Case Name: Fairchild against Brown and others
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1835-07
Citations: 11 Conn. 26
Docket Number: 
Parties: Fairchild against Brown and others.
Judges: The other Judges concurred in this opinion.
Reporter: Connecticut Reports
Volume: 11
Pages: 26–40

Head Matter:
Fairchild against Brown and others.
Middlesex,
July, 1835.
-.-.A, being indebted to B, gave him three promissory notes, payable at different times then future, and secured, by a mortgage executed by 4 to B ; and B, for a valuable consideration, assigned such notes and mortgage to C. Shortly afterwards, and before the notes become due, C assigned them, together with the mortgage, to D, under an agreement between C and D, that they should remain the property of C, until D should remove the incumbrances on a certain farm, which he had agreed to sell to C. D failed to remove such, incumbrances, and his title was foreclosed. Some time afterwards, while the notes were in the possession of D, he, being in embarrassed circumstances, fraudulently procured a release to be executed, by B to him, of the land mortgaged by 4 to B, as security for the notes, with the intent of vesting such security in D; and then D, with the intention of defrauding C, released the same land to A, the original mortgagor, With the like fraudulent intention, and with the knowledge of E, and by his co-operation, D then procured A to give five new notes for the amount due on the three first given, which were then taken up ; and to execute a new mortgage to E of the land originally mortgaged to B ; A having no notice that D was not the lawful owner of the notes so taken up. The new notes were payable at different future times ; three of them to E or bearer, and two without words of negotiability. After one of the notes not negotiable became due. but before either of the other notes became due, F, for a valuable and sufficient consideration by him paid, and in good faith, and without notice of any fraud or wrong, purchased of E the five last mentioned notes, which E assigned to F, together with the mortgage attached to them. On a bill in chancery brought by C against F, for the benefit of the notes and mortgage, it was held, 1, that A had a perfect right to substitute the five notes given to Efor the three original notes given to B, then lawfully in the possession of D, without notice to A that D was not the lawful owner of them ; 2. that of the three negotiable notes given to E, F was both the equitable and the legal owner, having been purchased by him before they were due, in the course of trade,for a valuable consideration paid at the time, with the use of due caution, and without any circumstance raising the slightest suspicion of the legality of the transfer; 3. that as to the two notes not negotiable, oneof which was over-due, C had not an equitable claim superior or equal to that of F, because the fraud committed on C was the consequence of ins own folly or negligence; because these notes, as well as the others, were purchased by F, not only without notice of any fraud, but without any negligence or circumstances of suspicion attending the purchase; because the equity of C arising out of the agreement between him and D, was a secret equity, against which F could not protect himself; and because the rule that the assignee of a chose in action not negotiable and the endorsee of negotiable paper over-due, take such paper subject to all the equities to which it was liable in the hands of the assignor orendorser, was not applicable to F&emdash;the equity sought to be enforced by C not growing out of the notes in question, but a collateral matter, and not being an equity in favour of the original debtor; consequently, that C was not entitled to any decree in his favour.
This was a bill in chancery to obtain the possession of certain promissory notes and the securities attached to them.
