Nassau Bank v. Campbell

This action was brought to recover upon two promissory notes drawn on demand with interest, it appearing upon their face that there had been deposited as collateral security to the notes nine Fifth avenue Plaza bonds for $1,000 each with accrued interest on the same from October 1,1884. Each of the; notes bore date April 12, 1886, and was made by Phyfe & Campbell and endorsed by William Campbell, the testator of the defendants. All the bonds of the character stated in these notes to have been pledged as collateral were secured by a mortgage upon certain property in the city of New York.

On the 14th of April, 1886, after William Campbell had endorsed the notes in question, the mortgage in question was surrendered with the consent of the holders of the bonds so- as to leave the security of the bonds subservient to other loans upon the property mortgaged, which they were not before such cancellation. And this was done without the knowledge of the endorser William Campbell.

We think this proceeding discharged the indorser. The notes upon their face showed that certain securities were pledged as collateral, and the endorser had a right to assume that these securities would follow the notes in the same condition in which they were at the time he made the endorsement; and any trafficking with these securities by which their valpe was impaired necessarily operated as a release of the endorser.

It is clear that if any person had purchased these notes unaccompanied by the bonds, the endorser would not be held, because upon payment he is entitled to be subrogated to the securities there stated to have been pledged for their payment; so, if these securities are impaired in value by the action of the holder after endorsement of the notes, the same rule must necessarily apply. The endorser was endorsing a note secured in a certain way. His-

Some point was made in reference to the protest of the notes in question that the bonds not having been tendered at the time of the -demand, the endorser was discharged. But the difficulty with this position is that no such point was made during the. trial, nor is any such point raised by the pleadings. The ground of the motion to dismiss based upon the question of the collateral securities was stated to bé that as the plaintiff had neither tendered the return of the securities, nor made any accounting for the same he ' ■could not recover, which, distinctly, did not refer to the time of making the protest, but up to the time of trial; and no attention was drawn to the question as to what was done at the time of the protest. The plaintiff was not bound to either tender the securities or account for the same upon this trial. If the endorser desired the securities he could pay the notes. If anything had been realized upon the securities that was.a matter of defense.

Upon the whole case we are of opinion that the judgment should be reversed and a new trial ordered, with costs to appellant to abide event.

Lawrence,.J., concurs.

O’Brien, J. The bank held fifteen bonds of the Fifth Avenue Plaza Company as collateral security for the loan of $7,500 to Wyckoff. By agreement between Wyckoff and the bank the bank gave up two of the bonds to Wyckoff, and also permitted -the remaining thirteen to be postponed to a new' mortgage, to be given to the Rew York Life Insurance Company.

Both of these considerations as between Wyckoff and the bank were good and valuable, and if nothing else appeared -would have been a sufficient consideration for Campbell’s endorsement.

There is no doubt that the postponement of the payment of the thirteen bonds to the new mortgage -impaired the value of them, and by giving up the two bonds to Wyckoff, the bank lessened its - security which it held for the payment of Wyclcoff’s note. To what extent the endorser was injured would under such circumstances be a question of fact.

The evidence, however, tended to show that this arrangement between .Wyckoff and the bank was made prior to April 12, 1886, and that the consideration for.the postponement ot the payment of the bonds to the new mortgage and the giving up of the two bonds to Wyckoff by the bank was under the agreement to deliver the note endorsed by the defendant Campbell. It will further appear from the testimony that the day fixed for stamping the bonds with the statement that they were postponed to the lien of the new mortgage and the giving of the notes sued upon with

The closing of the transaction was, however, postponed until the fourteenth, when Wyckoff went to the bank, obtained the fifteen bonds and had them all stamped as postponed to the new mortgage. The bank, as stated, gave up to him two of the bonds, retaining thirteen, of which thirteen nine are the bonds mentioned in the notes.

Two questions upon this evidence it seems to me were presented.

First. As to whether the surrender by the bank of the security it then had; in consideration of the receipt of the notes endorsed, were not part and parcel of one transaction ?

Secondly. That even if this should not be so, whether or not any injury, and if so how much, resulted from postponing the payment ■of the nine bonds held as collateral to the new mortgage ?

In connection with these questions it must be remembered that the notes themselves only specified nine bonds, whereas, in point of fact, the bank received and held thirteen. Moreover it must be noticed that the bonds, after being stamped, answered the description of the collaterals mentioned in the notes, and thus another inference arises in favor of the view that the endorsement of William Campbell was obtained by Phyfe & Campbell upon the notes for the purpose of carrying out the very agreement made by Wyckoff with the bank. It is true there is no evidence showing that when Campbell endorsed the notes that knowledge was brought home to him as to the exact use to which they were finally put, or any knowledge that the collateral bonds were to be postponed to the lien of the new mortgage.

There is some evidence to support the conclusion that Phyfe & •Campbell, who took part in having the bonds stamped, obtained the endorsement for their accommodation and to carry out the agreement which they had made with Wyckoff for the payment of their debt to him. If therefore we assume the adjustment between Wyckoff and the bank to have taken place on the 12th, •and that in consideration of the surrender of the two bonds and the stamping of the remaining bonds as postponed to the lien of the new mortgage Wyckoff delivered the notes endorsed, and if it be conceded that the bank refused to carry out the arrangement until it received the notes so endorsed, a recovery upon these facts could have been had as against the endorser, for the reason that this would have presented a case where one endorses for the ■accommodation of another, and notes so endorsed áre used for the very purpose for which they were endorsed. The delay from the 12th to the 14th in closing would not change the rights of the parties.

The learned judge upon the trial however directed a verdict in favor of the plaintiff. This, I think, was error, for the reason that there were certain questions of fact presented upon the evidence which should have been presented to the jury. I concur, therefore, in the result reached by the presiding justice, that the judgment must be reversed and a new trial ordered.