Smith v. Lansing.

Applying those debts and appropriating other means which belonged to the bank, he acquired the titles, and he did not even profess to make himself a debtor to the institution for the amount of its funds which he thus used, although he took the titles in his own name and with no attending declaration of trust in favor of his principal with whose funds he was thus dealing. If it were assumed that he designed to hold the lands thus acquired for his own benefit, the rights of the plaintiff would depend, not on the principle referred to, but on another, having a more simple and direct application to the facts. On that assumption, the defendant would stand in the situation of using the corporate funds without even the formality of borrowing those funds, and, therefore, without any pretence of authority, and investing them in a private speculation in lands. Upon such facts, the conduct of the defendant would be grossly fraudulent. The bank, in its election, could charge him as a defaulter, in respect to the assets thus used, or it could follow them into the lands acquired, and claim unconditionally a conveyance. As the defendant was a trustee in respect to the funds appropriated without authority, equity, if the bank so insisted, would impress the same trust upon the land, and a conveyance of the legal title could be rightfully demanded.

But no such fraud is imputed to the defendant, and he claims nothing to justify such an interpretation. Having used the assets of the bank, he admits that his purchase was in trust for the bank. The trust is, therefore, to be enforced; and this he does not contest. But what is that trust? A more exact and punctilious mode of dealing would certainly have suggested a contemporaneous declaration in writing, stating the purposes for which he took those titles. But there is no written evidence of this trust, and the plaintiff's remedy is simply and purely to enforce the one which the law implies from the circumstances. But all the circumstances must be considered. It appears that the defendant purchased the lands, using the funds of the bank, and took the title to himself, with the intention of holding it for the indemnity of himself and others who had united with him in becoming security to the State, and to a

Smith v. Lansing.

savings bank in Buffalo, for moneys deposited with the institution. The finding at the trial is, that the defendant took title to the several parcels of land, claiming to hold them for that purpose. The transactions, in their real character, amounted, therefore, to an appropriation by the financial head of the bank of a certain portion of its funds and assets to the purpose of securing himself and his associates for the liabilities they had assumed. If he had a right to take a pledge for that purpose, it can make no difference in what form he kept the value in pledge. He might keep the assets thus appropriated, or he might invest them in land. If the bank might complain of such investment as unauthorized or unwise, and might, on that ground, charge him with a loss, if one should occur, this would furnish no reason for taking the value thus appropriated out of his hands unconditionally, provided he had a right to secure himself and his associates by taking any pledge what

ever.

I see no reason for disturbing the arrangements in question, in opposition to the intention by which they were characterized. The plaintiff's claim, when stated according to law and logic, is, that the defendant holds the title to certain lands which he acquired by using the funds of the bank. This being true, the law impresses a trust upon the lands, and requires the defendant to convey them accordingly. But one of the objects embraced in the trust was the security of the defendant and others for certain liabilities. This object cannot be disregarded. The legal title is in the defendant, and the trust is not brought to light at all except through parol facts which the plaintiff must make out by proof or admission. But all the facts must be attended to, because they all tend to qualify and define the trust. The bank had liens upon each of the parcels of land to secure debts due to it. Undoubtedly, it was beneficial and wise to purchase them in order to make the liens available. At all events, the plaintiff suggests nothing to the contrary of this. The complaint is, that he purchased them for himself, contrary to his duty, as the managing officer of the bank. But this is an illogical view of the facts. The defendant purchased for

Smith v. Lansing.

the bank, taking the legal title to himself for a security only, and he paid with the funds of the bank. The only question, then, is, whether he and his associates, in the liability which they had assumed, had a right to be secured by his act in the premises. And I think they had this right. It is in the usual line of business for a bank to take deposits. The State, as we know, requires security to be given, and any other depositor may require it. And if the president or cashier, being the general agent or manager, enters into the required bonds and procures others to unite with him, I see no reason why he may not, in good faith, take a counter security from the institution. He may be the actor in his official capacity, and, with others united in interest, he may also be the recipient in the transaction. What is fairly done for such a purpose should be allowed to stand. The result in this case will violate no rule of law, while equity will be promoted. The plaintiff claims a conveyance of a legal estate to effectuate a trust; but the trust, in its true character, will not be effectuated in the way he proposes.

