prior to the time the statute of limitations becomes a bar against him, may recover indemnity.81 The failure of the creditor to present his claim to the decedent principal's estate will not relieve the surety from paying the debt. If the surety dies, and the time within which the statute permits claims to be presented to his estate would prevent the filing of such claim, the administrator by paying the obligation of the surety may recover the amount from the principal for money paid to his use.33 The surety is entitled to reimbursement on an instrument to which the statute of limitations has become a bar to him, but not to the principal, since that defense is waivable.34 However, if the statute barred any recovery against both principal and surety, payment by the latter is voluntary.35 So a surety, paying without judgment against him, who could have avoided payment by availing himself of the statute of limitations, is unable to recover the sum against property mortgaged to him as security therefor, against a purchaser from the principal, or one having a lien on such property.86 81 Sibley v. McAllaster (1836) 8 N. H. 389; Marshall v. Hudson, Adm'x (1836) 9 Yerg. (Tenn.) 57. 32 Villars v. Palmer et al. (1873) 67 Ill. 204. 88 Shaw et al. v. Loud (1815) 12 Mass. 447. 84 McClatchie v. Durham (1880) 44 Mich. 435, 7 N. W. 76. 35 Schlitz et al. v. Thomas et al. (1923) Cal. Dist. Court of Appeal 216 Pac. 51, 52: "Appellants contend that the liability of the corporation to pay the $4,000 note had been extinguished by the statute of limitations before the alleged payment thereof by plaintiffs and that therefore the payment was voluntary and gave plaintiffs no cause of action against the defendants. This contention must be sustained. To entitle a guarantor or surety to reimbursement, contribution, or subrogation on account of payments made in behalf of his principal, it It is recognized that a surety who has become such without the request of the principal, express or implied, cannot have the aid of a law court to obtain reimbursement. True, he may be liable to the obligee; but if his liability was assumed against the wish of the principal, the latter is not liable to the surety.87 And the fact that the obligation of the guarantor was beneficial to the principal does not permit the inference that he requested the former to sign. The express request, or circumstances from which one may be implied, must be shown.88 In this respect, indemnity differs from subrogation; for if a surety becomes bound against the wish of the principal, he is entitled to be subrogated to the rights of the creditor against the principal.99 Subrogation is not founded upon a promise but exists because of the relation of the parties, while the right of indemnity rests upon a contract, express or implied. § 158. The amount of recovery. Until the surety has paid some portion of the principal's debt, no action for indemnity against the latter will lie. However, in the case of a grantee from the mortgagor of realty who has expressly assumed the fense that the mortgagor or principal in the bond or debt could have made, and in this case appellant can make the same defense that Ball could have made if the beneficiaries of the bond had attempted to compel him to pay by reason of his suretyship on the bond. This record shows that, as between appellant and appellees other than Ball, his lien upon the land purchased by him was superior to that of said appellees." May v. Ball et al. (1900) 21 Ky. Law Rep. 1673, 56 S. W. 7. 37 Teberg v. Swenson and Son (1884) 32 Kan. 224, 229; McPherson v. Meek (1860) 30 Mo. 345; Gray v. Bowls (1836) 18 N. C. 437; Carter v. Black (1839) 4 Devereux & Battle (20 N. C.) 425. For a case apparently contra, see Hecker et al. v. Mahler (1901) 64 Oh. St. 398, 60 N. E. 555. A voluntary payment by the surety, which the principal subsequently promises to reimburse him, will not bind the promisor. Bevan v. Tomlinson (1865) 25 Ind. 253; Thompson et al. v. Thompson (1902) 76 App. Div. 178, 78 N. Y. S. 389. 88No evidence is detailed, tending to prove that the guaranty was given by Judge White to his son-inlaw, at the request of his son, or that the money was paid at the request of the son, or that he in any way sanctioned the proceeding. His request cannot be inferred simply from the fact that the guaranty was signed for his benefit. The case should show something further." Executors of White v. White and Trustee (1857) 30 Vt. 338, 342. 39 Mathews et al. v. Aikin (1848) 1 Com. (N. Y.) 595. mortgage, the view of some courts is that the latter, though really a surety, upon the failure of the grantee to pay the mortgage assumed, may recover in contract from the grantee, prior to the payment of the mortgage. He recovers upon the express agreement, and not upon an implied promise.40 By virtue of a clear express agreement, distinguished from the principal's implied contract to repay, the surety may proceed against any independent security prior to discharging the debt to the obligee.41 The right of indemnity, resting upon an implied promise, does not exist for any sum in excess of what the surety pays, with interest, which is frequently regulated by statute. Even though the original obligation bound the principal and surety to pay attorney's fees, unless the surety pays the attorney, or became obligated to do so, he cannot recover that amount from the principal. The principal's implied promise is to reimburse the surety for such sums as he was compelled to pay. The surety is not entitled to make profit from the transaction. Any compromise he is able to effect with the obligee inures to the benefit of the principal. He is for such purpose agent for the principal, and like any agent cannot speculate at his principal's expense. Therefore, the burden is assumed by the surety to establish the amount he has paid.44 He can recover from the principal only such sum as will reimburse him for expenditures made to the obligee, and required by his agreement. Indem 43 40 See Sec. 155, supra; Malott v. Goff (1884) 96 Ind. 496; Locke v. Homer (1881) 131 Mass. 93, 41 Am. Rep. 199. Poe v. Dixon (1899) 60 Oh. St. 124, 54 N. E. 86, holds that the holder of a note or mortgagee can recover only on such a promise to assume the payment of the mortgage by the grantee. The promise, unless it is explicit, is not to the grantor. The agreement is made for the benefit of creditors and not for the surety's benefit. 