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NOTES OF LECTURES 
 
 ON 
 
 EQUITY JURISPRUDENCE 
 
 TO ACCOMPANY 
 
 Merwin's Equity- 
 
 Prepared for the Use of Students of the Law School 
 of the University of Virginia 
 
 BY 
 
 WM. MInSr LILE 
 
 Professor of Law 
 
 University of Virginia 
 
 University Book Store 
 Anderson Brothers 
 1921 
 
COPYEIGHT 1931 
 BY 
 
 Wm. Minor LilK 
 
NOTES ON 
 EQUITY JURISPRUDENCE 
 
 {To Accompany Merzvin's Equity) 
 CHAPTER I 
 
 Preliminary. 
 
 Equity Jurisprudence. — The term "Equity" here is a tech- 
 nical one, and is to be distinguished from "equity" in the sense 
 of natural justice. The technical term is, for most purposes, 
 interchangeable with that of "chancery." The expression "court 
 of equity" and "courts of chancery" are synonymous. 
 
 To explain at length the origin and scope of equity jurispru- 
 dence is beyond the purpose of these Notes. 
 
 Inasmuch, however, as the principles of equity have per- 
 meated almost every department of the municipal law, it is im- 
 portant that the studeiit, early in his legal studies, should appre- 
 hend something of the ancestry and proportions of this younger 
 but vigorous sister of the common law. 
 
 Definition of equity. — In brief, equity, as the term is used 
 in our legal terminology, may be defined as that peculiar system 
 of remedial justice which was administered by the High Court 
 of Chancery in England, as distinguished from that adminis- 
 tered in the ordinary Courts of common law.^ 
 
 In some of the states of the American Union, the equity juris- 
 diction is still administered, as formerly in England, in separate 
 courts of chancery; in others, (as in Virginia and the Federal 
 Courts) the two systems of law and equity are kept distinct, but 
 are administered by the same courts ; while in still a third group, 
 the two systems have been, to a large extent, blended into a sin- 
 gle system. 2 
 
 ' Bisham's Equity, 1. 
 
 ' It is interesting to note that where this amalgamation has taken 
 place, the principles of equity override those of the common law, in 
 case of conflict. 
 
2 Notes on Equity Jurisprudence 
 
 Origin of equity. — The equity jurisdiction originated at an 
 early period in the history of the English people. Its birth and 
 subsequent development were due to several causes, chief of 
 which was the extremely narrow jurisdiction exercised by the 
 common law courts. 
 
 How narrow was this jurisdiction may be gathered from 
 the subjoined outline of the remedies afforded in the common 
 law courts. 
 
 The need of equity — list of common law remedies. — -For 
 purposes of comparison, these remedies are here listed. The 
 student will note how limited they are, both in number and scope. 
 These remain to us to-day in our common law courts, with prac- 
 tically no change either in number or in scope. 
 
 1. Action of debt — to recover a specific sum of money due by 
 contract. 
 
 2. Assumpsit. — to recover damages for a breach of a simple 
 contract. 
 
 3. Covenant — to recover damages for a breach of a sealed 
 contract. 
 
 4- (a) Trespass and (b) Trespass on the Case — ^to recover 
 damages for a tort to person or property. 
 
 5. (a) Detinue and (b) Replevin — to recover a specific chat- 
 tel, wrongfully taken. 
 
 6. Trover and conversion — To recover the value of a specific 
 chattel, wrongfully taken. 
 
 7. (a) Bjectment — and (b) Unlawful Entry, etc. — ^to recover 
 real property, wrongfully taken or withheld. 
 
 And as a condition precedent, in every instance, the plaintiff 
 must have legal title to the thing claimed — a mere equitable ti- 
 tle, howsoever meritorious, being utterly rejected in a court of 
 law.^^ 
 
 -^ In Strader v. Metropolitan Life Ins. Co. (Va.) 105 S. 'E. 74 
 (1920), in an action at law on an insurance policy, the plaintiff's decla- 
 ration alleged (1) that the policy was payable to the insured; (3) that 
 insured durfng his lifetime assigned one-half thereof to plaintiff; 
 
 (3) that by his will, insured bequeathed the residue to plaintiff, and 
 
 (4) that plaintiff was complete owner of the policy. There was no 
 allegation, however, of the assent of insured's executor to the passage 
 of legal title from the •executor of the insured to the plaintiff. Held, 
 Plaintiff's declaration does not set 'out a legal title and the action 
 cannot be maintained. 
 
Origin of Equity. 3 
 
 These common law courts, created in earlier periods, in an un- 
 enlightened age, when litigation was comparatively rare, and 
 when notions of justice were correspondingly crude, refused to 
 extend their jurisdiction, or to modify their principles and pro- 
 cedure, to meet the increased needs of a more enlightened civili- 
 zation. Cases were constantly arising, many illustrations of 
 which will appear later, for which no remedy was afforded by 
 the common law courts ; or in which the remedy was inade- 
 quate; or, again, in which, from the peculiar circumstances of 
 the case, manifest injustice would result from the application of 
 the rigid rules of the common law. 
 
 Origin of equity, continued. — According to English concep- 
 tions, certainly after the Norman Conquest (A. D. 1066), the 
 king was the supreme fountain of justice, and theoretically (per- 
 haps sometimes actually) presided in the courts. As cases arose 
 for which the common law courts, exercising the narrow juris- 
 diction already referred to, could not afford a proper remedy; 
 or in which unrighteous judgments resulted, or were likely to 
 result, by reason of the technical and inelastic rules which were 
 the delight of the common law courts ; or, again, in which, the 
 poor and the humble suffered injustice because of the undue in- 
 fluence exerted by rich and powerful upon the judges and juries, 
 it was but natural that special application for relief in such cases 
 should be made directly to the king in person. So long as these 
 applications for the exercise of the royal discretion were infre- 
 quent, the king sometimes dealt with them in person, and some- 
 times referred them to his secretary or chancellor. 
 
 The same — origin continued. — In the course of time, as 
 these applications for the exercise of the royal interposition in- 
 creased in number and importance, they were regularly referred 
 to the chancellor for proper action; and, still later, they came 
 to be addressed directly to the chancellor himself. 
 
 This officer naturally viewed the growth of his jurisdiction 
 with satisfaction, as it tended to magnify his office and to dig- 
 nify his own importance in the realm. L,itigants were therefore 
 encouraged to bring their grievances before the chancellor, and 
 the equity jurisdiction grew apace.* 
 
 * 1 Story's Eq. Jurisp. ch. 2; Bisphatn. Princ. of Eq. ch. 1; 
 Pomeroy, Eq. Jurisp. ch. 1, et seq. 
 
4 Notes on Equity Jurisprudence 
 
 Test of equity jurisdiction. — The test of the chancellor's 
 jurisdiction was, from the beginning, as the test of equity juris- 
 diction has remained substantially to this day, the absence of 
 a plain and adequate remedy at law. 
 
 Original sources of equity jurisprudence. — Originally, in 
 undertaking to provide a remedy for a particular grievance, or 
 to devise an equitable principle unknown to the common law, the 
 Chancellor was guided by no fixed rules, but acted according to 
 his conscience. Hence arose the satirical remark of Selden, 
 that the measure of justice in equity was more or less according 
 to the length of the Chancellor's foot.^ 
 
 This ofificer was, however, usually an ecclesiastic, and there- 
 fore learned in the civil or Roman Law, upon which highly de- 
 veloped system he naturally drew as an aid to his conscience. 
 From this circumstance it happens that the principles and pro- 
 cedure of modern courts of equity are largely borrowed from 
 the civil law. 
 
 Equity established. — It was from this accidental beginning, 
 and from this crude and informal procedure in the office of 
 the secretary of the king, that there gradually developed, under 
 the guiding hands of a long line of learned and distinguished 
 chancellors, an organized court, with clearly delimited jurisdic- 
 tion, fixed methods of procedure, and that fine system of mod- 
 ern law known as Equity Jurisprudence. 
 
 Subjects of equitable cognizance. — The subjects of equita- 
 ble cognizance are, in the main, trusts (that is, where the legal 
 title to property is held by one person and the beneficial owner- 
 ship is in another) ; fraud; unconscionable bargains not amount- 
 ing to fraud at law; discovery of evidence; relief from, forfei- 
 tures and penalties, and from accident and mistake; specific per- 
 formance of contracts; injunctions; and the settlement of com- 
 plicated accounts. 
 
 ' "Equity is a roguish thing. For law we have a measure, know 
 what to trust to; equity is according to the conscience of him that 
 is chancellor, and as that is larger or narrower, so is equity. 'Tis 
 all one as if they should make the standard for the measure ,we call 
 a 'foot', a chancellor's foot; what an uncertain measure this would be! 
 One chancellor has a long foot, another a short foot, a third an in- 
 different foot. 'Tis the same thing in the chancellor's conscience." 
 — Table Talk. 
 
LiAW AND Equity Proceduri; Contrasted 5 
 
 As illustrating the difference in the rights recognized at law 
 and in equity, it may be said that an estate conveyed to A, in 
 trust for B, is treated in a court of law as belonging exclusively 
 to A — B's rights being recognized only in a court of equity. 
 Again, at law, the remedy for a breach of contract is an action 
 for damages — in equity, in a proper case, the contract will be 
 specifically enforced. At law where injury is threatened to the 
 property of another, there is no preventive remedy — ^the only re- 
 lief being an action for damages after the wrong has been con- 
 summated. In equity, on the other hand, an injunction will be 
 granted to prevent the threatened injury, if serious enough to 
 bring the case within the equity cognizance.* 
 
 At law there is no remedy or compelling the re-execution of 
 important documents which have been lost or destroyed — or for 
 the reformation of written instruments which, by mistake, do 
 not express the true intention of the parties. Equity, however, 
 has a complete workshop of its own, and will make a remedy for 
 every conceivable legal wrong, where no remedy, or an inade- 
 quate one, exists at law — its maxim being "equity will suffer no 
 wrong to be without a remedy." Vbi inuria, ibi rem,ediuin. 
 
 Procedure at law and in equity contrasted. — The pro- 
 cedure in equity also differs widely from that at law. For in- 
 stance in equity the judge (or "chancellor") decides both of law 
 and of fact wthout a jury; and the testimony is heard not ore 
 tenus, as at law, but in the form of written depositions, taken, 
 in advance of the trial, before a notary or other official — ^the 
 chancellor himself neither seeing nor hearing the witnesses. 
 The chancellor may, however, where the testimony is conflict- 
 ing, call in a jury as an aid to his conscience — but he may reject 
 
 ° The history of medicine furnishes a parallel. Formerly, the art 
 of disagnosing and healing diseases was assiduously cultivated, to 
 the almost total neglect of the art of prevention. The patient was 
 allowed to become sick, or the wound to suppurate, and then the 
 medical man administered curative agents. Here we have the common 
 law /action for damages, after the wrong is consummated. In more 
 recent times, a large part of the physician's efiforts is devoted to the 
 preventive side — hygiene and asepsis. Here we have the injunction 
 in equity. Both illustrate the application of the maxim "Prevention 
 is better than cure." 
 
