Dimock v. U.S. Nat. Bank

• Decision Date: 06 February 1893
• Citation: 55 N.J.L. 296,25 A. 926
• Parties: DIMOCK et al. v. UNITED STATES NAT. BANK.
• Court: New Jersey Supreme Court

25 A. 926

55 N.J.L. 296

DIMOCK et al.

v. UNITED STATES NAT. BANK.

Court of Errors and Appeals of New Jersey.

Feb. 6, 1893.

(Syllabus by the Court)

Error to circuit court, Union county; Van Syckel, Judge.

Action on a note by the United States National Bank against Anthony W. Dimock and others. Plaintiff had judgment, and defendants bring error. Affirmed.

The facts appear in the following statement by Depue, J.:

This suit was brought upon a note of which the following is a copy :

"$50,000. New York, April 17, 1884. Four mouths after date, without grace, we promise to pay to the United States National Bank, or order, at its office in the city of New York, the sum of fifty thousand 00-100 for value received, with interest at the rate of six per cent. per annum pay able; having deposited herewith, and pledged as collateral security to the holder thereof, the following property, viz.: 200 shares Bankers' & Merchants' Tel. stock; 200 shares Missouri Pacific R. R. stock; 200 shares Delaware, Lac. & W. R. R. stock; 15 shares Central Iowa, Ill Div. 1st bonds,—with authority to the holder hereof to sell the whole of said property, or any part thereof, or any substitutes there for, or any additions thereto, at any brokers' board in the city of New York, or at public or private sale in said city or elsewhere, at the option of such holder, on the nonperformance of any of the promises herein contained, without notice of amount claimed to be due, without demand of payment, without advertisement, and without notice of the time and place of sale, each and every of which is hereby expressly waived.

"It is agreed that, in case of depreciation in the market value of the property hereby pledged, (which market value is now $——,) or which may hereafer be pledged for this loan, a payment shall be made on account of this loan upon the demand of the holder hereof, so that the said market value shall always be at least—— per cent. more than the amount unpaid of this note; and that, in case of failure to make such payment, this note shall, at the option of the holder hereof, become due and payable forthwith, anything hereinbefore expressed to the contrary notwithstanding; and that the holder may immediately reimburse—— by sale of the said property or any part thereof. In case the net proceeds arising from any sale hereunder shall be less than the amount due hereon,——promise to pay to the holder, forthwith after such sale, the amount of such deficiency, with legal interest.

"It is further agreed that any excess in the value of said collaterals, or surplus from the sale thereof beyond the amount due hereon, shall be applicable upon any other note or claim held by the holder hereof against—— now due or to become due, or that may be hereafter contracted; and that, if no other note or claim against ——is so held, such surplus, after the payment of this note, shall be returned to ——or—— assigns.

"It is further agreed that, upon any sale by virtue hereof, the holder hereof may purchase the whole or any part of such property discharged from any right of redemption, which is hereby expressly released to the holder hereof, who shall retain a claim against the maker hereof for any deficiency rising upon such sale. A. W. Dimock & Co."

The other facts appear in the opinion of the court.

B. C. Chetwood, for plaintiff in error.

E. A. & W. T. Day, for defendants in error.

DEPUE, J., (after stating the facts.) The note on which this suit was brought was in terms payable in four months after date. It became due August 15, 1884. This suit was brought May 21, 1891. The suit was in all respects regular, and its regularity was in no wise dependent upon that paragraph in the pledge of securities which, upon certain conditions, accelerated the maturity of the note, and made the money payable at a time earlier than that named on its face. The securities pledged for the payment of the note were sold by the plaintiff on the 15th of May. 1884, as the note matured in the following August. From the sale the sum of $45,450.26 was realized, leaving a balance due on the note of $4,456.25, for which the plaintiff claimed judgment. The defendants' contention was that the sale in May was unauthorized, and amounted in law to a conversion. In all other respects the sale was in conformity with the power. On the theory that the sale at the time in question was unauthorized, the defendants contended that they were entitled to have the value of the securities allowed to them at their highest market price between the conversion and the time of the trial. The defendants gave in evidence the fact that in December, 1886, and April and May, 1887, these securities were worth in the market the sum of $56,860, sufficient to pay the plaintiff's note, and leave a balance of $6,860 due the defendants, for which they claimed judgment by way of recoupment. The defendants' claim was disallowed, and judgment given for the plaintiff for the sum of $4,456.25, being the balance due on the note after crediting on it the proceeds of sale with interest. The case was tried by the judge, a jury being waived. A general exception was taken to his finding. Upon such an exception, if there be evidence to sustain the finding, the exception will not be sustained.

The plaintiff is a national bank, located in the city of New York. The defendants, at the time of these transactions, were bankers and brokers in New York. The debt for which the note was given was a loan of $50,000 to the defendants. The form of the contract pledging securities for the repayment of loans is such as is usual in that city. It must be assumed that the parties were aware of the effect of the terms of such contracts, and with the course of dealing in that market with securities pledged as security for loans.

By the first paragraph in the defendant's contract the plaintiff was authorized to sell the securities at any brokers' board in the city of New York, or at public or private sale in said city or elsewhere, at its option, on the nonperformance of any of the defendants' promises therein contained, without any notice of the time and place of sale. This contract was embodied in and made part of the note itself, and the promise to pay in the note was one of the promises on which a sale was authorized. The sale was made through a firm of brokers who were members of the stock exchange in New York city. There is no foundation in the evidence for complaint of the manner or fairness with which the sale was conducted.

The power of the plaintiff to sell the securities before the four months named in the note had expired depends upon the construction and effect of the second paragraph of the contract. There was some discussion on the argument as to the light to fill the blanks in that paragraph. The evidence was not sufficient to justify the court in filling the blanks. The contract will be construed in the condition it was in when it was delivered to the plaintiff. In this paragraph it is provided that, in case of a depreciation in the market value of the property pledged, the defendants should, on demand by the holder of the note, make a payment thereon, so that the market value of the securities should always be more than the amount of the debt; and that, in case of the failure of the defendants to make such payment, the note should, at the payee's option, become due forthwith; and that the plaintiff might immediately reimburse itself by the sale of the property or any part thereof; and that in case the net proceeds of such sale should be less than the amount then due on the note, the defendants should forthwith, after such sale, pay the amount of such deficiency, with interest. The power to sell the securities before the maturity of the note, according to its terms, was made to depend upon the concurrence of two conditions,—the depreciation in the market value of the property pledged; and the failure of the defendants, after demand, to make a payment on account of the loan, so that the market value of the securities pledged should be more than...