182 A.D. 252 | N.Y. App. Div. | 1918
The plaintiff recovered a judgment for $1,139.70. Both parties are dissatisfied and these are cross-appeals.
The plaintiff in the present action is an Alabama bank. There are two other actions by two other Alabama banks against the same defendants. The pleadings are identical, and each action is brought on two notes of $2,500 each, aggregating $15,000. These notes were secured by the same collateral, deposited under a collateral agreement, and held for the benefit of this plaintiff and the other banks. The disposition of the other cases depends upon the result of the appeals in this case. The defendant Jennings was not served.
The complaint sets forth four causes of action. The first and third are to recover from the defendants as makers and indorsers of the promissory note for $2,500. The second
In detail, the facts are somewhat as follows: The defendants Jones and Stallo were directors of the Manhattan Securities Company, which later was placed in the hands of a receiver. -■ This company being in need of money, the defendants borrowed money on their own paper, secured by collateral which the company held in its treasury. These notes matured and were renewed several times. The last time the notes were renewed, the interest was not paid on the old notes, and a note was given for the interest. At the last renewal the defendants made six identical promissory notes. The present actions are brought on these notes. The notes were negotiated with banks in Alabama, one of them being the plaintiff. Each note was for $2,500 and was dated November 22, 1910, payable March 22, 1911. Each note was dated and made payable at Montgomery, Ala., where the rate of interest is eight per cent. By the terms of the note the makers agreed to pay a reasonable attorney’s fee and all costs of collection if the note was unpaid at maturity, and the said note is made, by its terms, with reference to the Constitution and laws of Alabama. A collateral agreement accompanied these notes, by the terms of which agreement defendants deposited as
The collateral agreement is signed by the defendants, and in it the notes of Bagg, Stratton and the Manhattan Securities Company are pledged as collateral security for the notes in suit. This agreement has a caption as follows: “ The State of Alabama, Montgomery County, ss.” By its terms, the notes are deposited with the plaintiff, as trustee, to secure all of the six notes which are the subject of the three actions involved here. By its terms, also, they are deposited to secure any other 1 ability of the defendants to the owner of the note, with fullest powers to sell, at public or private sale, without advertising or notice, with authority for the owner or holders of the notes to “ purchase * * * said securities discharged from any right of redemption or liability of conversion.”
Two of the notes in question were held by the Bank of Luverne, Ala., two by the Butler County Bank, Alabama, and the other two by the plaintiff. On March 22, 1911, the notes in suit became due and were not paid. They were protested and notice of protest was sent to the defendants, and no payment was made on account of these notes. However, the plaintiff did receive some money from defendant Jones. It appears that Jones obtained the discount of a $2,500 note and paid over the proceeds, $2,350, to the plaintiff. One thousand one hundred and twenty-one dollars and sixteen cents of this amount was used to pay off the note which had . been given for interest, and the balance was divided among the three banks which held the other notes as payments on account of the principal notes. The notes became due on March 22, 1911. Nothing further was paid on account of the notes, and on July 15, 1912, they were sold at public auction in the court square of the city of Montgomery, Ala. Notice of the time and place of sale was published in the Montgomery
On October 14, 1912, Bagg paid something more than $8,500 of his notes, and the indorser on the $2,000 Manhattan Securities Company note paid $500 on account of that note and the balance about nine months later. The indorser on the $3,000 Manhattan Securities Company note paid, •between October 26, 1912, down to the date of the trial, April 29, 1915, $1,111 on account of the principal and interest .on that note. In this action the defendants claim that they are entitled to have credited to them on their notes the amount of these payments on the collateral notes, on the ground that the sale of the collateral was not a bona fide sale, but was fraudulent as to them. On the other hand,- the plaintiffs claim that the sale was made in strict accordance with the terms of the collateral agreement, and that the payments made on account of the collateral notes belong to the purchaser at the sale, to wit, the trustee for the banks. The court submitted , this question to the jury and left it to them to determine whether the sale was in good faith, and the jury found that it . was not in good faith and that the defendants were entitled to be credited with the payments made after the sale on account of the collateral notes. The defendants claim that the evidence
On the other hand, the plaintiffs urge that there was no reason to expect that the makers of the notes would ever pay them, inasmuch as they were all long past due and had been protested for non-payment, and that, under the circumstances, it would not have insured a greater price at the sale, even if the financial standing of the makers and indorsers had been advertised. Furthermore, they claim that the fact, that the notes were protested is some proof that their financial standing was not good, and, at any rate, they, the plaintiffs, had no assurance that their financial standing was good, at least fiot enough to warrant them in making any public representations on that subject, and furthermore, they contend that, in making this sale, they not only complied implicitly with the terms of the collateral agreement, but did more, in that they gave ample notice to the defendants that they purposed to make the sale in the public market of Montgomery, Ala., on the date mentioned.
The court left to the jury this question of good faith, and the jury found that the sale was not conducted in good faith, and allowed the defendants to credit on their obligation all the sums received by the plaintiffs in payment of these collateral notes. It seems to me that the evidence of bad faith was’ insufficient, if not lacking altogether, and that the plaintiffs were well within their rights, secured to them by the collateral agreement, in making the sale as they did. By reference to the notes which were sold, we find that the last note to fall due became due on July 1, 1911, a year and fifteen days before the sale. It was all dishonored paper, and protested, and nothing could be realized on the notes, and the maker of two of the notes, the Manhattan Securities Company, was in the hands of receivers. The Stratton note for $5,000 had been dishonored for more than a year and nothing was ever realized on it.
The finding of the jury that the sale of the collateral in question was not made in good faith is reversed, and the judgment in favor of the plaintiff is modified by increasing the recovery to the amount as claimed in the complaint to be due on account of the principal of the notes, together with six per " cent interest on said amounts from the date of maturity of each note. The judgment should also provide for the payment of $500 attorney’s fee as found by the jury. As thus modified the judgment and order are affirmed, with costs to the plaintiff, appellant, in both courts.
Clarke, P. J., Scott, Dowling and Page, JJ., concurred;.
Judgment modified as stated in opinion, and as modified, judgment and order affirmed, with costs to plaintiff, appellant. Order to be settled on notice.