Paoli v. East River National Bank , 155 N.Y.S. 245 ( 1915 )

Shearn, J.

Plaintiff’s testator borrowed from the defendant bank $8,000 upon four promissory notes. Two renewal notes aggregating $1,800 and interest remained unpaid at his death. When the loan was obtained plaintiff’s testator executed and delivered to the defendant an instrument purporting to set forth his assets and liabilities containing this provision:

“ In consideration of granting any credit by said bank, the undersigned agree that in case of failure or insolvency on the part of the undersigned, or in the event of it appearing at any time that any of the following representations are untrue, or in case of the occurrence of such change as aforesaid or of failure to notify such change as above agreed, all or any of the claims or demands against the undersigned held by said bank shall at the option thereof, immediately become due and payable.

“ Further, that the exercise of or omission to exercise such option in any instance shall not waive or affect any other or subsequent right to exercise the same.9 9

Defendant pleaded as a defense and counterclaim that a change had occurred in the financial condition of plaintiff’s testator and that at the time of his death he was insolvent, by reason of which it claimed the right to offset the amount due upon the notes against the claim of the plaintiff for the balance of the deposit. The proof showed conclusively not only that plaintiff’s testator was insolvent at the time of his death but that the statement upon the faith of which the defendant bank made the loan was false. The theory of the trial court evidently was, and it is contended on behalf of the respondent, that as the option to have the notes become due and payable immediately was not exercised until after the death of plaintiff’s testator, there was no mutuality of debt at the time of his death. The contract was not that the notes should become due when the option was exercised but that they should become due immediately upon the happening of the event, i. e., when the plaintiff’s testator became insolvent. Not only is this the plain meaning of the agreement but a different construction would be unreasonable and would work a manifest injustice. The bank could not exercise its option until it learned of the fact of insolvency. When it exercised the option,- the due date of the notes became that provided in the agreement. Furthermore, the notes were due and payable when the credit was obtained because of the false statement of assets. Neither the contract nor the law justifies holding that they only became due and payable when the fraud was discovered. If plaintiff’s testator were alive, he could not recover. ' Now that, he is dead, his estate should not be permitted to recover from the bank the fund on deposit upon a theory which ignores the contract which was the foundation of the credit extended by tbe defendant bank to plaintiff’s testator.

Bijur and Page, JJ., concur.

Judgment reversed and new trial ordered, with costs to appellant to abide event.