KUNG FU INDUSTRIAL CO V METRO MANUFACTURING INC
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STATE OF MICHIGAN
COURT OF APPEALS
KUNG FU INDUSTRIAL,
UNPUBLISHED
October 31, 1997
Plaintiff-Appellant,
v
No. 197084
Macomb Circuit Court
LC No. 92-003571 CK
METRO MANUFACTURING,
Defendant,
and
JERRY THIEL,
Appellee.
Before: Holbrook, Jr., P.J., and Michael J. Kelly and Gribbs, JJ.
MEMORANDUM.
Plaintiff appeals by right from a post judgment order of the Macomb Circuit Court, relieving
appellee surety of his obligations under a $50,000 stay bond. This case is being decided without oral
argument pursuant to MCR 7.214(E).
The circuit court correctly cited Howard v Lud, 119 Mich App 55, 60; 325 NW2d 623
(1982), for the proposition that:
It is a matter of general suretyship law that a surety will be released, even as
against the obligee, where his risk is materially increased by some action of the obligor.
74 Am Jur 2d, Suretyship, §34, p 35.
However, this correct principle of law has been misapplied by the circuit court on these facts. Here, the
obligors did nothing after the suretyship obligation was established to increase the risk beyond that
contemplated by the surety at the time of origination. There was always a risk that the collateral, which
consisted only of the personal guarantees of four corporate principals, would prove unavailing if all four
people declared bankruptcy. That such risk actually came to pass is simply not the same thing as saying
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that the risk was increased; nor is any claim made that all the guarantors were insolvent when their
guarantees were given but that such information was fraudulently withheld from appellee surety. The
surety’s obligation is not released by the discharge of the principal by an act of the law in which the
creditor does not participate, as in the case of a discharge of the principal in bankruptcy or under
insolvency laws. 74 Am Jur 2d, Suretyship, § 98, p 72. The present scenario is precisely within the
scope of the risk which appellee surety accepted, and if the premium charged and collateral obtained
failed to protect the surety against loss, that is in the nature of the suretyship business and provides no
basis for relieving the surety of the obligation undertaken and on which plaintiff properly was entitled to
rely.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain
jurisdiction.
/s/ Donald E. Holbrook, Jr.
/s/ Michael J. Kelly
/s/ Roman S. Gribbs
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