bonds, the agreement made may be in effect at least that no bondholder will enforce the payment of his bond except at the instance of the named percentage of bondholders. The effect may be that the right of action is joint. Creditors may make an agreement among themselves and with the debtor, each to forego his individual right of action. A familiar instance of this is a composition agreement. Such an agreement would mean that no creditor would enforce payment of the debt due him except at the instance of the named percentage of all creditors.
Coming from generals to particulars, the defendant here issued bonds of this debenture type in the aggregate sum of $12,000,000. They matured March 1, 1933. Anticipating this maturity a new issue of bonds was made to take the place of the first issue. We will assume, as is usual in such cases, that a very large percentage of the bondholders have accepted the new issues. The plaintiff as the holder of $40,000 of the first issue asks for payment of the bonds he holds and has brought this suit declaring upon the promise which the bonds express. The defendant has interposed the defense that the bonds sued upon are part of an issue of $12,000,000, the holders of which are all bound by the agreement into which they have entered.
The defendant relies upon the following cases to support its proposition that this agreement is a defense: Allan v. Moline Plow Co. (C.C.A.) 14 F.2d 912; Crosthwaite v. Moline Plow Co. (D.C.) 298 F. 466; Lidgerwood v. Hale & Kilburn Corp. (D.C.) 47 F.2d 318.
The plaintiff per contra relies on the case of Lubin v. Pressed Steel Car Company, 146 Misc. 462, 263 N.Y.S. 433.
It is unnecessary for us to go into this, because the very capable counsel for plaintiff concedes that, if plaintiff is a party to this agreement, he is bound by it and cannot maintain his action.
Each of the parties has set up a claim to so-called equities. As we view it, each is standing upon his legal rights. Even if it were true, of which we know nothing, that the plaintiff bought the bonds in suit just before they matured, whatever may have been his motive for so doing, if he has a legal right to judgment, this right cannot be denied him. He very confidently asserts this right, but bases it upon the proposition that the bonds sued upon the negotiable instruments freed as such from the defense set up. We repeat that there is no denial of the sufficiency of the defense as such. The denial is that it can be set up as a defense to a demand for payment of a negotiable instrument. We think it clear that we cannot enter a summary judgment on this ground. The rule before us is for judgment for want of a sufficient affidavit of defense. The real position of the plaintiff is that the defense set up, although sufficient in itself, cannot prevent the entry of judgment because the instrument sued upon is negotiable and the plaintiff an innocent holder for value without notice, before maturity. We cannot make the latter finding from this record. Thus what the plaintiff is really asking us to do is to rule as a question of law in advance of trial that the instruments sued upon are within the law of negotiable instruments. An affirmative answer to this question would not give the plaintiff the right to judgment now, and, as the question will arise as a trial question, it is best left to be made the subject of a trial ruling. In other words, even if the obligation sued upon be a negotiable instrument, if the plaintiff is not an innocent holder, but knew that the obligation was subject to this defense, he took title cum onere. The question of whether the obligation is negotiable, within the meaning of the Negotiable Instruments Law, is thus an abstract question of law which we are not now called upon to answer.
Rule for judgment discharged.
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