Opinion ID: 1864901
Heading Depth: 1
Heading Rank: 2

Heading: Release of the Sureties

Text: The next question presented by this litigation is whether National Leasing's handling of the Family Pools accounts amounted to an impairment of the Fabachers' subrogation rights under Louisiana Civil Code Article 3061, or otherwise prejudiced them in their status as solidary sureties, and thus entitled them to discharge from their suretyship obligations. In other words, was National Leasing permitted first to accept sporadic payments and then to accelerate the rentals after lessee had long been in default, rather than to exercise its contractual right to terminate the leases, and thereafter obtain the leased equipment and sell it so as to reduce the outstanding liability of the lessee? The Fabachers' personal liability to National Leasing for payments owed by Family Pools, Inc., rests on the following solidary suretyship agreement, gratuitously executed by them in connection with each of the five contracts sued upon: In consideration of the Lessor entering into this lease with the Lessee, the undersigned hereby guarantees and becomes surety for the Lessee in favor of the Lessor for the full and faithful performance of all Lessee's obligations under this lease. This obligation of the undersigned surety is joint, several and in solido with the Lessee. The undersigned shall be bound as if principal obligors for all amounts due under this lease, both for the basic term and for the continued month to month basis thereafter, and consents in advance to all extensions. The undersigned renounce any plea and benefit of discussion or division granted by law to sureties; it is understood and agreed that without this guarantee or surety agreement, Lessor would be unwilling to enter into this contract of lease with the Lessee. (Emphasis supplied.) Appellants, in addition to obligating themselves in solido with the lessee, expressly consented in advance to all extensions of time given to the lessee by National Leasing. Louisiana Civil Code Article 3063 [9] provides that an extension of time granted the principal debtor by the creditor without consent of the surety operates to release the surety, and this right has been held to extend to solidary sureties. See, Jones v. Fleming, 15 La.Ann. 522 (1860); cf. Moriarty v. Bagnetto, 110 La. 598, 34 So. 701 (1903); Hubert, The Nature and Essentials of Conventional Suretyship, 13 Tul.L. Rev. 519, 523 n. 27 (1939); 2 M. Planiol, Traité élémentaire de droit civil, No. 2384 at 354-55 (La.St.Law Inst. transl.1959); Comment, Article 3045 and Solidary Suretyship, 39 Tul.L.Rev. 85, 93-94 (1964). Appellants, however, having expressly consented in advance to all extensions in each surety agreement, cannot complain that the creditor, National Leasing, has not insisted upon timely payment of the rental obligations by the principal debtor, Family Pools, Inc. [10] Likewise, we do not find that National Leasing's election to accelerate the rentals upon lessee's default, rather than to exercise its contractually authorized option to terminate the lease, effected an impairment of the Fabachers' subrogation to National Leasing's rights, mortgages and privileges within the contemplation of La.C.C. art. 3061. The only right which the Fabachers contend has been impaired is the right to obtain possession and sell the leased equipment. However, this argument overlooks the fact that Article 3061 provides that the surety is discharged when an act of the creditor causes the surety loss of subrogation to the creditor's rights against the principal debtor. In the instant case National Leasing never acquired the right to repossess and sell the equipment because it did not terminate the lease. By electing to accelerate the payments, and sue for all rentals, under the contract National Leasing could only acquire a judgment against the principal debtor to which the Fabachers' rights of subrogation have not been impaired. The Fabachers urge, in what we consider to be an alternative argument, that we adopt the findings and reasons for judgment of the trial court. The trial judge found that the contracts were terminated as of January 19, 1973, and that    [t]he failure of the lessor to comply with the final accounting provisions [of the contracts] and to sell the vehicles in question, prejudiced the rights of the two sureties in that no effort was made by the parties upon default and termination to determine the value of the property and to sell it before there was further depreciation. (Emphasis supplied.) The theory relied on by the trial judge was that the sureties' obligations were fixed at the time he determined the contracts were terminated, and that National Leasing failed to take steps to protect the sureties' subrogation rights by allowing the equipment to remain in the lessee's handscontinually depreciating in value all the while. Having concluded that the leases did not end on January 19, 1973, and that the sureties' liabilities were not fixed as of that date, we cannot accept the rationale expressed by the trial court and urged on appeal by the Fabachers. We find that the court of appeal correctly declined to release the Fabachers, as solidary sureties on the contracts, from the obligations they willingly undertook by executing the surety agreements.