учебный год 2023 / Child, Handbook of the law of suretyship and guaranty

the payment of rent "so long as M. shall occupy said premises" does not make the guarantor liable after the tenant leaves, though long before the lease expires.uo

A guaranty of a note after maturity means that it will be paid within a reasonable time; " 1 and a guaranty that a note will be "good and collectible two years" means any time within two years after it is due. 411

Part Performance of Se·ucrable Contracts.

If a contract of suretyship be severable, a surety may be liable for part, although all of the terms of the guaranty are not complied with by the creditor.411 A guarantor of a lease is liable for each monthly installment of rent as it becomes due."'

Performance in the Alternative.

If a surety undertakes that the principal shall perform one of two or more acts in the alternative, a performance of any one of the acts will discharge the surety. Thus, where the undertaking was that an importer of goods would pay a certain sum, or the amount of duties to be due, or would export the goods, the payment of the sum specified discharged the sureties, although such sum was less than the amount of duties subsequently due.'81

Liability of Surety for Principal's Errors of Judgment.

The sureties upon the bond of an officer may be liable for losses arising from his lack of judgment, as well as for those arising from his dishonesty. ue

Indemnity Against Liability Before Damage.

While, as a general rule, sureties are not liable to the creditor or obligee until he has suffered an actual loss, the contract may be worded so as to make the surety liable before

ue Hayden v. Crane, 1 Lans. (N. Y.) 181. uo Morrow v. Brady, 12 R. I. 130.

u1 Yeates v. Walker, 62 Ky. (1 Duv.) 84. •a2 Marsh v. Day, 35 Mass. (18 Pick.) 321. •as Nnsh v. Hartland, 2 Ir. L. Rep. 190.

•u llinz v. Tyler, 79 Ill. 248; Kingsbury v. Westfall, 61 N. Y. 356. u1 Dumont v. United States, 98 U. S. 142, 25 L. Ed. 65.

ue Witkowski v. Hern, 82 Cal. 604, 23 Pac. 132; Dodd v. State, 18

81JBE'I'Y DISCHABGED WHEN PBiliCIPAL 18.

128. A dboharee of the prblolpal dliiCharpa the 111U'et7,- oept where the prblolpal b dbohareed tJuooqh aome defe..e peno:aal to hllllaeH, - d whloh doea aot co to the aaha~oe of the oontraot.

DESTRUCTION OF PBOPEBTY.

129. If the prblolpal be dbob.areed 'b7 a deatractlof the prope:rt7 Ia :regard to whloh the au:ret7 b liable, the a111'et7 b dbcharged alae, Ullleaa he haa -dertak- abaolatelJ' that the prope:rt7 ahall be returned.

As has been stated before, owing to the fact that the surety and principal are each liable to the crec..litor,u• and in some cases jointly, their respective rights and liabilities being intermingled, it is difficult to make any systematic arrangement of

been made to treat of such transactions as would discharge the surety only, leaving the principal still liable to the creditor, though some of the defenses considered, such as alteration, might be available to the principal if he had not participated therein. It is the intention to take up now the defenses which would be available to the principal as well as to the surety, though, to avoid repetition, the right of a surety to avail himself of a defense, when not available to the principal in a particular case, will be considered when that defense is treated of as a defense by both. Thus, while a release of the principal would discharge a surety,627 the right of a surety alone to set up that defense will be considered in connection with a release of both.

Surety's Liability Measured by That of Principal.

The general rule is that the liability of the surety is commensurate with that of his principal, us and the former may

10; Gage v. Lewis, GS III. 604; Winchell v. Doty, 15 Hun (N. Y.) 1; St. Albans Bank v. Dillon, 30 Vt. 122, 73 Am. Dec. 295.

§ 132) PATMENT, TENDER, RELEASE. 247

right to make the application has passed to the creditor by a failure of the debtor to make any designation, and the creditor has exercised his right, he cannot be compelled afterwards to apply it otherwise. Where the creditor receives a payment in ignorance of the fact that a surety has any interest in its application, and the debtor makes no application at the time of payment, the creditor, after applying the payment to a debt other than the one for which such surety was liable, is not bound to make any change thereafter.•u

Application by Court.

