The Kanawha and Hocking Coal and Coke Company, a West Virginia corporation, under date of July 1,1901, duly issued 3,500 bonds of the par value of $1,000 each with coupons attached for the payment of interest at the rate of five per cent per annum, payable semi-annually until the maturity of the bonds fifty years after date. The bonds were secured by a first mortgage on property of the coal company and payment of both principal and interest when due was guaranteed by defendant and in case of any default it covenanted to pay the holders of the bonds on demand. There was a default in the payment of the interest due on the bonds July 1, 1915, and pursuant to the provisions of section 3 of the mortgage a ' majority in amount of the bonds duly declared the principal of all the bonds outstanding due and payable immediately.
The issues were referred. The referee reported under date of December 24, 1917, in favor of judgment for the plaintiffs as demanded and judgment was entered on the report on the twenty-sixth of December. Three days later the motion to open it was made.
The grounds of the motion and the defense sought to be interposed by the third supplementary answer are that on the day of the entry of the judgment, or thereafter, the holder of the bonds, with the approval of the then owner thereof, received payment of the interest evidenced by the coupons together with interest thereon from the dates of the defaults and thereby waived the default and annulled the election to declare the principal due and has reinstated the bonds according to their original tenor as if there had been no default and that thereby it has become impossible for the plaintiffs • to secure to defendant the right to subrogation and to foreclose the mortgage and recover over against the mortgagor on paying the judgment and that such waiver and such reinstatement of the bonds without the consent of the defendant discharged it from liability. If the defendant had shown, as it claims to. have shown, that the holder with the approval of the owner of the bonds had accepted payment of the interest according to the coupons and of interest thereon from the dates of the defaults, it would doubtless be entitled to relief either in the form here requested by opening the judgment or by action to enjoin the enforcement of and for the cancellation of the judgment, for it should not be required to pay the principal of the bonds if the holders and owners thereof have not preserved the default so that it may at once prosecute the remedies which the holders and owners of the bonds had against the principal debtor when the action was commenced. If the action alleged to have been taken by the holders and owners of the bonds on or since the recovery of the judgment had been taken before it would have been a complete defense to the action. (Ost v. Mindlin, 170 App. Div. 558; Ducker v. Rapp, 67 N. Y. 464; Grant v. Smith, 46 id. 93; Paine v.
The bonds including all involved in this action were, purchased by the railroad company pursuant to said leave and delivered to said trust company pursuant to said order. On the 26th of December, 1917, the day the judgment was entered herein, said trust company deposited for collection a check received by its attorney two days before from the mortgagor for the amount due on the matured coupons together with interest thereon from the dates when due until December 24, 1917. The conditions upon which the attorney for the trust company was authorized by the mortgagor to deliver the check to the trust company were upon receipt of the coupons, income tax certificates and a receipt to be returned to the mortgagor. These conditions were complied with by the trustee. It, however, has not paid the money over to the New York Central Railroad Company, the present owner of the bonds, but still holds it and has applied to the Federal court for directions in the premises with respect to the disposition of the money. It is contended in behalf of the respondents that this payment should be deemed a payment on the judgment and that it in no manner affects defendant’s right to subrogation. It seems quite clear that it was not so intended by the mortgagor. The difficulty with appellant’s contention is, however, that the trust company had no authority to waive the default and it does not appear that the railroad company, the present owner of the bonds, has waived it. Counsel for respondents contends that the default could only be waived by formal action by a majority in ownership of the bonds after payment of all arrears. The provision of the mortgage authorizing the owners of a majority in amount of the bonds to declare the principal due after default for six months in the payment of an installment of interest is subject to a condition as follows: “ That if, at any time after the principal of said bonds shall have been so declared due and payable, all arrears of interest upon all such bonds with interest at the rate of five per cent per annum on overdue installments of interest shall either be paid by the Company or be collected out of the mortgaged premises before any sale of the mortgaged premises shall have been made, then and in every such case the holders of a
It follows that the order should be affirmed, with ten dollars costs and disbursements.
Clarke, P. J., Dowling, Smith and Shearn, JJ., concurred.
Order affirmed, with ten dollars costs and disbursements.