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581 S.W.2d 237

Hooper v. Ryan

Court of Appeals of Texas

Decided May 24, 1979

Court of Appeals of Texas · decided 1979-05-24

Cited by 17 later decisions — most recently July 1995

4 federal appellate · 1 district · 10 state decisions

Key passage — most relied on by later courts

“(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 dishon- or with respect to any such person does not discharge any party as to whom presentment, protest or notice of dishon- or 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.”

quoted by 1 later decision, including Ramsey v. First National Bank & Trust Co. of Corbin

Relies on 62 Ill. 2d 16 - Wohlhuter v. St. Charles Lumber & Fuel Co. · Reed v. Buck · Bute v. Brainerd

Good law ✅— No negative treatment on recordhow we know

Decided 1979-05-24

View the full empirical analysis of this case →

¶1 OPINION

McDONALD, Chief Justice.

¶2 Plaintiffs Hooper and Baker were payees of a $25,000. installment note, secured by lien on an apartment house, executed by co-makers defendant Ryan and C. K. Booker. The note was paid down to $24,000. and defaulted. Plaintiffs caused trustee’s sale to be had on the property and bought it in *238 for $14,000., leaving a deficiency on the note of $10,000. Plaintiffs filed this suit for such deficiency against defendants Ryan and C. K. Booker. After such suit was filed Booker paid plaintiffs $300. cash plus a $3,000. installment note secured by real estate, and for such plaintiffs agreed to release Booker for “his liability in the judgment and his liability only”.

¶3 Plaintiffs then nonsuited as to Booker.

¶4 Trial was to a jury which found:

1) Plaintiff Hooper without the consent of defendant Ryan unjustifiably impaired collateral for the note.
2) Plaintiff Hooper without the consent of defendant Ryan released co-maker Booker without an express reservation of rights that Ryan had a right of recourse against Booker.

¶5 Plaintiffs moved for judgment non ob-stante veredicto. The trial court rendered judgment on such verdict that plaintiffs take nothing against defendant Ryan.

¶6 Plaintiffs appeal on 11 points contending:

1) Issue 1 is immaterial since impairment of collateral is not a defense available to a co-maker.
2) Issue 2 is immaterial since the payee of a note is not required to obtain the permission of a co-maker before releasing another co-maker, and is not required to make a reservation of rights expressly reserving the right of a co-maker to sue another co-maker.
3) The trial court erred in overruling plaintiffs’ motion for judgment non obstante.

¶7 Defendant Ryan and Booker were comakers of a note upon which there was a balance due of $10,000. Plaintiffs were payees of such note. Plaintiffs sued Ryan and Booker for the $10,000.; thereafter accepted $3,300. from Booker and “released him from his liability only”, and continued suit against defendant Ryan. The trial court rendered judgment plaintiffs take nothing.

¶8 A co-maker’s liability to a payee is joint and several; the release of one comaker of a joint obligation does not serve to release the other co-maker; and the payee of the note may sue any co-maker alone or jointly with the other principal obligor. One co-maker if prejudiced by action against him alone is entitled to contribution from the other co-maker for any excess of his prorata that he is compelled to pay. Gaines v. Gaines, (Tex.Civ.App. Fort Worth) NWH, 119 S.W.2d 427; Shield v. First Coleman National Bank (Tex.Civ.App.Austin), 160 S.W.2d 277; affirmed 140 Tex. 117, 166 S.W.2d 688; Palmer v. FDIC (Tex.Civ.App. Houston 1), NRE, 527 S.W.2d 788; Reed v. Buck, Tex., 370 S.W.2d 867; Bute v. Brainerd, 93 Tex. 137, 53 S.W. 1017; Article 1986 VATS.

¶9 Defendant Ryan asserts that Section 3.606 Uniform Commercial Code applies to a co-maker and precludes his liability to plaintiffs.

¶10 Section 3.606 UCC provides: Impairment of Recourse or of Collateral.

“1) The holder discharges any party 1 to the instrument to the extent that without such party’s consent the holder:
“a) without express reservation of rights releases … any person 1 against whom the party has to the knowledge of the holder a right of recourse ….
“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”.

¶11 Section 3.606 of the Uniform Commercial Code applies to sureties and not to co-makers. Wohlhuter v. St. Charles Lbr. & Fuel Co., 62 Ill.2d 16, 338 N.E.2d 179; Hallowell v. Turner 95 Idaho 392, 509 P.2d 1313. The court in Wohlhuter said:

“Defendants contend that the ‘intent and literal meaning’ of Section 3 — 606 of the Uniform Commercial Code is that the unjustifiable impairment of collateral serves to discharge any party to the instrument from liability and that in limiting its ap *239 plication to ‘known sureties’ the appellate court erred. …
“We agree with the appellate court that ‘On its face UCC Section 3 — 606 would appear to apply to any party to the instrument.’ … We also agree that the defense of impairment of collateral under Section 3-606 was not available to defendants for the reason that they executed the note as co-makers’’.

¶12 Plaintiffs’ contentions are sustained.

¶13 The judgment of the trial court is reversed and judgment here rendered for plaintiffs for $6,700.

¶14 REVERSED AND RENDERED.

1

¶15 . Emphasis added.

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