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    *Covell v. The President, Directors and Company of the Tradesman’s Bank, and Mullins.
    0. held a single bill, or sealed note, against H. for $2,425, payable to himself in twelve months from the date with interest. 0. borrowed of M. $100, and pledged this sealed note to him to secure the repayment, and indorsed his name in blank on the note. M. being indebted to the Tradesman’s Bank in the sum of $2,600, agreed to transfer the note to the bank, as security for $1,000, part of the debt he owed the bank, provided the bank would advance to him the remainder of the note. The bank advanced the money, and M. indorsed his name in blank on the note, and delivered it to the bank. M. afterwards became insolvent, and never paid any part of the §1,000, or of the money advanced to him by the bank. Soon after 0. delivered the note to M., M. received a larger sum of money belonging to 0. than the amount 0. owed him. The bank were ignorant of the right of O., and gave H. notice not to pay the note to any one except themselves. 0. gave notice to the bank of his title to the note, and demanded it from them. The bank refused to deliver 0. the 'note. Held, that 0., having both the prior equity and the legal right, was entitled to the note.
    July 7th.
    Had the note been negotiable, and had it been taken by the bank in the usual course of business, the equity of the bank would have been equal to that of C.; and the legal right of the bank to collect the money due on the note in their own name would have prevailed over the prior equity of C.

      Aliter, if the note, although negotiable, had been transferred to the bank merely as a security for an antecedent debt.
    Where the equities of the parties are equal, the party who has the legal right will prevail.
    If neither party has the legal right, the maxim qui prior est in tempore, potior est injure, applies.
    The assignee of a chose in action, who only obtains an equitable interest therein, and who must sue in the name of the original owner, is not protected against a prior equity.
    The complainant held a single bill, or sealed note, against T. and J. Hunt, for $2,425, payable to himself, in twelve months from date, with interest, and dated the 27th of September, 1826. On the 19th of October, in the same year, he borrowed of the defendant Mullins, a broker, the sum of $1,000, and pledged the sealed note to secure the repayment, indorsing his name in blank on the note. Mullins gave him a receipt for the note, promising to return it when he should receive the $1,000. On the 10th of November, 1826, Mullins being indebted to the Tradesman’s Bank, about $2,600, went to the cashier pretending to be owner of the *note, and proposed to let the bank have it in security for $1,000 of that debt, provided the cashier would advance him the residue of the amount of the note in money. The proposition was acceded to. Mullins indorsed his name in blank on the note, delivered it to the cashier, and received the balance in money, which the cashier advanced for the bank, on the credit of the note, without any knowlege or suspicion of any right or claim on the part of the complainant or of any one else. The cashier had previously ascertained from the Hunts, that justly owed the note to Covell, and that they intended to pay it when it became due. At the time the sealed note was received by the bank, the cashier took Mullins’ note for the whole amount due from him, including the money then advanced; and the sealed note was taken as security for the payment. The cashier testified, that his object in taking Mullins’ 'note was to insure the payment of interest every sixty days. Mullins has never paid any part of the $1,000, or of the advance to him. Soon after Covell left the sealed note in pledge to Mullins, the latter received a considerable sum of money for Covell, which, after deducting the $1000 and a previous loan, left $310 due from him to Covell; which balance still remains unpaid.
    The bank gave notice to the Hunts of the assignment of the sealed note, and that they must not pay it to any one else. After Covell ascertained that the sealed note had been assigned by Mullins, he gave notice to the bank of his right, and applied by his counsel to have the note delivered up to him; which was refused. Since the commencement of this suit, by an arrangement between the parties, the injunction has been modified so far as to permit the money to be collected; and the same is now deposited in one of the banks of the city of New York, to abide the decision of this cause.

      P. Ruggles, for the complainant:
    The sealed note pledged by the complainant to Mullins, and by him transferred to the Tradesman’s Bank, not being negotiable, went into the possession of the bank, subject to all the equities which existed between the complainant and Mullins. The *complainant’s name being indorsed on the note, amounted to nothing more than an assignment as security for the $1000 borrowed from Mullins; and that sum having been received by Mullins, neither he, nor any person claiming under him, could hold the note as against the complainant. An assignee of a chose in action takes it subject to the same equity it was liable to in the hands of the assignor. (1 Mad. Ch. last ed. 547; 2 Vern. 692; id. 764; Clute v. Robinson, 2 John. R. 595; 1 John. Dig. 53; Chamberlain v. Gorham, 20 John R. 144; Davies v. Austin, 1 Ves. jun. 249; Bank of Niagara v. M'Cracken, 18 John. R. 493.) If the sealed note is tobe considered as a pledge in the hands of Mullins, and as a chattel, he could make no disposition of it, not even to raise the money for which it was pledged, without giving reasonable notice to the complainant to redeem it. (Hart v. Ten Eyck, 2 John. Ch. R. 100; 1 Madd. Ch. 529.) The defendants having refused to deliver the note to the complainant when demanded, and after having notice of his rights, ought to pay him his costs.

      W. Slosson, for the defendants.:
    The defendants are entitled to all the protection of bona fide holders of the note. The complainant, by indorsing the note in blank, authorized the holder to fill it up, with an assignment of the whole interest direct to the Tradesman’s Bank, or to any one else. The complainant having given this power, he must abide the consequences of a transfer to a bona fide purchaser. (Lovell v. Evertson, 11 John. R. 52; Mitchell v. Culver, 7 Cowen, 336, 337, and note.) Alter such a blank indorsement, the purchaser is not bound to look to any latent equity between the assignor and Mullins. (Murray v. Lylburn, 2 John. Ch. R. 443; Livingston v. Dean, Id. 480.) The principle is a fundamental one in equity, that where one puts it in the power of another to hold himself out as the absolute owner, he cannot set up, as against a bona fide purchaser, any latent equity not known to such purchaser. (Niven v. Belknap, 2 John. R. 589.) The assignee of choses in action is as much protected in equity as the purchaser of goods. The assignment of a sealed instrument may be in writing without seal, and even by *delivery merely. (Prescott v. Hull, 17 John. R. 284; Briggs v. Dorr, 19 John. R. 95; Ford v. Stewart, 19 John. R. 342. The note, although under seal, was in every other respect a mere promissory note. All the parties so treated it. The complainant by indorsing the note in blank, is liable as upon a new note drawn by him. (Chitty on Bills, 184.)
   The Chancellor :—In this case a gross fraud has been practiced by the defendant Mullins, and the question is, upon which of' the two innocent, parties to this suit must the loss fall ? Although it is not distinctly stated in the pleadings and proofs, it seems to be understood by the parties that Mullins is insolvent. As to the $1,000 which was due from Mullins at the time he transferred the sealed note, there can be no hardship in the case, as respects the bank. They are, as to that sum, no worse off than they were before the note was received in security. The complainant is clearly entitled to that part of the proceeds of the sealed note. In relation to the sum of $1,425, which Mullins actually obtained in ¿money from the bank by falsely and fraudulently pretending that he was the owner of the note, there is great hardship on both sides. As to the first sum, the complainant has not only the prior but the greater equity. The questions which arise in relation to the last sum, are: 1. Has either party the greater equity? 2. If the- equities are equal, has either party the legal right ? 3. If neither has the greater equity, or the legal-right, which party has the prior equity ?

