The opinion of the court was delivered by
Barrett, J.
The bill, in this case, was brought to foreclose a mortgage given by the defendant to Dennis "W". Bryan, dated the 26th day of March, 1852, to secure the payment of two notes of twenty dollars each, one of which was payable January 1st, 1853, the other was payable January 1st, 1854.
On the 5th day of October, 1852, this mortgage was assigned to George S. Bryan and John D. Smith, and said notes (which were payable to hearer), were at the same time transferred to them. On the 17th day of February, 1853, said mortgage and notes were transferred to the orators, and on that day this suit was commenced.
On the 7th of October, 1852, Samuel Jones brought his suit against said Dennis W. Bryan, and summoned this defendant as trustee. The writ was served on the truscee on that day, but no service was made on said Dennis W., on account of his having previously left the country. In that suit judgment was rendered against said Dennis W., for twenty-eight dollars and fifty-five cents damages, and three dollars and seven cents costs. This defendant, as trustee, disclosed the giving of said notes, and that prior to the service of said trustee process on him, he had no notice of their having been transferred by said Dennis W.; that he had paid nothing on said notes, except some five dollars, by way of an account against said Dennis W., which was to be turned on said first note. The precise sum turns out to be five dollars and twenty-nine cents. It was never indorsed on said note. The defendant was adjudged trustee for the amount .of the judgment recovered by Jones, as above stated, with interest, computed to January 1st, 1854, at which time the second note fell due ; in which adjudication he was allowed on said first note the sum of five dollars, as the amount of said account, as so much in payment thereof, and eighty-one cents as his costs as such trustee.
The amount for which he was adjudged trustee, including the costs allowed to him, was thirty-four dollars and seventy-seven cents. The defendant has paid said judgment against him as [664]*664trustee, and claims that what he has thus paid, together with his said account, and his costs, shall be held as a good payment upon said notes.
The defendant, in his answer, sets forth the facts, and avers and insists that he had no notice of the transfer of said notes, prior to the service of said trustee process on him.
The answer was traversed, and testimony was taken by both, parties, on the question, whether the defendant was notified of the transfer of said notes before the service of said trustee process on him. The only controversy, as to matters of fact, is upon this question.
I. On the case as made up by the files and record evidence, it is claimed by the orators that no recognizance for review was entered before the magistrate, as is required by statute in case of judgment by default against an absent defendant who has not had personal notice of the suit; and that, therefore, the judgment against Dennis W. Bryan is void; and, as a consequence, that the adjudication as to his trustee in the same suit is of no validity, and gives no warrant, and affords no protection for the defendant, in paying said judgment against him as trustee of said Dennis W.
The provision of the statute in this behalf has no reference to the rendering of the judgment, but only to the issuing of an execution upon a judgment already rendered. It would seem that a neglect to comply with this provision of the statute could only be taken advantage of by the defendant in that suit, by a direct proceeding predicated upon the irregularity in the issuing of the execution, but in no manner calling in question the regularity of the judgment itself. It is difficult upon, or in analogy to, any principle, or rule, or usage, to hold that a trustee, under a valid adjudication, who is subject to being reached by execution issued in pursuance of that adjudication, may be put to the peril, on the one hand, of insuring the regularity of the issuing of the execution, when called upon by an officer for its satisfaction, or, on the other, of losing the protection which such satisfaction ordinarily gives, to the party making it.
If authority were needed on this subject, the case of Westoby v. Day, 22 Eng. L. & Eq. 261, and cases there cited, would be ample.
II. The assignment of the mortgage was duly executed and [665]*665recorded on the 5th day of October, 1852, two days before tbe trustee process was served on this defendant. The orators claim that the record of said assignment 'affected the defendant with notice of the transfer of the notes, secured by said mortgage.
It seems obvious that notice by mere' legal implication can not answer the purpose of the statute, requiring notice of transfer of a promissory note, in order to protect it against trustee process.
In every point of view, actual personal notice must have been contemplated by that provision of the statute, and so this court have virtually held, whenever the subject, in one form and another, has come under consideration.
The answer denies actual notice prior to the service of the trustee process. The testimony which bears on this subject, when fairly weighed, can hardly be regarded as* overcoming the answer. We feel compelled to regard the answer as true in this respect. Under the views thus presented, the defendant is entitled to be shielded for what he has paid on the judgment, of Jones against him as trustee, and for his costs as such trustee.
