Williams v. Cornell

Ingraham, P. J.: The question-'.as to the sufficiency of this complaint depends upon the title that the-plaintiff acquired to the debt, to secure which the mortgage was given by virtue of the assignment of the bond and mortgage from the mortgagee, which the complaint alleges was an assignment of “said agreement, notes, bond and mortgage, together with the moneys due and to grow due thereon or thereunder.” The complaint alleges the recovery of two judgments by one Peirce'against the defendant John M. Cornell, one recovered on. the 17th of July, 1908, and the other on the 15th of January, 1907, aggregating about $105,000. • It is then, alleged that for the purpose of'securing the payment of these judgments, and on the .18th of- June, 1907, the defendant John M. Cornell made an agreement with the said Peirce.in' writing whereby, among other things, “ it was agreed that as collateral security for the payment of said'judgments, upon which it was thereby agreed-that the sum of * * * $100,977.20 was then due and owing by the said defendant John HI. Cornell to the said Peirce, the latter would accept thirty certain promissory notes, aggregating in amount the said sum of * •* * $100,977.20, to be made and executed by a corporation known as the J. B. & J¡ M. Cornell Company, to bear date the 12th-day of June, 1907, and-to be payable-to the order" of said defendant John M: Cornell,, and by him to be indorsed to said Peirce.” The acceptance of these notes made by á third party and indorsed by the judgment debtor, payable at various dates in the future, undoubtedly gave to the holder of the notes a right of action against the maker and indorser, which was independent of-the right, to enforce the judgment. It would undoubtedly give to the holder of the notes, to whom Peirce had transferred them, a cause of action against both the corporation and Cornell, if not paid when they became due. They'are alleged to have been given as collateral security for the payment of the judgments, but, of course, upon payment-of the'notes, the judgments .would have been satisfied, Or upon the payment of any of the notes, the judgments would have beón reduced- by the amount paid. To entitle a party to recover upon one of these notes, it was not essential that the judgments should have been assigned with it, and if the judgment'creditor had assigned- these notes to a -third party, so that an independent liability existed in favor, of the third party against the maker and [797] indorser of the' notes, undoubtedly a court • of equity would have restrained the judgment creditor from enforcing the judgment. . The obligation to pay these notes, therefore, existed independent of the "judgments, and the right to enforce them did not at all depend upon the ownership of the judgments by the party seeking to enforce them. On the same day that the notes were executed and, as the complaint alleges, “ for the purpose of further securing the payment thereof to the said Peirce, and as further collateral security therefor,” the defendant John M. Cornell duly made and executed under ' his hand and seal and delivered to the said Peirce his certain bond •for the sum of $50,000, bearing date the 18th day of March, 1907, ■ wherein and whereby he bound himself, his executors, administrators and assigns in the sum of $50,000, upon condition that the same should be void if the said John M. Cornell, his heirs, exécutors or administrators shoiild well and truly pay or cause to be paid to the said Peirce, his executors, administrators or assigns the said sum of $50,000 on the 18th of March, 1910, and the interest thereon to be paid semi-annually ; and as collateral security for the payment of the. said bond, given to secure the payment of the said judgments as aforesaid, the defendants duly made and executed under their hands and seals and delivered to the said Peirce a mortgage covering certain real property specifically .described in the complaint ; that in and by the said mortgage it was expressly agreed that the principal sum of $50,000 should become due at the option of the said Peirce after default in the payment of interest for thirty days, or after default in the payment of any tax or assessment upon the premises mentioned for sixty days after notice and demand. Here' was an instrument under seal whereby the defendants obligated themselves to pay on a day named the sum of $50,000, secured by a mortgage given to secure the payment of • the judgments. Upon its face it was an absolute obligation to pay this sum of money. As between the parties, it was given to secure the payment of the judgments, but its acceptance by Peirce would also have the effect of postponing any right to enforce the judgments to the extent of the obligation contained in the bond ; and undoubtedly,- upon payment of this bond, the obligation of the judgment debtor on the judgments would have been released to the [798] amount paid oh the boiid. Upon the transfer of. this bond by Peirce to a third party, I think the right of the judgment creditor .to enforce the judgments, so far as it included the amount due upon the bond, had been suspended. The statement that the judgment debtor gave a bond whereby he became obligated' to pay a definite sum of money upon a day certain) itself created an obligation which could be erif oreed by a foreclosure of the' mortgage without reference to the j udgments. The statement that the bond was given by the judgment debtor as “ collateral security ” for the payment of the judgments is necessarily an incorrect statement of the obligation of the debtor in giving the bond. The debtor, being indebted to his creditor in a sum. of money, gives a bond as evidence of the indebtedness, not as collateral security for its payment. It is a little difficult to see how. an original obligation of a debtor given to his creditor can. be given •as security for the debt. The. bond was given as evidence of the debt) and then the complaint alleges that to secure the. payment of the bond tlie mortgage in suit was given. And this,. I think, is tó be construed as the legal effect of these allegations. However that may be, Peirce, tlie judgment creditor, having accepted these notes- and this bond secured by a mortgage, assigned the notes unpaid and the' agreement hndér which the notes were given and the bond and. mort- . gage, “ together with' the - moneys due and to grow due thereon or thereunder ” to the plaintiff, who thereupon became the holder and owner thereof. . The notes were dated the 12th day of June, 1907, and were payable in equal amounts monthly' for thirty months, so that On the 7th of July, 1909, twenty-four of the notes had become due, and six notes were not yet due. On the 7th of July, 1909, these notes as well as the agreements and bond and mortgage were . assigned to the plaintiff; for value. Plaintiff thereby acquired a . good' title to the notes which Were given under the agreement. He thereby become the owner of the notes and entitled to enforce them against the parties liable thereon. He became the owner of'the bond by: which the defendant" John M. Cornell had acknowledged himself indebted to the" owner thereof in the sum of $50,000, and became ‘the ówhér of the mortgage given to secure that bond'. The bond'having become due by its terms, it seems to me the plaintiff" was entitled to enforce the obligation created by the bond and the' mortgage given" to secure its payment, irrespective . of' the title [799] to the original judgment, and as such entitled to maintain this action. The rule relied upon by Mr. Justice Soott in his opinion, that where an indebtedness is secured by a mortgage or ■ pledge of collateral security, the debt for which the security is given must be transferred to the party seeking to enforce the obligation, is not, I think, applicable to a case of this kind, where. an obligation is expressly given as representing the indebtedness, and that obligation is secured by a mortgage or collateral security which has been assigned by the creditor, and where both the obligation and the property transferred to secure such obligation are owned by the party seeking to enforce them. The bond, in this case being an instrument under seal was executed by the debtor as representing a part of the obligation under the original judgment, and was accepted by the creditor as a means of securing to him the payment of the judgment. When so delivered and accepted, it became an obligation of the debtor which could be transferred by the creditor; and by the transfer of the bond and mortgage the transferee became vested with the right to enforce the payment of the bond, and to have the mortgage given to secure its payment enforced. I think, therefore, that the court below was right in overruling the demurrers, and that the judgment appealed from should be affirmed. Clarke, J., concurred'; Scott and Miller, JJ., dissented.