The assignment of a debt carries with it the cuted to Carpenter a mortgage upon certain mortgage. This is the universal rule. real estate therein described. The mort- [*272 In Martin v. Moulin, 2 Burr. 978, Lord Mans-gage was conditioned for the payment of the field says: a mortgage is a charge upon the note at maturity, according to its effect. land, and whatever will give the money, will On the 24th of July, 1867, more than two carry the estate in the land along with it, to months before the maturity of the note, Jacob every purpose. The estate in the land is the B. Carpenter, for a valuable consideration, as same thing as the money due upon it. signed the note and mortgage to B. Platte Car In Martin v. Moulin, 2 Burr. 978, Lord Mans-penter, the appellant. The note not being paid J., says: "The mortgage interest, as distinct from the debt, is not a fit subject for assignment. It has no determinate value. If it should be assigned, the assignee must hold the interest at the will and disposal of the creditor who holds the bonds, Accessorium non ducit, sed sequitur suum principalem."

It is to be remarked that the doctrine is: that the mortgage follows the debt; not the bond, note or other evidence of debt, but the debt. No equities attach to the securities that do not attach to the debt.

There is no hardship in this rule, any more than in that which exempts commercial paper in their hands from equities between the immediate parties; nor is there any more hardship than in the ordinary rule which makes a title good, and discharges secret trusts, in a purchaser for value without notice.

On this question, when the debt is by note, see Dutton v. Ives, 5 Mich. 515, and Cornell v. Hichens, 11 Wis. 353, in which states the rule is as contended for by us; and Walker v. Dement, 42 III. 273, where the rule is against us. Messrs. Bartlett & Casey, S. E. Browne, and Thomas G. Putnam, for appellee:

at maturity, the appellant filed this bill against Mahala Longan, in the district court of Jefferson county, Colorado territory, to foreclose the mortgage.

She answered and alleged that when she executed the mortgage to Jacob B. Carpenter, she also delivered to him certain wheat and flour, which he promised to sell, and to apply the proceeds to the payment of the note; that at the maturity of the note she had tendered the amount due upon it, and had demanded the return of the note and mortgage and of the wheat and flour, all which was refused. Subsequently she filed and amended answer, in which she charged that Jacob B. Carpenter had converted the wheat and flour to his own use, and that when the appellant took the assignment of the note and mortgage, he had full knowledge of the facts touching the delivery of the wheat and flour to his assignor. Testimony was taken upon both sides. It was proved that the wheat and flour were in the hands of Miller & Williams, warehousemen, in the city of Denver, that they sold and received payment for a part, and that the money thus received and the residue of the wheat and flour were lost by their failure. The only question made in the case was, upon whom this loss should fall, whether upon the appellant or the appellee. The view which we have taken of the case renders it unnecessary to advert more fully to the facts relating to the subject. The district court decreed in favor of the appellant for the full amount of the note and interest. The supreme court of the territory reversed the decree, holding that the value of the wheat and flour should be deducted. The complainant thereThe cases of Olds v. Cummings, and Walker upon removed the case to this court by appeal. v. Dement, must either be overruled or rather It is proved and not controverted that the ignored by the court, or they settle this ques-note and mortgage were assigned to the appeltion beyond all doubt in favor of the appellee; lant for a valuable consideration *before [*273 and for that reason we call the especial atten- the maturity of the note. Notice of anything tion of the court to these reports. See also touching the wheat and flour is not brought the report of the decision of the supreme court home to him. of Colorado, and the cases there cited, to be found in 10 Am. L. Reg. 650.

Appellee can set up any defense to a recovery in the name of B. Platte Carpenter, that she could have set up had the suit been brought in the name of Jacob B. Carpenter.

13 Ill. 85: 2 Cow. 320; 4 Ves. Sr. 118; 2 Ves. Sr. 389; Oliv. Conv. 344; 2 Johns. Ch. 441; 6 Mich. 126; 9 Ves. Jr. 264; Olds v. Cummings, 31 III. 188; Walker v. Dement, 42 Ill. 272; Hubbard v. Turner, 2 McL. 519; Gordon v. Lewis, 2 Sum. 143; Westfall v. Jones, 23 Barb.

