Majority
p. 529(65 App. Div. 257.) BANK OF METROPOLIS v. JARVIS et al. (Supreme Court, Appellate Division, First Department. November 8, 1901.) The following is the opinion of HAMILTON ODELL, Referee: This is a controversy between the plaintiff and the defendant George T. Jarvis, as receiver, over a fund of $15,000, the proceeds of $100,000 of second mortgage bonds of the Peoria, Decatur & Evansville Railroad Company. Both parties claim through or under the defendant David J. Mackey, the former owner of the bonds. The facts on which the plaintiff’s claim is founded are as follows: On November 11, 1893, the said Mackey was indebted to the plaintiff as maker of two promissory notes,—one for the sum
Headnote
Extension op Note—Assignment op Collateral—Consideration.A maker of a note applied to the bank for an extension, which it agreed to grant if he would furnish additional collaterals. The maker offered as security railroad bonds held as collateral by another bank, but subject to an attachment and to an injunction in supplementary proceedings. The maker inclosed an order on the bank having the collateral, to hold for the bank, which was the owner of his note, his equity in such collaterals, stating that the attachment and injunction order had been taken care of, and that the bank holding the note should have whatever equity he had over and above the attachment, without any obligation to extend the notes, but, if the attachment was removed within a week, then the notes to be extended as asked. Thereafter the maker assigned to third parties such collaterals, and informed the holder of the note that there was no indebtedness against the collaterals, whereupon the note was extended. The injunction was vacated, and the attachment dissolved. Held, that the bank owning the note was a holder for value of the maker’s interest in the collaterals, though it could have brought suit on the overdue notes at any time between the date of the letter inclosing the order to the bank having the collaterals to hold the equity for the bank holding the note and the date when the attachment was withdrawn.
Appeal from judgment on report of referee.
Action by the Bank of the Metropolis against George T. Jarvis, receiver of the Louisville, Evansville & St. Louis Consolidated Railroad Company, and others. Judgment for plaintiff, and defendant Jarvis appeals.
Affirmed.
p. 530The defendant Jarvis insists that the plaintiff has failed to show any right in or title to the fund; that there was no legal assignment to the plaintiff by Mackey of his interest in the bonds; that there was no agreement on the part of the plaintiff to extend the notes; and that the proposed transfer of the bonds to the plaintiff as additional security came to nothing, because the plaintiff was not to be bound to grant the extension asked for unless the attachment of the. security and trust company was vacated during-the following week, and the attachment was not gotten rid of for a long time thereafter. It seems to me that the facts of the case justify a contrary conclusion. They may be summarized as follows: The notes were overdue. Mackey applied for time. The plaintiff agreed to grant it if furnished with additional
of $35,000, dated June 12, 1893, and payable four months thereafter; and the other for the sum of $5,000, dated August 9, 1893, and payable four months thereafter,—and also as indorser of a third note for $25,000, made by the Peoria, Decatur & Evansville Bailroad Company, dated July 26, 1893, and payable two months thereafter. All of the notes were partially secured by collaterals. The two notes for $25,000 and $35,000, respectively, were overdue. Mackey was unable to take them up, and applied to the plaintiff for an extension of time. The plaintiff’s president testifies: “Mr. Mackey asked for an extension, and we told him we must have more collateral,—more margin. * * * He applied to have the notes renewed, and we told hint we would do it,—that is, if he would give us additional collateral,—which he agreed to do in this $100,000 of Peoria, Decatur & Evansville Bailroad.” At this time the bonds were in the possession of the National City Bank, which held them as security for a loan theretofore made to Mackey. They were also subject to an attachment which had been issued in an action against Mackey, brought by the New York Security & Trust Company, and on the 2d of November the City Bank, as a party having property of a judgment debtor, had been served with an order, containing the usual injunction, in proceedings supplementary to execution upon a judgment recovered against Mackey by the Seaboard National Bank. Following the arrangement for an extension above referred to, and on said 11th of November, Mackey wrote the plaintiff a letter, in which, after referring to his indebtedness to the plaintiff on the said three notes for $35,000, $5,000, and $25,000, respectively, he said: “I would say to you that, conditioned on your extending the payment of all such notes until the 11th day of January, 1894, I have written a letter, which I herewith inclose, to the City Nat’l Bank, No. 52 Wall St., authorizing them to hold for you the equity that I have in certain collateral deposited with them. * * * There is an existing attachment on the collateral with , the City National Bank, but that attachment is to be removed within the next