Peoples Bank of South Carolina, Inc. v. Robinson, 20826

• Decision Date: 04 December 1978
• Docket Number: No. 20826,20826
• Citation: 249 S.E.2d 784,272 S.C. 155
• Court: South Carolina Supreme Court
• Parties: , 25 UCC Rep.Serv. 799 The PEOPLES BANK OF SOUTH CAROLINA, INC., Respondent, v. Chester L. ROBINSON and Beverly D. Robinson, Appellants.

Page 784

249 S.E.2d 784

272 S.C. 155, 25 UCC Rep.Serv. 799

The PEOPLES BANK OF SOUTH CAROLINA, INC., Respondent, v. Chester L. ROBINSON and Beverly D. Robinson, Appellants.

No. 20826.

Supreme Court of South Carolina.

Dec. 4, 1978.

Frederick K. Jones, Florence, for appellants.

Marvin P. Jackson, Jr., Florence, for respondent.

RHODES, Justice:

This case involves a claim and delivery action, based on a promissory note and security agreement, commenced by respondent (Bank) to recover from appellants (Robinsons) the possession of an automobile. The answer of the appellants asserted as a defense that respondent bank had discharged appellants' indebtedness and the lien on the automobile by delivering to them certain documents relieving them from liability on both the note and security agreement.

Both parties moved for summary judgments and the circuit court found in favor of respondent bank, concluding that the delivery of the documents purporting to cancel the indebtedness was ineffective as it was the result of a clerical error. From this order appellants have appealed. We affirm.

The facts, which are not in dispute, outline the following sequence of events. On March 23, 1976, the Robinsons purchased the automobile in question and obtained a loan from respondent in the amount of $2,802.72, payable in 24 monthly installments. As evidence of their indebtedness, appellants executed a note payable to respondent and also executed a security agreement granting a lien over the automobile. A record designating the bank as the first lienholder was entered on the certificate of title of the South Carolina Motor Vehicle Division.

In explanation of the clerical error asserted by the bank, a bank officer by way of affidavit stated:

That sometime during the month of March, 1977, . . . the Plaintiff (Respondent), its agents, servants any (sic) employees, unintentionally and inadvertently by mistake marked said note and security agreement "Paid and Satisfied" and released said lien upon the certificate of title to said motor vehicle and sent the said note and security agreement and certificate of title to said motor vehicle to the Defendants (Appellants), all of which . . . was done through inadvertent and unintentional error. . . .

The circumstances of the respondent's unintentional act are not contradicted by appellants. It is stipulated that the appellants paid on the indebtedness until July, 1977, at which time they ceased making monthly payments. Appellants further admit that they have failed to pay the remaining indebtedness, upon which the present suit is predicated, and characterize the alleged discharge by respondent as gratuitous.

The only issue before us is whether the respondent's clerical error can be construed as a discharge of appellants' indebtedness on the automobile pursuant to § 36-3-605(1)(b). This section of the Uniform Commercial Code provides in pertinent part: "The holder of an instrument may even without consideration discharge any party . . . by renouncing his rights by a writing signed and delivered or by surrender of the instrument to the party to be discharged."

Appellants' position is that delivery of either the note or the notarized release of lien effected a "discharge" entitling them to summary judgment, and respondent's lack of possession of the aforementioned documents precluded it from summary judgment. Although the record reveals that the promissory note and security agreement were marked "Paid and Satisfied" and were returned to appellants with a notarized release of lien on their certificate of title, we cannot conclude that these unintentional actions constitute a discharge as envisioned by § 36-3-605(1)(b). Commentators on the Uniform Commercial Code conclude that the courts ". . . have glossed this section (36-3-605(1)(b)) by requiring that surrender of the instrument be accompanied by an intent to discharge the party." J. White, R. Summers, Uniform Commercial Code at 447 (1972).

The above conclusory comment is supported by a number of cases. In Bank of Austin v. Barnett, 549 S.W.2d 428 (Tex.Civ.App.1977), appellant bank effected various transactions with appellee in an attempt to renew and combine three separate notes with accompanying security agreement into one new note in the amount of the individual's total indebtedness. The action before the court involved the question of whether the bank's return of the original notes to the individual endorser would operate as a release of the total debt. In recognizing that the same result would obtain under pre-code law, the court held that the evidence was insufficient to prove any intent on the part of the bank to release the original indebtedness or the...