The greater equity must prevail not only against a lesser equity which is prior in point of time, but is sometimes permitted to prevail even as against the legal right. If the note in question had been negotiable, and had been taken by the bank in due course of business, the equity of the bank to retain it in security for the money advanced, would be equal to the equity of the complainant to receive back his note from Mullins; and the legal right of the assignees to collect the money in their own name would prevail over the prior equity of the complainant. But according to the decision of this court, and of the Court of Errors, in Coddington v. Bay, (5 John. Ch. R. 54, 20 John. R. 647, S. C.,) the bank would not *be entitled to retain the proceeds even of a negotiable note thus transferred to them, merely as a security for an antecedent debt. In this case, I cannot find any principle to support the position that the bank has any greater equity to have the money which was advanced on the security of this instrument repaid, than the complainant has to have his note returned to him, agreeably to the terms of his agreement with Mullins. Where the equities of the parties are equal, if either has the legal right, that must prevail ; but if neither has a legal right to the subject or thing in controversy, the maxim, qui prior est in tempore, portior est injure, applies. (Tourville v. Naish, 3 P. Wms. 308.) It was on these principles, that, in England, if there were two Iona fide mortgagees having equal equities, and the junior incumbrancer could obtain the legal estate by getting the assignment of an older mortgage, he could tack his junior mortgage thereto, and thus get a preference over the intermediate mortgage; but if there was still a fourth mortgage, older than either, outstanding in the hands of a third person, or if the legal estate was in the hands of trustees, all the subsequent mortgages must be satisfied according to their priority in point of time. (Brace v. The Duchess of Marlborough, 2 P. Wms. 491.) On the same principal, a negotiable note payable to bearer or indorsed in blank, which, by commercial usage, may be prosecuted in the name of the holder, if it is in the hands of an agent, or is stolen, or is lost by the owner, and by the improper act of the agent, thief or finder is put in circulation, and thus comes into the hands of a bona fide holder in the due course of business, the equal equity of such holder will enable him to retain it against the former owner; while, on the other hand, the assignee of a chose in action, who only obtains an equitable interest therein, and must sue in the name of the original owner, is not protected against a prior equity. (Coles v. Jones, 2 Vern. 692. Norton v. Rose, 2 Wash. R. 233. Turton v. Benson, 2 Vern. 764. Livingston v. Hubbs, 2 John. Ch. R. 512.) It will also be found on examination, that the case of Redfearn v. Ferrier & Somervail, (1 Dow. Parl. Rep. 50,) cited by Chancellor Kent, in Murray v. Lylburn, (2 John. Ch. R. 443,) was decided upon the principles above stated. In that case, a share in the Edinburgh Glass House *Company, which by the rules of the company could only be holden by a single individual, stood in the name of Stuart, but in fact it belonged to the firm of Stuart & Somervail. Their partnership was dissolved by the bankruptcy of Stuart; and after the dissolution, Stuart assigned the share on the books of the company to Redfearn, who had no notice of the equitable claim of Somervail. A question having arisen between Somervail and Redfearn, as to the right to the share, the agent of the company raised an action of multiple poinding, (a proceeding somewhat similar to our bill of inter-pleader,) to settle the rights of the parties. The Court of Sessions in Scotland decided against the rights of the assignee, but on appeal to the House of Lords, that decision was reversed. Not on the ground that the assignee of a chose in action was protected against a latent equity in a third person, because a share in a joint stock company is not a chose in action. It was evidently decided on the ground, that by the law of Scotland the assignment, intimated on the books of the company, vested the legal interest and right to the stock in the assignee; and the equities of the parties being equal, the court would not divest him of his legal right.

In Willis v. Twambly, (13 Mass. Rep. 204,) a note had been given to a minor, payable in sheep. He sold the note to a third person, and received a watch in payment. The infant afterwards elected to rescind the bargain, and tendered the watch to the assignee, who refused to receive it; and afterwards assigned the note to a bona fide assignee without notice. The court held, that the first assignee could transfer to the second no greater right or interest in the note than he had himself; and that the second assignee took it subject to all the equity which existed between the infant and the first assignee. In the same case, Parker, Ch. J., says, “the assignee of a chose in action must take it principally upon the credit of the party from whom he receives it; for it is always liable to be defeated by equitable circumstances subsisting between the original contracting parties, the assignee being subject to the same equity as the assignor.

In the case before me, the sealed note was merely pledged to Mullins to secure the payment of the $100; to that *extent alone he had an equitable claim upon the money due thereon. The complainant still retained the legal interest in the debt from the Hunts; and an action to recover the amount must be brought in his name. After repayment of the $100, his release to the Hunts would have been a legal and valid discharge of the debt. It was impossible for Mullins to transfer any greater right to the bank than he himself possessed. That was not a legal right, but a mere equitable lien upon the chose in action, which has since been divested, and that before Covell had any notice of the transfer. The maxim, caveat emptor, is properly applicable to this purchase of a chose in action. If the agent of the bank had used the same diligence in ascertaining the right of Mullins to the note, as he did in ascertaining the liability of the obligors, he never would have advanced the money on the credit of this instrument. The bare signature of Covell on the instrument was certainly no better evidence of the right of Mullins than the signature of the Hunts was of their indebtedness. There was as much occasion for inquiry in the one case as in the other.

Again, the equity of Covell to have his note returned arises out of a transaction prior in point of time to the advance of the money by the bank. The prior equity and the legal right are both united in the complainant; he is, therefore, entitled to the whole of the proceeds of the sealed note. And the defendants having refused to deliver up the note after they were informed of his rights, must pay the costs to which he has been subjected in consequence of that refusal.

       On this maxim, depends the rights of property in treasure-trove, wrecks, Legge v. Boyd, 1 C. B. 92; E. C. L. R. 60, and dereleets, id. Waifs and estrays, 1 Black. Com. 291; Armory v. Delamere, 1 Stra. 504; Mortimer v. Cradock, 7 Jur. 45. The law of primogeniture, 2 Black. Com. 83, 84. It is acted on in case of conflicting titles; see argument of Sir E. Sugden in Cholmondeley v. Clinton, 2 Meriv. 239; Broom’s Maxims, 263 n. In assignments, and between incumbrancers and purchasers; Foster v. Blackstone, 1 Mylne & K. 297, 2 P. Wms. 491. In regard to the doctrine of tacking of mortgages, 3 Prest. Abs. tit. 274, 215; Willoughby v. Willoughby, 1 T. R. 773, 4. M'Niel v. Cahil, 2 Bligh. 228. See 4 Kent, 178, n. The law relative to patents and copyrights is altogether referable to this maxim. Broom’s Maxims, 260, 272, and cases there cited.


source: Caselaw Access Project

license: Public Domain

text:
    *Richards v. Barlow and others.
    July 8th.
    Where exceptions are taken to the defendant’s answer, some of which are allowed and others are disallowed, and the defendant excepts to so much of the master's report as allowed a part of the exceptions to the answer, and on hearing before the court, the master’s report is confirmed, the complainant is entitled to the costs of the hearing, and also of the .reference and of those exceptions to the answer which are allowed by the master; and the defendant is not entitled to the costs of the exceptions disallowed by the master.
    If any of the exceptions to the answer are well taken, the defendant must submit to answer further as to those exceptions, or he will not have costs of the exceptions which are disallowed by the master.
    In this case, exceptions were taken to the defendant’s answer, some of which, on reference to the master, were allowed, and the others were disallowed. The complainant submitted to the master’s report, but the defendants excepted to so much thereof as allowed a part of the exceptions to their answer. On hearing before the court, the master’s report was confirmed. A question having arisen as to the costs, the questions were submitted to the court.
   The Chancellor :—The complainant is entitled to the costs of the hearing on the exceptions to the master’s report, all of which have been disallowed. He is also entitled to the costs of the reference, and of those exceptions to the answer which were allowed by the master. But the defendant is not entitled to costs on account of the exceptions which were disallowed by the master. If part of the exceptions to an answer are well taken, the defendant must submit to answer as to such exceptions, or he will not be allowed the costs of litigating the others before the master.


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    *Delafield and others v. Colden and others.
    July 14th.
    The object of the law of Congress organizing the board of Florida commissioners, was to ascertain who were entitled to indemnity against the Spanish government; not to investigate all the various equities which might arise as to the distribution of the fund awarded for any particular injury.
    Where money was awarded by the Florida commissioners upon a memorial of one of two joint owners, and the applicant claimed in his memorial the whole to himself without naming his joint owner, it was held that the joint owner not named, was not bound to put in his claim and contest his right before the commissioners; that the person who received the money awarded, was a trustee, and accountable in equity to the real parties interested in the fund.
    Where the executors, who have no interest in the question, are made defendants in Chancery, they are entitled to their costs out of the fund.
    On the 14th of March, 1798, John Delafield, an insurance broker, and John B. Church, an insurer, in the city of New York, entered into a co-partnership in the business of marine insurance, which partnership was to continue until dissolved by mutual consent, or by a written notice from either of the parties. By the partnership articles, the policies were to be subscribed by Church, in his own name only; and all such policies were to be deemed and taken to be on account of the partnership. All expenses, charges, disbursements, profits and losses incurred concerning the partnership were to be borne and defrayed in equal proportions by the co-partners. On the 29th of November, 1798, Church gave to Delafield written notice, in conformity to the stipulation in the articles, that the partnership would cease after the 31st of December, in the same year; and that he should underwrite on his own account after that time.
    Among the policies underwritten by Church during the continuance of the partnership, on which losses happened, were the two following, which alone are the subjects of controversy in this suit: A policy underwritten by Church on the cargo of the schooner Dorchester, the 17th of April, 1798, in the sum of $1,000; and also underwritten by George Knox, David Smith and others, in the sum of $3,000. And another policy, dated on the 27th *of November, 1789, on the brig Eagle, Churchill master, underwritten by Church in the sum of $1,000, and by divers other persons in the sum of $4,000. On the 11th of Janary, 1799, after the dissolution of the partnership, Church underwrote another policy on the freight of the brig Eagle, in the sum of $1,000, which policy was also underwritten by other persons in the sum of $4,000. The Dorchester was carried into a Spanish port and condemned, with her cargo, in July, 1798. On the 6th of August, 1798, the insurers accepted the abandonment, and agreed to pay the loss; and the assured assigned all his interest to the underwriters. The brig Eagle was also carried into a Spanish port and condemned; and the insurers, both on the brig and her freight, accepted the abandonment, and the assured assigned all their interest to John Ferrers, in trust for the underwriters, in proportion to the several sums subscribed by them respectively. Ferrers died in December, 1813, and Church died in 1816, insolvent and intestate. Delafield lived until the 3d of July, 1824. The executors of Férrers, in June, 1822, in consequence of an agreement between him. and the underwriters upon the cargo of the Dorchester, presented a memorial to the commissioners under the Florida treaty, in the name of George Knox and David Smith, two of the underwriters, in behalf of themselves and the others, setting out the insurance, condemnation, abandonment and assignment for the benefit of the underwriters, and also setting out, among other things, the interest of Mrs. Burner as the administratrix of Church, but without noticing the partnership, or the claim of Delafield as the surviving partner or otherwise. The claim contained in the memorial was allowed; and the defendant Golden, as one of the executors of Ferrers, in pursuance of the award of the commissioners, received for the share of Church’s subscription to the policy, $700 94, over and above his charges and expenses in obtaining the allowance and payment of the claim.
    In March, 1823, the executors of Ferrers also presented another memorial to the Florida commissioners, setting forth the insurances on the brig Eagle and her freight; and the *condemnation and abandonment, and the assignment to Ferrers for the use of the underwriters; and setting out the claim of the administratrix of Church, but without noticing the partnership, or the claim of Delafield as surviving partner or otherwise on the policy on the brig. The claim was allowed, and the defendant Golden also received for the share of Church’s subscription to the policy on the brig, $593 12, over and above the charges and expenses in obtaining the same, and the like sum for the subscription of Church to the policy on the freight.
    The defendant Golden, as one of the executors of Ferrers, also received, at the same time, other sums which had been allowed under the treaty, on account of other claims upon policies subscribed by Church, the whole amount of which, including the above sums, was $12,487 14, besides disbursements. Of the amounts thus received, he has paid over to the administrators of Church $11,051 14, leaving still in his hands $1,436. The complainants claim the half of the proceeds of Church’s insurance on the brig Eagle, and on the cargo of the Dorchester. The administrators of Church claim the whole amount of the proceeds of both.

