Titus v. Himrod

39 Barb. 581, 1863 N.Y. App. Div. LEXIS 44

• Court: New York Supreme Court
• Decided: May 4, 1863
• Status: Published

Opinion

By the Court,

Mullin, J.

This action is brought against the defendant as surviving assignee, under a general assignment made by John De Mott to Peter Himrod and John L. Eastman, to recover the balance, due on a promissory note made by said John De Mott as principal and Ralph Swart-' haut as surety, for the sum of $2500, to the order of Jones, Himrod & Titus, payable at the Bank of Commerce in the city of New York, at four months from date, and dated the 13th of January, 1853. The defendant, after admitting some and denying other allegations of the complaint, sets up by way of affirmative defense, that in March, 1852, the said De Mott and Swarthoüt made and delivered to Jones and others above named, a note for the sum of $2500, payable at four months at the Bank of Commerce. The payees transferred the said note before maturity to the plaintiff in this suit, but such transfer was not known, until long afterwards, to the said makers, or to Eastman. That in October, 1852, Mott, the principal debtor, consigned to the payees 2600 bushels of wheat, to be sold and the proceeds applied in payment of the note of March, 1852. The wheat was received and sold, but the proceeds were not applied in payment of the said note. On the contrary, the plaintiff in this suit, who held said last mentioned note, prosecuted the same to judgment and collected the same from the assignees of Mott. The answer further alleges that said Jones and others have never accounted for the proceeds of said Wheat, but are still indebted for the same, and that such proceeds were in their hands as a fund applicable to and which did extinguish the note on which this action is brought. It is further-alleged that the note in suit was wrongfully transferred to the plaintiff, after maturity, for the purpose of defrauding certain creditors of said Mott. The answer sets up a counter-claim for certain property consigned to said Jones and others in October, 1854, amounting to $50, and which Himrod and Titus, two of said firm, agreed to apply on said note.

In order to the better understanding of the case it is necessary to refer to some other facts proved on the trial. For some years prior to the giving of the note in suit, Jones, Himrod & Titus, merchants residing and doing business in this city, had been receiving property from De Mott, one of the makers of said note, who resided at Lodi, in the county of Seneca in this state, and selling the same on commission, and advancing to said De Mott on property so consigned. Jones and others were at all times, it would seem, during their dealing with De Mott, largely in advance to him. On the 12th of February, 1852, their account rendered shows a balance due to them of $22,735.23, and on the 11th of January, 1853, the balance due them was $22,926.83. In addition to the property consigned as security to the said Jones and others, De Mott assigned to them' certain bonds-and mortgages, and gave them notes signed by said Swarthout as surety. After disposing of all these collaterals, and applying all payments, there is still due to said Jones and others something over $7000.

The defendant is one of the assignees of De Mott in the assignment made to them for the benefit of the creditors of said De Mott. By this assignment Swarthout is preferred for all sums for which he is liable for said De Mott, and it is conceded that if this note in suit is a- valid debt against Swarthout, the defendant has ample means in his hands with which to pay it. The assignees have already made several payments upon it, the last on the 25th of November, 1854.

The referee dismissed the complaint on two grounds ; 1st. That Jones and others, by failing to apply the proceeds of the wheat specifically consigned to pay the note of March, 1852, became liable to Swarthout for damages equal to.the amount of the note, and as these damages were an equitable set-off in favor of Swarthout against the said Jones and others, and as the plaintiff acquired title after maturity, he took the note subject to such set-off; 2d. That the liability of Jones and others to Swarthout, for damages, may be treated as an additional fund held by Swarthout for his security; and the other creditors of De Mott, having only one fund to resort to for the payment of their debt, may require Swarthout who has two, to resort to the one which the other creditors have not, to obtain payment of his claim.

The note of March, 1852, was a valid security in the hands of Jones and others at the time of its transfer to the plaintiff, De Mott owing them a very large amount at that time. The transfer to the plaintiff before maturity, of that note, made .him a bona tide holder for value, and he held it discharged of defenses which might otherwise have been interposed to it had it remained in the payee’s hands. As between them and De Mott, the note would have been paid on the sale of the wheat specifically consigned for that purpose. But when these proceeds were realized they did not own the note, and they neglected to pay it to the plaintiff. Payment of that note was enforced by due process of law. It may be conceded that Jones and others became liable to De Mott for such damages as he may have sustained by the neglect to pay and take up that note. But I am wholly unable to perceive how Swarthout acquired any interest in those damages. The contract, if there was one, was with De Mott alone, and passed by his assignment, to the defendant. Swarthout has never had any right of action against Jones and others. Neither do I perceive any connection between the.notes of March, 1852, and January, 1853. The former was paid in full, and the latter is a new and independent security and resting on a distinct consideration. There is no mode by which the breach of contract of Jones and others, to pay the first note, can be made available against the note in suit. The damages for the breach of such contract were unliquidated and not the subject of set-off; and they are not set up by way of counter-claim. But if a counter-claim was properly set up it would not be a defense to this action. If the damages for the breach of the contract were available and established they should be applied in satisfaction of an equal amount of the balance due from De Mott to them, and not in satisfaction of the note in suit.

It seems to me that upon no principle of either law or equity can the plaintiff’s claim be defeated upon either of the grounds taken by the referee; because, 1st. The damages are not the subject of counter-claim against the plaintiff, and 2d. Swarthout has never repudiated his liability on the note, or in any way authorized the defendant to refuse the payment of the balance due on said note. f

[New York General Term, May, 4, 1863.

Sutherland, Clerke and Mullin, Justices.]

Having paid so large a part of the note after full knowledge of all the facts in the case, it is merely captious now to resist the payment of the balance.

The judgment must be reversed and a new trial ordered; costs to abide the event.