text:
    Proctor vs. Farnam.
    Where mortgaged premises were sold under a decree of the court of chancery, and the purchaser being unable to raise the money immediately, and being informed by M. that the U. & S. Rail Road Company intended to take the premises for a depot, and that the damages would be appraised without reference to the increase of the value of the land by the location of such rail road, assigned his bid to M., who was the solicitor for the complainant in the foreclosure suit, and assumed the payment of such bid, and such original purchaser afterwards sold and assigned his bid, a second time; to other persons for a considerable advance; Held, that M., the first assignee of the bid, was entitled to a conveyance of the premises, from the master.
    A purchaser at a master’s sale, under a decree of the court of chancery, may make a valid transfer of his bid to a third person, before the execution of the master’s deed for the premises. And the court, upon the application of such assignee, may direct the execution of a conveyance immediately to him, by the master ; subject to the equitable rights or liens of other persons, as against the originalpurchaser, which had become vested previous to the assignment of his bid,
    This was an appeal from a decretal order of the vice chancellor of the fifth circuit. The question arose upon the sale of mortgaged premises in a foreclosure suit; and notice had been given by the mortgagor of an application for a resale. That application had not been finally disposed of when the decretal order, from which this appeal was taken, was entered, but it was ultimately refused. At the sale of the premises by the master, the same were bid off by J. Fay, the appellant, for $1007; but as the purchaser was not able to raise the money immediately, the master gave him a day or two to comply with the terms of the sale, which time was after-wards extended. - While the .purchaser was endeavoring to borrow the money to pay the bid, he ascertained that the Utica and Schenectady Rail Road Company would probably take the lot for a depot. He was also informed, that by the act of incorporation, the company would have the right to take it, upon an appraisement, and that the principle upon which such appraisals were made, was the value of the property, without reference to the increase of such value by th@ location of the rail road at that place. He thereupon applied to C. A, Mann, who had previously offered to take his bid, to know whether such was the law, and whether the company intended to take this lot. Mann told him that such was the law, and that he understood that the company intended to take that lot for the accommodation of their rail road. The purchaser thereupon gave to Mann an assignment of his bid, and Mann, who was the solictor for the complainant in the foreclosure suit, agreed to save him harmless, or to indemnify him against any claim upon him on account of his having bid off the premises at the master’s sale. Fay was afterwards advised that the company had no right to take the lot; and that, if they took it, the value of the land, independent of its increased value by the location of the rail road there, was not the legal rule of damages; and he subsequently sold his bid for a considerable advance. The master having declined to execute the deed, except under the direction of the court, Mann made an application to the vice chancellor, for the purpose of obtaining an order to have the master’s deed made out tc him, in conformity with the assignment to him from Fay. The application was opposed by Fay, but was granted by the court, without prejudice to the application which was then pending on the part of the mortgagor for a resale. From this decretal order, the defendant Fay appealed to the chancellor.
    The following opinion was delivered by the vice chancellor^ upon making the order appealed from:
    Denio, V. C. The counsel for Fay, the purchaser, objects to being made liable to the jurisdiction of the court, in the summary manner adopted by the petitioner, and insists on the rights which all persons have, in general, of being heard by formal allegations and proofs in the ordinary course of justice, where important interests claimed by them are brought into discussion. The petitioner likewise thinks himself aggrieved, by being met by the affidavit of the purchaser, taken ex parte, without an opportunity afforded him to controvert them., The answer to the complaints on both sides is, that these parties, Fay by becoming the purchaser under the decree, and the petitioner by undertaking to substitute himself for the purchaser, have respectively made themselves parties to the original suit, in a certain sense, so far at least as to subject them to this form of proceeding. It is a familiar principle that any one who interferes pendente tite with the subject matter of a suit in equity, submits himself to the jurisdiction of the court, to be exercised by petition or motion in the original suit, and that he acquires no rights in that manner which may not be modified, controlled or directed, without any new proceeding directly against him; and this doctrine applies with full force to this case of a purchaser under the decree, and to all who claim interest under him. (Requa v. Rea, 2 Paige's Rep. 341.)
    - It is further objected, on the part of Fay* that the decree directs the master to make the conveyance to the purchaser, as highest bidder, and that it is not the practice of the court to interfere with his duties; and that especially the court will not do so, where it would change the effect of the decree. I find, however, that it has been the practice of the English chancery to admit, under certain circumstances, the substitution of another person for the purchaser; and such orders have, upon several occasions, been made in this circuit, since I have been in office, in cases where no objection was made. (Rigby v. M’Namara, 6 Ves. 515. Vale v. Davenport, Idem, 815.) I see, therefore, no objection to the making of the order asked for, arising out of the manner in which the matter is brought before me, or the nature of the relief sought. But it is further objected, that the consent of Fay, as set forth in the instrument produced, is not a valid transfer; or at least, that it is revocable in its character, and that he now wishes to revoke it. And it is also insisted, that it was obtained by misrepresentations as to the situation and value of the premises which he had purchased. The instrument executed by Fay to Mann recites that the former was unable to fulfil the conditions of the sale, and it professes to be a conveyance of his interest in the subject, for a valuable consideration. The election spoken of, in the request to the master, does not refer to any contingency upon which Fay should be reinvested with the right he had parted with, but to a doubt whether Mann would think it advisable to avail himself of the right which ho had acquired. It is admitted that a concurrent paroi understanding was given by Mann, that he would, at all events, save Fay harmless from the consequences of the transaction. I do not think that the transaction should be tested by the ordinary rules relating to the transfer of real estate. A transfer made upon good consideration, intended to be absolute, and not conditional, is all that seems to be required. But if those rules did apply, I think the instrument in question might be safely tested by them. The statutory provision, (2 R. S. 135, § 8,) requiring certain contracts to be in writing, and that the consideration should be expressed, does not embrace such contracts, when under seal; and that provision, as well ás the one relative to certain rules of evidence, (2 R. S. 406, § 77,} relates only to executory agreements, and not to those which operate by passing an estate or interest. Besides, if the consideration could be inquired into, the undertaking to exonerate Fay would be sufficient to support the instrument. See Jackson v, Schoonmaker, (2 John. Rep. 230,) as to the manner in which the consideration may be stated in a deed. I am therefore of the opinion that the agreement and assignment constituted a valid absolute transfer, and not a conditional, or revocable one; and that it ought to be carried into effect, if fairly obtained.
    It was, however, as is alleged, obtained by unfair practices. At the time when Fay applied to Mann, the former was, so far as we know, utterly unable to comply with the conditions of his bid. He was liable to be proceeded against by attachment for not doing so; and under such circumstances" he could not have required much persuasion to consent that the bid should he taken off liis hands. The representations alleged to have been made by Mann are, that the rail road company designed to take the lot for their purposes, at an appraisal; that the damages would be estimated without reference to the enhanced value occasioned by the locating of the road; and that they had a right thus to take it. If this information was untrue, whether from design or mistake, on the part of the petiüoner, I would not enforce the agreement to substitute hitó as the purchaser. There is no evidence, one way or the oth--cr, whether the lot is so situated, in respect to location, that it may be taken for the track of the road, or for the depot of the company. In either case I apprehend that the company might enter upon it, and in case of disagreement with the owner, concerning the price, might procure an appraisement, according to the provisions of the charter. The language of the seventh section, (Laws of 1833, p. 465,) is, that the company may enter upon and take possession and use all such lands and real estate as may be indispensable to the construction and maintenance of said double rail road or ways, and the accommodations requisite and appertaining unto them. If this lot is so situated as to be a convenient location for the buildings usually erected at the termination of a rail road for the sheltering of their carriages and apparatus, which as Í understand is an indispensable accommodation, and is what is meant by a depot, I cannot see why it is not embraced within the provision in question. By the same section, the lands are to be appraised at what the commissioners deem to be the full value of them ; and where lands are necessarily taken for the construction of the road, as erections connected with it, the recompense should be, not what they would be worth provided they were not taken for the road, but were so situated in regard to the road as that the value would be enhanced by its construction—but the fair worth of them, independently of that circumstance. It does not appear but that the account given by Mann, of the value of the lot before the road was located, was in all respects correct; at any rate, Fay had the same means of judging which Mann had, and he cannot pretend that be was deceived upon that point. Nor is Mann responsible for what was said to Fay by Clark, or the other persons named.
    Upon the whole, I cannot say, upon these papers, that there was any thing untrue or unfair in the representations made by the petitioner. And if his bargain with Fay was a fair one, the subsequent transaction with Thorn and Curtis was void, for the want of any right or interest remaining in Fay upon which to contract with them. I am therefore of opinion that Maim should be substituted for the purchaser, at the master’s sale.

