612 Indemnification of Surety

• Jurisdiction: Arizona

Where the principal obligor or another is required to indemnify the surety for any payments made, any release by the surety must be supported by consideration. A guarantor’s promise is to pay the debt of another, while that of the surety is to pay a debt which becomes the surety’s upon the principal’s failure to pay; the surety’s liability is therefore primary and the guarantor’s secondary, and the surety may not seek indemnification from the guarantor.

In J.D. Halstead Lumber Co. v. Hartford Accident & Indem. Co., 38 Ariz. 228, 298 P. 925 (1931), the surety required the contractor and Halstead Lumber Co. to agree to indemnify it against any loss which it might sustain on a performance bond.

At the end of construction, a number of parties with lienable claims remained unpaid. The surety was required to pay some of them, and sought indemnification from Halstead Lumber. Halstead Lumber presented at trial...