Recoupment of the value of the goods and chattels described in the answer and testimony, a valid defense.

Stearns v. Marsh, 4 Denio, 227; Rosevelt v. Bank, Hopk. 579.

Mr. Justice Swayne delivered the opinion of the court:

This is an appeal in equity from the decree of the supreme court of Colorado territory.

On the 5th of March, 1867, the appellee, Mahala Longan, and Jesse B. Longan, executed their promissory note to Jacob B. Carpenter, or order, for the sum of $980, payable six months after date, at the Colorado National Bank, in Denver city, with interest at the rate of three and a half per cent per month until paid. At the same time Mahala Longan exe

The assignment of a note underdue raises the presumption of the want of notice, and this presumption stands until it is overcome by sufficient proof. The case is a different one from what it would be if the mortgage stood alone, or the note was non-negotiable, or had been assigned after maturity. The question presented for our determination is, whether an assignee, under the circumstances of this case, takes the mortgage as he takes the note, free from the objections to which it was liable in the hands of the mortgagee. We hold the affirmative. Powell, Mort. 908; 1 Hill. Mort. 572; Coot, Mort. 304; Reeves v. Scully, Walk. Ch. 248; Fisher v. Otis, 3 Chand. 83; Martineau v. McCollum, 4 Chand. 153; Bloomer v. Henderson, 8 Mich. 395; Potts v. Blackwell, 4 Jones, 58; Cicotte v. Gagnier, 2 Mich. 381; Pierce v. Faunce, 47 Me. 507; Palmer v. Yates, 3 Sandf. 137; Taylor v. Page, 6 Allen, 86; Croft v. Buns

*It must be admitted that there is [*275 considerable discrepancy in the authorities upon the question under consideration.

ter, 9 Wis. 503; Cornell v. Hichens, 11 Wis. 353. The contract as regards the note was that the maker should pay it at maturity to any bona fide indorsee, without reference to any defenses to which it might have been liable in the hands of the payee. The mortgage was conditioned to secure the fulfillment of that contract. To let in such a defense against such a holder would be a clear departure from the agreement of the mortgagor and mortgagee, to which the assignee subsequently, in good faith, became a party. If the mortgagor desired to reserve such an advantage, he should have given a non-negotiable instrument. If one of two innocent persons must suffer by a deceit, it is more consonant to reason that he who "puts trust and confidence in the deceiver should be The transfer of the note carries with it the a loser rather than a stranger." Hern v. Nich-security, without any formal assignment or deols, 1 Salk. 289. livery, or even mention of the latter. If not as

In Baily v. Smith, 14 Ohio St. 396-a case marked by great ability and fullness of research-the supreme court of Ohio came to a conclusion different from that at which we have arrived. The judgment was put chiefly upon the ground that notes, negotiable, are made so by statute, while there is no such statutory provision as to mortgages, and that hence the assignee takes the latter as he would any other chose in action, subject to all the equities which subsisted against it while in the hands of the original holder. To this view of the subject there are several answers.

the amount due on the note is ascertained in the foreclosure proceeding, equity recognizes it as conclusive, and decrees accordingly. Whether the title of the assignee is legal or equitable is immaterial. The result follows irrespective of that question. The process is only a mode of enforcing a lien.