      B. F. Cooper, for the appellant.
    €?. «S. Mann, the respondent, in person.
   The Chancellor.

The law of this case is so fully and correctly laid down in the opinion of the vice chancellor, that it is only necessary for me to say that I concur with him in the conclusion at which he arrived, and in the reasons upon which that opinion was founded. It is not pretended on the part of the appellant that it was not true, as he was told by Mann, that the rail road company intended to take the lot for the necessary accommodation of the rail road; and the statute gave them the right to take it for that purpose. Neither is it alleged that the amount bid was not the full value of the lot, under the circumstances, or at least what both parties supposed to be its full value at the time the appellant made a legal and valid transfer of the bid to Mann ; although, for some reason which is not disclosed in these papers, Thorn and Curtis subsequently supposed they could make a good speculation upon the lot by paying an increased price beyond the laid. Their conduct in attempting to purchase into this litigation, may perhaps be accounted for from the fact stated in the affidavit of the appellant—that certain citizens of Utica had agreed to pay the necessary expense of procuring the lot for the use of the company; and that it was expected, from that circumstance, a greater sum might be obtained, by a compromise with those citizens, to prevent litigation and expense. Whatever may have been their motives, Fay had parted with all his interest in his bid, by a legal and binding assignment thereof, and they probably knew of it before they attempted to purchase his right. Whether they did or not, the maxim that he who is first in time is strongest in right, is applicable to this case and must prevail.

It is the constant practice of this court to permit the purchaser at a master’s sale to assign his bid, and to direct the conveyance to be made to the assignee; without prejudice. however, to any equitable rights or liens of third persons as against the original purchaser, which may have become vested before such assignment of his bid. In the state of Kentucky, it has recently been decided that even a sheriff’s deed may be given to an assignee of the purchaser, so as to give the substituted purchaser the legal title to the premises. (Frizzle v. Veach, 1 Dana’s Rep. 211.) It is not necessary to inquire whether such would be the legal effect of a sheriff’s deed to a substituted purchaser here ; but this- court will always protect the equitable rights of parties, by directing the conveyance to be made to the assignee.

The order appealed from must be affirmed, with costs.


source: Caselaw Access Project

author: The Chancellor.

license: Public Domain

text:
    The Attorney General vs. Purmort and others. Purmort and others vs. M’Crea & The Attorney General.
    Where P. contracted with M. for the parchase of [and, and afterwards mortgaged it to the state, before he had paid for the same, or obtained a conveyance from M., and- the mortgage was afterwards foreclosed, and the promises bid in by the comptroller in the name of and as the agent of M^. and P. afterwards, under the representation of M. that he had settled -with the state or was holden for the payment of the mortgage, took from him a warranty deed of the premises, and gave back a bond and mortgage for the purchase money, including the amount of the mortgage to the state, the whole of which purchase money was paid' by P., and M. afterwards denied the authority of the comptroller to bid in the premises for him as his agent, and refused to pay such bid, whereupon the attorney general fileS-an information against P. and his grantees to foreclose the original mortgage to the state, and they filed a cross bill against M. and the attorney-general to compel the former to payoff the mortgage so as to relieve the premises therefrom; Held, that M. was bound to pay off and discharge the. mortgage to the state, and to indemnify P. and his grantees against the same.
    The information by the attorney general, in the first of th© above causes, was filed to foreclose two mortgages given to the state, by John Purmort and wife, in September, 1813; but both for the same debt and upon the same premises, the last being given to correct a mistake in the description of the premises in the first. The mortgages were given by Purmort for the security of a loan of $1000 from the state. The information stated, among other things, that the mortgages were attempted to be foreclosed under the statute, and in April, 1818, were bid off by A. MTntyre, the comptroller, for and in the name of M’Crea, for an amount equal to the principal and interest, and the costs of foreclosure; that by the terms of sale, under the law as it then stood, the purchaser was required to pay down the costs of the foreclosure, and the whole interest due at the time of sale, and one eighth of the principal monies, and to secure the residue by bond and mortgage on the premises, or other unencumbered real estate; that M’Crea was not present at the sale, and did not comply with such conditions ; and he afterwards denied the authority of the comptroller to bid off the property for him, and wholly dis-affirmed the purchase; that a suit was subsequently instituted, in the name of the people, against M’Crea, in the supreme court, to recover the amount of the bid, and a verdict was found against him, subject to the opinion of the court, and the judgment was afterwards arrested ; that the mortgagor had conveyed certain undivided portions of the premises to bis children, the other defendants in the information; and that the mortgage monies, to the amount of about $2000, including interest, remained unpaid.
    The defendants, by their answers, admitted the allegations contained in the information ; but they averred and insisted that A. M’lntyre bid off the mortgaged premises at the attorney general’s sale, in 1818, as the agent of M’Crea, and with his knowledge and consent; and that the defendant J. Purmort, believing that the lien and encumbrance of the mortgages to the state had been fully paid off and extinguished by M’Crea, afterwards accounted with and paid to M’Crea, in good faith, the full amount of the mortgages. By the report of the master, the amount due to the state upon the mortgages was ascertained to be $2036,40, on the 5th of August, 1831, including interest.
    The defendants in the first cause, shortly after putting in their answer, filed their bill in the second cause against M’Crea and the attorney general, in the nature of a cross-bill, for the purpose of having the causes heard together, and to compel M’Grea to pay off and satisfy the mortgages to the sja{e_ The complainants in the second suit alleged that John Purmort, the elder, in 1812 and prior thereto, was in possess*on °f mortgaged premises, a lot of about 35 acres in the county of Essex, as a purchaser thereof and under color of title; that in ISIS he discovered that his title was defective, and that the defendant M’Crea had acquired a valid title to the premises, under a sheriff’s sale ; that having made valuable improvements upon the premises, he was anxious to secure the legal title, and for that purpose he entered into an agreement with M’Crea, by which the latter agreed to release his interest to Purmort for $3000, payable in four equal annual payments from the first of May, 1812, with interest annually, the one half thereof payable in bar iron ; that he continued in possession under that agreement until the 16th of September, 1819, when M’Crea gave him a deed for the premises; and that in the mean time he obtained the loan from the state and gave the bond and mortgages above mentioned, to secure the payment thereof, believing that he should be able to perfect his title under the agreement with M’Crea. The complainants further alleged that J. Purmort paid $215 to the state, on account of the interest on the loan; but a portion of the interest remaining unpaid in 1817, the mortgages were put into the hands of the attorney general to foreclose ; that the attorney general having been informed that Purmort had not perfected his title, and that M’Crea had been privy to the obtaining the loan upon a mortgage of the premises, threatened to make M’Cvca a party to proceedings to foreclose the mortgages, so as to charge his title to the premises, with the lien of the mortgage debt; that to prevent such proceedings against himself, and to protect his own interest as well as to benefit Purmort, who was not able to purchase in the premises upon the terms required on a sale thereof upon a foreclosure of the mortgages, M’Crea agreed to purchase in the premises upon the sale, and to comply with the conditions thereof; and that after the premises were so purchased in by M’Crea, Purmort should endeavor to sell the same for enough to pay the amount of M’Crea’s bid, and what was still due under the agreement of May, 1812, and that the balance for which lie should sell the premises, if any, should be retained by Purmort ; and which agreement the defendants alleged was evidenced by written documents under the hand of M’Crea; that before the day of sale, M’Crea made an arrangement with M’Intyre, the then comptroller, to bid off the premises, for him and in his name, as his agent; that the same were bid off by M’Intyre accordingly, for $1158,22, the amount then due on the mortgages, including costs. The complainants also alleged that about the 16th of September, 1819, Purmort not having been able to sell the premises, and M’Crea having represented to him that lie had complied with the conditions of the sale on the foreclosure of the mortgages, and that he had assumed and provided for the payment of the whole debt, whereby the lien and encumbrance of the mortgages were extinguished, and Purmort supposing such representations to be true, agreed to purchase the premises from M’Crea for $¡5100, which included the amount due the latter under the agreement of 1812, and the amount bid for him by M’Intyre on the foreclosure sale ; that M’Crea thereupon gave him a deed for the premises, and Purmort and his wife gave back to M’Crea a bond and mortgage for the purchase money which has since been paid ; and that the deed from M’Crea to Purmort contained the following covenants, in addition to the usual covenants of seisin and quiet enjoyment against all estates, charges, conditions and encumbrances, and for further assurance : ce And the said party of the first part, for himself and his heirs, covenants to warrant, and by these presents forever to defend the premises, and every part and parcel thereof, with their appurtenances, unto the said party of the second part, his heirs and assigns, against the claims of all persons whomsoever; and if he or they shall be legally evicted, to pay the value of the premises with the improvements at the time of such eviction, with the legal and necessary charges in defending the same, if by reason of any encumbrance of the said party of the first part, his heirs or assigns The complainants further alleged that J. Purmort, the elder, supposing that he had a perfect title to the premises, after-wards conveyed certain undivided portions thereof to three of bis sons, the other complainants, who were in possession thereof at the time of filing their bill; that in 1827, Purmort and his wife learned, to their great surprise, that M’Crea had not complied with the conditions of the foreclosure sale, and that he had refused to do so, by reason whereof, as the complainants were advised, such sale was void, and the lien of the state upon the premises was not extinguished; that in consequence of such default of M’Crea, the attorney general had commenced proceedings in this court against the complainants in this suit; that until after the commencement of such proceedings, they supposed that M’Crae, under the covenants in his deed, would be bound to indemnify them against the mortgages to the state, and they did not know that there was any thing peculiar in the covenants; but, upon the inspection of the printed covenants of warranty in the deed, by counsel, the following words were found to have been added to the printed warranty, in the hand-writing of M’Crea : “if by reason of any encumbrance of the said party of the first part, his heirs or assignsthat M’Crea now insists upon that written clause as qualifying all the covenants in the deed, and as exonerating him from any obligation to indemnify them against the encumbrance of the mortgage to the state ; that M’Crea was a counsellor of the supreme court, and prepared the deed, without any counsel having examined it on the part of the grantee, and delivered it to him as a good warranty deed of the premises, and represented it as such, without calling his attention in any manner to the written clause, or explaining it to him; that if he had known the deed contained such a special clause, he would have objected to receiving the same ; and that M’Crea inserted the written clause in the deed, knowing that the mortgages to- the state had not been satisfied, and fraudulently concealed that fact from Purmort, and inserted the said clause to shield himself from responsibility when the state of the encumbrances should be discovered. The complainants further alleged that they had requested M’Crea to pay off the mortgage to the state and indemnify them against the costs of foreclosure, which he refused to do. They therefore prayed that the procceedings in the foreclosure suit might be stayed until the defendants in tins suit had answered ; that both suits might be heard together; and for general relief,
    To this bill the attorney general put in a general answer, leaving the complainants to proof of the matters charged in their bill, and submitting the rights of the people of the state to the decision of the court.
    An answer on oath from the defendant M’Crea being waived by the complainants, in their bill, he put in an answer, without oath, in which he admitted many of the allegations in the bill, as to which there was no dispute between (he parties, but denied the principal facts upon which the complainants claim to have equitable relief rested; particularly the agreement with Purmort to bid off the premises at the sale upon the foreclosure of the mortgages, or that he authorized M’Intyre to bid off the premises for him ; or that the subsequent sale and conveyance to Purmort had any connection with the agreement of May, 1812, or with the mortgage to the state, or the bid made by MTntyre; or that he represented to Purmort that he had discharged, or assumed the mortgages to the state, or had complied with the conditions of the sale under the mortgages. And the defendant insisted that no right or cause of action had accrued to the complainants within six years before the filing of their bill. Both causes were brought to hearing together; the first upon bill and answer, and the last upon pleadings and proofs.

