Camden National Bank v. Fries-Breslin Co. , 214 Pa. 395 ( 1906 )

Opinion by

Mr. Justice Brown,

In plaintiff’s statement there is an averment that it became the holder of the note in suit for value- before maturity, and without notice of any defense that the maker might have. The circumstances under which it obtained the note are set forth in detail. The defendant seeks to avoid liability on the obligation by averring that it was procured by fraud and that the plaintiff is not a bona fide holder for value and without notice. If the note was procured by fraud, the holder would be put to proof of consideration, that it had acted fairly, paid value, and had no notice of the alleged fraud: Hutchinson v. Boggs, 28 Pa. 294; Hoffman v. Foster, 43 Pa. 137; Reamer v. Bell, 79 Pa. 292; Lerch Hardware Co. v. First National Bank of Columbia, 109 Pa. 240; Real Estate Investment Co. v. Russel, 148 Pa. 496.

From a careful examination of the affidavit of defense it is clear that there is no such allegation of fraud in connection with the procurement of the note by Fries, the payee, as would be sufficient to prevent judgment if the suit had been brought on it by him, instead of by the present plaintiff. The alleged fraud upon which the appellant relies for a reversal of the judgment is thus set forth: “ Frederick Fries, John M. Carroll, T. J. Breslin, and others were stockholders in the Fries-Breslin Company, a corporation created by and existing under the laws of the state of New Jersey, with its principal offices at Camden, N. J., and the said Frederick Fries claimed, on or before November 25, 1901, that the said Fries-Breslin Company was indebted to him for dividends in a large sum of money. This was denied by the defendant company, chiefly on the ground that the said dividends had not been regularly or formally declared. After suit in the courts of the state of New Jersey it was adjudged that the said dividends were regularly declared, and thereupon the note in the aforesaid suit was given, together with several other notes.” This is an admission by the defendant that the note in suit was given in payment, or part payment of the dividends to which it had been judicially determined Fries was entitled. The affidavit of defense then proceeds to aver: “ After giving the said note it was discovered by the stockholders of the said company that the said dividends had not been earned, but had been made to appear as due by a fraudulent conspiracy among Frederick Fries and Thomas J. Breslin, whereby, by means of fictitious inventories, dividends were made to appear as earned, when as a matter of fact they had not been earned.”

It is to be noted that there is no averment by the defendant that the judicial determination of the regularity of the award of dividends to Fries does not still stand as a judgment that he is entitled to them, and, this being so, his right to receive them cannot be attacked in this proceeding. Until the judgment establishing their regularity has been opened, modified or-reversed, the defendant can make no defense in a suit to collect a note given in payment of them. In the suit brought to determine the regularity of the dividends and the right of Fries to receive them every question relating to them was raised, or ought to have been raised.

There is a further averment in the affidavit of defense that the same state of affairs exists regarding a claim of Breslin against the said Fries-Breslin Company; that on July 9,1904, a bill in equity was filed in the United States circuit court for the district of New J ersey, praying that the said Breslin be enjoined from collecting his claim by reason of the alleged fraud perpetrated by him and the said Fries; that thereafter, on July 30, 1904, an injunction was awarded by the said court enjoining the said Fries-Breslin Company from paying Fries and Breslin any sum of money on account of alleged profits of said company alleged to be due to them, and from paying said Breslin any sum of money on a certain judgment recovered by him against the said company in the supreme court of the state of New Jersey, or through any process issued thereon, and restraining Breslin from collecting the same. But there is nothing in this averment to show that the company was enjoined from paying to Fries the dividends judicially found to have been regularly awarded to him, and in payment of which the company gave the note in suit. There is no allegation that the company was enjoined from paying him his dividends, or that he was enjoined from collecting the note in suit. In short, in this last averment nothing appears as a reason why the company should not pay the note to Fries or to the present holder. Breslin has been enjoined from collecting his judgment, and the Fries-Breslin Company has been enjoined from paying him and Fries any money on account of alleged profits, are the averments of the affidavit of defense; but there is no averment, as stated, that the company has been enjoined from paying the dividends to Fries, or the note given for them. The affidavit of defense must lie taken most strongly against tbe defendant which made it, and as there is no averment that Fries has been enjoined from collecting the dividends awarded to him, it is to be assumed that the defendant could not make it.

There is nothing else in the affidavit of defense requiring notice, for nothing else appears that can be regarded as a defense. Though the plaintiff holds the note as, collateral security, in the absence of any defense against it, even if it was still in the hands of the payee, the appellee is entitled to judgment for the whole amount due on it, with liability to account for the surplus to Fries, for whom the bank will hold said surplus as trustee: 4 Am. & Eng. Ency. of Law, (2d. ed.), p. 347.

Judgment affirmed.