Brothers v. Goodman

• Decision Date: 28 February 1941
• Docket Number: 3-1940
• Citation: 18 A.2d 519,144 Pa.Super. 43
• Parties: Lit Brothers, Appellant, v. Goodman et al
• Court: Pennsylvania Superior Court

18 A.2d 519

144 Pa.Super. 43

Lit Brothers, Appellant, v. Goodman et al

No. 3-1940

Superior Court of Pennsylvania

February 28, 1941

Argued October 18, 1940.

Appeal from judgment of M. C. Phila. Co., June T., 1938, No. 468, in case of Lit Brothers, to the use of Y. Priscilla Kaplan, v Frank Goodman et al.

Assumpsit. Before Glass, J., without a jury.

The facts are stated in the opinion of the Superior Court.

Findings and judgment for defendants. Use plaintiff appealed.

Error assigned, among others, was refusal of judgment n. o. v.

Judgment reversed.

D Benjamin Kresch, with him William H. Kresch and Wolf, Block Schorr & Solis-Cohen, for appellant.

Ivan Michaelson Czap, with him Michael H. Egnal and Nathan Silverstein, for appellees.

Before Keller, P. J., Cunningham, Baldrige, Stadtfeld, Parker, Rhodes and Hirt, JJ.

OPINION

Keller, P. J.

On May 7, 1926, four promissory notes, each in the amount of $ 500, were executed by the four defendants in this case. The notes were to the order of Lit Brothers, were not under seal and were payable seven, eight, nine and ten months after date, respectively. On March 10, 1927, all the notes being then due and unpaid, a summons in assumpsit was issued in which Lit Brothers was the plaintiff and Frank Goodman, J. Solomon Kresch, Bernard Goodman and Fred Goldentyer were defendants. The amount claimed was $ 2000 with interest and costs. On May 20, 1927, a statement of claim was filed -- endorsed with notice to file an affidavit of defense -- setting out the notes, averring presentation for payment "to the defendants" and their failure to pay the notes or any part thereof. An affidavit of defense, which is not printed in the record, was filed on June 28, 1927. On July 28, 1927, a supplemental affidavit of defense containing New Matter was filed by the defendant, Bernard Goodman, "on behalf of himself and his co-defendants, and with their consent". The New Matter set out that the plaintiff, by its agent, had orally promised to renew the notes when they fell due, on payment of interest, and that this promise had induced the contract. Further, it averred that this part of the agreement had been left out of the notes by mutual mistake. On February 2, 1928 the plaintiff filed an answer to the New Matter, containing a complete denial of an oral promise, and averring that if one had been made, the agent making it was without authority.

Under the explicit provision of the Practice Act of May 14, 1915, P. L. 483, sec. 2, as amended by the Act of March 30, 1925, P. L. 84, No. 54, sec. 1, the pleadings were then closed and the case was at issue. Nothing was done until September 30, 1933, when, by order of plaintiff's attorney, the action was marked to the use of Y. Priscilla Kaplan. Nothing further was done until January 12, 1938, when, without leave of court, Goldentyer filed a separate affidavit of defense. This separate affidavit of defense did not deny the affiant's liability to the legal plaintiff on the notes. It set up as an affirmative defense that the notes had been paid to Lit Brothers by his three co-defendants -- not, it will be noted, by him; following which the plaintiff's statement by agreement was amended by a paragraph averring that on or about September 20, 1933, the said notes were delivered and transferred by the legal plaintiff, Lit Brothers, to the use plaintiff, Y. Priscilla Kaplan, and were thereafter endorsed by legal plaintiff to use plaintiff.

Leave of court to file this separate affidavit of defense should have been obtained (Dever v. Kathrins & Golen, 82 Pa.Super. 140); and, as the affidavit raised an entirely new issue and an affirmative defense, the burden of proving it was on the defendant Goldentyer, and by analogy to the entry of non pros. for delay in prosecuting an action, (Potter Title & Trust Co. v. Frank, 298 Pa. 137, 139, 148 A. 50; Waring Bros. & Co. v. Penna. R. Co., 176 Pa. 172, 176, 35 A. 106; Ulakovic v. Metropolitan Life Ins. Co., 339 Pa. 571, 16 A.2d 41), the court below would not have abused its discretion if it had refused to allow it to be filed ten years after the bringing of the action and over four years after the alleged payment (Dever v. Kathrins & Golen, supra).

But since (1) the use plaintiff has not complained of it, (2) her counsel has entered into a stipulation (12a) providing for treating the statement of claim as amended to show the transfer of the notes to her and (3) the separate affidavit of defense was filed about 17 months before the trial, it can be considered.