On the 20th of February, 1824, Guernsey I ates held and owned three promissory notes, dated April 8th, 1823, payable to himself, or order, made by Luther Freeman and Arza Freeman; one of which notes was for the sum of 300 dollars, and payable on the 1st of March, 1824, with interest; another for the same sum, payable on the 1st of September, 1824, with interest ; and the other was for 1,000 dollars, payable on the 1st of March, 1825, with interest. As security for the payment of the two first-mentioned notes, Bates then held a mortgage deed of a tract of land, executed by L. and A. Freeman to him. He had also agreed with L. and A. Freeman, that he would execute to them a deed with warranty ofa certain other piece of land, of which he was then seised in fee, and which he had previously purchased from one Israel Smith, who had conveyed it to him on L. and A. Freeman paying him the amount due on said two notes for 300 dollars each, and also executing back to him mortgage of the same piece of land, conditioned for hte payment of said note if 1,000 dollars. On the 20th of February 1824, in consideration that the plaintiff had, at the special intance and request of Bales, conveyed to him in fell simole, and agreed to fulfil said agtreement with L. and A. Freeman, on Bates's part, he, Bate, agreed with the plaintiff, that he would, and he did, transfer and aggign to the p;aintiff, at his, the plaintiff's sole risk, the promissory notes aforesaid, and all his, Bates's interest therein, and also all his beneficial interest in said agreement between him and L. and A. freeman, and also paid to the plaintiff the sum of 400 dollar, in cash, and agreed with the plaintiff that he would pay the sum of 57 dol-lan, 28 cents, for him, to one Nancy Lee, being the balance due on a certain note previously given by the plaintiff to her; and that Bates would pay for the plaintiff to Nehemiah Hubbard, on a debt which the plaintiffthen owed him, the sum of 100 dollar; and that Bates would pay to the plaintiff in one year from the20th of February 1824. the sum of 297 dollars, 17 cents It was also then and there agreed between these parties, that said Bates should transfer and assign to the plaintiff all the benefit of said mortgageto be exeruted by L. and A. Freeman to him; and the plaintiffathesametime, received from Bates, in pursuance of such agreement, said promissory notes, and becamethe owner thereof, and also received from him a deed of warranty to L. and A. Freeman of the land purchased from Israel Smith, with the intent that such deeds should be delivered, by the plaintiff, to L. and A. Freeman, in fulfilment of said agreement on the part, of Bates with them, whenever they should pay said two notes of 300 dollars each, and be ready to execute back to the plaintiff a mortgage of said piece of land, mortgaged for the security of said note of 1000 dollars.
On the 24th of February, 1824, an agreement was entered into between the plaintiff and Joshua West, of Lee in Massachusetts, respecting the purchase, by the plaintiff, from him, of a certain farm in Lee, called the Charter farm, of which West was then seised in fee, subject to a mortgage deed thereof, which had been executed by him to certain of his creditors, securing certain debts due, from him to them. This agreement was in these words : “ Received, February, 24th, 1834, of Henry Fairchild, three notes against Luther Freeman and Arza Freeman, to the amount of 1600 dollars, and also a deed of Bates to said Freeman, and a mortgage which said Freeman gave Bates, all of which, in part payment, towards the Charter farm; and whereas,there is a mortgage on theCharter farm; now I agree to clear said mortgage from said premises, otherwise to return the said notes and deed to said Fairchild, notwithstanding said Fairchild has signed over the notes to me, and they are to remain his property till said farm is free of all incumbrances ; as witness my hand, (signed) Joshua West.”
West then received said three notes from the plaintiff, for the purpose and under the agreement contained in this writing, But neither West, nor any other person for him, has ever exonerated the Charter farm, or any part thereof, from said mortgage ; and the title of West to the Charier farm has been foreclosed,'by the mortgagee ; and no title thereto, or interest therein, has ever been vested in the plaintiff.
On the 29th of August, 1826. after the reception of said notes by West, and while they were in his possession, he, being in embarrassed circumstances, fraudulently procured from Bates a release and quit-claim of all Bates’s right, title and interest in and to the piece of land, which had, before the agreement between Bates and the plaintiff, been mortgaged, by Luther Freeman, to Bales, as security for the payment of said two notes of 300 dollars each, with the intent of vesting in West the security furnished by the last mentioned mortgage.
