
    NOVEMBER TERM, 1845.
    Wilson L. Roberts et al. vs. Rufus K. Bean.
    Where a person, entrusted -with a note to place in the hands of an attorney for collection, with instructions to deposit the attorney’s receipt, subject to the order of the owner of the note, did place the note in the hands of an attorney, and afterwards, instead of depositing the attorney’s receipt, as instructed, assigned it to a third person, without notice of the fact that he held it in trust only ; it was held, in a controversy between the owner of the note and the assignee of the receipt for the money in the hands of the attorney, that the owner of the note was entitled to it.
    A., for a valuable consideration, transferred to B., without recourse, a promissory note; B. afterwards gave the note to A., with directions to place it in the hands of an attorney for collection, and deposit the attorney’s receipt therefor in the hands of C., subject to the order of B.; A. did place the note in the hands of an attorney for collection, but instead of depositing .the receipt with C., as instructed, he left another receipt, by mistake, which B. refused to accept, and assigned the attorney’s receipt to D.; the attorney collected the money and paid it' to E. as the agent of D.; B. filed his bill, praying for an injunction, and a decree for the money ; E., pending the injunction, though believing it to have been dissolved, paid the money to D. Held, that B. was entitled to a decree against E. for the money.
    The receipt of an attorney at law, for a note placed in his hands for collection, is not negotiable, either by the common law or statute.
    In error, from the circuit court of Carroll county, sitting in chancery, Hon. Benjamin F. Carruthers, judge.
    On the 5th day of January, 1843, Rufus K. Bean filed a bill on the chancery side of the circuit court of Carroll county, against Wilson L. Roberts, Darby Ryan, and Treadwell S. Ayres. The bill alleges that Roberts, for a valuable consideration, indorsed and delivered to Bean, without recourse, a promissory note, drawn by John D. Wyatt and John S. Ross, in favor of Roberts, for the sum of $220, a copy of which is exhibited with the hill; that, some time after the purchase and delivery of the note, as Roberts was going to Lexington, Bean gave him the note, with directions to place it in the hands of some attorney for collection, to take the attorney’s receipt for it, and deposit the receipt with Mr. Levi Ray, who resided in Lexington; that the note was placed by Roberts in the hands of Mr. Dyer, an attorney, residing in Lexington, for collection, but by mistake, as he afterwards wrote to Bean, which letter is also exhibited with the hill; Roberts left a different receipt with Mr. Ray, and on which Bean refused to accept, and placed the receipt of Mr. Dyer in the hands of Darby Ryan, who pretends to be the owner of the same. The bill further alleges that Dyer sued on the note, and collected one hundred and forty-eight dollars and sixty-one cents, and paid the same to Ayres, as the agent of Ryan; and that Ayres then had the money in possession. The bill charges that Bean is entitled to the money, and prays for an injunction, and for general relief. An injunction was granted. At the return term Ryan filed his answer, which admits that Bean had made a trade with Roberts, by which he was to have the' benefit of the note, but denies that it was indorsed or delivered to Bean. The answer states that there was an agreement between Bean and Roberts, that the suit should be instituted in the name of the latter, and the proceeds, when collected, paid over to the former. Denies any knowledge of the charges of Bean to Roberts about placing the attorney’s receipt in the hands of Ray, or of Roberts’ mistake in leaving a different receipt, and calls for proof of the several allegations on those points. He avers that he purchased Dyer’s receipt, and gave for it $220, without knowing there was any claim by Bean, or any other person, to it, and he never heard of Bean’s claim for about twelve months after his purchase; that he is an innocent purchaser, for a valuable consideration, and entitled in equity to the money enjoined; that Bean, by leaving the note with Roberts, enabled him to practise a fraud, and the loss should fall on his own shoulders. He insists that the injunction should be dissolved, and the money paid over to him.
    On the 17th day of April, 1843, a rule was granted requiring the complainant to file the exhibits referred to in his bill, on or before the 10th day of May, 1843; and on his failure to do so¡ 
      that the injunction should be dissolved, and the hill dismissed. On the 9th day of October, 1843, upon the affidavit of the complainant, the rule was discharged, and he was permitted to file his exhibits. To this order, discharging the rule, and granting leave to file the exhibits, the counsel of Ryan filed a bill of exceptions.
