St. Paul Fire and Marine Insurance Company, a Corporation v. Michigan National Bank of Detroit, a National Banking Corporation

The Court holds that the surety’s payment to the creditor (Precision) of his principal’s indebtedness on the negotiable instrument extinguishes the underlying debt and restricts the surety to an action for subrogation. Thus, since the surety has paid the debt evidenced by the instrument, the assignment of the creditor’s cause of action against the bank for untimely dishonor of the instrument is a nullity. I disagree with this line of reasoning.

There is a clear split of authority on the question whether a surety who pays his principal’s note or draft is restricted to a suit for subrogation or…