Pearce v. Rice

Syllabus

<p>F. owed H. & Co. on account about $22,000. He settled this in part by a cash payment, and in part by a transfer of promissory notes payable' to himself, the payment of two of which, for $5000 each, was guaranteed by him in writing. H. & Co. transferred these notes to a bank as collateral to their own note for about $13,000. They then became insolvent, and assigned all their estate to P. as assignee for distribution among their creditors. The bank sued F. on his guaranty. He set up in defence that his indebtedness to H. & Co. grew out of dealings in options in grain and other commodities, to be settled on the basis of “ differences,” and that it was invalidated by the statutes of Illinois, where the transactions took place. The court held that he could not maintain this statutory defence as against a bona fide holder of the guaranteed notes, and gave judgment against him. Execution on this judgment being returned unsatisfied, a bill was filed on behalf of the bank to obtain a discovery of his property and the appointment of .a receiver, to which F., and the maker of the notes, and R., with others, were made defendants. P.', the assignee of H. & Co., was, on his own application, subsequently made a defendant. An injunction issued, restraining each of the defendants from disposing of any notes in his possession due to F. Subsequently ■ to these proceedings F. assigned to R. the two notes which H. & Co. had transferred to the bank. P., as assignee of H. & Co., filed a cross-bill in the equity suit, showing that the judgment in favor- of the bank was in excess of the balance due the bank by H. & Co. R. filed an answer' and a cross-bill in that suit, setting up his claim to the said notes, and maintaining that the judgment in favor of the bank was invalid, as’ being in conflict with the statutes of Illinois. Held,</p> <p>(1) That the liability of F. upon the guaranty was, as between the bank and-him, fixed by the judgment in the action at law;</p> <p>(2) That all the b