week. I authorize you to deliver to the City National Bank the letter that I herewith inclose, immediately, and with the understanding that you shall have whatever equity there remains there to me over and above the attachment, without any obligation on your part to extend the notes; but, if the attachment herein referred to is removed within the next week, them it is understood that the notes are extended as herein provided.” In a postscript the writer said: “There are two liens filed under the City National Bank collaterals of mine,—the New York Security & Trust Co. and tho Seaboard National Bank. Both have been taken care of, and the attachments are to be removed next week.” In the letter to the City Bank Mackey directed the bank to hold the bonds (subject to its lien) “for any existing indebtedness of myself, either as maker of promissory notes or indorser of promissory notes held by the Bank of the Metropolis, of the city of New York, and this will be your authority for so doing.” On November 13th the City Bank wrote the plaintiff, acknowledging the receipt of Mackey’s letter of the 11th, and saying: “We will do whatever .we can to protect your interests in the matter referred to therein.” A few days later Mackey assigned to E. P. Huston and W. J. Lewis, of Evansville, Ind. (through whom the defendant Jarvis claims), the said railroad bonds and other collateral held by the City Bank. It is admitted that the injunction order contained in the order in supplementary proceedings in the case of the Seaboard Bank was vacated on December 21, 1893, and that the attachment in the case of the New York Security & Trust Company was withdrawn on December 26th.
p. 531The learned counsel for the receiver argues that at any time between the 11th of November (the date of Mackey’s letter to the plaintiff) and the 26tli. of December (the day when the attachment was withdrawn) the plaintiff' could have brought suit upon the overdue notes, and that such suit could not have been defended by Mackey on the ground that payment of the notes-had been extended. That may be so, but it does not prove that thé plaintiff was not a holder or transferee for value of Mackey’s interest in the bonds. If the plaintiff had discovered that Mackey’s- promise to remove the attachment had not been kept, and that his subsequent assurance that “it was all' cleaned up” was not true, it might have taken immediate steps to enforce payment of the notes, and there could have been no defense, because Mackey’s right to demand an extension under his arrangement with the plaintiff depended upon the attachment being removed in accordance- with his stipulation. But, in my judgment, the plaintiff might safely rely, as it undoubtedly did rely, upon the representations of Mackey,—First, that the attachment-had “been taken care of,” and would be removed; and, second, that “it. was all cleaned up.” As between the plaintiff and Mackey, the plaintiff was not bound to make inquiry, or otherwise test the truth of what he said.. It believed his statements, and, so believing, gave him the indulgence he requested. Mackey therefore received from the plaintiff the very consideration, for which he made the transfer of his interest in the bonds. In Insurance Co. v. Smith, 23 Hun, 535 , the court cited with approval the-early case of Mapes v. Sidney, Cro. Jac. 683, where the defendant was held liable upon his promise to pay a debt in consideration that the plaintiff would forbear to sue one F. S. upon it, and it appeared that the forbearance had in fact been secured. Judge Daniels said: “No time was there agreed upon, but still it was held that the plaintiff was entitled to recover, as the object the party had in view in making the promise was actually obtained." That is the case here. On the faith of the security he offered and the representations he made concerning it, Mackey obtained the extension he applied" for, and neither he nor his subsequent transferees should now be permitted to assail the plaintiff’s title to such security on the ground that such representations were not true. As this conclusion disposes of the only question at issue in the case, it is not necessary to consider other points discussed by counsel. Argued before VAN BRUNT, P. J„ and HATCH, McLAUCHAIN, O’BRIEN, and INGRAHAM, JJ.
security. This Mackey agreed to give. He offered as such security the 10G> Peoria & Decatur bonds then, held as collateral by the City Bank. It was satisfactory to the plaintiff. Mackey directed the City Bank to hold the bonds, subject to its prior claim, for the plaintiff’s benefit; that is, for Ms indebtedness to the plaintiff as maker or indorser, which the City Bank in substance agreed to do. At the same time he notified the plaintiff that the bonds were then subject also to the lien of an attachment which would be removed during the next week, and in his letter of notification said that, if the attachment “is removed within the next week, then it is understood that the notes are extended as herein provided.” Thereafter, “within one week or-two weeks,” he informed the plaintiff “that it was all cleaned up; there was no indebtedness against it”; and the plaintiff gave him the extension.
There should be judgment for the plaintiff.
John A. Carver, for appellant.
William V. Rowe, for respondent.
Judgment affirmed, with costs, on opinion c£ referee.