Oregon Bank v. Baardson
| Decision Date | 11 September 1970 |
| Citation | 256 Or. 454,473 P.2d 1015 |
| Parties | , 8 UCC Rep.Serv. 196 The OREGON BANK, an Oregon corporation, Respondent. v. Andrew B. BAARDSON, Appellant. |
| Court | Oregon Supreme Court |
Robert L. Myers, Portland, argued the cause for appellant. With him on the briefs were Shuler, Rankin, Myers & Walsh, Portland.
Warren Hastings, Portland, argued the cause for respondent. With him on the brief were Galbreath & Pope, Milton-Freewater, and Phillips, Coughlin, Buell & Phillips, Portland.
The plaintiff bank brought an action to recover on two promissory notes signed by the defendant and Lee Williams as co-makers. The defendant answered alleging that he was an accommodation maker and was discharged from his obligation because the bank impaired collateral given by his co-maker, Williams. The only issues were those raised by the answer and a counterclaim. The court directed a verdict for plaintiff and defendant appeals.
Williams makes mobile pellet mills. Such mills procees hay into pellets to feed stock. The defendant Baardson sells some of the machinery and equipment which is used in assembling a pellet mill. A Washington concern, Wi-Co., entered into a written agreement with Williams on December 11, 1962, whereby Wi-Co. agreed to purchase a mill to be assembled by Williams.
On the same date Baardson and Williams entered into a written agreement which recited that Baardson was to furnish most of the equipment for the Wi-Co. mill and $5,500 would be borrowed from the bank to purchase the component parts not furnished by Baardson. Baardson would pay the bank loan and take over the sales contract with Wi-Co. Baardson would be paid by Williams for the equipment Baardson furnished by Wi-Co.'s payments on the sales contract.
To obtain the $5,500 from the bank, Williams and Baardson signed a promissory note as co-makers. The 90-day note was executed December 12, 1963, and was unsecured. They executed additional notes to the bank to secure additional funds to complete the mill. The notes were never paid.
On March 31, 1964, Wi-Co. and one Peterson, a financially responsibile person, executed a chattel mortgage on the mill to Williams to secure a note apparently executed by the mortgagors for the price of the mill. The proceeds to be obtained from this note and mortgage were assigned by Williams to the bank. Subsequently, Williams retook possession of the mill and gave a chattel mortgage on it to the bank.
Baardson offered to subordinate his interest in the mill to the bank, provided he was assigned Wi-Co.'s mortgage to Williams after the bank was paid and Williams alone signed the new note. Baardson also sent the bank Williams' note to him as evidence of the debt for equipment purchased from Baardson for the mill, and asked the bank to collect from the payments made by Wi-Co. on their note and mortgage after the bank was paid.
The bank eventually obtained the mill and sold it in November 1966 for $2,200. The net proceeds of the sale were applied on the notes. Thereafter, this action was filed.
Baardon contends that he was discharged because the bank impaired collateral, the collateral being the assignment of Peterson's and Wi-Co.'s note and mortgage on the mill and Williams' subsequent mortgage on the mill.
In order to have standing to complain about alleged impairment of collateral, the collateral must have been given by or on behalf of a person against whom Baardson had a right of recourse, allegedly Williams. The Uniform Commercial Code, ORS 73.6060, provides:
'(1) The holder discharge any party to the instrument to the extent that without such party's consent the holder:
'* * *
'(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.'
Baardson had a right of recourse against Williams if Baardson was an accommodation maker. ORS 73.4150. ORS 73.4150 provides:
'(1) An accommodation party is one who signs the instrument in any capacity for the purpose of lending his name to another party to it.'
The official comment to the quoted section states: 'Subsection (1) * * * recognizes that an accommodation party is always a surety (which includes a guarantor) * * *.'
The notes do not indicate that Baardson signed as an accommodation maker. That is not necessary. ORS 73.4150(3) provides: '* * * (T)he accommodation character may be shown by oral proof (with exceptions not relevant here).'
We hold, however, that the written agreement between Baardson and Williams, dated December 11, 1963, precludes Baardson from...
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