Naef v. Potter

• Decision Date: 18 April 1907
• Citation: 80 N.E. 1084,226 Ill. 628
• Parties: NAEF et al. v. POTTER.
• Court: Illinois Supreme Court

226 Ill. 628

80 N.E. 1084

NAEF et al.

v.POTTER.

Supreme Court of Illinois.

April 18, 1907.

Appeal from Appellate Court, First District.

Action by Frances E. Potter against Otto Naef and another. From a judgment for plaintiff, defendants appeal. Affirmed.

George W. Plummer and Wharton Plummer, for appellants.

Joseph B. Leake, for appellee.

VICKERS, J.

This appeal brings before us the record of a foreclosure proceeding in the Cook county circuit court wherein Frances E. Potter was complainant and Otto Naef and others were defendants. The court below found for the complainant and entered its decree of foreclosure of a trust deed executed by Otto Naef and wife on June 5, 1897, to secure a promissory note for $6,500. The decree has been affirmed by the Appellate Court for the First District, and appellants prosecute this further appeal.

On June 5, 1897, appellants executed the note and trust deed in question, and delivered the same to Charles Rascher. The note matured three years after date. Appellants set up the defense that the note and trust deed were executed as accommodation paper, to be used by Rascher as collateral security with the American National Bank, and with no other person, to secure a loan of $3,500 to Rascher. Appellants' note and trust deed were used by Rascher as collateral with the American National Bank, and were held by said bank until after appellants' note matured by its terms. The principal note to which appellants' note and trust deed were collateral had been reduced by payments to $2,200. Rascher executed a note for $2,200, upon which appellee furnished the money to pay the balance due the bank. Appellants' note and mortgage were withdrawn from the bank and hypothecated to complainant as collateral security for the $2,200 note. Appellants contend that the use of this note and trust deed as collateral to the $2,200 note payable to appellee was such a wrongful diversion of the accommodation paper from the original purpose for which it was executed that they are not liable. Appellants' contention cannot be sustained. There is no proof in this record that appellee had any notice of the alleged restrictions as to the use to be made of the note and trust deed by Rascher, and the rule is well established that one who has received accommodation paper after it has been diverted from its contemplated purpose, without notice of the diversion, in good faith and for value, is entitled to recover thereon. 1 Am. & Eng. Ency. of Law (2d Ed.) p. 384, and cases cited.

But it is said appellee accepted the note and trust deed after maturity, and the rule applicable generally to commercial paper is invoked-that the transferee of past-due negotiable paper takes it...