If the parties have made no application, and it must be made by the court, the latter will be governed by the circumstances of each particular case. Generally, payments on a running account will be applied to the oldest items, whether secured or not.n• A payment will be applied upon a debt that is due in preference to one that is not; and, as between a secured and an unsecured debt, the application is made, generally, so as to give the creditor the best security for the in- debtedness remaining unpaid.81 •

Tender.

While the general rule is that a tender, to be effective, must be kept good,017 the rule does not apply in the case of a con· tract of suretyship.n• A tender by the principal,eu or by the

au State, to Use of Buchanan County, v. Smith, 26 Mo. 226, 72 Am. Dec. 204; HARDING v. TIFFT, 75 N. Y. 461.

au Worthley v. Emerson, 116 Mass. 374; Frost v. Mlxsell, 38 N. J. Eq. 586; Truscott v. King, 6 N. Y. 147; Hollister v. Davis, 54 Pa. 508; Berghaus v. Alter, 9 Watts (Pa.) 386; Pierce v. Knight, 31 Vt. 701.

ua Barbee v. Morris, 221 Ill. 382, 77 N. E. 589; Lash v. Edgerton, 13 Minn. 210 (Gil. 197); Langdon v. Bowen, 46 Vt. 512.

SIT Clark, Cont. (2d Ed.) p. 440.

eu Randol v. Tatum, 98 Cal. 390, 33 Pac. 433; Smith v. Loan AI!B'n, 119 N. C. 257, 26 S. E. 40. See, however, State, to Use of Haines. v. Alden's Secnrltles, 12 Ohio, 59.

au Life Ass'n of America v. Neville, 72 Ala. 517; Curiae v. Packard, 29 Cal. 194; Bonner v. Nelson, 57 Ga. 433; Spurgeon v. Smltha. 114 Ind. 4:33, 17 N. E. 105; Fisher v. Stockebrand, 26 Knn. GH;-•: Hansford v. Perrin, 45 Ky. (6 B. lion.) 595; Johnson v. l\Illls, 10 Cu~h. (linss.) 503; McQuesten v. Noyes, 6 N. H. 19; Johnson v. h·ey, 44 Tenn. (4 Cold.) 608, 94 Am. Dec. 206; Watson v. Rend, 1

creditor as to the effect of the release. Where the creditor received from the principal a part of the amount due, and released him as to the remainder on account of a statement made by his agent that the surety would continue liable, the legal effect of the act would not be changed, as every one is supposed to know the law.818

Release Obtai11cd by Fraud.

Where the surety is released through the fraud of the principal, the creditor, upon discovery of the fraud, will be restored to his rights against the surety, although the surety was ignorant of the fraud. Thus, where the creditor, at the suggestion of the surety, takes a mortgage from the principal, which the latter alone knows to be fictitious, and the surety is released, the rights of the creditor against the surety can be revived.810

The cancellation of a bond pursuant to law will discharge the sureties thereon; 811 but where the principal, who has given a bond under order of the court, has been charged with mismanagement of funds, those entitled to receive such funds acquire a vested interest in the bond, and the court has no right to release it without the consent of those so interested.'11

Release of One or More Installments.

If the indebtedness for which a surety is bound be payable in installments, a release of the principal as to one or more installments will not affect the liability of the surety as to those installments not released.eaa Each installment is regarded as a separate demand. Thus, a guarantor of the payment of rent is not discharged, as to rent already due, by a surrender of the lease.'u

ut Lewis v. Jones, 4 Bnrn. & C. 506.

eao Seholefield v. Templer, 4 De Gex & 1. 429, nmrmtng Jobn. 155. e8t Loekwood v. Penu, 22 Ln. Ann. 29.

Ga2 Pollock v. Cox, lOS Ga. 430, 34 S. E. 21~; lloehereau v. Jones. 29 Ln. Ann. 82; DEOBALD v. OPPERMANN, 111 N. Y. 531. 19 N. E. 94, 2 L. R. A. 644, 7 Am. St. Rep. 760; Commonwealth, to Use of Shatl'ner's Adm'r. v. Rogers, 53 Pn. 470.

