American Sign Co. v. Electro-Lens Sign Co.

[1] The action is to recover on promissory notes made by the defendant corporation and indorsed by its codefendants for deferred payments on the purchase price, under a contract of sale, of certain territorial rights or privileges under patents owned by the plaintiff; ^nd the primary question presented by the demurrer and motion to strike interposed by plaintiff to the answer and cross-complaint is whether in an action at law in this court on a contract not under seal the defense of failure of consideration based on fraud inducing the making of the contract can he interposed, the contention of plaintiff being that such a defense has no competent place on the law side in a federal court, but is cognizable only in equity.

The substantive question has given rise to some difference of view and decision in the lower federal courts, aidsing largely, I think, out of an unwarranted extension in some cases of the principles announced in the case of George v. Tate, 102 U. S. 564 , 26 L. Ed. 232 , the leading case relied upon by plaintiff to sustain its contention. That case was an action to recover on a bond given to prevent the levy or execution of a writ of attachment, wherein the…