      JL C. Paige, for the attorney general.

      B. F. Butler, for the Purmorts.

      J. Tallmadge fy L. H. Palmer, for the defendant M’Crea.
   The Chancellor.

When this case was formerly before me, upon the demurrer of the defendant M’Crea to the bill of the Purmorts for want of equity, I came to the conclusion that the facts stated in the bill were sufficient to entitle the complainants to equitable relief. And as the defendant did not think proper to appeal from the decree overruling the demurver, that decision must now be considered as the settled law 0f case and cannot again be opened for discussion here. This disposes of the objection of the defendant’s counsel, that

the complainants had a perfect remedy at law upon the covenants in the deed of M’Crea, or by an action for the alleged deceit, and that they had no right to come into this court for equitable relief. Another and a conclusive answer, however, to tin's ejection, is, that it was not insisted upon by the defendant in his answer; and it is too late for a defendant to make the objection for the first time at the hearing, upon pleadings and proofs, that the complainants had an adequate remedy at law. The rule on this subject is so well settled that it is unnecessary to refer to any authorities in its support. I shall therefore proceed to examine the case on its merits. The right of the complainants to relief upon their cross-bill, or move properly their original bill in the nature of a cross-bill, depends principally upon the transactions which occurred at the time of giving the deed to John Purmort, the elder, in 1819, and upon the construction of the covenants contained in that deed. It is necessary, however, that I should advert to certain transactions which had previously occurred, for the purpose of ascertaining what were the rights of the several parties, under the agreement of May, 1810, the subsequent mortgages to the state, and the purchase of the premises, by M’Intyre in the name of M’Crea, at the sale upon the foreclosure. By (he agreement of May, 1812, Purmort, who was previously in possession under claim of title, became the purchaser of all of the interest of M’Crea in the premises, for the consideration of $2000, to be paid in four yearly payments. And by the acceptance of that agreement, he became the tenant at will of the premises, to M’Crea, with a right in equity to compel a specific performance of the contract. This equitable interest was transferred to the state by the giving of the mortgages by Purmort; and a valid equitable interest in the premises would pass to the purchaser under the foreclosure and sale by the officers of the state, subject to the lien of M’Crea for the unpaid purchase money under the contract of May, 1812. It is alleged, in the answer of M’Crea, that this con (ract was abandoned by the parties previous to the new agreement which was made in September, 1819 ; but he has introduced ne proof to sustain this allegation in his answer, and the contrary is fairly inferrible from the circumstances of the case and the continued possession of Purmort. Indeed, it was impossible for the original parties to make any valid agreement to rescind this contract, without the assent of the state, which had become the equitable assignee thereof by virtue of the mortgages. If the purchase by M’Intyre, in the name of M’Crea, was unauthorized, the latter might after-wards elect to affirm the contract of purchase made for him and in his name; and there is no evidence that he had dissented from or disaffirmed such purchase previous to the giving of fire deed to Purmort, in September, 1819. On the contrary, 5 think the letters which are made exhibits in the cause show that he had elected to affirm that purchase. In October, 1820, M’Intyre writes to him as follows: “ Dear Sir—More than two years ago you became the purchaser of land mortgaged io the state, in Essex county, by John Purmort. You had not the money at the time to make the first payment, but you engaged to pay it in a few weeks, and to give your bond and mortgage for the balance, as is usual and as required by law. You have however totally neglected it. It is high time the business was closed, and I must beg your immediate attention to it.” In his answer to this letter, written a few days thereafter, the defendant M’Crea quotes that part of the letter in which M’Intyre states that he was to have complied with the terms of the purchase in a few weeks; and so far from denying any part of the statement of M’lntyre as contained in that letter, he makes an excuse for not having complied with the terms of sale, and requests further indulgence to enable him ¿o obtain a payment from Purmort upon his bond and mortgage, taken upon the conveyance of the premises to him the year previous. And in his letter to Dexter, the attorney general's cleric, as late as March, 1826, he recognizes the validity of the purchase in his name, and says he expects to comply with the terms of the sale as he had agreed ; and alleges that he had complied with them in part. These letters, independent of the testimony of Nicholson and Judge Pinch, -vontain written evidence that he had authorized M’Intyre to bid off the -premises in his 'name originally, or that he, ha'5 rat*^e^ anc^ affirmed that act afterwards. The payment made thereon, which he alludes to in the letter to Dexter as not having been noted on the books of the comptroller, was probably the costs of the foreclosure, which may have been advanced by him and paid over to the attorney general; which costs, from the statement of the amount bid beyond the principal and interest then due, was about $52.

