Bank of America v. Engleman

MOORE, P. J.

Appellant sued for a declaration of its rights under an assignment for the benefit of creditors and to compel respondent to pay dividends on two promissory notes of the debtor. From a judgment denying that respondent was obliged to pay such dividends comes this appeal.

Two Notes of Debtor

On September 24, 1947, Mr. A. Austin purchased certain corporate shares and promissory notes from one Burcham. The latter was at the time an officer of the Belfast Bottling Company

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herein referred to as “debtor,” the issuer of the shares and maker of the notes. By a written agreement the purchase price was fixed at $25,940.69, of which $4,640.69 was payable immediately, the balance on October 1, 1951; Austin was to be personally liable for $10,000 but not for the remainder in the event debtor should legally exercise its right to dissolve or liquidate its assets prior to the due date of the balance. The notes so acquired from Burcham were valid and, pursuant to the agreement, were surrendered by Austin in exchange for new notes of the company in the same amounts. One of such new notes delivered to Austin was a demand note for the principal sum of $45,657.24 and is herein referred to as the “Austin note.” At the time of its execution the corporation was contemplating a refinancing of its business through a loan of $50,000 from appellant. By reason of such plan, the note to Austin provided that it was to be subordinate to the note the corporation was about to execute to the bank. The Austin note was by him pledged to Burcham to secure payment of the balance of $21,300 on the purchase price of the stock and notes.

The Clark Note

In October, 1947, debtor executed its promissory note to one Clark in the amount of $27,500. This instrument provided for installment payments and contained the following pertinent provisions: “the first installment becoming due on or before the first day following the date A. Austin has satisfied

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his obligation to Gouley Burcham under that certain agreement dated September 24,1947, if at said time the said Austin has received, as payment upon notes owned by him or as payment in dividends on stock owned by him, the sum of $15,000. If the said Austin has not so received said sum the due date of this note shall be. extended until the said Austin has received- the payment of said sum.”