Beneficial Finance Co. of New York, Inc. v. Husner

Citation369 N.Y.S.2d 975,82 Misc.2d 550
Parties, 17 UCC Rep.Serv. 477 BENEFICIAL FINANCE CO. OF NEW YORK, INC., Plaintiff, v. George HUSNER and Ruth Husner, Defendants.
Decision Date17 June 1975
CourtUnited States State Supreme Court (New York)
MEMORANDUM

JAMES H. BOOMER, Justice.

The holder of a note discharges from liability an indorser of the note to the extent that the holder releases collateral given by the maker. Under the Uniform Commercial Code not only is an indorser discharged to the extent of the release of the collateral, but also discharged is any party who, to the knowledge of the holder, has a right of recourse against the maker (Uniform Commercial Code, § 3--606). The official comment to section 3--606 of the Uniform Commercial Code explains: 'The suretyship defenses here provided are not limited to parties who are 'secondarily liable,' but are available to any party who is in the position of a surety, having a right of recourse either on the instrument or dehors it, including an accommodation maker or acceptor known to the holder to be so.'

The knotty question in this case is whether the 'suretyship defenses' extend not only to an accommodation maker but also to a co-maker who does not sign as an accommodation for the other co-maker, but may have a right of contribution from the co-maker. Specifically, is one co-maker discharged from liability to the extent that the holder releases collateral given by the other co-maker?

Here, the plaintiff finance company sues upon a note signed by the defendant husband and wife as co-makers. The amount of the note was $1,296.00 and $693.58 now remains unpaid. As collateral for the loan, the finance company had been given a security interest in a 1966 Chevrolet automobile owned by the wife. The husband and wife separated and when no payments were made on the note, the finance company, without the consent of the husband, agreed to let the wife sell her automobile free of this lien if she made a payment on the note. The wife then sold the automobile to her sister for $200 and paid that amount to the finance company on the note. The husband claims that the automobile was worth substantially in excess of $200 and that to the extent of the value of the collateral released, he should be discharged from liability on the note.

A fair reading of section 3--606 of the Uniform Commercial Code leads to the conclusion that the husband would be discharged from liability on the note to the extent of the collateral released if to the knowledge of the finance company the husband had a right of recourse against the wife. Does the husband have a right of recourse against the wife? What are the rights of co-makers against each other?

The rights and liabilities of makers, as between themselves, depend upon the contract between them and the relation they sustain to each other and to the transaction.' (10 C.J.S. Bills and Notes § 37.) In the absence of any agreement to the contrary, parties executing notes as joint and several principals are liable between themselves, in proportion to the benefits received, and each has a right of contribution from the others to the extent he is required to pay more than his proportionate share (10 C.J.S. Bills and Notes § 37).

Since one co-obligor has a right of contribution from the others which may be destroyed by a release of the others, it is the rule that: ...

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16 cases
  • Federal Deposit Ins. Corp. v. Blue Rock Shopping Center, Inc., 83-1862
    • United States
    • U.S. Court of Appeals — Third Circuit
    • June 19, 1985
    ...held, however, that defendants had waived their rights under 3-606.16 American Express also cited Beneficial Finance Co. of N.Y. v. Husner, 82 Misc.2d 550, 369 N.Y.S.2d 975 (N.Y.Sup.Ct.1975), which held that the right of one co-obligor on a note to contribution from another co-obligor, who ......
  • Fed. Deposit Ins. Corp. v. Blue Rock Shop. Center
    • United States
    • U.S. District Court — District of Delaware
    • June 29, 1983
    ...Southwest Florida Production Credit Association v. Schirow, 388 So.2d 338-39 (Fla.App.1980); Beneficial Co. of New York, Inc. v. Husner, 82 Misc.2d 550, 369 N.Y.S.2d 975, 977-78 (N.Y.Supr.1975); Rushton v. U.M. & M. Credit Corp., 245 Ark. 703, 434 S.W.2d 81, 83 (Ark.1968). This conclusion i......
  • Lyons v. Citizens Commercial Bank of Tallahassee, AQ-272
    • United States
    • Florida District Court of Appeals
    • December 14, 1983
    ...to show that an unjustifiable impairment of collateral had occurred. Additionally, in Beneficial Finance Company of New York, Inc. v. Husner, 82 Misc.2d 550, 369 N.Y.S.2d 975 (N.Y.Sup.Ct.1975), a reported trial level decision, a husband and wife executed a promissory note giving as collater......
  • Crimmins v. Lowry
    • United States
    • Texas Supreme Court
    • May 29, 1985
    ...Bank v. Baardson, 256 Or. 454, 473 P.2d 1015 (1970). Cases holding that a comaker is discharged include: Beneficial Fin. Co. v. Husner, 82 Misc.2d 550, 369 N.Y.2d 975 (1975); Rushton v. U.M. & M. Credit Corp., 245 Ark. 703, 434 S.W.2d 81 (1968); Southwest Florida Prod. Credit Ass'n v. Schir......
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