III. But the orators still claim, that, as against them, as Iona fide holders of said notes, transferred by the payee while current, without notice of the defendant’s claim to have his account applied on the first due of said notes, said account can not be allowed and treated as payment, pro tanto, on said note. The defendant insists that as said account has been allowed to him in the adjudication of his liability as trustee, said adjudication is to be held conclusive against any holders of said notes, to the same extent as it would be against the payee of said notes, if he had not transferred them.
If the orators had brought a suit against the defendant on these notes, free from the intervention of the trustee proceeding, clearly the defendant could not have offset his account in such suit; nor could he have availed himself of it in defence, as payment pro tanto. The orators hold the notes, with all the rights accorded by the law merchant, subject only to the effect of the trustee proceeding without notice of the transfer having been given to the maker, as provided by statute. They were not party to the trustee judgment. They were not cited in as claimants, nor did they, of their own motion, appear as such in said trustee suit. Their failure to appear and prosecute as claimants, even though they knew of the pen[666]*666dency of the suit, can not be held to affect them, only so far as that proceeding diverted the money due on those notes from their own, into the pocket of the creditor in that suit. The creditor, as against the trustee, stands on the rights of the principal debtor, and subject to all legal offsets and counter equities. The orators stand on the rights of the payee of the notes, but not subject to such offsets and equities.
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The opinion of the court was delivered by
Barrett, J.
The bill, in this case, was brought to foreclose a mortgage given by the defendant to Dennis "W". Bryan, dated the 26th day of March, 1852, to secure the payment of two notes of twenty dollars each, one of which was payable January 1st, 1853, the other was payable January 1st, 1854.
On the 5th day of October, 1852, this mortgage was assigned to George S. Bryan and John D. Smith, and said notes (which were payable to hearer), were at the same time transferred to them. On the 17th day of February, 1853, said mortgage and notes were transferred to the orators, and on that day this suit was commenced.
On the 7th of October, 1852, Samuel Jones brought his suit against said Dennis W. Bryan, and summoned this defendant as trustee. The writ was served on the truscee on that day, but no service was made on said Dennis W., on account of his having previously left the country. In that suit judgment was rendered against said Dennis W., for twenty-eight dollars and fifty-five cents damages, and three dollars and seven cents costs. This defendant, as trustee, disclosed the giving of said notes, and that prior to the service of said trustee process on him, he had no notice of their having been transferred by said Dennis W.; that he had paid nothing on said notes, except some five dollars, by way of an account against said Dennis W., which was to be turned on said first note. The precise sum turns out to be five dollars and twenty-nine cents. It was never indorsed on said note. The defendant was adjudged trustee for the amount .of the judgment recovered by Jones, as above stated, with interest, computed to January 1st, 1854, at which time the second note fell due ; in which adjudication he was allowed on said first note the sum of five dollars, as the amount of said account, as so much in payment thereof, and eighty-one cents as his costs as such trustee.
The amount for which he was adjudged trustee, including the costs allowed to him, was thirty-four dollars and seventy-seven cents. The defendant has paid said judgment against him as [664]*664trustee, and claims that what he has thus paid, together with his said account, and his costs, shall be held as a good payment upon said notes.
The defendant, in his answer, sets forth the facts, and avers and insists that he had no notice of the transfer of said notes, prior to the service of said trustee process on him.
The answer was traversed, and testimony was taken by both, parties, on the question, whether the defendant was notified of the transfer of said notes before the service of said trustee process on him. The only controversy, as to matters of fact, is upon this question.
I. On the case as made up by the files and record evidence, it is claimed by the orators that no recognizance for review was entered before the magistrate, as is required by statute in case of judgment by default against an absent defendant who has not had personal notice of the suit; and that, therefore, the judgment against Dennis W. Bryan is void; and, as a consequence, that the adjudication as to his trustee in the same suit is of no validity, and gives no warrant, and affords no protection for the defendant, in paying said judgment against him as trustee of said Dennis W.
The provision of the statute in this behalf has no reference to the rendering of the judgment, but only to the issuing of an execution upon a judgment already rendered. It would seem that a neglect to comply with this provision of the statute could only be taken advantage of by the defendant in that suit, by a direct proceeding predicated upon the irregularity in the issuing of the execution, but in no manner calling in question the regularity of the judgment itself. It is difficult upon, or in analogy to, any principle, or rule, or usage, to hold that a trustee, under a valid adjudication, who is subject to being reached by execution issued in pursuance of that adjudication, may be put to the peril, on the one hand, of insuring the regularity of the issuing of the execution, when called upon by an officer for its satisfaction, or, on the other, of losing the protection which such satisfaction ordinarily gives, to the party making it.