41 Cooper et al. v. Parker (1912) 176 Ala. 122, 57 So. 472. 42 But if the surety's claim is for subrogation, and not indemnity, he may recover on the original note providing for attorney's fees, just the same as the payee could have done, and this even though he expended no attorney's fees. Beville v. Boyd (1897) Court of Civil Appeals of Texas, 41 S. W. 670. 43 Reed v. Norris (1837) 2 M. & C. 362, 40 Eng. Rep. Reprint 678. 44 Feamster et al. v. Withrow, Trustee et al. (1878) 12 W. Va. 611, 653. nification and not profit is the measure of the surety's recourse against the principal.45 While a guarantor or surety is entitled to recover any necessary costs in defending himself against an action brought by the obligee, he cannot recover any costs unnecessarily incurred. He is obliged to show that the defense he made was in good faith, to protect the interests of the principal and himself, and with reasonable prospect of success.46 Under no circumstances, except by express agreement, can the surety recover for loss to his business or credit, or for any hardship in procuring the money with which to pay the obligee.47 The surety may pay the creditor by giving anything of value which the latter will accept; but the amount of indemnity from the principal is confined to the actual, and not the face value of what the creditor has accepted.48 But no more than the actual debt is recoverable, although the property given by the guarantor to the creditor might exceed in value the amount of his original obligation.49 If the debt be extinguished by conveyance of personal or real property, the surety will recover from the principal the value of the property.50 § 159. Payment by the surety giving his note. Besides the payment of money to the obligee, the surety may discharge the principal's debt by giving his negotiable note. Its acceptance by the creditor, not as collateral, but in extinguishment of the debt, entitles the surety to bring an action immediately against the principal for the entire amount of his note, even 45 Gieseke v. Johnson (1888) 115 Ind. 308, 17 N. E. 573; Eaton v. Lambert (1871) 1 Neb. 339; Child v. Eureka Waterworks (1862) 44 N. H. 354; Matthews v. Hall's Adm'r (1883) 21 W. Va. 510. 46 Beckley v. Munson (1853) 22 Conn. 298; Hayden v. Cabot (1821) 17 Mass. 168; Whitworth et al. v. Tilman (1866) 40 Miss. 76; Holmes v. Weed (1857) 24 Barb. (N. Y.) 546; Thompson et al. v. Taylor, Executrix (1878) 72 N. Y. 32; Hullett v. Soullard (1854) 26 Vt. 295; Cranmer et al. v. McSwords et al. 48 Jordan, Adm 'r V. Adams (1847) 7 Ark. 348; Succession of Dinkgrave (1879) 31 La. Ann. 703; Feamster et al. v. Withrow et al. (1876) 9 W. Va. 296, 313. 49 Hickman et al. v. McCurdy (1832) 7 J. J. Marsh. (Ky.) 555, 558. 50 Bonney v. Seely (1829) 2 Wend. (N. Y.) 481. before its maturity. The substituted note is treated as cash. Whether this note given by the surety can be collected because of his insolvency, is not material. The reason is that negotiable instruments in ordinary business transactions are treated as currency.51 However, one surety, by giving a note for his share to a co-surety, who has paid the entire debt to the principal, is not entitled to recover from the principal the amount of this note. The right to reimbursement seems confined to the surety who has given his note in extinguishment of the debt due to the original creditor.52 And a renewal of a note by giving another, signed by both principal and surety, is not a payment of the first, and the surety cannot recover indemnity until the renewal note is paid.58 A distinction must be observed between the case of a surety giving a negotiable and a non-negotiable instrument in 51 The original case of Barclay et al. v. Gooch (1797) 2 Esp. 571, deciding this point, while it has been doubted (see Cornwall v. Gould [1827] 4 Pick. [Mass.] 444, 446), has been followed quite generally. Russell v. La Roque and Hatch (1847) 11 Ala. 352; Neale v. Newland (1842) 4 Ark. 506, 38 Am. Dec. 42; Bone v. Torry (1855) 16 Ark. 83; Flannagan v. Forrest et al. (1894) 94 Ga. 685, 21 S. E. 712; Maysville Telephone Co. v. First National Bank of Maysville (1911) 142 Ky. 578, 134 S. W. 886; Bausman v. Credit Guarantee Co. (1891) 47 Minn. 377, 50 N. W. 496; Pearson v. Parker (1826) 3 N. H. 366; Merchants' and Manufacturers National Bank of Middletown v. Cumings et al. (1896) 149 N. Y. 360, 44 N. E. 173. "Whether the note which has thus been accepted in payment can be collected or not, either by reason of its inherent defects, or the insolvency of the maker, is not a matter for the party who has promised to pay the said amount to inquire into. Whether the party receiving the note can collect it, is a matter (in the absence of fraud or collusion) between him and the maker of the note only. . . . Whether the note was stamped or not, or was void by reason of the want of a stamp, or only voidable, are questions entirely immaterial in this case. Hardin v. Branner (1868) 25 Ia. 364, 370. Accord: Auerbach v. Rogin (1903) 40 Misc. 695, 83 N. Y. S. 154; Brandt on Suretyship and Guaranty (1905, 3d Ed.) Sec. 232. A contrary view, denying reimbursement to the surety until he has paid the note given by him in payment of his principal's obligation, is supported in some jurisdictions. See Romine et ux. v. Romine (1877) 59 Ind. 346. 52 Stone v. Hammell (1890) 83 Cal. 547, 23 Pac. 703, 8 L. R. A. 425, 17 A. S. R. 272. 53 Griffin v. Long et al. (1910) 96 Ark. 268, 131 S. W. 672. |