Case ID: ad_51/html/0302-01.html
Source: Caselaw Access Project
Author: {"author": "Hirschberg, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Simeon M. Jones, Respondent, v. Henry Bristow, Appellant.
    
      Collateral furnished by a payee to a subsequent indorser of a note —respective rights therein of a maker for value, and of an accomodation maker.
    
    The payee of certain promissory notes' delivered them to a third person, who indorsed and procured them to be discounted, and paid the entire proceeds to the payee, which assigned to him certain collateral under an agreement that if the notes were not paid at maturity, the proceeds of the collateral were to be applied to their payment and any balance remaining returned to the payee.
    
      The indorser, having been compelled to take up the notes at maturity, brought an action thereon against the maker who had given the notes for value.
    
      Held, that the indorser was accountable to the payee only for the collateral and the proceeds thereof, and that the possession of such collateral and of the proceeds was no bar to his right to recover upon the notes against the maker. Semble, that even if the notes had been made for the accommodation of the payee, the maker would have no right to the collateral until after he had paid them, and that he could not compel the indorser to account for the collateral as a prerequisite to his right to collect the notes.
    Appeal by the defendant, Henry Bristow, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 13th day of November, 1899, upon the report of a referee.
    
      Charles J. Patterson, for the appellant..
    
      Joseph A. Burr, for the respondent.
   Hirschberg, J.:

This judgment was recovered on three promissory notes made by the defendant, payable to the order of the Domestic Sewing Machine Company, and amounting together to the sum of $8,900. These notes, together with a number of others not made by the defendant, and amounting in the aggregate to about $95,000, were taken by the payee to the plaintiff, who indorsed them and procured them to be discounted at various banks in Pittsburg, Pa., and the entire proceeds were paid over to the sewing machine company. On maturity the plaintiff was obliged to and did take them all up, paying them out of his own funds. Subsequently to the discounting, and on the 12th day of May, 1893, the company assigned to the plaintiff certain property and assets, subject, however, to the claims of one Sutherland on account of notes given by liim, and under an agreement that in case all the paper discounted should be promptly met and paid at maturity, the assets were to be returned to the company, but that in case of failure to- meet the notes, then the assets were to be collected, sold and reduced to cash, the proceeds applied to the ^ payment of the notes, and any balance remaining was to be paid to the company. Less than $25,000 of the notes have since been paid by the makers, not including the defendant, and the plaintiff has realized something from the assets. The amount so realized does not appear. The answer alleges that it amounts to $46,000, and the reply that it does not exceed $4,000. At the defendant’s figures it would not pay the plaintiff’s claim, exclusive of the notes in suit.

The defendant claimed that he made the notes in suit for the accommodation of the Domestic Sewing Machine Company. The learned referee, found that they were given for value, and this finding is abundantly established by the evidence. As there is no evidence supporting the defense of payment, and as the plaintiff is accountable, only to 'the company, for the assets received by him as collateral and for the amount realized therefrom, the possession of' such collateral and of the sums collected from it, is no bar to the plaintiff’s right of recovery on ■ the obligations from the defendant, as the maker for value and the principal debtor.

This finding by the referee, and' our approval of it, render unnecessary the examination of other questions presented and argued on the appeal. We are of opinion, however, that even on the assumption that the notes were made by the defendant for the sole accommodation of the payee, the defendant cannot compel an accounting by the plaintiff as a prerequisite to the collection of the notes at' law. The situation is analogous to the cases where security furnished by a principal debtor to the holder of a note has not been resorted to' at the time an accommodation indorser has been sued. There is no trust relation or special equity as between the parties to this suit, which operates to take the case out of the ordinary rule. In First National Bank, v. Wood (71 N. Y. 405) the court said (p. 410): “ While an accommodation indorser may be regarded as surety in some cases, and under certain circumstances, and has all the rights applicable to that relationship, yet as between him and a bona fide' holder, where his liability has become fixed, he becomes the principal debtor, and if he desires the benefit of any security held by the creditor, he must pay up the debt, fulfill the contract and enforce the right of subrogation to the holder as to the securities held by him.” (See, also, Western Trans, & Coal Co. v. Kilderhouse, 87 N. Y. 430 ; People v. Remington, 54 Hun, 505; affd., 121 N. Y. 328; Third National Bank v. Shields, 55 Hun, 274; Sterne v. Talbott, 89 id. 368.)

The judgment should be affirmed, with costs.

All concurred.

Judgment affirmed, with costs.