Earle v. Enos

• Decision Date: 13 May 1904
• Docket Number: 59.
• Citation: 130 F. 467
• Parties: EARLE v. ENOS.
• Court: U.S. District Court — Eastern District of Pennsylvania

130 F. 467

EARLE v. ENOS.

No. 59.

United States Circuit Court, E.D. Pennsylvania.

May 13, 1904

Asa W Waters, for plaintiff.

A. S Ashbridge, Jr., for defendant.

J. B McPHERSON, District Judge.

The affidavit of defense in this case is as follows:

'David G. Enos, being duly sworn according to law, deposeth and saith that he is the defendant in the above-entitled case, and as such has a just, true, full, and complete defense to the plaintiff's entire claim as contained in said statement, of the following nature, to wit:

'(1) The deponent admits that he signed the note upon which suit in this case was brought.

'(2) The deponent avers that at the time of the execution and delivery of the said note to the Chestnut Street National Bank, William M. Singerly was the president of the said bank, and was its chief executive officer; and the deponent further avers that he never received any consideration for the said note, and that he signed the said note as an accommodation to T. H. Bechtel, and for the accommodation of the said bank. The said note was delivered to the said William M. Singerly, president of the said bank, in the presence of the deponent, and the deponent then and there stated to the said William M. Singerly that he had not received and would not receive any consideration for the said note, to which the said William. M. Singerly replied that he understood that, that it was for the benefit of Mr. Bechtel, and that the bank would not look to the said D. G. Enos for the payment of said note, or hold him liable thereon, but would look to Mr. T. H. Bechtel alone, and his collateral deposited with said bank, for payment thereof. Thereupon the deponent delivered the said note to the said William M. Singerly, and the said note was discounted by the said Chestnut Street National Bank, and the proceeds thereof were credited by the said Chestnut Street National Bank to the account of the said T. H. Bechtel, who was a depositor in said bank at the time of its closing of its doors; and, in addition thereto, the deponent avers that the forty dollars paid on account of said note was paid by the said T. H. Bechtel, and not by the deponent.

'(3) The deponent specifically avers that he never received any consideration for this note, and that it was known by the said Chestnut Street National Bank, at the time it was discounted by them, that he had never received any consideration therefor, and the said Chestnut Street National Bank, through William M. Singerly, its president and chief executive officer, agreed to and with the deponent that it, the said bank, would not look to the deponent for the payment of the said note at maturity, or hold defendant liable therefor, but would only hold the said T. H. Bechtel, and his collateral deposited with said bank, liable therefor, and acknowledged that the said note was only delivered to the said bank as an accommodation for the said T. H. Bechtel and said bank; and upon this promise, and only upon this, the said note was delivered to the said bank.

'(4) At the time said note was delivered to said William M. Singerly there was in possession of said bank a certificate for 400 shares of the Black Lick Coal Company, 200 shares of which were pledged as collateral security for the payment of another note of $2,800 of said Bechtel, and the remainder of said collateral was not specifically pledged for the payment of any specific note, but was collateral security for payment of any indebtedness of said Bechtel to the payment of which the bank chose to apply the same. And it was these 200 shares of stock of Black Lick Coal Company which the said William . Singerly promised and agreed to apply to the payment of the note in suit at its maturity. At the time the plaintiff took possession of the assets of this bank said 400 shares of said stock came into his possession as receiver, and was subsequently sold by him for the sum of $10 per share, and he received the sum of four thousand dollars therefor, of which two thousand dollars was received from the sale of the unapplied collateral, which the said William M. Singerly covenanted and agreed with the deponent to apply to the payment of the note in suit. And said promise so to apply said collateral was the inducement upon which said note was secured by said bank. The said note was therefore paid when plaintiff received said two thousand dollars from the sale of said collateral, and should have been delivered to the defendant.

'All of which facts are true, and the deponent expects to be able to prove the same upon the trial of this case.'

In my opinion, this affidavit is insufficient to prevent judgment for the plaintiff. It sets up two defenses: First, that the defendant is an accommodation maker, and that the president of the bank knew that fact from the beginning of the transaction; and, second, that when the note was made and discounted a collateral agreement was entered into, which provided that the note need not be paid according to its terms, but should be taken care of by the bank out of the proceeds of certain securities that had been pledged by the indorser. These defenses have been decided to be ineffectual, both by the courts of Pennsylvania and the courts of the United States. The first defense was considered by the Supreme Court of Pennsylvania in Lord v. Ocean Bank, 20 Pa. 384, 59 Am.Dec. 728, and was decided to be insufficient; the court saying:

'But the maker of an accommodation note cannot set up the want of consideration as a defense against it in the hands of a third person, though it be there as collateral security merely. He who chooses to put himself in the front of a negotiable instrument for the benefit of his friend must abide the consequence ((Walker v. Bank) 12 Serg.& R. 382), and has no more right to complain, if his friend accommodates himself by pledging it for an old debt, than if he had used it in any other way. This was decided ((Appleton v. Donaldson) 3 Pa. 381) in a case strongly resembling the present one. Accommodation paper is a loan of the maker's credit without restriction as to the manner of its use.'

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