      M. C. Patterson, for the complainants,
    contended that they were entitled to the whole of the moneys in the hands of the defendant Golden, John Delafield having survived John B. Church; that the legal interest in partnership property passes to the surviving partner; (Peters' admr. v. Davis, 7 Mass. Rep. 257;) that the payment by Golden to the administrators of Church was no satisfaction to Delafield or his executors; (Wallace v. Fitzsimmons, 1 Dallas, 250;) and that the defendants, Bunner and wife, ought to pay the costs; (Adair v. Shaw, 1 Sch. & Lef. 280.)

      Dunlap and J. A. Hamilton, for Bunner and wife,
    contended that the complainants’ remedy was at law; that the legal title to the moneys was in Church; that the rule of survivorship did not apply; that Delafield forfeited all title to any part of the moneys, by not making his claim before the *commissioners; and that the statement in the bill was not broad enough to reach the relief sought.

      C. Graham, for the executors of Ferrers,
    contended that they were bound to appear, and were therefore entitled to costs out of the fund. (1 John. Ch. R. 473, 508; Morrel and others v. Dickey, 1 John. Ch. R. 153; Goodrich v. Pendleton, 3 John. Ch. R. 520; Rodgers and others v. Ross, 4 John. Ch. R. 608; Masters v. Rashley, 1 Ves. jun. 205; Attorney-General v. City of London, 1 Ves. jun. 246.)
   The Chancellor:—The preliminary question which has been raised as to the admissibility of the transcript of the broker’s books kept by Delafield, and which transcript is in the handwriting of his deceased clerk, it is not necessary for me to consider; and I lay the evidence derived from those hooks entirely out of the question, in the decision of this cause. Independent of these books, there is no evidence that Delafield paid the loss upon the brig Eagle, or upon the cargo of the Dorchester. On the other hand, there is no evidence that Church ever paid the same, or any part thereof. In the absence of all proof on the subject, the fair presumption is, that both losses were paid out of the partnership funds; and in that case, it is perfectly immaterial which partner actually paid the loss. By the indorsement on the back of Delafield’s bond, which indorsement was signed by both of the partners, it appears that as late as the 1st of November, 1806, nearly eight years after the dissolution of the partnership and more than seven after the adjustment of the loss under the last policy, the partners had a settlement of accounts, of what kind does not distinctly appear; although from the memorandum indorsed on the bond, I think it was not the partnership account. But after a lapse of thirty years from the dissolution of the partnership, it may fairly be presumed that all the partnership accounts were closed previous to the time of the indorsement on the bond. There could be no reason at that time for leaving this part of the partnership accounts open. Although a nominal claim existed against the Spanish government, neither party could then *have had any reasonable expectation of receiving indemnity. There can, therefore, be no doubt of the equitable right of the executors of Delafield to receive their moiety of the net proceeds of the amount awarded under the Florida treaty, on account of the underwriting these two policies by Church during the existence of the partnership. But it is contended that the money was awarded by the board of commissioners, on memorials claiming it on account of the administratrix of Church alone; that Delafield ought to have put in his claim, and contested his right before the commissioners; and that having neglected to do so the award is conclusive against his right.

On referring to the treaty, and to the law organizing the board of Florida commissioners, I am satisfied such cannot be the effect of the award. The object of organizing the board, was to ascertain who were entitled to indemnity against the Spanish government. It never could have been intended that the board should investigate all the various equities which might arise as to the distribution of the fund awarded for any particular injury. The persons who have prosecuted these claims, and obtained the money on account of any illegal capture or condemnation by the Spanish authorities, are trustees, and are accountable in equity to the real parties who were entitled to the indemnity awarded by the commissioners. But in this case, the complainants must pay their share of what the administrators of Church agreed to give Mr. Hamilton for Ids' services in obtaining the adjustment of the claim. The whole sum being received by Mr. Golden at the same time, that which has been paid over to the defendant Bunner, must be applied towards the satisfaction of those claims which he was entitled to receive; and the complainants are entitled to their indemnity, out of the moneys still remaining in the hands of the executors of Ferrers. Those executors having no interest in the question, they are entitled to their costs out of the fund; and the complainants will, in that case, have their remedy over for those costs, as well as the general costs of the suit, against the other *defendants. But as the administrators of Church ought not to be personally charged with the payment of any costs, and the money in the hands of the executors of Ferrers being sufficient for the purpose, I shall direct that out of the moneys in the hands of such executors, they pay to the complainants the one-half of the net proceeds of the sums received on account of the indemnity of Church upon the brig Eagle, Churchill, master, and upon the cargo of the schooner Dorchester, as stated in the schedule annexed to their answer, after deducting therefrom the share of the expenses and commissions of James A. Hamilton, as specified in the answer of the defendants Bunner and wife, and in the schedule thereto annexed; and that the said executors of Ferrers pay those expenses and commissions to the said Hamilton, or to the defendant Bunner, for his use; and that out of the other half or residue of the said net proceeds, the said executors of Ferrers retain their own costs of this suit: and that they also pay to the complainants their costs of this suit to be taxed, and pay over the residue thereof to the defendants, Rudolph Bunner and his wife, as the personal representatives of John B. Church, deceased.


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    *Byington v. Wood.
    August 5th.
    Exceptions to an answer are always referred in the first instance to a master.
    If either party negléets to appear before the master and argue the exceptions, he will not afterwards be permitted to bring them before the court by exceptions to the master’s report.
    Ho exceptions can be taken to a master’s report, which are not founded upon objections distinctly taken before the master.
    In the case of a reference to state an account, the objections to the report are taken and argued after the draft of the report is prepared.
    In such cases, objections may be taken by a party who has not previously appeared before the master; but he cannot introduce any new matter in evidence to support such objections.
    This case came before the court for a hearing upon exceptions to a master’s report upon exceptions to the answer. The defendant did not appear before the master on the reference to argue the exceptions to the answer.
    N. P. Randall, for the complainant.

      Wood, defendant, in proper person.
   The Chancellor :—It appears by the affidavits of the complainant’s solicitor and the report of the master, that the defendant never appeared before bim on the reference, to argue the exceptions to the answer; and it is now objected, that under such circumstances, he has no right to except to the master’s report.

It is the practice on the equity side of the exchequer, to refer exceptions to an answer to the court in the first instance ; but in the Court of Chancery a different practice prevails. The multiplicity of business in the latter court renders it impossible for the Chancellor to examine the numerous cases of exceptions to answers which must constantly occur. It is for this reason that such exceptions must, in the first instance, be passed upon by a master; and the cases which are brought before the court, by way of appeal from his decision, are comparatively few. The whole benefit of the reference to a master in the first instance will be lost, if the parties are not compelled to appear and litigate the matter before him. *It is undoubtedly the duty of the master, although he proceeds ex parte, to examine the subject with as much care as if both parties appeared and contested the matter before him. But every person, at all conversant with the proceedings of courts of justice, is aware that the arguments of counsel materially assist the minds of those who are entrusted with the decision of any matter in coming to a correct conclusion, both as to the law and the facts of the case. Hence it is, that a court of dernier resort will not hear and decide any point which has not been distinctly submitted to the court below. And, for the same reason, this court will not permit any exceptions to be taken to a master’s report which are not founded on objections distinctly made, and urged upon the consideration of the master. (Remson v. Remson, 2 John. Ch. Rep. 495; Methodist Church v. Jacques, 3 John. Ch. Rep. 78; Beame’s Orders, 258; Hues v. Lawes, Bunb. Rep. 93.

