Brooklyn Bank v. Barnaby

• Decision Date: 04 January 1910
• Parties: BROOKLYN BANK v. BARNABY.
• Court: New York Court of Appeals Court of Appeals

197 N.Y. 210

90 N.E. 834

BROOKLYN BANK

v.BARNABY.

Court of Appeals of New York.

Jan. 4, 1910.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by the Brooklyn Bank against Frank A. Barnaby. From a judgment of the Appellate Division, Second Department (126 App. Div. 936,110 N. Y. Supp. 1123), unanimously affirming a judgment of the Trial Term, defendant appeals. Reversed, and new trial ordered.

This is an action upon a promissory note for $68,000, made and delivered by the defendant to the plaintiff, bearing date February 12, 1894, and payable on demand, with interest. Attached to the note was a schedule of securities, which the defendant had deposited with the plaintiff as collateral, and this was followed by a written authorization empowering the bank, its president, and cashier to sell without notice at the board of brokers, or at public or private sale, at the option of the bank, its president or cashier, in case of the nonpayment of the note, the net proceeds to be applied to the payment of the note, including interest, the surplus, if any, to be accounted for, and the deficiency, if any, to be paid by the defendant.

Beginning with the 8th day of March, 1894, and continuting to and including the 2d day of October, 1895, the defendant made certain payments, as to which there is no dispute, and which were duly indorsed on the back of the note. The plaintiff contends that two payments of later date were made, the first on the 24th day of August, 1899, amounting to $526.50, and the second on the 10th day of December, 1901, amounting to $1,775. The defendant, while admitting the transaction upon which the plaintiff predicates its claim of these two last payments, denies that they were such payments as to affect the running of the statute of limitations, and it is upon that theory that he defends this action. The action was commenced on September 12, 1906. That was 11 years after the last conceded payment of October, 1895, seven years after the first disputed payment of August 24, 1899, and five years after the last disputed payment of December 10, 1901. The case was tried before the court without a jury, and the court expressly found that all the payments contended for by the plaintiff were in fact made; but it also found the specific facts constituting the disputed payments of 1899 and 1901.

The findings which relate to the transaction of 1899 are as follows: ‘That on the 24th day of August, 1899, the plaintiff, at the request of the defendant, returned to the defendant seventy-five (75) shares of the Knickerbocker Steamboat Company stock, mentioned in the promissory note set forth in the second finding of fact, which request was made in the words and figures following: ‘Brooklyn, N. Y., Aug. 24, 1899. To the Brooklyn Bank: Please deliver to bearer: 75 shares Knickerbocker Steamboat Company now held as collateral security in my loan of Feby. 12th, 1894, and accept in place thereof five hundred and sixty-two 50 dollars ($562.50). Respectfully [Signed], F. A. Barnaby.’ That at the time of the delivery of said seventy-five (75) shares of the Knickerbocker Steamboat Company stock, Thomas M. Halsey, cashier of the plaintiff bank, indorsed upon the promissory note set forth in the second finding of fact, the following matter: ‘Aug. 24th, 1899. Rec'd. a/c within loan five hundred and sixty-two 50/100 Dollars and ret. 75 shares Knickerbocker Steamboat Co. Thos. M. Halsey, Cash.’'

The details of the transaction of December, 1901, the court found to be as follows: ‘That on the 10th day of December, 1901, the plaintiff sold at private sale twenty-five (25) shares of Eagle Warehouse Company stock, being part of the collateral security mentioned in said promissory note set forth in said second finding of fact, and received therefor the sum of $1,775. That, after the sale of the said twenty-five (25) shares of the Eagle Warehouse Company stock, the plaintiff on the 10th day of December, 1901, sent a letter by mail to the defendant notifying him of the said sale. That the said letter mentioned in the foregoing finding of fact was written and mailed after the sale of the said twenty-five (25) shares of the Eagle Warehouse Company stock had been made. That the plaintiff credited the proceeds of the sale of the said twenty-five (25) shares of the Eagle Warehouse Company stock to the account of the loan. That on the 10th day of December, 1901, the cashier of the plaintiff bank made and indorsed upon the back of the promissory note mentioned in the second finding of fact the following indorsement: ‘December 10th, 1901. Rec'd. a/c within loan fourteen hundred and thirty-seven 50/100 from sale of 25 shares Eagle Warehouse Co. Thos. M. Halsey, Cash.’'