6 NoTi;s ON Equity Jurisprudence 
 
 the verdict, when returned, if the justice of the case seems to 
 demand itJ 
 
 Common law and Equity compared further. — The sub- 
 joined comparison may aid the student's mental conception of 
 the two systems of law and equity. Suppose the two to be rep- 
 resented as two hospitals : 
 
 1. The common law hospital is hoary with age, non-progres- 
 sive and wedded to its own traditions and customs; proud of 
 its prestige, and intensely jealous of its long-enjoyed monopoly. 
 Its peculiar features are a medical side only — its administrators 
 neither knowing nor practicing surgery — and knowing nothing, 
 and caring less, about preventive medicine. It prescribes fixed, 
 old-time, ironclad remedies, and one only for each of the very 
 few diseases which it recognizes and treats. It accepts but 
 seven diseases out of all the ills that assail the flesh, and hence 
 there are but seven varieties of drugs in its entire pharmacopeia. 
 It admits no patient even with a recognized ailment, unless he 
 is clothed in an approved and prescribed costume. 
 
 2. The equity is a later and a more scientific home for the 
 sick, and board of health for the well. In response to the per- 
 sistent clamor of the people for better medical and surgical 
 treatment, the new hospital is established by and under the im- 
 mediate patronage of the king, and is served by the king's house- 
 hold physicians, familiar with all the modern medical and surgi- 
 cal learning of Continental Europe. Surgery and preventive 
 medicine are skillfully practiced; new diseases are diagnosed, 
 and new remedies devised, whenever the occasion makes the 
 necessity. It is open to every sufferer, whatever the nature of 
 his malady — but with one sharply drawn exception. This ex- 
 ception, established at the very beginning of the new enterprise, 
 and ever since vigorously enforced, is that no patient will be re- 
 ceived who is a proper subject for the older rival. If his disease 
 is one that can be, and will be, properly treated in the older hos- 
 pital, his application for admission to the newer will be rejected. 
 Such refusal, in such circumstances, to accept the patient avoids 
 
 ' Miller v. Wills, 95 Va. 337, 28 S. E. 337. See "Issue out of 
 chancery," infra. 
 
Law and Equity Contrasted 7 
 
 the appearance of rivalry, and enables the younger to escape the 
 jealousy and ill will likely to flow from loss of patients or dimi- 
 nution of prestige on the part of the older. In such case, then, and 
 in such case only, the patient will be denied admission — not on 
 the ground that he is not ill, nor because o£ lack of facilities for 
 his cure, but solely on the ground that he can receive proper 
 treatment at the other place. But if really ill, and his disease 
 is thought to be subject to palliation or cure, and is one not 
 recognized, or otherwise not satisfactorily remediable, at the 
 other place, then the patient will be welcomed. Nor is question 
 ever raised as to the garb in which he is clothed, provided it be 
 honestly his own. 
 
 The court of law is the old hospital, the court of equity the 
 new; the req|Uired garb is the legal title. Thus neither inter- 
 feres with the bi:siness' of the other, and neilLer occupies or as- 
 serts over the other a position of superiority. Each has its own 
 peculiar functions, wholly independent of the other. Equity has 
 simply stepped in and pre-empted a portion of the field of jus- 
 tice which the common law courts refused to occupy. 
 
 It often happens, however, that a patient suffering with a dis- 
 ease for which the older hospital would treat him, is, notwith- 
 standing, received and treated in the younger. This occurs 
 where the latter is convinced that the treatment prescribed in 
 the older is, for that particular case, not a satisfactory one — ^but 
 that its own course of treatment is far more scientific and ef- 
 ficacious. In legal terminology this is a case of concurrent juris- 
 diction — equity taking cognizance of a common law case be- 
 cause the remedy in the law courts is not "plain, adequate and 
 complete." We shall have occasion to deal at some length with 
 this topic of concurrent jurisdiction, in another place. 
 
 Mr. Snell ^ in his learned treatise on the equity of jurisdiction, 
 has well expressed the thought of the last paragraph but one: 
 "Equity may then be defined as that portion of natural justice, 
 which, though of such a nature as properly to admit of being 
 judicially enforced, was, from circumstances hereafter to be 
 noticed, omitted to be enforced by the common law divisions, , 
 and which the chancery division, or court of chancery, for rea- 
 sons of its own, enforced." 
 
 Princ. of Equity, 3. 
 
8 Notes on Equity Jurisprudence 
 
 Foundation of equity. — In striking contrast with the rules 
 of the common law, many of which are in the highest degree 
 technical, and the application of which frequently results in gross 
 injustice to the litigant, the principles of equity jurisprudence 
 are based on equity and good conscience. No principle that 
 would shock the conscience of an intelligent layman possessing 
 a delicate ethical sense, is likely ever to be found embodied in 
 equity jurisprudence. The formalism and the inelasticity of 
 the common law — the measuring out of justice by prescribed 
 formulae as a dealer measures out his wares — the frigid indiffer- 
 ence of the common law judge to the injustice of his judgment 
 based on a settled but highly technical common law rule — are 
 all foreign to equity jurisprudence. The study of this branch of 
 the law is, therefore, a study of human ethics, concretely ap- 
 plied. 
 
 Advice. — Unless the student cultivates a close and intimate 
 relation with this topic, and learns to live in its atmosphere from 
 his first acquaintance with it, he cannot hope to reap the full 
 benefit of his pursuit of legal wisdom while in the Law School. 
 If he holds himself aloof, and tries merely to remember written 
 rules, he can never realize the aspiration to become a learned, 
 practical, dependable and conscientious practitioner. The surest 
 test of a sound legal mind is its appreciation of those elemen- 
 tary principles of equity jurisprudence which we shall be study- 
 ing together during this first term of our second-year law stu- 
 dies. The student must, therefore, live close to his equity 
 studies, and endeavor to make equitable principles a part of his 
 every day thought. 
 
 Page 6, § 10. Issue out of chancery. — When the chancellor 
 finding himself in doubt on an issue of fact, by reason of conflict- 
 ing' testimony, sends the issue to one of the common-law courts 
 to be tried before a jury, as mentioned in the text, this is known 
 as an "issue out of chancery," or a "feigned issue." The student 
 will observe that it is within the discretion of the chancellor thus 
 to call in the aid of a jury, or not, as he pleases ; and that even 
 after the jury brings in its verdict on the issue, the chancellor 
 may disagree with the jury, and not only overrule the verdict, 
 but himself decide the issue of fa.ct contrary to the view taken 
 by the jury. 
 
Issue out of Chancery 9 
 
 The Text refers to the issue out of chancery as if it were a 
 rare proceeding, but it is quite common in many of the States, 
 including Virginia. In Virginia, where the same judge is at 
 once a common-law judge and a chancellor, these issues out of 
 chancery are tried before the chancellor himself, thus affording 
 an illustration of a jury trying a chancery cause: * 
 
 The same — court's power to direct issue not subject to 
 control of parties. — In Shoemaker v. Shoemaker,!" the chan- 
 cellor decided certain disputed questions of fact without the aid 
 of a jury — neither party requesting a jury trial. On appeal the 
 court found the testimony of so conflicting a nature that grave 
 doubt was entertained whether the finding of the lower court was 
 or was not erroneous. Thereupon the appellate court reversed 
 the decree and directed the chancellor to submit the issues to a 
 jury. This decision has been criticized; ^^ but when it is re- 
 called that in this State the erroneous exercise of judicial discre- 
 tion is ground for reversal; and that it is the duty of the court 
 of appeals, on appeal in a chancery case, to consider the testi- 
 mony and pass upon the issues of fact involved, in spite of the 
 findings of the chancellor below, and hence as much its duty and 
 right ex mero motu to direct an issue for trial by jury as it is 
 the right and duty of the chancellor, the criticism loses force. 
 If, on consideration of the whole record, the appellate court is 
 not satisfied that the ends of justice have been met by the find- 
 ings of the chancellor, to reverse the decree and direct a jury 
 trial seems eminently a proper proceeding — in spite of the waiver 
 of a jury by the parties below. In short, if the parties by their 
 waiver cannot deprive the chancellor of the power to direct an 
 issue, neither should such waiver deprive the appellate court of 
 that power. 
 
 " See Lavell v. Gold, 25 iGratt. 473, and note in Michie's edition. It 
 is immaterial in Virginia whether the issue tie tried on the law or 
 the equity side of the court. Meade v. Meade, 1111 Va. 451. See 
 further: Powell v. Manson, 22 Gratt. 177 (where [Staples, J., explains 
 the practice and procedure); Stevens v. Duckett, 107 Va. 17; Carter 
 V. Jeffries, 110 Va. 735. 
 
 '° 112 Va. 798. 
 
 ^ 17 Va. Law Reg. 717. 
 
10 Notes on Equity Jurisprudence 
 
 CHAPTER II. 
 
 This chapter is a resume of the contents of the volume, in- 
 tended to give the student a bird's-eye view of the ground over 
 which he is to travel later, and with more attention to minute 
 detail. 
 
 CHAPTER III. 
 Concurrent Jurisdiction. 
 
 Page 26. Test of equity jurisdiction. — The test of equity 
 jurisdiction as given in the Text is not strictly accurate, namely, 
 that equity does not take jurisdiction "where there is a complete 
 remedy at law." As we shall see presently, there may be a com- 
 plete remedy at law, and yet eqiuitable jurisdiction may exist con- 
 currently w\th it. The real test is. Has there always been a com- 
 plete remedy at law. See third note below. 
 
 Page 27, § 56. Equity jurisdiction in cases of fraud. — 
 
 Let us change the first sentence of the second paragraph here to 
 read, "Equity also has concurrent jurisdiction over cases of 
 fraud but it will not assume this jurisdiction in every case." 
 Equity will not, as a rule, assume jurisdiction in cases of fraud, 
 save where the remedy at law is less convenient or less complete 
 than that which equity can provide. ^ 
 
 Page 29. In several places on this page, the author repeats 
 the inaccurate test of equity jurisdiction, namely, Is there a com- 
 plete remedy at law? instead of, Has there always been a com- 
 plete remedy at law? as previously noted. 
 
 Page 29. Effect on equity jurisdiction of statute giving 
 law courts jurisdiction. — It is settled that where equity has 
 once taken jurisdiction because of the lack of legal remedy, it 
 will continue to exercise the jurisdiction, even though subse- 
 
 ' See Green v. Spalding, 76 Va. 411, and Text, 305. 
 
Test of Equity Jurisdiction 11 
 
 quently courts of law have assumed a similar jurisdiction, as the 
 result of statute, or otherwise.^ 
 
 Page 30, § 62. Remedy at law must be plain and ade- 
 quate — illustrations. — Where an insurance policy was made 
 payable to the "estate" of a dead man, it was doubtful who 
 should be proper plaintiff in a court of law ; hence, equity took a 
 jurisdiction.* After a decedent's death, a number of securities 
 belonging to him were in possession of and claimed by a kinsman, 
 as a gift from the decedent before his death. The administrator 
 denied the gift, and employed counsel to sue for recovery of the 
 securities. Inasmuch, however, as the administrator could not 
 describe the securities, a declaration at law could not be drawn. 
 Because of this difficulty at law, equity took jurisdiction of the 
 purely legal claim.* 
 
 So where one party is 'both maker and joint payee of a note 
 — e. g., a note executed by A to A and B — as A cannot, in a law 
 court, be both plaintiff and defendant in the same action, the 
 remedy is in equity only.^ 
 
 Page 32, § 66. Specific performance of contract for per- 
 sonal property. — (Omit first paragraph.) The better rule 
 here is that equity will never enforce a contract concerning per- 
 sonal property, unless the property be of a uniqiue character, not 
 procurable in the open market, and where damages will not 
 compensate for the breach of the contract, or there are special 
 circumstances, rendering the aid of the court of equity necessary 
 to prevent a failure of justice.® 
 
 Page 34, §§ 68-73. Shares in corporations. — Whatever 
 may be the English rule on this subject, by the overwhelming 
 weight of authority in America, a contract for the sale of cor- 
 
 ^ ("Equity, like the proverbial turtle, when it once takes hold, never 
 lets loose until it thunders, which thunder is the fulmination of a 
 statute so directing it.") Thompson v. Allen County, 115 U. S. 
 550; Steinman v. Vicars, 99 Va. 595; Herring v. Wilton, 106 Va. 
 176; Johnson v. Black, 103 Va. 477. 
 
