Suretyship

Suretyship – Termination of suretyship

August 2, 2018 By Louisiana Notary Leave a Comment

Suretyship – Termination of suretyship

Art. 3058. Extinction of the suretyship. The obligations of a surety are extinguished by the different manners in which conventional obligations are extinguished, subject to the following modifications.

Art. 3059. Extinction of principal obligation. The extinction of the principal obligation extinguishes the suretyship.

Art. 3060. Prescription of the surety’s obligation, right of reimbursement, and contribution. Prescription of the principal obligation extinguishes the obligation of the surety. A surety’s action for contribution from his co-sureties and his action for reimbursement from the principal obligor prescribe in ten years. The interruption of prescription against a surety is effective against the principal obligor and other sureties only when such parties have mutually agreed to be bound together with the surety against whom prescription was interrupted.

Art. 3061. Termination of suretyship. A surety may terminate the suretyship by notice to the creditor. The termination does not affect the surety’s liability for obligations incurred by the principal obligor, or obligations the creditor is bound to permit the principal obligor to incur at the time the notice is received, nor may it prejudice the creditor or principal obligor who has changed his position in reliance on the suretyship. Knowledge of the death of a surety has the same effect on a creditor as would a notice of termination received from the surety. A termination resulting from notice of the surety’s death does not affect a universal successor of the surety who thereafter unequivocally confirms his willingness to continue to be bound thereby. The confirmation need not be in writing to be enforceable.

Art. 3062. Effect of modifications of principal obligation. The modification or amendment of the principal obligation, or the impairment of real security held for it, by the creditor, in any material manner and without the consent of the surety, has the following effects.

Revision Comments-1987. Louisiana jurisprudence has created a special rule, applicable to compensated sureties who guarantee construction or other contracts, that changes or alterations that do not materially affect the surety’s liability and that bear a reasonable relationship to the extent of the original project will .not release the surety. See State v. Preferred Acc. Ins. Co. of N.Y., 149 So.2d 632 (La.App. 1st Cir.1963). This jurisprudential rule was made statutory in R.S. 9:4812(E)(2). This Article extends that rule to commercial suretyships generally and amplifies its provisions.

Suretyship – Effects among several sureties

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Suretyship – Effects among several sureties

Art. 3055. Liability among co-sureties.Co-sureties are those who are sureties for the same obligation of the same obligor. They are presumed to share the burden of the principal obligation in proportion to their number unless the parties agreed otherwise or contemplated that he who bound himself first would bear the entire burden of the obligation regardless of others who thereafter bind themselves independently of and in reliance upon the obligation of the former.

Art. 3056. Right of contribution among co-sureties. A surety who pays the creditor may proceed directly or by way of subrogation to recover from his co-sureties the share of the principal obligation each is to bear. If a co-surety becomes insolvent, his share is to be borne by those who would have borne it in his absence.

Art. 3057. Limitation upon right of contribution. A surety who pays the creditor more than his share may recover the excess from his co-sureties in proportion to the amount of the obligation each is to bear as to him. If a surety obtains the conventional discharge of other co-sureties by paying the creditor, any reduction in the amount owed by those released benefits them proportionately.

Suretyship – Effects between surety and principal debtor

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Suretyship – Effects between surety and principal debtor

Art. 3047. Rights of the surety. A surety has the right of subrogation, the right of reimbursement, and the right to require security from the principal obligor.

Art. 3048. Surety’s right of subrogation. The surety who pays the principal obligation is subrogated by operation of law to the rights of the creditor.

Art. 3049. Surety’s right of reimbursement for payment of obligation. A surety who pays the creditor is entitled to reimbursement from the principal obligor. He may not recover reimbursement until the principal obligation is due and eligible. A surety for multiple solidary obligors may recover from any of them reimbursement of the whole amount he has paid the creditor.

Art. 3050. Surety’s right of reimbursement for payment of obligation not owed A surety who in good faith pays the creditor when the principal obligation is extinguished, or when the principal obligor had the means of defeating it, is nevertheless entitled to reimbursement from the principal obligor if the surety made a reasonable effort to notify the principal obligor that the creditor was insisting on payment or if the principal obligor was apprised that the creditor was insisting on payment.The surety’s rights against the creditor are not thereby excluded.

Art. 3051. Payment by debtor without notice of payment by surety. A surety may not recover from the principal obligor, by way of subrogation or reimbursement, the amount paid the creditor if the principal obligor also pays the creditor for want of being warned by the surety of the previous payment. In these circumstances, the surety may recover from the creditor.

Art. 3052. Limitation on right of surery to recover what he paid creditor A surety may not recover from the principal obligor more than he paid to secure a discharge, but he may recover by subrogation such attorney’s fees and interest as are owed with respect to the principal obligation.

Art. 3053. Surety’s right to require security. A surety, before making payment, may demand security from the principal obligor to guarantee his reimbursement when:

(1) The surety is sued by the creditor;

(2) The principal obligor is insolvent, unless the principal obligation is such that its performance does not require his solvency;

(3) The principal obligor fails to perform an act promised in return for the suretyship; or

(4) The principal obligation is due or would be due but for an extension of its term not consented to by the surety.
The principal obligor may refuse to give security if the principal obligation is extinguished or if he has a defense against it.

