The Mount Vernon Rattan Company, Respondent, v. Nathan Joachimson and Others, Appellants

The Mount Vernon Rattan Company, Respondent, v. Nathan Joachimson and Others, Appellants. Second Department, April 26, 1907. Contract — agreement of creditor of solvent corporation not to enforce ■ collection —. consideration — collection of corporate note without legal process not violation of agreement. An agreement by a solvent corporation with its creditors to distribute .its assets ratably is merely a promise to do what the law requires and furnishes no consideration for an agreement by a creditor to forbear enforcing the collection of his claim. A promise by a creditor of such corporation to forbear “forcing” collection of its claims is not violated by the presentation for payment of a corporate note at the bank where the corporation deposited its assets and the payment thereof, by the bank. Such agreement should ■ be construed merely to require forbearance from collection by legal proceedings. Appeal by the defendants, Nathan Joachimson and others, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk' of the county of Westchester on the 20th day of October, 1906, upon the decision of the court, rendered after a trial at the Westchester Special Term, overruling the defendants’ demurrer to the complaint. The complaint alleges that the plaintiff is a domestic corporation; that the defendants, except Max Israel, are engaged in • business under- the firm, name of R; Joacliimson; that the defendant Max ■ Israel is the duly authorized agent of said firm; that on April. 19, 1906, the plaintiff being indebted to the said'firm, together,with a large number of other creditors^ and desiring to distribute the:assets ' among them equitably and in proportion to tliéir respective claims so ' far as its assets would go pro rata, caused a meeting of its creditors to be called at which nearly all of them were represented, and the said firm appeared by the defendant Max Israel; that at said meeting it:was mutually agreed by and between the plaintiff and a large ■ number of its creditors 'that the officers, of the plaintiff should dispose of its assets and that the proceeds resulting therefrom should be distributed equitably and pro rata among its creditors, and that ■ all of said creditors then, and there represented would -consent to find abide by such distribution ;■ and that “ such agreement was entered ■ into mutually and said creditors agreed to forbear forcing collection of their, said claims, and said company proceeded so to dispose of its said assets, and wind up its affairs, all in consideration of said creditors making such agreement as aforesaid.” . The complaint further alleges that the plaintiff corporation proceeded to dispose of its assets and turn the same into money, which money was deposited to its credit in the First Rational Banh of . Mount Vernon, R. Y.; that at the time of the’agreement heretofore mentioned the said firm of R. Joachimson held as evidence of its claim a note of the plaintiff for $1,000, payable .at the First' Rational Bank of Mount Vernon, and on thé day when the said note became dtie- the defendants, in violation of their said agreement, and without the knowledge or consent of the plaintiff,, presented such note for payment, “ and. did knowingly, wilfully and wrongfully thereby obtain from said First Rational Bank of Mount Vernon, . ,R. Y., the sum of one thousand dollars,” which the plaintiff after-wards demanded, and the defendants wrongfully refused to return the same and converted said money to their own use. The defendants demurred to the complaint on the ground that it .- did not state facts sufficient to constitute a cause of fiction. . Their . demurrer has been overruled fit the Special Term, and the defendants have appealed from the interlocutory judgment there rendered to this court. Horace E. Parker [Mot'ris J. Hirsch and Herbert H Maass, ■with him on the brief], for the appellants. Thomas A. MeEermeW [Frederick W. Clark with him on the "brief], for the respondent. [MAJORITY — Woodward, J. :] Woodward, J. : The principal question discussed in the opinion of the learned judge at Special Term is whether the complaint shows upon its face "that the plaintiff corporation was insolvent at the time when the ¡agreement was made relating to the distribution of the assets. It •appears to have been assumed that if the corporation was insolvent •at that time the agreement was invalid. It seems to us, however, that the issue presented by the demurrer must be determined in "favor of the defendants irrespective of that question. If we assume in accordance with the conclusion of the court below that the complaint' does not show the corporation to have been insolvent, it is -difficult to perceive what consideration there was moving to. the ■defendants for entering into the agreement, or how the plaintiff ¡suffered any damage in a legal sense by reason of the presentation ■of its note and the payment thereof. A solvent corporation is certainly bound to pay its debts. And if this corporation was solvent, ■the agreement on its part to distribute the proceeds resulting from the disposition of its assets equitably among its creditors was merely ¡a promise to do that which the law required. Such a promise is mot a consideration sufficient to support an agreement on the part of a creditor “ to forbear forcing collection ” of his claim. On the same assumption of solvency no harm resulted to the plaintiff by reason of the presentation of its note at the bank where it was made payable, and where presumably the plaintiff had deposited sufficient funds to pay it. Furthermore, it seems to us that the complaint is plainly insufficient in another view. The agreement whiph it is. alleged that the defendants have violated by obtaining payment of the note wdiich evidenced their claim was an agreement to forbear from forcibly collecting such claim. This plainly contemplated merely collection by legal process. The element of force, however, was wholly lacldng in the act of the defendants of- which the plaintiff «complains. There was nothing forcible in the presentation of the note at the bank. If.the note had.been dishonored and the defendants had instituted legal proceedings to collect it, then it might well be claimed that there had been a violation of■ the agreement; but . we think it would be giving to the language of the pleader a meaning wholly unwarranted by his words to hold that what the defendants did was an effort forcibly to collect their debt. » • . ' . Eor these reasons we are satisfied that the complaint failed to set . out facts sufficient to constitute .a pause of action. The- interlocutory judgment should, therefore, be-reversed and.the demurrer sustained, with leave to the plaintiff , to amend upon themsual terms Hirsghberq, P. J., Jenks,. Hooker arid Gaynor, Jj., concurred Interlocutory judgment- reversed, with costs, and demurrer sus tained, with costs, with leave to the plaintiff to plead anew on, pay mem within twenty, days. -