A surety seeking to write bonds payable to the government must
approved by the Treasury Department, which receives financial
from the surety and sets maximum limits for the bonds that may be
written if the surety is approved. See 31 U.S.C. § 9305. If a
fails to make payment, the Treasury Department may suspend or
privilege of writing bonds. Id. Whenever the Federal Rules of Civil
Procedure, including the Supplementary Rules for Certain Admiralty
Maritime Claims, require or permit the giving of security, each
on such an undertaking submits itself to the jurisdiction of the
and its liability may be enforced on motion without the necessity
independent action. See Fed. R. Civ. P. 65.1. |
When suit against a surety is required on an undertaking other
one provided for or permitted under the Rules, suit should be filed
against the surety in the district in which the bond was entered
or in the district where the principal office of the surety is
See 31 U.S.C. § 9307. If a series of small claims are
suit to avoid a multiplicity of actions, suit in the district of
surety's principal office is indicated.
A surety completing performance for a contractor is subrogated
the contractor's rights as to any remaining payments due under the
contract. Pearlman v. Reliance Ins. Co., 371 U.S. 132 (1962);
Surety Co. of New York v. Bethlehem Nat. Bank of Bethlehem, Pa.,
U.S. 314 (1941). A surety must pay all of an obligation before it
entitled to enforce its principal's rights by way of subrogation.
American Surety Co. of New York v. Westinghouse Electric Mfg. Co.,
U.S. 133 (1935); Jenkins v. National Surety Co., 277 U.S. 258, 266
(1928); United States v. National Surety Co., 254 U.S. 73, 76
The United States is not required to withhold progress
from the contractor on the mere request of the surety without the
opportunity for its own independent appraisal of the financial
of the contractor. United States v. Continental Casualty Co., 346
Supp. 1239 (N.D. Ill. 1972); but see Balboa Insurance Co. v. United
States, 775 F.2d 1158 (Fed. Cir. 1985); American Fidelity Fire
Co. v. United States, 513 F.2d 1375 (Ct. Cl. 1975); United States
Continental Casualty Co., 512 F.2d 475 (5th Cir. 1975), as to
which may prejudice the surety.
"In general, a judgment against the principal is prima facie
evidence against the surety." Massachusetts Bonding & Ins. Co. v.
E. Denike, Inc., 92 F.2d 657, 658 (3d Cir. 1937). "If the surety
participates in the proceeding against its principal, it is
as to the issue therein decided against its principal." Id.
and citations omitted).
[cited in USAM 4-4.510]