shall not be liable under this guaranty to exceed the sum of $20,000....." The banker, on the faith of this guaranty, discounted a certain note issued by F. & L. The banker then sold this note to another banker, but the buyer of the note did not know that the first banker held a guaranty for the payment of the note. The court held that the guaranty was a general, continuing one, and that the last purchaser of the note, although he did not know of the guaranty at the time he purchased it, had a right to avail himself of it. "The securities pledged for a debt follow it, in equity, no matter how the debt be modified or into whose hands it may come. Until the debt is paid, the pledge accompanies it, and remains for its payment, and is available to all who may acquire title thereto."

Rights of guarantor against principal.-A guarantor who has guaranteed the payment of the debt of another or the performance of his contract is entitled to be re-imbursed by the principal for any damage that may have resulted to him by reason of the guaranty. This right of reimbursement arises by implication of law and does not need to be stipulalated for by the parties. A guarantor does not need to wait until he is sued, but whenever his liability arises he may discharge it and then hold the principal for the amount which he has been obliged to pay. But a guarantor cannot sue his principal before he has paid; the fact that he will be called upon to pay in the future will not enable him to hold the principal. Where there are several guarantors, and one of them discharges the whole liability, or more than his share, he is entitled to sue the principal for the amount paid, or may bring suit for contribution against the other guarantors, for their share of the amount paid. When there are several guarantors and one or more of them are insolvent or non-residents and one of them pays the whole debt or more than his share, he may sue the resident solvent guarantors for contribution, and for the purpose of ascertaining the proportionate share of each of such guarantors, the insolvents and non-residents are not counted. ... Where one of the co-sureties has paid the whole debt, he is entitled to contribution from such of his co-sureties as are solvent and within the state. The insolvent and non-resident sureties are simply ignored. The non-resident is treated as an insolvent surety, and neither is a necessary party to a suit for contribution." This statement applies as well to guarantors as sureties.

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Discharge of guarantor.-A guarantor is liable for the performance of the obligation of the principal, and is generally not discharged until the principal has performed. Therefore, anything which will discharge the principal will discharge the guarantor. But there are quite a number of acts on the part of a creditor which will discharge a guarantor but not the principal. As a general rule, any act on the part of a creditor which will prejudice the position of the guarantor or injure his rights will release a guarantor to the extent of the damage done. Whenever, therefore, the contract between the principal and the creditor is changed without the consent of the guarantor, so that in legal effect it is not the same contract as the one guaranteed, the guarantor is discharged. It matters not how slight the change in the contract may be; if it can be said that the contract is not the same as the original, in its legal effect, the guarantor is discharged. It frequently occurs that a creditor whose claim is guaranteed gives an extention of time to the principal without the consent of the guarantor. When the extention of time so given is for a definite period, or for an indefinite but reasonable period, and it is given for a consideration, without the consent of the guarantor, the latter is discharged. The mere fact that the creditor allows his claim to run along without waiving his right to enforce it at any time, will not discharge a guarantor, neither will the fact that the creditor fails to begin suit against the principal or guarantor after he has a right to do so, although it result in damage to the guarantor, discharge the latter. One who guarantees the performance of a contract is discharged if without his consent the contract is materially altered, when the contract is in writing. When fraud has been practiced on the guarantor by the creditor, or with his knowledge and consent, in obtaining the guaranty, it is voidable at the option of the guarantor, as any other contract. If the creditor, without the consent of the guarantor, releases any security which he has for the obligation of the principal, in addition to the guaranty, the guarantor is discharged to the extent of the securities released, as such release prejudices his rights. As between him and the creditor he is entitled to have such securities applied on the obligation of the principal before he is called upon to pay, and when he pays the obligation of the principal, the guarantor is entitled to have turned over to him

by the creditors all collateral security held by the creditor to secure the obligation which he has guaranteed. If the creditor has discharged one of several guarantors without the consent of all, all are discharged. When the principal does not perform and the guarantor is liable, but the creditor delays in enforcing liability, and the guarantor may suffer loss through such course, a court of equity will entertain a suit by the guarantor against the principal, to compel the latter to pay, or against the creditor, to compel him to proceed against the principal. The better course in such a case is for the guarantor to pay and then sue the principal for the amount paid. When the obligation of the guarantor is absolute, the creditor does not need to sue the principal upon default, but may proceed immediately against the guarantor. Whenever the guaranty is not absolute, as in case of a guaranty for collection, it is first necessary to sue the principal and when collection fails, then the guarantor may be sued. In case suit is necessary against the principal before the liability of the guarantor attaches, the creditor must act with diligence or the guarantor will be discharged by operation of law, to the extent of the damage done. Some cases even go so far as to decide that if the creditor does not proceed to prosecute the principal in such case with diligence, the guarantor is absolutely discharged, whether he has suffered damage or not.

