Court Opinion

ID: 6247257
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:03:18.35989+00
Date Added: 2024-06-11T08:59:19.655065
License: Public Domain

Opinion by
Mr. Justice Mitchell,
The notes in suit were given by defendant to plaintiff as composition notes in a proceeding in bankruptcy, and the affidavits of defense aver that the notes were assigned by plaintiff to one Clarke, and by Clarke to defendant, with a saving of the right of Greenwald & Mayer to hold them as collateral security for the sum of §1,750 due to them individually. The affidavits further aver that Greenwald & Mayer have already received from dividends in the bankruptcy proceeding, paid or now payable, full satisfaction of their claim. If the facts be so as we must assume on the rule for judgment, there is nothing due to plaintiff for which judgment can now be entered.
Whether plaintiff can recover on a trial will involve other considerations. The agreement between plaintiff and Clarke provides for the giving of certain notes by Clarke, in part payment for the assignment to him of the notes in suit, but also provides that the notes in suit shall be held by Greenwald & Mayer, attorneys for plaintiff, as collateral security for Clarke’s notes, to be delivered to Clarke on payment of all his own notes. By the supplemental agreement between the same parties two days later, it was further agreed that out of the proceeds of the composition notes (in suit) to which plaintiff would be entitled, there should be retained by Greenwald & Mayer §1,750, and “ when such sum is paid any other moneys realized upon said notes shall be paid to said Clarke.” This is the real point of controversy in the present case. The defendant claims that this provision is a substitute for the clause as to the collateral in the original agreement, and under it the right to hold the *328Potes in suit is only to secure the money due Greenwald & Mayer, which defendant claims has already been paid. Plaintiff on the other hand claims that the only effect of the supplemental agreement is to entitle Greenwald & Mayer to the first payment out of the moneys realized on the composition notes, without disturbing the right to hold the rest of the notes as security for the payment of Clarke’s notes. On the face of the writings the latter would seem to be the correct construction. Plaintiff under the. composition received the notes of defendant. These he sold to Clarke, taking in payment, inter alia, Clarke’s notes, but under the agreement continuing to hold defendant’s notes as collateral security for Clarke’s, with a stipulation that if default should be made on any of Clarke’s notes, “ the composition notes shall be retained until the parties of the second part ” (among whom was the plaintiff) shall have received a stipulated percentage of their claims. By the supplemental agreement, a preference in payment was given to the claim of Greenwald & Mayer, and when that was paid the subsequent moneys were to go to Clarke. Under the original agreement Clarke’s right to receive the money on the composition notes as it was paid might have been open to question, but under the supplemental agreement it was made clear. But at the same time there is no evidence of intent on the part of plaintiff to release his hold on the composition notes as security for the payment of Clarke’s and the provision for default on the latter, already quoted, is clear to the contrary. The effect of the two instruments together, is that Greenwald & Mayer, as attorneys for plaintiff, were to hold defendant’s notes as security for Clarke’s, and out of the first moneys received (whether as proceeds of these notes, or of Clarke’s, or in some other manner from the bankrupt estate is not clear) were to pay their own claim of $1,750, then to pay over proceeds to Clarke, so long as he was not in default on any of his own notes ; if he became in default then to pay plaintiff and the other parties of the second part up to the stipulated percentage; and finally, when Clarke’s notes were all paid, to deliver up to him the collateral. While the meaning is not free from obscurity, this construction seems to be indicated on the face of the papers, though at the trial it may be changed by evidence of a different one by the parties at the time or subsequently.
*329P1a.int.iff however was not entitled to judgment. The notes sued on were not his property but Clarke’s, and his title to them was only to hold as collateral security for the payment of Clarke’s notes. The latter under the agreement were the principal debt and so long as there was no default on that there was no right of plaintiff to "proceed on the collateral. The composition between defendant and his creditors provided that if default was made on any of the composition notes, all of them should become due, and plaintiff declared on this basis. But that was not sufficient. Clarke might have done so as the owner of the notes but plaintiff lost his right to do so when he parted with his ownership and agreed to take Clarke’s notes as the principal debt. Thereafter he could not proceed on the defendant’s notes until a default occurred on Clarke’s, and while it is said in argument that there was such default, yet it is not averred in the statement nor does it appear anywhere of record, and under the agreements set forth in the affidavits of defense, it was a condition precedent to plaintiff’s right of action against defendant.
Judgment affirmed.