Hart v. United States Trust Co.

• Decision Date: 13 February 1888
• Docket Number: 18
• Citation: 118 Pa. 565,12 A. 561
• Parties: WM. R. HART v. THE UNITED STATES TRUST CO
• Court: Pennsylvania Supreme Court

12 A. 561

WM. R. HART v. THE UNITED STATES TRUST CO

118 Pa. 565

No. 18

Supreme Court of Pennsylvania

February 13, 1888

Argued January 11, 1888

ERROR TO THE COURT OF COMMON PLEAS NO. 3 OF PHILADELPHIA COUNTY.

No. 18 July Term 1887, Sup. Ct.; court below, No. 477 December Term 1886, C.P. No. 3.

On December 4, 1886, an action was brought by the United States Trust Company, of New York, against William R. Hart, to recover upon two notes, the copies of which filed were:

$3,417.29

PHILADELPHIA June 24, 1886.

Five months after date I promise to pay to the order of Martin Kalbfleisch's Sons thirty-four hundred and seventeen .29 dollars. Without defalcation, value received.

WM. R HART.

[Indorsed]

MARTIN KALBFLEISCH'S SONS.

Pay J. A. Lewis, cashier, or order for collection for account of Manhattan Company, N.Y.

$2,518.74

PHILADELPHIA, July 10, 1886.

Four months after date I promise to pay to the order of Martin Kalbfleisch's Sons twenty-five hundred and eighteen .74 dollars. Without defalcation, value received.

WM. R. HART.

[Indorsed as the one above.]

On December 24, 1886, an affidavit of defence was filed which set forth:

The notes of which copies have been filed are notes signed by the deponent for the accommodation of the payees, Martin Kalbfleisch's Sons, and by him delivered to them without receiving any consideration therefor; the said Martin Kalbfleisch's Sons suspended payment early in August, 1886, and at that time, as this deponent is informed, had in their possession the notes in suit, which they then promised this deponent not to use but to return to this deponent. That thereafter, this deponent is informed, the said payees caused these notes to be deposited with the plaintiff as collateral for an antecedent debt, but this deponent is informed that the plaintiff gave no value and allowed nothing upon the notes in suit; and therefore this deponent avers that the plaintiff is not a holder of the notes in suit for a valuable consideration; all of which facts this deponent is informed and believes to be true, and expects to be able to prove at the trial of this cause, if any there be.

On February 26, 1887, the plaintiffs took a rule for judgment for want of a sufficient affidavit of defence, which rule on April 2, 1887, the court, FINLETTER, P.J., filing no opinion, made absolute, and on April 9, 1887, judgment was entered in favor of the plaintiff for $6,069.27. Thereupon the defendant took this writ assigning the order for judgment as error.

Judgment affirmed.

Mr. Samuel Dickson (with him Mr. Richard C. Dale), for the plaintiff in error:

The rule of Lord v. Ocean Bank, 20 Pa. 384, and that line of cases, which sustain the right of a holder of paper as collateral for an antecedent debt to enforce payment against an accommodation maker or indorser, has no application. When these notes were given to the payees, they were given to them as solvent men. Their failure changed the relations of the parties: they might then have been compelled to return the notes: Dougherty v. Central N. Bank, 93 Pa. 227. They recognized their duty to return and promised to return them; they then were no longer the holders with the right to use them for their own benefit, but bailees with the duty to return, and their subsequent use was a clear misappropriation and fraud upon the maker. While an accommodation maker may not defeat the purpose for which the paper was made, he may impeach the paper for fraud in its making or procurement, or in its misappropriation by the payee: Carpenter v. N.B. of the Republic, 106 Pa. 170; Royer v. Keystone N. Bank, 83 Pa. 248; Maynard v. Sixth N. Bank, 98 Pa. 250. In the last cited case, it was said by Mr. Justice PAXSON: "It is an undisputed fact in this cause that the note in controversy was held by the plaintiff below merely as a collateral security for an antecedent debt. It was not, therefore, a holder for value, and the defendants were entitled to set up any defence they had against the payee."

Mr. William S. Devine and Mr. Samuel B. Huey, for the defendant in error.

The maker of accommodation paper pledged for an antecedent debt may not set up want of consideration as a defence against a recovery by the indorsee: Appleton v. Donaldson, 3 Pa. 381; Lord v. Ocean Bank, 20 Pa. 386; Twining v. Hunt, 7 W.N. 223; Shaeffer v. Fowler, 111 Pa. 451, 459. While the exception, which allows the maker in case of the fraudulent use of the paper, to set up want of consideration, found in the cases relied upon by the defendant, is as well defined as the rule itself, yet those cases are distinctly and expressly ruled on the ground that they do not come within the principles ruling accommodation paper. It would be extending the exception to a point not yet reached if it be held that a defence which admits the accommodation character of the paper, and relies solely on the ground of an unexecuted parol promise made after delivery, and without consideration, can avail against an innocent holder to whom the paper was pledged before maturity.

Before GORDON, C.J., PAXSON, STERRETT, GREEN, CLARK and WILLIAMS, JJ.; TRUNKEY, J., absent.

OPINION

JUSTICE WILLIAMS:

This action was brought to recover the amount of two promissory notes. They were given by Hart payable to the order of Martin Kalbfleisch's Sons, and indorsed by them to the trust company. The affidavit of defence set out the following facts:

1. That the notes were without consideration, having been made for the accommodation of the payees.

2. That before their negotiation the payees becoming insolvent suspended payment.

3. After such suspension the payees promised Hart not to use, but to return the notes.

4. Notwithstanding such promise, the payees did not return them but turned them over to the trust company as collateral security for an...