On the 31st of August, 1826, West, with the intention of defrauding the plaintiff, quit-claimed to Luther Freeman the piece of land, which had been previously quit-claimed, by Bates, to him. On the same day, West, with the like fraudulent intent, with the knowledge and assent of Farsus Botsford, Joseph, Hawley and Aaron Hawley, of Lenox, in Massachusetts, partners, under the firm of Botsford, Hawley & Co., and by their co-operation, instrumentality and connivance, procured L. and A. Freeman, in payment of the promissory notes first-mentioned, to make and deliver their five several promissory notes, for sums, amounting, in the aggregate, to the sum due on said three promissory notes, to Botsford, Hawley & Co.; which five notes were as follows, viz. one for 350 dollars, payable on the 1st of May, 1627, signed by L. Freeman ; one for 346 dollars, 76 cents, payable jointly and severally by L. and A. Freeman, in one year from the 1st of May, 1827, to Bots-ford, Hawley & Co., or bearer: another, signed by L. Freeman, for 346 dollars, 76 cents, payable in two years from the 1st of May, 1827 ; another signed by L. and A. Freeman, for 346 dollars, 76 cents, payable to Botsford, Hanley & Co., or bearer, in three years from the 1st of May, 1827 ; and the other, signed by L. and A. Freeman, for 346 dollars, 76 cents, payable to Botsford, Hawley & Co., or bearer, in four years from the 1st of May, 1827. These notes, payable to Botsford, Hawley & Co., or bearer, were, by the laws of Massachusetts, negotiable. On the same 31st of August, 1826, West, with the intent of defrauding the plaintiff, and with the knowledge and assent of Botsford, Hawley & Co., procured L. and A. Freeman to mortgage to Botsford, Hawley & Co. the piece of land so quit-claimed by West to Luther Freeman for the security of said note of 350 dollars, payable on the 1st of May, 1827, and of said note of 346 dollars, 76 cents, payable in two years from the first of May, 1827; and with the like fraudulent intent, and with the knowledge and assent of Botsford, Haw-ley & Co., and by their co-operation, West procured L. and A. Freeman to mortgage to them, Botsford, Hawley &. Co., the piece of land, which Bates purchased of Israel Smith, for the security of said three other notes, which were given by L. and A. Freeman to Botsford, Hawley & Co. These mortgages Botsford, Hawley & Co. accepted : West having, before the execution of the last-mentioned mortgage, with a like fraudulent intent and with the knowledge and co-operation of Botsford, Hawley & Co., delivered to L. and A. Freeman the deed of land, excuted by Bates to L. and A. Freeman, and by Bates delivered so the plaintiff, with the intent that it should he delivered to L. and A. Freeman, in fulfilment of the agreement on the part of Bates, with them, and which deed the plaintiff, at the time of the agreement between him and West, delivered to West, together with said three promissory notes first above-mentioned, to be kept for the plaintiff until the Charter farm should be exonerated from said incumbrances, when West was to have the benefit of them, in the same manner and for the same purpose for which the plaintiff received them of Bates,
On the 29th of February, 1828, Henry C. Brown, one of the defendants, for a valuable and sufficient consideration by him paid, in good faith, and without notice of any wrong or fraud concerning said notes, purchased of Botsford, Hawley & Co. two promissory notes, one payable to them, or bearer, one year from the first of May, 1827, for 346 dollars,76 cents ; and the other, payable also to them, or bearer, three years from the 1st of May 1827, for 346 dollars, 76 cents, both dated August 31st, 1826, and signed by L. and A. Freeman. On the same day, Botsford, Hawley & Co., by their deed of that date, duly executed, assigned said notes, together with a certain mortgage thereto annexed of the land mortgaged by L. and A. Freeman, to secure the payment of said two notes, and also one other note payable to Botsford, Hawley Co., or bearer, four years from the 1st of May 1827, for the sum of 346 dollars, 76 cents, dated August 31st, 1826, signed by L. and A. Freeman. And on the same day, Brown, in good faith, and for a sufficient and valuable consideration, purchased of Botsford, Hawley & Co. one other promissory note, payable to them, two years from the 1st of May, 1827, for 346 dollars, 76 cents, dated August 31st, 1826, signed by L. Freeman ; and Botsford, Hawley & Co., for a valuable and sufficient consideration, by their deed of that date, duly executed, assigned said note, together with a certain mortgage to said assignment annexed, of the land mortgaged by L. Freeman, to secure the payment of this note, as well as another note, payable to