee to an obligee, such as Oahu, that its contract will be completed even if the subcontractor defaults. This generally involves the surety, here Island, agreeing to complete the construction or pay the obligee the reasonable costs of completing it. E.g., Aetna Cas. Sur. Co. v. United States, 845 F.2d 971, 973-74 (Fed. Cir. 1988). The primary and obvious reason to reference the subcontract in the bond is to establish the limits of and to aid in measuring Island's obligation to Oahu under the bond.
This generally involves the surety, here Island, agreeing to complete the construction or pay the obligee the reasonable costs of completing it. E.g., Aetna Cas. & Sur. Co. v. United States, 845 F.2d 971, 973-74 (Fed. Cir. 1988). The primary and obvious reason to reference the subcontract in the bond is to establish the limits of and to aid in measuring Island's obligation to Oahu under the bond.