Bishop v. United Missouri Bank of Carthage

Citation647 S.W.2d 625
Decision Date17 February 1983
Docket NumberNo. 12683,12683
Parties36 UCC Rep.Serv. 1276 John M. and Mary Ann BISHOP, Plaintiffs-Respondents, v. UNITED MISSOURI BANK OF CARTHAGE, Defendant-Appellant.
CourtCourt of Appeal of Missouri (US)

Thomas E. Klinginsmith, Thomas L. Williams, Carthage, for plaintiffs-respondents.

Jerry E. Wells, Joplin, for defendant-appellant.

GREENE, Chief Judge.

Defendant, United Missouri Bank of Carthage, appeals from an order and judgment of the trial court sustaining John and Mary Bishop's motion for summary judgment on count II of their first amended petition, and for summary judgment in the Bishops' favor on the bank's counterclaim. Count II of the first amended petition sought a declaratory judgment that the Bishops, as comakers, were discharged under § 400.3-606 1 from any obligation on a promissory note since the other comakers to that note had been released by the bank. The bank's counterclaim was for the unpaid balance of the note.

Summary judgments are authorized only when 1) there is no issue as to any material fact, and 2) the party requesting the summary judgment is entitled to it as a matter of law. Clevenger and Wright Co. v. A.O. Smith Harvestore Products, Inc., 625 S.W.2d 906, 908 (Mo.App.1981). Our review of the record is made in the light most favorable to the defendant bank. Kinder v. Notorangelo, 615 S.W.2d 433, 434 (Mo.App.1980).

Based on the pleadings, affidavits, depositions, and interrogatories, the material facts before the trial court at the time it entered summary judgment were as follows.

On January 31, 1977, John and Mary Bishop and Henry and Elizabeth Mohr executed a promissory note for $115,000 in favor of the United Missouri Bank of Carthage. This note enabled Mr. and Mrs. Mohr to buy a 49% interest in the AirCo Tool Engineering Company owned by the Bishops. Almost $84,500 of the loan proceeds were actually used to pay some of the Bishops' prior loans at the bank, and the remaining $30,500 were credited to the company's account at the bank.

Collateral given to support the loan was 1) an assignment, with power of attorney, to the bank of John Bishop's rights in an assignment of inheritance from the Mohrs to him in Henry Mohr's grandmother's estate; 2) an assignment of a $125,000 life insurance policy on the life of Henry Mohr; 3) a note for $75,000 from the Bishops secured by a deed of trust on the AirCo Tool Building; and, 4) a note for $35,000 secured by a second deed of trust on the Mohr residence which had been assigned to John Bishop.

The note matured on January 31, 1979. Attempts by the bank to secure payment on the note failed, and in July 1979, the bank began foreclosure proceedings on the Mohr residence under a first deed of trust held by the bank. The Mohrs then filed a petition in bankruptcy. Subsequent negotiations between the bank and the Mohrs resulted in releases being prepared and executed by both sides on February 27 and March 2, 1981. In these releases, the Mohrs pledged to dismiss their petition in bankruptcy, transfer the title of their residence to the bank, and pay the bank $2,500 within 15 days after the receipt by them of any inheritance of $2,500 or more from Mr. Mohr's grandmother's estate. The bank, in exchange for those promises by the Mohrs, released the Mohrs from the $115,000 note and two other notes, and also released any interest it may have had against the estate of Henry Mohr's grandmother.

Prior to the execution of the releases, the Bishops were advised by the bank at various times as to the status of its legal proceedings against the Mohrs and the Bishops' liability on the note for any balance it was unable to collect from the Mohrs. The Bishops, however, were not informed by the bank about the possibility of the Mohrs being released from the note, nor were they informed about the releases at the time of the actual execution of the releases. The bank never sought or received the consent of the Bishops to release the Mohrs from the note. Also, the bank never expressly reserved its rights on the note against the Bishops prior to or contemporaneous with the execution of the releases.

The Bishops promptly filed suit for a declaratory judgment that they were no longer obligated on the note, when they eventually discovered that releases had been executed by the bank and the Mohrs. After amending their pleadings, the Bishops moved for summary judgment on count II in which they contended that as comakers they were discharged from obligation on the note under § 400.3-606. In its judgment on count II, the trial court 1) found that the releases executed by the bank and the Mohrs were for the purpose of fully and forever compromising, discharging and releasing all claims of every kind, character, and description; 2) found that the releases were executed without notice to, or the consent of, the Bishops and without an express reservation of rights by the bank against the Bishops; 3) ordered the return or release of the collateral the Bishops had pledged with regard to the note; and 4) sustained the Bishops' motion for summary judgment against the bank on its counterclaim for the balance due on the note.

