Queen City Bank v. Brown — 82 N.Y. Sup. Ct. 259

Majority

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Queen City Bank, Appellant, v. M. Filmore Brown and Another, Respondents.

Headnote

Recoupment by a principal inures to the surety — -an error prejudicial to the respondent, disregarded on appeal.

When a principal and surety are sued together, a successful recoupment hy the principal inures to the benefit of the surety even though the surety, if sued alone, could not have availed himself of the defense.

In an action on a note, the maker answered, setting up a counterclaim, and offered to allow judgment to be taken against him for the amount demanded in the complaint, less the counterclaim. The offer was accepted and judgment against him was entered in accordance therewith. The indorser did not answer, and judgment was entered against her for the amount demanded in the complaint.

3eld, that the indorser was entitled to an order modifying the judgment against her by reducing the amount thereof to the amount of the judgment against the maker of the note.

Although an order contains an erroneous provision, prejudicial to the respondents, yet if the order is otherwise proper, it will be affirmed on appeal.

Appeal by the plaintiff, the Queen City Bank, from an order of the Supreme Court, made at the Erie County Special Term and entered in the office of the clerk of the county of Erie on the 3d day of March, 1893, directing that a judgment in favor of the plain

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tiff against tbe defendants be satisfied upon tbe payment of tbe sum of $286.50.

Lora/n L. Lewis, Jr., for tbe appellant.

LIugh, O. Sells, for tbe respondents.

Tbis action was brought to recover tbe amount due on a promissory note made by tbe defendant M. Fillmore Brown, indorsed by tbe defendant Libbie T. Brown, and discounted by tbe plaintiff. Tbe defendant Libbie T. Brown did not appear or answer. Tbe defendant M. Fillmore Brown answered, setting up a counterclaim in which be alleged 'that tbe plaintiff, in discounting this and other notes, bad unlawfully and wrongfully compelled him to pay for tbe use of tbe money a greater sum than tbe rate of interest allowed by law, and that by reason thereof tbe plaintiff bad become indebted to him in tbe sum of forty-five dollars and forty-six cents, which amount be desired to counterclaim upon tbe amount due upon tbe note, and thereupon be offered to allow tbe plaintiff to take judgment against him for tbe balance due upon tbe note. Tbis offer was accepted by tbe plaintiff and judgment entered against tbe defendant M. Fillmore Brown for tbe sum of $286.50, and against defendant Libbie T. Brown for tbe sum of $329.80.

Thereupon a motion was made to correct tbe judgment by reducing tbe recovery against Libbie T. Brown to tbe amount of tbe recovery against .M. Fillmore Brown. Tbe Special Term ordered that tbe defendants, upon payment of tbe amount of tbe judgment entered against M. Fillmore Brown, with tbe interest thereon to tbe plaintiff or its attorney, within ten days from tbe service of tbe order, shall receive satisfaction and discharge of tbe judgment; but if not so paid tbe motion was denied, with ten dollars costs to tbe plaintiff. From tbis order tbe plaintiff appealed.

We do not understand that tbe relief asked for under tbe motion was discretionary with tbe Special Term, and it, therefore, bad no right to impose tbe condition embraced in tbe order, but tbe defendants have not appealed. Therefore, the order may be permitted to stand if they were entitled to tbe modification of "the judgment asked for. It appears that tbe defendant Libbie T. Brown was tbe

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indorser, and as snob became surety for tbe defendant M. Eillmore Brown, who was the maker of the note and primarily liable for its payment. If she is compelled to pay the amount of the note she has a right to recover the amount so paid from the principal. But her principal has agreed with the plaintiff that the amount of his claim for unlawful interest, collected from him by the plaintiff, should be deducted from the amount of the note, and that judgment taken against him should be only for the balance due. If she is, therefore, compelled to pay the full amount of the note, and he to reimburse her for the amount so paid, he is thus deprived of the benefit of his agreement, and of his right of action against the plaintiff. We do not understand that this can be done. It is quite possible that his counterclaim, as pleaded, could not have been allowed in that action, for the reason that his claim was in the nature of a penalty. But the plaintiff, by allowing it and, accepting his offer, in effect credited that amount upon its claim upon the note, thereby reducing it to the amount for which judgment was entered against him. We understand the rule to be that when the principal and surety are sued together a successful recoupment by the principal inures to the benefit of the surety, even though the surety could not, if sued alone, avail himself or herself of the defense. (Springer v. Dwyer, 50 N. Y. 19 -22; Gillespie v. Torrance, 25 id. 306.)

It follows that the defendants were entitled to the relief asked for in their motion, and that, therefore, the order should be affirmed, with ten dollars costs and disbursements.

Dwight, P. J., and Lewis, J., concurred.

Order appealed from affirmed, with ten dollars costs and disbursements.

Cases cited

Springer v. Dwyer 50 N. Y. 19 N.Y. 1872-06-20 p. 261