In the case of an ordinary reference to take an account, the objections to the report are to be made and urged after the master has prepared the draft of his report; and in such cases, objections may be taken by a party who has not previously appeared before the master. (Howard’s Equity Side, 40.) But he cannot introduce any new matters in evidence to support such objections. On a reference of exceptions to an answer, the master makes no draft of his report, but the whole matter is argued before the master in the first instance. And if either party neglects to appear and argue the exceptions before him, such party cannot be permitted afterwards to bring them before this court by exceptions to the report of the master. The exceptions to the master’s report in this case are, therefore, overruled with costs. But as the defendant has probably acted under a mistake as to the practice, I shall, on his paying the costs of the former reference and of this hearing, direct the original exceptions to the answer to be referred back to the master, that the defendant may have an opportunity to be heard thereon.


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    *Brown v. Lynch and Lynch.
    Thomas B. and J. B. were owners of a farm in Orange county, which, in 1811, was, by a fraud upon them, mortgaged to R. The mortgage was foreclosed in Chancery, and the farm advertised for sale by a master. Before the sale, B., by an arrangement with Thomas B. and J. B., agreed to purchase in the farm for their benefit, for which he was to receive a stipulated compensation. R., the mortgagee, in order to favor Thomas B, and J. B., agreed with B. that he might bid off the property for $1,500, about half the amount of the mortgage. B., at the sale, prevented others bidding, by representing that he intended to buy for Thomas B. and J. B. B. purchased the farm at the master’s sale for $1,540, about 1,000 below value. Afterwards B. refused to convey the farm to Thomas B. and J. B., or to account to them for the value, although they tendered to him the amount of his bid, with interest, and the sum agreed to be paid for his services. It was held that B. was a trustee for Thomas B. and J. B., and had no other interest in the farm than that of a mortgagee to secure the repayment of the purchase-money, and the payment of the sum agreed to be allowed Mm for his services.
    It was also held, that a purchaser of the farm from B., with full knowledge of the claim of Thomas B. and J. B., was an incompetent witness for B.

      August 5th.
    A court of chancery relieve against a fraud, by converting the person guilty of it into a trustee for those who have been injured thereby.
    Appeal from the Equity Court of the Second Circuit. The facts in the case, and the reasons for the decree in the court below, are stated in the following opinion delivered by Judge Emott in the Equity Court.
   Opinion :—The plaintiffs were owners of a farm in Cornwall, in Orange county, which, in 1811, by a fraud upon them, was mortgaged by their brother, Nathaniel Lynch, to John C. Romeyn, of New-York. The mortgage was foreclosed in Chancery, and the lands advertised by a master for sale, on the 29th day of May, 1824. They were sold to the defendant on the 8th day of June, for $1,540. The farm was, in fact, worth $2,500, and was sold by the defendant to Benjamin Colter, in March, 1825, for $2,300. Thus far, the parties agree as to the facts; but in what follows, they are at issue: the defendant denying fully the statement made by the plaintiffs. The plaintiffs alleged that the purchase was made by the defendant under an agreement and understanding between them, that it should be for the benefit of the *plaintiffs; and the defendant having, by management and imposition, obtained the title, he now, oppressively, and meaning to take an undue advantage of the plaintiffs, claims the property as his own, and will neither convey to them, or account to them for the value.

A further part of the case on the part of the plaintiffs is, that the purchase was made at a reduced amount, and at about half the mortgage rent, with the consent of Romeyn, the mortgagee, to favor the plaintiffs. This averment is, I think, sufficiently made out by the testimony of Benjamin Van Dusen; who says that the defendant, between the postponement and the sale, told him that he had agreed with the holder of the incumbrance for the property at $1,500, but that it still must be set up for sale; and of James Green, who testified, that before the sale, the defendant told him he had been to New York and bought the land of Romeyn, who held the mortgage, and that the defendant at the sale, said to Romeyn that he was buying . for the plaintiffs, and Romeyn then said it should go for $1,500. This being so, we are not bound or embarrassed by the decisions about agreements not to bid at public sales. A combination to prevent bidding at a sale on execution, is held contrary to morality and sound policy, and every contract on such combination is void, as it operates as a fraud upon the debtor and all his other creditors, and opens a door to oppressive speculation. (Jones v. Caswell, 3 John. Cas. 29. Doolin v. Ward 6 Johns. R. 194. Wilbur v. How, 8 John. R. 444. Thomson v. Davis, 13 John. R. 112.) If there was an agreement here to prevent bidding at the sale, it was with the assent of the creditor, giving to him, the sum he was willing to receive, under the circumstances of the case, from the plaintiffs; and therefore not to his injury or prejudice. It was to save the property of the plaintiffs, and if they had other creditors, to give them the means to pay their debts; and therefore closed the door against speculations, and could not operate as a fraud upon any person. The true questions in this case are, has the fraud been made out ? and can the court interfere if the fraud has been committed? The fraud alleged, it must be remembered, is, that the defendant, pretending to be a friend *to the plaintiffs, made arrangements with them and the mortgagee to purchase the property, for which he was to be paid a stipulated compensation; and that he prevented Other persons bidding at the sale, or interesting themselves for the plaintiffs. By these means, it is said that he got the property at little more than half its value, and is now attempting to turn the profit to his own account. As to the fraud, Samuel McGill says that he and his father-in-law, Yan Duzen, talked about purchasing, and would have purchased, if they had not been informed that the defendant was to purchase for the Lynches. On the morning when the property was to have been sold, the defendant was at the house of the witness, and told him he had the evening before agreed with the plaintiffs to go and buy the property for them, and said he thought it would be a shame for any man to come and run it up on them, for they had lived their best days on it, and had a great deal of bad luck, and ought to have the property. Van Duzen, the father-in-law, says that he attended the first day of sale to purchase ; that the evening of the day of the adjournment he went to the defendant to ascertain whether he was going to buy for the plaintiffs: the defendant told him he had agreed for the property for the plaintiffs for $1,500. The witness would have given $2,500 for the property, but he gave up his intention of bidding on the declaration of the defendant that he was purchasing for the plaintiffs. David Lynch testified, that the defendant called on the plaintiff, Thomas Lynch, the night of the postponement; he said he had agreed for the property, and wanted the plaintiffs to make the title as bad as they could, so that he could buy cheap for them, and prevent others, bidding, The defendant said the plaintiffs should have the property, and no one else. It was agreed that the. defendant should have $60 for his trouble. James Green says, that a few days before the 29th of May, the defendant called on him to know whether he meant to bid on the property, and said he thought of buying for the plaintiffs. After the postponement, and before the sale, the defendant again called on him to ascertain whether he intended to bid, and said it would be-unkind and unneighborly for him to do so, and that he was buying for the plaintiffs, and had agreed on *the sum with Romeyn. The defendant and the plaintiffs were in frequent private - conversation at the sale. John B. Green testified, that the defendant, before the sale, applied to him to know if James Green intended bidding, and said he was going to buy for the plaintiffs, and wished Green not to bid. The defendant said that the title was not good, that he did not want to make anything, and expected nothing but his money. William Atkinson said, that on the day on which the property was first advertised, the defendant told him he had bought the property for the Lynches, it was a hard case for them and he pitied them. In addition to this, and to show the conduct and the pretended motives of the defendant before the sale, we have the further testimony of McGill, that the defendant, after the sale, said that the coming down of Bridgen, and the claim by him, was under a plan laid by the defendant and the plaintiffs, to prevent people from bidding on the property. Van Duzen says, that after the defendant offered to sell the place, he told the witness it was a plan of his and Thomas Lynch to get Brigden to come to the sale and claim the property, and that the defendant appeared tickled about it, and laughed, and said the property was about to fall into his hands. And William Southerland testified, that the defendant, after the sale, declared to him that he had said a good deal to prevent others from bidding on the property, and that he did it with a view to help the plaintiffs, and to buy in the lands cheap for their benefit.

