First National Bank v. Lawall , 280 Pa. 407 ( 1924 )

Opinion by

Mr. Justice Sadler.

One Tbomas was tbe owner of an interest in a coal lease, wbicb be_ assigned as collateral security to a savings bank at Pittston. Later, he transferred his remaining equity therein to the plaintiff here, to protect any loans he might have or thereafter make. Within a month, in 1915, he borrowed a considerable sum on four notes, drawn to the order of Lawall, the defendant, and another, both of whom endorsed the same, and guaranteed prompt payment according to the terms of the obligations, and these notes were discounted by the plaintiff. It was to recover on the amount advanced that suit was brought in 1921.

An affidavit of defense, raising a question of law, held insufficient, was followed by a second, directed to the merits of the contention, which in turn was overruled as evasive, and a judgment was entered for the plaintiff. Later, a petition was presented, asking that it be opened, so that a supplementary affidavit could be filed, which application was denied, though execution was stayed until the collateral deposited with the bank could be disposed of, and its value thus determined.

By subsequent proceedings, the plaintiff asked that the limitation be removed, and an order followed permitting a rehearing, both as to the right to file a supplemental affidavit, as well as to consider the application to remove the restriction witholding immediate execution, which ended in a direction, though dissented from by one member of the court below, that the judgment be opened, and leave be granted to set up the new defense. In the meantime, the interest of Thomas in the coal lease was sold at a fair public sale, after frequent efforts to secure a private purchaser, but the proceeds were insufficient to liquidate the indebtedness of the first assignee, and nothing remained to apply to the claims of the plaintiff here.

The second defense rested upon a promise alleged to have been made by the president of the plaintiff bank, acting for and on its behalf, that defendant would not incur any liability, — his endorsement being only a matter of form, — since the indebtedness represented would be liquidated by tbe sale of tbe interest in tbe coal lease, held as collateral, at a sum largely in excess of the amount of tbe notes, and that negotiations to this end were already in progress. Tbe appellee insisted these averments were insufficient to prevent judgment, and the rule to show cause why such should not be entered was made absolute. All of tbe judges, to whom tbe matter was presented, concurred in this determination, though giving different reasons for tbe conclusion reached. This appeal followed.

Tbe legal question here, involved is tbe sufficiency of tbe defense, in view of tbe contemporaneous parol agreement set up, which is alleged to have been the inducement to tbe signing of tbe notes sued upon. For tbe purpose of this discussion, tbe averments of tbe affidavit will be considered as true. It is correctly stated that where, at tbe execution of tbe writing, a stipulation has been entered into, a condition annexed, or a promise made by word of mouth, upon tbe faith of which tbe writing has been executed, parol evidence is admissible, though it may vary and materially change tbe terms of tbe contract: Michigan Mut. Life Ins. Co. v. Williams, 155 Pa. 405. Likewise, if there is an attempt to make a fraudulent use of tbe instrument, in violation of a promise or agreement made at tbe time of signing, and without which it would not have been executed, parol evidence is admissible to contradict or vary tbe terms of tbe writing: Kerr v. McClure, 266 Pa. 103; Tasin v. Bastress, 268 Pa. 85, 91. And tbe same principle is applied where tbe understanding is- to pay tbe obligation from some particular fund in tbe bands or control of tbe promisor: Gandy v. Weckerly, 220 Pa. 285, tbe case relied on now by appellant. It will, however, be noticed that, in tbe authority last cited, there was set up a promise to pay tbe note from a fund to be received by tbe plaintiff, and not an agreement that tbe maker should be relieved from all responsibility on tbe obligation, as claimed by tbe present defendant.

The distinction suggested has been recognized in the decisions of this court. In Second Nat. Bank of Reading v. Yeager, 268 Pa. 167, 169, it was said: “In an action on a promissory note, defense may be made of an oral contemporaneous parol agreement providing for payment of the note from a certain fund, or the raising of such fund for payment by means over which the promisor had control; in such case, the source of payment must be first exhausted before recourse can be had upon the note.” It was there held that an affidavit of defense setting up such a parol agreement must likewise aver the existence of resources applicable to the payment of the obligation. This situation is not presented here. The bank had certain collateral, subject to prior claims of others, but any equity which it had therein was divested by a sale for a sum less than sufficient to pay the holders of the first assignment, prior to the filing of the supplemental affidavit.

Defendant admitted his endorsement of the note, and that the bank paid full value therefor. He does not insist there was any fraud, accident or mistake in its execution, that it was improperly used, or a condition annexed, or any fund in the hands of the holder applicable to its payment, but only that he was not to be held liable, since the collateral was believed to be sufficient at the time of signing. The effect of the evidence proposed in substantiation of the defense would not be to vary the written instrument, but nullify and destroy it, — assuming that the facts alleged can be shown, — and this is not permissible: Second Nat. Bank of Reading v. Yeager, supra; Gilmore v. Gilmore, 276 Pa. 333; Evans v. Edelstein, 276 Pa. 516. A case, similar in its facts, where a like determination was made, is found in First Nat. Bank of Greencastle v. Baer, 277 Pa. 184.

We agree with the learned court below that the supplemental affidavit was insufficient, and judgment was therefore properly entered for the plaintiff. The one assignment of error is overruled.

The judgment is affirmed.