Lord v. The Ocean Bank

• Decision Date: 01 January 1853
• Citation: 20 Pa. 384
• Parties: Lord versus The Ocean Bank.
• Court: Pennsylvania Supreme Court

20 Pa. 384

Lord versus The Ocean Bank.

Supreme Court of Pennsylvania.

ERROR to the District Court, Philadelphia.

Arundel, with whom was Falton, for the plaintiffs in error.—It was, inter alia, contended that the drawers had the right to have any moneys received from the collaterals applied to their note, and that in the affidavit of defence it was alleged that they expected to be able to prove that part of the moneys receivable on the securities had been received. The part so received should go to the relief or discharge of the note.

The right of subrogation may exist in this case. The second section of the Act of 28th March, 1835, relative to affidavits of defence in suits in the District Court, is in derogation of the common law, and should be strictly construed: 1 Miles 122; 6 W. & Ser. 482.

Hopper, contrà.—The whole of the paper held by the bank as

security for the note discounted, may be accommodation paper, and if the maker of every such note can set up such a defence, the securities could not be made available to the bank. It is not alleged in the affidavit that the note discounted has been paid in full, nor is the amount received by the bank on account specified.

The discount of the note was a sufficient consideration on the part of the bank. As to the consideration as between Adee, the payee, and the defendants as drawers, it is not material as respects the bank. Accommodation paper is a loan of the credit of the maker to the extent of the value of the note, for the benefit of the payee, without restriction: 3 Barr 386, Appleton v. Donaldson; 12 Ser. & R. 382, Walker v. Bank of Montgomery County.

There can be no substitution to the right of a party whose debt is not wholly satisfied: 6 Watts 221, Kyner v. Kyner.

The opinion of the Court was delivered by BLACK, C. J.

This suit was on a promissory note made by W. H. Lord & Co. payable to the order of Daniel Adee. The makers received no consideration from the payee. The note was made solely for his accommodation. He endorsed it to the Ocean Bank as collateral security for a note of his own which had been previously discounted there. These facts were stated in an affidavit of defence, but the District Court gave judgment for the plaintiff, being of opinion that if proved they would be insufficient.

It has been ruled in several cases, that one to whom a negotiable instrument has been endorsed as collateral security for a pre-existing debt, who has given no other consideration for it, is not a holder for value (11 Ser. & R. 377; 4 Wh. 258; 6 Wh. 220). The maker, it is said, may aver any ground of defence against the endorsee of such a note which would have been competent against the original payee (4 Harris 120). This...