    Ayres, after that time, answered, denying any knowledge of the various allegations of the bill, about the indorsement and delivery of the note, assignment of the receipt, or the rights of the respective parties to the money in controversy; states that he received from Ryan, for collection, the receipt of Dyer, and that, as the attorney and agent of Ryan, he received from Dyer the sum of $148 61, as the net proceeds of the note mentioned in the receipt, of which fact he immediately informed Ryan. That about the time he received the money Bean gave him notice not to pay it over to Ryan, and afterwards filed his bill, and obtained an injunction restraining him from doing so. The answer further states, that a rule was taken against the complainant, requiring him to file his exhibits within a specified time, and, on his failure to do so, that the injunction should be dissolved; that, after the expiration of the time specified, the attorney of Ryan had the rule made absolute, and the injunction dissolved, and then called on him for the money; that he paid over to Ryan’s attorney $128 61, and retained $20 for his fee. He again repeats, he does not know under what circumstances Ryan became the owner of the claim or receipt of Dyer, which, on the back, seemed to be regularly transferred to Ryan. When Dyer paid the money he gave up the receipt.
    Roberts filed no answer, and the bill was taken for confessed against him.
    The deposition of James M. Dyer, taken by the complainant, proves that the original note, a copy of which is filed as an exhibit to the complainant’s bill, was placed in his hands for collection, on the 9th day of December, 1838, by Wilson L. Roberts; that he brought suit on it in the circuit court of Holmes county, and recovered a judgment at the April term, 1841, for the sum of $153 24, the defendants having pleaded a failure of consideration, and been released from the balance of the debt. That he collected the judgment, which amounted, including interest, to the sum of f 168 61, twenty dollars of which he retained for his fee, and the residue he paid to Tread-well S. Ayres, who was the holder of his receipt for the note. The receipt appeared, from an indorsement on the back, to have been transferred by Wilson L. Roberts to D. Ryan, on the 1st of September, 1839. Rufus K. Bean had claimed the money before it was paid over to Ayres, and Ayres was to hold the money, and pay it to Ryan or Bean, as a competent court might decree. The signature of Roberts to the letter, filed as an exhibit to the bill, he thought, resembled the signature on the back of his receipt, by which it was transferred to Ryan, though he had never seen Roberts write, and was not acquainted with his signature. Within a few weeks after he received the note for collection, both Bean and Levi Ray notified him that Bean claimed it. He never' saw Ryan, and the first he knew of Ryan’s having purchased his receipt, was from a letter, coming through the mail, from Ryan, informing him of the fact; and he immediately wrote to Ryan, advising him that Bean claimed the note. On the same day he received from Roberts the notes of Wyatt and Ross, he also received a note on William 0. Kenney, for $>150; and at Roberts’s request he wrote separate receipts for the notes. On the note against Kenney he had never been able to collect anything. He had several times heard Bean say he did not wish to be known as the plaintiff, for fear of a garnishment.
    The deposition of Levi Ray proves that a short time prior to the 17th day of December, 1838, Rufus K. Bean placed the note in his hands, to present it to Wyatt and Ross for payment; he does not know whether there was any indorsement on it at that time or not; but there now appears to be an indorsement, which, however, is much defaced, and crossed over, in these words: “I assign the within note, without recourse. December 7th, 1838. W. L. Roberts.” That about the 1st of December, 1838, Bean and Roberts came to him in Lexington, and told him Bean had sold to Roberts a barouche, for the note of Wyatt and Ross; that Roberts was to place the note in the hands of James M. Dyer, for suit, and deposit with him, Ray, subject to Bean’s order, Dyer’s receipt therefor; that some days thereafter, Roberts called at his counting-room, and said he had received the barouche, and he wished to leave' Dyer’s receipt for Bean. Being sick at the time, he told Roberts to leave it with his clerk; and he directed the clerk to file it in his receipt-book. When Bean called for the receipt he found that Roberts, instead of leaving the receipt for Wyatt and Ross’s note, left a receipt for a note on William C. Kenney, for $ 150; which Bean refused to accept, saying he was to have the receipt for the note on Wyatt and Ross, for $220; and that Kenney was notoriously insolvent. On cross-examination, he stated that the suit was brought in the name of Roberts, instead of Bean, because the latter was afraid of a garnishment, and because Wyatt and Ross were old friends, and he did not wish to ofFend them; that he never saw Ryan, and knew nothing of his claim.
    On the final hearing a decree was rendered in favor of the complainant, against Ayres, for the money. And the defendants removed the case to this court, by a writ of error.
    
