Case ID: ad_17/html/0419-01.html
Source: Caselaw Access Project
Author: {"author": "Ingraham, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Martens-Turner Company, Respondent, v. James Mackintosh, Appellant.
    
      Acceptance by a creditor of Ms debtor’s note suspends action on the debt until the note matures.
    
    The acceptance by a creditor of a promissory note of his debtor for an existing indebtedness has the effect of suspending the right of the creditor tosue upon the indebtedness until after the maturity of the note.
    By the execution of a negotiable promissory note, there is imposed upon the debtor a much inore onerous obligation than that resulting from a mere agreement to pay money, as, in the hands of an indorsee for value, the note imposes upon its maker the obligation to pay it, regardless of any equities which may exist between him and his original creditor, the payee; the creditor, on the other hand, receives an important advantage in his right to transfer the obligation of his debtor to a third person by mere indorsement and delivery of the note.
    Appeal by the defendant, James Mackintosh, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 13th day of January, 1897, upon the verdict of a jury directed by the court upon the pleadings after a trial at the New York Trial Term.
    
      George W. Stephens, for the appellant.
    
      Terry Smith, for the respondent.
   Ingraham, J.:

■The action was brought to recover upon two causes of action. The first was a cause of action for goods sold and. delivered; and the second, for goods sold and delivered upon a credit, alleging that the credit was obtained by false representations.

The answer of the defendant admitted the sale and delivery of the goods set forth in the first cause of action, alleging the commencement of the action on the 24th day ■ of December, 1894, and that, at the time the said action was commenced, nothing was due from the defendant to the plaintiff, except the amount due on a note of $323.11, and further alleging that the defendant had given to the plaintiff promissory notes for the goods sold and delivered in the cause of action set up in the complaint; that the plaintiff had accepted the said notes, such notes being given in payment, and not otherwise, of the entire amount which was due and owing from the defendant to the plaintiff, and that said notes were not due at the. time of the commencement of the action, except the note for $323.11, and denied the allegations of the second cause of' action as to the fraud alleged.

Upon motion judgment was entered in favor of- the plaintiff for the. amount of. the promissory note admitted to be due, and upon the trial, the court,, on motion of the plaintiff, directed a .judgment for the balance of the amount- claimed to be d-Ue, on the ground that the giving by the defendant and the acceptance by the plaintiff of a promissory-note for the amount of the sale of such goods was. not an extension of the time of payment, but that,- notwithstanding the giving and .acceptance of- the notes in payment of the indebtedness which notes were not due at the time of the commencement of the action, the plaintiff couM at any .time maintain an action to recover . the price of the goods sold and delivered.

The counsel for the respondent refers to but one authorityas justifying the decision of the court below, viz.-: Graham v. Negus(8 N. Y. Supp. 679). That case is opposed to a long line of authorities in this State (including decisions of the Court of Appeals upon the exact point), in England and many of the other States: The rule is stated in the American and English-Encyclopedia of Law (Vol. 18, p. 177), as follows: •“ The taking'.of a note for a debt, whether.such note is negotiable or not, operates to suspend the right of the creditor to sue on the original cause of action until after the maturity of the note; ” and the cases to which reference is made in the note amply sustain this proposition. It was expressly - applied by the - Court of Appeals -in this State in the cases of Happy v. Mosher (48 N. Y. 313) and Hubbard v. Gurney (64 id. 457). Whether "upon this allegation in the answer tlie acceptance of the note'was an extinguishment under the original obligation to pay for the goods sold and delivered, it is -not necessary to determine. ' .At - least- the•aeceptance of the'notés was a suspension of the .right, to- sue for the '.-amount due upon the original cause of .action for goods sold' and -delivered: The. consideration for this suspension of the right to -enforce-the obligation is apparent. By the execution of the promissory note- the -debtor places in the hands of' the creditor an- obliga-' '-'tion-which imposes upon him a.much more. onerous -obligation than that upon the mere agreement to pay money. By it the creditor has the right to transfer by mere indorsement and delivery the obligation of the debtor, which in the hands of the indorsee for value before maturity, imposes'upon the maker of the note an obligation to pay regardless of any equities which exist between himself and his original creditor. That this right of transfer to such a third party gives to the creditor an important advantage, and imposes upon the debtor an increased liability is apparent, and is certainly an ample consideration for an agreement, implied by the delivery of the note, that at least the right to enforce the original obligation should be suspended until a failure to pay the note when due. That this must be so is apjiarent from the fact that such a right to transfer the note by indorsement exists. Upon such transfer the right to sue upon the original cause of action would be' suspended, not only until the note was due, but until the note so delivered had again become the property of the original debtor. To hold that, notwithstanding the giving and acceptance by tlie original creditor of a note for the amount of the indebtedness, such original creditor could at once commence' an action to collect the original indebtedness, would expose such a debtor to a two-fold liability in case of the transfer of the note, and would be to allow a violation of a clearly implied agreement for which there was ample consideration. We think it quite clear that both upon principle and authority the giving and acceptance by the creditor of a note for an existing indebtedness at least' suspends the right of the creditor to sue on such indebtedness until after the maturity of the note, and that the direction of the verdict was erroneous.

It follows that the judgment appealed from must be reversed and a new trial ordered, with costs to the appellant to abide the event.

_ Patterson, Williams, O’Brien and Parker, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellant to abide the event.