If I am right in the conclusion at which I have arrived on this part of the case, M’Crea, by the purchase of M’Infyre for him and in his name, had become the owner of Purmort’s equitable interest in the premises under the agreement of May, 1812, upon complying with the terms of sale ; and having the ■legal title in himself previous to that time, the right of redemption of Purmort in this mere equity would have been merged or .extinguished by the payment of the amount of the bid, without any written conveyance of the attorney general, so as to deprive Purmort of the right to claim a specific peformance of the agreement of May, 1812.- And Purmort’s equitable interest being sold for the full amount due to the state on the mortgages, he had a right to insist that the mortgage money should be paid by M’Crea,"as the person who, in equity, was primarily liable to the state. As -between M’Crea ■and Purmort, the mortgage debt was extinguished, and 'M’Crea was, in equity, bound to pay it and indemnify Purmort against it. But until the terms of the mortgage sale were complied with, the state had a lien upon the premises, in the hands of M’Crea, for the unpaid purchase money on that sale. And this lien was, in equity, although perhaps ■not at law, an.encumbrance of M’Ciea upon -the premises ■conveyed to Purmort by the deed of September, 1819. The -complainants have therefore an equitable tight to insist that he should be decreed to pay off and extinguish the debt due to the state, so as to indemnify them against that encumbrance ; and that equitable obligation arises from the deed of ■September, 1819, and the situation of the parties at the time that deed was given, independent of any representations or assumption of the payment of the state debt, by M’Crea, in September, 1819, which are not contained in the deed itself,

if I am wrong, however, in this view of the case, and the foreclosure is to be considered as a mere nullity, what was the situation and what were the rights of the parties at the time of making the new contract between Purmort and M’Crea at the time of giving that deed 1 Purmort was then in the possession of the premises under the agreement to purchase, made with M’Crea in 1812, which agreement had never been entirely abandoned; the alleged agreement of M’Crea to purchase in the premises on the foreclosure of the mortgages being perfectly consistent with the contract of 1812, as it was the interest acquired under that contract, which was covered by the mortgages to the state. And as time was not made an essential part of the contract, the neglect of Purmort to pay the money at the times specified, was not, in equity, a forfeiture of bis rights, under the agreement of 1812. (Getchell v. Jewett, 4 Greenl. Rep. 350. Brashier v. Gralz, 6 Wheaton’s Rep. 528.) As Í have before observed, there is no evidence in this case of the abandonment of the agreement of 1813, by either party ; and the continuance of Purmort in possession without the payment of rent, or any attempt to remove him, is strong evidence that the fact was otherwise. The amount, due upon that agreement, in September, 1819, was about $3032, and Purmort was entitled to a specific performance thereof upon the payment of that sum; but he would have been obliged, in that case, to pay off and discharge the mortgages to the state, which at that time amounted to about $1200 more. Upon the payment of these two sums, considering the mortgage sale a nullity, he would have obtained a perfect title to the premises, discharged of all claims whatever. I cannot believe, therefore, that it was the intention of either of the parties, at the time of. the execution of the deed of September, 1819, that Purmort should pay the whole consideration mentioned in that conveyance, fifty-one tons of -iron, estimated at $100 the ton, and should also be liable to pay off and discharge the mortgages to the state. It will be seen that the $5100 secured by Purmort’s bond and mortgage at that time, discounting thé interest on the payments, which were not on interest, amounts to just about the two sums due to the state upon the mortgages, and to the de« fendant M’Crea under the agreement of May, 1812. I aisd think the defendant is under a mistake in supposing, as aU Ieged in his answer, that the written clause, at the end of the printed covenants of warranty in the deed, was inserted by him for the purpose of showing that he was not liable for the payment of the amount due to the state, and did not intend to warrant the title against that encumbrance, I think it is very, evident, from the whole transaction, that the written clause was inserted in the deed, by him, for a different and much more honest purpose. The printed blank, used upon that occasion, was from a form which I had myself prepared and had printed, to be used only in special cases. And the concluding clause, making the grantor liable, in case of eviction, for the full value of the premises, with the improvements, at the time of such eviction, without reference to the amount of the consideration expressed in the conveyance, was not usually inserted in full covenant warranty deeds. The defendant, although he admits that he delivered this conveyance to Purmort as a good warranty deed, and represented the same to him as such, had a right to insert the written qualification, of this extraordinary and unusal covenant, to pay the increased value of the premises, with the improvements, to the case of an eviction on account of an encumbrance created by himself. I am satisfied, therefore, that he inserted the written clause for this purpose only, and not to qualify or alter the legal effect of any of the other covenants in the conveyance. And this is, I think, the fair legal construction of this written clause, when taken in connection with the printed covenants of warranty, &c. Any other construction of this clause would be inconsistent with-the admission of M’Crea that he delivered the conveyance as a. good warranty deed, and with the proof of his declarations at the time the conveyance was given. It would also operate as a fraud upon the grantee y for if the written clause should be construed as a restriction upon the covenants, of seisin and for quiet enjoyment, and upon the .general covenant of warranty against the lawful claims of all persons, it would render those covenants nugatory, and only amount to a warranty against the encumbrances which the grantor had himself created; that is, to very little more than a quit claim deed.

The testimony of Nicholson and Judge Finch, who were present when the deed was given, establishes the fact, beyond all question, that the parties acted upon the assumption that M’Crea had become responsible for the payment of the debt due to the state, and that the amount of such debt was included in, and formed a part of, the consideration of the §5100 bond and mortgage, which has since been paid. And the letters of M’Crea, of October, 1820, and March, 1826, show that he considered himself as under obligation to pay that debt, long subsequent to the conveyance of September, 1819.

I cannot discover any valid objection to the complainant’s claim arising out of the statute of frauds. The amount of the debt was included in the bond and mortgage to M’Crea, under the assumption or understanding that M’Crea had become responsible to the state for the payment thereof; and Purmort having subsequently paid the whole amount of that bond and mortgage, under the supposition that the state debt had been discharged, the defendant M’Crea is, in equity, bound to make good his representations made to Purmort at the time when such bond and mortgage was given. Neither can the statute of limitations avail the defendant in this case. Even if there had been an express promise to pay the debt to the state, upon which Purmort might have sustained an action at law if such promise was not complied with, the letter of March, 1826, is a recognition of an existing indebtedness at that time from which a new promise might be inferred. But, in this case, the bond and mortgage were given upon the assumption that M’Crea had already become responsible to the state for the payment of the debt; and this being a case of equitable cognizance merely, the six years limitation is not applicable.

