Though it is well settled that an assignee is subject to the equities of the obligor, it is a matter of dispute how far an assignee is subject to equities of third persons against the assignor; as, for instance, where the assignor was himself an assignee of the chose in action the assignment of which he had procured by fraud, or where for any reason the assignor held the assigned claim subject to a trust actual or constructive. An assignee who takes the assignment with notice of the claim against the assigned right, (and still more clearly if he undertakes to satisfy the claim) would everywhere undoubtedly hold the assigned chose in action subject to the prior claim.36 But even though the assignee paid value with no knowledge of any outstanding claim, it is still true that the defrauded original owner or person beneficially entitled to the assignment has an equity prior in time and, therefore, superior to that of the ultimate assignee. If, indeed, the latter could be regarded as the owner of a legal right, his right would be superior to the original equity.37 What has been already said in regard to the assignment of choses in action and is later summarized37a indicates that the ultimate purchaser cannot be regarded as himself the legal owner of the chose in action in the full sense of the word; but it has been urged by a learned writer 38 that the ultimate assignee has a legal power of attorney, of which equity should not deprive him if he has acquired it for value and in good faith. This may be granted, but it cannot be admitted that the mere possession of a power of attorney involves any legal ownership of the right to which the power relates. It is the giving of a right of ownership which constituted historically the contribution of courts of equity to the law of assignment. Whatever changes of procedure may have been made, it still seems true that such ownership of a chose in action as an assignee has is properly spoken of as equitable 38a though the power of attorney which goes with the assignment expressly or by implication is a legal right (not, however, a legal property right). Accordingly, the latent or collateral equity against the assignor of an intangible chose in action should prevail over the right of the subsequent purchaser in good faith; and in the absence of an estoppel such is the rule prevailing in England and in many of the United States.39 In some States, however, the courts have followed an early statement of Chancellor Kent,40 which is now overruled in New York,41 to the effect that an assignee is not bound by equities in favor of third persons since though he can make inquiries of the debtor before taking the assignment and thereby acquaint himself with any defences the debtor may have, no such procedure is possible in regard to equities of unknown third persons.42 Whatever may be the practical force of the reasoning of Chancellor Kent, it fails to meet the technical argument that the assignee is entitled to enforce merely the assignee's rights as under a power from him, and is, therefore, necessarily subject to the same defences to which he is subject, but if, as some of the decisions hold, the assignee under modern statute acquires the legal ownership of the assigned right as fully as if a novation had been made, the latent equities would be cut off.43

36 Buffalo Glass Co. v. Assets Reali-ation Co., 133 N. Y. App. D. 775, 117 N. Y. S. 1087.

37 See, e. g., Duncan Townsite v. Lane, 245 U. S. 308, 311, 62 L. Ed. 309, 38 S.Ct. 99.

37a Infra, Sec. 447.

38 Ames, 1 Harv. L. Rev. 7, Cases on Trusts (2d ed.), 310. 38aSee infra, Sec.Sec. 446a, 447.

39Cockell v. Taylor, 15 Beav. 103; Barnard v. Hunter, 2 Jur. N. S. 1213; Sutherland v. Reeve, 151 111. 384, 38 N. E. 130; Pearson v. Luecht, 199 111. 475, 65 N. E. 363; Brown v. Equitable Life Assur. Soc., 75 Minn. 412, 78 N. W. 103, 671, 79 N. W. 968; Tripp v. Jordan et at., 177 Mo. App. 339, 164, S. W. 158; Bush v. Lathrop, 22 N. Y. 535; Cutts v. Guild, 57 N. Y. 229; Owen v. Evans, 134 N. Y. 614, 31 N. E. 999; Central Trust Co. v. West India Co., 169 N. Y. 314, 62 N. E. 387; Culmer v. American Grocery Co., 21 N. Y. App. Div. 556, 48 N. Y. S. 431; State v. Hearn, 109 N. C. 150, 13 S. E. 895; Gillette v. Murphy, 7 Okl. 91, 54 Pac. 413; Perkins v. W. A. Lippincott Co., 260 Pa. 473,103, Atl. 877; Downer v. South Royalton Bank, 39 Vt. 25. See also Western Nat. Bank v. Maverick Nat. Bank, 90 Ga, 339, 16 S. E. 942,35 Am. St. Rep. 210; Oaborn v. McClelland, 43 Ohio St. 284, 1 N. E. 644.

40In Murray v. Lylburn, 2 Johns. Ch. 441. See also Livingston v. Dean, 2 Johns. Ch. 479.

