Thompson v. Hazard — 6 N.Y. St. Rep. 311

Majority

p. 311

John A. Thompson, Resp’t, v. Rowland H. Hazard and. Stephen F. Moriarty, App’lts.

(Supreme Court, General Term, Third Department,

Filed January 24, 1887.)

Headnote

Bond—Construction of language—Action on bond.

The owner of bonds which were in the hands of the assignee of a bankrupt company by written contract agreed to sell them to another, who assigned the contract to the defendants. The owner subsequently assigned his interest in the contract to the plaintiff. While the bonds were in the hands of the assignee the owner was sued by one who attempted to levy upon the sum to be paid by the defendants for the purchase of the bonds. The United States district court, in which the bankruptcy proceedings were pending, made an order that the bonds in question be delivered to the defendants upon their executin': and delivering to the plaintiff a bond ■conditioned that the defendants should pay or cause to be paid to the plaintiff herein a certain sum upon the discontinuance of the above mentioned attachment, or its dissolution, or its being held invalid, or that they should pay or cause to be paid so much of the sum as should not be held by the attachment. Held, that the plaintiff must show covenant broken ■at the time of the commencement of an action on the bond, that the covenant was not to pay if the attachment were in fact invalid but if it were held so, and that the plain meaning of the bond was that the holding to that effect should be in the action in which it was issued in order to create an obligation on the part of the defendants.

Appeal from a judgment in favor of plaintiff entered upon the report of a referee..

The action was brought to recover upon a bond executed by the defendants to the plaintiff.

From the evidence, it appeared that in August, 1882, one Mathias 0. Eaton was the owner of a parcel of bonds known as the “Mexican Woodhouse bonds.” These bonds seem to have been in the custody of the Manhattan Engraving Company, a bankrupt, at the time its assets passed into the

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hands of its assignee in bankruptcy, and these bonds thus came to the assignee’s hands.

In August, 1882, Eaton, by a written contract, agreed to sell the bonds to one Brie, and this contract was subsequently assigned to the defendants. Eaton assigned his interest in the same contract to the plaintiff.

The plaintiff was willing that the defendants should have the bonds, the defendants were willing to take and pay for them, but the bonds were in the custody of the assignee in bankruptcy of the engraving company. Meanwhile, one Smith sued Eaton, and obtained an attachment, which he attempted to levy upon $6,000 of the sum to be paid by the defendants for the purchase of the bonds.

Matters being in this situation, the United States district court made an order that the Mexican Woodhouse bonds in question be delivered to the defendants, upon the defendants, among other things, executing and delivering to the plaintiff the bond upon which the present action is brought. The bond, after reciting the history of the transactions, the order of the court and the delivery to, the defendants of the bonds, contains this condition :

“Now, the condition of this obligation is such, that if the above bounden obligors * * * shall well and truly pay or cause to be paid to the above named John A. Thompson * * * the sum of $6,000, and interest from the date hereof, upon the discontinuance of the above mentioned attachment, or the dissolution of said warrant of attachment, or if said attachment be held invalid to hold said sum, or if they shall pay so much of said sum of $6,000 and interest, as shall not be held by and under the said warrant of attachment in said action in the supreme court of the state of New York, then,” etc.

The plaintiff did not prove that any adjudication or order had been made in the action of Smith v. Eaton, vacating, or in any way determining whether the attachment was a hen upon the price of the Mexican Woodhouse bonds, to be paid by the defendants. The defendants moved for a non-suit upon the ground that no cause of action had been proven. They also asked the referee to hold that the attachment was a bar to this action. The referee refused and held that no part of the unpaid price of the Mexican bonds had been attached, and that the attachment is invalid to hold and does not hold the sum of $6,000 or any part of the unpaid price of the Mexican bonds, and hence the attachment is no obstacle to plaintiff’s recovery.

William H. Newman, for app’lts; Thornton A. Niver, for resp’ts.

The covenant of the bond executed by the

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defendants was that they -should pay the plaintiff the $6,000; if said attachment shall be held invalid to hold said sum of $6,000. The referee held in this action, without any evidence that it had been so held in the action of Smith v. Eaton that the attachment was invalid to hold said sum, and, therefore, held that the plaintiff was entitled to recover.

The covenant was not to pay if the attachment was in fact invalid, etc., but if it should be held invalid. The plaintiff must show covenant broken at the time of the commencement of the action, and it had not then been so held. Besides the plain meaning of the covenant was to pay if the attachment should be held invalid, etc., in the action in which the attachment was issued. The bond recited that the attachment was issued in the action of Smith v. Eaton in the state court. Whether the attachment was valid or not, or operated as a lien upon any part of purchase price of the Mexican bonds, or could in any way prejudice the defendants, was a question which the defendants suggested in the proceeding in the XT. S. district court. That court could not decide the question, as the attachment had been issued in another action in the state court; but the district court it seems had the control of the custody of the Mexican bonds in the hands of its officer, the assignee in bankruptcy of the Engraving company. The District court thought it right to cause the Mexican bonds to be delivered to the defendants who held the contract or option for their purchase. The defendants were willing upon obtaining these bonds to pay for them, but since some attempt had been made by Smith in his suit against Eation to attach $6,000 of the price to be paid by the defendants, the defendants desired to be protected in their payment from liability to pay both the plaintiff and the attachment creditor of Eaton, plaintiff’s assignor. Hence, the bond in suit. The defendants entered into no engagement to pay if they could not sustain the attachment much less if they could not sustain it in a suit between themselves and this plaintiff. The plaintiff are mere stake holders, to abide the fate of the attachment in the suit of Smith v. Eaton. If it shall be held in that suit that the attachment is valid, the defendants must pay there. This judgment would be no defense to them, and paying here will be no escape from paying there.

The motion for a non-suit presented the whole question, and it should have been granted.

Judgment reversed, reference discharged, new trial . granted, costs to abide the event.

Learned, P. J., and Bocees, J., concur.