118 Pa. 565 | Pa. | 1888
Opinion,
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 antecedent debt.
The court below entered judgment against the defendant for want of a sufficient affidavit of defence, and this ruling is here assigned for error.
The general rule as to the liability of the maker of an accommodation note was laid down with clearness in Lord v. The Ocean Bank, 20 Pa. 384. It was there said that “he who chooses to put himself in the front of a negotiable instrument
We are now asked to take one more step, in the way of impairing the commercial value of accommodation paper, by holding that the insolvency of the payee happening between the procurement and the negotiation of an accommodation-note, gives the maker the right to have his note retired; and. that the promise of the payee to deliver it up to him makes the subsequent negotiation of it a fraud on the maker, which he can set up against the holder who has taken it as security for an existing debt of the payee. But one who lends his credit, like one who lends his money, takes the risk of the continuing-solvency of the borrower. If insolvency happen it is not easy to see how the lender of his credit is placed in a worse position where it happens before, than where it happens after, the nego
In the case now before us Hart lent his note to Kalbfleisch’s Sons for their accommodation. Whatever conversation he may have had with them after their failure, he did not take back his note but left it in their possession. They made use of it before its maturity to secure an antecedent debt and perhaps saved themselves thereby from legal proceedings at the instance of the creditor. The trust company appear to have taken it without notice of the alleged agreement, in the ordinary course of business, before maturity, as security for an antecedent debt, and we can see no reason why they should not be permitted to collect it. It is better not to extend the exceptions to, or go further in the impairment of, the negotiability of accommodation paper. A note fairly obtained and properly used cannot be defeated in the hands of the holder, because the payee had promised to deliver it up, but had not done so, and that is the substance of the defence set up in this ease. If the maker had the right to recall it when the payee became
Judgment affirmed.