Detailed Answer
(b) The discharge or release of one cosurety by the
creditor results in a reduction of liability of the remaining
cosurety. This reduction of liability is limited to the released
cosurety’s pro rata share of debt liability (unless there is a reservation
of rights by the creditor against the remaining cosurety).
Since Mane released Rey without reserving rights against Salem,
Salem is released to the extent of Rey’s pro rata share of the
$90,000 liability. Salem’s maximum liability can be calculated as
follows:
Rey’s %
$120,000
$240,000 = .50
Loan balance $ 90,000
× Rey’s % × .50
$ 45,000
Loan balance $ 90,000
Rey’s pro rata share (45,000)
Salem’s maximum liability $ 45,000