These views lead to a reversal of the judgment given at the general term, and an affirmance of that of the special term of the Supreme Court.

BACON, J., expressed no opinion; all the other judges concurred-DENIO and DAVIES, JS., protesting, however, against any implication that the financial officer of a moneyed corporation is at liberty to speculate upon real estate bought by him under execution or the foreclosure of a mortgage in its favor.

Judgment reversed, and judgment at special term affirmed.

Bush v. Lathrop.

BUSH, Administrator, &c., v. LATHROP.

The equities existing between the assignor and assignee of a chose in action, not negotiable, attend the title transferred to a subsequent assignee for value and without notice. The latter takes the exact position of his vendor.

So held, where a mortgage was transferred by an assignee thereof, by an instrument absolute upon its face, but was taken, in fact, as security for a much smaller sum than that due upon the mortgage, and the second assignee transferred it for full value to a third person, without notice. The supposed distinction between latent equities, so called, and those existing between the original parties to the instrument, examined and repudiated, per DENIO, J.

APPEAL from the Supreme Court. Action to compel the defendant to assign to the plaintiff a bond and mortgage executed by one Addis to one Cole, and by the latter assigned to Noble, the plaintiff's intestate, and which had come to the hands of the defendant under the circumstances hereinafter mentioned. The trial was before Mr. Justice BALCOM, without a jury. From his finding, these facts appeared: The bond and mortgage were given to secure the sum of $1,400 and interest, by certain installments. On the 15th May, 1857, Noble, being the owner of them, and being indebted to one Joseph W. Preston, in the sum of $268.20, gave him his promissory note for that amount, and assigned the bond and mortgage to him, as security for the payment of the note. Preston, at the same time, gave back a receipt acknowledging the assignment to him of the bond and mortgage, and agreeing to return the same to Noble on the payment of the note. The assignment was written on the back of the mortgage, and expressed a consideration of $268.20; and it contained a covenant that $1,400 and interest was due on the bond and mortgage: in other respects, it was absolute in its terms. Noble died on the 19th November following, and the plaintiff was soon afterwards appointed his administrator. On the 18th day of January, 1858, Preston assigned the bond and mortgage to James H. Smith and War

Bush v. Lathrop.

ren Newton. This assignment expressed a consideration of $1,475, and contained a covenant on the part of the assignor that $1,400 was due on the securities. There was no evidence of the actual payment of any part of the consideration mentioned. On the 24th day of February following, Smith and Newton assigned the bond and mortgage to the defendant. This instrument was expressed to be in consideration of $1,488. 76, and the assignors covenanted that that amount was due upon the bond and mortgage. The judge found that the last mentioned sum was paid by the defendant to his assignors in money and a promissory note. The evidence on that point was this: D. T. Miller, a subscribing witness to the assignment to the defendant, testified that he saw the money counted and paid to the amount of $1,300, and that, for the balance, the defendant gave his note. The plaintiff then proved that the defendant had said that he paid for the mortgage in a check on a bank. The defendant was then examined as a witness in his own behalf, and testified that he paid for the bond and mortgage the full amount expressed in the assignment. He did not appear to have been asked by his own or by the plaintiff's counsel whether he then believed Smith and Newton to be the absolute owners of the bond and mortgage, or anything to that effect, and he did not say anything upon that point. It ap peared that the defendant was a brother-in-law of Warren Newton, and that Smith and Newton both lived in a town adjoining that in which the defendant resided; but neither of them were examined as witnesses. The plaintiff, as administrator, took possession of the effects of the deceased in December, 1857, and then found the receipt signed by Preston among his papers. He could not find Preston, who seems to have left the country, or learn where the bond and mortgage were, until the 1st March, 1858, when he ascertained that they were in the hands of the defendant; upon which he immediately tendered him the amount of principal and interest due on the note of Noble, and demanded a reässignment of the securities, which he refused to execute. The plaintiff then deposited the amount in a bank for his use, first informing him that he should do so.