Upon every principle of justice and equity, the defendant M’Crea is bound to pay off and discharge the mortgages to the state, and to fully indemnify the complainants against any costs or charges on account thereof. I shall therefore direct a decree to be entered, in these suits, requiring the defendant M’Crea to pay to the attorney general the amount reported due by the master, with interest thereon from the date of the report, together with the costs of the attorney general in both suits; and that he also pay to the complainants.in. the last suit their costs in both. If the amount due to the state, and the attorney general’s costs, are not paid by or collected from M’Crea within three months after the entering of the decree, the mortgaged premises must be sold in the usual manner, for the payment thereof, with the usual resort over against the mortgagor for. any deficiency which may exist... And in that case, the complainants in the second suit are to be permitted to collect the whole amount of the decree against the defendant M’Crea.,


text:
    Bradley vs. Root and others.
    Where the holder of a mail contract assigned the same to the complainant; -who agreed to carry the mail during the continuance of the contract, and. was to receive therefor all the monies which should become payable under the contract, according to the terms thereof; and the assignor afterwards gave R. an order upon the postmaster general, for the monies which might-become payable upon the contract, to indemnify R. and S. against a responsibility which they had previously incurred as his endorsers ; Held, that the complainant, by the assignment of the mail contract, had a specific equitable lien upon the monies which were to be received for carrying., the mail under the contract; and that having the prior as well as the superi- or equitable right to such monies, R. was bound to pay over to him the amount which had been received from the postmaster general’upon such order.
    An order to pay a debt out of a particular fund belonging to the debtor, is unequitable assignment of the fund pro tanto, and gives the creditor who receives the order a specific equitable lien upon such fund.
    If a complainant examines a defendant, who is primarily liable for the payment of the demand for which the suit is brought, as a witness against a-co-defendant who is only secondarily liable, he cannot have a decree against either of those defendants, upon that part of the case to which ha examined one of them as a witness.
    The rule that a complainant cannot have a decree against a defendant whom he' has examined as a witness in the cause, does not apply to the case of a mere formal defendant, as an executor or trustee, against whom no personal decree is sought, and who has no personal interest in the question as to which he is examined as a witness against his co-defendants ; nor to the case of a defendant who by his answer admits his own-liability, or-who suffers the bill to.be taken.as-confessed against him.; :: • /

      Whore a defendant admits that, he is primarily liable to the complainant for the payment of the demand for which the suit is brought, he may be examined, either by the complainant or by his co-defendants, as a witness in the cause.
    Where the complainant examined a witness against the original defendants in the cause, and it appeared upon such examination that the witness was primarily liable for the payment of part of the claim for which the suit was brought, and he was thereupon made a defendant, by a supplemental bill, and suffered such bill to be taken as confessed against him; Held, that the complainant was not precluded from having a decree against the defendant who had thus been examined as a witness before he was a party to the suit.
    This was an appeal from a decree of the vice chancellor of the third circuit. The complainant stated in his bill that Sylvester Stewart, one of the defendants, in the fall of 1820, obtained from the postmaster general three separate and distinct contracts for carrying the mail on different routes, for four years from the 1st of January, 1831; the last of which contracts, under which the complainant claimed the right to relief in this suit, was for carrying the mail from Stamford, or the head of the Delaware, by Harpersfield, Kórtright, &c. to Oxford and back, once a week, at the rate of $75 per quarter, the other contracts having been assigned or given up previous to March, 1832 ; that on the 21st of January, 1831, the contract for carrying the mail from Stamford to Oxford and "back, and all the interest of Stewart therein, was assigned by Mm to the complainant, who agreed to carry the mail according to the contract, and was to receive all the monies due and payable on the same; but no notice of such assignment was given to the postmaster general; that the complainant carried ■Che mail, under the contract, up to the 20th of May, 1823, and received the stipulated compensation to the first of January, 1822, except $30 which was received in a draft on a country post master, and not being paid, the draft was returned to the general post office ; and that there was due to the complainant for his services under the contract, on the first of May5 1823, $400, exclusive of the draft returned; that the complainant was ignorant of the regulation of the department requiring notice of the assignment of a contract to be given to the department to entitle the assignee to receive payment in his own name; and that the defendant. Root, about the last of-Marche 1822, knowing or having reason to believe or suspect that the contract had been assigned to the- complainant, or the equitable right thereto transferred to him, fraudulently and collusively, and without the complainant’s knowledge, procured an order from Stewart upon the postmaster general for the payment of $625 on his mail contracts, payable from time to time as the payments should become due, Stewart then being notoriously insolvent; under which order the defendant Root had received in payments from the postmaster general, from time'to time, $430, which belonged to the complainant under the assigned contract. By the answer of the defendant, S. Stewart, the allegations in the bill were admitted, except that he denied that he had any intention of defrauding the complainant. General Root, by his answer, admitted the receipt of the order, and that S. Stewart was then insolvent; and that he had received from the postmaster general $395, on the order, including $60 in drafts, on postmasters, which had not been paid at the time of putting in the answer. He also alleged in his answer, that the draft upon the post office department was given to him by S. Stewart, to indemnify him and John Stewart for responsibilities incurred before that time, as his endorsers, and to secure the payment of debts due to the defendant Root, individually. And he denied that the draft was received with the view or design of preventing the complainant from receiving the avails of the contract, or with a view to injure or defraud him. Proofs were afterwards taken in the cause, and the complainant proved the assignment of the contract, and the carrying of the mail by himself, as alleged in the bill John Stewart was examined as a witness on the part of the complainant, but the defendant, Root, having made the objection that he was a necessary party, as the order on the postmaster general was given for the benefit of himself and J. Stewart jointly, J. Stewart, under an order of the court, was afterwards made a party defendant, by a supplemental bill; which bill was taken as confessed against him.
    Upon the hearing of the cause the vice chancellor, decreed the payment of the $395, received by Root, and the interest thereon from the first of July, 1823, with costs. And a further provision was made, in the decree, for the settlement of the equities between the several defendants, and to compel an equitable contribution. From this decree the defendant, Root, appealed to the chancellor.

      B. 3?. Butler «$• 32. Root, for the appellant.
    There is no proof of such an assignment of the mail contract to the complainant, as is set forth in the bill; nor is it shown that the complainant had any right to resort to any person except S. Stewart, for the monies due him on the covenant of Stewart. Whatever may have been the right of Bradley as between him and S. Stewart, the defendant Root had no such notice as to invalidate the order executed to him. The notice proved was at most, a notice that Bradley was a sub-contractor, and was entitled to $73 out of every $200. The order should therefore be sustained to the extent of the monies then due on the note to Day.
    The only equitable claim which can be set up by the complainant against the defendant Root separately from John Stewart, is for the $75 out of every $200 mentioned in the exhibits D. and E.; and for this he cannot have a decree in this suit, because it is properly recoverable at law, and is utterly repugnant to the whole scope of the bill, and the relief prayed by it. But if any decree in favor of the complainant is made in this cause, the defendant Root should be allowed the payment to Day of $105; and he should in no event be charged with costs. The costs, if allowed to the complainant, should be charged on the defendant John Stewart, whose conduct throughout the whole matter has not only been disingenuous, but fraudulent, both towards the complainant and his co-surety, Root.
    • As between the defendants themselves, the defendant Root is entitled to be indemnified against the notes to Day, and also for his private account; provided the balance in the hands of John Stewart are sufficient, together with what will remain in the hands of Root, after allowing his private account, to satisfy complainant’s demand, which is evidently the case.

      S. Sherwood, for the respondent.
    The defendants Root and J. Stewart, with full knowledge that the mail contract from Stamford to Oxford had been assigned to the complainant, received $¡395 belonging to the complainant. Root should therefore be decreed to refund the same with interest; and the vice chancellor’s decree is correct in this respect. The money being inequitably obtained, no part of it ought to be retained, either to pay the notes endorsed by Root and John Stewart, or Root’s private demand, if he has any.
    The decree being against Root and S. Stewart only, and John Stewart being made a party after he was examined as a witness, at which time he was competent, the decree is not objectionable on that ground; even if that question had been raised below.
   The Chancellor.

Before I proceed to examine the merits of this case, it is proper that I should notice one or two formal objections to the complainant’s right to recover in this suit, which were made on the hearing. If the complainant had a perfect remedy at law to recover the money due to him on the contract, and which was received by the defendant Root, it is too late to make that objection at this time, as it was not insisted on in the defendants’ answer; and it has frequently been decided by this court that it is too late to make-such an objection for the first time at the hearing.

