611 Subrogation

• Jurisdiction: Arizona

A surety which completes its bonded obligation and pays the creditors is subrogated as to the rights of those whom it has protected by such performance and payments.

Subrogation is the substitution of one person in the place of another with respect to the legal rights of the other. Where the surety pays the obligations of a principal obligor it is substituted for and succeeds to the rights of the obligor and those whom it has paid and protected.

In U.S. Fidelity & Guar. Co. v. California-Arizona Constr. Co., supra, the surety completed the contract. The contract proceeds were paid over to the surety for its completion with the exception of approximately$4,000, which was being held under another agreement between the contractor and the Superintendent of Streets. The court held that the surety, having completed the contract, was entitled to all of the proceeds of the contract.

In Southern Sur. Co. v. City of Prescott, 26 Ariz. 66, 221 P. 834(1924), the surety completed the paving work in accordance with the contract and, under facts somewhat similar to California-Arizona Constr. Co., the court directed that the contract proceeds be paid to the surety.

In Butler v. Pacific Nat'l Ins. Co., supra, the trustee of a bankrupt highway contractor brought an action against the surety and the State of Arizona to determine who was entitled to the...