Surety

3 A person who engages to be answerable for the debt, default, or miscarriage of another. The engagement constitutes a contract of suretyship.* A person who, being liable to pay a debt or perform an obligation, is entitled, if it is enforced against him, to be indemnified by > L. supremus, upg^most. ' 1 Story, Eq. § 626, quoting Lord Hardwicke in Pit v. Cholmondeley, 3 Ves. 566-66 (18S4). See also Perkins f. Hart, 11 Wheat. 266 (1826). >F. sureti: L. se-, apart from, free of; euro, anxsome other person who ought himself to have made or performed before the former was compelled to do so.i The relation is fixed by the arrangement and equities between the debtors or obligors, and may be un lino wn to the creditor.^ ' Co-surety. Persons are co-sureties, so as to give the right of contribution, when they are bound for the performance by the same principal of the same duty.2 A contract of " suretyship " is a direct liability to the creditor for the act to be perforaied by the debtor; a " guaranty " is a liability only for his ability to perform this act. A surety assumes to pierform the contract if the principal should not; a guarantor undertakes that his principal can perform — that he is able to perform. The undertaking in suretyship is immediate and direct that the iact shall be done; if not done, the surety becomes at once responsible. In a case of guaranty, non-ability, that is, insolvency, must first be shown. ^ A "^ surety " is usually bound with his principal, by the same instrument, executed at the same time and on the same consideration. He is an original promisor, and a debtor from the beginning, and held to know every default of his principal. He may be sued with the principal. The contract of a "guarantor" is his own separate undertaking, in which the principal does not join. The original contract of the principal is not his contract, and he is not bound to take notice of its non-performance. He is often discharged by indulgence to the principal, and usually is not liable unless notified of his default. At the same time, each stands responsible for the debt, default, or miscarriage of the other; each is a favorite in law, and not bound beyond the strict terms of the engagement.* The liabilitj^ of a surety is not to be extended, by implication, beyond the terms of his contract. To the extent, and in the manner, and under the circumstances, pointed out in his obligation, he is bound, and no farther. It is not sufi Sicient that he may sustain no injury by a change in the contract, or that it may even be for his benefit. He has a right to stand upon the very terms of his contract; and if he does not assent to any variation of it, and a variation is made, it is fatal. The courts scan contracts of sureties with considerable strictness. ^ When a change is made without his assent, he is not bound by the contract in its original form, for that has ceased to exist. He is not bound by the conti-act in its altered form, for to that he never assented. " 1 Smith V. Shelden, 35 Mich. 48 (1876), Cooley, C. J.; Wendlandt v. Sohr, 37 Minn. 163 (1887).

2 Young V. Shunk, 30 Minn. 505 (1883), Gilfillan, C. J. 8 Eeigart v. White, 52 Pa. 440 (1866), Agnew, J. 4 Markland Mining & Manuf. Co. v. Kimmel, 87 Ind. 56&-69 (1882), cases, Zollars, J. S^e also Barns u Barrow,. 61 N. Y. 42-46 (1874), cases; Kingsbury v. Westfall, ib. 360 (1875); Hammel v. Beardsley, 31 Minn. 315 (1883).

He is a " favored debtor." His rights are zealously guarded both at law and in equity. The slightest fraud on the part of the creditor, touching the contract, annuls it. Any alteration after it is made, though beneficial to the surety, has the same effect. His contract, exactly as made', is the measure of his liability; and, if the case against hiih be not clearly within it, he is entitled to go acquit. But there is a duty incumbent on him. He must not rest supine, close his eyes and fail to seek important information within his reach. If he does this, and a loss occurs, he cannot, in the absence of fraud by the creditor, set up as a defense facts then first learned which he ought to have known and considered before entering into the contract. ^ "VVTien it is said that the contract is to be construed strictly, the meaning is that the obligation is not to be extended to any other subject, or person, or period of time than is expressed or necessarily included in it This rule applies only to the contract itself, not to matters collateral and incidental or arising in execution of it, which are governed by the rules that apply to like circumstances, whatever the relation of the parties." In the case of an absolute guaranty by a surety of payment of a debt, no duty rests upon the creditor in the first instance to take steps against the debtor, and a request to proceed, and damage resulting to the surety from a failure to proceed, must be shown by the surety, to establish a defense. But in the case of an undertaking of such a nature that proceedings must be taken against the debtor before the obliga-. tion of the surety to pay arises, proof of a request to proceed is not necessary, the law in such case implying the condition precedent that due diligence will be used in proceeding against the principal. ^ Where a law provides that a surety may require his creditor, by written notice, to commence action against the principal, the notice must be unconditional — to commence forthwith; a notice that the surety "wishes" the creditor to collect the claim or have it arranged, the surety not desiring to remain liable, is mot sufficient.^ A surety who pays the debt for which he is bound is not only entitled to all the rights of the creditor against the principal for the whole amount, but against the other sureties for their proportional part.^ United States, 2 Wall. 233-35 (1864), cases; Read v. Bowman, ib.

603 (1864), cases; State v. Churchill, 48 Ark. 442 (1886), cases; 20 Cent. Law J. 183-89 (1885), cases. 1 Magee v. Manhattan Life Ins. Co., 92 U. S. 98 ^1875), cases, Swayne, J. 2 Warner v. Connecticut Mut. Life Ins. Co., 109 U. S. 363 (16a3), Matthews, J.; Burge, Suretyship, 1 Am. ed. 40. 3 Toles V. Adee, 91 N. Y. 573 (1883), Rapallo, J. 4 Meriden Silver Plate Co. v. Flory, 44 Ohio St. 435 (1836); Baker v. Kellogg, S9 id. 665 (1876): Ohio Rev. St. §5833. 6 United States v. Ryder, 110 U. S. 733 (1884); Hampton V. Phipps, 108 id.

263-66 (1833), cases; Shaeffer v. Clendenin, 100 Pa. 567 (1882); Stevens v. Tucker, 87 Ind. The rule of law is that where one surety has paid the debt, he can recover from a co-surety, at law, an aliquot part of the debt, regard being had to the number, but not to the solvency, of the sureties. It any co-surety is insolvent, a larger proportion may be recovered in equity.^ When a surety has contracted with reference to the conduct of a party in a proceeding in court, in the absence of fraud or collusion, he is concluded by the judgment. ^ If the surety holds indemnity from the principal, the cx'edltor may have the debt satisfied out of it; if the indemnity Is against a contingent liability, the creditor cannot be substituted until the liability hecomes absolute, that is, until the claim is reduced to judgment.* If the purpose for which the contract is made is illegal, the surety cannot be held. Thus, a bond to release property from an unlawful attachment creates no liability.* Surety company. An association of persons, usually incorporated, which makes a business of acting as surety for persons occupying positions of trust, for a compensation which varies with the amount of the bond or security required. Such companies are sometimes also called " guaranty companies."

See Alteration, 2; Appeal, 2; Assent; Conteibution; Discussion;0uaranty, 2; Indorsement; Joint AND Several; Liability, Contingent; Peace, 1; Recognizance; Strictus; Subrogation.