p. 277Weed and others v. Darley and Peale.Headnote
Following securities wrongly transferred Promissory note. ■ Assignee. Liability to refund.Where assignees, under an assignment for the benefit of creditors, receive pro. missory notes as part of the estate and collect and apply the avails in dividend to creditors, they cannot be compelled to repay the amount, where it turns out that the assignor held such notes as indemnity against his out. standing endorsements and ought not to have assigned them as part of his effects.
The complainants obtained a judgment against John Pendleton, John Hanna, Henry O'Brien, Alpheus Be Forest and James Be Forest, on a promissory note for upwards of four thousand dollars. John Pendleton had become endorser on this note and others, at the request and for the benefit of Hanna, Be Forest and Co., who handed to Pendleton certain notes to indemnify his endorsement. Pendleton failed, made an assignment to the defendants, and, in such assignment, transferred the notes so given to protect him against his endorsements, to assignees, the defendants John Barley and Reubens Peale. The complainants, having obtained a judgment on the note endorsed by John Pendleton, and as holders of the other notes bearing his endorsement and made for the accommodation of Hanna, Be Forest and Co., claimed to follow the indemnity notes and the avails in the hands of the assignees. The latter showed by their answer that they had collected on some of the notes to the amount of nine hundred and seventy-four dollars and had also distributed that sum amongst John Pendleton’s creditors prior to any notice. The principal question was, as to the liability of the assignees to make good the nine hundred and seventy-four dollars. The cause was heard on bill and answer.
Mr. E. Griffin, for complainant.
Mr. O. Bushnell, for the defendants.
p. 278:&emdash;It is but an equitable title of a right in equity which the complainants set up to have the benefit of the securities which Pendleton held for his own protection, as endorser of the notes, which became the property of the complainants. They could follow those securities or the proceeds into the hands of third persons who had not given value for them whenever they could be found; but third persons receiving and parting with these securities or proceeds in good faith and without notice of the equitable claim or right of the complainants cannot afterwards be made liable to them. The defendants, as assignees of Pendleton, acted in good faith in. receiving the notes assigned and collecting the money upon them, and having paid over or distributed among Pendleton’s creditors the sum of nine hundred and seventy-four dollars, before they had any notice of the complainant’s equitable claim, are now, in equity and justice, to be protected against a second payment. The principle is fairly stated in Haggerty v, Palmer, 6 J. C. R. 438, where the Chancellor observes, if the money had been actually appropriated by the assignees before notice of the suit, and of the injunction, the remedy would have been gone. The remedy for this money is gone as respects these defendants; and the complainants’ bill must be dismissed, with costs.