$ con

Úpon a bill of foreclosure filed by the as-signable at law, it is clearly so in equity. When signee, an account must be taken to ascertain the amount due upon the instrument secured by the mortgage. Here the amount due was the face of the note and interest, and that could have been recovered in an action at law. Equity 274*] could not find that less was due. It is a case in which equity must follow the law. A decree that the amount due shall be paid with- All the authorities agree that the debt is the in a specified time, or that the mortgaged prem- principal thing and the mortgage an accessory. ises shall be sold, follows necessarily. Powell, Equity puts the principal and accessory upon a cited, supra, says: "But if the debt were on a footing of equality, and gives to the assignee of negotiable security, as a bill of exchange col- the evidence of the debt the same rights in relaterally secured by a mortgage, and the mort-gard to both. There is no departure from any gagee, after payment of part of it by the mort- principle of law or equity in reaching this gager, actually negotiated the note for the clusion. There is no analogy between this case value. the indorsee or assignee would, it seems, and one where a chose in action standing alone in all events, be entitled to have his money from is sought to be enforced. The fallacy which the mortgagor on liquidating the account, al- lies in overlooking this distinction has misled though he had paid it before, because the indor- many able minds, and is the source of all the see or assignee has a legal right to the note and confusion that exists. The mortgage can have a legal remedy at law, which a court of equity no separate existence. When the note is paid ought not to take from him, but to allow him the mortgage expires. It cannot survive for a the benefit of on the account." moment the debt which the note represents. This dependent and incidental relation is the controlling consideration, and takes the case out of the rule applied to choses in action, *where no such relation of dependence [*276 exists. Accessorium non ducit, sequitur principale.

A different doctrine would involve strange anomalies. The assignee might file his bill and the court dismiss it. He could then sue at law, recover judgment, and sell the mortgaged premises under execution. It is not pretended that equity would interpose against him. So, if the aid of equity were properly invoked to give effect to the lien of the judgment upon the same premises for the full amount, it could not be refused. Surely such an excrescence ought not to be permitted to disfigure any system of enlightened jurisprudence. It is the policy of the law to avoid circuity of action, and parties ought not to be driven from one forum to obtain a remedy which cannot be denied in another.

The mortgaged premises are pledged as security for the debt. In proportion as a remedy is denied the contract is violated and the rights of the assignee are set at naught. In other words, the mortgage ceases to be security for a part or the whole of the debt, its express provisions to the contrary notwithstanding.

The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity. Jackson v. Blodget, 5 Cow. 205; Jackson v. Willard, 4 Johns. 43.

In Pierce v. Faunce, 47 Me. 513, the court say: "A mortgage is pro tanto a purchase, and a bona fide mortgagee is equally entitled to protection as the bona fide grantee. So the assignee of a mortgage is on the same footing with the bona fide mortgagee. In all cases the reliwhen that discloses an unimpeachable title he ance of the purchaser is upon the record, and receives the protection of the law as against

unknown and latent defects."

Matthews v. Wallwyn, 4 Ves. 126, is usually much relied upon by those who maintain the infirmity of the assignee's title. In that case the mortgage was given to secure the payment of a non-negotiable bond. The mortgagee assigned the bond and mortgage fraudulently, and thereafter received large sums which should have been credited upon the debt. The assignee sought to enforce the mortgage for the full amount specified in the bond. The Lord Chancellor was at first troubled by the consideration that the mortgage deed purported to convey the legal title, and seemed inclined to think that might take the case out of the rule of liability

trict of Columbia.

Suit was brought in the court below by the state of Texas, for the alleged conversion of certain bonds known as United States Texas indeninity bonds. Judgment for part of the amount claimed have been given at the circuit, and affirmed by the general term of said court, each of the parties sued out a writ of error to this court.

which would be applied to the bond if standing | Argued Apr. 18, 1872. Decided Mar. 3, 1873. alone. He finally came to a different conclusion, holding the mortgage to be a mere securIN ERROR to the Supreme Court of the Disity. He said, finally: "The debt, therefore, is the principal thing; and it is obvious that if an action was brought on the bond in the name of the mortgagee, as it must be, the mortgagor shall pay no more than what is really due upon the bond. If an action of covenant was brought by the covenantee, the account must be settled in that action. In this court, the condition of the assignee cannot be better than it would be at law in any mode he could take to recover what was due upon the assignment." The principle is distinctly recognized that the measure of liability upon the instrument secured is the measure of the liability chargeable upon the security. The condition of the assignee cannot be better in law than it is in equity. 277*] *So, neither can it be worse. Upon this ground we place our judgment.

