Plaintiff American Manufacturing Mutual Insurance Company (‘‘American’’) filed this action seeking a declaratory judgment that it was not liable to the defendant creditors on two surety bonds. The district court entered summary judgment in American’s favor and the defendants appeal. For the reasons that follow, we vacate and remand.

 The Packers and Stockyards Act of 1921, [citation], (the ‘‘PSA’’) and its implementing regulations require that every livestock dealer execute and maintain a reasonable bond to secure the performance of its obligations. [Citation.] The PSA’s bonding requirement was designed ‘‘to safeguard the farmers and ranchers who produce cattle against the losses they would suffer if they sold their livestock to insolvent or defaulting purchasers.’’ [Citation.]

   Two livestock dealers, Thurston Paulk, d/b/a Paulk Livestock Company (‘‘Paulk Livestock’’), and Coffee County Stockyard, Incorporated (‘‘Coffee County Livestock’’), applied to American to serve as a surety and issue bonds for them to meet the PSA’s requirements. The applications for both bonds contained agreements to indemnify American for any losses that it might incur as a result of their issuance. The principal on the first bond was Thurston Paulk, d/b/a Paulk Livestock. The application was signed by Thurston Paulk in his role as the sole proprietor of Paulk Livestock. The indemnification agreement contained the purported signatures of Thurston Paulk, Betty Paulk, and a witness. The principal on the second bond was Coffee County Livestock. The application contained the signature of Thurston Paulk in his role as president of Coffee County Livestock. The indemnification agreement contained the purported signatures of Thurston Paulk, Betty Paulk, Ashley Paulk, and a witness. American relied upon the information contained in the forms and the alleged genuineness of the signatures in making the decision to issue the bonds.

   After the bonds were issued, Paulk Livestock and Coffee County Livestock purchased numerous hogs from defendants Tison Hog Market, Inc.; Gainesville Livestock Market, Inc.; Madison Hog Market, Inc., d/b/a Townsend Livestock Market; South Carolina Farm Bureau Marketing Association; and Georgia Farm Bureau Marketing Association, Inc. When the defendant hog sellers did not receive payment for the hogs, they made claims against the surety bonds for the purchase money that they were due. * * *

   American conducted an investigation and learned that the bonds’ indemnification agreements contained forged signatures. In particular, American discovered evidence suggesting that: (1) Ashley Paulk had not signed or authorized anyone to sign his name to the Coffee County Livestock bond indemnification agreement; and (2) Betty Paulk had not signed or authorized anyone to sign her name to either bond’s indemnification agreement. American claimed that it would not have issued the bonds had it known that Betty and Ashley Paulk had not agreed to indemnify it, and it declared the bonds rescinded and returned all the premiums.

   American then brought this action seeking a declaratory judgment relieving it from liability to the defendants on the ground that the bonds were void * * * under Georgia insurance law due to the fraudulent and material misrepresentations of the bonds’ principals. American argued that the principals had forged the signatures of Betty and Ashley Paulk on the indemnification agreements in order to induce it into issuing the bond * * * . [The defendants] argued that Georgia insurance law did not apply to the surety contracts at issue in this case and that under both federal and Georgia surety law, American was still liable on the bonds.

   Cross motions for summary judgment were filed. The district court granted American’s motion for summary judgment and denied those filed by the defendants ***. Then, applying Georgia insurance law, it concluded that the bonds were void * * * .

   The ultimate issue presented by this appeal is whether a surety in Georgia is liable on its bond to creditors when the principal fraudulently induces the surety to issue the bond. The defendants argue that American is still liable on the bonds under general surety law because fraud committed by a principal alone in inducing a surety to issue a surety bond does not release the surety from liability. * * *

***

   It is well established under the common law of suretyship that ‘‘fraud or misrepresentation practiced by the principal alone on the surety, without any knowledge or participation on the part of the creditor or obligee, in inducing the surety to enter into the suretyship contract will not affect the liability of the surety.’’ [Citations.] From a practical standpoint, this common law treatment of a principal’s fraud is the only one that makes sense. A creditor does business with a principal in reliance upon the existence of a bond. The bond provides security for the creditor because normally the creditor would have no way of knowing whether the principal is insolvent or otherwise an unreliable party with which to engage in business. [Citation.] If the creditor’s ability to recover on a bond was dependent on the accuracy of the principal’s representations to the surety, then the value of the bond to the creditor would be greatly lessened because the creditor would have no way of knowing what representations were made in the procurement of the bond. More importantly for the case at bar, this common law approach * * * enables a livestock seller to deal freely with livestock dealers knowing that the required bond will protect them in the event of a default even if the principal hid facts from the surety when obtaining the bond.

***

   Instead of applying * * * insurance law, however, the district court should have applied Georgia surety law. The surety bonds in this case are surety contracts that are not governed exclusively by the insurance law of Georgia. * * *

   The Georgia Code contains an entirely separate title that applies to suretyship contracts. [Citation.] The chapter defines a contract of suretyship as one ‘‘whereby a person obligates himself to pay the debt of another in consideration of a benefit flowing to the surety * * * ’’ [citation]. This is the commonly understood definition  of a surety relationship and describes the situation that we have in the case at bar. The Georgia Code does not contain a statement as to the effect of a principal’s fraud on a surety’s liability to the creditor. Georgia courts, however, have applied the common law and held that a surety is still liable to a creditor even if the principal commits fraud so long as the creditor does not participate in the fraud. [Citation.] * * *

   Applying the common law to the case at bar, there is no evidence that the defendants participated in any fraud. The fraud was committed solely by the principals. Under these circumstances, American is not relieved of liability on the bonds.

   [Citation.] * * *