Also known as: secondary obligor · secondary obligor's · surety · guarantor
Written by attorneys · grounded in primary & secondary sources — see below
An obligor whose duty to perform or pay on an obligation arises only after the primary obligor defaults. The secondary obligor typically undertakes this role as a guarantor or surety to answer for the debt or performance of another.
Spectrum Financial, acting as surety on a construction bond, prepared internal memos assessing its exposure after the principal contractor defaulted. When litigation ensued, the opposing party sought those memos in discovery. The court denied the request because the materials were prepared in anticipation of litigation by a representative of a party.
Sean Steele borrowed from a bank and gave a mortgage on his warehouse. He later sold the property to Synergy Systems, which expressly assumed the debt in the deed. When Synergy defaulted, the bank sued Sean for the deficiency. The court held Sean remained personally liable as a secondary obligor because the assumption did not release him without the bank's consent.
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When mortgaged property is transferred with an assumption, the buyer becomes the principal obligor while the original borrower remains personally liable to the lender as a secondary obligor unless the lender expressly releases the original borrower.
Yes. In secured transactions, notice of a proposed disposition of collateral must be sent to the debtor and to secondary obligors such as guarantors or sureties.
Yes. A material modification of the principal obligation without the secondary obligor's consent can discharge the secondary obligor under suretyship principles.
After payment, the secondary obligor may seek exoneration, reimbursement, restitution, or subrogation against the principal obligor or the collateral.
…Stat. Ann. § 78.07 (Supp. 1972-1973): "Bond; Requisites.—Before a replevy writ issues, plaintiff shall file a bond with surety payable to defendant to be approved by the clerk in at least double the value of the property to be replevied conditioned that plaintiff will prosecute his action to effect and without…