We think the doctrine we have laid down is sustained by reason, principle and the greater weight of authority.

The decree of the Supreme Court of the Territory is reversed, and the case will be remanded with directions to enter a decree in conformity with this opinion.

1. The decisions in Texas v. White, 74 U. s. 19 L. ed. and Texas v. Hardenberg, 77 U. S. 19 L. ed. that when a state, by public statute, requires the indorsement of its governor as a prerequisite to the valid transfer of bonds belonging to it, the holder of such bonds, without such indorsement, will have no title as against the state, were confined to bonds issued without such indorsement, for the purpose of aiding the Rebellion. 2. No presumption arises from the absence of that indorsement alone, that bonds, issued for a lawful purpose, had been issued without authority. 3. If the usurping government was in actual control of the state, the validity of its alienation of bonds must depend on the object and purpose of it. If that was just in itself and laudable, the alienation was valid; if, on the contrary, the object and purpose were to break up the Union, the alienation was invalid.

4. No one other than a holder of the bonds, or one who, having held them, has received the proceeds, with notice of the illegal transfer for an

illegal purpose, can be held liable to the claim of

the reconstituted state.

5. After presentment, recognition and order of payment, anyone. never having held or controlled the bonds, may receive the proceeds upon a proper order. In such a case the state must look to the United States. if bonds still belonging to it have been paid to third parties.

[Nos. 194, 195.]

The exceptions taken upon the trial below, to which this court refers in the opinion, are as follows:

Defendant's 10th Exception.

On the application of the plaintiff, the court instructed the jury as follows:

First. That the persons exercising the functions of government in the state of Texas, from August, 1861, to July, 1865, were a usurping state government, at war with the United States, and incapable of performing any act which could legally devest the title to property of the state, and that if the jury find, from the evidence, that the bonds in question were alienated by the said usurping government of the state of Texas, or any of its agents, then that such alienation passes no title.

Second. That if the jury find from the evidence that the defendants took the bonds without said bonds having on them the indorsement of a governor of the state of Texas, loyal to the United States, then that defendants so took the bonds without obtaining any legal title thereto.

Third. That if the jury find from the evidence, that the defendants took the bonds in question. after they had matured and become due and payable, then that defendants took the bonds subject to all the equities passing to them in the hands of the usurping government of Texas and its agents, and so took them subject to the right of property in them of the state of Texas, the plaintiff here.

Fourth. That if the jury find from the evidence that the bonds in question were transferred after maturity by persons exercising authority in Texas, and at war with the United States, then, that the bonds, no matter how or from whom received by defendants, were, in defendant's hands, still the property of plaintiff, and that the act of defendants in procuring payment of them from the U. S. Treasury (if the jury find that was done) was an act of conversion, and makes the defendants liable for the value of the bonds at the date of conversion, with interest.

To the granting of which instructions, the defendants, by their counsel, except.

Plaintiff's Exception.

After the rulings hereinbefore set forth and excepted to, the defendants prayed the court as follows:

tioned in the declaration were held and claimed 1. If the jury find that any of the bonds menby other parties, and were presented and filed by them at the United States Treasury for redemption, and that thereafter the defendants, for the accomodation of said parties, advanced to them the amounts payable to them by the United States, upon assignment of the treasury

them subject to all the equitable rights of the state when its relations to the Union had been restored.

But it must be observed that we have not held that such a repealing act was absolutely void, and that the title of the state could in no case be devested. On the contrary, it may be fairly inferred from what was said in Texas v. White, that if the bonds were issued and used for a lawful purpose, the title passed to the holder unaffected by any claim of the state. Title to the bonds issued to White and Chiles was held not to be devested out of the state, because of the unlawful purpose with which they were issued, and because the holders were, in our opinion, chargeable with notice of the invalidity of their issue and of their unlawful

use.