Botsford, Hawley & Co., dated August 31st, 1826, signed by L. Freeman, payable on the 1st of May, 1827, for 350 dollars, which note Brown, sometime in the year 1829, purchased of one Winthrop Laflin. to whom it had been sold, Brown paying for it the full amount of the note and interest, deducting an endorsement on it of 170 dollars. On the 2d of July, 1820, Brown purchased said note, payable four years from the first of May, 1827, of Walter Laflin, paying for it its full amount and value which note had been transferred to Laftin, by West, In the purchase of the two last-mentioned notes, Brown acted in good faith, and without notice of any fraud. The three notes first above mentioned, given by L. and A. Fremann to Bates, have never been paid, in any other way than by the evecution and delivery, under the circumstances aforesaid, by L. and A. Freeman of the five notes above-mentioned, on one of which, was said endorsement of 170 dollars. Brown still holds and keeps there five notes, and all the securities therefor, and claims the moneys due thereon. In May or June, 1827, L. and A. Freeman had notice from, the plaintiff not to pay to any other person than him the sums of money mentioned in and due on the three promitory notes first above mentioned, and also the sums of money mentioned in and due on the five notes given by L. and A. Freeman, to Botsford, Hawley & Co.; and L. and A. Freeman have neglected and refused to pay to the plaintiff the sums of money mentioned in and due on all these notes, It did not appear, that at the time the five notes were given by L. and A. Freeman to Bolsford, Hawley & Co., or before that time, L. and A. Freeman, or either of them, had any notice, that West was not the lawful owner of the three notes and deed before-mentioned, which, at the time of giving the five notes before-mentionnd to Botsford, Hawley & Co., were taken up, by L. and A. Freeman.
The case was reserved for the advice of this court.
Storrs and S. Clark, for the plaintiff, contendded,
1. That West acquired no legal interest in the three notes of L. & A. Freeman, by their being placed in his hands, by the plaintiff; but the legal title always remained in the plaintiff. They were negotiable, but were not indorsed, either by Bates to the plain-till; or by the plaintiff to West. No indorsement is found, and none is acknowledged in the agreement between the plaintiff and West. The expression in the agreement, "has signed over the notes," does not import an indorsement. And if it did, this is not an acknowledgment by the plaintiff, nor binding on him, as between him and West. Nor is it an admis- sion, either by West or the plaintiff, as between West or the, plaintiff and the other defendants or any other persons,
2. That the equitable title to these notes, was always in the plaintiff. First, as against the Freemans. This depends on the transaction between the plaintiff and West. West received the notes from the plaintiff and had them in his possession. This, of itself, was no transfer of any equitable title whatever. It constituted no authority for West to receive payment; it did not make West agent of the plaintiff; and if it conferred, or would be deemed to confer, any authority on West (as between the plaintiff and the Freemans) it would be only to receive the money ;-not to treat the notes as his ( West's) own ; nor to take the payment to himself, by substituted notes. It was, at most, only an authority to receive payment for the plaintiff as his agent. It was incumbent on the Freemans to make en-quiry, before they treated West as owner. They are chargeable with notice ; because there was sufficient to put them on enquiry; and because the notes were not indorsed, which is the only legal mode of transfer.
Secondly, as against West. The case shews an intention in West to defraud the plaintiff in procuring the notes to be exchanged for the five notes to Botsford Hawley & Co. West, of course, had knowledge of all the circumstances. By his agreement with the plaintiff, he was a trustee of the three notes until the incumbrances were removed from the Charter farm. A court of equity would enforce that agreement and compel the reddi very of the notes.
Thirdly, as against Botsford Hawley & Co. The case shews, that the three notes were given up, in exchange for the other five notes, with a fraudulent intent in West, and by “the co-operation, instrumentality, and connivance” of Botsford Hawley & Co. They being affected with notice and with acting fraudulently, were trustees of the plaintiff equally with West himself, and in no better condition. No consideration appears to have been paid, by Botsford Hawley & Co.; and if there had been, it, would avail nothing to them, acting with knowledge and fraudulently.