 ' Portsmouth Ins. Co. v. Reynolds, 33 Gratt. 614. 
 
 ' Smith V. Smith, 92 Va. 696. See further, Perkins v. Siegfried, 
 97 Va. 744. 
 
 " Reid V. Windsor, 111 Va. 835. 
 
 « Southern Iron, etc., Co. v. Vaughan (Ala.), L. R. A. 1918E, 594, 
 and full note. 
 
12 Notes on Equity Jurisprudence 
 
 porate stocks will not be specifically enforced, save where the 
 circumstances are peculiar, as stated in the preceding note. The 
 sound doctrine on this subject is stated in the text, in § 72!' 
 
 The fact that the purchaser's object is to secure control of the 
 corporation, is no valid objection to specific performance of a 
 contract for the sale of shares, if the contract be otherwise 
 proper for specific performance; unless, perhaps, where the 
 control is sought from improper motives.® 
 
 Page 39, § 75. (Omit last four lines of this page and re- 
 mainder of paragraph, page 40). 
 
 CHAPTER IV. 
 Concurrent Jurisdiction (Continued). 
 
 Bill to remove cloud from title — (l)Title- holder out of 
 possession. — Where the holder of the legal title to real prop- 
 erty is out of posesssion, it is an elementary principle that since 
 he may maintain ejectment at law against the adverse claimant 
 in possession, his remedy is at law and not in equity. 
 
 The same — (2) title-holder in possession. — But where 
 the holder of the legal title is in possession of the property, so 
 that he cannot maintain an action at law against an adverse 
 claimant, then, because of the inadequacy of the legal remedy, a 
 court of equity will entertain a bill in his behalf for inquiring 
 into any adverse claim constituting a cloud on the title; and, on 
 proper proof, will decree the removal of such cloud. ^ 
 
 The same — (3) title of plaintiff in possession. — The au- 
 thorities are not uniform as to the character of the title (that is 
 whether legal or equitable) which the plaintiff in possession 
 must exhibit in order to sustain a bill to remove a cloud from 
 his title. 
 
 In many jurisdictions, including Virginia (until a recent stat- 
 
 ' See note, 50 h. R. A. 501; L. R. A. 1915D, 300. 
 ' See 3 CI. & Marsh, on Corp. 1663; Text, § 75. 
 
 '■ Glenn v. West, 103 Va. 521; 3 Pomeroy's Eq. Jurisp. 1399; White- 
 house V. Jones (W. Va.), 13 L,. R. A. (N. S.) 49 and extensive note. 
 
Concurrent Jurisdiction 13 
 
 ute altered the rule) and the Federal jurisdiction, it is held es- 
 sential that the plaintiff have legal title. If he has equitable title 
 only, he must acquire the legal title before filing his bill, since 
 the purpose of such a bill is to protect the owner of the legal 
 title from being disturbed in his possession, and his title ren- 
 dered less secure, or less marketable, by reason of the cloud rest- 
 ing thereon. 2 
 
 The rule is now otherwise in Virginia, by virtue of a recent 
 statute declaring that such a bill may be maintained on an eqid- 
 table title, and this whether the plaintiff be in possession or not.^ 
 
 Pages 47-49. §§ 90-3. (Omit.) 
 
 Page 45, § 85. Enjoining domestic and foreign judg- 
 ments. — The last sentence in this section "Judgments of the 
 several states are domestic judgments within this principle," is 
 out of place. It should be placed at the end of the first para- 
 graph. The Text will then read as follows : "A domestic judg- 
 ment is conclusive between the parties ; i. e. in a suit at law 
 upon it, it is not open to the defendant to impeach it for fraud 
 or for any other cause. It is conclusively presumed to be cor- 
 rect. Judgments of the several states are domestic judgments 
 within this principle" — ^this because of the provision in the 
 United States Constitution requiring that each state shall give 
 full faith and credit to the judicial proceedings of every other 
 state.* 
 
 The result is: (1) As to domestic judgments, and judgments 
 of other states of the Union, these being conclusive at law, eq- 
 uity will intervene, and enjoin their enforcement, when they 
 have been secured by fraud — ^because there is no relief at law. 
 But (2) In the case of foreign judgments (but not judgments of 
 sister states), these are not conclusive at law, and hence the 
 law court itself will afford relief in a proper case. For this rea- 
 son equity will not here intervene. 
 
 ^ Tax Title Co. v. 'Denoon, 107 JVa. 201; Frost v. Spitley, 121 U. 
 S. 552. 
 
 ' Va. Code 1919, § 6248. The subject is regulated by statute in 
 many states. See, generally, both as to the unwritten law and as 
 to the effect and construction of governing statutes, 3 Pomeroy's 
 Eq. Jurisp. 1395-96; monographic note, 12 L. R. A. (N. S.) 49-82. 
 
 " See Christmas v. Russell, 5 Wall 1290; Maxwell v. Stuart, 22 
 Wall 77. 
 
14 Notes on Equity Jurisprudence 
 
 CHAPTER V. 
 
 Concurrent Jurisdiction (Continued). 
 
 Page S3, § 98. Where the ground for equitable relief 
 fails, will a court of equity give legal relief? — The conclu- 
 sion reached by the Text, in the several sections devoted to this 
 question, is that the equity must be answered in the negative, 
 namely, that equity in such case will decline further jurisdiction 
 and remit the plaintiff to his remedy at law. The weight of au- 
 thority is probably the reverse. That is to say, if the plaintiff 
 comes into equity in good faith, on an allegation of peculiar cir- 
 cumstances giving equity jurisdiction, the court may retain the 
 bill and give complete relief, even though the proof does not es- 
 tablish the peculiar circumstances alleged, or the equitable char- 
 acter of the claim, and though the claim turn out to be purely 
 legal. The plaintiff must, however, have gone into court in ab- 
 solute good faith, since if the court is not satisfied of this good 
 faith it will dismiss the bill as an effort to obtain equitable ju- 
 risdiction by fraud. 
 
 The same — illustration. — This is well illustrated in the case 
 of Walters v. Farmers Bank.^ Here the plaintiff held a note, 
 made by a married woman, and endorsed by one Walters, her 
 trustee. As the law then stood, a married woman's contract was 
 void at law, but if she possessed equitable separate estate when 
 the contract was made, such estate might (and may still) be sub- 
 jected in equity. Suit in equity was instituted against the mar- 
 ried woman to subject her equitable separate estate to the pay- 
 ment of the note, the endorser properly being made a party, 
 though the claim against him was purely legal. If the court had 
 jurisdiction of the married woman, it had also jurisdiction of 
 the endorser, notwithstanding the legal nature of his obligation, 
 since it is a maxim of equity, that when it takes jurisdiction of a 
 matter, it will give complete relief. It turned out subsequently, 
 that at the time the bill was filed, the married woman had no 
 equitable separate estate, having previously sold it, but of this, 
 
 ' 76 Va. 13. 
 
Concurrent Jurisdiction 15 
 
 the plaintiff was ignorant. Hence, there was in fact no equitable 
 claim to be considered by the court, and in consequence the suit 
 was dismissed as to the female defendant. The defendant en- 
 dorser thereupon moved to dismiss as to him also, for want of 
 jurisdiction. The court held, however, that the bill might be 
 retained, and purely legal relief against the endorser be adminis- 
 tered. The court said, speaking through Staples, J. : 
 
 "It has been said, however, that inasmuch as Mrs. Neal had no 
 separate estate at the time the bill was filed, the jurisdiction of equity 
 could not attach as to any of the parties, and the bill ought to have 
 been dismissed as to all. * * ♦ xhe principle is almost universal 
 that jurisdiction of the subject matter does not depend upon the 
 ultimate existence of a good cause of action in the particular case. Be- 
 ing once properly and lawfully acquired, so subsequent fact can defeat 
 that jurisdiction. Gocinwell v. Burwell, 1 L,ord Raymond, 466-67; 
 Hunt V. Hunt, 72 N. Y. 217; Salter v. .Salter, 6 Black, i625; Wells on 
 Jurisdiction of Courts, 68; Bush v. Campbell, 25 Graft. 435. 
 
 "The learned counsel for the appellant relies upon the case of 
 Jones V. Bradshaw, 16 Graft. 356, in which it was held that where 
 a party resorts to a court of equity for a discovery as the sole 
 ground for equitable relief, if it appear that he is full handed 
 with proof, his bill must be dismissed. In such case it is mani- 
 fest that the object is by a false pretence to transfer the contro- 
 versy from a legal to . an equitable forum. The rule can have no 
 application to a plaintiff who, in the bona fide assertion of an equitable 
 right, invokes the jurisdiction of a court of equity, but, from some 
 cause developed in the course of the investigation, fails in establishing 
 his title to the specific relief claimed in his bill. In every instance the 
 court must determine upon the facts and circumstances of the particu- 
 lar case, whether it is better to leave the parties to their legal rights 
 and remedies, or to go on and end the litigation by giving complete 
 and final relief in the cause. 1 Bart. Ch. Pract. 339, and notes." 
 
 This principle does not include the case where the plaintiff 
 comes into equity from mere ignorance of the law — but extends 
 only to miscarriages of fact, accompanied by the utmost good 
 faith.2 
 
 Page 56, § 105. May consent confer jurisdiction? — It is 
 settled, save possibly in Massachusetts (as noted in Text, §§ 
 106-7), that consent cannot confer jurisdiction — that is to say, 
 if a suit which properly belongs to a court of law he brought in 
 equity, even though the defendant makes no objection, and be 
 
 ' See 1 Pomeroy Eq. Jur. 181; Paper by Prof. H. St. G. Tucker, 
 15 Va. St. Bar Asso. Rep. 221; Gordonsville, etc., Co. v. Jones (Tenn.), 
 57 S. W. 63; Case v. Minot (Mass,.), 22 h. R. A. 536; Johnson v. 
 Bunn, 108 Va. 490, annotated in 19 L. R. A. (N. S.) 1064. 
 
16 Notes on Equity Jurisprudence 
 
 willing that equity shall adjudge the matter, the chancellor him- 
 self will take notice of the defect of jurisdiction and the cause 
 will be dismissed. This is substantially the doctrine stated in §§ 
 105 and 108 of the Text. 
 Page 59, §§ 106-7. (Omit.) 
 
 Page 59. Distinction between "jurisdiction" and 
 "venue" — The student must carefully distinguish between ju- 
 risdiction — that is, the right of the court to adjudicate causes of 
 the nature of that alleged in plaintiff's bill — and mere venue — 
 that is, the place of suit. 
 
