The law tries to strike a balance between the rights and obligations of the surety, the debtor and the creditor, ensuring that the latter gets paid whilst the surety does not suffer an excessive burden. There are various pleas which the surety may make use of to defend his rights in front of the creditor, which also ensure that the money paid is recovered. Amongst such there are the benefit of discussion and the benefit of division, which the simple surety can make use of.
The Benefit of Discussion
The benefit of discussion is a plea available to the simple surety as a means of additional protection. This can be invoked in case the debtor fails to pay the creditor by the time agreed upon and the latter proceeds against the surety for payment. The surety has a right to plead that the assets of the debtor have to be discussed first before this burden is put on the surety.[1] In fact, article 1934 of the Civil Code states that;
“The surety is only bound to pay in the event of the default of the principal debtor whose property must first be discussed”
The court in the case of P.L. Giuseppe Mangion v Onor. Riccardo Micallef nomine[2] held that the surety is bound to pay the creditor, in case of default from the debtor. Nonetheless according to Mifsud v Cuschieri[3], when the creditor institutes a case against the surety, the former must prove that the debtor did not pay when the debt was due. There are no explicit provisions in the law stating that proceedings need to be instituted against the debtor before, turning to the surety. Nonetheless, the law provides a defence to the simple surety, which he may raise if he so requires.[4]
The benefit of discussion can only be invoked by the simple surety as its obligation is subsidiary in nature. It is the principal debtor who must pay the debt, and the surety would have to institute proceedings against such debtor to recover the money paid to the creditor. Hence, to avoid the circuits of actions, the principal debtor’s money needs to be discussed first.[5] The Civil Code in article 1935(b) specifically prohibits those sureties which have bound themselves jointly and severally with the debtor, from using this plea, as such sureties are in the same position of the principal debtor.[6]
The Benefit of Division
This plea, similarly, to the previous one is available only to simple sureties. However, for it to be applicable there needs to be two or more simple sureties for the same debtor and the same debt. When there are multiple sureties, each surety is considered to be liable for the whole debt[7] and technically it is up to the creditor to choose who to ask for full payment. Nonetheless, the co-surety may;
“… demand that the creditor should divide his action and reduce it to the share due by each surety”[8]
This plea has only two conditions for its application; firstly it needs to be invoked and is not applied automatically, and secondly, it precludes the joint and several surety from raising it. Although co-sureties are liable for the whole debt, it does not mean that co-sureties are jointly and severally bound. In fact, this plea discharges the surety from the share of the debt due by other co-sureties, except for cases of insolvency.[9] Laurent asserts that in case the surety does not raise this plea and instead pays the total amount, he would not be able to claim back the debt from creditor which was due by the other co-sureties.[10]
The benefit of this plea operates only in favour of the co-surety raising it, whilst the other co-sureties remain liable for the rest of the debt.[11] Thus, the objective of this plea is based on equity, whereby it discharges the surety from the share of the debt due by the other co-sureties. This plea does not apply to those co-sureties being insolvent at the time of the division.[12]
The surety in solidum is not able to make use of this plea, since the creditor has the luxury to recover the money owed to him from any of the people bound, including both debtors and sureties.
One must be cautious since these pleas are not applicable in case of the joint and several surety.
This shall not be construed to be as advice but shall merely serve as a brief description of the pleas a surety can invoke as a means of protection. If you would like to get to know more about this please do not hesitate to contact us on [email protected].
[1] Paul Anthony Cachia‘THE DEFENCES AND REMEDIES OF THE SURETY’, LL.D, June 2003
[2] 5th May 1890, Court of Appeal
[3] 18th February 1925, Court of Appeal
[4] Paul Anthony Cachia
[5] Caruana Galizia V., the Law of Guarantees & Minor Contracts
[6] Article 1935 Civil Code
[7] Article 1937 Civil Code
[8] Ibid.
[9] Paul Anthony Cachia
[10] Laurent, Principii di Diritto Civile, Volume XXVII, Casa Editrice Vallardi Milano, pg. 182, no. 221.
[11] Paul Anthony Cachia
[12] Ibid