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

• Decision Date: 17 June 1975
• Citation: 369 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.
• Court: New York Supreme Court

Page 975

369 N.Y.S.2d 975

82 Misc.2d 550, 17 UCC Rep.Serv. 477

BENEFICIAL FINANCE CO. OF NEW YORK, INC., Plaintiff, v.George HUSNER and Ruth Husner, Defendants.

Supreme Court, Wayne County.

June 17, 1975.

Hill & Cook, P.C., Syracuse (George V. Cook, Syracuse, of counsel), for plaintiff.

Brandt, Kehoe & Parenti, Wolcott (L. Paul Kehoe, Wolcott, of counsel), for defendant George Husner.

Legal Aid Society of Wayne County (Daniel M. Wyner, Lyons, of counsel), for defendant Ruth Husner.

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: 'Releasing or giving time to * * * one of several principal debtors will discharge the others in respect to the portion of the debt as to which the party released or given...