In the case of Pearlman v. Reliance Insurance Co., 1962, the US Supreme Court had to decide who has a right to a fund held by Miller Act surety when both the contractor's trustee in bankruptcy and unpaid materialmen claimed it. The court ruled that neither party had priority over one another as they were both creditors of the same debtor (the contractor). The funds in question were due under contracts for public work, which are protected by payment bonds according to federal law (Miller Act). Therefore, these funds should be used first to pay those who supplied labor and materials for public construction before any other claims can be satisfied. This decision established an important precedent regarding priorities among competing claimants on such bond proceeds.

In the dissenting opinion for Pearlman v. Reliance Insurance Co., Justice Harlan argued that the majority's decision failed to properly consider and apply principles of equity. He contended that, in cases where a surety has paid out on a bond due to default by the principal, it should be entitled to reimbursement from any funds recovered by creditors in bankruptcy proceedings before those funds are distributed among general unsecured creditors. This is because such payments are made under compulsion and not voluntarily; thus, they should be treated as involuntary loans which ought to be repaid first when assets become available. The justice further criticized the majority's reliance on technicalities of property law rather than focusing on equitable considerations inherent in bankruptcy law.