Court Opinion

ID: 5497666
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:54:46.107642+00
Date Added: 2024-06-11T08:33:51.223311
License: Public Domain

Merwin, J.
It will be observed that E. Remington & Sons are liable upon all the obligations representing the actual debts, making up the aggregate of $43,077.50, held by the bank, and proved without objection. Such liability, to the extent of $11,000, is as indorser, and on the balance as maker. The Remington Agricultural Company and P. Remington are neither of them liable on $5,600; they are liable one or the other on the balance. The referee held that the coupon notes of the corporation did not constitute a valid security for the payment of its own indebtedness, and applied this rule to the $5,600. He also held that they did constitute a valid security for the liabilities of the Remington Agricultural Company and P. Remington on the balance of the claims of the bank, and could be proved by the bank as such, in addition to the amount of the claims themselves. The ruling as to the $5,600 was acquiesced in by the bank. The ruling as to the other was excepted to by the receivers, and this exception was sustained by the special term; so that the question is, can the bank, by reason of its holding the coupon notes as collateral security for any obligations against the Remington Agricultural Company or P. Remington, prove the amount of such notes in addition to the debts for which they are held as collateral? This would, in effect, prove the actual debt twice. The coupon notes carried with them no lien on the property of the corporation. There was an arrangement by which certain stock of the corporation was to be held as collateral, and which, perhaps, by the opportunity which it gave to control the management of the corporate business, furnished a consideration or object for the exchange of mortgage bonds for coupon notes. Whatever benefit there was in this might be realized by the holder of such notes as collateral. He would, however, have no claim on the property of the corporation beyond the amount of his actual debt. The coupon notes were only personal obligations. The bank had certain obligations against the insolvent corporation, partly as maker and partly as indorser, which it has proved for the full amount of its debt. It has another form of obligation against the same corporation for the same debt. This does not increase, *34as against otherereditors, the amount of the indebtedness. Being once proved, the right of the claimant in that regard is exhausted. It is not a question as to the adjustment of specific liens, but simply to ascertain the amount in fact of the debts of the corporation, preparatory to a “just and fair distribution of the property of the corporation, and of the proceeds thereof, among its fair and honest creditors.” Code Civil Proc. § 1793. As said in Bank v. Railroad Co., 122 Mass. 242, “a debtor’s liability to his creditor, where other creditors are concerned, is not increased by increasing the number of his promises to pay the same debt, in whatever form he may make them. To hold otherwise would be to enable the debtor to incumber his assets by a new method, greatly to the prejudice of all other creditors.” We think that the appellant, having once proved its entire debt, including the obligations upon which the Bennington Agricultural Company and P. Bemington were liable, has no right to prove, in addition thereto, the coupon notes.
The receivers attack the right of the bank to prove the coupon notes on the further grounds (1) that the bank had no right, in the consummation of the exchange of the mortgage bonds for the coupon notes, to stipulate that it might hold these notes as collateral for the debts of other parties, and thereby obtain an advantage to itself over and above what the others had under the agreement; and (2) that such agreement on the part of the defendant corporation was ultra ñires, it not appearing that all the stockholders assented. In view of the conclusion upon the other aspect of the case, it is not necessary to discuss those propositions. It follows that the order appealed from should be affirmed. All concur.