 For example, we may say, with a fair degree of accuracy, that 
 every chancery court in Virginia (and there is one for every 
 county and city) has complete jurisdiction (in a case proper for 
 equitable relief) over every person and all property, real and 
 personal, within the borders of the State. The defendant, how- 
 ever, has the privilege — in case he sees fit to avail himself of it, 
 in the proper time and manner — of being sued in a certain lo- 
 cality, namely, in his county, or where the property is, etc. This 
 privilege he may waive, and does waive, unless he objects at a 
 very early stage of the proceedings. Here, his objection is not 
 to the jurisdiction, but to the venue, or place of suit.^ 
 
 Page 59. Effect where court of equity takes jurisdiction 
 by mistake. — It is a general rule that the judgment or decree 
 of a court without jurisdiction of the subject matter, is coram 
 non judice and void. This, however, does not apply in civil cases 
 where the only question of jurisdiction is between a court of 
 law and a court of chancery, in the erroneous exercise by the 
 latter court of its concurrent jurisdiction. The rule here is, 
 therefore, that if, through inadvertence or outright error, a court 
 of equity does take jurisdiction of a matter with respect to 
 which there was an adequate remedy at law, the decree is not 
 void as being the judgment of a court without' jurisdiction, but 
 is merely erroneous, or voidable — ^that is to say, it is valid and 
 binding until impeached by an appeal taken in due time, or by 
 other proper proceeding directly assailing the decree.* 
 
 ' Moore v. N. & W. R. R. Co., 124 Va. 638— quoting this note. 
 * Lemon v. Herbert, 92 Va. 653; Mellen i: Iron Works, ISl U. 
 S. 352; Goodman v. Winter, 64 Ala. 420, 431-433. 
 
Concurrent Jurisdiction 17 
 
 "If," says Brickell, C. J., in the Alabama case cited above, "an 
 action of ejectment, or a real action were instituted in the court 
 of chancery; or an indictment or information for crime were pre- 
 ferred, the case would be coram non judice, and the decree pronounced 
 void. Or, if in the mode of pleading at common law, any cause of 
 action cognizable exclusively at law was presented, the decree of the 
 court would be void. But if, by appropriate pleading, a case was 
 presented, of which the court would have jurisdiction, if there were 
 not an adequate remedy at law, the error of the court in adjudging 
 that it had jurisdiction, though the bill disclosed the adequacy of 
 legal remedy, and was [for that reason] demurrable, would not 
 render the decree void. + * * jj. would be erroneous and re- 
 versible, but binding and conclusive until it was reversed. A court 
 having jurisdiction to decide the case as presented, does not (avoid 
 its judgment by deciding erroneously that it belongs to a class 
 in which relief ought to be granted. * * * Xhe court has power, 
 and is bound to hear and determine — and the case is coram judice. 
 De Guindre v. Williams, 31 Ind. 456; Shroyer v. Richmond, 16 Ohio 
 St. 455; Cox V. Thomas, 9 Gratt. 313." 
 
 But if a court without any equity jurisdiction whatsoever — 
 for example, one of the character of the recently abolished 
 county courts of Virginia, or the hustings court of the city of 
 Richmond — should entertain a bill in equity, its decree would 
 be not merely erroneous and subject to reversal on appeal, but 
 absolutely void. 
 
18 Notes on Equity Jurisprudence 
 
 CHAPTER VI. 
 
 Maxims. 
 
 Page 60, § 110. "Equity follows the law"— restricted 
 
 application. — Whatever may have been the efficacy of thi.s 
 maxim in earlier times, and during the formative period of the 
 equity jurisdiction, its operation has become so restricted in the 
 course of the development of equity, as almost to warrant its ex- 
 clusion from the category of equitable maxims. 
 
 If equity had followed the law in all cases there would been 
 no need for the system. The student will remember that the 
 birth and remarkable development of the equity system were 
 due to the narrowness and inadequacy of the common law — 
 and it was by the refusal of equity to follow the law that it has 
 won and maintained the important place is now occupies in 
 English and American jurisprudence. 
 
 The same — to what extent equity follows the law. — In 
 
 developing its own system, equity did not wholly reject the prin- 
 ciples recognized at law. It seems to have exercised its own 
 judgment in adopting such of these principles as seemed wise 
 and just, and in rejecting the rest. 
 
 Thus, in the recognition of trust estates in direct opposition to 
 the common law, equity follows the rules of descent and distri- 
 bution as existing in the common-law courts. It also follows, in 
 the main, general legal principles applicable to the formation and 
 validity of contracts; the general rules of construction and in- 
 terpretation of written instruments; the substantial rules of the 
 law merchant; the ordinary rules of evidence — with same strik- 
 ing exceptions in cases of mistake, fraud, and accident; and al- 
 ways where legal rights and titles are the subject of inquiry. 
 Other instances will appear hereafter. 
 
 But, as already indicated, much of equity jurisprudence is 
 made up of principles peculiar to that system, with a complete 
 disregard of legal rules, and in direct conflict therewith. 
 
 For example, in opposition to legal rules, equity enforces 
 trusts; it ignores the sanctity of the seal on a bond or other ob- 
 ligation when justice demands it; compels the adversary to dis- 
 
Maxims — Equity FolIvOws the Law 19 
 
 cover evidence against himself; grants injunctions, specific per- 
 formance, and relief from penalties ; relieves from the results of 
 accident or mistake; and recognizes the right of the mortgagor 
 to redeem after breach of condition — in all of which cases it 
 acts in direct opposition to the rules of the common law.^ 
 
 Equity following the law, continued — ^legal title. — It is 
 
 in connection with questions of legal title to property that this 
 maxim is most frequently applied in equity. Here equity fol- 
 lows legal rules as strictly as do courts of law. Whatever is nec- 
 essary or sufficient to constitute legal title in the one courc is 
 equally necessary and sufficient in the other. But after follow- 
 ing the legal rule as far as that rule goes, equity, in a proper case, 
 goes a bow-shot beyond, and lays upon the owner of the legal 
 title such further duties and obligations as justice and good 
 conscience require. 
 
 Thus, where A conveys or devises an estate to B, in trust for 
 C, the law court would declare legal title in B, and ignore any 
 right in C. Equity follows the law court in assigning legal title 
 to B, and then proceeds to compel B to recognize C's equitable 
 ownership. 
 
 So where A induces B to devise an estate to him, on a prom- 
 ise to hold it for the benefit of C^ — or where an only son induces 
 his father not to make a will so that the father's estate will pass 
 to the son on the former's death intestate, but with a promise on 
 the part of the son to dispose of some portion of the estate so 
 passing to him in a particular way (as to endow the Law Li- 
 brary of the University of Virginia) — a court of equity would 
 concur with the court of law in holding that in the first case the 
 entire estate passed to A, under the will, and, in the second case, 
 to the son by inheritance; but equity would attach to this legal 
 title an equitable obligation to perform the trusts upon which the 
 legal title was accepted. 
 
 Pages 62-66, §§ 113-118. Statute of limitations in equity 
 — does equity follow the law here? — The student will ob- 
 serve that these sections are devoted, under the general head of 
 
 ' See an interesting 'article on this maxim in 40 Am. Law Review, 
 108. ' 
 
20 Notes on Equity Jurisprudence 
 
 the maxim before mentioned, to the subject of the statute of limi- 
 tations in equity. 
 
 Perhaps it may serve to clear up the situation somewhat by 
 pointing out the circumstance that, as a general rule, the stat- 
 utes of limitation do not, in terms, refer to equitable claims, but 
 only to claims asserted at law. Where a particular equitable 
 claim is expressly included in the statute, there is no room left 
 for discussion — since courts of equity are as much under the 
 control of the legislature as courts of law. 
 
 In § lis, the Text lays down, with a fair degree of accuracy, 
 two rules on the subject of the statute of limitations in equity, 
 where equitable claims are not expressly mentioned in the stat- 
 ute, namely : 
 
 (1) Concurrent jurisdiction. — In cases of concurrent juris- 
 diction, that is, where the claim is legal, but equity jurisdiction 
 is invoked because of the more convenient remedy, then equity 
 considers itself bound by the statute of limitations applicable to 
 the legal claim, even though the statute itself makes no reference 
 to the equitable remedy. 
 
 Illustrations here would be a suit in equity to enforce liability 
 on a lost negotiable note — the claim being purely legal, and the 
 equity jurisdiction being invoked merely by reason of the acci- 
 dent of loss of the instrument. 
 
 So, in the same case, if the equity jurisdiction had been in- 
 voked on the ground of the maker's death, and the necessity of 
 equity's aid in winding up his estate. So where an author sues 
 an infringer of his copyright in equity for an injunction, and, as 
 incidental thereto, for an account of all profits resulting from 
 the infringement. Here the claim for profits is a purely legal 
 one, and is asserted in equity only because of the more conveni- 
 ent remedy there. In each of these cases equity would follow 
 the law hy applying the statute of limitation (if pleaded), just 
 as if the claim were being prosecuted in a court of law.^ 
 
 ' Redford v. Clarke, 100 iVa. 115; See Winston 'v. IGordon, 115 Va. 
 899 — a case in equity against bank directors to hold them liable for 
 negligence in the performance of their 'duties — a mere tort, but 
 enforceable in equity for special reasons. The statute of limitations 
 applicable to tort actions at law was held applicable. It will be 
 noticed that in these cases, though the procedure in the two tribunals 
 is different, the relief given is precisely the same in each court. 
 
Statute of Limitations in Equity 21 
 
 (2) Following legal analogy. — Although the claim of the plain- 
 tiff rests on an equitable title merely, yet if, in an analogous case 
 at law, the statute would have barred the claim — and this is par- 
 ticularly true in the case of adverse titles — then equity, though 
 not in terms bound by the statute, will follow the analogy of the 
 law, and apply the statute. 
 
 Thus, where A. procures a conveyance to himself of B's farm, 
 by fraudulent representations, or other inequitable conduct, B 
 may sue either at law or in equity. At law his action would be 
 for damages only — usually an unsatisfactory remedy. In eq- 
 uity he would sue for a rescission of the conveyance and a re- 
 investment of the title in himself. Here the case, as in (1) 
 above, is one of concurrent jurisdiction, but which a wholly dif- 
 ferent remedy sought. Here, again, equity would permit the 
 statute of limitations to be set up against the plaintiff's claim 
 (but excluding the time during which the plaintiff was in ig- 
 norance of the facts constituting the fraud). Here A is treated 
 in equity, as a constructive trustee for B. Hence the rule, that 
 in equity a constructive trustee may claim the benefit of the 
 statute of limitations.* 
 
 Let us add a third and a fourth case: 
 
 (3) Claims purely equitable. — Where the right sought to be 
 enforced in equity is a purely equitable one (that is one not rec- 
 ognized at law) and there is no express statutory bar, and no 
 analogy to be followed because claims of the character asserted 
 are unknown to the law courts, then equity applies its own pe- 
 culiar rule of laches, explained infra.* 
 
 Thus, the claims of the cestui against the trustee of an ex- 
 press or resulting trust (it is otherwise, as we have seen, in the 
 case of the constructive trust) constitute subject-matter purely 
 
 ^ Rowe V. Bentley, 29 Gratt. 756, 759-760; cases in preceding foot 
 note; 2 Va. Law 'Reg. (N. IS.) 6X2. It is generally held Ithat although 
 a debt be barred by the statute at law, equity will enforce any valid 
 lien by which the debt is secured, whether the lien be legal or equi- 
 table. A note secured, for example, by a mortgage or vendor's lien, 
 or a subscription to corporate shares, secured by a lien on the 
 shares, would illustrate such cases. See U. S. Cigarette Machine 
 Co. V. Brown, ill9 Va. 813; Brent v. Bank of Washington, 10 Pet. 
 596. 
 