There is other testimony which relates to the declarations and the acts of the defendant after the sale. McGill says, that he did not attend the sale on the 8th of June, believing that the defendant was to buy in for the plaintiffs; that a short time, and not more than three weeks after the sale, the defendant said he had bought the property for the plaintiffs for $1,540, and had charged them $60 for his trouble, and that the plaintiffs were to pay for the properly in the spring. In December the witness applied to the defendant to hire the property, but he declined letting it, as he had bought it in for the plaintiffs, and expected they would redeem it. Van Duzen says, he heard the defendant say several times, that the plaintiffs had a right to redeem by the 1st of April, by paying his bid of $1,540, with interest, and $60 for his trouble; and that he had *taken leases from the plaintiffs, and had included in the leases the interest to the 1st of April. Southerland says, that in January or February he called on the defendant to buy the place, who offered to sell to him at $25 the acre. The defendant said lie had bought the property for the benefit or accommodation of the plaintiffs, if they could raise the money; but they had done a good deal to injure him, and they should not have the land unless they paid the full amount a stranger would pay, and he was sure they could not do that. Lancaster says, that in May or June, 1824, after the purchase, the defendant said he had not bought the land for himself, but that he bought for the plaintiffs, and that he went to the sale on purpose to buy for them; they were to have until the 1st of April to raise the money, but he would not be particular as to the time. The defendant spoke of the interference of Green, and said but for him he would have made a better bargain for the plaintiffs by forty dollars, and he thought it hard of Green that he bid after he knew the defendant was purchasing for the plaintiffs. Cook testified, that in April the defendant told him he bought the property for the plaintiffs, but they had not done as they ought to have done, and now they should not have it. And Taylor says, that he lived with the defendant at the time of the purchase, and once asked him if he meant to let the plaintiffs have the property; he said he did, if they ever got ready to redeem it, and he had told them to go on with their work as usual.

There was much additional testimony, which I have gone over with great care; but I do not think it materially varies the case.

I am satisfied, from all the testimony in the cause, that the defendant went into this purchase under the pretence of aiding the plaintiffs, who had been most grievously injured in the mortgage, and who were to be utterly ruined by it, if the whole amount of the incumbrance was to be exacted; and that he acted by the consent of, and under an agreement with the plaintiffs, who were to rest upon him, and to pay him for his services. I am also satisfied that the defendant, by representing to the mortgagee the hardships of the plaintiffs’ situation, and he was acting for them in order to save *something to them, induced the mortgagée to agree not to bid on the property over $1,500, or in other words, to receive that sum for his debt, which amounted to much more. And I am further satisfied, that the defendant, by getting the plaintiffs to aid him in casting a slur over the title, and by holding himself out to the world as the agent and friend of the plaintiffs, prevented a competition and bidding at the sale, and had a property struck off to him for $1,540, which was fairly worth $2,500, and which he now treats as his own, in defiance of the plaintiffs, and their claim under his agreement. It is apparent, then, that the defendant went into this purchase with fraudulent views, and has obtained a title to the property by trick and contrivance. It is fair for the defendant and for all others to advance their means by speculation or purchase; but they ought not to do it at the expense of honor or honesty, and if they make the attempt, it is at their peril. In this case, I am of opinion that it is established that the defendant has committed a fraud on the plaintiffs, by agreeing to purchase for their benefit, when, in truth, he meant to purchase for himself, in a manner to insure great profits; that he has committed a fraud on the mortgagee, by inducing him to believe that the purchase was for the plaintiffs, and thus prevailing on him to take about half of his debt. And he has committed a fraud on the public by false representations about the title, and of his intentions towards the plaintiffs; thereby preventing a bidding at the sale. It remains to be seen, whether a court of equity has power to correct the fraud. In Pickett v. Loggon, (14 Ves. 234,) Lord Eldon says: “It has long been settled that if a conveyance has been obtained by means, which in this court, have the character of imposition, fraud, oppression or undue advantage, the person deriving a title under it is a trustee, and the species of relief is by directing a re-conveyance.”

This is according to the doctrine of Lord Hardwicke, in Barnesley v. Powell, (1 Ves. 289,) and in Young v. Peachy, (2 Atk. 254.) A father having obtained an absolute conveyance from a daughter, in order to answer a particular purpose, afterwards made use of it for another, she was relieved under the head of fraud. Lord Hardwicke, in that case, *says, “There have been a great many cases, ever since the statute of frauds, where a person has obtained an absolute conveyance from another in order to answer one particular purpose, but has afterwards made use of it for another, that this court has relieved under the head of fraud; for a practice of this sort is a deceit and fraud which the court ought to relieve against: the doing it is a dolus malus, &c.” In Thynn v. Thynn, (1 Vern. 296,) a man having made a will, and appointed his wife executrix, the son prevailed on his mother to get the father to make a new will, and to name him as executor, he promising to be trustee only for his mother. Upon the whole matter, it appearing to be as well a fraud as also a trust, Lord Keeper North, notwithstanding the statute of frauds, although no trust was declared in writing, decreed it for the plaintiff. In Devenish v. Baines, (Prec. in Ch. 3,) a copyholder, by his will, intending to give the greatest part of his estate to his godson, and the rest to his wife, she persuaded him to nominate her to the whole, promising to give the godson the part designed for him. On a bill filed, she plead the statute of frauds; but the lords commissioners decreed against her; not as an agreement or trust, but as a fraud.

In Chamberlain v. Chamberlain, (2 Eq. Ca. Abr. 43,) a son and heir apparent having persuaded his father not to make a will, by which he intended to make certain provisions for younger children, on his promise that they should have such provisions, it was decreed that the defendant should pay the legacies, jet the assets be what they might. The same law will be found in Reech v. Kennegal, (1 Ves. 125,) in which case Lord. Hardwicke says, “It is not necessary that the fraud should be on the person coming for payment aloneit was here also a fraud on the testator. And in Drakeford v. Wilkes, (3 Atk. 539,) it was held that the legatee promising a testator in consideration of a disposition, in the will in her favor, she would do an act in favor of a third person, equity would make her perform. Lord Hardwicke says, that If there is a declaration and understanding by a legatee to do an act, in consideration of the testator devising to that legatee, he knew of no case where the court had not directed it, *whether such understanding was before the will or afterwards.” Of the modern cases, we have Strickland v. Aldbridge, (9 Ves. 516,) where, to a bill by the heir against the devisee, alleging that the devise was upon a secret trust or understanding for a charitable purpose, against the statute, a plea of the statute of fraud was ordered to stand for an answer, Lord Eldon saying it was clear that a trust would be created, upon the-principle on which this court acts as to fraud. And in Mestaer v. Gillespie, (11 Ves. 626,) Lord Eldon says, upon the statute of frauds, although declaring that interest shall not be bound except by writing, cases in this court are perfectly familiar, deciding that a fraudulent use shall not be made of the statute, when this court has interfered against a party meaning to make it an instrument of fraud, and said he should not take advantage of his own fraud, even though the statute has declared that in case those circumstances do not exist, the instrument shall be absolutely void.

Upon the authority of these cases, I have no doubt of the power of the court to correct the fraud, and it only remains to consider the best manner of doing it under the circumstances of the case.

The plaintiffs might certainly be permitted by a new bill in the nature of a bill of supplement, to follow the property in the hands of the person who has taken the conveyance during the pendency of this suit; and it is for that reason that I have held him interested, and suppressed his testimony ; but this would lead to more delay and expense than would be proper. The short way of ending the controversy will be to declare that the defendant, having committed a fraud as well on the plaintiffs as on Romeyn in the purchase, he was therefore a trustee for the plaintiffs, subject to the payment to him of the $1,540 paid on the purchase, and of $60, the compensation agreed on; and that the defendant, in making the sale to Benjamin Coulter, acted as the trustee of the plaintiffs, and is answerable to them for the amount of the sale, making the deductions of the two sums before mentioned.

In conformity to that opinion, the following decree was made in the equity court; from which decree the defendant below appealed to this court.

*“ This cause having heretofore been brought to a hearing upon the pleadings and proofs therein, and the same having been argued by Mr. David Buggies, of counsel for the complainants, and by Mr. George E. Tallman, of counsel for the defendant, and due deliberation being had thereupon, the court doth declare, that the said defendant committed a fraud upon the said complainants, in the purchase of the lands in the pleadings and proofs in this cause mentioned ; and that he made such purchase, and received the conveyance of the said lands as trustee for the said complainants and for their benefit; subject, however, to the payment to him of the sum of one thousand five hundred and forty dollars, paid by the said defendant on such purchase, and the sum of sixty dollars, the compensation to the defendant for making the same, agreed upon by the parties, with interest on both sums from the 8th day of June, in the year one thousand eight hundred and twenty-four, the time of making such purchase; and that the said defendant, in making the sale of the said lands to Benjamin Coulter, in the proofs mentioned, acted as the trustee of the said complainants, and is answerable to them for the amount of the sale moneys, being the sum of two thousand three hundred dollars, with interest thereon froip the nineteenth day of May, in the year one thousand eight hundred and twenty-five, the time of such sale, making the deductions of the two sums before mentioned; and it appearing to this court, by computation, making the charges and allowances aforesaid, that there is due to the said complainants from the said defendant, the sum of seven hundred and thirty dollars and two cents, on the day of the date of this decree: It is therefore ordered, adjudged, and decreed, and the circuit judge of the second circuit, by the power and authority of this court, doth order, adjudge and decree, that the said defendant pay to the said complainants or to their solicitor, the sum of seven hundred and thirty dollars and two cents, with interest thereon from this day, together with the complainants’ costs in this cause to be taxed, within thirty days after demand made and service of a copy of this decree upon the said defendant; and in default of such payment, that the said complainants have execution for the same.”

