This is an action brought by the assignee of a promissory note, secured by a chattel mortgage, for a deficiency judgment against certain alleged accommodation parties to the note. A judgment of liability against Janburt, the maker of the note, has already been entered. The question of the extent of the parties' liability on the note has been severed from the present action, which is solely concerned with the liability of the alleged accommodation parties. R.R. 4:43-2. The following facts are not in dispute:
On March 1, 1960 defendant, Janburt Embroidery Corp. (Janburt) obtained a loan from Robert Reiner, Inc. (Reiner), in return for which Janburt executed 72 negotiable promissory notes payable to Reiner's order at stated monthly intervals. The notes were secured by a chattel mortgage on certain pieces of machinery owned by Janburt. The signatures of codefendants James Lo Curto, Bernard Josephs, George Josephs and Harry Josephs (not served in this action) appeared on the reverse side of each of the 72 notes. The following statement appeared immediately above the aforesaid signatures: "We hereby waive notice of protest, presentment and dishonor."
In January 1963 John A. Vollman, now president of Reiner, purchased a majority stock interest in Reiner, Inc. This purchase was financed by A.J. Armstrong and Co. (Armstrong), plaintiff herein, a New York corporation. As part of the consideration for Armstrong's financing of Vollman's
purchase, a general assignment of accounts receivable including, presumably, the chattel paper which is the basis of this suit, was made to Armstrong. Reiner, however, was to continue to collect the moneys due under the assignment. It does not appear whether the general assignment represented a sale of Reiner's accounts receivable or simply the creation of a security interest in them.
In January 1963 Janburt asked Reiner to refinance their notes of 1960. Each of these notes was drawn for $805.55, representing monthly repayments of principal and interest at 6%. Pursuant to Janburt's request Reiner drew a "refinance note" in April 1963, but dated May 15, 1963. The refinance note provided that $38,400, the unpaid balance due under 1960 series of notes, was to be repaid in 48 monthly installments of $510.02, with a final "balloon" payment of $24,849.15. The refinance note was to bear an annual interest rate of 8 1/2%.
The refinance note contained the following statements in two separate paragraphs:
"1. Upon failure to make any payment as herein agreed, or in the event of death, insolvency or bankruptcy or failure in business of the maker, this note shall, at the option of the holder immediately become due and payable without demand or notice * * *.
2. The undersigned hereby waives notice of nonpayment, protest, presentment and demand * * *."
At the bottom of the refinance note appeared the typed signature of Janburt Embroidery Corp., by James Lo Curto, president. Attesting was Harry Josephs, as secretary of Janburt. The signatures of Bernard Josephs and George Josephs, the former above the latter, appeared immediately beneath that of Harry Josephs. On the reverse side of the refinance note all four signatures appeared with the signatories' respective addresses. No corporate offices appeared after any of these signatures.
Vollman testified that this note with its individual endorsements was not received by him until November 11,
1963, at which time it was forwarded to Armstrong accompanied by Reiner's assignment.
Subsequent to the drawing of the refinance note a so-called "Extension Agreement" was drawn between Janburt (mortgagor), Reiner (mortgagee) and Armstrong. The extension agreement was dated June 1963. It purported to amend the terms of the chattel mortgage executed between Janburt and Reiner and assigned by Reiner to Armstrong. Among other provisions the agreement provided:
"* * * 1. The mortgagor shall be and hereby is indebted to Armstrong in the amount of $38,813.05.
2. Said indebtedness of $38,813.05 shall be payable as follows: $413.05 upon signing of this extension agreement and the balance of $38,400 in 48 equal monthly installments of $510.02 each and a 49th and final installment of $25,025.16 * * *."
It should be noted that the extension agreement increased Janburt's total indebtedness by more than $400 over the total in the refinance note of May 1963. The extension agreement was signed: