First Department, April, 1910. [Vol. 137. 1908. In order to make a decree for the distribution of the several funds it will be necessary to have the computations brought down to the present time. It will, therefore, be referred back to the referee to make the necessary calculations and to draft a form of decree in conformity with the following directions: First. The amount standing to the credit of "Margaret O'Sullivan Mortgage Account" shall be ascertained and ratably distributed among the petitioners according to their proportionate interests therein as found by the referee. Second. The amount now standing to the credit of the "General Fund of the Supreme Court, Appellate Division, First Department," shall be ascertained. From this fund shall be paid the fees and disbursements of the referee. Third. The said fund shall then be disintegrated, and the amount thereof distributed proportionately among the several funds of which it was created. Fourth. From the Surplus Interest Account shall be paid to the General Fund of the Supreme Court and the Surplus Balance Account respectively the interest which should have been paid into those accounts, but was in fact paid into the Surplus Interest Account, as reported by the referee, together with the estimated amount of interest earned upon said sums and paid into the Surplus Interest Account. Fifth. The General Fund of the Supreme Court and the Surplus Balance Account, as thus reinstated, should then be distributed among and credited to the several accounts from which they were taken, and the amounts should then be paid over to the Treasurer of the State of New York, together with a statement of the several accounts to which they are applicable under the provisions of section 9 of chapter 651 of the Laws of 1892 (now State Finance Law [Consol. Laws, chap. 56; Laws of 1909, chap. 58], § 44). Sixth. The balance remaining in the Surplus Interest Account and the Contingent Account shall be consolidated into an account to be known as the "General Fund of the Supreme Court, First Department," and the amount of said fund with the accumulations of interest ascertained. From this fund will be paid to the petitioners, and to others similarly situated, such proportion of their losses as may, upon the coming in of the report, appear to be reasonable, due regard being had to reserving in said fund a sum which may be applied hereafter to proper purposes. The counsel who appeared before the referee App. Div.] First Department, April, 1910. have rendered most valuable and laborious service in unraveling a very complicated matter, but we doubt our authority to grant them allowances out of the fund. Present INGRAHAM, P. J., MCLAUGHLIN, CLARKE, SCOTT and DOWLING, JJ. Motion granted to the extent stated in opinion, and the matter referred back to referee. Settle order on notice. HENRY K. S. WILLIAMS, Respondent, v. JOHN M. CORNELL and SARAH K. CORNELL, His Wife, Appellants. First Department, April 22, 1910. Pleading-complaint in action to foreclose a mortgage securing notes and judgment. A complaint in a suit to foreclose a mortgage will be sustained on demurrer where in substance it alleges that the bond and mortgage were given by the defendant to the plaintiff's assignor to secure the payment of certain notes which in their turn were given to secure the payment of certain judgments recovered by the assignor against the defendant, and that the agreement, notes, bond and mortgage, together with the moneys due or to grow due thereon or thereunder, were assigned to the plaintiff. (Per INGRAHAM, P. J., and CLARKE, J.): On the transfer of the bond and mortgage to the plaintiff, his assignor's right to enforce the judgment, so far as it included any amount due upon the bond, was suspended, although the assignee may enforce the mortgage without reference to the judgment. (Per LAUGHLIN, J.): The assignment of the notes and bond and mortgage carried with it the judgment for which they were collateral security. SCOTT and MILLER, JJ., dissented, with opinion. APPEAL by the defendants, John M. Cornell and another, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 28th day of January, 1910, upon the decision of the court rendered after a trial at the New York Special Term overruling the defendants' separate demurrers to the complaint. W. B. Symmes, Jr., for the appellants. Theodore S. Rumney, Jr., for the respondent, INGRAHAM, P. J.: First Department, April, 1910. * [Vol. 137. 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 13th 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 M. 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 a 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 been 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 App. Div.] First Department, April, 1910. 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, executors or administrators should 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 First Department, April, 1910. [Vol. 137. amount paid on the bond. 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 enforced by a foreclosure of the mortgage without reference to the judgments. 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 the mortgage in suit was given. And this, I think, is to be construed as the legal effect of these allegations. However that may be, Peirce, the judgment creditor, having accepted these notes and this bond secured by a mortgage, assigned the notes unpaid and the agreement under which the notes were given and the bond and mortgage, "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 owner 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 |