Hanover National Bank v. Blake

Van Brunt, P. J.

This action was brought to recover against the defendant Frederick D. Blake and Charles Waterman, copartners under the firm name of F. D. Blake & Co., upon a certain promissory note made by said firm, and indorsed by the defendant Sarah F. Blake. The defendants by their answer alleged that the plaintiff was a creditor of the firm of F. D. Blake & Co., and that, said last-mentioned firm being in a failing condition, they executed and delivered an assignment of their property for the benefit of creditors; that subsequently the said F. D. Blake & Co.’s creditors entered into a sealed agreement, by which they agreed to compromise their debts, and to accept from said firm certain promissory notes made by them, and that thereafter the plaintiff refused to accept a promissory nóte of the character called for by the aforesaid composition agreement, but exacted the indorsement upon said note of Sarah F. Blake,—all of which was in fraud of the rights of the other creditors, and witiiout their privity, knowledge, and consent. Upon the trial, the truth of the facts set forth in the defendant’s answer was admitted, and thereupon the court dismissed the complaint as to the defendant Sarah F. Blake, the indorser of the note, and directed a verdict against the defendants Frederick D. Blake and Charles Waterman, the makers of the note in question, to which exception was duly taken. Upon this appeal it is claimed that, the taking of the indorsed note being in fraud of the other creditors of F. D. Blake & Co., no recovery whatever could be had. There is nothing in the answer which affects the integrity of the composition agreement. Whatever fraud was perpetrated, was perpetrated after the agreement had been duly executed and became a valid instrument. It is clear, upon the facts admitted, that the plaintiff was bound to accept the note of E. D. Blake & Co. unindorsed. They refused, however, to accept it, and Sarah F. Blake indorsed the note. As to *914 this indorsement, it is apparent that the plaintiff was not a holder of.this note for value. It could have been compelled to take the note, or, if it refused, and had sued F. D. Blake & Co. for the original debt, or for the amount due upon the composition agreement, it could not have recovered; except, perhaps, after the expiration of the time covered by the note, it might have recovered, under the composition agreement, the amount which would have been represented by the note had it been received by them. There was nothing which in any way affected the validity of the composition agreement. It was binding upon all the creditors. It is only frauds which enter into the ¡composition agreement itself that can affect its validity or its operative force. In the case at bar there is no allegation of any such fraud; the only allegation being that, after the composition agreement had become effectual, it demanded additional security. It is clear that this was entirely without consideration. It had no right to exact this security, and it was void as far as the additional security itself was concerned; but it in no way affected the original debt arising under the composition agreement. By exacting this additional security, certainly the plaintiff did not release the defendants from the obligation to pay any tiling which would be the result were the claim of the defendants to be sustained. We think, therefore, that the direction was right, and the exceptions should be overruled, and the plaintiff have judgment upon the verdict, with costs. All concur.