Case Name: The Jefferson County National Bank, Respondent, v. Adelaide W. Dewey, as Executrix of Addice E. Dewey, Deceased, et al., Appellants, Impleaded with Others
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1909-12-07
Citations: 197 N.Y. 14
Docket Number: 
Parties: The Jefferson County National Bank, Respondent, v. Adelaide W. Dewey, as Executrix of Addice E. Dewey, Deceased, et al., Appellants, Impleaded with Others.
Judges: 
Reporter: New York Reports
Volume: 197
Pages: 14–27

Head Matter:
The Jefferson County National Bank, Respondent, v. Adelaide W. Dewey, as Executrix of Addice E. Dewey, Deceased, et al., Appellants, Impleaded with Others.
Bills, notes and checks — liability of indorsers — effect of conditional payment of note.
Indorsers upon a promissory note paid the balance remaining due after the payee had credited and indorsed thereon the amount which it had recovered upon a judgment against the maker, in a creditor’s action to set aside other j udgments against such maker, whereupon the payee delivered the note to the indorsers. This transaction was had while an appeal was pending in the creditor’s action which resulted in a reversal of the judgment therein. As the result of the reversal the payee was obliged to refund the amount received upon the note in the creditor’s action. Held, following the decision on the former appeal in this action (181 JCT. Y.-98), that the payment by the indorsers was a conditional payment to the knowledge of all the parties, and further that the additional evidence given on the trial now pnder review, as to the extent of knowledge of one of the indorsers relative to existing conditions at the time he made the payment, is not sufficient to change the rights of the parties, and that in making a partial payment under the circumstances, the indorsers recognized their liability; hence the payments made by them operated only to extinguish the note pro tanto and the action is not barred.
Jefferson do. Nat. Bank v. Dewey, 131 App. Div. 894, affirmed.
(Argued October 13, 1909;
decided December 7, 1909.)
Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered November 27, 1907, affirming a judgment in favor of plaintiff entered upon a verdict directed by the court.
The nature of the action and the facts, so far as material, are stated in the opinion.
J. N. Carlisle for Adelaide W. Dewey, as executrix, appellant.
The trial court erred in refusing to submit to the jury the question as to whether or not the payments made by the defendants Nettleton and Dewey were made in payment and discharge of the note in suit and not in recognition of or conceding any further liability. (Crow v. Gleason, 141 N. Y. 489; Adams v. Olin, 140 N. Y. 150; Pulver v. Esselstyn, 22 Misc. Rep. 433.)
Theodore E. Hancock for Albert E. Nettleton, appellant.
The trial court committed error in directing a verdict for the plaintiff. (McDonald v. M. R. R. Co., 167 N. Y. 66; Strickland v. Henry, 175 N. Y. 372; Shortsleeve v. Stebbins, 77 App. Div. 588; Powell v. Powell, 71 N. Y. 71; Chisholm v. State, 141 N. Y. 246; Snowden v. Town of Somerset, 171 N. Y. 99.) By directing a verdict for the plaintiff the trial court erroneously decided that the defendant Nettleton did not make his final payment of $215.35 with the intent and purpose of discharging his final liability on the note. (Schwartzman v. Post, 94 App. Div. 475; Larkins v. Hardenbrook, 90 N. Y. 333; Jaffray v. Davis, 124 N. Y. 170.) In directing a verdict for the plaintiff the trial court erroneously held as a matter of law that the plaintiff’s claim was not barred by the Statute of Limitations. (Abb. Tr. Ev. 824; Adams v. Olin, 140 N. Y. 150; Crow v. Gleason, 141 N. Y. 489.) By accepting the check of Nettleton, with the condition of an absolute release thereon, the plaintiff discharged Nettleton. from further liability thereon. (Wisner v. Schopp, 34 App. Div. 199; Fuller v. Kemp, 138 N. Y. 231; Freiberg v. Moffet, 91 Hun, 17; Van Bokkelen v. Taylor, 62 N. Y. 105; Hills v. Somner, 53 Hun, 392; Reynolds v. Empire Co., 85 Hun, 470; Looby v. Village of West Troy, 24 Hun, 78; Logan v. Davidson, 18 App. Div. 353.)
Frederick W. Boyer for respondent.
The note was not paid; the Statute of Limitations did not apply; the claim that the defendants were discharged from liability under sections 200 and 203 of the Negotiable Instruments Law was not tenable and there was no accord and satisfaction. (J. C. Nat. Bank v. Dewey, 181 N. Y. 98.)

Opinion:
Haight, J.
This action was brought upon a. promissory note, made by the Eureka Chemical Company, for the sum of twenty-eight hundred dollars, payable four months after date to the order of the indorsers named therein, which note had been indorsed by the defendants and four other persons and transferred to the plaintiff. At the maturity of the note the same was duly protested and the indorsers were charged by giving them notice.
