Court Opinion

ID: 6606028
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:12:17.027947+00
Date Added: 2024-06-11T15:58:11.298518
License: Public Domain

Lyost, J.
Briefly stated, the case, so far as there is any controversy, is as follows: The defendant became surety for Cook’s debt to the plaintiff, and Cook indemnified him by executing to him a chattel mortgage on certain property. The plaintiff released Cook from liability for such debt, without the consent of the defendant. Afterwards, defendant sold his security to McArthur, without the consent of the plaintiff, for the consideration (as the circuit court found) of $475.
The only question in the case is, Did the release of Cook also release the defendant, his surety ? The general rule undoubtedly is that the release of the principal debtoi’, without the consent of the surety, releases the surety. But if the surety is fully indemnified against loss by reason of having become such, a release of the principal without payment of the debt does not release the surety. This is the rule laid down in Fay v. Tower, 58 Wis. 286, as applied to a case in which an unauthorized extension of credit had been given to the principal. Manifestly, the same rule should be applied where the surety is absolutely released from the debt. The rule is founded upon a very plain principle of justice. To illustrate: A. becomes security for B. to C. for the payment of $1,000. B. puts property into the hands of A., worth $1,000, to indemnify him against loss *155because of the obligation thus assumed by. him. C. releases B., the principal debtor, from all liability on account of the debt, but receives no payment thereop. A., the surety, then sells the pledged property for $1,000 and retains the proceeds. It is entirely reasonable and just that, notwithstanding the release of the principal debtor, C. should have his remedy against the surety for the amount realized by him in the sale of the pledged property. Such, we think, is the law. It seems to us that we have here just such a case.
By the Court.— The judgment of the circuit court is affirmed.