Mr. Justice Scott
delivered the opinion of the Court:
The facts in this case, susceptible of direct proof, are so well established as to admit of no disagreement. The subject of controversy is that with which the law charges the parties interested with notice..
Prior to November, 1872, complainant, with defendant Runyan, and Harlow P. Smith, were the owners of a tract of land adjoining the city of Chicago. Subsequently the owners platted it into lots and blocks, designating it as “Central Park Second Addition to Chicago.” A division of the lots between the owners was made, and it is as to a portion of the lots set apart to complainant Bullock, this litigation concerns. 1
On the 7th day of November, 1872, complainant and his wife gave defendant Bunyan a power of attorney to sell and convey the lots that had been set apart to complainant in the division. The power was general. No specific directions were given as to the terms upon which sales should be made. Under the power given, Bunyan made numerous sales of lots between March 4, 1873, and May 31, 1875, and conveyed the property by deed, as the attorney in fact of complainant and his wife. Some of the sales appear to have been partly for cash and partly on time, and in the latter case the purchase money was secured, either by mortgage or deed of trust on the property. Among others, sales were made to defendants Story, Flanagan and Douglas, each purchaser securing a portion or all of the purchase money of the lots conveyed to him, by mortgage or trust deed. The notes taken for the lots sold were either made payable to' Bunyan or to persons selected by him, and who afterwards assigned the same to him. A portion of the notes given by Flanagan, Story and Douglas, respectively, were afterwards sold and assigned to defendant Silverman, and are the notes involved in this controversy. All of the notes assigned to Silverman were purchased by him in good faith, for a valuable consideration, and before maturity, except one of Flanagan’s, and as to that note, he inquired of the maker, and was told it was all right and would be paid.
In the summer of 1876 Bunyan failed and left the State. On learning the fact of Bunyan’s embarrassment, complainant undertook to discover the condition of his property, and on obtaining the requisite information, the original bill in this case was filed, in which was set forth the various sales of lots made by Runyan under the power of attorney given to him, and charging that the same were made without the knowledge or consent of complainant; that they were fraudulent and void j that Runyan had no authority to make sales of lots on a credit and to take notes and trust deeds running to himself or to a third party for the purchase money, and charges the several purchasers of lots, and of notes given for the same, with notice of his ownership and interest therein. Both the purchasers and the parties holding notes were made defendants, and a decree was asked that all sales be set aside as fraudulent, and'in case any such sales should be found to be valid, and any of the purchase money agreed to be paid remained unpaid, that the parties owing it should be decreed to pay it to complainant. The bill contains other matters in relation to moneys due from Runyan to complainant, but as the present litigants are not interested in that branch of the case, it will not be necessary to state them.
• After making his answer to the original bill, Silverman filed a cross-bill, by which he seeks a foreclosure of the mortgages or trust deeds by which the notes assigned to him by .Runyan • are secured. On the hearing the circuit court decreed relief, substantially as asked in the original bill, affirming some of the sales, but giving to complainant the benefit of all the purchase money, and dismissed Silver-man’s cross-bill. That decree was affirmed in the Appellate Court, and now Silverman brings the ease, to this court on his appeal.
. The case has been most elaborately argued, but it seems to us the controlling questions present no great difficulty in their solution. The sales of lots, both to Story and Flanagan, were made in good faith, and were so understood by them, and there is, and can be no reason why the purchasers are not entitled to the benefit of their contracts. As we have seen, the power of attorney from complainant and his wife to Runyan, was as broad and comprehensive as it could well be made. It Avas to sell and convey the property, and to do all things necessary to be done, as fully as the owner could do were he personally present. ISTo limitation was placed on "the power of the attorney acting on behalf of the owner, and no directions were given as to how the sales should be made, whether for cash or on time. The power being general it would seem to be in the discretion of the attorney to make sales of the property according to the usual custom in such matters, whatever that might be.
