Case ID: nys_7/html/0714-01.html
Source: Caselaw Access Project
Author: {"author": "Martin, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Ford v. Binghamton Hydraulic Power Co.
    
      (Supreme Court, General Term, Fourth Department.
    
    November, 1889.)
    Corporations—Action on Note—Notice op Issues.
    An action against a domestic corporation by an indorser of its accommodation paper, to recover for payment of protested notes, is an action to recover damages for non-payment, within the meaning of Code Civil Proc. N. T. § 1778, providing that in an action against a foreign or domestic corporation, to recover damages for non-payment of a promissory note, unless defendant serves with a copy of his answer or demurrer a copy of an order of the judge directing that the issues presented by the pleadings be tried, plaintiff may take judgment, as in case of default in pleading, at the expiration of 20 days.
    Appeal from special term, Broome county.
    Action by William L. Ford against the Binghamton Hydraulic Power Company to recover for payment, as accommodation indorser, of two promissory notes. On taking the default of defendant, judgment was entered for plaintiff, and defendant appeals.
    Argued before Hardin, P. J., and Martin and Merwin, JJ.
    
      Canniff & Penrie, for appellant. A. D. Wales, for respondent.
   Martin, J.

The appellant, a domestic corporation, made two promissory notes, payable to its order, which were indorsed by the respondent for the accommodation of the appellant. When due, they were not paid. After protest, and notice to respondent of non-payment and protest, he paid and took up the notes, and brought an action against the appellant to recover the amount thereof. The defendant demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. Eo copy of an order of a judge directing that the issues raised by the demurrer should be tried, was served with such demurrer. At the expiration of 20 days after the personal service of the summons and complaint herein, the respondent entered judgment as in case of default in pleading. The appellant then mo ved at special term to set aside and vacate such judgment, on the ground that the appellant had no authority to enter it until the issues raised by such demurrer were tried and determined. This motion was denied. Section 1778 of the Code of Civil Procedure provides: “In an action against a foreign or domestic corporation to recover damages for the non-payment of a promissory note or other evidence of debt, for the absolute payment of money upon demand, or at a particular time, * * * unless the defendant serves with a copy of his answer or demurrer a copy of an order of a judge directing that the issues presented by the pleadings be tried, the plaintiff may take judgment, as in case of default in pleading, at the expiration of twenty days after service of a copy of the complaint, either personally with the summons, or upon defendant’s attorney, pursuant to his demand therefor.”

The only question presented on this appeal is whether this was an action to recover damages for the non-payment of a promissory note, or other evidence of debt, for the absolute payment of money, within the intent and purpose of this statute. Where an indorser of a promissory note has paid and taken it up, he becomes a holder for value, and may maintain an action to recover the amount of the maker. 2 Daniel, Neg. Inst. 219; Kelly v. Burroughs, 102 N. Y. 93, 6 N. E. Rep. 109. That an action by such an indorser and holder against the maker is an action to recover damages for the nonpayment of a promissory note, and within the provisions of section 1778, is, we think, quite manifest. Eor do we find anything in the case of Insurance Co. v. Insurance Co., 88 N. Y. 424, in conflict with this conclusion. In that case the action was upon an insurance policy, which was held to be a conditional contract, and not within the provisions of that section. We do not think the case of Storer v. Publishing Co., 6 N. Y. Supp. 63, in principle like the case at bar. In the Storer Case the action was against a domestic corporation, as indorser of a promissory note, and it was held that the contract of indorsement was not an instrument which was of itself evidence of debt; that the indorser’s liability was not absolute, but contingent,—requiring proof aliunde the instrument of presentation, demand, non-payment, and notice, to show that the contingent liability had become absolute, and hence not within the provisions of section 1778. In the case at bar the contract of the corporation was evidenced by two promissory notes made by it, whereby it became absolutely liable for the payment at a particular time of the amounts of money mentioned therein. The liability of the defendant was in no wise a contingent one. It was fixed at the inception of the notes, and by the express provisions thereof. Eo proof aliunde the note was required to establish the defendant’s liability, nor to show that it was absolute. We are of the opinion that this action was against a domestic corporation, to recover damages for the non-payment of a promissory note, and that the special term properly refused to vacate the judgment entered herein. Order affirmed, with $10 costs and disbursements. All concur.