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There is no requirement, however, that any surety accept indemnity offered by the principal, and a refusal to receive the proffered securities will not defeat the right to recover contribution.2

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§ 186. Where the paying surety is indemnified. Where the principal gives securities or money to one surety with which to pay his debt, the value of such securities will be offset against any claim for contribution. Equity requires equalization of the burden only in case of a surety who is compelled to pay out of his own funds.

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"It is a settled principle of equity that if one of several co-sureties, subsequently take a security from the principal, for his own indemnity, it inures to the common benefit of all the sureties. If, therefore, the principal convey property by deed of trust expressed for the benefit of one of the sureties only, the others have an equity to come upon it, to the same extent, that he can. A surety, who has the means of indemnity in his own hands cannot pay the debt of his principal and proceed against a co-surety for contribution. As each surety has an equal equity against the principal, no one can engross the funds supplied by him to the exclusion of the others. If the principal has given securities to one surety, the latter cannot in chancery recover contribution from his co-surety without accounting for the property, and either showing how much he received upon it, and making a ratable abatement of the proceeds, or showing that by due diligence he could not realize anything from it. A surety thus receiving securities for his own indemnity, is a trustee for his co-sureties." 25

In the event indemnity is given by the principal to a surety, therefore, each surety must bring into hotchpot all benefits received, and have them credited against any claim he may have against his co-sureties.26 If one of the co-sureties pays the debt,

24 Smith v. Mason (1895) 44 Neb. 610, 63 N. W. 41, 44.

25 Boughner v. Hall (1884) 24 W. Va. 249, 264. Accord: Sanders v. Wheelburg, Executor (1866) 107 Ind. 266, 7 N. E. 573; In re Skiles' Estate (1895) 211 Pa. St. 631, 61 Atl. 245.

26 Steel v. Dixon (1881) 17 Ch. D. 825. See Berridge v. Berridge (1890) 44 Ch. D. 168; Brown v. Conway (1926) Ia. 206 N. W. 665.

So where the creditor insured the life of the debtor, which insurance he assigned to one of the sureties, such surety must bring into account

and procures from the obligee an assignment of a mortgage given by the principal to secure the debt for which the coobligors became responsible, and subsequently at a foreclosure sale and for a fair price purchases the mortgaged premises, he is not a trustee, but absolute owner of the property. No cosurety, when called upon to contribute, can claim an interest therein. The court will inquire whether the sale was fair and for an adequate price. If satisfied that it was, the co-sureties will be denied the right to participate therein, and will be required to contribute a proportionate share.27

One who becomes bound with his principal on one obligation, for which he is indemnified, is not required to share the security given him by the principal with another with whom he became bound on another separate and distinct undertaking for the same principal even though the indemnity was given to secure the first surety on both undertakings, unless its value exceeds his liability on the first.28 If the indemnity is furnished by a stranger, no co-surety has any claim to it, unless the surety indemnified has been constituted a trustee for the benefit of his associates. That the wife of the principal gave a deed to her separate property, in the execution of which the husband joined, to one surety, does not require the grantee to share it with his co-sureties. In jurisdictions where the wife can hold realty in her own name, and the husband must join in the conveyance, he is furnishing no part of the indemnity, his only interest being that of curtesy, which is a contingent estate.29 After the sureties have adjusted their accounts, and each has contributed his

the amount received from the insurance company upon the death of the principal, but is to be credited with premiums paid in keeping up the policies. But policies taken by a surety on the life of the principal after their liabilities became fixed, need not be brought into hotchpot. In re Arcedeckne (1883) 24 Ch. D. 709.

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27 Livingston's Executors v. Van Rensselaer's Adm'rs (1830) Wend. (N. Y.) 63.

Where a surety surrenders securities, it is presumed they were of the value expressed on their face. The one surrendering has the burden to show they were of less than their face value. Paulin v. Kaign (1861) 29 N. J. L. 480.

28 Titcomb v. McAllister (1889) 81 Me. 399, 17 Atl. 315.

29 Leggett v. McClelland (1884) 39 Oh. St. 624.

portion, if the principal pays one for his own benefit, the others are not entitled to share in this sum.80

In a leading case, two co-sureties, one liable for $400,000, and the other for $310,000, gave mortgages on real estate, each to the other, conditioned that each mortgagor would indemnify the other from all claims by reason of the undertaking on behalf of their principal. They both became insolvent. The obligee on the principal's bond claimed he should be subrogated to the rights of the principal against the sureties for the reason that the mortgages interchanged inured to the benefit of the principal debt. In reversing the decree of the Circuit Court, Mr. Justice Matthews said:

"The right of subrogation, on which they rest it, is merely a right to be substituted in place of each of the co-sureties in respect to the other, in order to enforce the mortgages given by them respectively according to their terms. But the conditions of those mortgages have not been broken, and the very fact, which is supposed to confer the right upon the creditor to interpose, the insolvency of the sureties, has rendered it impossible for either to fasten upon the other a breach of the condition of his mortgage. As neither can pay his own proportion of the liability they agreed to divide, neither can claim indemnity against the other for an over-payment. It is entirely clear, therefore, that neither of the sureties could be, under the circumstances as they appear, entitled, as mortgagee, to foreclose the mortgage against the other. The condition of each mortgage was, that the mortgagor would perform his part of the agreement and indemnify the mortgagee against the consequences of a failure to do so. The mortgages

were not created for the security of the principal debt, but as security for a debt possibly to arise from one surety to another. As to which of them has there been as yet any default? Plainly none as to either." 81

• § 187. Contribution and indemnity may co-exist. surety who has paid the obligee

30 Hall v. Cushman (1845) 16 N. H. 462, 43 Am. Dec. 562. See Gould v. Fuller (1841) 18 Me. 364; Harrison v. Phillips (1870) 46 Mo. 520.

