Hugh Getty, Inc. v. Cauchois

Scott, J.': Appeal by defendant from a judgment entered upon a directed verdict. The action is by an indorsee against an-indorser-of-cer [444] tain promissory notes, none of which by their terms were due and pay- ' able when the action was commenced, and the sole question involved is whether or not the action was prematurely brought. In October, 1908, the defendant, being indebted to plaintiff, paid, it a certain ■ sum in cash and gave it twenty-two promissory notes (of which twenty-one are embraced in this action) made by the Black [Realty Company to its own order, indorsed by it, and in turn indorsed by the' defendant. These notes were for $250 each and payable at intervals of one month; beginning November 1, 1909. They constituted part of an issue of thirty-four similar notes by the said Black [Realty Company, all of which had originally been delivered to defendant. To secure the payment of these thirty-four notes the Black .Realty Company had executed to defendant a mortgage upon real property which contained the following clause: “ It is hereby expressly agreed that the whole of1 the said principal sum and all of the unpaid promissory notes shall become due at the option of the said party of the second' part [defendant herein] after default in the payment of any of said promissory notes for twenty days.” It is alleged that the Black Realty Company defaulted in the payment of three of the notes made by it, not among those held by plaintiff. Whereupon plaintiff elected to declare all of the notes due and payable, and sued defendant as indorser. It is not easy to see upon what theory the plaintiff claims the right to accelerate the due date of defendant’s indebtedness. The relation between plaintiff and defendant is that of indorsee and indorser, and the only contract betwuen them, is that evidenced by the notes which specify the date upon which defendant’s obligation to' pay will mature. The plaintiff seems to consider that in some way it is entitled to exercise the option given to defendant by the terms of the mortgage. Undoubtedly the security follows the debt, and plaintiff having acquired part of the debt owed by the Black [Realty Company^ is entitled to the benefit pro tanto of the security. . If it had acquired all of the notes, it may be that it would have stood in defendant’s shoes and been entitled as against the realty eorrvpany to declare all the notes due. But it does not and never has held all the notes, and'has no better right to deal with the security than the holders of the other notes have, and without their concurrence had no right to undertake to declare the whole debt presently due. (Shaw v. [445] Wellman, 59 Hun, 447; Cresco Realty Co. v. Clark, 128 App. Div. 144; Mallory v. West Shore. H. R. R. R. Co., 35 N. Y. Super. Ct. 174.) But even if plaintiff had acquired the right as against the Black Realty Company to declare the whole debt due, so as to resort to the security, the exercise of that right would not have affected the agreement between plaintiff and defendant which was represented by the terms of the notes. It follows that the action was prematurely brought, and the judgment appealed from must be reversed and a new trial granted, with costs to appellant to abide the event. Ingraham, P. J., McLaughlin, Laughlin and Clarke, JJ., concurred. Judgment reversed, new trial ordered, costs to appellant to abide event.