Case Name: The Hanover National Bank, Resp't, v. Frederick D. Blake et al., App'lts
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1891-06-12
Citations: 39 N.Y. St. Rep. 335
Docket Number: 
Parties: The Hanover National Bank, Resp’t, v. Frederick D. Blake et al., App’lts.
Judges: 
Reporter: New York State Reporter
Volume: 39
Pages: 335–336

Head Matter:
The Hanover National Bank, Resp’t, v. Frederick D. Blake et al., App’lts.
(Supreme Court, General Term, First Department,
Filed June 12, 1891.)
Debtor and creditor—Composition agreement—Effect of creditors OBTAINING ADDITIONAL SECURITY.
Defendant’s firm having made an assignment for the benefit of creditors, plaintiff entered into an agreement with them and the other creditors, by which defendants were to give certain notes in settlement of their debts. AJterwards plaintiff refused to accept a promissory note of the character called for by the composition agreement and exacted the endorsement of Sarah F. Blake. In an action upon such endorsed note. Held, that the attempt to obtain the additional security did not avoid the notes as against defendants, hut only released Sarah F. Blake.
Motion for new trial on exceptions ordered to be heard in the first instance at the general term.
C. B. Smith, for app’lts ; T. S. Moore, for resp’t.

Opinion:
Van Brunt, P. J.
—This action was brought to recover against-the defendant Frederick D. Blake and Chas. Waterman, copartners under the firm name of F. D. Blake & Co., upon a certain promissory note made by said firm, and endorsed by the defendant, Sarah F. Blake.
The defendants, by their answer, alleged that the plaintiff was-a- creditor of- the firm of F. D. Blake & Co.; and that said last mentioned firm being in a failing condition they executed and de-' livered an assignment of their property for the benefit of creditors; that subsequently the said F. D. Blake & Co.'s creditors entered into a sealed agreement by which they agreed to compromise their debts and to accept from said firm, certain promissory notes made by them, and that thereafter the plaintiff refused to accept a promissory note of the character called for by the aforesaid composition agreement, but exacted the endorsement upon said note of Sarah F. Blake, all of which was in fraud of the rights of the other creditors and without their privity, knowledge and consent.
Upon the trial the truth of the facts set forth in the defendant's answer was admitted, and thereupon the court dismissed the complaint as to the defendant Sarah F. Blake, the endorser of the note, and directed a verdict against the defendants Frederick D. Blake and Charles Waterman, the makers of the note in question, to which exception was duly taken.
Upon this appeal it is claimed that the taking of the endorsed note being in fraud of the other creditors of F. D. Blake & Co., no recovery whatever could be had.
There is nothing in the answer which affects the integrity of the composition agreement. Whatever fraud was perpetrated, was perpetrated after the agreement had been duly executed, and become a valid instrument.
It is clear, upon the facts admitted, that the plaintiff was bound to accept the note of F. D. Blake & Co., unendorsed. They refused, however, to accept it, and Sarah F. Blake endorsed the note. As to this endorsement, it is apparent that the plaintiffs were not holders of this note for value.
They could have been compelled to take the note, or, if they refused, and had sued F. D. Blake & Co. for the original debt or for the amount due upon the composition agreement, they could not have recovered; except, perhaps, after the expiration of the time covered by the note, they might have recovered under the composition agreement the amount which would have been represented by the note, had it been received by them. There was nothing which in any way affected the validity of the composition agreement It was binding upon all the creditors. It is only frauds which enter into the composition agreement itself, that can affect its validity or its operative force. In the case at bar there is no allegation of any such fraud; the only allegation being that, after the composition agreement had become effectual, they demanded additional security.
It is clear that this was entirely without consideration. They had no right to exact this security, and it was void as far as the additional security itself was concerned, but it in no way affected the original debt arising under the composition agreement By exacting this additional security, certainly the plaintiffs did not release the defendants from the obligation to pay anything, which would be the result were the claim of the defendants to be sustained.
We think, therefore, that the direction was right, and the exceptions should be overruled, and the plaintiff have judgment upon the verdict, with costs.
Barrett and Patterson, JJ., concur.