# Where are they getting these numbers?

• Creator
Topic
• #3181502
animalwithin
Participant

Ivor borrowed \$420,000 from Lear Bank. At Lear’s request, Ivor entered into an agreement with Ash, Kane, and Queen for them to act as co-sureties on the loan. The agreement between Ivor and the co-sureties provided that the maximum liability of each co-surety was: Ash, \$84,000; Kane, \$126,000; and Queen, \$210,000. After making several payments, Ivor defaulted on the loan. The balance was \$280,000. If Queen pays \$210,000 and Ivor subsequently pays \$70,000, what amounts may Queen recover from Ash and Kane?

The right of contribution arises when one co-surety, in performance of the principal debtor’s obligation, pays more than his or her proportionate share of the total liability. The right of contribution allows the performing co-surety to receive reimbursement from the other co-sureties for their pro rata shares of the liability. Queen paid his or her maximum liability of \$210,000, or 50% of the debt; then Ivor paid \$70,000, reducing the balance from \$280,000 to \$210,000. Ash’s maximum liability of \$84,000 represents 20% of the original \$420,000 debt, so Queen may collect 20% of the remainder,or \$42,000, from Ash. Kane’s maximum liability of \$126,000 represents 30% (of \$420,000), so Queen may collect \$63,000 (\$210,000 x 30%) from Kane.

I understand the % but the question says the balance was \$280,000. If Queen paid \$210,000 and Ivor paid \$70,000 then the balance is zero. If we go back to the original amount and apply the \$210+\$70, then we’re left with a loan balance of \$140,000. Where are they getting \$280,000?

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• #3181625
water
Participant

Basically you want to use \$210k, which is the amount that was paid by one co-surety. That co-surety has the right to seek reimbursement from the other co-sureties, in the original proportions of the agreement:

Ash: 84K/420K = 20%
Kane: 126K/420k = 30%
Queen: 210/420K = 50%

Ash's maximum liability of \$84,000 represents 20% of the original \$420,000 debt, so Queen may collect 20% of the remainder (\$210,000) or \$42,000, from Ash. \$42,000 = \$210,000 x 20%

Kane's maximum liability of \$126,000 represents 30% (of \$420,000), so Queen may collect \$63,000 (\$210,000 x 30%) from Kane.

So Queen ended up getting 105k back from the other co-sureties, so that she would only be guaranteeing 50% of the 210K she had to pay earlier.

REG - 91 (May 18 2020)

FAR - 89 (Aug 24 2020)

BEC - 95 (Sept 28 2020)

AUD - 90 (Nov 12 2020)

#3181949
animalwithin
Participant

Hmmm, interesting. And we're using the \$210k because that was what Queen paid and the question is asking what amount specifically that Queen can recover?

#3182162
Sam
Participant

Yup that's right. You'd always take the amount that was paid by one surety, and that surety can then ensure that it ends up allocated among the other co-sureties, according to the agreement

BEC - 90 (7/19, 8 weeks)
FAR - 78 (10/19, 10 weeks)
AUD - 75 (12/19, 8 weeks)
REG - 90 (7/20, ~12 weeks, split up)

Ethics - 97 (~6 hours to go through the material & take the quiz)
Licensed in Virginia (10/20, ~1.5 weeks to process after submitting everything)

#3182261
animalwithin
Participant

Thank you both!

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