Arnot v. Union Salt Co.

• Decision Date: 21 December 1906
• Citation: 186 N.Y. 501,79 N.E. 719
• Parties: ARNOT v. UNION SALT CO.
• Court: New York Court of Appeals Court of Appeals

186 N.Y. 501

79 N.E. 719

ARNOT

v.UNION SALT CO.

Court of Appeals of New York.

Dec. 21, 1906.

Appeal from Supreme Court, Appellate Division, Third Department.

Suit by Matthias H. Arnot, as trustee, against the Union Salt Company. From a judgment affirming a judgment of foreclosure in favor of plaintiff (96 N. Y. Supp. 80,109 App. Div. 433), defendant appeals. Reversed, and new trial granted.

Alton B. Parker and Philo P. Safford, for appellant.

Frederick Collins, for respondent.

WILLARD BARTLETT, J.

This is a suit to foreclose a mortgage made by the defendant corporation to the plaintiff, as trustee, to secure the payment of 200 bonds of the par value of $500 each, and the coupons attached to the same, representing interest payable thereon annually at the rate of 5 per cent. per annum. The mortgage contains a provision that, in case of any default by the Union Salt Company in the payment of interest upon said bonds or any of them, and the continuance of such default for six months, ‘if the holders of one-half in value of the then outstanding bonds hereby intended to be secured shall so elect and notify the trustee in writing of such election, the whole of the principal of all the bonds then outstanding shall forthwith be declared by the trustee to be, and shall immediately become, due and payable, although the period limited in said bonds for the payment thereof shall not then have expired.’ For some time prior to July 1, 1904, Matthias H. Arnot was the owner of 115 out of the 200 bonds of the Union Salt Company, of the par value of $57.500. In June, 1904, his private secretary, Mr. Edward J. Dunn, cut from these bonds the coupons which were due on the ensuing 1st of July, and which were payable at the office of the Chemung Canal Trust Company in the city of Elmira. On June 27, 1904, Mr. Dunn deposited these coupons with the Chemung Canal Trust Company to the credit of Mr. Arnot. Although the Union Salt Company had at the time on deposit with the Chemung Canal Trust Company $539.75 which might have been applied in part payment of Mr. Arnot's coupons, none of the coupons was paid; and on the 9th day of July, 1904, Mr. Arnot gave to the Chemung Canal Trust Company a check to repay that institution for the credit which it had given to him on account of the coupons. Upon the delivery of this check to the receiving teller, he gave the coupons back to Mr. Dunn, who then replaced them among Mr. Arnot's securities.

Treating this transaction as a proper presentation of the coupons and a demand for payment thereof, upon which the Union Salt Company had made default, Mr. Arnot on January 9, 1905, being then the holder of more than one-half in value of the then outstanding bonds of the Union Salt Company, served upon himself as trustee under the mortgage a notice that he elected to declare the whole of the principal of all of the bonds of said corporation then outstanding to be forthwith due and payable, and a request that the trustee should declare said principal to be forthwith due and payable, although the period limited in said bonds for the payment thereof had not expired, in pursuance of which request the trustee did, on the same date, declare the whole of the principal of all the bonds aforesaid to be immediately due and payable. On the basis of this action, under what may be termed the ‘acceleration clause’ of the mortgage, the present foreclosure suit was institutedand has been successfully carried to judgment. That judgment has been affirmed by the Appellate Division, but its order does not show the affirmance to have been unanimous. In this court the right of the plaintiff to a foreclosure of the mortgage under the acceleration clause is disputed on two grounds: First, on the ground that there is no evidence whatever to sustain the finding of the trial court to the effect that Mr. Arnot's coupons were so presented as to render their nonpayment by the Chemung Canal Trust Company a default on the part of the Union Salt Company within the terms of the mortgage; and, secondly, on the ground that the trial court should have found that, as requested by the defendant and established by uncontroverted evidence, Mr. Arnot acquiesced in an agreement which was entered into prior to July 1, 1904, by all the other directors of the defendant corporation that they should all indefinitely delay the presentation for payment of their coupons payable on their face on July 1, 1904.

In the view which I take of the case it is necessary to consider only the second point. In reference to this alleged agreement of forbearance or waiver the learned trial judge made the following finding of fact at the request of the defendant: ‘(10) That prior to July 1, 1904, all of defendant's directors, except plaintiff, viz., E. P. S. Wright, P. Halsey Hawes, Geo. S. Coon, and Everett E. Buchanan, mutually agreed to withhold for an indefinite time presentation for payment of the coupons payable on their face July 1, 1904, attached to the bonds held by them, respectively, which were a part of the issue of bonds set forth in the complaint herein.’ The defendant further requested the court to make three additional findings of fact on this subject, all of which were refused; the defendant excepting in each instance to the refusal. These proposed additional findings are in the following words: ‘(11) That plaintiff was not present when said agreement was made, but that the same was made by all the other directors of defendant, with the expectation that plaintiff would, upon being apprised thereof by said Buchanan, consent to withhold in like manner presentation for payment of his (plaintiff's) coupons payable on their face July 1, 1904, attached to the bonds of said issue held by plaintiff. (12) That said Wright, Hawes, and Coon made said agreement in reliance upon said Buchanan's promise to see plaintiff at once and notify said Wright, Hawes, and Coon in case plaintiff should decline to acquiesce therein. (13) That plaintiff thereafter did acquiesce in said agreement.’ Inasmuch as the affirmance by the Appellate Division was not unanimous, the exception to the refusals to find as requested are available to the appellant in this court (Le Gendre v. Scottish U. & N. Ins. Co., 183 N. Y. 392, 76 N. E. 472), and where it appears, as I think it does here, that the proposed findings are sustained by uncontradicted evidence, and that the facts which they embody suffice to relieve the appellant of liability, such exceptions, of course, demand a reversal of the judgment.

Three witnesses were called to testify in regard to the agreement mentioned in the tenth proposed finding-Mr. E. P. S. Wright, the president of the defendant corporation, Mr. P. Halsey Hawes, its secretary and treasurer, and Mr. E. E. Buchanan, a director. The agreement was made at the annual meeting of the stockholders of the Union Salt Company, which was held at Watkins, N. Y., on June 28, 1904. All the directors were present, with the exception of Mr. Arnot, who was the vice president. Being asked to state what was said at that meeting as to the coupons payable July 1, 1904, Mr. Wright testified: ‘Mr. Hawes said it would be difficult for the company to pay the bond interest at the present time due July 1, 1904. I also made the same statement to the directors, and I stated, and Mr. Hawes stated, that we thought that the company would begin to make more money, get money back, and be able to pay the bond interest later on, possibly in the fall. I said, and Mr. Hawes said, and Mr. Coon said, and Mr. Buchanan said it...