PRINCIPAL AND SURETY - DISCHARGE OF SURETY FOR A LESSEE BY ASSIGNMENT OF THE LEASE

Lands set aside by statute as common property of the Chickasaw and Choctaw Indian tribes were, pursuant to an act of Congress, leased to one Gunther by mining trustees of the tribes. The lease contained covenants to pay stipulated annual advance royalties, and also provided that no assignment should be made without the consent of the trustees subject to the approval of the Secretary of the Interior. Defendant surety company executed a bond for the faithful performance of the terms of the lease, and the same was duly approved. Then Gunther, with the consent of the trustees, but not the approval of the Secretary of the Interior or surety, assigned the lease to a mining company in which he owned 298 of the 300 shares of stock. From 1925 to 1930 the company failed to pay royalties falling due. In 1930 the surety, then notified of the assignment, entered into an agreement with the company whereby the latter should build up a fund for payment of the past due royalties. A small amount had been paid to the federal government on account when suit was instituted against Gunther and the surety for the balance. Held, over the defenses of assignment and alteration of the contract and estoppel, that the surety company was liable. American Surety Co. of New York v. United, States, (C. C. A. 10th, 1940) 112 F. (2d) 903