3. That equity will follow the three notes into whose hands soever they come fraudulently, or with notice; and will follow whatever is substituted for them; for if West or Botsford Hawley & Co. are trustees of the three notes for the plaintiff, they are, of course, trustees of the five taken for them. Murray & al. v. Lylburn & al. 2 Johns. Ch. Rep. 441. Livingston v. Hubbs & al. 2 Johns. Ch. Rep. 512. Holdridge v. Gillespie, 2 Johns. Ch. Rep, 30. 33. and cases cited ibid, viz. 1 Dow 269. 1 Ch. Cas. 191. 1 Bro. Ch. Cas. 198. 18 Ves. 274. 1 Ball & Beatty 467. 2 Ball & Beatty 290. 298. Murray & al. v. Ballou & al. 1 Johns. Ch. Rep. 566, Clute v. Robinson. 2 Johns. Rep. 595. Unless therefore, the negotiation of the notes to Brown interferes with the plaintiff’s rights, the plaintiff has a perfect case in equity, and is entitled to require the three notes to be given up, or the notes substituted, or both, and all securities for them, and to be placed in the same condition as if the three notes had always been in his possession.
4. That the fact of Brown's purchasing the five substituted notes, did not deprive the plaintiff of his equitable right. None of these notes were indorsed to Brown. Two of them, viz. the note for 350 dollars and that for 346 dollars, 76 cents, payable in two years from the 1st of May, 1827, were not negotiable ; and the former of these two notes was over-due, when received by Brown. As to these notes, Brown had no remedy at law, but merely an equitable remedy, which fails, if the notes were obtained by fraud. 2 Sw. Dig. 140. 1 Har. Chan, 18. The deeds which were put into the hands of West, by the plaintiff, and by West assigned to Botsford, Hawley & Co., stand upon no higher ground than notes over-due.
Although Brown paid for the notes a valuable consideration, still they were received under such circumstances as naturally to excite suspicion. He did not receive them in the ordinary course of business. And if there be any negligence on either side, in this case, it seems imputable rather to Brown than to the plaintiff. This is sufficient to turn the scale of equity in the plaintiff’s favour.
Hungerford and Barnes for the defendant
Brown, (the other defendants not appearing) contended, that from the facts disclosed, the plaintiff had no equitable right, to be restored to the condition in which he was originally placed by Bates. If he had no such right, things must remain as they are ; since no other person calls for relief, or is entitled to it. The question, therefore, depends entirely upon the effect, in reference to third persons, which a court of equity is bound to give, under the circumstances of the case, to the agreemeiit. between the plaintiff and West. The three notes were all payable to Bates, or order. They had, of couise, been indorsed by him and from the terms of the writing given by West to the plaintiff, it appears, that these notes were assigned to West before they were due. The makers, therefore, having no notice, of any fraud, were justified in giving the five notes, and the mortgage to secure them ; since all the interest of the original mortgaged security had been rested in West, by die transfer of the three notes to him.
How, then, does the plaintiff stand before the court ? Instead of placing the three notes and the deed in the hands of a third person, with orders to deliver them to West, on the performance of certain conditions, he placed them directly in the hands of West, without any security but a simple receipt The plaintiff was thus guilty of gross negligence and inattention to his interest. The injurious effect, of which he complains, resulted from his own folly ; and it is a clear principle, that no man is entitled to the aid of a court of equity, when that aid is rendered necessary, by his own fault. The plaintiff having enabled West to commit a fraud, assumes the consequences upon himself. 1 Madd. Chan. 822.
If the plaintiff and Brown are equally innocent, the former ought, to suffer, because he reposed confidence in West, and trusted to his personal responsibility. The receipt, taken by the plaintiff from West, constituted a secret equity, against which Brown could not protect himself: and being a purchaser in good faith, he is not bound by that equity. Murray v. Lylburn, 2 Johns. Chan. Rep. 441. & seq.