*G. F. Tallman, for the appellant:—Coulter was a competent witness. He had no interest in the event of the suit. Nelson v. McDonald & others, 6 John. Ch. R. 201.) The agreement between Brown and the Lynches was void for want of mutuality. • It could not have been enforced by Brown. (Tucker v. Woods, 12 John. R. 190.) It was also within the statute of frauds. It was not in the character of a mortgage. There was no loan to the Lynches; nor any resulting trust in their favor. The agreement, if there was one, had been rescinded by the Lynches. If there was any fraud, it was perpetrated by Brown and the Lynches in conjunction, with intent to injure the mortgagee. If so, they were in ¡pari delicto, and the court would not assist either. If there was an agreement not to bid against each other at the sale, and they were to become partners in the purchase, the agreement was fraudulent, and against public policy. (Doolin v. Ward, 6 John. 195; Thompson v. Davies, 13 John, 112.) The facts in the cases cited by the circuit judge are not like those in this case. The bill does not meet the respondent’s case. The relief given must be according to the case stated in the bill. (Mitf. Pl. 38, 39; Wilkin & others v. Wilkin, 1 John. Ch. R. 111; Hiern v. Mill, 13 Ves. 119; Dormer v. Fortescue, 3 Atk. 132.)

D. Ruggles and P. Ruggles for the respondents:—The agreement between Brown and the Lynches could have been enforced by Brown. The consideration was in his own hands. Brown, after his purchase, became in effect the assignee of the mortgage. The Lynches had the equity of redemption. The rule of in pari delicto does not apply to a court of equity. There the different degrees of guilt of parties are inquired into. (Eden on Injunc. 16; Osborn v. Williams, 18 Ves. 379; Lord St. John v. Lady St. John, 11 Ves. 535.) Courts of equity will not permit the statute of frauds to be made an instrument to perpetrate fraud. (Rob. on Frauds, 79, 102, 103; Walker v. Walker, 2 Atk. 98; Barrow v. Greenough, 3 Ves. 152; 2 Desaus. R. 141; Reigal v. Wood & others, 1 John. Ch. 406; 1 Cruis. Dig. 485, tit. 12, Trust, ch. 1; Whelan v. Whelan & another, 3 *Cowen, 537; Boyd v. McLean, 1 John. Ch. R. 582. Clinan v. Cook, 1 Scho. & Lef. 22.) Part payment alone does not take a case out of the statute. An essential injury must result from not executing the agreement in order to take the case out of the statute. (Prec. in Chan. 519; Rice v. Peet, 15 John. 503; Botsford v. Burr, 2 John. Ch. R. 405.) Where there is a part payment of money, there will be a resulting trust pro tanto. Here was a fraud committed by Brown. The mortgagee was not a particeps criminis.

The Chahcellor :—A preliminary question has been raised as to the admissibility of the testimony of Benjamin Coulter as a witness for the appellant. Coulter purchased the premises in dispute with full knowledge of the claim of the respondents. He was, therefore, liable to lose the possession of the property which he had purchased, as well as the purchase-money which had been paid, if the plaintiffs in the court below succeeded in their suit.

It is true, he took a bond of indemnity from Brown, and the decree subsequently made in the cause did not interfere with his right to retain the property. Even if it had appeared that Brown was perfectly solvent and able to indemnify Trim, it is doubtful whether that would have made him a competent witness; and at the time he gave his testimony, he could not know that the plaintiffs would be satisfied with the personal responsibility of Brown. I, therefore, am induced to think the order of the circuit court suppressing the testimony was correct; but whether it was or was not cannot be very material, as that testimony could not have varied the conclusion at which the judge arrived in relation to the facts of the case.

From the testimony in the case it is satisfactorily established, notwithstanding the denial in the appellant’s answer, that he did agree to bid off the property for the respondents, and to give them time to redeem it, they paying him, the legal interest of the money, and sixty dollars extra, for his trouble. Such an agreement could be no fraud upon the holder of the mortgage, if, as the appellant’s counsel insists, *there were no unfair means used to prevent others from "bidding at the sale.

The respondents were not personally liable for the payment of the debt, although it was a lien on their farm. If the mortgagee choose to let it be bid in by them, or by any one in their behalf, for less than its real value, they were perfectly justifiable in procuring some one to bid it off for them. If, on the other hand, the defendant represented truly at the sale, and to several of the witnesses at other times, that the holder of the mortgage had agreed it might go for $1,500, if it was bid off for the Lynches, they were perfectly justifiable in taking any means in their power to prevent other persons from bidding over that sum for the property. In either case they had an interest in the premises which they had a right to protect and preserve; and it would have been a gross fraud for any one to hold out to them, under such circumstances, that he was bidding off the property for their benefit, when he in fact intended to appropriate it to Ms own use. If the appellant did in fact bid it off for them, under the agreement, he held it in trust for them, and had no other interest in it than that of a mortgagee, to secure the repayment of the purchase-money, and the $60, agreed to be paid him for his trouble. (Boyd v. McLean, 1 John. Ch. R. 582.) But if he had no such intention, and did not in fact bid off the property in trust for them, he was guilty of a fraud which this court will relieve against. The cases referred to by the circuit judge fully establish the principle, that this court has power to relieve against such fraud; and the means to be employed, is to convert the person who has gained an advantage by means of his fraudulent act, into a trustee for those who have been injured thereby.

There is no ground for the objection that the respondents have rescinded the agreement since the sale. After they ascertained that the appellant intended to defraud them of their property, they did indeed endeavor to induce him to give it up, by circulating reports prejudicial to the title. The leases insisted on by Mm were executed under the advice of their neighbor, without any intention on their part to relinquish their right; and there was nothing in that transaction *which could bar their remedy. The supposition, that they ever intended to give up their right to redeem the premises on account of any defect of title, is contradicted by the fact that at the time they were making those declarations they were in pursuit of Brown to tender him the money, and he was keeping out of the way to avoid them.

I am satisfied the respondents were entitled to the relief claimed by their bill, and the appellant’s counsel, on the argument, waived all objection to the particular form in wMch the relief was given, by decreeing the payment of the profits made by the sale of the land to Coulter, instead of decreeing a reconveyance. The decree of the equity court must therefore be affirmed tvith costs.

        Flagg v. Mann, 3 Sumner, 486; Allen v. McPherson, 1 Phil. 133; 5 Beav. 469; S. C., 1 H. L. Ca, 191; Hill on Trustees, 144, n.


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    Marshall and others v. Barclay and others.
    August 5th.
    Under the act of Congress of the 2d of March, 1799, the United States are not entitled to a preference in the payment of bonds given for duties, over the general creditors of the debtor, unless the debtor is actually insolvent, and his insolvency is manifested by some notorious or public act.
    To entitle the United States to this preference, on account of a voluntary assignment of the property of the debtor for the benefit of his creditors, it must appear that the assignment was of all the property of the debtor, or was made with a view to defeat the claim of the United States.
    Where, however, a debtor is actually insolvent, and intending to assign his whole property, first makes an assignment of part for the benefit of some of his creditors, and afterwards makes another assignment of the residue of his property for the benefit of his remaining creditors, the two assignments will be considered as one transaction, and the United States will be entitled to a preference.
    On the 16th July, 1816, John R. Murray and William Ogden, merchants in New York, became insolvent, and stopped payment. At that time, they owed several custom house bonds to the United States, which Major and Gillespie had signed as their sureties. Of those bonds, a part were afterwards paid by Major and Gillespie, and six still remain due and unpaid to the United States.
    On the 7th of May, 1817, Murray and Ogden conveyed to T. L. Ogden and B. W. Rodgers the bulk of their real estate, in trust for the equal benefit of all their creditors; and *on the 17th of the same month, the United States recovered judgments against them and their sureties on the custom house bonds. On the 28th of January, 1818, Murray and Ogden assigned all the rest of their property to W. Bayard and H. Barclay, in trust for their creditors generally, provided they should, within nine months, execute releases of their respective demands, and the dividends of those who should refuse, to be paid to the assignors; and on the 11th of November, 1819, they executed an assignment of the dividends for the benefit of those who had not released; provided they should come in and release prior to the actual payment of the first dividend of their estate. In July, 1820, they applied for the benefit of the . act to abolish imprisonment for debt in certain cases, and in October thereafter were discharged, and assigned all their property to Bayard and Barclay, who were appointed their assignees under the act; and on the 21st December, 1820, T. L. Ogden and B. W. Rodgers, together with Murray and Ogden, by an instrument which recited the previous assignment, for the more prompt and easy distribution of the funds of the estate, released and conveyed to Bayard and Barclay, the assignees under the act, all the property that had been conveyed and assigned to them for the benefit of the creditors of Murray and Ogden generally. In January, 1821, Major and Gillespie assigned all their estate to the complainants, Marshall, Schmidt and Selden, fbr the benefit of their creditors, and shortly thereafter, Gillespie died intestate.
    William Ogden is dead, and the bill has been taken pro confessa against his administrator. W. Bayard died after he had answered the bill, and it has been revived against his executors. Henry Barclay, the surviving trustee, has paid into court $12,650, and has in his hands a further sum belonging to the estate.