838 Coe v. Cassidy, 72 N. Y. 133, ntlirming 6 Daly (N. Y.) 242: Ducker v. Rnpp, 67 N. Y. 464.

eu KINGSBUHY v. WESTFALL, 61 N.Y. 856; Kingsbury v. Wll· Hams, 53 Barb. (N. Y.) 142.

right of homestead, are determined by the law in force when the surety became his creditor ; that is, at the time the surety entered into the relation.u

Equitable Counterclaim by Su,.ety.

For the reason that the principal is considered the debtor of the surety from the time the relation is entered into, an insolvent principal will not be allowed to recover a debt due from the surety to him 11 without indemnifying the latter in some way; or the proceedings may be stayed until a reasonable time has elapsed to enable the exact liability to be determined.11 Were the insolvent principal allowed to recover his claim from the surety, the surety would be without practical remedy when called upon to pay the debt to the creditor.21 An assignee of the principal fares no better than the principal himself.11 This right to an equitable counterclaim extends to funds of an insolvent principal in the hands of the surety, which the latter can retain,n and his possession will be constructive notice to every one of his rights therein.

While a surety, before payment, cannot set off his contingent liability against his principal,80 he can set off, after payment, whatever he has paid; 81 but, if there are co-sure-

u Keel v. Larkin, 72 Ala. 493.

u Tuscumbia Co. v. Rhodes, 8 Ala. 206; Merwin v. Austin, 58 Conn. 22, 18 Atl. 1029, 7 L. R. A. 84; Scott v. Timberlake, 83 N. C. 882; Barnes v. Barnes (Va.) 156 S. E. 172.

n Sims v. Wallace, 6 B. Mon. (Ky.) 410; RICHARDSON v. MER- RITT, 74 Minn. 354, 77 N. W. 234, 407, 968; Scott v. Timberlake, 83 N. C. 382; Reaver v. Beaver, 23 Pa. 167; Ross v. McKinny, 2 Rawle (Pa.) 227; FeaziQ v. Dlllnrd, 5 Leigh (Va.) 30; Mattingly v. Sutton, 19 W.Va. 19.

21 Abbey v. Van Campen, Freem. Ch. (Miss.) 278.

u Williams v. Helme, 16 N. C. 151, 18 Am. Dec. 580.

21 Battle v. Hart, 17 N. C. 81; McKnight v. Bradley, 10 Rich. Eq. (S. C.) 557. It a surety, who has paid his principal's debt. becomes administrator of tile prln<'lpnl's estate, the estate being solvent, he may apply funds of the estate to tile payment of the debt. Bates v. Vary, 40 Ala. 421. But a surety for a firm cannot apply firm funds to the satisfaction or an Individual debt or one or Its memht'rs. ror whom, also, he Is a surety. Downing v. Linville, 8 Bush (Ky.) 472.

ao Kinsey v. Ring, 88 Wis. 536, 58 N. W. 842.

u Merwin v. Austin, 58 Conn. 22, 18 Atl. 1029, 7 L. R. A. 84: MOR·

ties, his right of set-off against an insolvent principal extends to the amount of his share only, to be ascertained by apportioning the entire amount paid among the solvent sureties.11

True Relation Can Be Shown Orally.

As the right of a surety to indemnity is based upon an im-

strument; but the exact relation can be shown by oral testimony,81 and this can be done even in contradiction of the relation stated in the instrument.u The instrument shows the contract of the creditor with the principal and surety merely, and is not the contract between the principal and the surety. As has been shown, the principal and surety may change their relation by subsequent dealings; 11 and, as it is not the duty of the surety to indemnify the principal,81 the one appearing to be the principal can show that he is the surety,81 or that one appearing to be a surety is jointly liable with him.11

Surety Can Pay or Perform Without Request.

