Opinion ID: 1357622
Heading Depth: 2
Heading Rank: 4

Heading: Roscoe Jr. and Sr. implied suretyship issues.

Text: In the alternative, the Roscoes seem to contend that, as a result of the sale from Roscoe, Jr. to Love, the Loves became the principal obligors on the debt by implication of law, so that, as between the parties to that sale, the Loves were principal obligors and Roscoe, Jrs. were sureties. See A. Stearns & J. Elder, The Law of Suretyship § 2.3, at 10 (5th ed. 1951); Restatement of Security § 83(c) (1941). Arguably, then, when the holder of the seller's interest learned of the transaction and of Roscoe, Jrs.' implied suretyship relation with Love, it was legally required to refrain from doing anything which would adversely affect Roscoe, Jr.'s rights as surety by either impairing security for payment of the debt or the ability of the principal obligor to pay that debt. [3] See Westinghouse Credit Corp. v. Wolfer, 10 Cal. App.3d 63, 88 Cal. Rptr. 654, 657 (1970); Restatement of Security, supra, § 83, comment c. The Roscoes urge that when the holder of the seller's interest consented, without the Roscoes' knowledge, to the transfer of ownership from Love to Chambers, it committed an act which adversely affected the surety and thus released the Roscoes from their suretyship obligations. Even assuming that despite the contractual provision that they remained liable as primary obligors, the Roscoes were converted to sureties by reason of the sale to Love and Love's assumption of the payments, and even assuming further that the holder of the seller's interest was required by force of law to recognize this status, [4] we disagree with the Roscoes' position. By consenting to the sale from Love to Chambers, the holder of the seller's security interest did nothing that would release Roscoe, Jr. from a suretyship obligation. The obligee's consent to the principal's transfer of property which is security for the debt does not ordinarily release the surety, unless the effect of the transaction is to alter the obligation, as, for example, by releasing the original obligor. See Hartford Accident & Indemnity Co. v. Federal Bond & Mortgage Co., 59 F.2d 950, 954 (8th Cir.1932); Guide Realty Co. v. Lucas, 151 Misc. 775, 272 N.Y.S. 416, 417-18 (1934). Here, Western maintained that despite the transfer of the right of ownership in the trailer, the Loves remained primarily liable on the debt. This was established by the admission in evidence of the assumption agreement between Love and Chambers; it provided that the ORIGINAL PURCHASER [Roscoe, Jr.] or SUBSEQUENT TRANSFEREE [Love] agrees that he/she would not be relieved from any of his/her responsibilities under the agreement. Thus, there was evidence which permitted the finder of fact to conclude that the Roscoes' rights against Love were unaffected by Love's sale to Chambers, with the result that the Roscoes were not released from their obligations whether they were principal debtors or sureties for Love's assumed performance. [5] Cf. Restatement of Security § 122 (1941). The Roscoes were not, therefore, entitled to a directed verdict on this issue.