§ 17.001.Suit on Contract with Several Obligors or Parties Conditionally Liable

The rule governing who must be in the case when liability is secondary, and it has a general prohibition and a list of escapes.

The rule: the acceptor of a bill of exchange or a principal obligor on a contract may be sued alone or jointly with another liable party, but a judgment may not be rendered against a party not primarily liable unless judgment is also rendered against the principal obligor.

A guarantor, in other words, cannot ordinarily be picked off on their own. The creditor must obtain judgment against the person who owes the debt before the person who merely backed it can be made to pay.

Subsection (b) supplies four exceptions, and they share a theme: the principal obligor cannot practically be reached. The assignor, endorser, guarantor, or surety on a contract, or the drawer of an accepted bill, may be sued without the principal — or the suit against the principal may be discontinued — if the principal obligor:

is a nonresident or resides where he cannot be reached by the ordinary process of law; resides in a place that is unknown and cannot be ascertained by reasonable diligence; is dead; or is "actually or notoriously insolvent."

The last is the one most often relied on. A guarantee exists precisely because the principal might not pay, and requiring a judgment against a demonstrably insolvent debtor before reaching the guarantor would defeat the instrument.

That last phrase offers two routes — proof of actual insolvency, or insolvency so well known that proof is unnecessary.