      B. Robinson, for complainants.

      T. L. Ogden, for defendants.

      J. Duer, district attorney, for U. S.
   The Chancellor :—The question presented for the court to determine is, whether, under the act of the 2d of March, *1799, the United States, and the complainants as the assignees of Major and Gillespie, are entitled to a preference in payment of the amount of the bonds which are still due to the United States and those paid by the sureties, over the general creditors of Murray and Ogden. By the 65th section of that act, (1 Graydon’s Dig. 173,) the United States arc entitled to a priority of payment, on bonds for duties, in all cases of insolvency, or where any estate in the hands of executors, administrators or assignees, shall be insufficient to pay ail the debts due from the deceased, In another part of the same section it is declared, that the cases of insolvency therein mentioned shall be deemed to extend to cases in which a debtor, not having sufficient property to pay his or her debts, shall have made a voluntary assignment thereof for the benefit of his or her creditors.

In Prince v. Bartlett, (8 Cranch. Rep. 431,) the Supreme Court of the United States decided, that to give a preference, it must not only appear that their debtor was actually insolvent, but that such insolvency should have been manifested by some notorious or public act; as that he had made a voluntary assignment of his property for the benefit of his creditors, or that his property had been attached as the effects of an absconding, concealed or absent debtor. In that case, although the debtor was actually insolvent, and his property had been attached by a particular creditor to satisfy his private debt, agreeably to the laws of Massachusetts, it was held, that the United States were not entitled to any priority, and that the attaching creditor had a lien on the property attached, which could not be defeated by the process subsequently issued in behalf of the United States. And in the case of The United States v. Hooe, (3 Cranch, 73,) the same court decided, that to give a priority on account of the voluntary assignment of the property of the debtor for the benefit of his creditors, it must appear that it was an assignment of all the property of the debtor, or that it was made for the purpose of evading the claim of the United States. (See, also, Thelusson v. Smith, 1 Peters’ C. C. R. 195; United States v. King, Wallace’s R. 13.)

*In the case of Downing v. Kintzing, (2 Serg. & Rawle’s R. 326,) it was decided, that where a man, who was actually insolvent, and has stopped payment, and with a view of assigning his whole property, made an assignment of a part, for the benefit of some of his creditors, and afterwards made an assignment of the residue, for the benefit of his other creditors, the two assignments were to be taken together, and considered as one transaction, and that the United States were entitled to a priority. That case was undoubtedly decided on the principle that the intention of the debtor, at the time he made the first assignment, was to transfer the whole of his property for the benefit of his creditors; and the circumstance, that the assignments were in separate instruments, and executed on different days, was not permitted to change the rights of the parties from what they would have been if the assignments had been executed at the same time, and by a single instrument.

In the case before me, if I could come to the conclusion that it was the intention of Murray and Ogden to assign all their property for the benefit of their creditors, at the time they assigned their real estate to Ogden and Rodgers, it would come within the principle decided in the case of Downing v. Kintzing. But there is no evidence of any such intent in this case. I do not find it alleged in the complainants’ bill; and the answer of Murray to that part of the bill which charges the assignment to have been made for the purpose of defeating the judgments, expressly denies, that at that time they knew or believed the firm was insolvent. That there could not have been any intention of defeating the priority of the United States, appears from the answers of Murray to the original bill, and to the bill of revivor and supplement, in which he swears, that at the time of the first assignment, he supposed they had made ample provision for the payment of all the bonds due from them for duties, and for which Major and Gillespie were holden as sureties.

I have, therefore, brought myself to the conclusion, that the assignment of the real estate to Ogden and Rodgers did not entitle the United States, or Major and Gillespie, to a priority, and that the subsequent assignments cannot alter the rights of the parties in respect to that fund. By the assignment *of the lands of Murray and Ogden to trustees, for the benefit of all their creditors, those creditors did not obtain a general, but a specific lien on the lands conveyed, for the payment of their debts, and which could not be divested by any subsequent act of their debtors. As to the property assigned to Bayard and Barclay on the 28th of January, 1818, and in October, 1820, there can be no doubt of the right of the United States to a priority, or of the right of the complainants, so far as the bonds have been paid by Major and Gillespie, or either of them. For the purpose of ascertaining the rights of the respective parties, it will be necessary, in addition to the accounts directed to be taken by the order of the 1st of April, 1828, that an account should be taken of the several persons who were creditors of Murray and Ogden at the time of the assignment of the real estate, and of the amount that is now due to each, including the amount due to the United States on the unpaid bonds and the amount which is due to the complainants as assignees of Major and Gillespie, and distinguishing in that account between what is due on account of bonds paid by Major and Gillespie, and what is due on account of any other dealings between them and Murray and Ogden. And the Master must deduct from the amount paid by Major and Gillespie towards the custom house bonds, any sums which were received by them on account of funds or property placed in their hands specifically for the purpose of being applied to the payment thereof. On the coming in and confirmation of the' master’s report, under the order of the 1st of April last, and under the decree now to be entered, a proportional part of the costs of all the parties to this suit, must be paid out of the funds in the hands of the assignees arising from the first assignment, and the residue out of the fund arising from the other assignments. The fund arising from the first assignment must then be distributed ratably among the creditors for whose benefit the assignment was made, including the United States and the complainants. And out of the funds in the hands of the assignees arising from the other assignments, the United States will be entitled to a priority in payment, for the balance which may be due them, and which shall not be paid out of *the funds arising from the first assignment. The assignees of Major and Gillespie will next be entitled to be paid out of the same the balance due on account of the surety bonds, which they have not received out of the other fund. After that, if any thing remains, the creditors generally will be entitled to payment out of the same ratably, and including any balance that may still be due to the assignees of Major and Gillespie, on any other account than that of the custom house bonds.

        United States v. Munroe, 5 Mason, 572; United States v. Howland, 4 Wheaton, 108; United States v. Bank of the United States, 5 Rob. (La.) 262; Dias v. Bouchard, 10 Paige, 445; Conard v. Atlantic Ins. Co., 1 Peters, 386; Story, J., id. 439.


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    Noble and Others v. Wilson and Others.
    The answers of all the defendants in a suit must be perfected before an injunction will be dissolved, provided all the defendants are implicated in the same charge, and the complainant has taken the requisite steps to compel the answers.
    And where exceptions to the answer of one of the defendants are submitted to, if the exceptions go to the merits, an injunction will not be dissolved.
    The same rule holds where the exceptions are allowed by the master.
    If the exceptions to the answer have not been submitted to by the defendant, nor allowed by the master, the court will look into them to see they are not frivolous.
    If frivolous, they will furnish no objection to a motion to dissolve an injunction.
    Where there is one general exception to the master’s report, embracing all the exceptions allowed by him, and the master, in allowing the exceptions was right as to any of them, this general exception to the master’s report will be overruled.
    August 5th.
    The plaintiffs as judgment and execution creditors of Samuel Wilson, the elder, filed their bill against him and the other defendants, charging that he had fraudulently transferred his property to the other defendants, seeking a discovery of the fraud, and praying an injunction to restrain them from selling or incumbering the property. To the answer of three of the defendants the plaintiffs excepted, and those exceptions were submitted to. To the answer of the other three defendants exceptions were also taken, which, on reference to a master, were allowed; but those defendants excepted to the report of the master. The motion to dissolve the injunction and the argument on the exceptions were heard together.

      *P. Ruggles, for the complainants.

      J. Smith, for the defendants.
   The Chancellor :—The answer of all the defendants must be perfected before the injunction will be dissolved, provided they are all implicated in the same charge, and the complainant has made use of due diligence to get in their answers. In such cases, the exceptions to the answer of one of the defendants submitted to, is a good answer to a motion to dissolve the injunction, if those exceptions go to the merits of the case on which the injunction rests. The same rule must also be applied to the case of exceptions allowed by a master, although the defendant has excepted to the master’s report. If the exceptions have not been submitted to by the defendant, or allowed by a master, they are no answer to the motion, and the court will look into them, and see that they are not frivolous. If they have been allowed by the court, or a master, or have been submitted to, the injunction will not be dissolved until the answer is perfected, unless the court is fully satisfied that the answer to them cannot have any possible bearing on the question of dissolution.

In this case the defendants are all implicated in a charge of fraud; the exceptions seek a more full discovery of the evidence thereof; three of the defendants admit the exceptions 'to their answer to be well taken, by submitting to answer them; and the master has reported in favor of the exceptions to the answer of the other defendants. In addition to this, the answers, as they now stand, do not remove all suspicion of fraud in relation to the transactions referred to in the bill. The motion to dissolve the injunction is therefore refused with costs.

