Glidden Co. v. Zuckerman

• Decision Date: 16 March 1971
• Docket Number: No. 70--176,70--176
• Citation: 245 So.2d 639
• Parties: The GLIDDEN COMPANY, an Ohio corporation, Appellant, v. Donald S. ZUCKERMAN and Geraldine Zuckerman, Appellees.
• Court: Florida District Court of Appeals

Page 639

245 So.2d 639

The GLIDDEN COMPANY, an Ohio corporation, Appellant, v. Donald S. ZUCKERMAN and Geraldine Zuckerman, Appellees.

No. 70--176.

District Court of Appeal of Florida, Third District.

March 16, 1971.

Eli Breger, North Miami Beach, for appellant.

Smith, Mandler, Smith & Parker, and Joe N. Unger, Miami Beach, for appellees.

Before CHARLES CARROLL and HENDRY, JJ., and MARTIN, HENRY F., Jr., Associate Judge.

MARTIN, HENRY F., Jr., Associate Judge.

Appellant, plaintiff below, appeals from an adverse judgment on the pleadings entered upon defendant appellee's motion pursuant to Rule 1.140(c) F.R.C.P., 30 F.S.A. The parties will be referred to as they stood in the trial court.

The only pleadings before the trial court were the complaint and answer. It is well established that the allegations of the answer are deemed denied, where no reply is required, and such allegations cannot be a basis for any such judgment on the pleadings. City of Pompano Beach v. Oltman, Fla.App.1969, 228 So.2d 610; Miller v. Eatmon, Fla.App.1965, 177 So.2d 523. The test to be applied was spelled out in Reinhard v. Bliss, Fla.1956, 85 So.2d 131, 133, as follows:

'In passing on such motion made by defendant all well pleaded material allegations of the complaint and all fair inferences to be drawn therefrom must be taken as true and the inquiry is whether the plaintiff has stated a cause of action by his complaint. The test we apply in this instance is the same as if defendant has made a motion to dismiss the complaint for 'failure to state a cause of action' under State rule 1.11(b)(6). The allegations of the defendant's answer are of no avail to him at a hearing on defendant's motion for decree on the pleadings.'

The allegations of the complaint together with the exhibits attached thereto disclose that plaintiff seeks recovery against defendants as comakers of a promissory note dated October 8, 1966. Originally there were three comakers, namely: Paint Fair Stores, Inc., a corporation and the two present defendants individually. Defendants were also president and secretary respectively of the corporation and executed the note on its behalf. Subsequently, the corporate maker filed a voluntary petition in bankruptcy during the course of which plaintiff accepted 12 1/2% Thereof 'in full compromise, satisfaction settlement and discharge of its said claim against Paint Fair Stores, Inc.' The said settlement agreement contained an express reservation of rights against 'any endorser, guarantor or surety' on said promissory note.

The lower court concluded that the release or discharge of one of the principal debtors on such promissory note without an express reservation of rights against defendants as 'comakers', rendered the cause of action fatally defective and entered judgment accordingly.

On appeal, plaintiff contends that no express reservation of rights is necessary because of a specific provision in the Bankruptcy Act itself. 11 U.S.C.A. Section 34 provides:

'The liability of a person who is a codebtor with, or guarantor or in any manner a surety, for, a bankrupt shall not be altered by the discharge of such bankrupt.'

Appellee contends that this case involves a Compromise of a claim during the bankruptcy proceeding and that the above quoted section is therefore inapplicable since no Discharge is involved. No Florida cases on this precise point have been cited or found, however, a very analogous case is Lutz v. Frick Company, 1962, 242 Ind. 599, 181 N.E.2d 14 and cases therein cited. The rule which emerges from these authorities and which is supported by reason and logic is that general state law governs the rights and obligations of the parties to a compromise agreement reached during the progress of a bankruptcy proceeding. The pendency of such proceeding does not affect the application of such state law.

The promissory note here involved was executed prior to the effective date of the Uniform Commercial Code. The note was executed October 8, 1966 and the code became effective January 1, 1967 and applies to transactions occurring after that date. ¹ The pre-code Florida law with respect to negotiable instruments was the Negotiable Instruments Law (NIL) being Chapters 674, 675 and 676, Fla.Stat. (1965), F.S.A. An accurate statement of pre-code law is contained in 11 Am.Jur.2d, Bills and Notes, Section 909 as follows:

'The general rule that the release of one codebtor releases the other codebtors applies to the release of one or more--less than all--of the obligors on a promissory note who are jointly or jointly and severally bound. This was true defore the adoption of the NIL, and is the rule under the NIL by virtue of the provision of that act that a negotiable instrument is discharged by any act which will discharge a simple contract for the payment of money. The reason often advanced in support of this rule is, that since the debtors have a right of contribution among themselves, the releasing creditor ought not to be allowed to enforce his claim against one whose remedy of contribution has been destroyed by the release.

'Obviously, this rule, in its application to negotiable instruments, is subject to the same limitations and exceptions as in the case of other contracts for the payment of money, which are discussed under another title. The release by the holder of a promissory note of one of its comakers does not release the other makers where it is done at their request or with their consent.'

Professor Corbin, while disagreeing with the reasons advanced for the rule, does acknowledge its existence and refers to it 'as a trap into which many an obligee has fallen', ² and further points out that the American Law Institute declined to accept the rule in its Restatement of Contracts. ³ Corbin also explains that whatever distinctions may have existed originally between obligors bound 'jointly' or 'jointly and severally' for the performance of a single promise have been obliterated with the passage of time and that the rule under discussion...