Art. 3054. Failure to provide security. If, within ten days after the delivery of a written demand for the security; the principal obligor fails to provide the required security or fails to secure the discharge of the surety; the surety has an action to require the principal obligor to deposit into the registry of the court funds sufficient to satisfy the surety’s obligation to the creditor as a pledge for the principal obligor’s duty to reimburse the surety.

Suretyship – Defenses of surety

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Suretyship – Defenses of surety

Art. 3046. Defenses available to surety. The surety may assert against the creditor any defense to the principal obligation that the principal obligor could assert except lack of capacity or discharge in bankruptcy of the principal obligor.

Suretyship – Liability of surety

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Suretyship – Liability of surety

Art. 3045. Liability of sureties to creditor; division and discussion abolished. A surety, or each surety when there is more than one, is liable to the creditor in accordance with the provisions of this Chapter, for the full performance of the obligation of the principal obligor, without benefit of division or discussion, even in the absence of an express agreement of solidarity.

Suretyship – Ordinary suretyship

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Suretyship – Ordinary suretyship

Art. 3044. Ordinary suretyship; interpretation. An ordinary suretyship is one that is neither a commercial suretyship nor a legal suretyship. An ordinary ·suretyship must be strictly construed in favor of the surety.

Suretyship – Legal suretyship

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Suretyship – Legal suretyship

Art. 3043. Legal suretyship. A legal suretyship is one given pursuant to legislation, administrative act or regulation, or court order. Art. 3063. Commercial suretyship rules apply to legal suretyship. The provisions governing commercial suretyship contained in this Title apply to legal suretyship except as otherwise provided in this Chapter.

Art. 3064. Supplementary nature of this Chapter. The provisions of this Chapter apply to the extent they are not contrary to special laws governing particular kinds of legal suretyship.

Art. 3065. Qualifications of legal surety; evidenced by affidavit; lack thereof not a defense. Legal suretyship may be given only by a person authorized to conduct a surety business in Louisiana or by a natural person domiciled in this state who owns property in this state that is subject to seizure and is of sufficient value to satisfy the obligation of the surety. The qualification of a natural person to act as legal surety must be evidenced by his affidavit and the affidavit of the principal obligor. A legal surety may not raise his lack of qualification as a defense to an action on his contract.

Art. 3066. Legal suretyship to conform to law. A legal suretyship is deemed to conform to the requirements of the law or order pursuant to which it is given, except as provided by Article 3067.

Art. 3067. Permissible variations. A surety is not liable for a sum in excess of that expressly stated in his contract. A legal suretyship may contain terms more favorable to the creditor than those required by the law or order pursuant to which it is given, but it may not provide for a time longer than is provided by law for bringing an action against the surety.

Art. 3068. Pledge of funds in lieu of suretyship. Legal suretyship may be given whenever the law requires or permits a person to give security for an obligation. The principal obligor may in lieu of legal suretyship deposit a sum equal to the amount for which he is to furnish security to be held in pledge as security for his obligation.

Art. 3069. Necessity for judgment against legal surety. No judgment shall be rendered against a legal surety unless the creditor obtains judgment against the principal obligor fixing the amount of the latter’s liability to the creditor or unless the amount of that liability has otherwise been fixed. The creditor may join the surety and principal obligor in the same action.

C.C.P. art. 5121. Bond payable to clerk; cash bonds by plaintiffs authorized; person in interest may sue. When a party to a judicial proceeding is required by law or order of court to furnish security, any bond so furnished shall be made payable to the clerk of the trial court in which the proceeding was brought. When the party required to furnish same is a plaintiff, a cash bond may be furnished in lieu of other security; at his option.Any person in interest may sue thereon. No error, inaccuracy, or omission is naming the obligee on the bond is a defense to an action thereon.

C.C.P. art. 5121.1. Bond secured by immovable property. Any party to a judicial proceeding who is required by law or court order to provide security may furnish as security a bond secured by immovable property located in this state. The party providing the property bond shall present to a judge of the parish in which the immovable is located an assessment certificate, a homestead exemption waiver if applicable, and a mortgage certificate. Prior to presenting the bond to the court having jurisdiction over the judicial proceeding the bond shall be recorded in the mortgage office of the parish where the immovable is located and the recordation shall be evidenced on the mortgage certificate.

C.C.P. art. 5122. Oath of surety and principal on bond. A. Except as otherwise provided in this Article, no bond shall be accepted in a judicial proceeding unless accompanied by affidavits of:

(1) Each surety that he is worth the amount for which he bound himself therein, in assets subject to execution, over and above all of his other obligations.

(2) The party furnishing the bond that he is informed and believes that each surety on the bond is worth the amount for which the surety has bound himself therein, in assets subject to execution, over and above all of the other obligations of the surety.

(3) The party furnishing a bond secured by immovable property under Article 5121.1 that he is worth the amount for which he has bound himself and that the immovable securing the bond contains assets subject to execution, over and above all his other obligations.

B. This Article does not apply to a bond executed by a surety company licensed to do business in this state.