While a could not recover both in

31 Hampton, Adm 'r et al. V. Phipps (1882) 108 U. S. 260, 27 L. Ed. 719, 722.

demnity from the principal and contribution from the cosureties, he may elect to recover from either, for the two remedies are available. But it seems that so long as the surety has an unsatisfied judgment for indemnity against the principal, nothing indicating that it cannot be collected, he cannot maintain an action for contribution against a co-surety.32 The earlier cases held that the right to recover from the co-sureties was not dependent upon inability to recover indemnity.33 There is authority, especially in chancery courts that a complainant has no equity against a co-surety until he shows that satisfaction from the common principal cannot be obtained.34 But the better view which prevails in law courts is that the paying surety may maintain an action for contribution against his co-surety, without a showing of the insolvency of the principal.35

§ 188. Contribution for costs, attorney fees, or damages. It has been held by some courts that costs obtained by the creditor against one surety are not recoverable by him against his co-sureties, for the reason that costs were never a part of the common burden. Judgment for costs against the paying surety

32 Schmidt v. Coulter (1861) 6 Minn. 340.

33 In Cowell, Adm'r v. Edwards (1800) 2 Bosanquet & Puller 268, 126 Eng. Rep. Reprint 1275, the action being indebitatus assumpsit to recover a contributory share from the co-sureties, it was said that it might now perhaps be found too late to hold that this action could not be maintained at law, though neither the insolvency of the principals or of any of the co-sureties were proved." (Author's italics.)

In Schmidt v. Coulter (1861) 6 Minn. 340, 342, the statement is made that: "It is very doubtful, also, whether a surety can claim contribution against his co-surety, without showing the insolvency of the principal, when the suit is

against the co-surety alone, the principal not being made a party."

But in Lawson v. Wright (1786) 1 Cox Eq. Cases 275, 29 English Reports Reprint 1164, it was held unnecessary to prove the insolvency of the principal in a suit in equity to compel contribution if the principal were also a party; but it was intimated that proof of his insolveney would be required if the principal were not a party.

34 Rainey et al. v. Yarborough, Adm'r (1842) 37 N. C. 182, 38 Am. Dec. 681. See Morrison v. Poyntz (1838) 7 Dana (Ky.) 307, 32 Am. Dec. 92. See note following this case in 32 Am. Dec. p. 96.

35 Sloo, Adm'r v. Pool (1853) 15 Ill. 47; Smith v. Mason (1895) 44 Neb. 610, 63 N. W. 41, 43.

is distinguishable from the judgment for the principal's debt.36 As one opinion stated the reasons:

"The surety has a right to stand on the very terms of his contract. He is, in default of the principal, bound to contribute to the payment of the debt, but he does not obligate himself to pay any portion of the costs and damages, which may be superadded by the unauthorized act of his co-surety. This is not a common burthen, but must be borne by him who has been the cause of creating it." 87

The view has likewise been expressed that a surety who is sued is justified in employing counsel and defending himself "if he acted as a prudent man would, in the light of facts and circumstances, showing a probability of success in whole or in part sufficient to justify the expense likely to be incurred.'' 38 The proportion of such counsel fees may be recovered. Likewise interest on the amount due from defendant from the time of payment is recoverable.39

However, where judgment is obtained against two defendants, not co-sureties, the one who pays the costs cannot recover them in an independent action against his co-defendant.40

§ 189. Set-off. A surety who has paid no part of his principal's debt is not entitled to a set-off for a debt due him by the principal.41 Nor is one entitled, as between himself and an assignee of the insolvent principal, to set off a payment made by

36 Boardman v. Paige (1840) 11 N. H. 431, 434.

37 John, Adm'r v. Jones (1849) 16 Ala. 454, 462.

38 Backhus et al. v. Coyne (1881) 45 Mich. 584, 586, 8 N. W. 694, 695. Accord: Davis ". Emerson (1840) 17 Me. 64; Bright v. Lennon et al. (1880) 83 N. C. 184, 188; Van Winkle v. Johnson (1884) 11 Oregon 469, 50 Am. Rep. 495; Gross v. Davis (1888) 87 Tenn. 226, 11 S. W. 92, 10 A. S. R. 635; Fletcher et al. v. Jackson et al.

(1851) 23 Vt. 581, 56 Am. Dec. 98.

See Hitchman v. Stewart (1855) 3 Drewry 271, 61 Eng. Rep. Reprint 907.

39 Miles v. Bacon (1830) 4 J. J. Marsh (Ky.) 457, 463; Breckenridge v. Taylor (1837) 5 Dana (35 Ky.) 110, 114.

40 Dearsly v. Middleweek (1881) 18 Ch. 236. See Real and Personal Advance Co. v. McCarthy (1881) 18 Ch. D. 362. 41 Jones V. Wolcott, (1860) 15 Gray (Mass.) 541.

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