Naef v. Potter

Mr. Justice Ball

delivered the opinion of the court.

It appears from, the evidence that appellee through her agent, William S. Potivin, made a loan of $2,200, represented by the principal note in this case, to Charles Eascher about the time of the date of the note, and that the $6,500 note signed by Otto Naef and secured to be paid by a trust deed from Haef and his Wife to Fred Whitfield, trustee, ■were then taken as collateral security. That at the time she made this loan upon the faith of the collaterals appellee did not know that the $6,500 note was accommodation paper, or'that its use was in any way restricted.

Otto Haef in bis answer admits that Eascher August 4, 1900, delivered said $6,500 note to appellee “ as collateral security for a sum of money borrowed by said Eascher from said Potter"; but charges that said delivery was wrongful and was made long after said $6,500 note had matured.

It follows that the decree ordering the sale of the prem.iscs described in the deed of trust to Whitfield is right, unless the special defense set up in the answer of Naef to said bill is controlling.

The master saw and heard the witnesses. His means of determining where the truth lay are necessarily much superior to' ours, seeing as we do but the printed page. When the finding of the master upon questions of fact has been approved by the chancellor, unless we can say from an examination of -the record that the weight of the evidence is clearly and manifestly against the finding, we cannot disturb it. Williams v. Lindblom, 163 Ill. 350; Burgett v. Osborne, 172 Ill. 227; Siegel v. Andrews & Co., 181 Ill. 356; Mayrand v. Mayrand, 194 Ill. 45, and cases cited. We have made a careful examination of the record, and are not convinced that the master, when he found that the defense interposed by Otto Raef was not proved, decided against the clear weight of the evidence.

It was the intention of Otto Raef when he gave the $6,500 note and trust deed to Rascher to furnish to Rascher collaterals which would enable him to get a loan of $3,500 from the American Exchange Rational Bank; and he must be held to have agreed that if Rascher did not pay said sum of $3,500 in full when due, the bank should have the power, if necessar}7-, to foreclose the trust deed in order to make itself good. The bank then had the same right to this collateral paper it would have had, had it paid the $3,500 to Raef.

When Rascher’s note came due it was unpaid to the extent of $2,200. The bank would not extend the paper. He could not pay this remainder without borrowing. To get the money he executed the principal note in suit, and by a tender of the collateral induced appellee to advance $2,189.27 cash upon it. The transaction was closed in this way: Rascher and the agent of appellee went to the bank, and the money of appellee was there paid to Rascher and by him to the bank, and then the bank cancelled the $3,500 note and handed the collateral note and trust deed to Rascher, who turned them over to the agent of appellee. Thus Rascher’s indebtedness remained unpaid, although the evidence of it was changed. The debt thereafter due to appellee ^asjihs-same debt theretofore due to thejaank. The transaction was a continuing one, and in our opinion the collateral in the hands of appellee remained still subject to the extinguishment of the Rascher debt. Jackson v. First Nat’l Bk., 42 N. J. L. 177.

Raef is asked in this suit to do no more than he agreed to do, i. e., to pay whatever part of the Rascher $3,500 note the maker thereof neglected and refused to pay.Dawson v. Goodyear, 43 Conn. 548.

A consideration passing from the original payee to the maker of accommodation paper is not necessary to its validity, it being considered that the maker of such paper by his signature holds himself out to the public to be bound to every person who shall take the paper for value the same as if it was paid to himself. 1 Daniels’ Neg. Insts., sec. 726; Waite v. Kalurisky, 22 Ill. App. 382; Yeomans v. Lane, 101 Ill. App. 227; Greenway v. Orthwein Grain Co., 85 Fed. 536; Swift v. Tyson, 16 Peters, 1; Railroad v. Nat’l Bk., 102 U. S. 14.

The fact that the holder of accommodation paper knew when he took it that it was accommodation paper, will not affect his right to a recovery thereon. To hold the contrary would defeat the use and purpose of such paper as understood and acted upon in the commercial world. Metcalf v. Draper, 98 Ill. App. 409; Hodges v. Nash, 141 Ill. 394.

Rotice of the restriction placed upon the use of this collateral paper was not brought home to appellee. The evidence is clear that she,took it in good faith for value without knowledge that it was accommodation paper, the use of which was limited by' Rascher to its deposit with the bank. Under these circumstances appellee took the collateral free from the equities, if any, existing betwmen Rascher and Haef, although when she received the paper it was past due. Miller v. Larned, 103 Ill. 579, 580; 1 Daniels' Neg. Insts., sec. 726; Sturtevant v. Ford, 4 Manning & Granger, 101; Brown v. Mott, 7 John. 361; Redfield v. Bigelow’s L. Cas. 217; Harrington v. Dow, 3 Rob. 275; Bowman v. Van Kuren, 29 Wis. 209, 216; Schneider v. Lebanon D. & C. Co., 73 Ill. App. 617.

The fact that this $6,500 note was secured by a trust deed did not affect its negotiability nor require the person taking it as collateral security to make inquiry as to whether the statement concerning the security was true. Olds v. Cummings, 31 Ill. 188; Biegler v. M. L. & T. Co., 62 Ill. App. 560; Howry v. Eppinger, 34 Mich. 20; Metcalf v. Draper, 98 Ill. App. 406; Buehler v. McCormick, 169 Ill. 269.

The rule laid down in Olds v. Cummings, 31 Ill. 188, and many times restated by our courts, is not here in point. That case is based upon the older and superior equities existing in "the original mortgagor over those possessed by the assignee of the notes thus secured. But in the very nature of accommodation paper such older and superior equities do not belong to the original mortgagor. “ To allow equities existing between the original parties to accommodation paper secured by mortgage to prevail over the equities of the assignee of the note, would be to carry the doctrine of Olds v. Cummings to such an unreasonable extent as would ensnare honest dealers in such securities.” Miller v. Larned, 103 Ill. 580.

In accordance with these, views we "affirm the decree of the Circuit Court.

Affirmed.