1. In the absence of proof to show when promissory notes were
transferred by the payee, the law presumes that they were, when
under-due, taken in good faith by the transferee without notice of
any infirmity attaching to them, and he is entitled to the benefit
of the deed of trust given to secure them.
2. The trustee named in the deed is, like a mortgagee, a
purchaser for value. Both occupy the same ground with respect to
notice, either actual or constructive, of any outstanding
3. Where, therefore, the records of the proper office showed
that in 1866, when the deed was executed, there was no prior
encumbrance upon the land, held
that a party claiming
under a deed executed and recorded in 1848, which he alleges was
intended to embrace the same land, but which misdescribes it, which
misdescription was not asserted in any judicial proceeding nor
notice thereof given before action commenced by the holders of said
notes to enforce their trust, is not entitled to have his deed
reformed against their intervening rights.
The facts are stated in the opinion of the Court.
Page 95 U. S. 17
MR. JUSTICE SWAYNE delivered the opinion of the Court.
This is an appeal in equity. The appellants are the complainants
in the bill. The facts material to the determination of the case
lie within a narrow compass, and may be briefly stated. There is no
controversy about them.
On the 22d of May, 1866, the appellee, A. B. Montgomery, was
indebted to the firm of Estlin & Co., of New Orleans, in the
sum of $158,777.55. He made his sixty promissory notes of that
date, amounting in the aggregate to the sum named, all drawn to his
own order and payable, respectively, one, two, three, four, and
five years from date, with interest until paid. The maker endorsed
them in blank, and secured them by a deed of trust of certain lands
therein described situated in Washington County, Mississippi. He
delivered the notes so endorsed and the deed of trust to Estlin
& Co. They transferred the notes in the course of business to
other parties. Portions of them are held by each of the several
complainants. The bill was filed to enforce the deed of trust. It
avers that a part of the notes are outstanding in other hands, but
that the holders are unknown and cannot be ascertained. It sets
forth that it is filed for the benefit of such parties as well as
the complainants, and prays that the former may be permitted to
come in and prove their rights and participate in the avails of the
The defendants in their answers set up another deed of trust,
executed by A. B. Montgomery, on the 13th of July, 1848, to lands
covered by this deed of trust were described as in range nine,
while all those, except one tract embraced in the other deed, were
described as in range eight. With this exception, the description
in the earlier deed applied to the lands described in the later
one. The defendants insisted that the number of the range in the
first deed was a mistake of the scrivener who drew it, that the
number was intended to be eight instead of nine, and they insisted
that the instrument
Page 95 U. S. 18
should be reformed accordingly and that the liabilities intended
to be secured by it should be made the first lien upon those
premises. The court below decreed in conformity to this view, and
the appellants thereupon removed the case to this Court by appeal
for review. There is neither allegation nor proof that the
complainants or the other holders of the notes delivered to Estlin
& Co. had any notice of the alleged mistake when they took the
paper, nor is there any averment or proof of such notice to the
trustee when the deed was delivered. It is not shown by the proofs
when the notes were transferred by Estlin & Co., nor when they
came into the hands of the present holders. In the absence of such
proof, the law presumes they were taken under-due, in good faith,
and without notice of any infirmity attaching to them.
Pinkerton v. Bailey,
8 Wend. (N.Y.) 600; 2 Parsons on
Bills and Notes 9. Estlin & Co., however, unquestionably so
took them in fact, and this protects the subsequent takers.
The deed of trust securing the payment of the notes was an
incident, and accessory to them. The transfer of the notes carried
with it to the transferees the benefit of the security. The trustee
in such cases, like a mortgagee, is a purchaser for a valuable
consideration. Both occupy the same ground with respect to notice,
actual and constructive. It is that of a bona fide
purchaser until the contrary is made to appear. Carpenter
16 Wall. 271. Generally the rules which
apply to legal apply also to equitable estates. Croxall v.
5 Wall. 268. Here the law of notice as to
the trustee and cestui que
trust is the same.
Neither actual nor constructive notice to the trustee, nor to
Estlin & Co., nor to either of the other holders, in season to
have any effect, is shown.
There are other considerations belonging to the subject which
must not be overlooked.
When the notes and deed of trust were delivered, a thorough
examination was made in the proper office to ascertain if there was
any prior encumbrance. None was found. In fact, none existed. The
prior deed described wholly different lands. On the faith of this
condition of things Estlin & Co. acted. The misdescription in
the prior deed was not asserted in any judicial
Page 95 U. S. 19
proceeding to which the trustee or any cestui que trust
under the later deed was a party until it was put forth in this
suit, which was instituted on the 7th of June, 1869, more than
twenty years after the mistake occurred. As between Montgomery, the
grantor in the prior deed, and the cestuis que trust
that deed, the deed might have been reformed and enforced as
corrected. Davenport v. Sovil's Heirs,
6 Ohio St. 459. But
this cannot be done against the intervening rights of others
acquired in good faith. Ohio Life & Trust Co. v. Urbana
13 Ohio, 220.
Such a result would be contrary alike to the plainest principles
of reason, justice, and the law.
Decree reversed, and the cause remanded with directions to
enter a decree and proceed in conformity to this opinion.