Case Name: In the Matter of the Application of Nicola Abo Samra and John H. Cotait for an Order Releasing Them from the Lien of the Judgment Obtained by the Public Bank of New York City. Nicola Abo Samba and John H. Cotait, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-11-05
Citations: 169 A.D. 604
Docket Number: 
Parties: In the Matter of the Application of Nicola Abo Samra and John H. Cotait for an Order Releasing Them from the Lien of the Judgment Obtained by the Public Bank of New York City. Nicola Abo Samba and John H. Cotait, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 169
Pages: 604–607

Head Matter:
In the Matter of the Application of Nicola Abo Samra and John H. Cotait for an Order Releasing Them from the Lien of the Judgment Obtained by the Public Bank of New York City. Nicola Abo Samba and John H. Cotait, Appellants.
First Department,
November 5, 1915.
Debtor and creditor — composition agreement — when creditor by receiving assets becomes bound by composition.
Where the indorsers of a promissory note before it became due entered into a composition agreement with their creditors, and the bank holding the note, with knowledge of the composition, received, retained and receipted for checks in part payment from the committee of the creditors, from which it was only entitled to share in assets upon becoming bound by the composition agreement, the indorsers may, under section 280 of the Debtor and Creditor Law, compel the bank to release them from Lability on the note, as by sharing in the assets it became subject to the provisions of the statute.
The rule that there is no consideration for the release of a debt by payment of part thereof, when the whole is conceded to be due and owing, has no application to a composition between a debtor and his creditors.
Appeal by the petitioners, Nicola Abo Samra and another, from, an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 8th day of July, 1915, denying their motion for an order releasing as against them the lien of s-judgment.
E. Walter Beebe, for the appellants.
Henry L. Moses, for the respondent.

Opinion:
Laughlin, J.:
The judgment was recovered by default on the 8th day of December, "1914, against one Horne as maker and the petitioners as indorsers of a promissory note. The petitioners were copartners, and shortly after they indorsed the note and before it became due they became unable to meet their obligations, and in the month of November, 1913, entered into a composition agreement with their creditors, but the agreement was not executed by the bank. The composition agreement contemplated that all the assets of the copartnership should be, and they were, taken over by a creditors' committee which was authorized to liquidate the business and to form a corporation for the better accomplishment of liquidation. The bank must have known this, for on the 8th day of June, 1915, it wrote a letter to the attorney for the creditors' committee requesting to be advised whether the bank would receive the ten per cent dividend declared by the creditors' committee, as well as any dividend that might be declared subsequently, and he received an answer under date of June 10, 1915, stating that if the bank desired the benefit of any dividend in full compromise of its claim, the attorney for the committee would recommend that a check for the dividend be drawn to the order of the bank. Without awaiting the receipt of an answer to this letter, the creditors' committee on the .next day, June 11, 1915, through their attorney, forwarded to. the bank two checks for the first and final dividends, with a letter entitled "Re Abo Samra & Cotait, Ihc.," as follows: "Enclosed find checks in payment of first dividend of ten per cent and of final dividend in this matter, and in full settlement and discharge of all claims against the corporation and also of the old firm of Abo Samra & Cotait. Please acknowledge receipt in enclosed stamped envelope, either as subjoined or by separate note, and oblige." The bank received and accepted the checks and executed and returned the receipt subjoined to the letter, in the following form: "Received check for first dividend of ten per cent equal to $200.00. Received final dividend check for $132.66, as above." The bank has retained and presumably has used the checks. Two days after the bank returned the receipt, its attorney wrote the attorney for the committee requesting to be advised as to the nature of the composition agreement and as to whether all of the creditors with the exception of the bank had agreed to release their claims. It appears that the creditors' committee, pursuant to authority vested in it by the composition agree ment, has released the claims of those creditors who participated in that agreement. The bank was thereafter requested to execute a release of the judgment as against the petitioners, and upon its refusal they applied for the order, and from the denial of their motion they have appealed.
The motion is based on the provisions of section 280 of the Debtor and Creditor Law (Consol. Laws, chap. 12; Laws of 1909, chap. 11), which, so far as material, provides as follows: "A joint debtor may make a separate composition with his creditor. Such a composition discharges the debtor making it; and him only. The creditor must execute to the compounding debtor a release of the indebtedness or other instrument exonerating him therefrom. A member of a partnership cannot thus compound for a partnership debt, until the partnership has been dissolved by consent or otherwise. In that case the instrument must release or exonerate him, from all liability incurred by reason of his connection with the partnership." By the terms of the composition agreement any creditor could become a party thereto and those participating therein were to release the petitioners. It is insisted in behalf of the bank that it did not execute and is not bound by the composition agreement. I am of opinion that the bank, by thus receiving, retaining and receipting for the checks from the committee of the creditors — from whom it was only entitled to share in assets upon becoming bound by the composition agreement — became subject to the provisions of the statute quoted. The authorities upon which the learned counsel for the respondent relies, holding that there is no consideration for the release of a debt by payment of only part of the amount, when the whole is conceded to be due and owing, have no application to a composition between a debtor and his creditors. (See White v. Kuntz, 101 N. Y. 518; Chemical Nat. Bank v. Kohner, 85 id. 189; Baxter v. Bell, 86 id. 195; Hanover Nat. Bank v. Blake, 142 id. 404; Marx v. Jones, 36 Hun, 292; Mecum v. Becker, 164 App. Div. 852-854.) No question is presented with respect to the form of the relief to be granted, provided the statute is applicable, and, therefore, that need not be here considered.
It follows that the order should be reversed, with ten dollars costs and disbursements, and the motion granted, with ten dollars costs.
Ingraham, P. J., McLaughlin, Clarke and Scott, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.