 * See Craufurd v. Smith, 93 Va. 633, and cases cited below. 
 
22 Notes on Equity Jurisprudence 
 
 equitable. The question is not one of remedy but of right. A 
 law court knows nothing of such claims. 
 
 Suits to foreclose mortgages; to redeem mortgages; to cancel 
 written instruments for fraud or mistake, or to correct written 
 instruments for the same causes; to compel re-execution of writ- 
 ten instruments, lost, destroyed or mutilated; for relief from 
 forfeitures and penalties, etc., are illustrations of purely equita- 
 ble claims, to which, in absence of special provision, the statute 
 of limitations does not apply. They are, however, subject to the 
 defense of laches presently to be noticed. 
 
 (4) Bquitable claims expressly m,entioned in statute. — Where 
 claims purely equitable are expressly mentioned in the- statute of 
 limitations, e. g., foreclosure of mortgage (twenty years in Vir- 
 ginia) ; suit to set aside voluntary conveyance (five years). 
 Here, of course, equity must obey the statute, subject to the 
 next section. 
 
 Page 64, § 116. Lack of notice prevents the running of 
 statute of limitations in equity. — The rule of the common- 
 law courts is that ignorance of one's rights does not clog the 
 running of the statute, save where there has been fraudulent 
 concealment. But in equity the rule is the reverse, and courts 
 of equity, as a general rule, regard the statute of limitations as 
 running, if at all, only from the time that the plaintiff discovered 
 his right, or by due care might have discovered it, even though 
 there has been no fraudulent concealment. ^ 
 
 Laches. — The rule of laches referred to in the paragraph 
 numbered (3) above, is, that although equity, in such cases, is 
 not bound by the statute of limitations, it will yet refuse relief 
 to a plaintiff who has knowingly or negligenly slept on his rights, 
 as the result of which enforcement of the claim is likely to 
 produce a failure of justice by reason of the loss of evidence — 
 as by the death or forgetfulness of witnesses, or by loss or de- 
 struction of papers. 
 
 But where, on the other hand, none of these reasons exist — as 
 
 ■^ See 2 Potneroy's Eq. 917; Kilbourn v. Southerland, 130 U. S. 
 519; Rowe v. Bentley, 29 Gratt. 756; Hall v. Graham, 112 Va. 560; 
 Wingfield v. McGhee, 112 Va. 644; Winston v. Gordon, 115 iVa. 899. 
 
Laches 23 
 
 where the plaintiff was ignorant of his rights, without his fault, 
 or the justice of the claim rests in written documents, or in the 
 well authenticated admissions of the defendant — then equity may 
 enforce the claim in spite of the long lapse of time, unless the 
 circumstances of the delay indicate an abandonment of the claim. 
 
 Laches, continued — illustrations. — Thus, in a recent case 
 in Virginia,* after the estate of a decedent who died forty years 
 before, intestate, had been distributed among his heirs and dis- 
 tributees, a will was discovered which was duly probated, devis- 
 ing and bequeathing the estate to others than the distributees 
 and heirs. In a suit instituted by the beneficiaries under the will 
 to recover the estate from those who had thus unlawfully re- 
 ceived it, it was held that since this sort of a case was not men- 
 tioned in the statute of limitations, and since there was no le- 
 gal analogy to follow, the court would be governed by its own 
 peculiar rule as to stale claims. And inasmuch as the rights 
 of the plaintiff appeared on the face of the will, and the char- 
 acter of the estate and its distribution among the defendants 
 was a matter of record, and not dependent on oral testimony, 
 the defendants were required to account to the rightful owners 
 for what they had received. 
 
 Laches — illustrations, continued. — In Southern Railway 
 Co. V. Gregg,'' a vendor's lien on real property was enforced after 
 the lapse of sixteen years, although as a simple claim for money 
 it would have been barred at law in five years or less. In this 
 case the claim had been continuously asserted, and continuously 
 acknowledged. 
 
 In a still more recent case,* under similar circumstances, a 
 legacy charged on land was enforced after the lapse of fifty 
 years. And in still another case, it was held that where plain- 
 tiff discovered a considerable shortage in the acreage of a tract 
 of land purchased by him of the defendant, he might maintain 
 a bill in equity against the seller to recover the purchase money 
 
 Craufurd v. Smith, 93 Va. 633. 
 
 101 Va. 308. 
 
 Wingfield v. McGhee, 112 Va. 644. 
 
24 Notes on Equity Jurisprudence 
 
 pro tanto, although twenty-four years had elapsed between the 
 date of the payment and the discovery of the shortage.* 
 
 Laches, continued — rationale of the doctrine. — The word 
 laches is borrowed from the French, and literally means negli- 
 gence. Generally speaking, therefore, a plaintiff, to be barred of 
 his claim by laches, must have been guilty of negligence in not 
 asserting it earlier. 
 
 All courts abhor stale claims — for the reason that their en- 
 forcement is apt to result in injustice to the defendant by reason 
 of his inability to establish his defence after long lapse of time, 
 or, that in honest reliance upon the status quo, he has altered his 
 condition for the worse. There is also a presumption that a 
 claimant who has known of his right but has failed for a long 
 time to prosecute it, has either abandoned it, or has purposely 
 delayed his suit from some sinister motive — as the hope of the 
 death of those most familiar with the facts, or of their forget- 
 fulness of the facts, or of the loss otherwise of adverse evidence. 
 The burden, therefore, of removing such presumption is on the 
 claimant. 
 
 There is also a prima facie (i. e., rebuttable) presumption that 
 after a lapse of twenty years all matured claims have been set- 
 tled or adjusted. 
 
 The same — overcoming the presumption of laches. — It 
 
 is to be observed that every case of alleged laches stands on its 
 own bottom ; and the question of laches or no laches, in any case, 
 depends on the peculiar facts of that particular case. 
 
 In its last analysis, the question for the court in all such cases 
 is, Can the court, in this case, enter a decree for the plaintiff 
 without serious risk of doing injustice to the defendant? If 
 the claim has been continuously asserted and continuously ac- 
 knowledged, the case is plain. If not thus continuously asserted 
 and acknowledged, then the court must consider whether the lapse 
 of time and the acquiescence and other conduct of the plaintiff 
 
 ' Hall V. Graham, 112 Va. 560. The decision in this case is placed 
 by the court more distinctly on the ground that the statute of limita- 
 tions (assuming it applicable from analogy to a claim for money 
 at law) did not begin to run in equity (it is otherwise at law) un- 
 til the discovery of the mistake. Southern Pac. R. Co. v. Bogert, 
 250 U. S. 483, is an interesting case in this connection. 
 
Maxims — Foi<lowing the Law 25 
 
 have not indicated abandonment on his part. If not, then the 
 question is, Has the lapse of time resulted adversely to the de- 
 fendant, in the loss or serious impairment of the evidence by 
 which he would meet plaintiff's allegations? If the court can 
 answer this question affirmatively then, unless there be other 
 countervailing circumstances, the plaintiff will be denied re- 
 lief. But if the answer be negative, and the presumption of 
 abandonment has been repelled, and the court is satisfied that 
 in spite of the delay a decree may now be entered for the plain- 
 tiff, without serious risk of injustice to the defendant, the de- 
 fence of laches will be rejected. ^^ 
 
 Page 66, § 119. "Where equities are equal the law wUl 
 
 prevail." — The first paragraph of the Text contains an excel- 
 lent, statement of the real meaning of this maxim. This, in sub- 
 stance, is that as between two adverse claimants of the same 
 property, both equally honest and both having paid value, he 
 who has acquired the legal title (as opposed to the mere equita- 
 ble title of his adversary) will prevail, not only, as of course, 
 in a court of law (where equitable titles are not recognized), but 
 in a court of equity as well. 
 
 The student has already seen something of the same rule in 
 his studies of negotiable instruments, and of the law of sales 
 of personal chattels. A holder in due course of a negotiable in- 
 strument, tracing legal title to himself, has priority, not only 
 over the equities of the maker, but of any other claimant of the 
 paper, who must necessarily stand on a mere equitable title 
 
 The principle enunciated in the maxim is one of the most im- 
 portant in the whole realm of equity, and one of constant recur- 
 rence in this branch of jurisprudence. The more common form 
 in which it finds express.ion is that "a bona fide purchaser, for 
 value, of the legal title to property, real or personal, takes the 
 property free from all equitable claims of third persons of which 
 he had no notice.' We shall have occasion to make many prac- 
 
 " There is no fixed period of time within which flesh or fruit 
 will become stale. This period depends upon the temperature and 
 other surrounding conditions — each according to its own peculiar 
 surroundings. So with a case in equity on the question of laches, 
 when unaffected by the positive bar of the statute of limitations. 
 
26 Notes on Equity Jurisprudence 
 
 tical applications of this principle, and the student's careful at- 
 tention is invited to it here.^^ 
 
 Page 67, § 120. "He who seeks equity must do equity." 
 
 — This is one of the most valuable maxims in the scope of eq- 
 uity jurisprudence. The student will observe that it is especially 
 applicable to the plaintiff, or to one seeking affirmative relief. It 
 may be said to be the price which the court charges the plaintiff 
 for its assistance. There are several excellent illustrations of 
 the application of the maxim in the Text footnotes. 
 
 A good illustration is the rule that while a court of equity will 
 not enjoin a creditor who, before proceeding against the principal, 
 seeks to subject at law the estate of a surety (which he has a right 
 to do, since the surety is as much liable for the debt as is the 
 principal), yet if this creditor should find himself in need of the 
 aid of the court of equity, to enforce his claim against the surety, 
 the court will put him upon terms — that is to say, will make him 
 "do equity" by compelling him first to exhaust the estate of the 
 principal. It is, therefore, a settled rule of equity that it will not 
 subject the estate of a surety at the smt of a creditor, until the 
 principals estate is first subjected — save where the application of 
 this principle would cause inequitable delay or other injustice to 
 the creditor.12 
 
 The same — "putting plaintiff on terms." — The applca- 
 tion of the foregoing maxim is frequently called "putting plain- 
 tiff on terms." By this is meant that the court will consent to 
 grant the relief, in whole or in part, prayed by the plaintiff, on 
 condition that the plaintiff will himself comply with such terms 
 and conditions as equity and good conscience demand that he 
 should concede to his adversary. i^ 
 
 If the terms or conditions which the court may thus exact of 
 the plaintiff were confined to such as the defendant might have 
 demanded as of right, in an independent suit against the plaintiff, 
 
 " See an interesting application of the maxim in Evans v. Roanoke 
 Savings, Bank, 95 Va. 394; 3 Va. Law Reg. 705. 
 
 '^ See Horton v. Bond, 88 Gratt. 615. 
 
 ^ Striking illustrations of this principle will be found in the cases 
 cited: Shoflfela v. Nugent, 217 [U. S. 499; iVeazie v. .Williams, 8 iHow. 
 (U. 'S.) 133; Tennant v. Dunlop, 97 Va. 235. Numerous illustrations 
 occur also in the Text and footnotes. 
 
