the creditor's right against anyone primarily liable for the debt. The same right is given to one who becomes the surety of a surety, and pays the debt. When a party becomes a surety for the original surety, the former is not bound with the original surety, but the latter stands in relation of principal as to him and is primarily liable to him. Hence, if the second surety pays the debt, he is entitled to subrogation to the creditor's rights against botb the principal and his immediate surety. But, if the first surety pays the debt, since his relation is that of principal to the second surety, he cannot recover from such second surety, for the latter is not primarily liable for the debt. As to him, payment of the debt by the original surety is only a payment by his principal, and exonerates him from further liability.

§ 73. Two sets of sureties. There may be two sets of sureties of the same principal for the same debt, one subsequent to the other. In such case the subsequent set of sureties are primarily liable for the debt to the first set of sureties, and the latter are secondarily liable. For instance, a party who lost a suit at law wished to appeal, and gave a bond for $7,000 with two sureties on it. He lost the appeal and appealed from this decision to a higher court, giving a $9,000 bond with two new sureties, and again lost his appeal. The creditor's damages amounted to $11,000 and he recovered $9,000, the full amount of the bond, from the sureties on the second bond, and then sued the sureties on the first bond for the remaining $2,000 still due him. In such a case the sureties on the second bond are primarily liable; and, if the sureties on the first

bond had paid $7,000, they would have been subrogated to so much of the creditor's rights on the second bond as remained after the creditor was fully satisfied. Here the creditor could have gotten $4,000 on the second bond after getting $7,000 on the first bond; and the sureties on the latter could then have enforced the second bond to the extent of $5,000. But, since the creditor collected the entire amount on the second bond, the sureties on the first bond, being secondarily liable, were bound to make good any amount which might still be due, here $2,000; inasmuch as the sureties on the second bond were liable not for the whole amount due the creditor, but for only $9,000. It was therefore held, in a case similar to this, that the creditor could recover $2,000 on the first bond (19). The fact that there was a bond given with new sureties did not release the original sureties. When two sets of sureties enter into obligation as to the same debt at the same time, they are liable as co-sureties.

§ 74. Co-Sureties. A surety who pays the principal's debt is entitled to subrogation to the creditor's rights against his co-sureties, and can recover in this way from such co-sureties the amount of contribution to which he is entitled. The principle of subrogation applies to cases arising between co-sureties, as well as to those arising between principal and surety. The case discussed in § 69, above, is a case where this right of subrogation was enforced against a co-surety. There the surety had paid a debt of $16,000, was allowed subrogation to the creditor's right, and was thus able to file his claim for $16,000

(19) Chester v. Broderick, 131 New York, 549.

against the estate of the insolvent co-surety and collect dividends on that amount, until the total dividends amounted to $8,000, the amount of contribution he was entitled to. A surety will be entitled to the benefit of any compromise effected by the paying surety, or any discounts which have been obtained by paying the debt in depreciated currency, or any other reduction. A proportionate amount of such benefits must be deducted from the amount of contribution he pays. On the other hand, he must contribute for costs of a suit beneficial to his interest.

SECTION 2. INDEMNITY.

§ 75. Liability of principal to surety. The right of the surety to indemnity from the principal, for any payment which he may make to the creditor in consequence of the suretyship liability, arises at the time the surety becomes responsible for the debt of the principal. It is then the law raises an implied promise or contract on the part of the principal to make good any loss which the surety may suffer. When the debt is paid by the surety, no new contract is made, but the payment relates back to the time when the contract was entered into by which the surety's liability was incurred. Thus, the court in Appleton v. Bascom (20) in considering whether an action at law could be maintained by the surety against the principal said: "The implied promise of indemnity in the present case must be considered as made at the time when the plaintiff became responsible to the creditor on the bond.

(20) 3 Metcalf, 109.

The plaintiff's liability was the consideration of the principal's implied promise of indemnity, and the promise must be considered as made at the time when that liability was assumed." The payment by the surety only fixes the amount of damages for which the principal is liable under his original agreement to indemnify the surety. If a surety, however, gives his own bond or non-negotiable note in satisfaction of the principal's obligation, he cannot, before payment of such bond or note, secure indemnity from the principal; the giving of such an instrument is not considered a payment of the debt, for, should the surety fail to pay the note or bond, the creditor could still sue the principal on the original obligation (21). The rule would be different, however, if there was an agreement between the creditor and surety that the former was to take the surety's note in full payment of the debt due him, for such agreement would extinguish the debt of the principal to the creditor and would in fact amount to a payment.

§ 76. Payment by surety before maturity. The surety may pay the debt before it is due, if the principal is not injured thereby; but of course he cannot, if he does so, enforce indemnity against the principal until the debt matures. Likewise, a surety has a right to pay the debt as soon as due, and need not wait for the creditor to sue him. In fact, as we saw above (22), the surety cannot require the creditor to sue the principal, because the burden is on the surety to see the debt is paid. On payment of the debt before maturity, the surety can compel contribution

(21) Bennett v. Buchanan, 3 Indiana, 47. (22) § 36.

from co-sureties as soon as the debt comes due, for a payment before it is due is not a thing of which they can complain. It does not increase their burdens.

§ 77. Part payment by surety. The surety may compromise the debt or pay any part of it remaining due, and compel the principal to indemnify him. He may pay in instalments if he wishes, but if he does so he cannot bring a separate action against the principal for each instalment paid, unless the contract so provides. In short, any method of payment may be adopted by the surety, and he is entitled to indemnity for his outlay, whatever it may amount to, regardless of whether he has paid all the debt or not. Clearly, the payment of any amount, however small, releases the principal from so much liability to the creditor. Of course, if he compromises the debt and pays less than due in full satisfaction, he can recover only what he actually paid for he is only entitled to be made whole.

§ 78. Surety must be under legal obligation to pay. In order to secure the right of indemnity from the principal, the surety must be under legal obligation to pay-he must be legally bound in order to hold his principal. The theory of indemnity is that, when the debt comes due, the law implies a promise on the part of the principal to repay the surety, if the latter pays it; and, if the surety is not bound to pay, then there can be no such implied promise. He would pay as a mere volunteer and could not recover anything from the principal. The rule is the same when the surety is released from liability and then pays the debt; for, because he is released and