Washington Savings Bank v. Fletcher

Patterson, J.:

The right of the Judge Company to be made a party to the action depends upon its being interested in the subject thereof, and it is urged by the appellant that it is quite plain that that company has no interest in the result of the action; that such action relates to a trust created for the plaintiff’s benefit by the reorganization agreement, and to a contract to which the Judge Company is not a party; that that company issued bonds in payment for property acquired by it; that the plaintiff has the right to the possession of certain of these bonds and to sell them to pay the debt for which they were to be substituted collateral; that the Judge Company while in possession of the property for which the bonds were issued cannot claim that the new bonds should not be put in circulation or given to creditors who are entitled to them under the reorganization agreement. The argument apparently is, that the Judge Company under the terms of the reorganization agreement was bound to deliver to the trustees for distribution a certain number or amount of bonds of which the plaintiff was entitled to a fixed proportion and that the Judge Company has no property right or interest to protect, for by the issuance of those bonds it simply performed what it was obliged to perform under the terms of the reorganization agreement'; that no right or interest, or lien of any kind, of the Judge Company can be cut off or affected by a judgment in the action as it was originally' constituted; that all the plaintiff seeks is the delivery to itself of obligations of the Judge Company issued, by it and outstanding in the hands of the original defendants who held them as trustees for the plaintiff.

The argument of the appellant would have much weight were it not for additional facts which greatly qualify it. Upon looking at the 2d paragraph of the reorganization agreement we find that the bonds, series “ A, ” of which the plaintiff claims a part were to be delivered to creditors who ■ have loaned money, “ for which the creditor now holds collateral security,” but “ to the amount of their claims.” While the provision cited refers to the substitution of new for old collateral, the amount of the new collateral thus to be substituted is measured by the amount of the creditor’s claim. The contention of the Judge Company is that that means the amount of the lawful and just claim of the creditor against the Arkell Company and nothing else. It insists that the amount of the plaintiff’s claim is $3,800; that no indebtedness existed against the Arkell Company . in favor of the plaintiff for any larger amount, for the reason that, with knowledge of the relations of Ferguson to the Arkell Company,the plaintiff misapplied the proceeds of the discount and diverted a large portion thereof from the Arkell Company to pay a debt which Ferguson owed the plaintiff.

Concerning the real merits of this controversy, we have now nothing to decide, but if the construction of the Judge Company of the provision of the reorganization agreement referred to is. correct and the facts of the transaction are such as it claims, it has a very apparent interest in the defense of this action. What was decided by this court in Washington Savings Bank v. Ferguson (43 App. Div. 74) does not affect this question. What the Judge Company seeks to do here is to have its rights as against the plaintiff adjudicated, and to have it established that the plaintiff is entitled to no more security under the terms of the agreement than the equivalent amount of the just indebtedness of the Arkell Company to the plaintiff. It has a right to present and conduct its own defense, and is not to be deprived of that right because the members of the committed may have set up the facts constituting that defense in their answer. It may not be available to the committee, while it may be to the Judge Company.

In this view of the case, but, of course, without expressing any opinion as to the merits of the controversy, we think the order allowing the Judge Company to come into the action was properly made, and should be affirmed, with costs.

. O’Brien, Ingraham and Hatch, JJ., concurred; Van Brunt, P. J., dissented.