National Hudson River Bank v. Reynolds

This is an action to foreclose a mortgage givei by Lucy A. Reynolds in 1883 to the plaintiff. It was given a: security “for any and all endorsements now made by the saie Lucy A. Reynolds, or that she may hereafter make of note or note: or other paper of * * * ‘R. Reynolds Sons,’ * * * anc which shall be owned or held by the said National Hudson Rive: Bank.” * * * And “ to be a lien and security to said amoun for the payment of any and all notes, drafts or engagements, en dorsed by said Lucy A. Reynolds, now held by said bank o: which may hereafter be held and owned by said bank.” R. Reynolds’ Sons made a note for $5,000, to the order of Luc] A. Reynolds, dated November 25, 1887, payable in three month: at the National Hudson River Bank. This note had the following endorsement: “I hereby pledge my separate estate, both rea and personal, for the payment of this note. Lucy A. Reynolds.’ This was the last in a series of renewals of a note for the sami amount held by plaintiff at the time of the execution of tin mortgage, similar in form and endorsement to that above described

On the morning of February 18, 1888, the date on which said note became payable, there was sent to plaintiff a similar note of that date, of the same amount with like signature and endorsement. There was also sent with the same about $48 in money and a letter from E. Eeynolds’ Sons, in substance stating that the note and checks were to take up the old note due that day.

The cashier of the plaintiff held said note subject to the action of the board of directors at their next meeting, which would regularly have been in a week. The next meeting at which there was a quorum was April 7; and at that meeting the board decided not to accept the renewal note. Ho notice of non-payment of the note which came due February 28 was given to Lucy A. Eeynolds.

It had been the custom between plaintiff and E. Eeynolds’ Sons for plaintiff to accept renewal notes which would be discounted by the cashier on the day of their receipt and the amount credited to E. Eeynolds’ Sons. The maturing note would be paid by a check of E. Eeynolds’ Sons, and the note thus paid would be stamped “ paid ” by the bank and given up.

The principal question is, whether under the circumstances there was a waiver by Lucy A. Eeynolds of notice of non-payment and whether she became liable on the note due February 28th.

The note being payable at plaintiff’s counter and being held by plaintiff at maturity was duly presented for payment. But it was not paid and notice of non-payment was not given to the endorser. There is no doubt that an endorser may waive such notice and may do this without consideration. It is evident that the defendant endorsed the note of February 28th for the purpose of renewing the note due that day. She therefore must have known that the maker would not pay the old note at its maturity. For she provided him with the means of renewing it; and, if paid, it would of course not need to be renewed. As in the case of Sheldon v. Horton, 43 N. Y., 93 , where the plaintiff told the endorser that the maker wanted the note to remain another year, and the endorser said he was willing, so here. The endorser’s willingness that the debt should be extended, or renewed, removed the necessity of notifying the endorser of non-payment. The object of such notice is that the endorser may protect himself from loss. But when he consents to a renewal he evidently knows that the maker will not pay, and can protect himself if he so desires.

It is said by the defendant that the bank refused to accept the proposed renewal and did not notify her of the refusal It is not the actual extension or renewal which is relied on as a waiver, but the endorser’s knowledge that the note would not be paid, and the communication of such knowledge to the bank. In the case last mentioned it did not appear that there was a valid agreement on any consideration between the maker and the holder that the note should be extended; and the case states that it did not appear whether any time had been given the maker. The waiver, therefore, did not rest on a valid extension but on the act of the en

We must take the act of defendant in regard to the note in ■question in connection with similar acts in regard to former renewals of the same liability; and in connection with the mortgage now in suit. And as said in Cady v. Bradshaw, 116 N. Y., 188 ; 26 N. Y. State Rep., 518: “It (the waiver) may result from implication and usage or from any understanding between the parties which is of a character to satisfy the mind that a waiver is intended.” That case was one where the endorser, when an •extension was proposed, said he would let his name remain on the note. See also Leary v. Miller, 61 N. Y., 490 .

It may not be safe to assert that Lucy A. Reynolds had any •distinct intention of expressing a waiver of the right to have notice of non-payment. But it may well be said that the bank could understand from her act that she knew that the note was not to be paid; and therefore that the bank needed not to give her notice of what she knew.

But there is a further view. There are several clauses in the mortgage stating its object. One is as follows: “ This mortgage is given and is to remain a good and continuing security to the said National Hudson River Bank to the amount of $5,000 and to be a, lien and security to said amount for the payment of any and all notes, drafts or engagements endorsed by said Lucy A. Reynolds now held by the said bank or which may hereafter be held or owned by said bank.” Here is a clause making this mortgage security for the payment of any notes endorsed by defendant. The mortgage is not simply to secure her liability as endorser ; but it is to secure the payment of any notes endorsed by her. And the language includes not only notes and drafts but “ engagements.” Now the word “ engagements ” is not descriptive of ■commercial paper, to which alone the peculiar liability of endorsers applies. It is a word which might describe any contract And if a contract, other than negotiable paper, were held by the bank and Lucy A. Reynolds had “endorsed ” it, the parties to this mortgage could not have expected that such a contract would be protested.

We must therefore take the words “ endorsed by the said Lucy A. Reynolds ” as merely descriptive of the “ notes, drafts or engagements ” the payment of which was secured by the mortgage; and not as limiting the lien of the mortgage to that commercial paper on which she should be legally charged as endorser. There is another clause which speaks of security for endorsements; but that does not limit the- clause above cited. If the mortgage had expressed that it was to secure the payment of the $5,000 note made by R. Reynolds Sons and then held by the bank, it would not have been necessary under the mortgage to give notice of the non-payment; even if Lucy A. Reynolds had been an endorser thereon. So now, the bank has a note endorsed by Lucy A. Reynolds. This mortgage is security for the payment' of that note. Its endorsement .simply identifies it as one of the notes which the mortgage secures.

The defendant urges that the plaintiff in that action should have amended his complaint; that as he did not amend he might have there tried the question of the liability of Lucy A. Reynolds, and is therefore bound by the decision and cannot now assert her liability.

In the view last taken of this case that judgment is immaterial. Nor do we think that prior decision is an adjudication on the personal liability of Lucy A. Reynolds. The waiver of the plaintiff, set forth in the judge’s decision, was equivalent in effect to an amendment of the complaint The defendant’s counsel quotes a sentence from Pray v. Hegeman, 98 N. Y., 358 . But the following sentence explains the rule: “Whatever is necessarily implied in the" former decision is for the purpose of the estoppel deemed to have been actually decided.” Neither Lucy A. Reynolds’ personal liability nor her non-liability was necessarily implied in the former decision. It was not comprehended or involved therein. The foreclosure could, and did, proceed without any decision on that point. The former decision is no bar here.

Whether or not then the court below in this case found that the alleged claim for deficiency in the former action was based on the note in question is of no consequence.

Judgment affirmed, with costs.

Landon, J., concurs.