Tuttle v. Frelinghuysen.

the section. It was not a transfer of any of the notes, bonds, bills of exchange or other evidences of debt owing to the bank; for, as before stated, the drafts were not the property of the bank. Nor of any deposits to its credit; for the money due the James estate from it was a deposit to its debit. Nor is there any ground for holding that the object of the purchase was to prevent the application of any of the assets of the bank to its debts in the manner provided for by the national banking law, or to give a preference to the James estate as a creditor of the bank. But Baldwin's sole object and design, as cashier, in the transaction, were to get the money for the drafts to take up the worthless paper before referred to--to substitute cash for it -before the examiner should enter upon his investigation of the affairs of the institution.'

Nor is the objection of want of jurisdiction well founded. The defendant, who in this transaction stands as a mere volunteer, took into his possession property (the drafts) impressed with a trust, and he held it subject to the trust. He collected the money due upon the drafts, and now holds it, keeping it, in the language of his answer, in a separate account, so that upon adjudication of ownership the identical money may be subject to the order of this court. When the bill was filed (April 18th, 1882) he held the drafts, none of which had then matured. He has collected them since then. The bill prays that it may be decreed that he came into and holds possession of them wrongfully and without lawful right to take or hold them, and that he acquired them under and charged with a trust whereby it became his duty to hold and collect them, and on such collection to hold the proceeds in trust for the complainants, and that he be prevented from paying over such moneys as he shall receive from the drafts to any one except the complainants, or from making use thereof as his own, and from intermingling them. with assets or property held in trust for any other person, or rendering an account thereof to any other person as such. On the same day on which the bill was filed an injunction, according to its prayer, was ordered, and it was issued two days afterwards. The drafts were trust property, the property of the James estate,

Tuttle v. Frelinghuysen.

which the defendant took into his possession (with notice) as property belonging to the bank, and the executors sought by this suit to recover them. At the filing of the bill the property was still in the form of drafts. The fact that since then the money due on the drafts has been collected can make no difference as to the complainants' right to relief in this court. Especially is this so in view of the fact that the defendant has kept the proceeds by themselves, capable of identification, to answer the decree of this court. But, further, the defendant has no personal interest in the matter. He is acting merely as a trustee, and, in what he regarded as the proper discharge of his duty as such, took the drafts into his possession and held them as the property of his trust estate. If satisfied that they were such property, he would not only have felt at liberty to distribute the proceeds among those entitled to the assets of the bank, but it would have been his duty to do so, and he probably would have done it if not restrained by legal proceedings on the part of the complainants. The proper proceedings to that end were those in which he could be restrained by injunction from disposing of the property by distribution or otherwise, and could be required to hold it or its proceeds subject to judicial determination as to its ownership. He held the property and now holds its proceeds under a trust arising by operation of law. Trusts are enforced not only against those persons who are possessed of the trust property rightfully as trustees, but also against all persons who come into possession of the property bound by the trust with notice of the trust. 2 Spence's Eq. Jur. 194. In other words, the holder of trust property becomes a trustee of it as soon as he has notice that it is trust property. Not only can the trust property be followed into the hands of third persons, but the proceeds may be followed also as long as they can be traced and identified. Perry on Trusts § 835. Finding the drafts in the bank building, and in the possession of the cashier, the defendant, assuming that they were the property of the bank, claimed them as such, denying that they were the property of the James estate, notwithstanding the ear-mark upon them, and notwithstanding they were found among the securities of that estate, in a recep

Mutual Loan, Savings and Building Association v. Elwell.

tacle devoted to and used for the keeping of its papers, and notwithstanding, also, that the cashier was an executor of that estate, and it was evident that the estate had bought and paid for the drafts. He thus put the complainants to the proof that the drafts were such trust property, and the object of this suit is to establish that fact. This court, it is needless to say, is the proper forum for the purpose. I have no doubt whatever of its jurisdiction in the matter, nor of the propriety of having recourse to that jurisdiction in this case. The complainants are entitled to a decree for the amount of the proceeds of the drafts, with interest thereon from the time when they were collected, and they are entitled to costs.

