Karl loaned Linda $100,000. Madeline agreed to act as surety for $100,000. Nora agreed to act as surety for $75,000, and Orville agreed to act as surety for $25,000. Linda later defaulted on the loan, and Karl is now demanding payment from Nora and Orville. What amount do Nora and Orville have to pay? If Nora and Orville pay, does Madeline have any obligation? Explain
Nora must pay $75,000 and Orville must pay $25,000, because they agreed to those amounts and they are jointly and severally liable. However, they have a right of contribution from Madeline as follows:
Nora owes $75,000/$200,000 or 37.5% of the total surety amount. Orville owes $25,000/$200,000 or 12.5% of the total amount. Madeline owes $100,000/$200,000 or 50% of the total surety amount. Therefore, Madeline must reimburse Nora $37,500 and Orville $12,500.
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