Case Name: Harry H. Crouch, Appellant, v. J. George Wagner, Jr., and Ida J. Wagner, Respondents, Impleaded with Henry C. Albee
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1901
Citations: 63 A.D. 526
Docket Number: 
Parties: Harry H. Crouch, Appellant, v. J. George Wagner, Jr., and Ida J. Wagner, Respondents, Impleaded with Henry C. Albee.
Judges: 
Reporter: Appellate Division Reports
Volume: 63
Pages: 526–530

Head Matter:
Harry H. Crouch, Appellant, v. J. George Wagner, Jr., and Ida J. Wagner, Respondents, Impleaded with Henry C. Albee.
Collections by an attorney who represents to the debtor that the whole debt must be paid and obtains notes therefor, and to the. creditor that only part can be collected and delivers to Mm notes representing only such part—he may enforce payment of the notes retained by him.
Where an attorney, employed to collect certain judgments, obtains from the judgment debtor promissory notes aggregating the amount of the judgments and the expenses of collection, upon his representation to the judgment debtor that the judgment creditors will not accept less than the full amount of the judgments, and subsequently induces the. judgment creditors to satisfy the judgments upon the receipt of a portion of such notes aggregating thirty per cent of the amount of the judgments, upon representing to the judgment creditors that such is the best settlement he can obtain, and the attorney subsequently transfers the notes retained by him to a person who is not a bona fide holder for value, such person may maintain an action upon the notes.
Appeal by the plaintiff, Harry H. Crouch, from a judgment of the County Court of Monroe county in favor of the defendants, J. George Wagner, Jr., and another, entered in the office of the clerk of the county of Monroe on the 21st day of January, 1901, upon the decision of the court rendered upon an appeal from a judgment in favor of the plaintiff rendered by the Municipal Court of the city of Rochester.
William W. Armstrong, for the appellant.
Richard L. Saunders, for the respondents.

Opinion:
Williams, J.:
The judgment appealed from should be reversed and a new trial ordered, with costs to the appellant to abide event.
The appeal was brought on for hearing upon the pleadings, decision and judgment, no case being made, so that the question is whether upon the facts found by the court the dismissal of the complaint was proper. The action was brought to recover upon a promissory note, made by the defendant Wagner and indorsed by his wife, also a defendant, for $670. The note was delivered to the deféndant Albee and by him transferred to the plaintiff. The Wagners, only, defended, and their defense was that Albee procured the note from them by means of false and fraudulent representations that he was acting as attorney for various parties who held judgments against Wagner, and that the note was for the use and beneüt of such judgment creditors; that these representations were false and were known by Albee to be false, and were made with intent to deceive and defraud the defendants, and defendants relied upon them and believed them to be true and gave the note and received no consideration therefor. The facts found by the court were briefly as follows: There were four judgments against Wagner, aggregating about $800. Albee was a.collection agent and was employed by these judgment creditors to undertake to collect these judgments, under the agreement that he should be paid nothing by the creditors for services or expenses unless he succeeded in making collection, in which event he was to be paid out of the proceeds- collected, ten per cent by one creditor, twenty per cent by two others, and as to the fourth no per cent was agreed on. Albee undertook the collection of the judgments, instituted supplemental proceedings, was appointed receiver therein and incurred costs amounting to $78 in these pro. ceedings. He subsequently reported to the creditors that he could get only thirty per cent on the judgments, and to the Wagners that the creditors insisted upon full payment of the judgments and would receive nothing less. The judgment creditors were finally induced by Albee to accept notes made by Wagner and indorsed by his wife for about thirty per cent of their respective judgments, aggregating about $240, and on receipt of the notes the judgment creditors executed and delivered to Albee satisfactions of their judgments. Albee represented to the creditors that he had agreed with Wagner for the payment for his services,.in addition to giving the notes to the creditors. These notes were subsequently paid and the satisfactions were delivered to Wagner and filed in the clerk's office, so that the judgments were discharged of record. Albee at the time he took the four notes for the creditors also took from the Wagners three other notes, one for $61, to cover in part the expenses of supplementary proceedings and other legal expenses incurred in the collection, and that was paid at maturity; a second one for $300, and a third one, the note in suit, for $670. This last note contained this provision : "If all prior notes and this note is paid on or before Nov. 19th, 1898 (one year from date) a discount, amounting to $344.00, shall be allowed hereon. If not paid on or before Nov. 19th, 1898, and is paid at maturity) two years from date), there shall be allowed a discount of $294.00,. but not otherwise," These last two notes were procured by Albee's representation, and their supposition, that Albee was receiving the notes as the agent and representative of the judgment creditors, and that they were to be held by him for the benefit of said creditors, .and were to be paid to the creditors in consideration of the satisfaction of such judgments. Albee did not disclose to Wagner the fact that he had adjusted the judgments with the creditors on a thirty per cent basis, and Wagner knew nothing about that until a year after the last two. notes were given. Albee did not disclose to the creditors the fact that he had taken these last two notes, and they received their notes and satisfied the judgments in ignorance of the fact that he had taken and held these notes. About the time the notes were given, Wagner agreed to furnish Albee, on account of his services in •effecting the settlement, a first-class chainless bicycle, and subsequently he delivered to Albee two bicycles in place of the chainless one. The plaintiff was not a bona fide holder of the note for value, and had no better right to recover on the note than Albee had. It does not appear from the decision itself for what particular reason the county judge dismissed the complaint, but it does appear from the opinion written by him that the dismissal was solely upon the ground that Albee had no title to the note, and no right to recover thereon, the note belonging to the creditors. This proposition cannot he sustained. These notes were taken as the property of Albee or they were taken by him for the benefit of the creditors. Albee certainly claimed them as his, and as to every' person other than the creditors the notes were his. The creditors' might have made claim to them or might have permitted Albee to keep them, as he certainly intended to do, as his own property. No one else could assert want of title in Albee as to the notes. But assuming Albee took the notes for the benefit of the creditors, then he might sue them in his own name, under section 449, Code of Oivil Procedure. He was trustee of an express trust under the language of that section, and as such was authorized to prosecute an action thereon. Albee, however, had an interest in the notes. His services, his commissions were in the notes, and to some extent he was the owner of them, and his interest he transferred to the plaintiff, who was entitled to prosecute the action. The decision cannot be sustained on the ground of fraud. The judgment debtor owed the whole amount of the judgments. He suffered no damage in being required to pay the full amount thereof. The judgments, with interest and costs of supplementary proceedings, amount to $1,170. The' notes all together were for $1,270. Very likely there was a mistake of $100 in the computation, and that the intention was to take notes for just the amount of the judgments, interest and costs. There was very likely a failure of consideration as to the $100 in the notes, but fraud is not found as to such sum, and the only effect that can be given to that error is the reducing, by so much, the amount to be recovered on the note, and then by paying the-note in suit in one year $344 could be saved, or by paying in two years, when the note matured, $294 could be saved from the full amount of the judgments, interest and costs.
The judgment appealed from should be reversed and a new trial ordered, with costs to appellant to abide event.
All concurred.
Judgment of County Court reversed on the law and the facts and new trial ordered, with costs to the appellant to abide event.