
    Buffalo Loan, Trust and Safe Deposit Company, Plaintiff, v. John Carstensen, Defendant.
    
      Agreement 'to pay a note in ease of default on. the part of the corporation making it — what rights are acquired, by parties making payments under such agreement, ■in bonds and stock pledged to secure the note —effect of the corporation not borrowing the entire amount of the note, and of a portion thereof being borrowed after the maturity of the note.
    
    A corporation applied to a bank for a loan of $75,000 on its note payable June 1, 1900, such note to be secured by $100,000 in the bonds of the corporation and 4,245 shares of its stock, with a provision fora sale of the stock and bonds upon the non-payment of the. note on a depreciation in the value of the collateral. The note was further secured by an agreement, subscribed by certain individuals, providing that in case of default in the payment of the note each subscriber would, “on demand, purchase his proportion of the bonds deposited as collateral, and pay to the Trust Company the amount set opposite his signature hereto, together with any then accrued and unpaid interest upon said amount, receiving on such payment his proportion of the collateral as aforesaid.” Among the signatures was that of the treasurer of the corporation and following his signature were the words, $10,500 cash, $14,000 bonds, 600 shares stock. •The bank granted the application for the loan thus secured and advanced to the corporation thereon $50,000, the remaining $25,000 not having been requested by the corporation. The corporation only paid about $15,000 upon the note.
    
      Held, that under tire .agreement subscribed by him, the treasurer was required to pay such proportion of the $10,500 subscribed by him as the amount actually advanced by the corporation bore to the entire amount of the note, viz., two-thirds, or $7,000, and that upon making such payment he was entitled to two-thirds of the $14,000 in bonds and to two-thirds of the 600 shares of stock; That the fact that the bank had not advanced the entire amount of the loan did not operate to relieve the treasurer from his entire liability upon the agreement, it appearing that the corporation did not call for the entire amount;
    That the fact that $10,000 of the $50,000 actually advanced by the bank was advanced after the maturity of the note did not operate to lessen the treasurer’s liability, it appearing that he knew of the advancement of such sum and made no objection thereto.
    Submission of a controversy upon an agreed statement of facts, pursuant to section 1279 of the Code of Civil Procedure.
    
      Tracy O. Becker, for the plaintiff.
    
      Harry Bowers Mingle, M. Casewell Heine and Wilson Lee Cannon, for the defendant.
   Williams, J.:

Judgment should be ordered for the plaintiff as demanded by it except that the liability should be $7,500 instead of $10,500, and defendant should have the benefit of two-thirds of the $14,000 of bonds and 600 shares of stock.

The plaintiff seeks to recover upon an- agreement in writing, either $10,500, with interest from February 17, 1905, the defendant receiving $14,000 in bonds of the Depew Manufacturing Company or the balance of the $10,500 after a sale of the bonds, and an application of the proceeds of such sale upon the $10,500 and interest.

The defendant denies all liability, and claims if he is liable at all the amount should be only $5,600, with interest from February 17, 1905, and asks equitable relief.

The plaintiff is a Buffalo company; the manufacturing company a Maine company. The manufacturing company was organized to erect and equip a plant for the manufacture of mowing machines,- and about January 1, 1899, purchased twenty acres of land at Depew, near Buffalo, and commenced to erect its plant thereon. Thereafter, and about February 1, 1899, for the purpose of raising money to erect and equip the plant it issued $100,000 of bonds, and secured the same by a mortgage, covering all its property, real and personal. About December 2, 1899, it had contracted debts to the amount of $20,000 and more; had been unable to dispose of its bonds, and was without money to continue the construction of its plant or equip the same. In order to temporarily raise money until it could dispose of its bonds, it applied to the plaintiff on that day for a loan of $75,000 on its note, payable June 1, 1900, with interest at-six per cent semi-annually, secured by the $100,000 of bonds and 4,245 shares of its stock, with a provision for a sale of the bonds and stock upon non-payment of the note or interest when due, or the depreciation in the value of the collaterals in the meantime. The plaintiff refused this application, and thereupon the payment of said note was further proposed to be secured by the agreement in question, signed by defendant and other directors and stockholders. Defendant was a stockholder, director and the treasurer of the company. This agreement was made, and was to the effect, in brief, that in case the manufacturing company should fail to pay the note and interest, or part Of either, June 1,1900, each subscriber would; “ on demand, purchase his proportion of the bonds deposited as collateral, and pay to the Trust Company the amount set opposite his signature hereto, together with any then accrued :and unpaid interest upon said- amount, receiving on such payment his proportion of the Collateral as aforesaid. * * *” Defendant’s signature and amounts were as follows: J. Carstensen, $10,500 cash, $14,000' bonds, 600 shares stock.

The- application for the loan with all this security was granted. The plaintiff at various times down to June 1, 1900, advanced to the manufacturing company $40,000; on June first, $5,000; and oil June nineteenth, $5„000, making in all $50,000. The remaining $25,000 was hot asked for by the manufacturing company and was - never advanced. Ho payments have been made on the moneys advanced excepting $14,493, leaving a balance of principal unpaid $35,507, and no interest on such balance'has been paid since December 1, 1902, excepting $798.91 paid to apply thereon.

Defendant has paid nothing . personally upon the note. The manufacturing company has made some payments by the individual checks of the defendant loaned by -him to the company.

February 17, 1905, a tender by plaintiff was made to defendant of the $14,000 of bonds and the 600 shares of stock and demand made that he pay plaintiff the $10,500- and receive from plaintiff his proportion of the collateral pledged with the note and he refused to make the payment.

It seems to us that the failure by plaintiff to advance the whole $75,000 for which the note was given cannot affect the liability of the defendant' for his share of the amount that was actually advanced, $50,000. The plaintiff advanced all that, it was required to. There was- no refusal to advance the remaining $25,000, or any part of it. The whole amount was not required at once, apparently, but. was called for as needed.

The failure of-the manufacturing company to call for-the whole $75,000 inured to the benefit father than injury of the defendant. The defendant was the treasurer of the manufacturing company during all the time the advances were being made, and we may assume that the moneys advanced on the note passed through his hands' and he knew when and in what amounts the moneys were advanced, though it is agreed that the requests therefor were made by Cobb, managing director of the company. The treasurer would naturally receive the money, and it would be disbursed by checks bearing his signature. This consideration would seem a sufficient answer to the defendant’s contention that he should not be held liable in any event for the $5,000 advanced June 1, 1900, and the $5,000 advanced June nineteenth. If he knew of these advances and made no objections he would be regarded as consenting thereto, though made after the maturity of the note.

This action is equitable in its nature and both parties ask that equity be done. The defendant should not be relieved from liability on his agreement, nor should he be required to pay his whole $10,500 in purchase of his whole $14,000 of bonds and 600: shares of stock. There would be no equity in this, the whole $75,000 not having been advanced. He should only be required to pay his proportionate share of the moneys actually advanced, $50,000, which would be $7,000 and interest thereon from February 17, 1905, the time of the tender and demand. He should have the benefit of his. proportionate share of the bonds and stock upon making such payment, being' two-thirds thereof.

Judgment should, therefore, be ordered in favor of the plaintiff, as hereinbefore suggested.

All concurred.

Judgment ordered for plaintiff as demanded by it, except that the liability should be for $7,000 instead of $10,500, and the defendant should have the benefit of two-thirds of the $14,000 in bonds and the 600 shares of stock. 
      
       Decision changed by Williams, J., from §7,500 to §7,000.— [Rep.
     