Klein v. Runk — 130 A.D. 474

Majority

p. 474

Rudolph Klein, Appellant, v. Aurelia E. Runk, as Administratrix, etc., of Charles E. Runk, Deceased, Respondent.

First Department,

February 11, 1909.

Headnote

Executors and administrators — reference of claim against estate — lia- . bility on decedent’s promise to pay accommodation note;

As there are no pleadings where a claim against an estate is referred under section S718 of the Code of Civil Procedure, the plaintiff is entitled to judgment when the evidence shows the liability of the decedent.

Where an intestate during his lifetime made an express written agreement to “ pay and protect at maturity ” an accommodation note made for his benefit but his administratrix repurchased the note before maturity from the bank at which the intestate had discounted it. and transferred it to a.third person, who collected from the accommodation maker, the estate is liable to the maker, not upon the instrument, but upon the express promise to pay it.

The agreement of the decedent to pay the note was binding upon the representative, and the estate is liable where the representative, in violation of the agreement, put the note into circulation, so that it was collected from the maker.

Appeal by the plaintiff, Rudolph Klein, from so much of a judgment of the Supreme Court in part in favor of the defendant, entered in the office of the clerk of the county of Kew York oh the 28th day of August, 1908, upon the report of a referee, as disallowed a certain claim against the estate of Charles E. Bunk, deceased.

Charles A. Flammer, for the appellant.

Simon Sultan, for the respondent.

. The plaintiff presented to the defendant, as administratrix of Charles E. Bunk, deceased, a claim against the estate that was disputed, whereupon, on the consent of the parties, the claim was referred to a referee, who has reported in favor of the defendant, and from the judgment entered thereon the.plaintiff appeals. In proceedings of this kind where there are no pleadings, when the evidence taken before the referee shows a liability of the decedent to the plaintiff, the plaintiff is entitled to judgment.

It appears that the plaintiff was the keeper of a restaurant which the defendant’s testator was in the habit of frequenting, the plain

p. 475

tiff and the defendant’s testator being on terms of intimacy. On September 26, 1906, at the defendant’s testator’s request, the plaintiff gave to him a promissory note for $900 and received from the defendant’s testator the following instrument:

“Received-from Hr. Rudolph Klein his note for $900, which is an accommodation note and which I hereby agree to pay and protect at maturity.”

The defendant’s testator procured this note to he discounted and when it became due applied to the plaintiff for another note, saying that he would pay $100 on account and asking for anew accommodation note for $800. This the plaintiff gave, and at the same time the defendant’s testator promised to give him another letter in relation to the $800 note, but died within a day or two of making such promise. The new $800 note was discounted by a bank in which the defendant’s testator kept an account and the proceeds were used by the defendant’s testator, he. paying the $900 note. Some time after the death of the defendant’s testator the bank that had discounted the note demanded of defendant a settlement of the accounts between it and the deceased, whereupon the defendant paid to the bank all the money that the deceased owed to it and received from the bank, among other securities that the bank held belonging to the deceased, this $800 note in question. Subsequently the defendant transferred this note to a third party, who presented it at the hank in which the plaintiff had an account and at which it was payable. That bank paid it and charged it-up against the plaintiff’s account, whereupon the plaintiff made a claim for the repayment of the amount of this note.

It is-claimed by the defendant that the payment to the bank that had discounted the note by the defendant as administratrix of the deceased paid the note and thereby the note became a discharged obligation, and that the plaintiff’s remedy is either against the person presenting the note for payment to the plaintiff’s bank or of the plaintiff’s bank for paying a note which had been discharged by payment. The note, when taken up by the- defendant from the bank which had discounted it, was not then due, and it is quite true that that note in the hands of the defendant as administratrix could not be enforced against the plaintiff. It would have

p. 476

been good, however, in the possession of a bona fide holder forvalue without notice, being a negotiable instrument of which, the plaintiff was ¡the maker and indorsed by the payee, the defendant’s testator; during his lifetime and at his death held by a holder for value. When it again came into the hands of the administratrix she received whatever right to enforce the note that the bank had that discounted it, and while as administratrix the note was unenforcible against the' plaintiff, I think that a person purchasing it before maturity for value without notice, would have been .entitled to enforce it. But however that maybe, the defendant’s testator by his express' promise agreed with .the plaintiff that he would pay the note that was then given tp him as an accommodation note and protect it at maturity. Here was a positive obligation by which the plaintiff would be relieved from liability on that note. There can be nó doubt, I think, that a failure of the defendant’s testator to perform that promise and which had imposed upon the plaintiff a liability to pay the note would have entitled the plaintiff to a judgment against the defendant’s testator based, not upon the note or the fact that it was an accommodation note but upon, his express agreement to pay and protect it at maturity. When that note became due it was not paid by the defendant’s testator, but to take its place he procured the note now in suit from the plaintiff, promising to give him a corresponding agreement in relation to the.new note. But for the fact of his death before he had an opportunity to Comply with that agreement I think it may be assumed that the promise would have been complied with. But making the promise, as I look at it, imposed upon the defendant’s testator an obligation to comply with the original agreement in relation to the $900 note and imposed a positive duty upon the defendant’s testator which necessarily bound his personal representatives to pay this note and protect it at maturity. All of this proceeding between the defendant as administratrix and the bank that had discounted the note was immaterial. What the. defendant’s testator had agreed to do Was that when this note matured he would pay. and protect it. When the note was due, instead of the defendant as administratrix paying and protecting it, she put it into circulation so that the holder. presented and collected it and thus the plaintiff has been compelled to pay the note and is damaged in the amount that he

p. 477

has had to pay in consequence of the violation by the defendant’s testator or his administratrix of the agreement under which the note was obtained from the plaintiff.

Entirely irrespective of the provisions of the Negotiable Instruments Law^[1] or the implied obligation of a person who has received from another an accommodation note, it seems to me that under this express agreement a right to recover was disclosed by the evidence for which the plaintiff was entitled to a judgment. The defense to this claim is most unconscionable. The defendant as administratrix having received the note as a part of her testator’s estate certainly cannot be presumed to have given the note away. In violation of the express agreement of her testator, after the note had come into her hands, she so disposed of it that it became a charge against the plaintiff and was collected from his property. Certainly under these circumstances the estate of the testator should be held liable for the injury caused to the plaintiff solely by reason of the violation by the personal representatives of the person who had made the express agreement that he at maturity would pay and protect the note.

I think, therefore, that the decision of the referee was wrong; that the plaintiff was entitled upon the undisputed evidence to judgment; and the judgment should, therefore, be reversed and a new trial ordered before another referee, with costs to the appellant to abide the event.

McLaughlin, Clarke, Houghton and Scott, JJ., concurred.

Judgment reversed, new trial ordered before another referee, costs to appellant to abide event. Settle order on notice.

* See Laws of 1897, chap. 612.--- [Rep.