The facts are without substantial dispute, and are, in substance, as follows : At the time of the maturity of the note the maker, the Eureka Chemical Company, had become financially embarrassed, and a foreclosure of a mortgage upon its property was pending which finally resulted in a decree and a sale of the premises, upon which there was a surplus nearly sufficient to discharge the note in question. But in the meantime one, Mrs. Townley, had recovered a judgment against the company which became a first lien upon the surplus, and inasmuch as the judgment was greater than the amount of the surplus, it left nothing to apply upon the note. Under these circumstances Mr. Dewey, who was the president of the company and who, since the first trial of this action, has died, and is now represented by the 'defendant, his executrix, retained an attorney and instituted proceedings to have the Townley judgment vacated. Upon the hearing this relief was denied, the court suggesting that if the creditors' of the corporation were entitled to the relief asked for, it should be through an action in the nature of a creditors' bill. Thereupon Mr. Dewey consulted Mr. Sawyer, of Watertown, an attorney at law, and was advised by him to see Mr. Camp, the president of the bank, and explain the matter to him and see if he could obtain his consent to bring such an action. Thereupon Dewey left, as Mr. Sawyer testifies, and two or three days thereafter the president of the bank handed him the note in question, upon which he brought an action against the company serving the summons upon Dewey, as president, but did not make the indorsers parties to the action. Upon this action judgment was entered against the company by default, and execution was issued thereon. Thereupon th'e creditors' action was brought to set aside the Townley judgment which resulted in favor of the plaintiff, and then the sheriff, who had levied upon the surplus, paid over the sum of $2,574.00 to the bank, which received and indorsed the same upon the note in question. Subsequently, the bank notified the indorsers of the amount of the balance that remained due and unpaid upon the note, and the defendants Dewey and Nettleton each paid their respective shares; but the other four indorsers, having in the meantime become irresponsible, did not pay, and subsequently, upon the suggestion of the defendant Nettleton, he and Dewey made another payment upon the note of the balance that then remained due and unpaid, and upon receiving such amount the bank handed the note over to Dewey. Subsequent to the payment of the money by the sheriff to the bank, Mrs. Townley took an appeal from the judgment rendered against her to the Appellate Division, which affirmed the judgment. A further appeal was then taken by her to the Court of Appeals, which resulted in a reversal of the judgment. (Jefferson County National Bank v. Townley, 159 N. Y. 490.) An order was then obtained requiring the bank to make restitution of the money received from the sheriff. The bank, after complying with that order, again called upon the indorsers to make good the amount and also the costs which it had been compelled to pay upon the reversal of the judgment by the Court of Appeals. The indorsers having neglected to pay the same, this action was brought.
Upon the first trial judgment was awarded to the defendants. It was affirmed in the Appellate Division by a divided court, but in the Court of Appeals it was reversed and a new trial ordered. (Jefferson County National Bank v. Dewey, 181 N. Y. 98.) The opinion in that case was written by Judge O'Brien, and he disposed of all the questions then involved. Upon the new trial, by stipulation of the parties, the evidence was read from the record of the former trial, and the only additional evidence given was that of the defendant Nettleton. Upon his direct testimony he testifies that he knew nothing about the suit by the bank against the Eureka Chemical Company, and nothing with reference to. the suit brought against Mrs. Townley. He, however, admits that he was a director of the company; was an indorser upon this note; that he knew of the amount thereof and that it had not been paid by him; that he often consulted with Dewey witli reference to it, and that Dewey told him, after the Eureka Chemical Company was in trouble, that it had assets sufficient to take care of their liability upon the note; that he did not go into detail. He also conceded that he knew of the sale of the property of the chemical company under the foreclosure; that he knew that the real estate was sold, but did not know that all of the personal property was sold, and that he also had heard that the sum of $2,574.00 had been paid upon the note, but that he did not know that it came through the hands of the sheriff. He then concludes his testimony by stating, " Mr. Dewey was managing this matter for me and the other indorsers, and I trusted him." It appears to me that this statement can be given but one meaning, and that is that Dewey, the president of the company and one of the indorsers upon the note, was authorized by this defendant to manage the matter for him and the other indorsers. In other words, he was his agent, and whatever Dewey knew with reference to the Townley judgment and his proceedings with reference thereto, was imputable to the defendant Hettleton. As to Dewey, it is evident that he knew of all of the circumstances from the beginning to the end. He instituted the proceedings ; he himself so testified. He was a witness upon the trial of the creditors' action against Townley, and advised with the lawyers conducting the case.
At the conclusion of the evidence the court, following the decision of this court, directed a verdict in favor of the plaintiff for the balance due upon the note, but refused to include the costs which the bank had been compelled to pay upon the reversal of the Townley judgment in this court. It may be that the admissions of Dewey with reference to the instituting of the proceedings to set aside the Townley judgment, his interviews with Sawyer and the part that he took in the trial of the case, with the inferences to be drawn therefrom, were sufficient to make the question of costs one for the jury. But the bank has not appealed, and consequently that question is not now before us for review.
It is now contended that the evidence of Hettleton changes the rights of the parties from what they were when the case was under review in this court on the former appeal; that Hettleton made his payments upon the note with the understanding that it was a final payment discharging in full his obligation thereon, and that, therefore, the payment so made did not prevent the running of the Statute of Limitations. But, as we have seen, he or his agent Dewey understood all of the facts. They knew that they were severally liable upon the note as indorsers. They knew that it was a liquidated claim and could be discharged only by payment; that a payment of a less sum than the principal would, in law, be deemed a payment upon account. They knew that the $2,574.00 indorsed upon the note was made out of the assets of the company through some legal proceedings. In making a partial payment they recognized their liability as indorsers. As is stated by Judge O'Brien, "It may be, and probably is, true that the defendants made the payments with the hope and expectation that they would not have to pay any more. It may also be true that the plaintiff's officers received these payments with the same hopes and expectations, but it turned out that they were all mistaken and that all their calculations had been upset by the success of Mrs. Townley in securing a reversal of the judgment. The first indorsement had been made upon the note of money, the right to which, was in dispute and subject to the result of a pending litigation. It was a conditional payment to the knowledge of all the parties, and under these circumstances it cannot be held that the partial payments made by the defendants were not intended to be payments upon the note in the same sense as if the attempt to collect from the maker had never been made. The money paid by the indorsers they were bound to pay in any event, and the only protection that they had against further liability would be the successful result of the pending suit, which was to determine whether the large indorsement should inure to their benefit. Hence, the payments made by them operated only to extinguish the note pro imito, and so the action is not barred."
The judgment should be affirmed, with costs.