Melendy v. Keen

Citations

• 89 Ill. 395

Syllabus

<p>1. Fraud—defense to note and mortgage obtained by false and fraudulent representations. Where a note secured by mortgage is procured to be made to a railroad company for stock subscribed by the maker, by means of’ false and fraudulent representations, made by the officers and others on behalf of the company, as to the financial condition of the company at the time, and as to the value of the stock and dividends it would earn, which are relied on, the fraud in procuring the execution of the note and mortgage will constitute a complete defense against the collection of the same by the company, or an assignee, after maturity, of the note.</p> <p>2. Assignee—as to mortgage—how far protected against defense. In equity, the assignee of a promissory note, even though taking before its maturity, who seeks to foreclose the mortgage by which it is secured, takes it subject to any defense the maker has against the same in the hands of the original payee and mortgagee. But it. is said the rule is different where the mortgage is assigned with the consent of the mortgagor, and such seems to be the doctrine on this subject-.</p> <p>3. Assignment—to mi off defense of maker. The transfer of a note, and mortgage securing the same, made in the body of a separate instrument, executed for an independent purpose, as, an obligation of the transferer to pay money due from him, does not have the effect to transfer the note and mortgage so as to afford the holder that protection accorded to an assignee of a negotiable instrument before maturity without notice of any existing defense.</p> <p>4. Recoupment—allowed in equity. Where a railroad company, at the time of the execution of a note to it, secured by mortgage on real estate, in payment for stock subscribed, executes and delivers to the maker, as a part of the same transaction, a written guaranty indemnifying him against the interest, on the note, in consideration of the maker’s transfer of the dividends on his stock to that extent, th