Erie Boot & Shoe Co. v. Eichenlaub

Opinion, Mr. Justice Mitchell: This action was brought upon a promissory note made in the name of the company plaintiff in error by Joseph P. Eiehenlaub, its president, in favor of the estate of Joseph Eichenlaub, deceased, of which he was himself the executor. It was [168] therefore a note hr the name of a principal, but made by an agent in his own favor. The affidavit of defence avers that the note was made fraudulently, without the knowledge or authority of the company, and without consideration, and that the plaintiff below had knowledge of these facts before he took the note. The court below, conceding that this established a prima facie defence against the payee, nevertheless held the affidavit insufficient in the present action because the plaintiff had become the holder through his payment of the note to the bank. But this view of the case overlooks two important points in defendant’s favor. First; it nowhere appears that the bank was a bona fide holder for value before maturity. In fact it is only stated collaterally and argumentatively that the bank was a holder of the note at all; all that appears on the subject anywhere in the record being that part of the plaintiff’s statement which says that the defendant “ has never paid the said note or any part thereof, and the plaintiff was compelled and did pay to the Second National Bank, the owner and holder of said note, the sum of ten thousand dollars,” etc. Where the affidavit avers that a note was made or put in circulation fraudulently, it must appear that the holder has such a title as bars all the equities between the original parties. Under the former affidavit of defence law, such an affidavit was sufficient to prevent judgment: Smith v. L. & B. Ass’n, 93 Pa. 19. How far, under the procedure act of 1887, the plaintiff’s statement may supply the proof of title previously required to be made to a jury, it is not necessary now to consider, as it is entirely clear that nothing short of a specific and positive averment of the whole facts in plaintiff’s title, can. have that effect, and there is no such averment here. For all that appears, the bank may have been a mere depository of the note for the purpose of collection. On this branch alone the affidavit was sufficient. But secondly; even if the bank was a bona fide holder, judgment could not be entered in favor of the plaintiff, in the face of the supplemental affidavit that he knew of and was a party to the fraudulent arrangement by which the note was made. The bona fide title of a holder protects all subsequent holders, as a general rule, but this protection does not extend to a party to the original fraud. [169] The affidavits therefore set up facts which if true are a good defence against the present plaintiff. The counter statement of the defendant in error gives an entirely different version of the transaction, and states several facts that would do away entirely with the defence set up, hut being no part of the record these allegations cannot be considered here. The point against the affidavit that it is made by a mere stockholder without setting out any special knowledge of the facts, or any reason why it is not made by an officer or director, is well taken, but its effect is obviated by the averment in the supplemental affidavit that th e affiant is the manager of the business of the company. Upon the case as it stands, the defendant was entitled to go to a jury. Judgment reversed and procedendo awarded.