Keller v. Cohen , 217 Pa. 522 ( 1907 )

Opinion by

Mr. Justice Elkin,

This is an appeal from the order of the court below making absolute a rule for judgment for want of a sufficient affidavit of defense. The action is brought on two promissory notes made payable in five years from the date thereof, without interest. No question is raised as to the execution of the notes, but the affidavits of defense, among other things, set up that the appellant was induced to accept the loan, sign the notes and execute and deliver the assignment on the faith of the representation made by the appellee that the loan should be paid out of the immediate proceeds of profits derived from the sale of umbrella tubes made, and not otherwise, without which assurance and inducement Cohen would not have accepted the loan, signed the notes or executed the assignment. It appears from the averments contained in the affidavits of defense that some months prior to the execution of the notes the appellant, with one Seymour, applied for a patent for an improve-merit in umbrella tubes, which was afterwards granted. The appellee was desirous of obtaining an interest in the patent, and opened negotiations with appellant for the purpose of effecting an arrangement for the manufacture of umbrella tubes by the patent process. As a result of these negotiations appellee, on September 8, 1898, submitted to appellant a proposition in writing, setting out in substance that he would provide all the necessary cash funds to build a complete set of machines for the manufacture of umbrella tubes on the condition that appellant and Seymour transfer to him twenty per cent of their respective holdings in the patent. He also proposed to advance Oohen the sum of $1,500, afterwards increased to $2,000, and agreed that the amounts so advanced should be paid back out of the immediate proceeds of profits derived from the sale of umbrella tubes made. The affidavit further avers, “ that neither at the time of said proposal and its acceptance, nor at any time since, was there ever any agreement or understanding between defendant and plaintiff that said sum so advanced was to be paid from the proceeds of said insurance policy; but it was always understood and agreed between plaintiff and defendant that said sum so advanced was to be repaid from the profits derived from the sale of umbrella tubes made, said insurance policy having been assigned as collateral for the purpose of securing to plaintiff the performance by defendant of his part of the agreement, namely, to assign to plaintiff twenty per cent of defendant’s interest in said patent, and to repay said sum so advanced out of the immediate proceeds of profits derived, from the sale of umbrella tubes.” It is further averred that in pursuance of the agreement and understanding between the parties to this transaction, the Pennsylvania Tube Company was incorporated for the purpose of manufacturing umbrella tubes ; that the appellee is the president and principal stockholder of said company, and has had the management of its business, and has failed to render an account to appellant for any profits derived therefrom, or to show that said profits had not been applied on account of the moneys advanced. In the supplemental affidavit of defense it is further averred that the contract consisted of four concurrent elements, to wit: the proposal of September 8, 1898; the execution of the notes in question ; the advance of the said $2,000 ; the assignment of the insurance policy as collateral; and that without the concurrence of all these elements appellant would not have received the money advanced, executed the notes in question and entered into the transaction.

The legal effect of the averments contained in the affidavits of defense, is that the inducement which caused the appellant to accept the loan, execute the notes and make the assignment, was the agreement by appellee that the loan should be repaid out of the immediate profits derived from the sale of umbrella tubes. It is clearly competent for parties to contract for the payment of an obligation out of a particular fund and in a particular manner: Chambers v. Jaynes, 4 Pa. 39; Sartwell v. Wilcox, 20 Pa. 117; Creery v. Thompson, 26 Pa. Superior Ct. 511; Wharton on Contracts, sec. 598.

There can be no doubt that a good defense is made out by the facts stated in the affidavits, unless the rule contended for by appellee is held to be applicable; that is to say, appellant cannot take advantage- of the alleged contemporaneous agreements in writing because they in effect contradict the notes upon which suit is brought. Wharton v. Douglass, 76 Pa. 273; Lee v. Longbottom, 173 Pa. 408; Fuller v. Law, 207 Pa. 101, are relied on to support this contention. We do not question the' correctness of the rule laid down in these cases, but the facts relied on to sustain it are entirely different from those in the case at bar. As was stated by Mr. Justice Williams in Coal and Iron Company v. Willing, 180 Pa. 165: “The existence of a contemporaneous parol agreement between the parties, under the influence of which a note or contract has been signed, may always-be shown when the enforcement of the paper is attempted.” To the same effect is Keough v. Leslie, 92 Pa. 424; Martin v. Kline, 157 Pa. 473; Martin v. Fridenberg, 169 Pa. 447.

In the case at bar, however, the appellant does not rely on a parol agreement, but sets up an agreement in writing in support of his contention that the notes were to be paid out of a particular fund. The notes in question and the written agreements providing the manner of payment make up the whole contract between the parties, if the averments in the affidavits of defense are true, and we must so treat them in the disposition of the question raised on this appeal. This is not in conflict with the cases cited by appellee, because the agreement set up is not wholly inconsistent with the terms of the notes. The execution of the notes is acknowledged, the amount advanced admitted, but it is averred that “ the amount advanced (is) to be paid back to me from the proceeds of the profits derived from the sale of umbrella tubes made.” This only affects the manner of payment and specifically designates a source from which a fund is to be derived for the payment of the notes. If this was the agreement of the parties, they are bound by their own covenants. Certainly the facts averred are sufficient to put the parties to their proof on a trial before the jury.

Judgment reversed with a procedendo.