Appeal of the Mifflin County National Bank

Mr. Justice Green delivered the opinion of the court, It was found as a fact by the learned judge of the court below, and is not denied, that Weldon paid a valuable consideration for the judgment of Farrand against The Lewistowu Engine and Brass Company. It was also found that before or at the time he purchased the judgment, he inquired of several of the parties, who, as partners composing the defendant company, executed the confession of judgment in question, whether the judgment was all right, and was assured by them that it was. It is not pretended that Weldon had any actual notice of any equity existing in the appellant, or in A. R. Reese, to have the judgment applied to the benefit of either of them. In point of [153] fact, neither the company defendant nor any of the parties who signed the confession of judgment, have any defense whatever against its payment. Weldon holds, by valid assignment, the entire title of -the plaintiff in the judgment. The fund in court is the proceeds of an execution issued on this judgment, and it is claimed by, and has been awarded to, Weldon as the assignee of the plaintiff Farrand. Why should he not have it? The only reason urged, is, that the appellant, having discounted certain paper given by the company defendant, indorsed by A. R. Reese, A. J. Farrand and T. B. Reese, had an equity to have the judgment applied to its use, because it was given to indemnify the indorsers against their liability as such. The claim is pressed upon the ground that Weldon made no inquiry of A. R. Reese, when he took the transfer, and that the latter was not bound by the declarations of his co-obligors, because-the partnership was then dissolved. We do not perceive the materiality of this contention. The appellant’s' claim is in no sense whatever a defense against the judgment. On the contrary, it is a claim to have the fruits of the judgment paid over to the appellant. In other words, the appeílaut claims the ownership of the judgment,.not by force of any transfer or assignment, but because of its equitable right as a creditor, to have securities given by the debtor to protect the indorsers, applied in satisfaction of the debt. This would be all very well as between the bank and Farrand, if they only were the parties to the controversy ; but how can such a claim affect an innocent purchaser from Far-rand, for value actually paid, and without any notice of the equity set up by the appellant ? It is very true that the assignee of a judgment or mortgage takes it subject to all the defenses of the obligor against the obligee, but it is equally true that he does not take it subject to the secret equities of third persons. This is very familiar doctrine and has been repeatedly enforced by this court. In Davis v. Barr, 9 S. & R. 140, it was said by Gibson, J., “ It certainly is not a general principle of equity, that a purchaser for valuable consideration of the legal title to any kind of property, should take it subject to an equity of which he had not notice.” And again, on p. 141: “ But with any agreement between the original parties inconsistent with the purport or legal effect of the instrument, the assignee has nothing to do. No such agreement is within the purview of the act; and the assignee is not bound to call on the obligor for information about matters, the existence of which he has no reason to suspect, the necessity of inquiry being limited, as I have said, to want of consideration and set-off.” In Mott v. Clark, 9 Barr 404, it was said of the assignee of a bond and mortgage: “ He takes it subject to all the equity of the [154] mortgagor, but not to the latent equity of a third person. To subject him to such an equity he must have express or constructive notice at the time of the assignment.” The same doctrine has been held in the cases of Taylor v. Gitt, 10 Barr 428 ; Wetherill’s Appeal, 3 Grant 281; McConnell v. Wenrich, 4 Harr. 365 ; and Twitchell v. McMurtrie, 27 P. F. Smith 383. As A. R. Reese had no defense against the judgment, it was not necessary to apply to him to learn whether he had any secret agreement with the appellant that the judgment was to be held for the benefit of the latter. In any point of view Weldon was not subject to tlie duty of inquiry for such latent equities as it is sought to set up against him, and can stand upon his clear legal' title to the judgment and its fruits. Decree affirmed and appeal dismissed at the cost of the appellant.