Maxims — Doing Equity . . 27 
 
 or as plaintiff or defendant in a court of law, this principle 
 would lose much of its force and scope. But it is not so limited. 
 On the contrary, the court may, under this rule, decline relief 
 to which the plaintiff is clearly entitled, unless the plaintiff, as 
 the prif-e of the court's assistance, will do or perform something 
 which the court thinks the plaintiff as an honest person should 
 do in behalf of the defendant, even, though the terms and condi- 
 tions thus exacted are not of themselves justiciable rights, en- 
 forceable independently against the plaintiff. 
 
 The same — illustrations. — A few illustrations may make 
 this clearer : 
 
 Thus where the plaintiff seeks to recover property of which 
 he has been defrauded by the defendant, he must return to the 
 defendant the consideration received — ^though defendant, as the 
 penalty for his fraudulent conduct, could not recover such con- 
 sideration in an independent suit. 
 
 Again, a usurious borrower who comes into equity for relief 
 from the usurious contract, will be required, as the price of the 
 court's entertaining his suit, to repay to the usurious creditor the 
 entire principal of the debt, with legal interest — although the 
 vice of usury has rendered the contract void, or voidable, and 
 thus debarred the creditor from any recovery whatsoever in an 
 independent action. 
 
 The same — illustrations — continued. — Although a contract 
 made by an infant, not for necessaries, is voidable jDOth at law 
 and in equity, yet if the infant comes into equity for relief 
 against his contract — say, a mortgage on his farm — equity will 
 require him to account for all benefits actually accruing to him 
 from the loan or crther consideration received — for instance 
 taxes paid, or betterments to the property, or prior incumbrances 
 paid off, out of the loan. 
 
 A quite striking illustration occurs in the recent case of U. S. 
 Cigarette Machine Co. v. Brown.^* Brown had subscribed for 
 shares in the defendant company, but had failed to pay his sub- 
 scription in full. The company sued, in a court of law, for the 
 balance due, but was defeated on Brown's plea of the statute of 
 
 119 Va. 813. 
 
28 NoT^s ON Equity Jurisprudence 
 
 limitations. By statute, the company had a lien on the shares 
 for unpaid subscriptions. Later Brown sued in equity to compel 
 the issue and delivery of the shares. The court decreed that 
 Brown -jvas entitled to delivery of the shares only on condition 
 that he pay the full balance due thereon. 
 
 Page 69, § 124. "Equity treats that as done which ought 
 to be done" — doctrine of "conversion." — A common appli- 
 cation of this maxim is that mentioned in Text, footnote 2, viz : 
 that where a testator directs (not merely authorizes), his real 
 property to be sold and the proceeds divided among certain bene- 
 ficiaries, the interest of the latter in the estate is regarded as 
 personal property. 
 
 And, e converso, where money is bequeathed, or contracted, 
 to be laid out in real property, for a named beneficiary, a similar 
 conversion occurs — the money being regarded as real property. 
 The presumption of a change in the nature of a particular res, 
 prior to the fact, is known as the doctrine of "conversion." 
 
 So, where one validly contracts to sell real property to another, 
 in equity the land is regarded as belonging to the purchaser, and 
 the purchase money to the seller. And hence, where after such 
 a contract, the vendor marries a wife, she will not be entitled to 
 dower in the real property so sold although it be not conveyed 
 to the purchaser until after the marriage. i* 
 
 It is in accordanc with this principle that a vendee of real 
 property, under an executory contract of sale, (f. c. before title 
 conveyed), is regarded as the "unconditional and sole owner," 
 under a fire insurance policy requiring that the insured shall be 
 such, in order to render the policy valid. ^^ 
 
 The same — extent of conversion. — It is carefully to be ob- 
 served, however, that this conversion is a mere equitable concept, 
 adopted only for fixing the rights of the parties — and is limited 
 to that purpose. There is no presumption, for example, that the 
 
 " See Chapman v. Chapman, 93 Va. 538; Tazewell v. Smith, 1 
 Rand. 320; Shanks v. Edmondson, 28 Gratt. 811; :Re Handy's Estate 
 (Pa.l, 37 Atl. 854; Oiven v. Hilton, B5 U. S. 591; 17 Harvard Law 
 Review, 189. 
 
 " See Arkansas Ins. Co. r. Cox '(Okla.), 98 Pac. S52, "30 1, 
 R. A. (N. S.), 775, and note. 
 
Maxims — Conversion 29 
 
 formalities required for the passage of title have actually been 
 complied with. 
 
 For example, where A ought to have conveyed title to B at a 
 specified date, according to his contract, but did not, the rights 
 of the parties will be determined as if the conveyance had ac- 
 tually been made at the time stipulated; but the legal title will 
 not be regarded as actually passing to B until formal transfer by 
 deed. 
 
 The maxim, continued — conversion is complete. — 
 
 Where proper circumstances concur for application of the theory 
 of conversion, such conversion, so far as concerns the rights of 
 ownership, is out and out. 
 
 Thus, a devise of Blackacre to a trustee, with directions to 
 sell and pay over the proceeds to A, operates as a conversion 
 of the real property into personality from the moment the will 
 becomes effective. Should A now die intestate before the sale 
 actually takes place, his interest would be treated in eqwity as 
 personal estate, and would pass, not to his heirs, but to his per- 
 sonal representative. Nor would it be subject to his widow's 
 dower. 
 
 Carrying the principle a little further, if, instead of dying in- 
 testate A had by will given, in general terms, 'all his real estate' 
 to B, and 'all his personal estate' to C, the latter and not the 
 former would be entitled to the theoretically converted res. And, 
 as we shall see in the following section, C might elect to take it 
 in its original form of real property, and thus bring about what 
 is known as "reconversion." 
 
 The maxim, continued — "reconversion." — It is interest- 
 ing and of practical importance to note that where real property 
 is thus directed to be converted into money, or vice versa, and 
 devised or bequeathed absolutely to a named beneficiary in its 
 converted form, the beneficiary, if sui juris, may elect to receive 
 it in its original, unconverted form, and may require the execu- 
 tor or trustee to transfer it to him in such original form. This 
 is known as "reconversion." 
 
 This right of election follows necessarily from the circum- 
 stance that the entire res belongs to the beneficiary. If the prop- 
 erty to be sold is real property, the beneficiary, who is to receive 
 
30 Notes on Equity Jurisprudence 
 
 the entire proceeds, may appear at the sale and outbid any other 
 prospective purchaser, since he is complete master of the situ- 
 ation, and may pay the purchase price with a simple receipt to 
 the executor or trustee for the proceeds of the sale, whatever 
 the amount. 
 
 If, on the other hand, the res consists of money to be laid out 
 in land, the beneficiary may reconvert by demanding the money. 
 Here he is similarly dominus rei, since if the fund be actually 
 laid out in land, he may reconvert into money by a sale of the 
 land immediately upon the transfer of the latter to him. 
 
 In either case, therefore, equity accords to the beneficiary the 
 right to elect in which form he will receive the gift — thus avoid- 
 ing the doing of a vain act. 
 
 Page 70, § 125. "Equality is equity." — This maxim is 
 rather narrow in its scope, and is of less practical importance 
 than most of the others here presented. It simply means that 
 equity, (like a good parent with his children) when free to ex- 
 ercise discretion in the distribution of benefits or of burdens 
 among a class, all the members of which have an equal claim to 
 the consideration of the court, will, as far as possible, distribute 
 these benefits or burdens equally. Expressed in briefer form, 
 wherever in equity and good conscience benefits or burdens 
 should be borne equally by the interested parties, equity will so 
 distribute them, when not prevented by the positive terms of 
 the law, or of the will, contract or other instrument or transac- 
 action giving rise to the controversy. But the student must not 
 entertain the idea that equity ever exercises the autocratic power 
 of overturning the provisions of law, or the vested rights of par- 
 ties under a will, deed or other instrument, in order to carry out 
 its own ideas of equality — thus substituting its own will for that 
 or the original testator or grantor. 
 
 Page 70, § 125. The maxim, continued — illustrations. — 
 
 In Kass v. Kastleberg,!'' a testator bequeathed to his four sons, 
 "all my property used in my butchering business," and the residue 
 of his estate to his wife and all of his children, including the four 
 sons. In the settlement of his estate, it was doubtful from the tes- 
 
 98 Va. 378. 
 
Maxims — Equauty in Equity 31 
 
 timony whether a certain balance in bank was connected with 
 the "butchering business" or not. The court settled the doubt 
 by applying the maxim and dividing the balance among all the 
 children. 
 
 Omit § 126. Notice illustrations in §§ 127, 128 and 129. 
 
 Another illustration is found in the rule that where one hav- 
 ing the power of appointment of an estate among a named class, 
 or among designated persons, dies without making any appoint- 
 ment, equity will itself make the appointment; and, in accord- 
 ance with the maxim, will appoint to all of the possible bene- 
 ficiaries equally. Thus a bequest "to my wife for life, with re- 
 mainder to such of our children living at her death, as she may 
 by last will appoint." Here the wife may exercise a choice 
 among the children — including some and excluding others. But 
 if she fails to make any appointment at all, equity will distribute 
 the estate equally among all the children. 
 
 Pag* 72, § 130. "Equity deals with the individual"— in 
 
 rem proceedings. — While it is true that equity deals with the 
 individual, and, having jurisdiction of the individual, may gen- 
 erally settle the rights of the parties, although the subject-matter 
 of the controversy be in another state, the student must not in- 
 fer that equity deals with the individual only.^^ For the reverse 
 of the proposition stated is equally true, namely, that if equity 
 has jurisdiction of the subject-matter, it may adjudicate the 
 rights of the parties thereto, even though by reason of non-resi- 
 dence, or otherwise, it may be unable to obtain jurisdiction in 
 personam. 
 
 Thus, if a New York citizen have property in Virginia, which 
 he has incumbered with a mortgage to a creditor, the latter may 
 bring a bill to foreclose the mortgage in Virginia, although the 
 mortgagor refuses to appear, and the process of the Virginia 
 court cannot reach him in New York. In other words, equity 
 may deal in rem as well as in personam,.^^ 
 
 '* Vaught V. Meador, 99 ,Va. 569, 7 Va. Law Reg. 341 and note; 
 n. 23 L. IR. lA. 394; 'Newton v. iBronson, ,13 N. Y. 687, 67 Am. 
 Dec. 89, and full note. 
 
 '° See iPennoyer v. Neff, 95 U. S. S. 714; iFreeman v. Alderson, 119 
 U. S. 398; Wilson v. Seligman, 144 U. S. 41; note, 32 Am. St. 
 Rep. 624. 
 
32 Notes on Equity Jurisprudence 
 
 The same— exception to the rule that equity may dis- 
 pose of exraterritorial estate, where it has jurisdiction 
 over the parties. — While, as shown, it is usually sufficient for 
 the purpose of adjusting controversies concerning property in 
 another State, that equity can obtain jurisdiction of the indi- 
 vidual, an exception exists where it is necessary for the court to 
 deal directly with the extraterritorial property itself. In such 
 case, jurisdiction of the person is not sufficient, and the court 
 will decline to grant relief. As for example, in the case of par- 
 tition.2o 
 
 The same — a second application of the maxim — ^passing 
 legal title. — The maxim that equity deals with the individual 
 has another important application, in connection with the force 
 and effect of an equity decree. 
 