It is insisted on the part of the appellant that the defendant J. Stewart was primarily liable to the complainant for the money received of the postmaster general and paid over to Day, in discharge of the joint liability of Root and himself, and that the complainant, by examining him as a witness against Root, has precluded himself from having a decree against either. The rule is unquestionably as contended for by the appellant’s counsel, that if the complainant examines a defendant who is primarily liable, as a witness against his co-defendant who is only secondarily liable, he is not only precluded from having a decree against the witness, upon the part of the case to which he has examined him, but is also prevented thereby from obtaining a decree against the co-defendant who is only secondarily liable. (Goold v. O’Keefe, Beatty’s Ch. Rep. 356. Thompson v. Harrison, 1 Cox’s Ca, 344.) In this case the supplemental bill has been taken, as confessed, as against the defendant John Stewart. And as it is substantially charged in that bill that he had, from the bond and mortgage, received more than was sufficient to pay the whole debt of Day for which Stewart and Root were jointly liable as "endorsers, if Root is obliged to pay to the complainant the money received of the postmaster general, he will be entitled to a decree over against J. Stewart for so much of the money as was applied in payment of their joint indebtedness to Day, with interest from the time it ivas so paid.

This case, however, does not come within the principle of the rule to which I have adverted. The reason of the rule that the complainant cannot have an adverse decree against a defendant as to a part of the case to which he has examined him as a witness, is, that it would be charging him upon his own evidence, which can only be obtained against himself by proper charges in the bill, and by calling upon him to answer, in the usual way. (See Palmer v. Van Doren, 2 Edw. Ch. Rep. 193.) Neither does the rule extend to the case of a "mere formal defendant, as an executor, or trustee, against whom no personal decree is sought, and who has therefore no personal interest in the question as to which he is examined as a witness against his co-defendants. In the case of Carter v. Hawley, (Blunt's Ambler, 583, n. 3,) Lord Hardwicke, in reference to this point, says: <e The rule of this court differs from that of law, because there are several cases where the complainant must make parties of those defendants whom he must necessarily examine as witnesses, as in the case of trustees, whom he must examine, and notwithstanding pray a decree against them; for though they may have the legal estate in them, they are not materially interested.” The principle of the rule that the complainant cannot have an adverse decree against a defendant whom he has examined as a witness, does not appear to extend to the case of a defendant who by his answer admits his own liability, or who admits the same by suffering the bill to be taken as confessed. I infer that such was the case in Carter v. Hawley, as Lord Hardwicke permitted the deposition of a defendant to be read against his co-defendants, upon a bill for the specific performance of articles of agreement for the granting a lease, although he declared that the defendant who was thus examined was a necessary party to the suit. In Massy v. Massy, (Beatty’s Ch. Rep. 353,) where the complainant had examined the principal defendant as a witness against his co-defendants either through carelessness or ignorance although the complainant’s case was sufficiently admitted by the answers of all the defendants, Lord Chancellor Hart refused to dismiss the bill and turn the complainant around to a new suit, but directed the objectionable deposition to be expunged at the expense of the complainant. And in Lupton v. Lupton, (2 John. Ch. Rep. 614,) Chancellor Kent decided that a defendant who had suffered the bill to be taken as confessed against him, and thereby admitted that he was primarily liable for the payment of the legacy which was sought to be recovered against him and the other defendants, was a competent witness for his co-defendants, although there must be a personal decree against him in the first instance. In this court mere technical objections to the admissibility of evidence, on the ground that the witness is a party to the suit, are wholly discountenanced; although the complainant who has a right to call for an answer on oath from a defendant, as to every material fact in the cause, cannot be permitted to examine such defendant as a witness for the purpose of obtaining an adverse decree against himself. But where it appears from the answer of a defendant, or from his having suffered the bill to be taken as confessed, that he is primarily liable to the complainant, so that he stands indifferent as between other parties to the suit, and cannot possibly be either benefitted or injured by any testimony he may give in the cause, I can see no good reason why the right to examine him as a witness, on the part of the complainant as well as on the part of a co-defendant, should not be mutual. And such I think was the opinion of Lord Hardwicke, from his language in the case of Dixon v. Parker, (2 Ves. sen. 222,) who, after adverting to the difference between the rules of courts of law and the court of chancery in this respect, lays down the rule of evidence in the court of chancery thus : “ Where there is a defendant in this court, if, notwithstanding that he is not concerned in interest, either side may examine him as a witness; and, therefore, the compíainant, although he has made a person defendant whom he wants to examine as a witness, may, on suggestion that he is not concerned in interest, obtain an order for it, saving just exceptions; and so may a co-defendant.53

Again; there are other reasons in the present case why the role insisted on by the defendants5 counsel should not be applied here, for the purpose of depriving the complainant of his relief and turning him around to a new suit. When J. Stewart was examined as a witness against the defendants in the original bill, he was not a party to the suit, neither did it appear from the bill that he was in any way interested in the matters as to which relief was sought against the then defendants. The defendant Root, however, in his answer, alleged that the order upon the postmaster general, upon which the money claimed by the complainant was obtained, was given for the joint benefit of himself and J. Stewart, the witness, to secure them as endorsers of S. Stewart, upon the notes to Day, and that a part of the money thus received had been applied to the payment of those notes; and it also appeared, from the testimony in the cause, that J. Stewart had received a bond and mortgage from the principal debtor, as a counter security, upon which he had realized sufficient to pay the whole debt to Day, for which he and Root were jointly liable as sureties of S. Stewart. Under these circumstances, and after the proofs in the cause were closed, a supplemental bill was filed against J. Stewart only, under the direction of the court, for the purpose of making him a party, and to enable Root to obtain a decree over against him if the complainant should succeed in the suit. As Stewart suffered this supplemental bill to be taken as confessed, no evidence could be taken in the supplemental suit. He has not been examined as a witness since hé was made a party; but at the hearing, Ms deposition which had been taken in the original suit was read by the complainant’s counsel against Root and S. Stewart, the defendants in that suit. If there was any legal objection to the admissibility of this deposition under these circumstances, which at present I cannot discover, that may be a good reason for suppressing that part of the testimony; but it certainly affords no just ground for dismissing either the original or the supplemental bill.

The conclusion at which I have arrived upon another part of this case, renders it perfectly immaterial whether the deposition of J. Stewart is received or rejected. Independent of that deposition, the answer of the defendant Root and the written and oral testimony in the cause, show that he had sufficient to put him upon inquiry as to the complainants equitable rights, either as assignee of the mail contract, or as a sub-contractor under S. Stewart; even if Root and J. Stewart, for whose benefit the order was obtained, were in a situation to protect themselves as bona fide assignees of the money which was to become due under the mail contract with the postmaster general. But as the order was obtained merely as a, security, to be collected and applied in payment of a debt for which they were previously liable, and no additional responsibility was assumed or other security given up on the faith of that order, the prior equity of the complainant, if he had any, must prevail, whether Root or J. Stewart had or had not notice of such prior equity at the time the order was given, or subsequently thereto. The vice chancellor was, therefore, wrong in supposing that Root could defend himself on the ground that he was a bona fide assignee for a valuable consideration paid, even if every allegation in his answer is to be taken as true. Besides, the order itself was nothing more than an equitable assignment of the money to become due on the contract. And if there had been a previous equitable assignment to the complainant, who it appears has actually earned the money by carrying the mail, he has not only the prior but also the stronger and better equity to claim the assigned fund ; either of which is sufficient to authorize him to claim the money in the hands of the defendant Root, who paid no new consideration for his subsequent equity. It is only necessary, therefore, for me to inquire whether the complainant had such a prior equitable assignment of the fund.

