The law is clear that where a surety makes good under its contract of suretyship upon default of its principal, the surety acquires an equitable lien against any sum due its principal remaining in the hands of the one for whose protection the bond was written, and such claim of the surety is superior to any subsequent assignment by the principal to a third person even where such assignment was made prior to the default and payment by the sureties. Pearlman v. Reliance Ins. Co., 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed.2d 190 (1962); Henningsen v. United States Fidelity Guaranty Company, 208 U.S. 404, 28 S.Ct. 389, 52 L.Ed. 547 (1908); Prairie State Nat. Bank of Chicago v. United States, 164 U.S. 227, 17 S.Ct. 142, 41 L.Ed. 412 (1896); United States Fidelity Guaranty Co. v. United States, 10 Cir. 1952, 201 F.2d 118; Union Indemnity Co. v. City of Smyrna, 100 Fla. 980, 130 So. 453; Commercial Bank in Panama City v. Board of Public Inst., Fla. 1951, 55 So.2d 552. The question is whether the facts in our case fit within this general principal of suretyship law? Travelers contends that they do, but in saying this Travelers takes the position that Midtown and Riverside "knew" or "should have known" of Humphries default at the time the $12,000.00 assignment was honored and paid; or that Midtown and Riverside, having no knowledge of the default of Humphries on July 15, 1963, the time of the payment of the assignment, was immaterial because of the surety's superior claim.

In addition, it is settled Florida law that a surety completing work after abandonment by the contractor is subrogated to the rights of the owner in the rtainage funds as against a money lender who took an assignment of those funds as security for the loan, even though the loan proceeds were used to plat obligations connected with the bonded job which the surety might have been otherwise obligated to pay. Union Indemnity Co. v. City of New Smyrna, et al., 1930, 100 Fla. 980, 130 So. 453; Commercial Bank in Panama City v. Board of Public Instruction of Okaloosa County, et al., 55 So.2d 552, S.Ct.Fla. 1951; Lacy v. Maryland Casualty Co. (and Murchinson National Bank v. Maryland Cas. Co.) 32 F.2d 48, 4 Cir. 1929. It is necessary for the Court to decide whether THE BANK'S notification to UNITED's unauthorized agent, that THE BANK's loan was used to pay laborers and materialmen on the hospital job, affects its direct claim on the bond because it was not shown that the loan proceeds were so used, and it would not create liability as a matter of law, under the ruling of Union Indemnity Co., supra.

[5] The funds distributed by the judgment belong to the surety and not to the contractor, and, therefore, the bank acquired nothing by the assignment because the contractor had nothing to assign. Commercial Bank in Panama City v. Board of Public Instruction, 55 So.2d 552; Levy v. Jacobs, 3 Misc.2d 994, 148 N.Y.S. 2d 507; Lynip v. Alturas School Dist., 24 Cal.App. 426, 141 P. 835. It is stated in 6 C.J.S. 1139, 1141, § 84 2d as follows:

Federal courts in Florida, applying Florida suretyship law, still cite these cases: See Broward County, Florida Commission for the Use and Benefit of General Electric Co. v. Continental Casualty Company, 243 F. Supp. 118 (S.D.Fla. 1965); Aetna Insurance Company v. Poole Kent Company, 303 F. Supp. 963 (S.D.Fla. 1969). Commercial Bank in Panama City v. Board of Pub. Instruction of Okaloosa County, 55 So.2d 552 (Fla. 1951). As Judge Cowart points out in his opinion, Florida (as do other jurisdictions) recognizes two kinds of subrogation: "conventional" or "legal."

Appellee points to nothing in the complaint nor to any authority which would cause us not to recognize the validity of the assignment. Additionally, when the surety undertook the completion of the construction, it became subrogated, to the extent necessary to protect it from loss, to all the rights of the contractor in the funds still remaining unpaid in the Housing Authority's hands. Commercial Bank in Panama City v. Board of Public Instruction of Okaloosa County, 55 So.2d 552 (Fla. 1951); Union Indemnity Co. v. City of New Smyrna, 100 Fla. 980, 130 So. 453 (1930); Phifer State Bank v. Detroit Fidelity Surety Co., 97 Fla. 538, 121 So. 571 (1929). The court should not have dismissed the complaint because of any limitation period contained in the bond.

"It is generally held that a stipulation for the retention of a certain percentage of the consideration for the protection of materialmen, workmen, etc., is in part an indemnity for a surety who guarantees the performance of the contract by the contractor, and that it raises an equity in his favor in the fund thus created, or to be created, to the extent he suffers loss, which takes precedence over assignments of the fund by the contractor." To the same effect are the following cases which have been rendered since the date of the Annotation: First Nat. Bank of St. Paul v. M. E. I., 273 Minn. 407, 141 N.W.2d 491; Commercial Bank in Panama City v. B. of P.I. (Fla.) 55 So.2d 552; Danaias v. M. De M. C. Co. (D.C.N.H.) 102 F. Supp. 874; Murphy v. N. P. Co., 229 Wis. 100, 281 N.W. 705; Fidelity Nat. Bank of Oklahoma City v. U.S.C. Co., 191 Okl. 496, 131 P.2d 75; Hedley v. N.A.C. Co., 267 App. Div. 800, 46 N.Y.S.2d 388; Century Cement Mfg. Co. v. Fiore, 264 App. Div. 475, 36 N.Y.S.2d 332; Jackson Lumber Co. v. Moseley, 193 Miss. 804, 11 So.2d 199; First Nat. Bk. in Winfield, Kan. v. Fidelity Dep. Co. of M., 10 Cir., 65 F.2d 959; Maryland Casualty Co. v. City of Pittsburgh, D.C., 51 F. Supp. 459; Maryland Cas. Co. v. Lincoln Bank T. Co., D.C., 18 F. Supp. 375; U.S. Fidelity Guaranty Co. v. Bank of Brewton, D.C., 4 F. Supp. 272; Standard Acc. Ins. Co. v. Fed. Nat. Bank, 10 Cir., 112 F.2d 692; Maryland Casualty Co. v. Board of Water Com'rs, 2 Cir., 66 F.2d 730; Farmer's Bk. v. Hayes, 6 Cir., 58 F.2d 34. The reason most cited for the foregoing rule is the obvious fact that the bond executed by the surety is to protect the builder and not others who might extend cr