As Brown is a purchaser, for a valuable consideration, and not affected by any notice of fraud, he is entitled to the property in dispute: for a court of chancery will not take the least step against a purchaser, for a valuable consideration, without notice, not even to perpetuate testimony against him. Jerrard v. Saunders, 2 Ves. jun. 458. 1 Mad. Chan. 506. & seq.
Brown purchased the five notes before they were due. Three of these notes, being negotiable, could not be affected by the fraud, which was practised by West in obtaining them. 1 Mad. Chan. 153. If the plaintiff, therefore, is entitled to any relief, it can equitably extend only to the two remaining notes, and such proportion of the mortgaged security as these two notes carry with them.

Opinion:
Huntington J.
delivered the opinion of the court.
The plaintiff seeks, by this bill, to obtain the possession of certain promissory notes, and the securities attached to them, now in the hands of the defendant, Brown, to which, lie alleges, he has an equitable title superior to that of the holder.
We are of opinion, that the case presented by the record, is not one which calls for the interference of the court, to protect any equitable rights of the plaintiff.
Although L. & A. Freeman are made parties to the bill, they seek no relief. They do not insist upon any equities, disclosed, by the facts found by the committee, which require the protection of the court, in their behalf, against the claims of the defendant Brown. The controversy is wholly between the plaintiff and Brown:-and the question submitted to us, is, whether the former has made out a case, which will justify any decree in his favour ?
That a gross fraud has been practised upon the plaintiff, which has deprived him of his property, and caused him to sustain a severe loss, is abundantly evident from the record before us :-And it is as clearly manifest, that neither Luther nor Arza Freeman, nor Brown, were parties or privies to that fraud. No imputation rests upon them, or either of them. They have acted, in all respects, with perfect honesty and good faith. While, therefore, it is cause of regret, that the effects of a fraudulent combination should ever be felt, except by those who perpetrate or are privy to it; and although a court of equity will lend its aid, so far as justice and established principles will permit, to prevent such consequences from being visited upon the innocent subject of the fraud, it will take care, in its endeavours to do justice to one innocent person, not. to do injustice to others equally innocent and equally entitled to its protection.
It is too clear to admit of argument, that the makers of the three notes payable to Bales, had a perfect, right to substitute for them, the five notes, which were subsequently executed and delivered to Botsford, Hawley & Co. West had the lawful possession of them-they had been " signed over" and delivered to him, before they became due-they were negotiable, -he requested the makers to execute the new notes, and they were accordingly executed and delivered to Botsford, Hawley & Co., " in payment of the three first mentioned notes, which were then taken up," without any notice either to L. or A. Freeman, that West was not the lawful owner of them. The three notes were, therefore, paid in good faith, and delivered to the makers, who have an equitable, as well as legal, right to retain them, as against all the parties to this bill.
If the plaintiff has any equitable claim arising from the facts found in this case, which constitutes a part of the record, it must attach on all, or some of the five notes, made payable to Botsford, Hawley & Co. Three of these notes were negotiable; and were purchased by Brown, before they became due, " for a sufficient and valuable consideration, paid in good faith, and without notice of any wrong or fraud concerning them." These three notes are dated August 31, 1826; signed by L. & A. Freeman ; made payable to Botsford, Hawley Co., or bearer ; each for the sum of 346 dollars, 76 cents ; one payable one year from May 1, 1827,-and one three years from May 1, 1827; and were purchased by Brown, on the 29th Feby., 1828, The other is payable four years from May 1, 1827, and was purchased, by Brown, on the 2d of July. 1829.
It cannot be seriously contended, that the purchaser, under such considerations, is not the equitable and legal owner of them. It is too well established, by authority, founded on obvious principles of justice and commercial policy, to admit of doubt. These notes were taken, by Brown, innocently ;-in the course of trade ;-purchased for a valuable consideration . paid at the time ;-due caution was used ;-there was neither gross neglect, nor any circumstance raising the slightest suspicion of the legality of the transfer;-they were negotiable-and not due. Peacocks v. Rhodes, Doug. 633. Collins v. Martin, 1 Bos. & Pull. 648. Grant v. Vaughan, 3 Burr. 1516. Bay v. Coddington & al. 5 Johns. Ch. Rep. 54. S. C. 20 Johns. Rep. 637. 1 Madd. 153.