 A judgment at law, for example, that A recover a particular 
 parcel of land, fixes the legal title in A as against all parties to 
 the action. But the reverse is true in equity — it being a settled 
 principle that the decree of a court of equity does not operate ex 
 propria vigore, so as to affect the legal title to property — but its 
 force is, in large measure, due to its effect on the conscience of 
 the individual against whom the decree is directed, and the 
 power of the court to compel obedience to its decree, by its proc- 
 ess of contempt. Hence the rule is that the decree in equity 
 cannot of it.^ own force divest or transfer legal title to property. 
 The maxim does not mean that equity cannot, by a proper pro- 
 ceeding, act in rem, where the res is within the jurisdiction, but 
 that its decree can, of itself, operate only in personam. 
 
 Hence, in order to pass legal title to real property under a de- 
 cree, from one person to another, there must be a conveyance by 
 the party in whom is the legal title, or by a master, or commis- 
 sioner, acting in pursuance of the decree — and of course, the 
 holder of the legal title must be a party to the suit.^^ 
 
 "" See Poindexter v. Burrell, 82 Va. 507; Hotchkiss v. Middlekoff, 
 96 iVa. 649. 
 
 It is generally held also that an injunction for trespass on lands 
 is so local in Its nature, that courts of equity outside of the State 
 where the land is situated will not assume jurisdiction. Northern 
 Ind. Ry. Co. v. Mich. Cent. Ry. Co., 15 Howard, 233; 3 L. C. E. 
 1817-1832. 
 
 ^ Proctor V. Ferebee (X'. C.) 36 Am. Dec. 34, and full note; 4 
 Min. Inst. 1464. 
 
Maxims — Equity Deals with the Individual 33 
 
 By statute in Virginia, a decree in a partition suit vests legal 
 title in the parties. ^^ And a decree appointing a new trustee to 
 execute a trust, vests legal title in the appointee, without a Jeed 
 or other formality. ^^ 
 
 To meet the inconvenience frequently arising from the rule in 
 question — particularly where the legal title to be conveyed is 
 vested in infants or lunatics, though not confined to those cases 
 — courts of equity have the power, either by statute ^* or by un- 
 written rule, to appoint a master, or commissioner, to convey ti- 
 tle as directed by the decree, on behalf of all parties to the suit. 
 Such a conveyance will convey complete legal title as effectu- 
 ally as if executed by every party in interest represented in the 
 suit.26 
 
 The same — conveyance by foreign master. — ^It seems 
 scarcely necessary to point out that since the decree operates 
 only on the conscience of the defendant, and not ex propria 
 vigore, the court cannot through its officers exercise, as of right, 
 authority over property. in another state. Hence a conveyance 
 of land in one state made by a master in chancery acting under 
 the decree of a court in another state, is ineffectual ' to pass ti- 
 tle.2« 
 
 A conveyance of land in another state must, then, be made by 
 the party in, whom the title is. If he be within the jurisdiction 
 of the court and sui juris, such a conveyance may be compelled 
 by the process of contempt— operating, it will be observed, in 
 personam only. If he is beyond the jurisdiction, the court is 
 powerless in the premises. 
 
 The same — a third application — enjoining proceedings 
 at law. — As we shall see later, courts of equity constantly exer- 
 cise the jurisdiction to enjoin proceedings at law, where satisfied 
 that complete justice cannot be administered in the common law 
 court. This -may be done before action brought, or while the 
 action is pending, or after judgment at law. 
 
 '^ Va. Code 1919, § 5283. 
 '' Va. Code 1919, § 5303. 
 ^ Va. Code 1919, § 6396. 
 '= Hurt V. Jones, 75 Va. 341. 
 
 ^ Fall 'v. ;Eastin, 315 U. S. 1, reported with annotations in 33 L,- 
 R. A. 924; extensive annotation, 69 L. R. A. 673, 694. 
 
34 N'OTEls ON Equity Jurisprudence 
 
 But under the influence of the rule that 'equity deals with the 
 individual,' this injunction is addressed, not to the common law 
 court itself, nor to the sheriff or clerk, or other official of that 
 court, but solely to the plaintiff in the common law action; and 
 its purport is that he shall not proceed further in the law court, 
 or avail himself of the judgment recovered, until the court of 
 equity has adjudicated the rights of the parties. 
 
 In such case, where equity has taken jurisdiction it will at 
 once proceed to administer relief ; and even though the plaintiff 
 in equity (defendant at law) fails to make out his equitable de- 
 fence at the trial, the court may generally proceed to do what is 
 right between the parties, even to the administering of legal re- 
 lief. 
 
 Such an injunction operates only on the enjoined individual, 
 and in no wise interferes with the proceedings in the law court, 
 until the enjoined party (necessarily dominus litis in that court) 
 himself stays the proceedings, in obedience to the mandate of 
 the chancellor. Thus the court of equity avoids a clash of juris- 
 diction with the law court, or the arousing of its jealousy or ill 
 will — a very important consideration in the earlier days of the 
 equity jurisdiction. 
 
 Page 78 (footnote). "He who comes into equity, must 
 do so withclean hands." — This maxim is one of frequent ap- 
 plication in equity, and its significance and scope may best be in- 
 dicated by examples. 
 
 Thus : Where one consort goes into equity seeking a divorce 
 on the ground of the other's adultery, recrimination by the de- 
 fendant is a bar to the suit. That is to say, if the defendant 
 can prove that the plaintiff is himself guilty of adultery, the 
 plaintiff has not come into court with clean hands and will not 
 be heard. 
 
 Again, where the plaintiff seeks to enjoin the defendant from 
 infringing an alleged trademark, if it appear to the court that 
 the trademark is itself fraudulent, and tends to deceive the pub- 
 lic, no relief will be granted, because of the lack of clean hands 
 on the part of the plaintiff.^'^ 
 
 " See the famous Fig Syrup case, Worden v. Cal. Fig Syrup Co., 
 187 U. S. 516; Houchens v. Houchens (Md.), 51 Atl. 823. 
 
Maxims — Unclean Hands 35 
 
 One of the most familiar applications of this maxim is in de- 
 nying relief to one who has conveyed his property to a confed- 
 erate, in order to defraud his creditors. The grantee may hold 
 the property and defy the grantor in his effort to recover it — 
 since the latter must set up his own fraud, and thus exhibit the 
 unclean hands condemned by the maxim. 2* 
 
 The same — unclean hands in the very subject-matter 
 of the suit. — The uncleanness, however, which debars the plain- 
 tiiif from relief must have a direct and immediate connection 
 with the equity which he is seeking to enforce. As said by the 
 court in Shaver v. Heller & Mertz Co.,^^ "the maxim does not 
 repel all sinners from courts of equity; nor does it disqualify 
 any complainant from obtaining relief there who has not dealt 
 unjustly in the very transaction concerning which he com- 
 plains." 
 
 Other maxims in equity. — Thus far effort has been made 
 to deal, somewhat in detail, with the more important maxims — 
 but the list has been in no wise exhausted. Others are noticed 
 briefly in Text footnotes pp. 78-79. For example: 
 
 (a) "Between equal equities time shall prevail." — 
 
 Sometimes expressed, "First in time first in right" — "prior in 
 tempore potior in jure." 
 
 This maxim is one usually resorted to as the rule of decision 
 where neither party has the legal title to the res in controversy, 
 and there is no other principle decisive of the case. It is always 
 applied with caution, as it expresses a broad general principle 
 only. 
 
 The case (inadequately) stated in the Text footnote (p. 78) 
 is a good illustration. Here A held the legal title to Blackacre, 
 subject to an equitable lien in B's favor. C purchased from A 
 without notice of B's lien, but A's conveyance to C was defect- 
 ive, and did not carry legal title. Here the equities of B and C 
 
 '" Harris v. Harris, 23 Gratt. 737; note 3 Am. St. Rep. 737. 
 
 " 108 Fed. (C. C. A.) 831. 
 
 " See Trice v. Comstock (C. C. A.), 131 Fed. 630; Stoffela v. 
 Nugent, 1217 U. S. 499 — a particularly interesting case, in which 
 Holmes, >J., said, very sententiously, that "a man by committing a 
 fraud does not become an outlaw and caput lupinum," 
 
36 Notes on Equity Jurisprudence 
 
 were precisely equal, and neither had legal title. Hence B, be- 
 ing first in time, was held to be first in right. 
 
 The principle is frequently applied in contests between com- 
 peting assignees of choses in action, neither of whom, by the 
 common law, can have legal title. Nothing else appearing, the 
 first assignee is preferred, as there is an equality of equities. 
 But if the first assignee fails to take possession of the instru- 
 ment evidencing the chose, whereby the second assignee is misled 
 into believing the assignor still to be the owner — or fails to no- 
 tify the debtor of the assignment to himself — or is otherwise 
 guilty of fraud or negligence, — and the second assignee has been 
 alert in making his title as secure as possible — then the equities 
 of the latter assignee are superior to those of the former, and 
 the maxim has no application. In order for the maxim to ap- 
 ply the equities must be "equal;" and in order for the equities to 
 be equal the one claimant must not have excelled, or fallen short 
 of, the honesty and diligence of the other. It is only where eq- 
 uities of the parties are evenly balanced, that a mere hair thrown 
 into the balance will turn the scales in favor of one or the other. 
 The equity of priority of time may in a sense be likened to this 
 deciding hair. 
 
 (b) "Equity gives complete relief." — A favorite and fre- 
 quently applied principle in equity. It means, in brief, that 
 where equity has taken jurisdiction of a cause for one equitable 
 purpose, it will proceed to settle the entire controversy among 
 all parties concerned, even though this requires the administer- 
 ing of legal relief. 
 
 The case of Walters v. Farmers Bank already noted ^^ illus- 
 trates the rule. In that case the holder's claim against the n ir- 
 ried woman (maker of the note) was in equity, while the claim 
 against the indorser was at law. It was held that equity would 
 take jurisdiction of the indorser as well, and thus give complete 
 relief in a single suit. « 
 
 So where equity takes jurisdiction to discover evidence in con- 
 nection with a purely legal claim, it may retain the bill and en- 
 ter a decree for the amount justly due. So where equity has 
 
 76 Va. 13; supra Ch. V. 
 
Maxims — Equity Looks at Substance 37 
 
 granted an injunction to prevent the cutting of timber, the in- 
 fringement of copyrights, trademarks or patent rights, and sim- 
 ilar wrongs primarily legal, it may go further and direct an ac- 
 count of the profits made by the defendant, though his wrong is 
 but a tort remediable in a court of law. As the parties are al- 
 ready in a court of equity, that court will completely dispose 
 of the whole controversy. We shall encounter many illustrations 
 of the application of this principle in the course of these studies. 
 
 (c) "Equity looks at substance, not at forms." — An 
 
 extremely wise and just principle is embodied in this maxim. 
 We shall see its influence in many directions as we advance in 
 our pursuit of equitable principles. 
 
 For example, the common law fetish-worship of the seal has 
 no place in equity. At law the seal cuts off all inquiry as to the 
 consideration of the sacred instrument; it permits no plea of 
 failure or fraud in the consideration ; the sacrosanct writing may 
 only be released by a writing of equal dignity and sanctity; no 
 agent may execute it without sacred credentials under seal ; even 
 payment of the obligation in full may not be pleaded, unless ac- 
 companied by a discharge under seal. 
 
