Dexter v. Stewart
7 Johns. Ch. 52
New York Court of Chancery
1823
Check Treatment
The Chancellor.

The just construction of the agreement, with its accompanying power of attorney, would seem to require that the proceeds of sales, under the power, should be strictly and specifically applied to the discharge of the debt due to Dexter, and to the payment of the costs and charges necessarily created in the due execution of the power. It was part of the express covenant of Stewart, that the power was to be used only for the purpose *55of carrying into effect the agreement. Under this construction, Stewart became a trustee, and took contracts . . and securities, and received the proceeds of sales m that character. The securities were not his property, to be by him disposed of for his own benefit, until Dexter was paid, as well as indemnified against responsibilities incurred by the use of the power. Unless we are to consider that Dexter had an equitable lien on the securities and contracts taken by Stewart, it would be impossible to render the power effectual, in carrying the agreement into effect, consistently with safety to the rights of the grantor, and consistently with the evident intention of the parties.

These contracts and securities did not pass to the assignees of Stewart, except subject to the same equities, and the same rights and claims of the plaintiff, that existed against them while in the hands of Stewart. It was not in the power of Stewart to assign them absolutely, without a breach of duty and of good faith; and the assignees of a bankrupt, in such cases, stand exactly in the situation-of their principal, and with no greater rights. It would, under the circumstances, to use the words of Lord Hardwicke, “ be the hardest thing in the world to say, these securities should go to the creditors at large.” Though a chose in action be taken in the name of the agent, it does not pass, by his act of bankruptcy, to his assignees, provided it be taken and held in trust. (Godfrey v. Furzo, 3 P. Wms 185. Ex parte Dumas, 1 Atk. 231. Ex parte Sayers, 5 Vesey, 169.) In this case, demand for security, in pursuance of a provision in the agreement, was made prior to the assignment, and the assignees are presumed to have known of it, as they knew of the agreement and the power, at the time of the assignment. The whole principal and interest became due by a refusal to give the security demanded, and the plaintiffs are now entitled to demand the entire debt, as well as indemnity against the costs and charges accrued under the agency. *56or to have the lands still unsold, and the contracts and securities taken for lands sold, assigned over to them, to ^ use(j for those purposes, and for the payment of the costs of this suit; and the surplus (if any) remaining after these purposes are answered, to be returned. I shall, accordingly, grant relief to this extent, and shall direct a reference to take an account of the amount due, and of the proper costs and expenses incurred under the agency, and justly chargeable upon the fund, and that the assignees, by a short day after the report shall have been made and confirmed, pay and indemnify, or convey the unsold lands, and assign over the Contracts and securities to the plaintiffs, in trust, to be used by them for their payment and indemnity, under the direction of a Master.

Decree accordingly.