If, in that case, there had been proof that a large portion of the bonds issued without the indorsement of the governor were in fact issued for legitimate objects, and were applied to legitimate purposes, no presumption could have arisen from the absence of that indorsement that the particular bonds which were the subject of controversy in that case had been issued without authority and for an unlawful purpose. If, for example, it had appeared that bonds to *412] a large amount had been issued unindorsed, and applied to the support of schools, or to the maintenance of asylums for the insane, for the deaf mute, or the blind, or to other purposes equally legitimate, the presumption, especially after payment by the United States, would have been in favor of the holders of bonds and not against them. We say especially after payment by the United States, for the United States were the obligors in the bonds, and it was against the United States that the Rebellion had been waged, and it was primarily the duty of the government to ascertain and decide whether the bonds had or had not been issued and used in aid of Rebellion, and had, therefore, presumptively passed into the hands of holders not entitled to payment as against the reconstituted state of Texas.

ment of Texas, from August, 1861, to July, 1865, was an usurping government, incapable of performing any act which could legally devest the title to the property of the state, and that if the jury should find that the bonds in question were alienated by that government or its agents, such alienation passed no title; also, that if the defendants could acquire no title to the bonds without the indorsement of them by a governor of Texas loyal to the United States; also, that if the defendants took the bonds after maturity, they took them subject to the right of property in them of the state of Texas; and finally, that if the bonds were transferred after maturity by persons exercising authority in Texas and at war with the United States, then, no matter how or from whom received by the defendants, they were still the property of the plaintiff, and the act of defendants in procuring payment of them from the United States Treasury, if that was done, was a conversion, and makes the defendants liable for their value with interest.

We think that the instruction, embodied in this tenth exception, was calculated to mislead the jury. Indeed it could hardly fail to do so. Whether the alienation of the bonds, *by [*413 the usurping government, devests the title of the state, depended, as we have said, upon other circumstances than the quality of the government. If the government was in actual control of the state, the validity of its alienation must depend on the object and purpose of it. If that was just in itself and laudable, the alienation was valid; if, on the contrary, the object and purpose were to break up the Union and to overthrow the constitutional government of the Union, the alienation was invalid. So the most that could be said, of the absence of the indorsement of the governor, was that it raised a presumption against the validity of the alienation, not that no title to the bonds could be obtained without such indorsement. So, too, it cannot have been correct to say without qualification that the defendants took the bonds, if originally transferred by persons exercising auThe action of the government in refusing pay-thority in Texas, at war with the United ment, during the war, of the coupons of the unindorsed bonds, increased the significance of its action in paying not only the coupons, but the bonds themselves, after the war had terminat- | ed. The bonds and coupons could only have been paid on proof, satisfactory to the government, that the title of the state had been devested by its actual authorities for some legiti- But in our judgment, the instruction given mate purpose, or if otherwise, then to parties upon the request of the defendants and exceptnot chargeable with notice of the unlawful is-ed to by the plaintiff, was quite correct. It was sue and use. Any other payment would have been a wrong to the reconstituted state.

There was no such proof in either of the cases formerly decided. Whether there was evidence in the present case establishing the fact of unlawful issue and use, and the further fact of notice to the defendants, within the principles heretofore laid down, as now explained and qualified, is for the jury.

We think it unnecessary to examine all the exceptions taken in this case. We shall confine ourselves to the tenth exception taken by the defendants, and to that taken by the plaintiffs.

From the first of these it appears that the court below instructed the jury that the govern

States, subject to all the equitles existing against the usurping government. That would depend upon the character and object of the original transfer. And the final proposition of the instruction must be qualified according to these principles, to make it conform to the law as we understand it.

to the effect that, if the bonds were presented to the Treasury Department by holders other than the defendants, and payment was ordered, and afterwards by the then holders the proceeds were directed to be paid to the defendants, and were received by them without ever having had possession or control of the bonds, or having claimed title to them, such receipt of the proceeds did not amount to a conversion by the defendants. We are entirely satisfied with this. We think it clear that no one other than a holder of the bonds, or one who, having held them, has received the proceeds, with notice of the illegal transfer for an illegal purpose, can be held liable to the claim of the reconstituted state. After presentment, recognition, and or