| New York Court of Chancery | Mar 15, 1836
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
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
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.