Opinion ID: 1289388
Heading Depth: 1
Heading Rank: 3

Heading: relationship of limitation and surety statutes

Text: Ordinary statutes of limitations merely barring the procedural remedy do not reflect a legislative policy to terminate responsibility, rather, as pointed out above, the bar of the statutes is based on lack of plaintiff diligence. When the plaintiff has been dilatory in seeking relief from the principal but diligent within statutory periods for seeking relief from the surety, it is proper to hold in accordance with the majority's view that the plaintiff may proceed against the surety ( Bloom v. Bender (1957) 48 Cal.2d 793, 797-798 [313 P.2d 568]; Gaffigan v. Lawton (1934) 1 Cal.2d 722, 723-724 [37 P.2d 79]) in cases where there is no legislative policy precluding reimbursement from the defaulting principal. Obviously, between a plaintiff who has not been as diligent as he should be, a defaulting principal who is solvent, and a diligent surety, the ultimate loss should fall on the defaulting principal, and the surety who pays should be entitled to reimbursement. [3] I join in the majority's disapproval of cases contrary to Bloom and Gaffigan. However, when clear legislative policy precludes reimbursement because the creditor's right and the principal's duty have terminated, there is no justification for holding the surety liable unless the surety by his conduct has enlarged the obligation. Section 2809 makes clear that the obligation of the surety is the same as that of the principal. Although section 2810 permits holding the surety liable notwithstanding a mere personal disability of the principal, it provides that the surety is exonerated when the liability of the principal thereafter ceases. When such defense of the principal is not merely procedural but substantive, the surety is entitled to it. [4] When the principal's defense is substantive, it is inequitable to refuse to permit the surety to assert it. Section 2847 provides for reimbursement, and because the surety is entitled to reimbursement, the principal is deprived of his substantive defense if the surety may not assert it. (See Union Bank v. Gradsky (1968) 265 Cal. App.2d 40, 47 [71 Cal. Rptr. 64]; Anderson v. Shaffer (1929) 98 Cal. App. 457, 462 [277 P. 185].) To avoid the inequitable result that a principal having a substantive defense will indirectly be held liable to the creditor, the surety must be permitted to assert the substantive defense. When the contractor's surety is deprived of the defense furnished by Code of Civil Procedure section 337.15 and required to pay, the surety will in turn be entitled to reimbursement from the contractor under Civil Code section 2847. This is the majority holding. Solvent contractors who have sureties are in effect deprived of the section 337.15 defense and required to pay contrary to the clear legislative intent reflected by the section. There is nothing in section 337.15 indicating that contractors with sureties shall remain responsible for latent defects more than 10 years after the improvement's substantial completion, and we should not defeat the legislative intent to terminate responsibility. To effect the legislative purpose, I would hold that the surety may assert the contractor's section 337.15 defense, and affirm the judgment in favor of the surety thereby precluding any need for reimbursement.