Smith v. Rothman

¶1There is no proof in the record of any agreement between plaintiff, as holder of the note, and defendant-appellant, as indorser, that the note was to be surrendered and a second mortgage substituted in its stead. Plaintiff wanted security for the various advances he had made, and the debtor gave him the note which appellant indorsed as evidence of the debt, with the understanding that any proceeds realized from the mortgage the debtor obtained would be applied against her obligations. It had been contemplated that the debtor would obtain such payments through foreclosure proceedings, and the mortgage proceeds were turned over voluntarily by the debtor. The debtor did not specify as to which of her obligations the payments were to be allocated. Plaintiff was therefore free to apply the proceeds to the total amount owed by the debtor as he saw fit (Harding v. Tifft, 75 N. Y. 461, 464) and to proceed on the note against her and the indorser, who had waived notice of protest and nonpayment, for the balance. The debtor did not assign her interest in the mortgage by virtue of judicial compulsion. It was a voluntary act so far as she was concerned, and the fact that foreclosure proceedings against a third person who was a stranger to the contract were necessary to produce payment does not affect the rights or obligations of the indorser. The determination of the Appellate Term affirming the judgment for plaintiff should be affirmed, with costs.