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Security Rights
Southern University Law Center
Pierre, John K.

Security Devices:
 
Art. 3035 Definition of Suretyship: an accessory contract by which a person binds himself to a creditor to fulfill the obligation of another upon the failure of the latter to do so.
 
Requirements:
1) written contract
2) containing the express provision tha the surety will be held liable if principal obnligor defaults
3) The surety must sign!
 
Triangle Relationship: Creditor—-Debtor—–Surety
 
Surety debt can be a “one-time” deal or a “continuing guarantee.”
 
Accommodation party- obligates themselves when they don’t have to for the maker on a negotiable instrument.
 
If signature appears on the instrument you incur liability
 
Distinguish the types of suretyship:
              1) commercial- 1) business entity or corporation
                                            2) engaged in the surety business
                                            3) principal obligation arises out of commercial transaction
                                            4) out of commercial transaction of the surety
2) Legal- given pursuant to legislation. Administrative act or regulation, or court order.
3) Ordinary- if its not legal or commercial its ordinary.—must be strictly construed in favor of the surety.
 
Art. 3037. Surety ostensibly bound as a principal with another; effect of knowledge of the creditor
·       One who ostensibly (apparently) binds himself as a principal obligor to satisfy the present or future obligations of another à considered a surety, 
·       if principal cause of contract w/ creditor is to guarantee performance of such obligations.
 
·       A creditor in whose favor a surety and principal obligor are bound together as principal obligors in solido may presume they are equally concerned in the matter until he clearly knows of their true relationship.
 
Art. 3038. Formal requirements of suretyship
·       Suretyship must be;
o      express and
o      in writing.
 
 
Art. 3039. Suretyship requires no formal acceptance
·       Suretyship is established upon:
o      receipt by the creditor of the writing evidencing the surety’s obligation.
o      creditor’s acceptance is presumed and no notice of acceptance is required.
 
Art. 3045. Liability of sureties to creditor; division and discussion abolished
·       A surety (when more than one – all), is liable to the creditor for:
o      the full performance of the obligation of the principal obligor,
o      without benefit of division or discussion,
o      even in the absence of an express agreement of solidarity.
 
Art. 3046. Defenses available to surety
·       surety may assert against the creditor any defense to the principal obligation that the principal obligor could assert EXCEPT:
o      lack of capacity or
o      discharge in bankruptcy of the principal obligor.
 
Comment c: The lack of capacity exception includes contracts made by a principal obligor who is an unemancipated minor an interdict, or a person deprived of reason at the time of contracting.
 
If principal obligor is in default, each surety is solidarily bound to pay the creditor.
 
Art. 3047 – Rights of the surety
1) subrogation: step into the shoes of creditor –right to sue
2) the right of reimbursement
3) Right to require security from the principal obligor—provide surety w/ collateral so that he can reduce his loss when he preys the creditor
 
Art. 3048. Surety’s right of subrogation
·       The surety who pays the principal obligation
·       is sub

al obligor fails to perform an act promised in return for the suretyship; or
4.    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, w/in 10days after the delivery of a written demand for the security,
o      principal obligor fails to provide the required security or
o      fails to secure the discharge of the surety,
·       surety has an action to require the principal obligor to deposit funds into the registry of the court that are sufficient to satisfy the surety’s obligation to the creditor as a pledge for the principal obligor’s duty to reimburse the surety.
 
Legal Surety: bail bondsmen
Cash bond or property bond- does not have to be immovable but that is the most common
 
Surety—creditor
1) If Debtor defaults—surety is liable
2) Surety can go after one surety, if there is more than one and that surety has a right against the other sureties.
 
Art. 3055. Liability among co-sureties
·       Co-sureties à 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:
o      parties agreed otherwise or