It is insisted on the part of the defendants that the instrument, executed by the complainant and S. Stewart, is not an assignment of the mail contract, but is merely a sub-contract. It is not alleged in the bill, that the mail contract was assigned by Stewart, in the manner required by the regulations of the post office department to entitle the assignee to claim compensation in his own name. On the contrary, it is alleged in the bill, that the complainant was altogether ignorant of the regulation making it necessary for the assignee to give notice of the assignment to the department. He, therefore, claims to be entitled to the fund, under an equitable assignment merely, and if he has proved such an assignment, it is all that could be required of him, under the allegations in the bill The agreement, in this case, recites the original mail contract, and that S. Stewart has assigned his interest therein to the complainant, and then concludes thus: “ Now, therefore, it is agreed between the said Burr Bradley and the said Sylvester Stewart, that the said Burr will well and faithfully carry the said mail, agreeably to the terms of the said contract first mentioned, and that the said Burr shall, for doing the same, receive the full benefit of said contract, and be entitled to all monies due from the postmaster general, agreeably to the terms of said contract for carrying said mail; and that the said Sjdvester will deliver and pay over to the said Burr all monies or drafts received by said Sylvester, by virtue of said mail contract.” This, in equity, is clearly an assignment of the contract, and of the specific fund which was to become payable from the postmaster general under the same. In Yates v. Groves, (1 Ves. jun. 280,) Lord Thurlow decided that an order to pay a debt out of a particular fund belonging to the debtor, constituted an equitable assignment of the fund pro tanto, and gave to the creditor a specific equitable lien thereon, although the order had not been accepted by the holders of the fund before the debtor’s bankruptcy. (See also l Mad. Rep. 55 ; 4 Sim. 607; 1 Russ. & Myl. 602 ; and 3 Dea. & Chit. Rep. 218.) Here, by the very terms of the agreement, the mail contract is declared to be assigned to the complainant, and it is also declared that he shall receive the full benefit of the contract, and be entitled to all monjes to become due for carrying the mail under the same. It seems to be impossible to make use of language more clear and'explicit, ie show the intention of the parties to give the assignee a specific equitable lien upon this particular fund. The subsequent covenant on the part of S. Stewart, to deliver and pay over to Bradley the monies and drafts received by virtue of the mail contract, is strictly in accordance with this view of the case, and would give the assignee the right to follow such monies and drafts into the hands of any persons, except bona fide receivers or purchasers for a full consideration paid upon the faith of such .monies or drafts, so long as the particular fund could be traced and identified.

The defendants Root and 8. Stewart have not, in their answers, insisted, as a defence, that the postmaster general elected to consider the contract forfeited, in consequence of any irregularity in carrying the mail under the same, or that 8, Stewart sustained any damage by reason of the complainant’s neglect to comply with the literal requirements of the contract ; but, on the contrary, it appears that the contract was considered in full force, and that the money received by Root was paid under the same. The whole of the evidence, therefore, as to any irregularity in carrying the mail, and as to the private habits of the complainant, was irrelevant and impertinent, and should have been expunged from the record, if a proper application for that purpose had been made.

The whole of the monies and drafts received by the defendant Root belonged to the complainant, under the assignment or agreement of 8. Stewart, and should not have been withheld from him after Root had notice of his equitable right thereto, even if Root and J. Stewart were not chargeable with notice of such rights at the time the order upon the postmaster general was received and there was no intention of defrauding Bradley at that time. And as the defendant Root refused to account for the money, and deliver over the drafts* after he had full notice of Bradley’s rights, the vice chancellor has very properly charged him with the whole amount of such money and drafts, with interest, and the costs of this suit.

Upon the facts stated in the supplemental bill, which is taken as confessed, and which facts appear from the testimony in the cause, there can be no doubt as to the right of the defendant Root to a decree over, against the defendant J. Stewart, for Ilhe $105 of the complainant’s money which was paid to Day, with the interest thereon from the time it was so paid; J. Stewart having realized, from the bond and mortgage turned out by the principal debtor, sufficient to pay the whole amount .due to Day for which Root and J. Stewart were liable as joint sureties. And as J. Stewart was a co-actor in the transaction by which the complainant was deprived of the money on the mail contract, for his and Root’s joint benefit, and with ■a full knowledge, according to his own admission, of Bradüey’s equitable right to the fund, I think he should be charged with the costs of this suit jointly with the other defendants, and should contribute his equal share with Root in the payment thereof.

That part of the decree between the co-defendants, which provides for an equitable contribution, will subject them to further unnecessary cost and expense, when the whole facts, upon which the right to equitable contribution depends, sufficiently appear upon the pleadings and proofs now before the court. The reference to a master to compute the interest on the $395 will also create'an unnecessary expense which may as well be avoided, although it is not of itself sufficient to justify an appeal. The decree of the vice chancellor must therefore be so modified as to decree the payment of the $395, •to the complainant, by the defendants Root and S. Stewart, with interest thereon from the first of July, 1823, until the same shall be collected or paid ; that the defendant Root have a decree over against the defendant J. Stewart for $105 and interest thereon from the same time; and that the complainant recover his costs against all the defendants jointly, J. Stewart contributing equally with Root towards the payment of such part thereof as cannot be collected of S. Stewart- on. the execution. The complainant is also entitled to his costs on this appeal against all the defendants, and to be apportioned, as between Root and J. Stewart, in the same manner.

As one of the parties has died since the argument, the decree upon this appeal must be entered nunc pro tune, as of the day when the hearing commenced before the chancellor.


text:
    H. H. & M. E. Evertson vs. E. Evertson, executor, &c.
    Where a guardian invested money belonging to the complainants, who were his wards, upon a bond and mortgage in his own name, and afterwards assigned such bond and mortgage as a collateral security for an antecedent debt due from himself, and subsequently died insolvent; Held, that the assignee of the bond and mortgage was not entitled to hold them as against the complainants, although he liad no nolice of their equitable right to the bond and mortgage at the time of the assignment; and that a payment to the assignee, by the mortgagor, after notice of the equitable rights of the complainants, would not protect him against their prior equity.
    Where a guardian held a bond and mortgage in bis own right, and had in his hands monies of his wards to the same amount to be invested for their benefit, and it was agreed between him and the mortgagor that the money of the infants should be substituted for that which was due to himself upon the bond and mortgage, and that those securities should remain to secure the payment of the money belonging to them; Held, that this was an equitable investment of the money of the infants upon the security of . the bond and mortgage.
    Walter Evertson, the father of the complainants, died in April, 1812, seized and possessed of real and personal estate to the value of $20,000. In November, 1810, he made his will, and appointed his wife and his father-in-law, together with his brother, George B. Evertson, his executors. By that will, the testator, after making a provision for his wife out of his personal property, in lieu of dower, directed his real estate to be sold, and the proceeds thereof, together with the residue of his personal property, to be put out, at lawful interest, on good security, and the yearly interest applied towards the education and support of his children; and that the principal should be divided between them as they arrived at twenty-one years of age. G. B.' Evertson alone proved the will and assumed the testamentary guardianship of the complainants, the only children of the decedent. In 1829, G. B. Evertson died insolvent, without having settled his accounts, as the testamentary guardian of the complainants and as executor of their father’s will, leaving a large balance due to them from him as such executor and guardian. Sometime previous to April, 1822, G. B. Evertson, J. Givan and J. W. Stevens were jointly concerned as the owners and proprietors of the Dutchess Cotton Factory, and carried on the same as copartners; and Evertson and Givan afterwards sold nut their interest in the factory to Stevens, and retired from the firm. Upon adjusting their accounts with him, a large balance was found due to each of the retiring partners. To secure the payment of a part of these balances, Stevens, on the 16th of April, 1822, executed a joint bond to them for §11,427, with interest; and further to secure the payment thereof, he executed to them a mortgage upon the machinery in the factory, in which bond and mortgage Givan was interested to the amount of §5000, and the residue of the debt belonged to Evertson. Stevens sold out his interest in the manufacturing establishment and the machinery to Dyett and Chapman, in the spring of 1823. The purchasers were desirous that a great part of the purchase money should remain on mortgage, but Evertson, being in want of his money to pay off a debt to the Manhattan Bank, would not consent to wait for the money due to him on the mortgage, given by Stevens on the machinery. He agreed, however, to accommodate the purchasers, by substituting §6000 of the money in his hands belonging to the estate of Walter Evertson, and to let it remain upon the mortgage until Henry, the eldest of the complainants should become of age, about eight years thereafter. It was accordingly arranged between the parties, that Chapman and Dyett, together with Stevens, should give a new bond to G, B. Evertson and J. Givan for §11,000, to secure the loan of the monies belonging to the estate of W. Evert-son, and the §5000 due to Givan, and that the old bond and mortgage should remain as a collateral security for the payment of the monies for which the new bond was given. The new bond was accordingly given, on the first of May, 1823, and G. B. Evertson, instead of receiving the §6427 from Chapman and Dyett and paying back to them the §6000 belonging to the estate of his brother W. Evertson, received only the balance of §427, and substituted the §5000, belonging to the complainants, by retaining that amount of their money in his hands, and applying it for his own purposes. The old bond and mortgage were accordingly endorsed down to the $11,000, of which $5000 belonged to Givan,and the residue to the estate of the complainants’ father. And Chapman and Dyett at the same time added a schedule of some new articles of machinery to the mortgage, as a part thereof, and to increase the security; which schedule was also endorsed on the mortgage, and signed by them. The bonds and mortgage were afterwards frequently recognized by G. B. Evertson, both by his letters and by paroi admissions and declarations, as a security for the money belonging to the estate of his deceased brother Walter; and the interest thereon, as the principal means upon which the complainants were dependant for their support.
    In the latter part of April, 1826, G. B. Evertson, being indebted to the defendant as the executrix of Nicholas Evert-son, by a written assignment, annexed to the bonds and mortgage and other securities, and to a deed of lands from William Smith, assigned and transferred such bonds and mortgage and other securities, together with the land described in the deed from Smith, to the defendant, as such executrix, by way of collateral security for the monies so due to her, and without prejudice to her right to proceed against him to compel payment of her debt, notwithstanding the assignment. In the answer of the defendant, she denied notice of the complainants’ equitable interest in the debts secured by the bonds and mortgage. The cause was heard upon pleadings and proofs. And upon the hearing, the assignment to the defendant was produced by the counsel. But the papers which had been attached thereto at the time of its execution, and which formed a part thereof, had been detached from the assignment; and some of them were not produced, particularly the deed from Smith, and an agreement recited in the assignment as accompanying the bonds and mortgage. The vice chancellor decided and decreed that the complainants 'had an equity in the bonds and mortgage, as against the estate of J. B. Evertson, but that such equity was latent as regarded the defendant, and that she was therefore entitled to priority of payment out of the proceeds of the bonds and mortgage, and the other assigned property. And a reference was directed to a master to take an account of the amount due to her, and the amount received by her, or which she might have received under the assignment, reserving all further questions anti directions. From this decree, the complainants appealed to the chancellor.

