000. This surety then brought a bill in equity against the other five sureties to enforce contribution. The court held that contribution between co-sureties, under separate instruments, is to be in proportion to the amounts of the separate instruments under which they are respectively bound. Here, then, the sureties on the first bond must bear two-thirds the loss and the sureties on the second bond one-third. Hence, the plaintiff is entitled to recover one-third of two-thirds or two-ninths of the loss from each of the sureties on the first bond, and one-third of one-third or one-ninth of the loss from each surety on the second bond (40). Had the bonds in this case been for the same amount, the two sets of sureties would have been liable to contribute equally toward any loss which might have occurred.

§ 98. Statute of limitations. The statute of limitations begins to run on the surety's right of contribution whenever he has paid more than his share of the debt. It is immaterial that, at the time of the action for contribution, the claim of the creditor against the co-surety is barred by the statute of limitations; for the implied obligation is to contribute in case the debt is paid by a cosurety, and the action arises when such co-surety has to pay (41). Of course, if the surety who pays does so knowing there is a defense to an action against him, he loses his right of contribution.

§ 99. Surety of a surety. A surety of a surety is not liable for contribution when the debt is paid by the co

(40) Bell's Administration v. Jasper, 2 Iredell, Equity (N. C.) 597. (41) May v. Vann, 15 Florida, 553.

surety of the one for whom he is surety. Suppose A and B are co-snreties on a promissory note for $100, and C becomes surety for A's obligation on the note. B pays the entire note and seeks contribution. B cannot enforce contribution as to C, who is a mere surety for A (42). C promised to pay the creditor if A did not, but is under no obligation to contribute to B.

SECTION 4. EXONERATION.

§ 100. Theory of exoneration. Exoneration is the right in equity which a surety has, after the suretyship debt falls due, to compel the principal debtor to satisfy the debt and thus relieve the surety from liability. The right may also be enforced against a co-surety as to the amount he is liable to contribute. It is not necessary that the surety who seeks exoneration first pay the debt. It is a remedy given the surety to enable him to relieve himself from payment of the debt. The theory on which the right is based is that the surety, as soon as the debt is due, is liable to be sued and forced to pay. He may have to sell property at a forced sale and may not be able to get full value for it, or his property may be seized and sold on execution; and, since he can recover from the principal only what he actually paid, he may lose a great deal by reason of being compelled to raise money quickly, or by reason of a sale on execution. If he suffers such a loss, it is a loss for which he can get no legal restitution. Therefore, after the debt falls due, a court of equity will allow him to file a bill to compel the party primarily liable

(42) Baldwin v. Fleming, 90 Indiana, 177.

to pay the debt and thus save this possibility of loss; or, he may compel co-sureties to bear their respective shares of the burden (43).

The

§ 101. When surety can enforce exoneration. right to compel exoneration does not arise until the debt matures. As soon as the debt matures, however, the general rule of law is that the surety may at once file a bill against the principal debtor to compel him to exonerate the surety by paying the creditor. Thus, in a Wisconsin case (44) where the creditor had obtained a judgment against the surety, the latter filed his bill against the principal to compel him to pay the judgment and save the surety from a possible levy. The court said that, since the principal was ultimately liable for the debt, the surety could, in equity, compel his principal to exonerate him from liability by extinguishing the obligation, without first having paid it himself; therefore, the principal would have to pay the judgment against the surety. It is not necessary that the surety first allow a judgment to be secured against him as in this case, but he can proceed to enforce this right as soon as the debt falls due and the principal does not pay it. When there is a co-surety, the same right exists against him to the extent to which he is liable for contribution; for, if the principal be insolvent, the co-surety ought to pay his share, and his failure to do so, according to the theory of exoneration as stated above, may cause the other surety great loss for which he will have no remedy at law or in equity. There

(43) Wolmershausen v. Gullick, [1893] 2 Ch. 514; Hodgson v. Baldwin, 65 Ill. 532.

(44) Dobe v. Fidelity and Casualty Co., 95 Wisconsin, 540.

is an old English case (45) where the principal covenanted to save the surety harmless, and, on the debt falling due, the surety sought by bill in equity to force the principal to pay the creditor and thus exonerate the surety. The court held that it would decree that the principal discharge the debt, for it was unreasonable that the surety always have a cloud hang over him. The principal ought in reason to be compelled to pay the debt and relieve him from this liability.

§ 102. Express contract by principal to exonerate surety. When the principal expressly agrees to hold the surety harmless by reason of his suretyship undertaking, if the debt falls due and the principal does not pay it, the surety can in equity specifically enforce this agreement against his principal. If one assumes to pay the debt of another and fails to do so, he will be liable for the full amount regardless of whether the former has paid or not. Thus, if one buys mortgaged land, assuming the mortgage debt, and does not pay it when due, he is liable to the grantor for the entire sum though the grantor has not paid the creditor (46).

§ 103. Securities given by both principal and surety. When both principal and surety give securities for the payment of the debt to the creditor, the surety is entitled to have the security given by the principal first applied to payment of the debt, at least where both securities are to be sold or foreclosed in the same proceeding. This, it is clear, is only a matter of right, for the principal is the one who ought to pay the debt and re

(45) Ranelaugh v. Hayes, 1 Vernon, 189.
(46) Foster v. Stolher, 42 Connecticut, 244.

lieve the surety from liability. Thus, in a certain case (47) a husband and wife had both mortgaged land to secure a debt, for which the husband was principal and the wife surety. The court held the surety was entitled to have the principal's mortgage first applied to payment of the debt. The surety may purchase at a sale of the principal's property which secured the debt, but a principal is not allowed to purchase at a sale by the creditor of the surety's property to satisfy the debt.

§ 104. Guaranty of collectibility. If the surety guarantees the collectibility of a note or other debt, the creditor can recover from him if the debt cannot be collected. The creditor must show, before he can recover, however, that the obligation is uncollectible. In such a guaranty, the creditor must use due diligence in trying to collect the debt as soon as it is due, for lack of diligence releases the guarantor. He does not guarantee it will always be collectible. When the party liable has removed from the state, however, the creditor is not compelled to follow him and try to collect before suing the guarantor. If the creditor's lack of diligence in pursuing the parties primarily liable for the debt is induced by the conduct of the guarantor, the latter will not be released from liability.

(47) Hoppes v. Hoppes, 123 Indiana, 397.