Portland National Bank v. Scott

Promissory Note — Contemporaneous Parol Agreement. — In an action upon a promissory note where no illegality or fraud is charged, it is not competent to allege or prove a contemporaneous parol agreement for the purpose of changing, varying or in any manner altering the legal effect of such promissory note. Section 5200, United States Revised Statutes — Construction by Federal Courts.— The construction of a statute of the United States hy the supremo court of the United States is binding upon the state courts. Idem — Violation of by Bank — Its Effect. — A loan made by a national bank toan association or person of a greater amount or proportion than is permitted hy this section, does not render the security taken for such loan void.

Multnomah county: E. D. Shattuck, Judge. Defendant appeals. This action is founded upon three several promissory notes made by the defendant to the plaintiff. The complaint is in the usual form. The answer in effect admits the execution and delivery of the notes, but denies there is anything due thereon. The answer for a further and separate defense then alleges: That at the time of the execution of said notes, and each of them, it was understood and agreed between the plaintiff and the defendant and the Portland & Willamette Valley Railway Company, a corporation, in consideration of the execution and delivery of said notes by the defendant, that the said plaintiff would and shouldlook to the said Portland & Willamette Valley Railway Company for the payment thereof, the latter-named corporation having received the entire consideration upon which said notes were made, and would not and should not charge or seek to charge or hold this defendant liable in any manner on cither of said promissory notes. The answer contains a further defense as follows: “That the said notes were signed by the defendant upon the procurement and at the instigation of one William Reid, then and now president of the plaintiff corporation, and then president of a railway corporation known as the Portland & Willamette Valley Railway Company; that said«railway company at the time of the execution of said notes owed large sums of money to said bank and divers persons, and that under the laws and the national bank act mentioned in the complaint, and the rules of the treasury department of the United States, plaintiff was not permitted and could not loan further sums of money to said railway company upon notes signed directly by the said rail way’company or otherwise; and for the purpose of contravening and violating said laws and rules and deceiving the government of the United States, and its national bank examiners, and the stockholders of said bank, the said William Reid, as such president, conspiring and colluding with intent to so contravene and violate the law and said rules, and deceive the said government of the United States, and said bank examiners, and stockholders, falsely and fraudulently procured this defendant to execute said notes, the consideration therein named being paid to the said Portland & Willamette Valley Railway Company with the understanding and agreement, in consideration of the execution of said notes by the defendant, that defendant was not to be liable thereon for any sum or amount whatever. To these separate defenses the plaintiff demurred, which demurrer was sustained by the court and final judgment rendered in ‘favor of the plaintiff, from which this appeal is taken. A collateral agreement made contemporaneously with the execution of a promissory note may be pleaded in defense to an action on the note between the parties. (Davis v. Brown> 94 U. S. 423; Walbridge v. Kibbee, 20 Vt. 543; Gibbon v. Scott, 2 Stark. 286; Elmore v. Hoffman, 6 Wis. 67; Pecker v. Sawyer, 24 Vt. 459; Susquehanna B. and B. Co. v. Evans, 4 Wash. 480; Dibble v. Duncan, 2 McLean, 553; 2 Estee’s Pleading, § 3493; Goodwin v. Nickerson, 51 Cal. 166; Mvm.ro v. King, 3 Col. 238; Bissingerr v. Geuteman, 6 Heisk. 277; 1 Greenl. on Ev. § 302; Cobb v. O’Neal, 2 Sneed, 437; Mitchell v. Planter’s Bank, 8 Hun, 215; Leman v. Smart, 11 Hun, 807; Work v. Ease, 34 Pa. St. 138; Vary v, Norton, 6 Fed. Eep. 308; Taylor v. Schofield, 2 Oranch C. C. 315; Rey v. Simpson, 22 How. 341.) The parties stand in pari delido. (Broom’s Legal Max. 720.) If the plaintiff pleads so as to avoid the facts, the. defendant may set them up in his answer. (Simpson v. Bloss, 7 Taunt. 246; Lewis v. Cosgrove, 2 Taunt. 2.) We rely upon the general principle so sharply stated by Pollock, C. B,: “Fraud cuts down everything.” (1 Dan. Neg. Inst. § 194.) The notes sued on are void on the ground of public policy. ('Campbell v. Skinner, 30 Mich. 32; Hamilton v. Sculls' Admr. 25 Mo. 165, 69 Am. Dec. 460; Ager v. Duncan, 50 Cal. 325; Randall v. Howard, 2 Black, 585.) Defense of in pari delido available at law. (2 Pom. Eq. Jur. 457, note 2, 460, note 1.) ' The president of the bank is personally responsible under the national banking act. (Witters v. Bowles, 31 Fed. Rep. 1.) A contemporaneous verbal agreement cannot be set up to defeat the notes. (Mills Co. Nat. Bank v. Perry, 72 Iowa, 15, 2 Am. St. Rep. 228; Bank of U 8. v. Dunn, 6 Peters, 51; McDonald v. Elfes, 61 Ind. 279.) Section 5200, Revised Statutes II. S., has been construed by the supreme court of the United States. (Union G. M. Co. v. Rocky M. Nat. Bank, 96 U. S. 640; O’Hare v. Bank, 77 Pa. St. 96 ; Pangborn v. Westlake, 36 Iowa, 546; Vining v. Bricker, 14 Ohio St. 331.) The unlawfulness does not render the contract void. (Oates v. Bank, 100 U. S. 239.) The objection is available to the United States only. (Fortier v. Bank, 112 U. S. 439; National Bank v. Matthews, 98 U. S. 621; Bank v. Whitney, 103 U. S. 99.)