A guarantor may also be discharged from liability on a guaranty by revoking it. Generally a guaranty for a single transaction, resting upon a consideration already received, cannot be revoked, but a continuing guaranty may be revoked so far as it has not been acted upon.

SECTION 2.

SURETY SHIP.

Suretyship is a contract by which one agrees to become responsible for the obligation of another, and by which he binds himself as a party to the contract with such other. The main distinction between guaranty and suretyship is that the latter is a primary obligation while guaranty is a secondary obligation. By a contract of suretyship the surety binds himself in the same manner that the principal does, and becomes a party to the contract and is liable thereon to the

same extent, and in the same manner, that the principal is. A surety makes the debt of the principal his own, and as his agreement, as between himself and the creditor, is to pay his own debt and not that of another, his agreement does not need to be in writing under the statute of frauds. The contract of suretyship is made in the same manner that any other contract is made, and the rules laid down in the chapter on Contracts govern. A person who cannot make a contract cannot become a surety. Married women, in general, cannot become sureties. The consideration for the contract of suretyship is generally the consideration moving to the principal, as it is made at the same time that the contract is made with the principal; if it is not, then there must be an independent consideration. Sometimes it happens that one who is liable for a debt will make a contract with another whereby the other agrees to pay it. In such case they are both liable to the creditor as principals, but as between each other the one who agrees to pay the debt becomes the principal and the other a surety. If the one who has agreed to pay the debt does not do so, the creditor may enforce payment from either or both. If the surety pays it, and the creditor holds any securities, the surety is entitled to them. It is frequently agreed, when real estate is sold which has a mortgage on it, that the purchaser shall assume the mortgage and agrees to pay it. The buyer in such case pays the value of the property, less the amount of the mortgage on it, and in consideration of the purchase agrees to pay the mortgage. As between the buyer and seller the relation of principal and surety exists, but as to the holder of the mortgage both are liable as principals. Sometimes on the dissolution of a partnership one partner will agree to pay all the firm debts. Here the same relation exists. Generally speaking, when one person can be held liable as a principal upon a contract or obligation, but as between himself and a third he is entitled to have such third person pay it, the relation of principal and surety exists. Thus, when two persons sign a note for money paid to both of them in small shares, each becomes surety for the other to extent of one-half of the note. If one of them pays the whole note he is entitled to be re-imbursed to the extent of half by the other.

The contracts of suretyship of an infant are voidable. A partner cannot bind the partnership by a contract of sure

tyship or guaranty unless the other partners consent, or unless the general course of the partnership business requires it. Most of the states now provide by statute that surety companies may become sureties on bonds required in legal and other proceedings in the same manner that individuals may become such, in case such companies are authorized to do busines in the state. Such is the law in Wisconsin, and a surety company's bond is accepted by law in all cases when that of an individual or individuals would be. The charters of these companies and the laws authorizing them to do business are generally broad enough to enable them to make any contract of guaranty or suretyship that an individual or individuals can. A surety's contract is generally strictly construed as it is one not for his personal benefit; he will not be held liable further than a reasonable construction of his contract will warrant. Practically all the law applying to contracts of guaranty applies to contracts of suretyship, except where, owing to the distinction between the two contracts, the difference has been pointed out,

Rights of surety against principal.-As in the case of the relation of guarantor and principal, so when the relation of surety and principal exists, the law will imply a promise on the part of the principal to hold the surety harmless against any damage he may suffer by reason of having made the contract. As to the creditor they are both liable as principals, but as between themselves it is agreed that the principal only shall pay the debt, and that if the surety pays it, the principal will re-imburse him. This obligation on the part of the principal arises by implication of law, and it is not necessary that the parties should stipulate for it. But while the implied agreement to re-pay in case the surety is called upon exists the moment that the relation exists, the right to call upon the principal does not accrue until the principal has actually made a payment. The fact that the principal will become liable will not warrant a recovery from the principal; he must actually pay, and then he can only recover the amount paid. If one is a surety without the request of the principal, that is, a mere volunteer, and pays the principal's debt, he cannot recover from the principal, as the payment is made without express or implied request. When a surety pays the debt of the principal with his own negotiable note, the law is that it amounts to a payment, and he is entitled to recover