Opinion ID: 1659755
Heading Depth: 1
Heading Rank: 2

Heading: Payment and satisfaction.

Text: Defendants contend that the settlement agreement reached between the plaintiff and Akwa-Downey demonstrates a full and complete accord and satisfaction between the parties, and that the payment made under that agreement by Akwa-Downey to plaintiff was not a part payment resulting in a deficiency but a payment in full satisfaction of the Akwa-Downey indebtedness to the plaintiff. Defendants conclude that payment or satisfaction of the principal debt discharges the guarantors. A guarantor's liability depends upon the terms of his engagement. Zrimsek v. American Automobile Ins. Co. (1959), 8 Wis. 2d 1, 98 N. W. 2d 383; 50 Am. Jur., Suretyship, p. 921, sec. 29. Defendants' contract of guaranty promises to pay or cause to be paid all the indebtedness, obligations and liability from or by Akwa-Downey to the plaintiffs. A guaranty, in its technical sense, is collateral to, and made independently of, the principal contract which it guarantees, and the guarantor's liability is secondary rather than primary or original. Associates Financial Services v. Eisenberg (1971), 51 Wis. 2d 85, 186 N. W. 2d 272; 38 C. J. S., Guaranty, p. 1130, sec. 2. As a general rule the payment or other satisfaction or extinguishment of the debt or obligation of the principal discharges the guarantor. [15] As stated in 50 Am. Jur., Suretyship, p. 983, sec. 121: ... Since a surety is bound only by the condition of his obligation, the principal's performance of the condition will release him. Since the natural limit of the obligation of a surety is to be found in the obligation of the principal, when that is extinguished, the surety is, in general, liberated.... [16] Since the guarantor's promise is to pay or perform if the debtor does not, the guarantor will be discharged when the principal pays the debt or performs the undertaking. The creditor is entitled to but one performance, and if he receives that, by payment or other satisfaction, the surety is discharged. [17] However, the duty of the principal must be fully satisfied and, if the principal only partially performs, a surety's obligation continues, although the amount which the creditor can recover from the surety is reduced by what he has received from the principal. The Restatement, Security, p. 304, sec. 115, states: It is to the interest of the surety that the creditor be allowed to take reasonable steps to satisfy his claim against the principal without discharging the surety. Any other rule would mean that whenever the principal owed a money obligation and was unable to make an immediate cash payment, the creditor to avoid discharging the surety, would proceed immediately against the latter. Defendants draw this court's attention to such words contained in the settlement as full and complete settlement and in full payment. Defendants argue that while the Akwa-Downey indebtedness was $622,579.03, and plaintiff received only $559,000 in cash, plaintiff was also released from disputed claims asserted to be worth $180,000. Defendants conclude that no underlying debt exists and that the guaranty contract of the defendants is satisfied. Paragraph 7 of the complaint alleges a deficiency due of $86,448, plus interest. Paragraph 9 of the settlement agreement reserves rights in the plaintiff to proceed against the defendants upon the guarantees to assure payment of the loans being compromised. There may be ambiguity in the settlement agreement as to whether the agreement constituted a full and complete payment of the debt. The resolution of this possible ambiguity will eventually rest upon proof of the intent of the parties thereto; however, when challenged by demurrer, this court must construe the above agreement in favor of that interpretation that would support a cause of action. Therefore, for the purposes of this appeal, it cannot be said that the Akwa-Downey debt, alleged in the complaint as underlying defendants' contract of guaranty, has been alleged as fully satisfied. Whether the claims released by Akwa-Downey in favor of the plaintiff are of sufficient value to make up the apparent deficiency is a matter to be decided upon trial, not demurrer.