Johnson v. Bloodgood , 2 Cai. Cas. 303 ( 1796 )

Kent, J.

This suit is substantially, betweefi the creditors of Johnson and the defendant. It is now well understood, that courts of law will take notice of assignments and trusts, and consider who are beneficially interested, and will protect the cestui que trust.^*

In giving my opinion, I mean not to question the law that a bill or note may be negotiated after it is due,^* and be declared up'onas such. But I approve and adopt, as salutary, and calculated to prevent fraud, the doctrine laid down in the cases of Brown and Davis,^† and Taylor and Mather, that if a bill or note be indorsed after it becomes due, it throws a suspicion on the transaction, and the indorsee shall take it, subject to all the equity that existed in favour of the maker of the note, before it was indorsed ; and if there be any attendant circumstances of fraud, thg indorsee shall have every presumption turned against him. So in the present case, the defendant, stating only generally the year 1793, in which he purchased the note, it shall be presumed he purchased it after the 16th January, 1793, the date of the assignment of the insolvent’s estate.

When a note is offered for sale, after it has become due, and at a discount, what is the necessary inference? most certainly that the maker is insolvent; and, if so, his effects and credits ought immediately to enure to the benefit of his creditors, and he be regarded but as their trustee.

The presumption will be, because, so, indeed, justice would dictate, that the insolvent makes forthwith, a full and frank disclosure and assignment of all his property, for the payment of his debts. And if the insolvent do, in fact, make such an assignment, the purchaser in such a case, of a note, after the assignment at a depreciated rate, for the purpose of a set-off, though he may not, in fact, know of the as-, signment, is nevertheless properly chargeable with having acted under the presumption of notice of the assignment. The law infers the notice, being what is termed constructive notice. 2 Fonb. 155. He accordingly commits a fraud upon the creditors ; he does an act mala fide, and, as lord Kenyon observed, in a case not very unlike the present, “ it would be most unjust, indeed, if one person who happens to be indebted to another, at the time of the bankruptcy of the latter, were permitted, by an intrigue between himself and a third person, so to change his own situation, as to diminish or totally destroy the debt due to the bankrupt, by an act ex post facto.”^*

I accordingly continue in the opinion that was given at the trial, that the note purchased by the defendant was inadmissible testimony, under his plea of payment, and that the defendant take nothing by his motion. Motion denied.

* 1 D.&.620.

* 1 Ld. Raym. 575.

† 3 Durnf. 80, 83.

* 6 Durnf. 59.