It may be true, as alleged, that complainant had no actual knowledge that his attorney in fact was making sales of his property on time, and taking notes in his own name for the purchase money. He seems to have trusted the matter of making sales of his property to his agent and attorney, without giving it the slightest personal attention. But as the mortgages and trust deeds, containing definite descriptions of the property sold, and the notes taken to secure the purchase money, were placed on record by the attorney in fact of complainant, such act may be justly regarded as the act of complainant, and it is not, therefore, unreasonable to hold that he had notice of what the record made by his own agent disclosed. The conveyance to Elanagan was made on the 18th day of March, 1873, and to Story on the 13th day-of June, 1873, and, although the deeds were on record, yet complainant made no objections to the sales to either of them until 1876, after his agent and attorney had misappropriated the funds and left the State. There could then be no equitable ground on which the sales could be set aside. Clearly the purchasers are entitled to the benefit of their contracts The decree declaring these sales valid was warranted by the facts.
As respects the sales of lots to Douglas, they were, no doubt, colorable and for the accommodation of Runyan. Were the rights of no third parties involved, all the sales to him might be set aside at the suit of complainant as a fraud upon him. But as to third parties, who may have acquired, in good faith, an interest in his notes, or the property itself, Douglas will not be permitted to allege his purchases were a mere accommodation to Runyan, and, hence, not binding on him. That Avould enable him to perpetrate a fraud on third persons avIio could not knoAV the sales to him were not in good faith. On the record it appeared to all the world to be absolute sales, and, as to parties dealing Avith the land or the securities made by him, he is concluded by Avhat the record he has himself made shoAA's. The land in his hands, as Avell as his personal responsibility, is bound for the payment of his outstanding notes in the hands of an innocent assignee for value. His notes, under our statute, were negotiable, and, as against him, carried with them the mortgage pledge for their payment. A court of chancery will not listen to him Avhen he asserts a transaction, fair on the record, Avas secretly colorable for accommodation of his grantor.
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Mr. Justice Scott
delivered the opinion of the Court:
The facts in this case, susceptible of direct proof, are so well established as to admit of no disagreement. The subject of controversy is that with which the law charges the parties interested with notice..
Prior to November, 1872, complainant, with defendant Runyan, and Harlow P. Smith, were the owners of a tract of land adjoining the city of Chicago. Subsequently the owners platted it into lots and blocks, designating it as “Central Park Second Addition to Chicago.” A division of the lots between the owners was made, and it is as to a portion of the lots set apart to complainant Bullock, this litigation concerns. 1
On the 7th day of November, 1872, complainant and his wife gave defendant Bunyan a power of attorney to sell and convey the lots that had been set apart to complainant in the division. The power was general. No specific directions were given as to the terms upon which sales should be made. Under the power given, Bunyan made numerous sales of lots between March 4, 1873, and May 31, 1875, and conveyed the property by deed, as the attorney in fact of complainant and his wife. Some of the sales appear to have been partly for cash and partly on time, and in the latter case the purchase money was secured, either by mortgage or deed of trust on the property. Among others, sales were made to defendants Story, Flanagan and Douglas, each purchaser securing a portion or all of the purchase money of the lots conveyed to him, by mortgage or trust deed. The notes taken for the lots sold were either made payable to' Bunyan or to persons selected by him, and who afterwards assigned the same to him. A portion of the notes given by Flanagan, Story and Douglas, respectively, were afterwards sold and assigned to defendant Silverman, and are the notes involved in this controversy. All of the notes assigned to Silverman were purchased by him in good faith, for a valuable consideration, and before maturity, except one of Flanagan’s, and as to that note, he inquired of the maker, and was told it was all right and would be paid.
