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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 conld 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 un paid 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 dne, 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
First Department, April, 1910. to the original judginent, and as such entitled to maintain this action.
The rule relied upon by Mr. Justice Scorr 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. LAUGHLIN, J. (concurring):
I concur in the aftirinance of the interlocutory judgment on the ground that in my opinion the acceptance of the notes, bond and mortgage by the judgment creditor suspended his right to enforce the judgment, at least until default of the obligation created by the notes and bond, and that the notes, bond and mortgage could not be duly assigned, as is alleged, without carrying with them the judgments, if they are to be regarded merely as collateral security for the payment thereof. It was entirely competent for Peirce to assign the judgments, and if that was necessary manifestly he intended it, for if he could not legally assign the notes, bond and mortgage without assigning an interest in the judgment, as seems probable, then to give the agreeinent and assignment effect they
First Department, April, 1910.
[Vol. 137. should be deemed to embrace the judgments. This clearly was the intention of the parties, and unless their acts be so construed the attempted assignment of the notes, bond and mortgage becomes a nullity. The allegation of the complaint is that the agreement, notes, bond and mortgage, together with the moneys due or to grow due thereunder, were “duly assigned.” If, as has been observed, this conld only be done by assigning the judgments as well, proof of the assignment of the judginents, if an express assignment were necessary, would be adınissible under this allegation, and, therefore, the complaint is sufficient to withstand the demurrer.
Scott, J. (dissenting): ...
The action is for the foreclosure of a mortgage. The complaint alleges the recovery of two judgments by John Peirce against John M. Cornell on which there was due on June 13, 1907, the sum of $100,977.20; that on said date an agreement was entered into between said Peirce and said Cornell wherein and whereby it was agreed that “as collateral security” for the payment of said judgments Peirce would accept thirty certain promissory notes, aggregating the amount then due upon the judgments, to be made and executed by a corporation known as J. B. & J. M. Cornell Company, to bear date June 12, 1907, and to be payable to the order of said John M. Cornell and by him to be indorsed to said Peirce, and to be payable consecutively from one to thirty months after said date; that it was further provided by said agreement that upon the failure or default of the said John M. Cornell to pay any one of said promissory notes when and at the time the same became due, unless payment thereof was duly extended in writing, the remaining notes then unpaid, and each and every one of them, together with the bond and mortgage in said agreement mentioned, should, at the election of said Peirce, immediately become due and payable.
The complaint further alleges that on said 13th day of June, 1907, the said Jolin M. Cornell was indebted to said Peirce in the sum of $100,977.20 “as aforesaid ” (i. e., by virtue of the two judgments), and “ for the purpose of further securing the payment thereof to the said Peirce and as further collateral security therefor,” the said Cornell executed and delivered to said Peirce his bond, under liie hand and seal, for the sum of $50,000, bearing date March 18, 1907,
First Department, April, 1910. payable March 18, 1910, with interest at five per cent, payable semiannually, and that as “collateral security for the payment of the bond given to secure the payment of said judgments as aforesaid," the said John M. Cornell and his wife executed and delivered to said Peirce the mortgage which is sought to be foreclosed in this action. The complaint further alleges the payment of the notes above mentioned to the extent of $56,000; the failure of Cornell to pay some of the notes when due, and the election of plaintiff, as Peirce's assignee, to consider them all due and payable.
The plaintiff's right to prosecute this action rests upon an assignment to hiin from Peirce as to which it is alleged that Peirce “ duly assigned said agreement, notes, bond and mortgage, together with the moneys due and to grow due thereon or thereunder.” There is no allegation that Peirce ever assigned to plaintiff the two judgments as collateral security for which it is alleged that the agreement, notes and bond and inortgage were given, and, for aught that appears in the complaint, Peirce may still hold the judgments or may have assigned them to some one other tlian the plaintiff. Thus there is set forth an original and principal indebtedness for which, as is alleged, a certain agreement, promissory notes and mortgage were given as collateral security, these words being used with respect to all of them. The collateral securities have been assigned to plaintiff, but, so far as appears by the complaint, the principal obligation has not been assigned to him. It is clear under the decisions in this State that the plaintiff fails to show that he took anything under the assigninent from Peirce, as he pleads it, for an assignment of the security, without a transfer of the principal debt is inoperative. (Wanzer v. Cary, 76 N. Y. 526.) The legal rule is that the incident shall pass by the grant of the principal, but not the principal by the grant of the incident, and the mortgage sought to be foreclosed in this action is but an incident to the principal debt which it is intended to secure. (Merritt v. Bartholick, 36 N. Y. 44; Manne v. Carlson, 49 App. Div. 276; Smith v. Thompson, 118 id. 6.) The plaintiff, not questioning this general rule, seeks to avoid its effect by contending that the language of the assign. ment as pleaded, imports an intention to include an assignment of the principal debt. This argument is based upon the fact that the
App. Div.-Vol. CXXXVII. 51
First Department, April, 1910.
[Vol. 137. assignment is of the agreement, notes and bond and mortgage, “together with the moneys due and to grow due thereon or there. under.” This, however, does not help the plaintiff. The moneys assigned to himn were the moneys “due and to grow due" under the collateral securities, and whether or not any moneys would ever become due under them must depend upon whether or not any moneys became due to plaintiff under the principal debt, for it is only in default of payınent of the principal debt that anything may be collected from the security. Unless, therefore, the plaintiff became the owner of the principal debt and entitled to collect it, he can have no claim upon the collateral security or the “moneys due and to grow due thereon or thereunder.” The cases cited by plaintiff in support of his contention are not in point. In Fitts v. Beardsley (28 N. Y. St. Repr. 658; affd. without opinion, 126 N.Y. 645) the assignment was of a mortgage alone “with all sums of money due and to grow due thereon,” but it appeared that there was no bond or other obligation; that the mortgage itself recited that it was given “in consideration of the sun of $40,000," and as security for that sum. The court" for the purposes of this litigation," as it expressly said, treated the mortgage as representing both the debt and the security, and affirined the validity of the assignment. In Baldwin v. Raplee (2 Fed. Cas. 521) the assignment transferred a mortgage with the bond accompanying it. It appeared that the debt was evidenced by a note, instead of a bond, and the court held that there was an evident intention to transfer the debt as well as the security. In Larned v. Donovan (31 Abb. N. C. 308; affd., 84 Hun, 533) the mortgage was unaccompanied by any bond, note or other obligation, but the mortgage itself recited that it was given in consideration of an “agreed indebtedness then recently incurred of $1,130.” Again the court treated the mortgage as representing both the evidence of indebtedness and the security for it, and held that the assignment of the mortgage carried with it a transfer of the debt. Campbell v. Birch (60 N. Y. 214) related to the transfer of a chattel mortgage which was overdue when assigned. It was held that the assignor, in consequence of the default, liad acquired a defeasible title to the chattels, and that the mortgage stood as a muniment of her title, and its assignment carried her title to the assignee. If in fact the judgınents in the present case