Upon all the findings of fact, the trial court based the legal conclusion that the exchange of stock for money in 1899, and the sale of the Eagle Warehouse Company stock in 1901, constituted payments which kept the note alive, so that the statute of limitations had not run when the action was commenced. Upon these findings and conclusions judgment was entered for the plaintiff, and upon defendant's appeal to the Appellate Division that judgment was unanimously affirmed. The defendant now appeals to this court, and the question which we are called upon to consider is whether the plaintiff's right of action upon the note is barred by the six years' statute of limitations.Emanuel J. Myers, for appellant.

Stephen P. Anderton, for respondent.

WERNER, J. (after stating the facts as above).

The action was brought, as stated in the foregoing compendium of facts, to recover upon a promissory note. The only defense interposed is that of the statute of limitations. The question whether that defense is valid or not depends upon the legal effect of two transactions which are relied upon by the plaintiff to take the case out of the operation of the statute. The repetition of a few facts will disclose the bearing of these transactions upon the issue presented.

The note was made on the 12th day of February, 1894. Between that date and the 2d day of October, 1895, several payments were made upon the note, which the defendant admits by not denying them. The learned trial court found that on the 24th day of August, 1899, and the 10th day of December, 1901, the defendant made further payments, and these findings have been unanimously affirmed by the Appellate Division. If there were no further findings upon that feature of the case, the unanimous affirmance would compel us to assume that there was evidence to support the legal conclusion that payments were made by the defendant in 1899 and 1901. The trial court went further, however, and found the specific facts constituting the transactions in these two years. From these specific findings it appears that in August, 1899, the defendant requested the plaintiff to release a part of the collateral held as security for the payment of the note, ‘and accept in place thereof five hundred and sixty-two dollars and fifty cents.’ The plaintiff complied with the defendant's request, and indorsed the money received by it as a payment upon the note. This payment is relied upon by the plaintiff to extend the period of limitation for six years from the time when it was made, and the defendant contends that it had no effect upon the running of the statute. Upon this question we think the finding of the learned trial court was correct. The effect of the transaction of 1899 was to extend the period of limitation. It was a payment made by the defendant himself upon his written request that the plaintiff accept a certain sum of money in lieu of a part of the collateral then held by it. It was made under circumstances which clearly support the implication that the defendant intended to acknowledge the obligation of the debt, and to make a new promise to pay the balance due.

The next transaction relating to the note in suit occurred on the 10th day of December, 1901. On that day the plaintiff,upon its own initiative, sold some of the collateral which it held, and realized thereon the sum of $1,775. Of that amount it applied the sum of $337.49 upon the interest which had accrued upon the note, and the balance of $1,437.51 it indorsed upon the note to apply on the principal remaining unpaid. After the sale the plaintiff mailed to the defendant a letter notifying him of what had been done.

It is this last-mentioned transaction of 1901 that presents the real question in the case, and that is whether the plaintiff's exercise of the right to sell the collateral and apply the proceeds constituted such a payment by the defendant as to extend the period of limitation for another six years from that time. If that was such a payment, the defendant's plea of the statute is unavailing for the action was brought within six years. If that was not such a payment, the plea is good, since the action was not commenced until seven years had elapsed after the payment of August, 1899. The contention of the plaintiff is that in selling the pledged collateral and applying the proceeds thereof to the payment of the note it acted as the agent of the defendant with express authority to sell and apply, and that the legal effect of such sale and application is precisely the same as though the payment had been made by the defendant himself under circumstances from which the law would imply such an acknowledgment and new promise as to extend the statutory period of limitation. The defendant admits the authority of the plaintiff to sell the collateral and apply the proceeds thereof to the payment of the note, but denies that the legal effect of this was to bind him by a new promise which operated to renew the running of the statute. These conflicting claims, based upon undisputed facts, bring into the foreground of the discussion the extent of the plaintiff's authority under the power to sell and apply. The language of the authorization is that the plaintiff m...