MODULE 28 DEBTOR-CREDITOR RELATIONSHIPS 275

160,00
and severally liable to the claims of the creditor. A right of ,
0 + 240,000 x 140,000 = 56,000
contribution arises when one cosurety, in performance of the 160,000
debtor's obligation, pays more than his proportionate share 27. (d) Cosureties are jointly and severally liable to the
of the total liability. The right of contribution entitles the creditor up to the amount of liability each agreed to. If a
performing cosurety to reimbursement from the other eo- cosurety pays more than hislher proportionate share of the
sureties for their pro rata shares of the liability. The pro rata debt, s/he may seek contribution from the other cosureties
shares of the cosureties are determined as follows: for the excess. Answer (a) is incorrect because the right of
Surety's pro rata Remaining Surety's exoneration refers to the surety requiring the debtor to pay
_-...,.-"s!.!Jhao!.!.r£.e liability liability the debt when able. Answer (b) is incorrect because subro-
Nash (40,000/180,000) x 36,000 8,000 gation refers to the right of the surety to obtain the same
Owen (60,0001180,000) x 36,000 12,000
Polk (80,0001180,000) x 36,000 16,000 rights against the debtor that the creditor had, once the
surety pays the creditor. Answer (c) is incorrect because the
Thus, Nash is entitled to recover $12,000 from Owen and right of reimbursement allows the surety to recover pay-
$16,000 from Polk for a total of $28,000. ments from the debtor that the surety has made to the credi-
24. (a) A discharge or release of one cosurety by a tor.
creditor results in a reduction of liability of the remaining
cosurety. The remaining cosurety is released to the extent of
the released cosurety's pro rata share of debt liability, unless
there is a reservation of rights by the creditor against the
remaining cosurety. Quill and West each had maximum
liability of $100,000. Thus, Ingot's release of West will
result in Quill's liability being reduced by West's pro rata
share of the total debt liability, which was one-half. There-
fore, Quill's liability has been reduced to $25,000 (i.e., 50%
of the loan balance) due to the release of West as a cosurety.
Answer (c) is therefore incorrect. Answer (d) is incorrect
because the release of the cosurety does not release the prin-
cipal debtor since the debtor's obligation is not affected in
any way by Ingot's release of West. Answer (b) is incorrect
because as discussed above, Quill'S liability has been re-
duced due to Ingot's release of West.

25. (b) The discharge or release of one cosurety by the

creditor results in a reduction of liability of the remaining
cosurety. This reduction ofliability is limited to the re-
leased cosurety's pro rata share of debt liability (unless there
is a reservation of rights by the creditor against the remain-
ing cosurety). Since Mane released Rey without reserving
rights against Salern, Salem is released to the extent of
Rey's pro rata share of the $90,000 liability. Salem's
maximum liability can be calculated as follows.'
$120,000
Rey's % $240,000 = .50
Loan $ 90,000
balance ~
x Rey's % $ 45,000
Loan balance $ 90,000
Rey's pro rata share (1i.QQQ)
Salem's maximum liability $ 45.llOO

26. (b) The right of contribution arises when one co-

surety, in performance of debtor's obligation, pays more
than his proportionate share of the total liability. The right
of contribution entitles the performing cosurety to reim-
bursement from the other cosureties for their pro rata shares
of the liability. Since Clark's debts have been discharged in
bankruptcy, River may only exercise his right of contribu-
tion against Zane, and may recover nothing from Clark.
Zane's pro rata share of the remaining $140,000 would be
determined as follows:
Dollar amount guaranteed by Zane
Total amount of risk assumed by x Remaining obligation
remaining cosureties