Nassau Bank v. Campbell

This action was brought to recover upon two promissory notes drawn on demand, with interest, it appearing upon their face that there had been deposited as collateral security to the notes nine Fifth Avenue Plaza bonds for $1,000 each, with accrued interest on the same from October 1, 1884. Each of the notes bore date April 12, 1886, and was made by Pliyfe & Campbell, and indorsed by William Campbell, the testator of the defendants. All the bonds of the character stated in these notes to have been pledged as collateral were secured by a mortgage upon certain property in the city of New York. On the 14th of April, 1886, after William Campbell had indorsed the notes in question, the mortgage in question was surrendered with the consent of the holders of the bonds, so as to leave the security of the bonds subservient to other loans upon the property mortgaged, which they were not before such cancellation. And this was done without the knowledge of the indorser, William Campbell. We think this proceeding discharged the indorser. The notes upon their face showed that certain securities were pledged as collateral, and the indorser had a right to assume that these securities would follow the notes in the same condition in which they were at the time he made the indorsement; and any trafficking with these securities by which their value was impaired necessarily operated as a release of the indorser. It is clear that, if any person had purchased these notes unaccompanied by the bonds, the indorser would not be held, because upon payment he is entitled to be subrogated to the securities there stated to have been pledged for their payment. So, if these securities are impaired in value by the action of the holder after indorsement of the notes, the same-, rule must necessarily apply. The indorser was indorsing a note secured in a certain way. His liability to final loss by reason of his indorsement of the note might depend very largely upon the value of the securities pledged for its payment, and therefore any diminution of their value was a direct detriment to him. It seems to us, therefore, that the necessary conclusion is that the changing of these securities subsequent to the indorsement of the notes necessarily releases the indorser, as the bonds, which, upon the face of the notes, are represented as accompanying the same, have been severed therefrom. Some point was made, in reference to the protest'of the notes in question, that, the bonds not having been tendered at the time of the demand, the indorser was discharged; but the difficulty with this position is that no such *738point was made during the trial, nor is any such point raised by the pleadings. The ground of the motion to dismiss, based upon the question of the collateral securities, was stated to be that, as the plaintiff had neither tendered the return of the securities, nor made any accounting for the same, he could not recover, which distinctly did not refer to the time of making the protest, but up to the time of trial; and no attention was drawn to the question as to what was done at the time of the protest. The plaintiff was not bound to either tender the securities or account for the same upon the trial. If the indorser desired the securities, he could pay the notes. If anything had been released upon the securities, that was a matter of defense. Upon the whole case we are of opinion that the judgment should be reversed, and a new trial ordered, with costs to appellant to abide event.

Lawrence, J., concurs.

(concurring.) The bank held 15 bonds of the Fifth Avenue Plaza Company as collateral security for the loan of $7,500 to Wyckoff. , By agreement between Wyckoff and the bank the bank gave up 2 of the bonds to Wyckoff, and also permitted the remaining 13 to be postponed to a new mortgage, to be given to the Hew York Life Insurance Company. Both of these considerations, as between Wyckoff and the bank, were good and valuable, and, if nothing else appeared, would have been a sufficient consideration for Campbell’s indorsement. There is no doubt that the postponement of the payment of the thirteen bonds to the new mortgage impaired the value of them, and by giving up the two bonds to Wyckoff the bank lessened its se-. curity which it held for the payment of Wyckoff’s note. To what extent the indorser was injured would, under such circumstances, be a question of fact. The evidence, however, tended to show that this arrangement between Wyckoff and the bank was made prior to April 12, 1886, and that the consideration for the postponement of the payment of the bonds to the new mortgage, and the giving up of the two bonds to Wyckoff by the bank, was under the agreement to deliver the notes indorsed by the defendant Campbell. It will further appear from the testimony that the day fixed for stamping the bonds with the statement that they were postponed to the lien of the new mortgage, and the giving of the notes sued upon, with Campbell’s indorsement, was originally April 12, 1886, and the notes bear date as of that day. The closing of the transaction was, however, postponed until the 14th, when Wyckoff went to the bank, obtained the 15 bonds, and had them all stamped as postponed to the new mortgage. The bank, as stated, gave up to him 2 of the bonds, retaining 13; of which 13, 9 are the bonds mentioned in the notes. Two questions, upon this evidence, it seems to me, were presented; First. As to whether the surrender by the bank of the security it then had in consideration of the receipt of the notes indorsed were not part and parcel of one transaction. Secondly. Even if this should not be so, whether or not any injury, and, if so, how much, resulted from postponing the payment of the 9 bonds held as collateral to the new mortgage. In connection with these questions it must be remembered that the notes themselves only specified 9 bonds, whereas, in point of fact, the bank received and held 13. Moreover, it must be noticed that the bonds, after being stamped, answered the description of the collaterals mentioned in the notes, and thus another inference arises in favor of the view that the indorsement of William Campbell was obtained by Phyfe & Campbell upon the notes for the purpose of carrying out the very agreement made by Wyckoff with the bank. It is true, there is no evidence showing that, when Campbell indorsed the notes, knowledge was brought home to him as to exact use to which they were finally put, or any knowledge that the collateral bonds were to be postponed to the lien of the new mortgage. There is some evidence to support the conclusion that Phyfe *739& Campbell, who took part in having the bonds stamped, obtained the indorsement for their accommodation, and to carry out the agreement which they had made with Wyckoff for the payment of their debt to him. If, therefore, we assume the adjustment between Wyckoff and the bank to have taken place on the 12th, and that, in consideration of the surrender of the two bonds, and the stamping of the remaining bonds as postponed to the lien of the new mortgage, Wyckoff delivered the notes indorsed; and if it be conceded that the bank refused to carry out the arrangement until it received the notes so indorsed,—a recovery upon those facts could have been had as against the indorser, for the reason that this would have presented a case where one indorses for the accommodation of another, and notes so indorsed are used for the very purpose for which they were indorsed. The delay from the 12th to the 14th in closing would not change the rights of the parties. The learned judge upon the trial, however, directed a verdict in favor of the plaintiff. This, I think, was error, for the reason that there were certain questions of fact presented upon the evidence which should have been presented to the jury. I concur, therefore, in the result reached by the presiding justice, that the judgment must be reversed, and a new trial ordered.