Court Opinion

ID: 6756517
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:27:33.529231+00
Date Added: 2024-06-11T16:01:58.399698
License: Public Domain

McCormac, J.,
dissenting. The majority has ignored the plain language of R. C. 1303.72 in interpreting the statute to provide that the complete release of the Tonkens, co-guarantors, did not result in the complete release of the Casts, partial co-guarantors. While the provisions of R. C. 1303.72 may be abstruse to the extent that careful reading is required, they are not ambiguous.
R. C. 1303.72 provides that, if the holder discharges any party to the instrument, the holder similarly discharges . a party who has a right of recourse against the *111discharged party unless an exception set forth in the statute applies.
Provident completely released all rights against the Tonkens, parties against whom the Gasts had a right of recourse. Thus the Gasts are entitled to a release to the same extent (completely) unless one of the statutory exceptions applies. Those are twofold: (1) consent by the Gasts, and (2) express reservation of rights by Provident against the Gasts pursuant to R. C. 1303.72(B).
The Gasts did not consent to the discharge of the Ton-kens, which disposes of the first exception. While Provident could have protected its rights against the Gasts without consent by express reservation of rights in the release pursuant to R. C. 1303.72(B), that was not done. The release given the Tonkens was a complete and unequivocal release with no express reservation of rights.
The language “to the extent” in R. C. 1303.72(A) means to the extent that the other party is released rathther than to the extent that his right of recourse is not preserved. There is no qualification in R. C. 1303.72(A)(1) to the discharge of a person in the Gasts’ position other than to the extent that the person against whom he has a right of recourse is released. Such limited discharge is provided for in R. C. 1303.72(A) (2) where collateral is unjustifiably impaired, in which case the discharge only goes to the extent of impairment. If a limited discharge were intended in R. C. 1303.72(A)(1), the statute would so provide by stating that the discharge is to the extent that the right of recourse is impaired. The Uniform Commercial Code was carefully and meticulously drafted by the most skilled commercial law lawyers in the United States. It is hardly flattering to their outstanding efforts to hold that their draftsmanship was as careless as the majority would have us believe. The majority has simply added language not in R. C. 1303.72 and not intended to be there.
This case demonstrates why a complete discharge in accordance with the plain meaning of the statute should be the law. The holder of the instrument is given the pro*112tection of either obtaining the consent of the other party prior to release or qualifying the release by inserting an express reservation of rights provision. In this case, Provident released the co-guarantors, the Tonkens, as part of a compromise of a lawsuit in the Court of Common Pleas of Butler County where the Tonkens sued Provident for $6,000,000. Provident released its claim against the Ton-kens for $47,479.16 in consideration of the dismissal of the Tonkens’ suit with prejudice. The discharge of the Ton-kens and the release on its face indicate discharge of the entire debt as consideration for settlement of the $6,-000,000 lawsuit, since no rights against any other party are expressly reserved. If the Tonkens received credit for payment of the entire amount of the note as consideration for dismissal of their $6,000,000 lawsuit, there is no liability on the note remaining to assert against the co-guarantors. At this point, it is difficult for the co-guarantors to prove what the value of the consideration given the bank by the Tonkens was, i.e., the settlement value of the Ton-kens’ $6,000,000 lawsuit. The record contains only an unsubstantiated statement by an officer of Provident, the Senior Vice President, that Provident received “nothing” for the release.
The majority decision demonstrates the undesirability of construing R. C. 1303.72(A)(1) to be that the discharge is only to the ex-tent that a right of recourse is prejudiced since.it leaves open questions which are often difficult to answer, such as the value of the consideration that a released party has given the holder of the obligation, particularly when the consideration consists of the dismissal with prejudice of another lawsuit. Therefore, even if R. C. 1303.72(A)(1) is held to be ambiguous, as is first required before a coiirt is permitted to determine the intention of the legislature, reasons predominate in favor of determining that the intention of the legislature was to totally discharge a co-party unless there was consent or an express reservation of rights. R. C. 1.49 reads in its entirety as follows:
*113“If a statute is ambiguous, the court, in determining the intention of the legislature, may consider among other matters:
“(A) The object sought to be attained;
“(B) The circumstances under which the statute was enacted;
“(C) The legislative history;
“(D) The common law or former statutory provisions, including laws upon the same or similar subjects; •
“(E) The consequences of a particular construction;
“(F) The administrative construction of the statute.”
In enacting the Uniform Commercial Cede, the object was to achieve clarity and uniformity in determining the obligations of parties involved in commercial transactions. The object of clarity mitigates in favor of interpreting R, C. 1303.72(A) (1) as it reads on its face. The majority’s reliance upon the common law is misplaced1. It is no longer necessary, as it was prior to adoption of the Uniform Commercial Code, to find it unequitable to totally release a co-guarantor when complete payment was not received from the released party. R. C. 1303.72 now provides means to the holder to protect himself when part consideration is paid by one party and rights are to be retained against another. Provident did not utilize the provisions to retain rights against others in R. C. 1303.72 nor did the Oasts receive the protections to be given them if rights were to be retained against them. The consequences of the construction adopted by the majority is to leave the law in a state of uncertainty, rather than uniformity and clarity, and to possibly allow the holder to collect more than the total amount of the obligation in the event that the guarantor is unable to prove that the total obligation was paid by the released party.
Reliance upon Ohio law is also misplaced, as the Uniform Commercial Code was ultimately adopted in every jurisdiction in the United States and was designed to make uniform the rules to be applied in commercial obligations throughout the country. As the majority admits, the law *114in some jurisdictions prior to the adoption of the Uniform Commercial Code was to totally discharge a co-surety if one surety had been totally discharged without reservation of rights. Since the uniform law was adopted in Ohio, it is unrealistic to conclude that the General Assembly intended to follow former Ohio law. A leading commentary on the Uniform Commercial Code sets forth the correct interpretation of discharge by release in the paragraph immediately preceding that quoted by the majority. 3 Anderson, Uniform Commercial Code 127, Section 3-606:4, provides, in part, as follows:
‘ ‘ The holder of an instrument may intentionally or unintentionally discharge a third person by his release of a particular party. If the holder gives a release to one party he may discharge any other party to the instrument if the holder has acted without the consent of such other party, and without making a reservation of rights.”
Applying that construction, which is contained within the plain meaning of R. C. 1303.72, the Gasts are entitled to a discharge to the same extent as the Tonkens since the Tonkens’ release was without consent of the Gasts and without reservation of rights.
The judgment of the Court of Appeals should be affirmed.
P. Brown, J., concurs in the foregoing dissenting opinion.