Thrall v. Spencer

Waite, J. It appears from the bill and report in this case, that Barber made three notes, of one thousand dollars each, payable to Andrus, or order, in one year, which Andrus, at the request, and for the accommodation of Barber, indorsed. For the security of Andrus, in consequence of his having so indorsed these notes, Barber mortgaged to him, by one deed, certain parcels of real estate, and by another deed, certain articles of household furniture. After these notes had gone into the hands of bona fide holders, and finally had become the property of the plaintiff, Andrus released to Barber all his interest in the furniture ; and the latter, immediately afterwards, mortgaged the same, with the exception of a small portion, to the defendant Spencer. When these last conveyances were made, the parties had full knowledge of the former mortgage of the furniture, but acted without any fraudulent intent. Upon these facts, can the claim of the plaintiff be supported ? In the first place, he has no legal title. The first mortgage of the furniture was not made to the holders of these notes, but to the accommodation indorser, for his security. Even if Andrus were still the holder of the property, the plaintiff could only reach it through the intervention of a court of equity. But he has taken an assignment of the notes, without making any claim for the property while Andrus retained the title. He has lain still, until the latter had parted with that title and the possession, and the property had gone into the hands of a bona fide holder, for valuable consideration. He therefore comes too late for relief. His case does not stand upon as high ground as if the mortgage had been made to the creditor to secure the payment of the debt. It was made to an indorser, not to secure the payment of the debt, but to secure him on account of his liability as an indorser. The latter may well relinquish his pledge, provided he acts in good faith, and without any fraudulent design, before any claim is made upon him for the property. It is said, that a person coming into possession of trust property, with notice of the trust, shall be considered as a trustee, and bound, with respect to that special property, to the execution of the trust. The Mechanics Bank of Alexandria v. [143] Seton & al. 1 Pet. R. 309. This was undoubtedly true. But how could Andrus be considered as the trustee of the plaintiff, when no such trust was specified in the conveyance to him, and no claim was made upon him, to have the property so holden ? The defendant might well infer from these circumstances, that the plaintiff did not require the aid of the furniture to obtain satisfaction for his debt. But there is another feature in this case. The report shows, that when the mortgage of the furniture was made, it was supposed by the parties, that the mortgage of the real estate would be sufficient to indemnify the indorser; and the conveyance of the furniture was not made to secure the indorser, but to protect the property from attachment, by Barber’s creditors. As against those creditors, the mortgage was fraudulent and void. Can Andrus be charged with inequitable conduct towards the plaintiff, by relinquishing such a title, and thereby doing away the fraud ? Had the plaintiff procured from Andrus a transfer of his title, with knowledge of the fraud, he could stand in no better situation than Andrus. Neither could hold,as against the creditors of Barber. For aught that appears in the case, the plaintiff might have attached the property, at any time before the mortgage to Spencer. Besides, can a court of equity be called upon to transfer the title of a fraudulent grantee, after the fraud is made manifest, to another person, who would stand in no better situation than such fraudulent grantee, and would be liable, at any time, to have the property taken from him, by the creditors of the grantor ? Such a proceeding would be a novelty in the history of judicial proceedings. We see no reason for disturbing the decree of the superior court. In this opinion the other Judges concurred. Judgment affirmed.