Case ID: tenn-ch-r_2/html/0412-01.html
Source: Caselaw Access Project
Author: {"author": "The Chancellor :", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Trabue & Lucas vs. James Bankhead.
    April Term, 1875.
    .Assignee has nr equity only the bights on the assignor against innocent third persons. — Where, pending a litigation carried on in equity in the name oí the assignor, the fund to which the assignor is eventually found entitled is loaned to him, under order of court, upon note with good security, the assignee, who subsequently and after the insolvency of the assignor intervenes for the assertion of his rights, must stand in the shoes of the assignor, and as the latter would have no equity against his sureties, neither has the former.
    -Assignee asserts his rights by supplemental bill. — The assignee of a claim in litigation in chancery can only obtain the benefits of the suit as a party by an original bill in the nature of a supplemental bill, and his rights as against persons having no previous notice will date from thé filing of his bill.
    
      Ed. Baxter, for assignee.
    
      G. M. Fogg, for sureties.
   The Chancellor :

— Long, having certain hogsheads of tobacco in the hands of Hamilton for sale, on the 22d of July, 1860, by order in writing, directed Hamilton to sell the tobacco and pay the proceeds to the defendant, Bankhead, on a. debt due to him from Long, and by virtue of which Bank-head had already attached the tobacco. On the 2d of August, 1860, the complainants, Trabue & Lucas, filed their bill in this court against Bankhead, Hamilton, and Long, claiming priority of satisfaction for a debt due to them from Long on an order from him. By consent of parties the tobacco was sold by Hamilton, and the proceeds paid to the clerk, to be loaned out by him, “ and the note or notes to be held by him subject to the decision of the cause.” In pursuance of this order, on the 29th of May, 1861, the clerk loaned out a sufficiency of the fund to meet the debt of Trabue & Lucas, to a third person, and the residue he loaned to Bankhead, taking his note at six months, with Gr. M. Fogg and N. Hobson as his sureties. Mr. Fogg was Bankhead’s lawyer in the case, and knew the facts to be as hereinbefore stated, but did not know then, nor until the filing of Letitia J. Harris’ petition in the cause, as hereinafter mentioned, that Bankhead had assigned his debt on Long-to B. D. Harris.

As a matter of fact, Bankhead had, on the 14th of September, 1860, delivered the note held by him on Long to. an attorney for collection, taking his receipt, and on the 4th. of October, 1860, he had assigned this receipt to B. D. Harris, in writing. On the 31st of October, 1860, Bank-head filed his answer to the bill of Trabue & Lucas, claiming, as the holder of said note, to be entitled to the proceeds of' the cotton, and saying nothing of the assignment to Harris. It does not appear that Harris gave notice to any person of' the assignment to him of the lawyer’s receipt, or set up any claim to the proceeds of the tobacco sold. He died intestate, and Letitia J. Harris was appointed and qualified as-his administratrix. On the 4th of November, 1869, she-filed her petition in this cause against Bankhead, Fogg, and Hobson, setting out the facts touching said assignment, stating that the litigation had been compromised with Trabue &. Lucas, and seeking — Bankhead having in the meantime-become insolvent — to hold his sureties liable to her, as. administratrix, for the money so loaned to Bankhead as. aforesaid, with interest. Long has never disputed Bank-head’s right to the proceeds of the cotton, and, on the-. 4th of November, 1869, a decree was entered, with the-consent of the said Letitia J. Harris, administratrix, disposing of the funds in the cause between her and the? complainants, except that part of the funds represented by the note of Bankhead. The question now raised is whether-the loss occasioned by the insolvency of Bankhead should fall upon his sureties, or on the petitioner.

The assignment and delivery of the attorney’s receipt for the note carried the equitable interest certainly, and it maybe the legal interest, in the note to the assignee, as against the assignor and all persons claiming under him, together with the benefit of collateral securities, and, among other things, with the benefit of legal proceedings in the name of the assignor to enforce the debt. Gayoso Savings Institute v. Fellows, 6 Coldw. 467. But, to secure the full benefits of such legal proceedings, the assignee must give notice ; otherwise, he will be bound by the proceedings in the suit after the alienation, and before he becomes a party. Story Eq. Pl. § 351. The assignee can only become a party to the suit by an original bill in the nature of a supplemental bill. Story Eq. Pl. § 348; Foster v. Deacon, 6 Madd. 59; Drever v. Mawdesley, 4 Myl. & Cr. 94; Northman v. Insurance Cos., 1 Tenn. Ch. 312. As between the assignee and the debtor, or any other party in interest to the suit, the former would be clearly bound by the proceedings in the cause until he gives notice or becomes a party. Pentland v. Quarrington, 3 Myl. & Cr. 249. A payment to the assignor without notice would undoubtedly be good, and any act of the assignor to the prejudice of the parties to the suit would bind the assignee. And any right acquired or loss incurred by the debtor, on the faith of the ownership being in the assignor, would prevail in equity against the assignee. Hobson v. Stevenson, 1 Tenn. Ch. 203.

The'fund derived from the sale of the tobacco undoubtedly 'belonged to Bankhead, under and by virtue of the order of Long and his own attachment, subject only to the rights of the complainants, the only persons contesting his right. If, now, Hamilton had paid the proceeds of the tobacco directly "to Bankhead, without notice of the assignment to Harris, the payment would have been good, and would have protected him against all the world, except Trabue & Lucas. The fund belonged to Bankhead, and he needed no decree -to perfect his rights, except as against Trabue & Lucas. If he get the fund into his possession by borrowing, or otherwise, he cannot be made to account for it, except to Trabue & Lucas. So far as this case is concerned, there can be no decree which can by any possibility affect Bankhead’s right, except in favor of the original complainants. If the clerk were to collect the note for the money loaned, the fund nvould be Bankhead’s, and the court would not only never order it to be collected from bim to be immediately returned, but would undoubtedly enjoin the clerk from collecting it, either at his instance or that of his sureties.

Undoubtedly Bankhead’s assignee had the right in his life-time, and his administratrix has the same right since his death, to come in by an original bill, in the nature of a supplemental bill, to assert the rights acquired by the assignment. This has been done by the administratrix by the proceeding of the 4th of November, 1869, in form a petition, but in substance an original bill. Whatever relief she was entitled to have on the 4th of November, 1869, by original bill, she may now have by her petition.

What, then, were her rights, under the circumstances, on the 4th of November, 1869? Manifestly, only such as Bankhead himself was on that day entitled to as against the parties and quasi parties to the original suit. If he had xeceived the proceeds of the tobacco directly from Long or Hamilton, he would have no right to make them pay it over again; neither would she. If he had received it from the clerk, with or without the order of court, he could not make him pay it again; neither can she. He did receive it upon giving security, but, if the security had been worthless when taken, he would have no remedy against the clerk; nor would she. The security was given by him, and the sureties became, thereby, parties to the suit; of course he cannot make the sureties pay the money because he is insolvent; neither can she. The assignee, by his silence and acquiescence, made the assignor his agent, by whose acts he is bound. He did more ; he left him the sole plaintiff, to hold himself out to the world as the owner of the fund. If Bankhead committed a fraud on Harris by concealing the assignment, Harris has been guilty of a greater fraud upon innocent parties by concealing his rights. I am clearly of opinion that his administratrix is only entitled to a decree against Bankhead, and not against his sureties.