Polk Chevrolet, Inc. v. Vicaro
162 So. 2d 761, 1964 La. App. LEXIS 1516 (1964)
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Rule of Law:
An accommodation co-maker on a promissory note is a primary obligor who is not discharged from liability when the creditor obtains a judgment against the other co-maker, modifies the payment terms with the other co-maker without extinguishing the original debt, executes against the secured collateral, or when the other co-maker is discharged in bankruptcy.
Facts:
- On April 30, 1959, Samuel J. Vicaro and his father, Vince J. Vicaro, co-signed a promissory note to Polk Chevrolet, Inc. to finance the purchase of an automobile by Samuel.
- As part of the same transaction, Samuel J. Vicaro granted a chattel mortgage on the vehicle as security for the note.
- Polk Chevrolet subsequently endorsed and transferred the note to General Motors Acceptance Corporation (GMAC).
- On December 29, 1960, Samuel J. Vicaro, acting alone, executed a second promissory note to GMAC to rearrange the installment payment schedule for the original debt.
- The second note expressly provided that the terms of the original note remained in full force and effect, except for the modified payment schedule.
- Subsequently, Samuel J. Vicaro obtained a discharge in bankruptcy.
Procedural Posture:
- Polk Chevrolet, Inc. obtained a judgment against Samuel J. Vicaro for the unpaid balance on the promissory notes.
- In execution of the judgment, Polk Chevrolet caused the mortgaged automobile to be seized and sold with appraisement, which resulted in a deficiency.
- Polk Chevrolet then sued Vince J. Vicaro in a Louisiana trial court to recover the deficiency.
- The trial court rendered a deficiency judgment in favor of Polk Chevrolet and against Vince J. Vicaro.
- Vince J. Vicaro, as appellant, appealed that judgment to the Court of Appeal of Louisiana, First Circuit, with Polk Chevrolet as appellee.
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Issue:
Is an accommodation co-maker of a promissory note, who is bound in solido, discharged from liability for a deficiency when the creditor obtains a judgment and executes against the mortgaged security in a separate action against the principal maker?
Opinions:
Majority - Judge Landry
No. An accommodation co-maker of a promissory note is a primary obligor and is not discharged from liability for a deficiency when the creditor proceeds separately against the principal maker and the secured property. The court rejected all of the defendant's defenses. First, Polk Chevrolet had the right to sue on the note because as a prior holder who reacquired the instrument, it could strike subsequent endorsements. Second, the execution of the second note by Samuel Vicaro was not a novation that extinguished the original debt, as the new instrument explicitly stated the original terms remained in effect and novation is never presumed. Third, under LSA-C.C. Article 2095, a suit against one solidary obligor does not bar a subsequent suit against another. Fourth, as an accommodation maker, Vince Vicaro is a primary, not secondary, obligor under LSA-R.S. 7:29, and is liable to the same extent as the maker who received value; therefore, the creditor's lawful judicial seizure and sale of the collateral did not deprive him of subrogation rights in a manner that would discharge his primary obligation. Finally, the bankruptcy discharge of one co-maker does not, under federal law, release another co-maker from their separate obligation to pay the debt.
Analysis:
This case solidifies the principle that an accommodation party who signs as a maker on a negotiable instrument assumes the liability of a primary obligor, not that of a surety or guarantor. The decision demonstrates that such a party cannot avail themselves of defenses typically available to secondary obligors, such as discharge due to modification of the underlying contract or impairment of collateral. This ruling reinforces the creditor's ability to pursue solidary obligors independently and serves as a strong precedent for holding co-makers fully liable despite actions taken solely against the principal debtor or the security.