      Cothran and Neill, for plaintiffs in error.
    We contend that Ryan is entitled to the proceeds of the judgment.
    1st. Because he is a purchaser from Roberts for a fair consideration, without notice of the latent claim or equity in Bean. Though the assignee of a chose in action takes it, subject to all the offsets and equities of the original obligor, yet the rule is well settled, “ that he does not take it subject to a latent equity, residing in a third party.” Murray v. Lilburn, 2 John. G. R. 444. This doctrine is expressly laid down and applied in the case of Livingston v. Dean, 2 John. G. R. 479. Before complainant can set up a shadow of claim to the money, he must charge and prove notice on Ryan of the existence of his claim. This is not charged nor proven, nor is it even pretended. We regard the above principle, 'supported as it is, as conclusive in the case; but as there are other principles equally conclusive, we will advert to some of them,
    
      The principle has been settled “ time out of mind,” that where equities are equal, (which we deny in this case,) that the party having the legal title is to be preferred. Fonbl. Equity, 327, and note E.; Ibid. 260, sec. 3. The legal title is in Ryan. H. & H. Dig. 373; Fitch v. Stamps, 6 How. 487. What is an equity in the above sense 1 It is such a claim as a good man can demand and receive from the courts, or his fellows, his conscience approving the act. Or in other words, such a claim or demand as the conscience of a good man will approve, and no “compunctious visitings” will follow. Has Ryan such a claim ? Upon this point there can be no doubt. Then having the legal title, it seems, by the application of the above rule, that the court cannot, in justice and conscience, wrest from him his legal advantage and title. By his legal title, his agent and attorney, T. S. Ayres, collected the money from Dyer. By his legal title and the order of this honorable court, Ayres paid over the money to his agent, G. F. Neill; and here it may not be amiss to call the attention of the court to another familiar principle of law, in the payment of money to an agent. The law says, “ what is done by the agent is done by the principal, and the payment of money to an agent, having authority to receive the same, is a payment to the principal.” Well, if the law regards the money as already in the hands of the principal, we are at a loss to perceive upon what principle of law, equity or morals, that the money (under the circumstances that surround this case) can now be wrested from Ryan; particularly as the payment to Ayres was prior to the commencement of this suit, and the payment to Neill by virtue of an interlocutory order of this honorable court.
    The last but not least unfavorable feature of this case for complainant is, the craft, cunning and fraud that attaches to him, as developed by the testimony of his own witnesses, and through and by which craft and cunning, he enabled Roberts to practise a fraud upon Ryan. For, say both the witnesses, that by the instruction of complainant, suit was to be brought in the name of Roberts. For what? To prevent the defendants in the suit at law being garnisheed by the creditors of complainant. This is the testimony; and it is nothing more nor less than that the suit was brought in the name of Roberts to defraud the creditors of Bean, the complainant. But Bean says, this has all happened by mistake in Roberts. The mistake commenced with himself, in not taking and keeping possession of the note; and this mistake was designed for a fraud upon his creditors, as the testimony shows. Where transactions are vitiated by fraud, the question is not as to the amount of fraud, but is there fraud at all 1 If there is, the whole contract is void. At any rate, this contract of Bean and Roberts is certainly void, as far as Ryan’s interest is affected by it. An honest, conscientious claim never has, nor will it ever, skulk and hide its head, as has this pretended claim of complainant’s, while the case was undergoing judicial investigation in the name of Roberts. At the time of this pretended transfer, equity required of him to speak out, and assert his right. Having failed to do so, honesty and fair dealing required it of him, the same equity will not now permit him to speak when it is his duty to be silent.
    Sheppard, for defendant in error.
    The only question in this case arises on the respective claims of Ryan and Bean, to certain funds collected by Dyer, and by him handed to defendant, Ayres, to hold it subject to the order of a court competent to decide on the rights of the parties.
    The deposition of Mr. Dyer fully establishes the fact, that Ayres was a mere stakeholder, and he was to pay it to Ryan or Bean, as it should be decided by a competent court.
    Bean has fully established his title to the fund, and has shown by all the witnesses that he paid a full price for the note.
    There is no evidence, except the simple allegation in his answer, that Ryan has ever paid any consideration at all. Ryan’s answer cannot be read in support of his right, and on the proof I am not able to see, that the court below could have made any other decree than to compel Ayres to pay the fund to Bean, who alone proved any title to it.
    If Ryan had proved that he had paid a full consideration for the attorney’s receipt, it would have given him no better right than a draft or order on the attorney for the money , which, if not paid on its presentment, would have given Ryan a right to recover the fund back from Roberts.
    Bean’s title is prior in time, and is first in right.
    If Ryan had proved that he had paid for the receipt, it would only have given him an equitable right to the fund, which he could not protect by the plea of a purchaser without notice.
    