      H. W. Warner, for the complainants.
    The assignment, raider which the defendant claims, is void. But even if it were good, yet the complainants’ equity is both prior in point of time, and superior to that of the defendant. The decis-< ion of the vice chancellor turned upon an assumed distinction between an equitable ownership of the bonds and mortgage?, and a latent equity in the complainants to have the benefit of those securities—a distinction withont a difference. But if the complainants’ equity were latent in a peculiar sense, which however is not admitted, still the defendant is not a bona fide purchaser for value, paid upon the faith of the assignment. She therefore took them, subject to such latent equity. The decree of the vice chancellor should be reversed, and a decree should be made establishing the complainants’ prior equity as respects the bonds and mortgage.

      Edgar Evertson, for the defendant.
    The bond’s and mortgage were taken originally for the benefit of the assignor and in his name, and were assigned to the defendant in good faith, for a valuable consideration and without notice; so that such bonds and mortgage cannot, in her hands, be subject to any latent equity of the appellants. The guardian of the appellants was not authorized to invest their money on personal securities; he must therefore have merely reserved the bonds and mortgage for a time, as a fund from which to pay the interest for their support, as appears from the defendant’s testimony.
    There is a fatal variance between the complainants’' bilí and their evidence. The testimony of 8tevens and Dyett could not be received to vary the terms or conditions of the securities to which they were parties. If the defendant had been informed of the latent equity of the appellants, she might have obtained other security for her debt instead of the bonds and mortgage in question; as G. B. Evertson was in good circumstances at the time of the assignment.
   The Chancellor.

For some reason which does not Rppear, a part of the papers originally annexed to the assignment to the defendant, as appears from the assignment itself, }mye been detached therefrom, and are not produced. One of the papers thus withheld appears to be an agreement which accompanied the bond and mortgage. It is impossible, therefore, for the court to determine the question whether there was any thing upon the face of the papers annexed to the assignment, and forming a part thereof, sufficient to put the defendant on inquiry, and to operate as a good constructive notice of the complainants’ right to the money secured by the bonds and moi'tgage. It is immaterial, however, whether the defendant had or had not actual or constructive notice of the complainants’ equitable rights, at the time of the assignment to her. She took the assignment merely as a security for an antecedent debt, without any new consideration paid, and she relinquished no right or security which she before had or held against the debtor. There was not even an extension of the time of payment of the original debt stipulated for upon the assignment of these securities. But on the contrary, it appears, from the assignment itself, that her right to proceed and collect the debt from Gr. B. Evertson notwithstanding this assignment, was expressly reserved. The defendant is not a bona fide purchaser for a valuable consideration paid, within the meaning of the rule which protects a bona fide purchaser or mortgagee of the legal estate, against a prior equity of which he had no notice at the time he paid his purchase money, or advanced the monies or other property, for which the deed or mortgage was given, upon the faith and credit of the title thus obtained. (Dickerson v. Tillinghast, 4 Paige’s Rep. 215. Coddington v. Bay, 20 John. Rep. 637.) It is not necessary, therefore, that I should examine the question as to the supposed distinction between a latent equity on the part of the obligors in the bond, and a latent equity in the complainants as the real owners of the debt itself; upon which supposed distinction the vice chancellor has based his decision. In the case of Covell v. The Tradesman’s Bank, (1 Paige’s Rep. 131,) J came to the conclusion that no such distinction existed where the subsequent assignee obtained nothing but an equity under his assignment, but neither the legal estate, nor the legal right to sue in his own name; even where he had actually advanced his money upon the faith of such assignment.

There can be no doubt, in this case, as to the equitable right of the complainants to the money secured by this bond and mortgage, in the same manner and to the same extent as .if their testamentary guardian, the executor of their father’s estate, had actually taken their monies and loaned them out upon these securities, taking such securities in his own name. For every substantial purpose there was a new bond and mortgage given, and the monies of the complainants, to the extent of $6000, were substituted in the place of so much of G. B. Evertson’s own debt which was secured by the original bond and mortgage of Stevens. It was not necessary that he should go through the formality of receiving the $6000 from Byett and Chapman,and putting it into one pocket, and then taking the same amount of the complainant’s money out of the other and handing it back, as the consideration for which the mortgage was to remain on the property and for . which the new bond was given. There was a substantial re-execution of the mortgage at that time, and some additional machinery was actually included therein by the agreement of the parties. All the obligors in the new bond, and the purchasers of the machinery upon which the mortgage was a lien, had notice at that time that the $6000 actually belonged to the estate of the complainants’ father, and not to George B. Evertson, in whose name the securities were taken. In such a case, if they should pay the mortgage monies to his assignee, knowing that he had assigned the securities in payment or as a security for his own debts and in violation of his trust, such payment would not, in this court, protect them from liability to the complainants. Upon every principle of justice, therefore, the rights of the infant cestuis que trust should be protected; for if the defendant had made use of even ordinary caution, by inquring either of Stevens, or of Chapman and Dyett, what was the real situation of these securities, she must have been informed that they belonged to the complainants and that G. B. Evertson had no right to transfer them to her as a collateral security for his owri debts.

The decree of the vice chancellor must be reversed, with costs. And a decree must be entered declaring that the complainants are entitled to the monies secured by these bonds and the mortgage, or so much thereof as it shall appear was due from G. B. Evertson to the complainants, at the time of his death, on account of the estate of their father. A refer■ence must be directed to ascertain the amount thus due; or at least so far as is necessary to determine that an indebtedness existed to the extent of these securities and the interest thereon from the time when the interest was last paid to G. B„ Evertson, or for their benefit; and also to ascertain what has been received by the defendant, and what is still due on the bonds and mortgage. The master is also to compute and allow interest, as shall be just. And all further questions and directions are to be resvered until the coming in of the master’s report; including the question of costs, other than the costs of this appeal.