In the summer of 1876 Bunyan failed and left the State. On learning the fact of Bunyan’s embarrassment, complainant undertook to discover the condition of his property, and on obtaining the requisite information, the original bill in this case was filed, in which was set forth the various sales of lots made by Runyan under the power of attorney given to him, and charging that the same were made without the knowledge or consent of complainant; that they were fraudulent and void j that Runyan had no authority to make sales of lots on a credit and to take notes and trust deeds running to himself or to a third party for the purchase money, and charges the several purchasers of lots, and of notes given for the same, with notice of his ownership and interest therein. Both the purchasers and the parties holding notes were made defendants, and a decree was asked that all sales be set aside as fraudulent, and'in case any such sales should be found to be valid, and any of the purchase money agreed to be paid remained unpaid, that the parties owing it should be decreed to pay it to complainant. The bill contains other matters in relation to moneys due from Runyan to complainant, but as the present litigants are not interested in that branch of the case, it will not be necessary to state them.
• After making his answer to the original bill, Silverman filed a cross-bill, by which he seeks a foreclosure of the mortgages or trust deeds by which the notes assigned to him by .Runyan • are secured. On the hearing the circuit court decreed relief, substantially as asked in the original bill, affirming some of the sales, but giving to complainant the benefit of all the purchase money, and dismissed Silver-man’s cross-bill. That decree was affirmed in the Appellate Court, and now Silverman brings the ease, to this court on his appeal.
. The case has been most elaborately argued, but it seems to us the controlling questions present no great difficulty in their solution. The sales of lots, both to Story and Flanagan, were made in good faith, and were so understood by them, and there is, and can be no reason why the purchasers are not entitled to the benefit of their contracts. As we have seen, the power of attorney from complainant and his wife to Runyan, was as broad and comprehensive as it could well be made. It Avas to sell and convey the property, and to do all things necessary to be done, as fully as the owner could do were he personally present. ISTo limitation was placed on "the power of the attorney acting on behalf of the owner, and no directions were given as to how the sales should be made, whether for cash or on time. The power being general it would seem to be in the discretion of the attorney to make sales of the property according to the usual custom in such matters, whatever that might be.
It may be true, as alleged, that complainant had no actual knowledge that his attorney in fact was making sales of his property on time, and taking notes in his own name for the purchase money. He seems to have trusted the matter of making sales of his property to his agent and attorney, without giving it the slightest personal attention. But as the mortgages and trust deeds, containing definite descriptions of the property sold, and the notes taken to secure the purchase money, were placed on record by the attorney in fact of complainant, such act may be justly regarded as the act of complainant, and it is not, therefore, unreasonable to hold that he had notice of what the record made by his own agent disclosed. The conveyance to Elanagan was made on the 18th day of March, 1873, and to Story on the 13th day-of June, 1873, and, although the deeds were on record, yet complainant made no objections to the sales to either of them until 1876, after his agent and attorney had misappropriated the funds and left the State. There could then be no equitable ground on which the sales could be set aside. Clearly the purchasers are entitled to the benefit of their contracts The decree declaring these sales valid was warranted by the facts.
As respects the sales of lots to Douglas, they were, no doubt, colorable and for the accommodation of Runyan. Were the rights of no third parties involved, all the sales to him might be set aside at the suit of complainant as a fraud upon him. But as to third parties, who may have acquired, in good faith, an interest in his notes, or the property itself, Douglas will not be permitted to allege his purchases were a mere accommodation to Runyan, and, hence, not binding on him. That Avould enable him to perpetrate a fraud on third persons avIio could not knoAV the sales to him were not in good faith. On the record it appeared to all the world to be absolute sales, and, as to parties dealing Avith the land or the securities made by him, he is concluded by Avhat the record he has himself made shoAA's. The land in his hands, as Avell as his personal responsibility, is bound for the payment of his outstanding notes in the hands of an innocent assignee for value. His notes, under our statute, were negotiable, and, as against him, carried with them the mortgage pledge for their payment. A court of chancery will not listen to him Avhen he asserts a transaction, fair on the record, Avas secretly colorable for accommodation of his grantor. His undertaking made it possible for his grantor to sell his notes to innocent parties, and to such persons he will be as absolutely bound for their payment as if the sales to him had been made in good faith. As to all the notes themselves, involved in this litigation, there, can be no question Silver-man is entitled to collect them of the makers, not only those bought before maturity, but the one over due Avhen he took' it, as he first inquired of the maker concerning it, and Avas assured it Avould be paid.