      B. D. Howard, for plaintiffs in error.
    1st. The legal title to the note is in Ryan. This court has decided, that the assignment and delivery of an attorney’s receipt, conveys the legal title to the proceeds of the fund assigned. Fitch v. Stamps, 6 How. 487. (See H. & H. 373.) Roberts was the payee of the note, and his possession of it was conclusive evidence of title in favor of innocent purchasers, who had no notice of a prior equity. His possession would have been prima facie evidence of title, even if it had been indorsed to Bean. There must be both indorsement and delivery to transfer the legal title to a note. Bailey on Bills, ch. 5, sec. 1, p. 103, 104; Chitty on Bills, 557, 558; Ibid. 263; 5 Price, 482; 18 Martin, 15.
    2d. Permitting Roberts to retain possession of the note, enabled him to perpetrate a fraud upon Ryan, inasmuch as his possession clothed him with a prima facie right to dispose of the bill. Bean has, therefore, concluded himself from setting up a claim to the proceeds of the note, as against Ryan, who is an innocent purchaser for a valuable consideration, and without notice. Murray v. Livingston, 2 John. Oh. R. 444; Livingston v. Dean, Ibid. 479; Bailey on Bills, ch. 5, p. 113; Ciarle v. Boyd, 2 Hamm. 56; Moxon v. Pulling, 4 Campb. 50; 1 Cl & P. 600.
    3d. Ryan has as good an equitable title as Bean, and he has also the legal title. This will entitle him to the proceeds. The judgment of the vice chancellor must therefore be reversed.
   Mr. Chief Justice Shakkey

delivered the opinion of the court.

Bean filed his bill on the chancery side of the circuit court of Carroll county, under the following circumstances, as alleged in the bill. For a valuable consideration, Roberts transferred to Bean a promissory note, made by J. H. Wyatt and John S. Ross, for the sum of $220, the assignment having been made without recourse. Shortly afterwards Bean delivered the note to Roberts, with directions to place it in the hands of an attorney for collection, and to deposit the attorney’s receipt with Levi Ray, subject to the order of Bean, which Roberts did; but instead of leaving the receipt for the transferred note, it seems that he left the receipt for a different note with Ray, by mistake, as appears by a letter from Roberts to Bean. The receipt so left, Bean refused to accept. Roberts placed the receipt which he should have deposited with Ray, in the hands of Ryan, who claims as assignee for a valuable consideration. The money was collected by the attorney, and paid over to T. S. Ayres, as the agent of Ryan, and the bill prayed for an injunction and relief.

Ryan admits, in his answer, that Bean did purchase the note as stated, but denies that it was delivered. He avers that he purchased the attorney’s receipt from Roberts, for a valuable consideration, without notice of the complainant’s claim, until long after he had purchased. He insists that complainant, by the arrangement with Roberts, enabled him to practise a fraud, and that respondent is entitled to the money.

The answer of Ayres discloses nothing material, except that he paid over the money to Ryan, suppbsing that the injunction had been dissolved. This impression arose, no doubt, from the decision on a motion to dismiss, because complainant had not filed his exhibits. The court directed, that unless they were filed by a certain time, the cause should be dismissed. But subsequently the complainant filed an affidavit, showing the reason why they were not filed, and thereupon the court overruled a motion to make the order of dismissal absolute.

The proof in the cause establishes the transfer of the note by Roberts to Bean, and the failure to deposit the receipt with Ray. Roberts failed to answer, but by letter admitted that the wrong receipt was left by mistake, which he promised to rectify.

For the plaintiffs in error it is insisted, that although the as-signee of a chose in action takes it subject to all the equities in favor of the obligor, yet he does not take it subject to the latent equities of third persons, of which he has no notice. And it is also contended, that where the equities are equal the legal right must prevail, and that' as Ryan, by the assignment of the receipt, had acquired a legal title, he is entitled to the money. The rules contended for are undoubtedly the true ones, and if the facts in the case will justify their application, Ryan was entitled to the money. But there are other rules which must also he kept in view; for instance, where the parties depend upon mere equities, that which is superior must prevail; and again, “he who has the precedency in time, has the advantage in right.” Apply these tests, and how does the matter stand ? The doctrine that the assignee of chose in action takes it subject only to the equities of the obligor, and not subject to the equities held by third persons, does not apply. It is a rule applicable to negotiable instruments, but an attorney’s receipt for a note to collect, is neither negotiable by the common law or by statute. Indeed, it is not a chose in action of itself, as no action could be maintained upon it without proof that the money had been collected. So that at most, Ryan acquired but an equity by the assignment. He had no legal title in aid of his equity; but Bean had, for the transfer of the note conveyed to him the legal right, and the transfer of the receipt was in fraud of that legal right. Strictly speaking, Roberts had no interest in the note, and therefore could assign none. But if the parties were put upon mere equities, that of Bean is superior! first) because he proves the consideration given for the note, and the other has failed to prove any consideration for the receipt; and second, because Bean has the priority in point of time. We are referred to the case of Fitch v. Stamps, 6 How. 487. That only proves that an order drawn on attorney for money to be collected, when accepted, vested the particular fund in the payee, who will be protected in equity against a subsequent assignee of the judgment, who took it with notice.

The decree is affirmed.  