Coombs v. Beneficial Finance Co.

• Decision Date: 01 April 1977
• Citation: 549 S.W.2d 327
• Parties: Claude E. COOMBS, Appellant, v. BENEFICIAL FINANCE COMPANY, Appellee.
• Court: Kentucky Court of Appeals

Page 327

549 S.W.2d 327

Claude E. COOMBS, Appellant, v. BENEFICIAL FINANCE COMPANY, Appellee.

Court of Appeals of Kentucky.

April 1, 1977.

Ronald L. Coombs, Eubanks, Lorenz, Coombs & Rankin, P.S.C., Louisville, for appellant.

Kenneth L. Burhans, Louisville, for Beneficial Finance Co.

Before GANT, HOWERTON and WHITE, JJ.

GANT, Judge.

On October 21, 1974, the Appellant, Claude A. Coombs, signed a certain promissory note as surety and co-obligor for one June McInerney to the Appellee, Beneficial Finance Company. The first payment was due on December 4, 1974, and apparently the Appellant learned immediately thereafter that the principal on the note had no intention of making payments thereunder. On December 27, 1974, Appellant notified the Appellee, pursuant to Ky.Rev.Stat. 412.110, that it should immediately proceed to collect from the principal.

This statute requires the creditor, after receipt of such notice, to bring such action "to the next term thereafter at which he can obtain judgment and in good faith prosecute the suit with reasonable diligence . . . " Appellee did not bring action against the principal until April 2, 1975, and on July 15, 1975, Miss McInerney filed bankruptcy and had her debt to Appellee discharged.

On October 15, 1975, this action was filed by the Appellee against the Appellant and no process was issued. On November 5, 1975, Appellant filed Answer and Counterclaim, the Answer alleging that the failure of the Appellee to comply with the provisions of Ky.Rev.Stat. 412.110 discharged him from his obligation and the Counterclaim alleging a violation of the Truth in Lending Act. The lower court dismissed the Counterclaim, holding that the one-year limitation on actions thereunder barred any recovery thereon and granted to the Appellee a summary judgment on his complaint in the amount of $1,370.59, together with interest from the date of the judgment. It is from this judgment that the Appellant appeals.

The issues in this case are quite simple. The first issue is whether or not the execution of the note by the Appellant constituted a waiver of his rights granted to him under Ky.Rev.Stat. 412.110. The waiver in its entirety is as follows:

All parties hereto, including makers, sureties, grantors and indorsers severally waive demand and presentment for payment, notice of protest and protest of this note and agree that their liability hereunder shall not be affected by an extension of time of payment of all or any part of the amount owing hereon at any time or times and waive, as to this debt, any and all exemptions permitted by law to be waived. (Emphasis ours).

The lower court and the Appellee rely on two Kentucky cases, viz., Owensboro Savings Bank & Trust Co.'s Receiver v. Haynes, 143 Ky. 534, 136 S.W. 1004 (1911) and the case of People's State Bank v. Atwood, 212 Ky. 462, 279 S.W. 670 (1926). The first of these cases involved the identical statute to Ky.Rev.Stat. 412.110, which at the time was numbered Ky.Stat. 4668. In this Owensboro Savings Bank case, notice had been given by the surety to commence action, just as in the present case. However, there was a vast difference in the language contained in the note itself. The body of the note sued on in that case provided as follows:

The parties hereto, including the makers and endorsers of this note, hereby expressly waive presentment thereof for payment, notice of non-payment, protest and notice of protest, and diligence in bringing suit against any party hereto, either maker or endorser.

That case went on to say that where the waiver is inserted in the body of the note it becomes a part of the contract of the endorser and is binding upon him.

In the second case above referred to, People's State Bank, supra, the same principle was applied where the bank had extended the time of payment but in that case there was a specific waiver of "all defenses on the ground of any extension of time of payment." In the instant case, however, there was no specific language waiving "diligence in bringing suit" as was found in the note in the Owensboro Savings Bank case, supra. Thus we have the very narrow question of whether the last phrase contained in this waiver constituted a waiver of diligence in bringing suit. The phrase to which the court refers is " . . . and waive, as to the debt, any and all exemptions permitted by law to be waived."

After a search of several standard dictionaries, legal dictionaries and other definitions found in numerous cases, the Court finds that the most common synonym for the word "exemption" is the word "immunity...