V.I.P. Agency of Northern California, Inc. v. Duffy Electronics, Inc.

Opinion

CHRISTIAN, J. Highlands Insurance Company of Houston, Texas appeals from a judgment rendered against it as surety on a bond to release attachment. On September 12, 1977, the V.I.P. Agency of Northern California, Inc., (V.I.P.) filed in the superior court (Santa Clara) a complaint against Duffy Electronics, Inc., (Duffy) seeking recovery of $10,200 allegedly due for services rendered in procuring two workers for employment by Duffy.

At the instance of V.I.P., the court issued a writ of attachment which authorized sequestration of two assets; funds on deposit in Duffy’s account at the Wells Fargo Bank, and an account receivable of Duffy (payable by Atari, Inc.). The attachment was released when Duffy presented an undertaking pursuant to Code of Civil Procedure section 489.3101 in the amount of $10,200.

[852]Duffy answered, admitting liability in the amount of $5,903.89. The parties, on December 12, 1977, stipulated for judgment in the amount of $7,000 on the condition that execution be stayed pending payment of the judgment in installments: $2,500 by December 22, 1977, and $1,000 monthly beginning February 1, 1978, and continuing until the balance was paid.

On May 23, 1978, V.I.P. moved for judgment in the amount of $4,500 against Highlands Insurance Company of Houston, Texas. (See Code Civ. Proc., § 1058a.) The motion was supported by a declaration relating the circumstances leading up to the judgment and stating that payments on the judgment had lapsed, leaving an unpaid amount of $4,500. Highlands opposed the motion with a declaration showing that it had received no notice of the stipulated judgment until March 16, 1978, when Highlands was notified that a judgment had been rendered and that a payment schedule had not been met.

Appellant points out that the continuing obligation of a surety is governed by statute. Civil Code section 2819 provides: “A surety is exonerated, except so far as he may be indemnified by the principal, if by any act of the creditor, without consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, [are] in any way impaired or suspended.” Here, the obligation of Duffy Electronics as principal was modified in two ways by the stipulated judgment. The amount of the obligation was reduced from $10,200 to $7,000, and enforcement of the judgment was deferred according to an agreed schedule. The first modification, a reduction in the amount of the debt, reduced the surety’s exposure but was not an alteration of the obligation. Therefore, no exoneration resulted from it. But the second,