Penn Safe Deposit & Trust Co. v. Kennedy

Citations

• 175 Pa. 160
• 34 A. 659
• 1896 Pa. LEXIS 1229

Syllabus

<p>Pi'omissory notes — -Accommodation notes — Defenses.</p> <p>An accommodation note is a loan of the credit of the maker to the payee which he may use as freely, and with the same effect as to the maker, as lie could use a note given for a full consideration. It is no defense for the maker of such a note when sued by the indorsee to aver the character of the note or knowledge of its character by the indorsee.</p> <p>A national bank desired to organize a safe deposit and trust company to be operated as an adjunct to the bank in the same building, and by the same clerks and bookkeepers. The capital stock was to be $125,000; $100,000 was to be paid for by the transfer to the trust company of some safe deposit vaults in the bank’s building, and the remainder was to be paid for in money by the bank. As the bank was forbidden to subscribe for stock directly, the directors joined in the execution of a note for $25,000 on the understanding that the note was to be entered on the books of the bank as having been regularly discounted, and the amount thereof carried to the credit of the company. Twenty shares of stock in the company were subscribed for by each of the eight makers of the note, and were issued to them as full paid stock, and at once turned over to the bank as collateral security for the payment of the note. The directors of the bank were elected directors of the trust company. Subsequently the bank, desiring to use the money that stood on its books as the deposit of the trust company, indorsed the note to the company, and canceled the credit for the deposit. Both the bank and the trust company subsequently failed. Held, (1) that as the directors had subscribed for the stock of the trust company, and given their personal note therefor, they were liable on the note in an action by the receivers of the trust company; (2) that even if the note had been an accommodation note for the accommodation of the bank, and this fact had been known to the trust company when it