United States v. Sturges et al.

resort to a Court of Equity for relief.

This is necessary in order to show a lien upon the chattel. If the aid is sought as to real estate, it is enough to show a judgment, creating a lien upon the land. And this the bill does show.

The objection, therefore, that there is a want of equity apparent on the face of the bill, cannot be sustained.

As against Butler then, there can be no reason why the relief prayed should not be granted. If the mortgage was given without consideration, and merely as he alleges, to enable him to raise money to pay off the judgment; he and the United States were the only parties who had any interest in it, and there is no principle on which it can be upheld as a valid outstanding encumbrance.

2. The next inquiry is, how stands the case as it relates to Sturges?

He sets out many matters as between him and Butler, not called for by the bill, and which can avail nothing, either against the United States, or against Butler. His rights in the present case, must be determined from his admissions, which are responsive to the bill. He admits the execution of the bond, and the recovery of the judgments as alleged in the bill, and also the execution of the mortgage; but denies it was given solely for the purpose of indemnifying him against the bond as one of the sureties of Minturn and Champlin, but was given as much to secure him for monies owing him by Butler, and against all other liabilities incurred by him on Butler's account, as against the Minturn and Champlin bond. He denies the allegations in the bill, that he had paid no money on account of the bond, or that none had been realized out of his property; but alleges, that his property had been sold at a sacrifice under the judgment against him, and great damage thereby sustained by him.

e 4 John. Ch. 676.

United States v. Sturges et al.

The admissions then of Sturges, show that the mortgage was not given to secure the payment of twenty-seven thou sand dollars as it purports upon its face, but that it was given. as collateral security, and to indemnify Sturges against responsibilities he was under for Butler, including the Minturn and Champlin debt. Had the admission of Sturges been that the mortgage was given solely for the purpose of indemnifying him against this debt, there can be no doubt but that it would have been within the proper province of a Court of Chancery, either to remove the encumbrance, or apply it towards payment of the debt for which it was intended as collateral security.

The principle which governs such cases is, that the collateral securities are trusts created for the better protection of the debt, and that it is the duty of the Court to see that they fulfil the purpose for which they were intended. But the admission of Sturges in the present case, shows that this mortgage was given as security for whatever debt there was due from Butler to him, and as an indemnity against the Minturn and Champlin debt, and all other responsibilities he had come under for Butler. If the United States ask for a decree upon this admission, without any other proof, it must all be taken together, so far as it is responsive to the bill; and it would be inequitable to take from Sturges this indemnity, without inquiry into the state of these accounts, and the responsibilities he is under for Butler; and the only course, therefore, that can be adopted, as between the United States and Sturges, is to refer the subject to a Master, to make the proper inquiries. If it was a mortgage for the payment of money absolutely, all that the United States could claim, would be to redeem the mortgage. And in the present case, all the legal purposes for which the mortgage was given must

d 1 Equi. Ab. 93. ; 1 John. Ca. 205.; 2 John. Ch. 296.

United States v. Sturges et al.

be fulfilled, before it can be removed out of the way of the judgment of the United States.

3. The next inquiry is, as to the rights of Burroughs, who is an assignee of the mortgage, without notice of the special purposes for which it was given. He took the assignment in payment and satisfaction of a debt of fifteen thousand dollars, due from Sturges to him; and the question is, whether he stands in any better situation, or has acquired any greater rights under the mortgage than Sturges himself possessed. The mortgage is only a pledge or security for the payment of a sum of money; it does not purport upon its face to be an absolute and unconditional conveyance of the land. It is subject to redemption by the mortgagor, and those claiming under him acquire all his rights in that respect; and the assignee of the mortgage stands in the place of the mortgagee, and can claim no greater rights under the mortgage than he could.

It is a general and well settled principle, that the assignee of a chose in action takes it subject to the same equity it was subject to in the hands of the assignor. This was the doctrine laid down in the case of Turtin v. Benson; and in numerous other cases in the English Courts. The same principle was fully adopted and sanctioned by the Court of Appeals in the state of Virginia, in the case of Norton v. Rose; and by the Court of Chancery in this state in the case of Murray v. Lylburn. The qualification of the rule as laid down by the Chancellor in the latter case, does not affect the question now before the Court. The rule he says is generally understood to mean the equity residing in the original obligor and debtor, and not an equity residing in some third person against the assignor. All the United States claim

e 1 Peere. Wms. 496.

g 2 Wash, Rep. 233.

f 1 Vernon, 691. 764.; 1 Ves. 123.; 4 Ves. jun. 121.

h 2 John. Ch. 443.

United States v. Sturges et al.

here, is the equity residing in Butler, the original debtor and mortgagor. They ask only to be placed in his shoes, and to redeem the mortgage, or have it stand only as an encumbrance to the same extent that it would have stood against him. It is a rule of equity, that a judgment creditor at law is entitled to redeem an encumbrance upon real estate, and thereby secure his legal priority.i

Although Burroughs is an assignee without notice of the equity now claimed, he is chargeable with negligence in not seeking for information. By proper inquiries from Sturges, he could have ascertained the nature and extent of his interest in the mortgage. An assignee cannot found an equity on his own negligence. If he might have had notice, and ought to have sought it, he stands in no better situation than if he had actually obtained it.

And there are circumstances in this case that ought to have excited his diligence, and put him on inquiry. The mortgage is dated the 12th of August, 1816, and the twenty-seven thousand dollars which it purports to secure, is made payable on the 12th of February thereafter; and the mortgage was not assigned to Burroughs until October, 1821. The cause of the delay, and whether any, and what payments had been made, were very natural inquiries for him to have made, and it is hardly presumable, that he did not make them; and if he did, it is most likely he was fully informed as to the situation of the mortgage; and if he did not, it was a negligence which is entitled to no favourable consideration in a Court of Equity. Had the mortgage been really given to secure the payment of twenty-seven thousand dollars as it purports, and the whole, or any part of it had been paid before the assignment; it could not be pretended that the assignee, although ignorant thereof, could again enforce pay

i 4 John. Ch. 692.

United States v. Sturges et al.

ment; and still such a claim would be sustained with the same equity as is set up in the present case.

Burroughs in his answer does not deny the allegations in the bill, as to the purposes for which the mortgage was given; he only alleges his ignorance thereof. It requires, therefore, but one witness in support of these allegations; and as Butler is the only witness who has been examined for that purpose, it becomes necessary to decide upon his competency. He is not objected to because a party in the cause: one defendant may be examined in equity for the plaintiff, or for his co-defendants if he has no interest in the event; though ordinarily this cannot be done at law.

In whatever point of light Butler is considered as standing, he does not appear to me to have such an interest as to exclude his testimony. If the mortgage is to be considered as given without consideration, and for the purposes alleged by Butler, he is interested to uphold it; as he would thereby protect his own property against the judgment of the United States; and in this view of the case, his interest is against the party calling him. If the mortgage is considered as a real security for the twenty-seven thousand dollars, Butler stands indifferent between the parties. His property is at all events swept away, either by the judgment or the mortgage; and it is immaterial to him under which it is taken ; and so far as respects his liability to costs, his interest is against the complainants, and to defeat the suit.

Burroughs must, therefore, under the allegations in the bill supported by the testimony of Butler, be considered as stand ́ing in the place of Sturges; and the extent of his interest as assignee of the mortgage, must depend on the result of the reference to a Master, in relation to the matters between Butler and Sturges.

k 1 Phil. Ev. 6. ; 2 John. Ch. 530.; 3 Atk. 401,