The surety, having undertaken to pay the creditor, or that the principal will pay or perform, not onty has the right to

GAN v. WORDELL, 178 Mass. 350, 59 N. E. 1037, 55 L. R. A. 83; Brittain v. Quiet, 54 N. C. 328, 62 Am. Dee. 202: In re Bally's Estate, 156 Pa. 634, 27 Atl. 560, 22 L. R. A. 444; Barney v. Grover, 28 Vt. 301.

u COSGROVE v. McKASY, 65 Minn. 426, 68 N. W. 76; Wayland

Where the creditor's agent, by direction of the creditor, becomes administrator of a debtor's estate, the adrnlnh;trntor's sureties cannot be held liaule by such creditor, as he himself, through his agent,

n Gray v. McDonald, 19 Wis. 213. One may show that he Is a supplemental surety. Chapeze v. Young. 87 Ky. 476, 9 S. W. 399. u Pollard v. Stanton, 5 Ala. 451; Mansfield v. Edwards, 136 Mass. 15, 49 Am. Rep. 1; Williams v. Glenn, 92 N. C. 253, 53 Am. Rep. 416.

indemnity from any surety :>r set of sureties who became such at a later date than the o~ who has paid.

NOTICE TO AJO) DEMAND OK PRINCIPAL lJlfl'fEOESSABY.

156.The auret7, If entitled to :recovu f:rom the p:rbacipal,

--. b:rlnc lllllt without Prine h1m p:revioua notice o:r paaktuc dem&Dd of h1m.

JOINT .&.OTIOX BY 00-BtrB.ETIES.

157. If two o:r more 11111'ctle• have paid the debt, the7 oaDD.ot Join .. pWntUr. agalu..t the p:rbacipal, unle•• thq have paid from a Joint fund. '

.&.OTIOX OX ORIGIXAL IXSTRU)IJ:NT.

158. Suit m&J'be b:rought upon the implied p:rombe, o:r upon the principal'• contract with the o:redltor, If 1110h contract la within the cont:rol of the auret7.

Notice to or DemmJd of Principal Not Necessary.

As soon as a surety has paid his principal's debt," it being due, he can bring suit against the principal without previous notice 70 or demand,11 as it is the principal's duty to take notice that the surety has been damnified by a failure to perfonn his contract.11 The right of action arises when the surety not only has dealt directly with the creditor, but when he has contributed his share to another surety who has satisfied the debt.71 However, one co-surety, paying the whole debt, can maintain an action against the principal for the entire amount without molesting the others.16

u Ritenour v. Mathews, 42 Ind. 7; Conn 'f', Coburn, 7 N. H. 868, 26 Am. Dee. 746.

to Sikes v. Quick, ~2 N. C. 19.

Tl Collins v. Boyd, 14 Ala. 505; Odlln T. Greenleaf, S N. H. 270; William's Adm'rs v. Wllliam's Adm'rs, ~ Ohio (5 Ham.) 444.

u Ward v. Henry, ~ Conn. 505, 18 Am. Dec. 119; Thompson T. Wilson's Ex'r, 13 La. 138.

u Odlln v. Greenleaf, 3 N. H. 270.

u Lowry v. Lumbermen's Bank, 2 Watts & S. (Pa.) 210.

about whom he knows nothing. The principal has a right to choose his creditors; and a person who becomes a surety without the principal's knowledge is, as to the principal, the same as a stranger who pays the debt.111 In sud~ cases, the principal successfully may resist payment by saying that he did not promise. However, where there are two or more jointly liable, a request from one of them will be regarded as a request by all, and a surety could recover from any of them.111

It is not requisite that the surety become such at the express request of the principal. The law will imply a request whenever the principal seems to have authorized such security, or afterwards has recognized the relation by his acts.111 Thus, where the principal appears in an appellate court, it will be inferred that a surety upon the appeal bond became such at the request of the principal.16

Incapacity of Principal.

When suerl'by the surety, the principal can defend successfully by showing his incapacity to enter into a contract. If the principal be an infant or an idiot, the surety cannot recover; nor could the surety recover from a corporation if the transaction was ultra vires.* The defense of infancy cannot be maintained successfully against a surety if it could not be against the creditor,11 as in the case of a guaranty of the payment of necessaries furnished. 88

It might be that, while the principal and surety each have capacity to contract with the creditor, they lack capacity to enter into contracts with each other. Thus, where a statute forbids contracts between husband and wife, the latter, as surety for her husband, cannot recover from him on an im- plied contract for indemnity.11