THE MUTUAL LOAN, SAVINGS AND BUILDING ASSOCIATION &c.

v.

RICHARD E. ELWELL et al.

A purchase-money mortgage may be made a second lien by an agreement, made after the sale, between the vendor and another mortgagee of the premises, where the agreement has been consummated by recording the other mortgage before the vendor's, and by the vendor's knowingly acquiescing therein for several years.

Bill to foreclose. On exceptions to master's report.

Mr. D. J. Pancoast, for the exceptions.

Mr. J. W. Westcott, contra.

THE CHANCELLOR.

The defendant Charles H. Smith sold a lot of land in Haddonfield, in Camden county, to the defendant Richard E. El

Mutual Loan, Savings and Building Association v. Elwell.

well, for $900, of which the latter was to pay part (about onehalf) in cash, and for the rest was to give to him a mortgage on the property. Elwell told Smith that he was going to get the cash from the complainant. He appears to have gone into possession before he got his deed, and to have built a shop upon the property. He applied to the complainant for a loan of $800 on first mortgage on the property before he got his deed, and the loan was made to him accordingly. The deed and the two mortgages, one to Smith for $500 and the other to the complainant for $800, were drawn by Mr. Rowand, a scrivener, who was the treasurer of the complainant. Of the $800 lent by the complainant, Rowand paid Elwell $435, retained $14.50 for drawing and recording the papers, and paid $350.50 to Smith. The money paid Elwell went to satisfy mechanics' claims for building the shop. The deed and mortgages were entrusted to Rowand to be recorded. He caused the complainant's mortgage to be recorded before Smith's. Smith insists that his mortgage is entitled to priority because it was given for purchase money. The master has reported in his favor and the complainant excepts. Rowand swears explicitly and unequivocally that before the papers were drawn he told Smith that the complainant would not advance or loan the money to Elwell except upon a first mortgage, and that for any balance due him (after applying the money borrowed from the complainant to the purchase) he would have to be content with a second lien, and that Smith told him that he would be perfectly satisfied. He also says that he put the complainant's mortgage on record before Smith's, according to agreement or arrangement made between the complainant and Elwell and Smith some time before the papers were executed. The complainant stipulated for a first mortgage of the property' for its security, and Elwell agreed to give it. The complainant's mortgage was in fact recorded before Smith's. Smith says he never discovered the fact that it was so recorded before his until about the spring of 1880. Though he says he thought then, and for a long time afterwards, and until after this suit was begun, that the fact that the complainant's mortgage was recorded first gave it priority, notwithstanding the fact that his mortgage was

Riehle v. Heulings.

given for purchase-money; and though he swears he did not agree that the complainant's mortgage should have priority over his, he does not appear ever to have complained because the complainant's mortgage was recorded before his. But, on the other hand, when Elwell ceased paying interest and the complainant threatened to foreclose, he sought to buy its mortgage. When Mr. Lippincott, a member of the association (the complainant), a short time before the testimony was taken before the master, in a conversation with him, referred to the agreement that the complainant's mortgage should have priority over his, he did not deny that the agreement was made, but said he cared nothing about it. The complainant stipulated that its mortgage was to be the first lien, and Rowand, its treasurer, knew it. He swears that Smith agreed to it, and that the complainant's mortgage was first recorded in pursuance of the agreement. Under the circumstances it seems to me very clear that the complainant is entitled to priority. The exception will be allowed, with costs.

ANNA M. RIEHLE

V.

ALBERT C. HEULINGS.

Where a right of way is appurtenant, and has been expressly granted to the adjoining land-owners, their heirs and assigns forever, non-user alone will not forfeit or extinguish it.

Bill for relief. On final hearing on pleadings and proofs.

Mr. S. K. Robbins, for complainant.

Mr. F. Voorhees, for defendant.

THE CHANCELLOR,

This suit is brought to obtain a perpetual injunction restraining the defendant from continuing to obstruct a private way