Goldentyer's affidavit of defense admitted execution of the notes but averred, in additional paragraphs, not headed 'New Matter' that his three co-defendants had paid Lit Brothers' claim in full, under an oral agreement. The agreement was in fact a written one and is set out in the record at pages 41a-46a.

Going to trial, as they did, without an answer to what was undoubtedly New Matter in the separate affidavit of defense ( Security T. & T. Co. v. Welsh & Brown, 104 Pa.Super. 502, 505, 159 A. 227) it is no wonder that confusion has resulted. See Hatfield v. Thomas Iron Co., 208 Pa. 478, 487, 57 A. 950. The use-plaintiff's theory was that the transaction resulting in the transfer of the notes to her and the marking of this suit to her use was a purchase of the notes by the three co-defendants with no intention to cancel them, and that therefore they are entitled to contribution against Goldentyer. Goldentyer's theory was that since Lit Brothers had been paid by his co-defendants the notes were discharged and his co-defendants had no right of subrogation to its rights; and that any right of contribution they might have against him must be enforced in a new action. At the trial before Judge Glass, sitting without a jury, it was developed that the three co-defendants had paid Lit Brothers, under their agreement; that the use-plaintiff is their nominee (28a) and that the notes were transferred and the suit marked to her use about the time of the last payment.

The trial judge found for defendants, refused use-plaintiff's motions for judgment n. o. v. and for a new trial and entered judgment for defendants. His grounds were (1) the legal plaintiff has been paid in full; (2) the use-plaintiff (as nominee of the three paying defendants) already has judgments against Goldentyer in the two other suits mentioned in the agreement, totalling more than one-fourth of the original debt and (3) one-fourth is the extreme limit of Goldentyer's liability. This appeal followed.

At the outset, it is necessary to point out the distinction between subrogation and contribution. Subrogation is the putting of one person in a position to exercise the rights and remedies formerly enjoyed by another and no longer of any use to that other. Contribution is the right enjoyed by a person who is jointly liable with others and has paid more than his proper share in discharge of the joint liability, to force them to reimburse him to the extent of their liability. In Wright v. Grover & Baker S. M. Co., 82 Pa. 80 81, it was put thus: "This case involves a consideration of two questions. One, the rights of a surety, who has paid the debt, against his co-surety; [i. e. contribution] the other, the manner in which he may enforce them [held to include subrogation]". The difference is also made clear in Goldman v. Mitchell-Fletcher Co., 292 Pa. 354, 141 A. 231, in which the court said that the only question raised was whether subrogation had been properly allowed. After deciding that it was, however, the court then discussed "the use which the Surety Company may make of the judgments against both defendants," and decided that it was a proper case for contribution.

It is important to note that the use-plaintiff, in this case, is seeking a judgment against all four defendants, although admittedly, that is only the initial step in the effort later to secure contribution from Goldentyer. It is clear, then, that the question of contribution does not here arise, but only the question of subrogation, and the further question whether the right to subrogation includes the right to continue this suit to judgment. There is nothing in the pleadings and nothing in the testimony at the trial throwing any light on the extent of Goldentyer's eventual liability. All persons whose names appear on a note as makers are primarily and unconditionally liable to the payee (10 C. J. S., Bills and Notes, sec. 37(a) p. 458) and each is therefore liable for the whole debt. As between themselves, however, their rights and liabilities depend on the relation they sustain to each other and to the transaction: 10 C. J. S., Bills and Notes, sec. 37(f) p. 465. It is frequently said that each joint debtor is surety for the other as to the amount beyond his agreed liability: Ackerman's Appeal, 106 Pa. 1, 5; Miller's Appeal, 119 Pa. 620, 630, 631, 13 A. 504; Slaymaker v. Gundacker's Exrs., 10 Serge. & Rawle 75, 81, 82; Watson's Appeal, 90 Pa. 426, 430. It is clear, then, that Goldentyer is presumptively liable over to his co-defendants who paid the payee, the legal plaintiff, and therefore, that their nominee, the use-plaintiff, is presumptively entitled to subrogation. See Reimel v. Northwestern Trust Company, 304 Pa. 121, 127, 155 A. 106.

There can be no doubt that the money paid by the three defendants under the agreement with Lit Brothers, was a purchase of the notes and not payment with intent to discharge. This is clear from the agreement and even if it were not, the intent to keep the obligation alive would be presumed: Croft v. Moore, 9 Watts 451, 454, 455; Gossin v. Brown, 11 Pa. 527, 532, 533; Morris v. Oakford, 9 Pa. 498. Nor is a formal assignment necessary to protect the one who pays: Lloyd v. Barr, 11 Pa....