If authority were needed on this subject, the case of Westoby v. Day, 22 Eng. L. & Eq. 261, and cases there cited, would be ample.
II. The assignment of the mortgage was duly executed and [665]*665recorded on the 5th day of October, 1852, two days before tbe trustee process was served on this defendant. The orators claim that the record of said assignment 'affected the defendant with notice of the transfer of the notes, secured by said mortgage.
It seems obvious that notice by mere' legal implication can not answer the purpose of the statute, requiring notice of transfer of a promissory note, in order to protect it against trustee process.
In every point of view, actual personal notice must have been contemplated by that provision of the statute, and so this court have virtually held, whenever the subject, in one form and another, has come under consideration.
The answer denies actual notice prior to the service of the trustee process. The testimony which bears on this subject, when fairly weighed, can hardly be regarded as* overcoming the answer. We feel compelled to regard the answer as true in this respect. Under the views thus presented, the defendant is entitled to be shielded for what he has paid on the judgment, of Jones against him as trustee, and for his costs as such trustee.
III. But the orators still claim, that, as against them, as Iona fide holders of said notes, transferred by the payee while current, without notice of the defendant’s claim to have his account applied on the first due of said notes, said account can not be allowed and treated as payment, pro tanto, on said note. The defendant insists that as said account has been allowed to him in the adjudication of his liability as trustee, said adjudication is to be held conclusive against any holders of said notes, to the same extent as it would be against the payee of said notes, if he had not transferred them.
If the orators had brought a suit against the defendant on these notes, free from the intervention of the trustee proceeding, clearly the defendant could not have offset his account in such suit; nor could he have availed himself of it in defence, as payment pro tanto. The orators hold the notes, with all the rights accorded by the law merchant, subject only to the effect of the trustee proceeding without notice of the transfer having been given to the maker, as provided by statute. They were not party to the trustee judgment. They were not cited in as claimants, nor did they, of their own motion, appear as such in said trustee suit. Their failure to appear and prosecute as claimants, even though they knew of the pen[666]*666dency of the suit, can not be held to affect them, only so far as that proceeding diverted the money due on those notes from their own, into the pocket of the creditor in that suit. The creditor, as against the trustee, stands on the rights of the principal debtor, and subject to all legal offsets and counter equities. The orators stand on the rights of the payee of the notes, but not subject to such offsets and equities. We, therefore, can not countenance the claim, or the idea that the position of the orators in this case, is any different, in respect to rights and equities, as between this defendant and the payee of said note, from what it would be if said trustee process had not secured to the attaching creditor a portion of the money due on said notes. Hence, we think the orators are entitled to their foreclosure for the balance of said notes, over what the defendant has paid on the judgment against him as trustee, together with his costs as such trustee.
IY. The ordinary rule would entitle the orators to a decree for costs. But the application of this rule is subject to the discretion of the court, in cases giving occasion for the exercise of that, discretion. It is obvious that the purpose of the orators, in instituting and prosecuting this suit, has been to enforce the payment to them of the full amount of the two notes. The litigation, on their part, has been directed to the disarming of the defendant of the defence afforded by the judgment against him as trustee, and the payment thereof. Nothing in the case indicates that if the orators had confined their claim to the balance of five dollars on the note first due, the defendant would have given them occasion for any suit. Indeed, the evidence in the case rebuts that idea. It is not -pretended that the orators ever called on the defendant for the payment of that balance, or ever offered to take it in satisfaction of their right to claim against him upon that note. The bill and the proofs of the orators go for the whole. The evidence, on the part of the defendant, shows that on the day on which the last note fell due, he tendered to one of the orators the sum of ten dollars, in payment of any sum that might be due on the mortgage, which tender was not accepted, and the litigation has proceeded. This sum, with what was paid on the judgment against the defendant as trustee, and his costs as such trustee, would have fully satisfied the whole amount then due on bqth notes.
[667]*667On the whole, we think the decree of the chancellor must be reversed, and the orators allowed to have a decree for the sum due on the notes, deducting what the defendant has paid on the trustee judgment, and his costs as such trustee. '
As to costs, inasmuch as the orators have failed, and the defendant has prevailed, in respect to the main purpose for which the bill was brought, under the views above expressed, the orators should riot be allowed any costs ; and the defendant should be allowed costs-that have accrued, or shall accrue since the 1st day of January, 1854, both in the court of chancery and in this court.
The case is remanded to be proceeded with accordingly.