Question

Crown Corporation has borrowed $16,000,000 from Third Bank. Third Bank required four sureties for the loan. The sureties are as follows:

Andover $4,000,000

Busch $8,000,000

Chapman $2,000,000

Davidson $2,000,000

Crown has defaulted on the loan after paying back $4,000,000. How much will each surety be required to pay? What if Busch was bankrupt? How much would Andover, Chapman, and Davidson have to pay?

Answer 1

In the absence of a contrary agreement, co sureties must repay the debt on a pro-rata basis.

Remaining debt to be repay= $12,000,000.

Hence the individual surety would be required to pay:

Andover: $3,000,000

Busch: $6,000,000

Chapman: $1,500,000

Davidson: $1,500,000

If Busch goes bankrupt, then others should share Busch's contribution.

Andover: $6,000,000

Chapman: $3,000,000

Davidson: $3,000,000