#### JOHN R. CARTER *against*PETER PRIVATT *and others.*

Where a debtor purchased a note on his creditor from a third person with the .purpose of using it as a set-off against his own note, but without any agreement to that effect, he is not forbid in equity to transfer it for the indemnity of other *bona fide*creditors, although the debtor was insolvent, and the effect of such transfer would be to cause such creditor to lose the amount of his note.

Where the object of a suit was to. enjoin the collection of a note, upon the ground of a counter claim in favor of the maker against the holder, a reference to a commissioner to state an account between the parties, a report and a confirmation thereof, before replication is entered and the cause set down for hearing, could not be considered as being intended as an adjudication upon the merits.

*346Cause transferred from the Court of Equity of Robeson county.

The defendant William W. Gnfm was indebted to the plaintiff in the sum of three hundred dollars, which debt was evidenced by promissory notes, payable to plaintiff, and by open accounts. While thus indebted, the said Gunn purchased from the defendant Privatt, a note on the plaintiff for fifty-seven dollars, bearing- interest, which was delivered to Gunn without being assigned. At the time of making this purchase, Gunn said the note would serve his purpose as cash, for that he intended to use it in part discharge of the claims that, the plaintiff, Carter, had against him ; but there was no allegation in the bill that any agreement to that effect ever took place between Gunn and the plaintiff.

Gunn became very much involved in debt, and afterwards left the country, entirely insolvent. Previously to his going off, he made a deed of trust for the benefit of his creditors, wherein he conveyed the interest of the note in question to the defendant Leitch, for that purpose. Leitch, the trustee, put the plaintiff’s note to Privatt in suit, in the name of the latter, and obtained judgment thereon. The bill was filed for an injunction against the defendants to prevent the collection of the judgment, and for general relief.

'The defendants Privatt and Leitch answered; but their answers, in the view taken of the case by the Court, are not material.

On the coming in of the answers, the cause was heard in the Court below, at the Spring Term of 1857, on a motion to dissolve the injunction which had previously issued. The motion was refused, and the injunction ordered to be continued to the hearing of the cause. At the same term, this order was made, “ That this cause be referred to the clerk and master of this Court, to state an account between the plaintiffs and defendants, and that he report to the next term of this Court.” At the Fall Term, 1857, the commissioner reported, and his report was confirmed. Afterwards, the cause was set down for hearing, and sent to this Court by consent.

*347Troy, for the plaintiff.

Kelly, for the defendants.

PeaesoN, J.

While the defendant Gunn was the equitable owner of the note, the plaintiff had an equity, as against him, upon which this Court would have interfered to prevent advantage from being laken of the fact that tire legal title was in the defendant Privatt, and would not have allowed the judgment in the name of Privatt to have been enforced for the benefit of Gunn, but would have causéd it to be discharged, by making it a set-off, *pro*tanto, to the larger amount due to the plaintiff.

But after Gunn transferred the equitable ownership of the note to the defendant Leitch, for the benefit of the cestuis qui trust.named in the deed, who were *bona fide*creditors of Gunn, the plaintiff had no equity as against Leitch; for he represents creditors ; and the rule is, when equities are equal, the law prevails, and, as between creditors, a court of equity will stand neutral and allow the law to take its course, unless there be some circumstance that makes the equity of one superior to that of the other.

The plaintiff relies on the circumstance, that at the time Gunn traded for the note, he said *“*he wanted it for the purpose of paying off claims which the plaintiff had against him.”

The plaintiff was not privy to this purpose of *Gunn.*It was collateral, and he was at liberty to change his mind in regard to it whenever he saw proper. In order to attach an equity to the note in favor of plaintiff, it is necessary that there should be an agreement between him and Gunn, that it should bo applied as a set-off, or the plaintiff should have sued him and forced him into an arrangement while the beneficial ownership was in him. Of this, there is no allegation, and we cannot see that it was against conscience for Gunn, in the exercise of the right of every man to prefer one creditor over another, to transfer it for the use of other *bona fide*creditors.

The plaintiff, as a last resort, falls back upon the position, *348that as the money is in his pocket, equity will not allow it to be taken out and applied to the use of others, causing hind to lose his debt.

This general position has nothing to sustain it. The legal title is in Privatt. líe has a right to collect the money for the benefit of the creditors represented by Leitcb, to whom the equitable title was transferred. It is the plaintiff’s misfortune not to have taken the steps necessary to attach an equity to the note while it was in the hands of Gunn.

• IJpon looking into the transcript, we hud that, upon the coming in of the answers of Privatt and Leitch, “ it is ordered that the cause be referred to the clerk and master to state the account,” and the report is filed and confirmed.

The plaintiff relies upon this as an adjudication of his right to an account. "We cannot give it that effect. There was no replication, and the cause was not set down for hearing until after the report was filed and confirmed. So, the order must have been intended, simply, as an enquiry to ascertain the fact of the plaintiff’s debt against Gunn. It cannot be taken as an adjudication of the rights of the parties; because, at that stage there was nothirg to adjudicate — nothing for the court to act upon.

Pee Cueiam, The bill must be dismissed.