41 See New York decisions stated supra, n. 39.

42 Winter v. Montgomery Gas Light Co., 89 Ala. 544, 7 South. 773; First National Bank v. Perris Irrigation District, 107 Cal. 55,40 Pac. 46; Ohio Life Ids. Co. v. Ross, 2 Md. Ch. 26; Duke v. Clark, 58 Miss. 465; Williams v. Donnelly, 64 Neb. 193, 74 N. W. 601; De-Witt v. VanSickle, 29 N. J. Eq. 209; Mifflin County Bank's Appeal 98 Pa. 150; Huber's Assigned Estate, 21 Pa. Sup. Ct. 612, 615 (but see Henry v. Black, 213 Pa. 620, 63 Atl. 250; Perkins v. W. A. Lippincott Co., 260 Pa. 473, 103 Atl. 877). In a few of these decisions which relate to mortgages and judgments, it is not clear how far the court intended to lay down broadly a principle covering all non-negotiable choses in action.

A distinction must be taken, however, where the chose in action has a tangible form, especially if it is by law assignable. An overdue negotiable promissory note though often likened to an ordinary chose in action is in reality different. Even after maturity the transfer of such a note by the holder transfers a legal title and though the circumstance that the transfer is after maturity puts the taker of the note on inquiry as to any defence the maker may have (since if he had had no defence the instrument would presumably have been paid) yet the fact that the instrument is overdue gives no reason to suppose that there are collateral equities affecting the transferor's title. In such a case, therefore, the bona fide purchaser of the note is protected.44 A principle is applicable also to other choses in action having tangible form like certificates of stock, policies of insurance, non-negotiable bonds, somewhat similar to that invoked when they are made the subject of gift.45 The ownership of the document is regarded as conferring a kind of legal ownership to the chose in action represented by it. Accordingly a bona fide purchaser of a certificate of stock,46 a non-negotiable bond or note,47 or a policy of insurance,48 is preferred to one having an equitable right against the assignor. Furthermore, it has been held that a written assignment of a chose in action by one who seeks to avoid the assignment later on equitable grounds estops the claimant as against a bona fide purchaser who bought the chose in action on the faith of that writing.49 In the cases thus far referred to the assignor though subject to an equity was either the legal owner of the chose in action or had an assignment from the legal owner. An assignor who has no legal title but is a mere bailee of a non-negotiable tangible chose in action can give no right even to a bona fide purchaser which can stand against the bailor's claim.50

43See infra, Sec.446.

44Wolf v. American Trust & Sav. Bank, 214 Fed. 761, 132 C. C. A. 410; Mohr v. Byrne, 136 Cal. 87,67 Pro. 11; Young Men's etc. Co. v. Rockford Nat. Bank, 179 111. 599, 46 L. R. A. 753, 70 Am. St. Rep. 135; Justice v. Stone-cipher, 267 111. 448, 108 N. E. 722; Moore v. Moore, 112 Ind. 149, 13 N. E. 673, 2 Am. St. Rep. 170; Ever-sole v. Maull, 50 Md. 95; Gardner v. Beacon Trust Co., 190 Mass. 27, 76 N. E. 455, 2 L. R. A. (N. S.) 767,112 Am. St. Rep. 303; Etheridge v. Gallagher, 55 Miss. 458; Lee v. Turner, 89 Mo. 489,14 8. W. 505; Neuhoff v. O'Reilly, 93 Mo. 164, 6 S. W. 78 (compare Turner v. Hoyle, 95 Mo. 337, 8 S. W. 157; Crawford v. Johnson, 87 Mo. App. 478,484;) Prieett v. Gamett, (Mo. App. 1917), 191

S. W. 1048; Patterson v. Rabb, 38 S. C. 138,17 S. E. 463,19 L. R. A. 831. See also Combs v. Hodge, 21 How. 397, 16 L. Ed. 115; and the argument in Pomeroy's Equity Juris., Sec.Sec. 707 et seg., and 11 Harv. L. Rev. 40. But see contra, In re European Bank, L. R. 5 Ch. 891; Foley v. Smith, 6 Wall. 492,18 L. Ed. 931; Texas v. White, 7 Wall. 700, 19 L. Ed. 227; Vermilye v. Adams Express Co., 21 Wall. 138, 22 L. Ed. 609; Bird v. Cockrem, 28 La. Ann. 70; Owen v. Evans, 134 N. Y. 514, 31 N. E. 999; Weathered v. Smith, 9 Tex. 622. It may be argued with some force that sections 52, 55, and 59 of the Negotiable Instruments Law support the claim of the party having the collateral or latent equity.

45 See infra, Sec. 439.