Guarantors Who Become Co-borrowers (Siman 77:4)

Two people guarantee the loan of a third. The lender sues one of the guarantors for the whole amount of the loan. Can the guarantor who paid recover half from the other guarantor, or only one-third?

Sa’if 4, Mechaber: Reuven needs a loan from Shimon. Shimon is unwilling to lend the money to Reuven unless Levi and Yehuda guarantee the loan, become co-borrowers with Reuven, and co-sign a promissory note in favor of Shimon. Subsequently, Reuven loses all his money. Shimon sues Levi for the whole amount of the loan. Levi pays the whole loan to Shimon. He then sues Yehuda to reimburse him for half. Yehuda responds by arguing that he was just one of three signers of the note in favor of Shimon. As such, his obligation is toward Shimon, not toward Levi.

Furthermore, he is only liable for one third of the loan, not for one half. He is prepared to repay Levi one third of the loan that Levi repaid on his behalf. As for the remaining third, it is not his obligation. It is Reuven’s obligation. To recover that, Levi must sue Reuven. If Reuven has no money, it is Levi’s loss. The court will reject this argument. It will enter judgment against Yehuda for half of the loan.

Ner Eyal: The issue in question here arises out of the fact that the two guarantors obligated themselves by signing the promissory note, not only as guarantors but also as co-borrowers.

We have seen in Siman 77: 1 that, based on the Yerushalmi, co-borrowers are deemed to have guaranteed to the lender the portion of the loan the other co-borrower owes. Accordingly, if one focuses on Levi and Yehuda as co-borrowers together with Reuven rather than as guarantors of Reuven, Yehuda should not be held liable for more than his primary obligation, which is one third. It is true that having been sued by Shimon, Levi had no choice but to pay off the whole loan. But it was Levi’s bad luck that Shimon sued Levi rather than Yehuda. Indeed, had Shimon sued Yehuda for the entire loan, Yehuda would have been in the same unfortunate position that Levi finds himself in now.

Levi, however, can rebut Yehuda’s argument in the following way. He can argue that in addition to being co-borrowers, Levi and Yehuda were also guarantors. Accordingly, if one focuses on Levi and Yehuda as guarantors of Reuven rather than as co-borrowers with Reuven , the lender may, as we have seen in Siman 77:3, proceed against one of the guarantors for the entire amount. The guarantor who paid off the entire loan may then recover half the loan from the other guarantor.

Both sides of the argument are posed by the Ba’al Terumot, who does not decide the question. In this Siman 77:4, the Mechaber rules that the halacha is that we focus on Yehuda as a guarantor, not as a co-borrower. As such, Yehuda must pay Levi half the loan Levi repaid to Shimon, not just one third.