Swett v. Stark
| Decision Date | 01 August 1887 |
| Citation | 31 F. 858 |
| Parties | SWETT v. STARK and another. |
| Court | U.S. District Court — Northern District of Illinois |
Rossington Smith & Dallas, for complainant.
Edsall & Edsall, for defendant.
On the eighteenth day of January, 1885, the defendants executed their two negotiable promissory notes,-- one for $2,000 payable to Mark P. Hillyer on the first day of May of the same year; and the other for $3,000, payable to the same person on the eighteenth day of January, 1891. Both notes were executed at Thomson, Illinois and payable at that place; and, to secure their payment, the defendants executed a mortgage upon real estate in Illinois. The mortgage contained a covenant whereby the principal of the notes was to become due if default occurred in the payment of any installment of interest; the interest being payable yearly. The notes and mortgage were sold and assigned to the plaintiff, before maturity, for value. Default occurred in the payment of interest on both notes, and the holders elected to declare the principle sum due, and brought this suit to foreclose the mortgage.
After setting up defenses which would be good against the payee the answer avers that the notes and mortgage were executed in Illinois, (where the notes were made payable,) with reference to the laws of that state, by which an assignee of such a mortgage could acquire no greater right, against the maker of the notes and mortgage, than the payee and mortgagee had; and that, in this suit to foreclose the mortgage, the defendants are entitled to all the defenses which they might plead if the mortgagee were complainant. The answer is excepted to as insufficient.
It is not claimed that there is a statute in Illinois under which the defendants may assert against the complainant, as the assignee and bona fide holder of the notes, the same equities or defenses which he would be entitled to against the payee. It has been held by the supreme court of Illinois, not under any local statute, but as a question of general or commercial law, that if a mortgage is given to secure a negotiable note and both the note and mortgage are transferred before maturity to a bona fide indorsee, he holds the mortgage subject to all equities between the original parties. But the supreme court of the United States has established a different rule for the federal courts. That court has held that where a negotiable note, secured by a mortgage, has been transferred to a bona fide holder for value before maturity, and a...
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