The only seeming difficulty in the case is, whether Silver-man is entitled to the security afforded by the mortgages or trust deeds by Avhich the notes in his hands are secured, and to have the same foreclosed for his benefit. As against the makers of the notes there can be no question made. Both Story and Flanagan assert the validity of their contracts, and are ready to pay, to Avhomsoever is entitled to receive it, the balance of the purchase money. As we have -seen, Douglas, as against an innocent assignee of his notes before maturity, for value, can make no defence, either as to the payment of his notes or as to the security pledged for their payment. Nothing is urged against these propositions, but the argument is made in favor of the equitable rights of complainant. It is said that when Silverman took to himself an assignment of the several mortgages or trust deeds, he took them' subject to all the rights of complainant in the real estate embraced in them. In support of this proposition the principle declared in Olds v. Cummings, 31 111. 188, and other cases in this court, is invoked, but, on a close analysis, it will be seen the cases cited do not sustain the position assumed by counsel. The doctrine is well understood, that an assignee of a mortgage takes it subject to the same equities it was subject to'in the hands of the assignor. It isi because a mortgage or deed of trust is n'ot assignable, either at common law or under our statute, as is commercial paper. By the common law, dioses in action are not; assignable so as to vest the absolute title in the assignee; nor has our statute enlarged the common law in this re- f spect. The principle of Olds v. Cummings is, that the assignee of a mortgage takes it subject to all equities existing in favor of the mortgagor. The reason assigned for the rule is, that it is the duty of a purchaser of a mortgage to inquire of the mortgagor if there be any reason why it should not be paid; but it was said in that case, he should not be required to inquire of the whole world to see if some one has not a latent equity which might be interfered with by the purchase of the mortgage, as, for instance, a cestui que trust. The cases cited by the court in support of the decision in Olds v. Cummings, are Murray v. Lylburn, 2 Johns. Ch. 44, Mott v. Clark, 9 Pa. St. 399, Pryor v. Wood, 31 id. 142, and Westfall v. Jones, 20 Barb. 10, and it will be found, on examination, that all of them, except Westfall v. Jones, hold, as Chancellor Kent expressed it, that the assignee of a chose in action takes it subject,to “ the equities residing in the original obligor or debtor, and not an equity residing in some third person against the assignor.” The case of Westfall v. Jones is silent on this question, and was cited, no doubt, for another purpose, viz: to show the assignee of a chose in action takes it subject to all the equities existing against it in the hands of the assignor, and that the term equities, as used in that connection, means defences.
Although this is the first case that has arisen in this State for the application of the doctrine, we must regard it as settled by the cases cited, that the assignee of a mortgage takes it subject only to equities existing in favor of the mortgagor, as against the assignor, and not subject to latent equities in favor of third persons in the subject involved in the assign-ment, of which he had no notice. The rule in Olds v. Cummings is a reasonable one, and can readily be observed. Persons dealing in such securities can, without difficulty, inquire of the makers if any defences exist against them, but more than that it is not practicable to do. Of course, it would not be possible to discover, even by the utmost diligence, all persons that might have equitable rights in the subject matter of the assignment, and the adoption of a rule that would let in latent equities to prevail against the assignee, would be to ensnare dealers in such securities.
Applying this rule to the case in hand, we find the mortgagors have no equities or defences that can prevail against the assignee of the several mortgages or trust deeds made by them, and as the equities of third persons in the property covered by the mortgages must be postponed to the rights of the assignee, it follows that whatever equities complainant may have in the propérty embraced in these mortgages or trust deeds are inferior to and must be postponed to the superior equities of the assignee, Silverman.
The judgment of the Appellate Court will be reversed, and the cause remanded with directions to that court to reverse the decree of the circuit court and remand the cause for further proceedings not inconsistent with this opinion.
Judgment reversed.
Mr. Justice Sheldon dissenting.