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Reeves v. Hunnicutt

Court of Appeals of Georgia
Jun 17, 1969
168 S.E.2d 663 (Ga. Ct. App. 1969)



ARGUED MAY 5, 1969.

DECIDED JUNE 17, 1969.

Action on note. Fulton Civil Court. Before Judge Webb.

Thomas E. Moran, for appellant.

Poole, Pierce Cooper, Walter G. Cooper, for appellees.

Under the terms of the instrument in question the defendant had consented to the surrender or release of the collateral and could not urge the provisions of Code Ann. § 109A-3-606, regarding the unjustifiable impairment of collateral, as grounds for his discharge. Hence, the trial judge did not err in granting the plaintiff's motion for summary judgment.

ARGUED MAY 5, 1969 — DECIDED JUNE 17, 1969.

Auto-Prep, Inc. and E. T. Brackett, individually as co-makers, executed a promissory note to the order of James O. Reeves. Reeves transferred the note to C. C. Hunnicutt with recourse. The note was secured by office and shop equipment. Thereafter Brackett transferred all of the equipment to G. L. Griffin who assumed all of the obligations of the note in a separate written instrument, but did not sign the note in any capacity. Subsequently Griffin transferred the equipment to Kelley W. Osley, Jr. who assumed the obligation of the note in a separate instrument but also did not sign the note in any capacity. Osley then transferred the equipment to Trammell C. Morris; the record does not disclose that Morris executed any written agreement in connection therewith. Brackett, Griffin, Osley and Morris each in turn after acceptance of the collateral made payments on the note to Hunnicutt.

When the note was in default Hunnicutt filed a claim against Auto-Prep, Inc., Brackett, Reeves, Griffin, Osley and Morris alleging that the defendants were jointly and severally indebted to him for the amount due on the note and attorney's fees. Thereafter Mildred B. Hunnicutt, as executrix of Hunnicutt's estate, was substituted as party plaintiff.

The plaintiff filed a motion for summary judgment against the defendant Reeves. The motion was granted, the defendant appealed and the case is here for review.

The defendant Reeves contends that acts of Hunnicutt unjustifiably impaired the collateral for the note within the meaning of Code Ann. § 109A-3-606 (b) (Ga. L. 1962, pp. 156, 278), thereby discharging him as a matter of law. The defendant contends: that Hunnicutt without his knowledge or consent allowed the original maker of the note to transfer the collateral securing the note to another party; that the collateral was then transferred several times without his knowledge or consent. The defendant insists that this action by Hunnicutt completely divorced him from the collateral, which has been dissipated, and destroyed his right of contribution from the transferees.

The defendant's contentions are without merit because of the provisions of the note in question which are in part: ". . . the surrender or release of any collateral held by the payee or holder hereof, shall not affect the liability of any indorser, guarantor, surety or other party to this note or release or relieve them or either of them, from liability to pay the full amount of this note, and the holder or payee may proceed against any party to this note without first proceeding against the maker or other party. The payee or holder hereof shall be under no duty to enforce payment of the collateral securing this note. Should any payee or holder undertake to collect upon said collateral or any part thereof, it shall not be liable for any negligence or mistake in judgment in making such collection, and shall have the full right and authority to adjust, compromise and receive less than the amount due upon any of said collateral, and otherwise to enter into any accord and satisfaction with respect to same as may to said payee or holder seem advisable, without liability of any nature to any party to this paper, except to duly credit the amount received, less expenses upon this note."

Code Ann. § 109A-3 — 606 provides that: "The holder discharges 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." (Emphasis supplied.) As pointed out in 2 ULA-UCC § 3-606, Official Comment #2: "Consent may be given in advance and is commonly incorporated in the instrument. . . It requires no consideration, and operates as a waiver of the consenting party's right to claim his own discharge." This is precisely what transpired in this situation.

It is clear that under the terms of the note knowledge on the part of Hunnicutt of transfers of the collateral would not affect the defendant's liability for payment of the note.

The granting of the summary judgment was not error.

Judgment affirmed. Felton, C. J., and Pannell, J., concur.

Summaries of

Reeves v. Hunnicutt

Court of Appeals of Georgia
Jun 17, 1969
168 S.E.2d 663 (Ga. Ct. App. 1969)
Case details for

Reeves v. Hunnicutt

Case Details

Full title:REEVES v. HUNNICUTT, Executrix, et al

Court:Court of Appeals of Georgia

Date published: Jun 17, 1969


168 S.E.2d 663 (Ga. Ct. App. 1969)
168 S.E.2d 663

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