I have looked into the bill, the answer of James and Daniel Wilson and Samuel Wilson, jun., and the exceptions to that answer, and am satisfied that all the exceptions are well taken except the second. As to that exception, that there is no charge in the bill to justify the interrogatory on which it is founded. The master’s report on the exceptions is therefore confirmed, except as to the second exceptions; and the *defendants must pay the costs of the other exception to their answer, and of the hearing before the master.

There is one general exception to the master’s report, embracing all the exceptions allowed by the master. In eight out of the nine exceptions allowed by the master, it appears the report was right; and according to the decision of the Master of the Rolls, in Hodges v. Solomons, (1 Cox. Ca. 249,) this exception to the report must be overruled. But I think it reasonable to modify the report in the manner above stated; and the defendants must pay to the complainants the full costs of the hearing on the exception.

      1] Depyster v. Graves, 2 John. Ch. 148; Vandervort v. Williams, 1 Clark. 377. This rule is not inflexible; it has its limitations and qualifications. One important one is, that the plaintiff must have taken the requisite steps to compel an answer from all the defendants; Mallet v. Weybosset Bank, 1 Barb. S. C. R. 217; Lubor v. Hess, 5 Paige, 85. So, where the defendants on whom the real gravamen rests have fully answered.; especially where the co-defendant is a non-resident. Id. This, in the text rule, is applicable only where the injunction has been properly granted. Id. And the rule is relaxed where the parties not answering, are mere formal parties; Higgins v. Woodward, Hopk. 342.


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    Fabre and Wife v. Colden.
    August 25th.
    One of two devisees cannot file a bill for an account against one of two executors, where the executors, by the will, have the charge of the real estate, without making the other devisee and executor parties.
    Where the husband applies to a court of equity for the control of his wife’s property, the court will protect her interests, and make such a decree as is most for her benefit.
    The complainants’ bill stated, among other things, that the defendant was the only acting executor of Anthony Marshall, late of the city of New York, who died in January, 1811, leaving two daughters, Rosalia, one of the complainants here, and Catherine. That by the will of the said Anthony, his executors were directed to take charge of the maintenance and education of his said children, until they should attain the age of 21 years; the expenses of which were to be paid out of the rents and profits of his real estate. He also directed that his just debts and funeral expenses, together with two annuities of small amount, should be first paid out of his estate, and devised the residue to his two daughters, to be equally divided between them when they should attain the age of 21 years: and in case of the death of either under age, and without leaving lawful issue, the proportion of such deceased child to go to the survivor. That on the 9th of February, 1828, Rosalia was married to Edward Fabre; since which time, the defendant has ^neglected and refused to pay or advance any thing towards her support or maintenance. That she will be 21 years old on the 18th day of May, 1829. That the only charge now upon said estate is an annuity of $250, and a sum sufficient for the support and maintenance of Rosalia and Catherine. The bill prayed for relief, by decreeing a discovery of the value of said real estate; of what it consists, what the rents, issues and profits of the same are, and have been; and that the complainants may be allowed out of the same, after deducting the annuity of $250, one-half of the residue, from the 9th day of February, 1828, to the 18th of May, 1829, and for general relief.
    The answer admitted the material allegations in the bill; but the defendant further stated, that the personal property of the testator was insufficient to pay his debts; and that, by an order of this court, they had been authorized and directed to apply so much of the rents and profits of the real estate as was not necessary for the support, maintenance and education of the daughters, and payment of the annuities, to satisfy those debts; that there was still an outstanding judgment, against the executors, unsatisfied; that as there were cross remainders, in case either of the children should die before twenty-one without issue, he was advised that it would be unsafe to pay to the complainants one-half of the rents and profits before Rosalia, the wife, arrived at the age of twenty-one. And he submitted himself to the court for advice and direction.
   The Chancellor :—There is no averment in the bill, or admission in the answer, that the husband is not amply able to provide for the support and maintenance of his wife; or that she needs any part of the rents and profits of the real estate in the hands of the executors and trustees for that purpose. She has no legal claim to any thing beyond that, until she is of age; and the executor would be unsafe in paying it to her. Catharine has a contingent interest in the fund; the whole will belong to her if Rosalia should die under age without issue, and no decree can be made in favor of the complainants without making Catharine a party. Neither *would it be proper to direct an account in this case, except she were a party, together with the other executor who has acted under the will.

Whenever the husband applies to get the control of his wife’s property through the medium of a court of equity, especially if the wife is an infant, the court will look to her interests, and make such a decree as is most for her benefit.

In this case, if the husband is able to provide for and support his wife, her substantial interest requires that the income of the property should be applied to the payment of the unsatisfied judgment, agreeably to the former order of this court; so that she may receive the property when she becomes of age, unincumbered and free from all claims against it.

The bill must be dismissed with costs; but without prejudice to the right of the complainants to call for an account, &c., when the wife is of age.


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    Candler v. Pettit and others.
    August 25th.
    If an original bill is wholly defective, and there is no ground for proceeding upon it, it cannot be sustained by filing a supplemental bill, founded upon matters which have subsequently taken place.
    Facts which existed before the filing of the original bill, should be inserted therein by way of amendment.
    But if the original bill was sufficient for one kind of relief, and facts after-wards occur which entitle the complainant to other or more extensive relief, he may have such relief by setting out the new matter in a supplemental bill.
    After a party has proceeded to judgment and execution at law, he may, by the aid of a court of equity, reach property in the hands of a third person, which was not, in itself, liable to execution.
    An injunction in such case will also be granted, to prevent the defendant from disposing of his property, after an execution has been issued and returned unsatisfied.
    The complainant filed Ms bill, setting forth among other things, the pendency of a suit in his favor against the defendant at law, and praying an injunction and ne exeat Both were granted by the master; but the injunction was *afterwards dissolved by the Chancellor, on'the ground that the complainant was not entitled to an injunction, to stay the defendant from disposing of his property until an execution had been issued and returned unsatisfied. The complainant having proceeded to judgment and execution at law, filed his supplemental bill, stating those facts, and prayed an injunction; on which the court granted a rule upon the defendants, to show cause why the injunction should not be granted, and allowed a temporary injunction in the meantime.

      George Brinckerhoff, for the defendants,
    showed cause, and contended, among other things, that, as there was no ground for the suit, at the time of filing the original bill, the plaintiff could not collect the supplemental bill with it, so as to sustain the injunction on the facts which had subsequently occurred.

      R. Sedgwick, contra.
   The Chancellor :—If the original bill is wholly defective, so that no valid decree could be made thereon, the party cannot, by filing a supplemental bill, founded upon matters which have subsequently taken place, sustain the proceedings originally commenced.

If the facts existed before the filing of the original bill, they should be inserted therein by way of amendment. And if the complainant had no ground for the proceedings originally, he should file a new bill, showing a case which will then entitle him to equitable relief. But if his original bill was sufficient to entitle him to one kind of relief, and facts subsequently occur which entitle him to other or more extensive relief, he may have such relief by setting out such new matter in the form of a supplemental bill.

In this case, the original bill was sustainable on the ground that the bail had become insolvent, and that there was sufficient shown to authorize the issuing of the ne exeat. (Porter v. Spencer, 2 John. Ch. R. 169.) In such cases the party is not confined to the temporary relief sought, but the court, having gained jurisdiction of the cause for the purpose* of such temporary relief, may retain it generally. (Per Spencer, Justice, in Rathbone v. Warren, 10 John. Rep. 596.)

The supplemental bill is therefore properly filed; and I think, on the facts disclosed, the complainant is entitled to the special relief prayed for in the supplemental bill. The cases of Haddan v. Spader, in the Court of Errors of this state, (20 John. Rep. 554,) and Taylor v. Jones, (2 Atk. Rep. 600,) and Edgell v. Haywood & Dawe, (3 Atk. 352,) in the English Court of Chancery, show, that after a party has proceeded to judgment and execution at law, he may by the aid of a court of equity reach property in the hands of a third person which was not in itself liable to execution. I have recently had occasion to declare, in a case which was before me in the Equity Court of the fourth circuit, that “ Every person should be permitted to exercise the most liberal and extended discretion as to the time and manner of disposing of his property, vesting the proceeds thereof, and of collecting his debts; provided he exercises that discretion fairly and honestly in reference to the equitable rights of his creditors to be paid out of the same, and without any view or intention of delaying, hindering or preventing them from obtaining their lawful dues and demands. But whenever he exceeds these limits of his legitimate authority and power over his property and funds; whenever there is reason to believe he has exercised that power with intent to delay, hinder or defraud those who have a claim upon that property and those funds for the satisfaction of their just demands, such exercise of power becomes unconscientious and unequitable; and a court of equity will then control and regulate its exercise, in such a manner as to compel him to do justice to his creditors. Such an unconscientious exercise of power by the debtor, is a fraud upon the creditor.” (Opinion in Weed & Marvin v. Pierce & others.)

The rule for an injunction in this case must be made absolute.