Ford v. Binghamton Hydraulic Power Co.

The appellant, a domestic corporation, made two promissory notes payable to its order, which were endorsed by the respondent for the accommodation of the appellant. When due they were not paid. After protest and notice to respondent of non-payment and protest he paid and took up the notes and brought an action against the appellant to recover the amount thereof. The defendant demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. No copy of an order of a judge directing that the issues raised by the demurrer should be tried was served with such demurrer. At the expiration of twenty days after the personal service of the summons and complaint herein the respondent entered judgment as in case of default in pleading. The appellant then moved at special term to set aside and vacate such judgment on the ground that the appellant had no authority to enter it until the issues raised by such demurrer were tiled and determined. This motion was denied.

Section 1778 of the Code of Civil Procedure provides: “In an action against a foreign or domestic corporation to recover damages for the non-payment of a promissory note, or other evidence of debt, for the absolute payment of money upon demand or at a particular time * * * unless the defendant serves with a copy of his answer or demurrer a copy of an order of a judge directing that the issues presented by the pleadings be tried, the plaintiff may take judgment, as in case of default in pleading, at the expiration of twenty days after service of a copy of the complaint, either personally with the summons or upon the defendant’s attorney pursuant to a demand therefor.”

The only question presented on this appeal is, whether this was an action to recover damages for the non-payment of a promissory note, or other evidence of debt, for the absolute payment of money within the intent and purpose of this statute. Where an endorser of a promissory note has paid and taken it up he becomes a holder for value, and may maintain an action to' recover the amount of the maker. 2 Daniel on Negotiable Instruments, 219; Kelly v. Burroughs, 102 N. Y., 93 ; 1 N. Y. State Rep., 161.

W e do not think the case of Shorer v. Times Printing & Publishing Co., 24 N. Y. State Rep., 868, in principle like the case at bar. In the Shorer case the action was against a domestic corporation as endorser of a promissory note, and it was held that the contract of endorsement was not an instrument which was of itself evidence of debt; that the endorser’s liability was not absolute but contingent, requiring proof aliunde the instrument of presentation, demand, non-payment, and notice to show that the contingent liability had become absolute, and hence, not within the provisions of § 1778. In the case at bar the contract of the corporation was evidenced by two promissory notes made by it, whereby it became absolutely liable for the payment at a particular time of the amount of money mentioned therein. The liability of the defendant was in no wise a contingent one. It was fixed at the inception of the notes and by the express provisions thereof. No proof aliunde the notes was required to establish the defendant’s liability, nor to show that it was absolute.

We are of the opinion that this action was against a domestic corporation to recover damages for the non-payment of promissory notes, and that the special term properly refused to vacate the judgment entered therein.

Order affirmed, with ten dollars costs and disbursements.

Hardin, P. J., and Merwin, J., concur.