The two other notes are dated August 31, 1826 ; are signed by Luther Freeman, payable to Botsford, Hawley & Co., two years from May 1, 1827, for the sum of 346 dollars, 76 cents; and were purchased by Brown, Feby. 29, 1828 ; the other, signed by Luther Freeman, payable on the first of May 1829, to Botsford, Hawley & Co., for 350 dollars, and was purchased, by Brown, some time in the year 1829, It appears, that these notes are not negotiable, not being parable to order, or bearer, and one of them was purchased, by Brown, when it was over-due. It is insisted, that as to these, the plaintiff is entitled to a decree in his favour. We think otherwise. We are of opinion, that the plaintiff has not any equitable claim to these notes, superior, or equal to that of the defendant Brown.
1. The fraud which was committed on the plaintiff, was the consequence of his own folly or negligence. He delivered the three notes payable to Bales, and the securities therefor, ditectly to West, instead of a third person, as escrows, to be delivered over, on the performance of certain conditions, without any indemnity, and relying solely upon a receipt, and the personal confidence he reposed in West. That confidence was mis-placed. This was his fault, as well as his misfortune. West, by means of it, was enabled to commit a fraud, the consequences of which, the plaintiff seeks, through the aid of the court, to visit upon the defendant. A court of equity cannot require the pecuniary loss sustained by the plaintiff, by means of a fraud committed under such circumstances, to be reimbursed, by one who has acted in good faith and without notice of such fraud. It cannot, as against a bona fide purchaser for value, give such an effect to the agreement between the plaintiff and West. It cannot, under any just and legal principles, hold the defendant, Brown, responsible for the unfortunate results of the plaintiff's negligence and inattention. Where one of two innocent persons must suffer, by the fraud of a third, the loss must be borne by him who furnished the means (however honest may have been his intentions) of perpetrating it. 1 Madd. 322. Goodtitle v. Morgan & al. 1 Term Rep. 755. Ryall v. Rolle, 1 Atk. 168. Lickbarrow v. Mason, 2 Term Rep. 70. Good & al. v. Harrison, 5 Barn. & Ald. 147. Gloucester Bank v. Salem Bank, 17 Mass. Rep. 38.
2, The notes were purchased by Brown, not only without notice of any fraud, but there were no circumstances of suspicion attending the purchase. There was no negligence, on his part, in not making enquiry ;-for he had no reason to suppose, that any fraud had been committed upon the plaintiff. He did not know that the plaintiff ever had, or claimed to have, an interest in the notes. It would not, therefore, have occurred to him, to have sought information from that source. If enquiry had been made of either of the makers of the notes,it would have been fruitless;-for they were ignorant of any fraud :-and had he addressed himself to the promisees, they doubtless, would have in formed him, that they were the lawful holders of the notes, and had a perfect right, to assign them. No fact existed, within the knowledge of Brown, which should have put him on enquiry: and if there had been, he neither knew, nor had the means of ascertaining, who could answer his enquiries. It would require great ingenuity to convinces court, acting upon principles, which give equitable jurisdiction, and authorize equitable interference, that justice demanded a decree to be passed against a defendant, under such circumstances ;-or a series of precedents too long and too firmly established to be overruled, to justify such a decree. No such conviction has been produced in our minds ;-no such precedents have been furnished us :-we think none can be found.