On appeal, the defendant bank claims that the trial court erred in granting the summary judgment because 1) material facts were at issue on whether the Bishops were comakers or sureties, on whether the Bishops consented to the releases, and on whether the bank expressly reserved its rights; 2) comakers are not covered by § 400.3-606; and, 3) it failed to make a finding on the extent of the impairment of the Bishops' right of recourse against the Mohrs on the note, and failed to determine the value of any impaired collateral.

Our review of these allegations of trial court error is limited to determining whether the trial court's judgment is supported by substantial evidence, is not against the weight of the evidence, and is a correct declaration or application of law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

In applying that standard of review to the bank's first issue, we find that there were no material facts at issue, and that there were only questions as to the legal effect of certain facts upon the question of what was the Bishops' status on the note (comaker, surety, etc.) and upon whether there was consent or an express reservation of rights. We also find, without an extensive review at this point of the facts already presented above, that that part of the trial court's judgment finding that the Bishops were comakers on the note, that there was no consent, and that there was no express reservation of rights satisfies the review standards of Murphy v. Carron, supra.

The bank's second issue on appeal regarding the application of § 400.3-606 to comakers raises a novel question of law in Missouri. No other Missouri appellate court has been forced to directly confront the issue of whether § 400.3-606 applies to comakers as well as to sureties and accommodation makers. 2

Section 400.3-606 provides that:

"(1) The holder discharges any party to the instrument to the extent that without such party's consent the holder

(a) without express reservation of rights releases or agrees not to sue any person against whom the party has to the knowledge of the holder a right of recourse or agrees to suspend the right to enforce against such person the instrument or collateral or otherwise discharges such person, except that failure or delay in effecting any required presentment, protest or notice of dishonor with respect to any such person does not discharge any party as to whom presentment, protest or notice of dishonor is effective or unnecessary; or

(b) unjustifiably impairs any collateral for the instrument given by or on behalf of the party or any person against whom he has a right of recourse.

(2) By express reservation of rights against a party with a right of recourse the holder preserves

(a) all his rights against such party as of the time when the instrument was originally due; and

(b) the right of the party to pay the instrument as of that time; and

(c) all rights of such party to recourse against others."

The bank contends that the comments to this section clearly indicate that this defense is available only to "any party" who is an accommodation maker or surety. 3 However, in order for us to reach the bank's conclusion, we would have to violate the ordinary rules of statutory construction.

It is well-settled law that in ascertaining the meaning of the statute, we must look to the express language of the law irrespective of what may have been intended. State ex rel. Degraffenreid v. Keet, 619 S.W.2d 873, 876 (Mo.App.1981). We cannot alter the plain, ordinary and natural meaning of words used in a statute and we must determine the meaning of the words by applying the plain and natural meaning of the language. Bethel v. Sunlight Janitor Service, 551 S.W.2d 616, 619 (Mo. banc 1977). An unambiguous statute should be taken to mean what it says, for the General Assembly is presumed to have intended what the law states directly, and courts have no leave to impose another meaning. State ex rel. Degraffenreid v. Keet, supra. We hold that the term "any party" as used in § 400.3-606 means any party to the instrument, including comakers. See Rushton v. U.M. & M. Credit Corporation, 245 Ark. 703, 434 S.W.2d 81, 83 (1968); Deese v. Mobley, 392 So.2d 364, 368 (Fla.Dist.Ct.App.1981); Southwest Florida Production Credit Association v. Schirow, 388 So.2d 338, 339-40 (Fla.Dist.Ct.App.1980); Beneficial Finance Co. of New York, Inc. v. Husner, 82 Misc.2d 550, 369 N.Y.S.2d 975, 977-78 (Sup.Ct. Wayne County 1975); W. Hawkland, Commercial Paper 99, 121 (1959); White & Summers, Uniform Commercial Code, 434 n. 121, § 13-14 (1972). 4 Not only is this result mandated by a plain reading of this unambiguous section, but there are also two other good supporting reasons.

First, this definition is consonant with the...

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