400.3-605. Discharge of endorsers and accommodation parties. - Missouri Statutes

Discharge of endorsers and accommodation parties.

400.3-605. (a) In this section, the term "endorser"includes a drawer having the obligation described in Section400.3-414(d).

(b) Discharge, under Section 400.3-604, of the obligationof a party to pay an instrument does not discharge the obligationof an endorser or accommodation party having a right of recourseagainst the discharged party.

(c) If a person entitled to enforce an instrument agrees,with or without consideration, to an extension of the due date ofthe obligation of a party to pay the instrument, the extensiondischarges an endorser or accommodation party having a right ofrecourse against the party whose obligation is extended to theextent the endorser or accommodation party proves that theextension caused loss to the endorser or accommodation party withrespect to the right of recourse.

(d) If a person entitled to enforce an instrument agrees,with or without consideration, to a material modification of theobligation of a party other than an extension of the due date,the modification discharges the obligation of an endorser oraccommodation party having a right of recourse against the personwhose obligation is modified to the extent the modificationcauses loss to the endorser or accommodation party with respectto the right of recourse. The loss suffered by the endorser oraccommodation party as a result of the modification is equal tothe amount of the right of recourse unless the person enforcingthe instrument proves that no loss was caused by the modificationor that the loss caused by the modification was an amount lessthan the amount of the right of recourse.

(e) If the obligation of a party to pay an instrument issecured by an interest in collateral and a person entitled toenforce the instrument impairs the value of the interest incollateral, the obligation of an endorser or accommodation partyhaving a right of recourse against the obligor is discharged tothe extent of the impairment. The value of an interest incollateral is impaired to the extent (i) the value of theinterest is reduced to an amount less than the amount of theright of recourse of the party asserting discharge, or (ii) thereduction in value of the interest causes an increase in theamount by which the amount of the right of recourse exceeds thevalue of the interest. The burden of proving impairment is onthe party asserting discharge.

(f) If the obligation of a party is secured by an interestin collateral not provided by an accommodation party and a personentitled to enforce the instrument impairs the value of theinterest in collateral, the obligation of any party who isjointly and severally liable with respect to the securedobligation is discharged to the extent the impairment causes theparty asserting discharge to pay more than that party would havebeen obliged to pay, taking into account rights of contribution,if impairment had not occurred. If the party asserting dischargeis an accommodation party not entitled to discharge undersubsection (e), the party is deemed to have a right tocontribution based on joint and several liability rather than aright to reimbursement. The burden of proving impairment is onthe party asserting discharge.

(g) Under subsection (e) or (f), impairing value of aninterest in collateral includes (i) failure to obtain or maintainperfection or recordation of the interest in collateral, (ii)release of collateral without substitution of collateral of equalvalue, (iii) failure to perform a duty to preserve the value ofcollateral owed, under Article 9 or other law, to a debtor orsurety or other person secondarily liable, or (iv) failure tocomply with applicable law in disposing of collateral.

(h) An accommodation party is not discharged undersubsection (c), (d), or (e) unless the person entitled to enforcethe instrument knows of the accommodation or has notice underSection 400.3-419(c) that the instrument was signed foraccommodation.

(i) A party is not discharged under this section if (i) theparty asserting discharge consents to the event or conduct thatis the basis of the discharge, or (ii) the instrument or aseparate agreement of the party provides for waiver of dischargeunder this section either specifically or by general languageindicating that parties waive defenses based on suretyship orimpairment of collateral.

(L. 1992 S.B. 448)

*No continuity with § 400.3-605 as repealed by L. 1992 S.B. 448.