3. The equity of the plaintiff, arises out of the agreement made between him and West, and is contained in the receipt" of Feby. 24, 1824, The existence of this agreement was unknown to Brown, when he became the purchaser of the notes. He had no reason to suppose any such agreement had been made, and, therefore, the equity arising from it, in favour of the plaintiff, was a secret equity, against which Brown could not protect himself: and being a purchaser in good faith and for value, and without notice, he is not bound by such an equity. If a third person were permitted to set up a secret equity against the assignor, to defeat or controul the interest of the assignee," no transfer could be made, which would be safe for the assigned. Redfern & al. v. Fernei & al. 1 Dow 50. Murray & al. v. Lylburn & al. 2 Johns. Ch. Rep. 441. To give to a secret agreement, such an effect, would he to tolerate a fraud upon a bona fide assignee, and a reproach to the law. Suydam v. Jones, 10 Wend. 180.
It is, however, strongly insisted, that the assignee of a mere chose in action not negotiable, takes it subject to all the equities to which it was liable in the hands of the assignor; and that the indorsee of negotiable paper, indorsed after if is due, takes it subject to similar equities:-and that as two of the notes purchased by the defendant, were choses in action not assignable it law, and one of them was over-due when it was purchased, they fall within the operation of this rule. The general princi ple stated by the plaintiff, is admitted. It is just in itself, and well established by authority. Bishop v. Dexter, 2 Conn. Rep. 419. Nevins v. Townsend, 6 Conn. Rep. 5. Robinson v. Lyman, 10 Conn. Rep. 30. But we do not concur in the opinion that it is applicable to the present case, for the following reasons, in addition to those we have already mentioned.
First, the equity which is sought to be enforced, in this case, is not one growing out of the notes which are the subject of this controversy. The plaintiff has no interest in, or connex-ion with them, except as they are connected with notes which once existed, but which have been properly paid by the makers. His name does not appear on these notes, in any form. He is neither maker nor promisee, assignor, nor assignee. His only equity arises form a collateral matter, and that is, the private agreement between himself and West, contained in the receipt of Feby. 24, 1824. This court, in the late cases of Robinson v. Lyman, 10 Conn. Rep. 30., and Stedman & al. v. Jillson & al. 10 Conn. Rep. 55., established the principle, " that the indorsee of an over-due bill or note, is liable to such equities only as attach on the bill or note itself, and not to claims arising out of collateral matter." The same doctrine is recognised in Burrough v. Moss & al. 10 Barn. & Cress. 558. and in Holland v. Makepeace, 8 Mass. Rep. 418. These cases are decisive against the claim of the plaintiff.
Secondly, the equity referred to, which attaches to paper not negotiable, or to negotiable paper assigned after it is due, is the equity which exists in favour of the original debtor,-not that of a third person against the assignor. The assignee receives it subject to such infirmities, equities, or (as has been said) de-fences, as existed against it, when it was assigned. But in whose favour must these equitios exist? We think, in favour whose favour must these assignee might reasonably suppose, could have such an equity-the debtor-of whom he could en-quire, and from whom, by the exercise of ordinary diligence, he could ascertain whether any claims existed, which might defeat what would otherwise be his just rights. We concur in the opinion expressed by Chancellor Kent, in the case of Murray & al. v. Lylburn & al. 2 Johns Ch. Rep. 441., that the equity is one "residing in the original obligator or debtor, and not an equirt residing in ome third person against the assign- or;" and in the remark of the court in the case of Norton v. Rose, 2 Wash. Rep. 233. that the assignee " takes such paper subject to all the equities of the obligor and of Story, J., in Green v. Darling & al. 5 Mason, 214 ; where a chose in action " is assignable, it maybe admitted that the assignee likes it subject to all the equities existing between the original parties, as to that very chose in action so assigned." Similar language is used, by the court, in the cases of Rosa v. Brotherson, 10 Wend. 85, and Hackley v. Sprague, Id. 113. In the case first named, it is said, the holder " takes it subject to all the equities existing between the original parties and in the latter case, if the note is transferred after it arrives at maturity, " the holders take it, as he does negotiable paper, subject to any defence which the maker has as against the payee."
Upon the whole, we are clearly of opinion, that the claim of the plaintiff has no support, either from principle or authority ; and therefore, that the superior court be advised to dismiss the bill.
The other Judges concurred in this opinion.
Bill to be dismissed.