 In equity, on the other hand, while the seal prima facie im- 
 ports a consideration, the court does not hesitate, where justice 
 demands it, to break the sacred seal, and to uncover and con- 
 demn whatever is of evil behind it. The form of the contract 
 here does not deter the chancellor from exploring the sub- 
 stance.*^ 
 
 The same — further illustrations. — So equity will treat a 
 deed, absolute in form, as a mortgage, on clear proof that such 
 was the real intention of the parties ; and will similarly deal with 
 any other instrument really meant as a mere security for the 
 payment of a debt, but given the form of a 'sale' or a 'lease' or 
 otherwise.** So equity delights in relieving distressed defend- 
 ants (compare Shylock v. Antonio) from the payment of penal- 
 
 '^ In most of the states, statutes have been adopted, permitting the 
 law courts in these cases to give reHef to a limited extent — the de- 
 fendant being privileged to file equitable pleas in actions on sealed 
 instruments. iSee Va. Code 1919, § 6145. 
 
 ■" Gates V. Arbuckle, 95 Va. 803. 
 
38 Notes on Equity Jurisprudence 
 
 ties and forfeitures, where it clearly appears that these were in- 
 tended to secure payment of money, or the performance of other 
 obligations.** Other applications of the principle will appear 
 hereafter. 
 
 (d) "Equity will never allow a trust to fail for want of 
 a trustee." — The maxim embodies a settled and favorite doc- 
 trine of equity. In brief, its significance is, that where a court 
 of equity is satisfied that the testator or grantor, in transferring 
 an interest in property, real or personal, intended a trust, the 
 circumstances that he named an improper trustee, or even failed 
 to name a trustee, or that the trustee; named declined the trust, 
 or later died or resigned, the court will not suffer the trust to 
 fail, but will itself appoint a trustee to execute the trust. 
 
 CHAPTER VII. 
 
 Trusts. 
 
 Page 84, § 151. Who may be a trustee. — The Text answers 
 this question by the statement that "cdl persons sui juris" may 
 be trustees. There is a manifest distinction between who may, 
 in the first instance, be a trustee, and who will be appointed or 
 sanctioned by the court of equity as a permanent trustee to hold 
 or manage an estate. The first question — who may be a trustee 
 ■ — may be answered by the statement that any living person may 
 be a trustee — whether sane, or insane, infant, or adult, individ- 
 ual or corporate. 
 
 This means that legal title to property, real or personal, may 
 be vested in any person in trust for another. But it does not 
 follow that the court, on objection made by one in interest, 
 would sanction the appointment or retention of an improper 
 person — whether the objection go to the trustee's moral char- 
 acter, his business ability, or otherwise. If for any reason the 
 court is satisfied that the trustee is an unfit person, it has am- 
 ple power to remove him and to substitute another trustee in 
 his stead. 
 
 See post, ch. xv. 
 
Trusts — New Trustee — Parol Trusts 39 
 
 Page 85, § 154. Appointment of new trustee. — Where for 
 any reason the office of trustee is vacated, and a new trustee is 
 appointed, it is essential that there be a conveyance of the legal 
 title from the former trustee, or his heirs, to the new trustee, 
 since, as we have heretofore seen, the mere decree of a court of 
 chancery cannot divest legal title to real property. This is so 
 inconvenient that in many states, statutes have been passed to 
 remedy the difficulty. ^ 
 
 In Virginia, by statute, the personal representative of a sole 
 trustee (even where the trust estate is real property), may exe- 
 cute the trust, or the court may appoint a new trustee, in which 
 case no conveyance to the newly appointed trustee is necessary. 
 Title passes by force of the statute.^ 
 
 Page 87, § 160. Statute of frauds — parol trusts in realty. 
 
 Logically it would seem that in those States in which § 7 of the 
 Statute of Frauds (requiring that declaration of trusts in lands 
 to be proved by a writing) has not been reenacted, trusts might 
 still be created by parol. This clause of the statute does not ex- 
 ist in Virginia nor in West Virginia, nor, as it seems, in Texas, 
 Delaware, North Carolina, Rhode Island, or Tennessee. The 
 question was long a debated one in Virginia, and there are dicta 
 to the effect that such trusts cannot be established by parol.^ 
 But the validity of these trusts is now firmly settled in Virginia 
 provided they are clearly proved.* 
 
 Page 88, § 162. Proof of trust under statute of frauds. — 
 
 The student's especial attention is called to this section, and to 
 
 '■ Note, 130 Am. St. Rep. SOS-SSS. 
 
 ' Va. Code 1919, §§ 6398-6303. 
 
 " See Sprinkle v. Hayworth, 26 IGratt. 384; Miller v. Miller, 99 Va. 
 125; Kline v. Kline, 103 Va. 1263; article in 7 Va. Law Reg. 15. 
 
 ^ Young 1). Holland, 117 Va. 433, 84 S. E. ,637; Fleenor v. Henley, 
 121 Va. 367. Authorities on the question generally are collected in 
 n. 39 L. R. A. (N. S.) |906; 12 Mich. Law 'Rev. 423 (excellent discus- 
 sion). Parol trusts upheld in West Virginia: Currence v. Ward, 27 
 S. E. 329; and so in several of the other States mentioned: Insurance 
 Co. V. Waller (Tenn.), 95 S. W. '811; Leaky v. Gunter, 25 Tex. 400; 
 5 Mich. Law 'Rev. ;145. See post, note to § 185, where the rule is 
 stated that a parol trust may be engrafted upon a devise in spite of 
 the statute of wills — where a fraud would otherwise be perpetrated 
 on the testator or his intended beneficiary. 
 
40 Notes on Equity Jurisprudence 
 
 the statement that the trust need not be "declared" by writing, 
 but only "proved" by writing. 
 
 A striking illustration of this principle is presented in the 
 case of Byers v. McAulley.B The facts were that A held the 
 legal title to certain real property under a devise in terms abso- 
 lute, but in fact on a parol trust to dispose of it in a certain way 
 at her death. She died leaving a will recking the trust, and dis- 
 posing of the property accordingly. The will was, however, 
 improperly executed, and therefore void as a will. Notwith- 
 standing the invalidity of the will, it was held sufficient as a 
 ■written acknowledgment of the trust, and hence the intended 
 beneficiary obtained possession of the estate — not through the 
 will as a devisee but as the beneficiary of a parol trust, estab- 
 lished by the invalid will as a writing. 
 
 Page 89. Simple deed with a declaration of trust in re- 
 turn. — The method of creating a trust mentioned in the first 
 paragraph here — by making an absolute conveyance to the in- 
 tended trustee, who, in return, executes a written declaration of 
 the trust, would certainly create a good trust. But no careful 
 person would create an important trust in that way — since this 
 would enable the trustee to dispose of the estate to a bona fide 
 purchaser, and thus defeat the equitable title of the cestui. 
 Where, on the other hand, the trust appears on the face of the 
 conveyance, every purchaser must take notice of its existence, 
 since one cannot claim through an instrument and deny notice of 
 what appears on its face. 
 
 ° 149 U. S. 608. See also, Re McAuUy's Estate (Pa.), 39 Atl. 31. 
 
Trusts — Precatory Words 41 
 
 CHAPTER VIII. 
 Trusts Created by Precatory Words. 
 
 Page 94, § 174. Trust created by precatory words. — The 
 
 student will observe that there is nothing peculiar about a trust 
 created by precatory words. If the words do create a trust, then 
 it is an express trust like those we have been considering in a 
 former chapter. The only difficulty presented in this connection 
 is to determine whether the words used do in fact create a trust. 
 In short, an express trust created by plain language is one way 
 of creating a trust; but another way (common to laymen) is to 
 create it by ambiguous language — ^the donor using such ex- 
 pressions as "I hope," "I feel sure," "in the confidence that," 
 etc., generally without considering or caring whether he is cre- 
 ating a trust or not. 
 
 It is useless for the student to endeavor to memorize the il- 
 illustrations given in this chapter, since the solution of each case 
 depends largely on its own peculiar surrounding facts, and most 
 of the learning of the subject consists of what is known as "case 
 law." The practitioner who is called upon to construe precatory 
 words, must examine carefully the decisions in his own local ju- 
 risdiction. ^ 
 
 Page 101. Gift to wife and children. — In Virginia, there 
 has been much discussion, and much litigation, over conveyances 
 and devises to, or for the benefit of, "wife and children." The 
 situation may be thus summed up : 
 
 1. Where the limitation is directly to the wife, or to a trustee 
 for the wife, with a clause superadded, such as "intending this 
 for the benefit of herself and children," or "for the support 
 and maintenance of herself and children," the mention of the 
 children is construed as a mere indication of the motive of the 
 gift, and no trust results for the children — the wife taking the 
 whole. 
 
 ' The subject will be found discussed at large in a note 106 Am. St. 
 Rep. 500 to 531. See Virginia cases collected in 4 Va. Law Reg. 545. 
 
42 NoTBS ON Equity Jurisprudence 
 
 2. Where also there is a gift directly to "wife and children," 
 or to a trustee for their benefit, but there is an indication im, the 
 instrument of grant, that the wife was the real object of the 
 donor's bounty, a similar result will follow, the wife taking the 
 whole; and the court will strain a point to reach this result, 
 searching the whole instrument to find such indication of in- 
 tent that the wife shall take the whole. 
 
 3. But where the gift is simply to, or in trust for, "wife and 
 children," and there is nowhere within the four corners of the 
 instrument any indication of a contrary intent, then wife and 
 children take as joint tenants, or tenants in common as the case 
 may be — the wife taking merely her proportion along with the 
 children. 2 
 
 The precatory words — discretionary or imperative? — 
 
 The intelligent student will at once see the difficulties of inter- 
 pretation presented by such words in a deed or will. The pur- 
 pose of interpretation is to ascertain the intent of the testator 
 or donor — and the whole effort of the court is directed to that 
 end. By using precatory words instead of clear, clean-cut lan- 
 guage of command, the donor has so beclouded his intent that 
 it cannot be gathered from the instrument itself. Hence the 
 rule in such cases is to endeavor to solve the riddle, as best 
 the court may, by reading the instrument in, the light of (a) 
 the whole instrument and (b) (in case of a will) of the general 
 scheme which the testator appears to have had in mind in the 
 distribution of his entire estate; as well as (c) in the light of 
 the circumstances surrounding the parties at the time of the ex- 
 ecution of the instrument of gift. To portray these circum- 
 stances parol evidence must be resorted to. As these conditions 
 are never precisely the same in any two cases, it follows that 
 every case here must stand on its own bottom, and be settled 
 according to its own peculiar facts. 
 
 The same — circumstances that conclusively repel the 
 presumption of a trust. — (1) Where complete power of dis- 
 
 ' See Fitzpatrick v. Fitzpatrick, ,100 ,Va. 553; 5 Va. Law Reg. 427, 
 443, 491; 7 Va. 'Law Reg. 547 and note; 8 Va. Law Reg. 21 and note; 
 Wright V. Wright, 104 Va. 8; Hansbrough v. Trustees Presb. Church 
 (Va.), 65 S. E. 465. 
 
Trusts — Precatory Words 43 
 
 position is given to the first taker, in terms or by implication, no 
 trust for another person can possibly result — since the power of 
 disposition carries complete ownership, inconsistent with any 
 ownership in another. For example "to my wife in fee, but I 
 desire what is left at her death to go to the Law Library of the 
 University of Virginia." ^ 
 
 The Same. — (2) So where the precatory words apply not 
 only to the res passing under the will, but to property of the first 
 taker over which the testator had no control. For example "to 
 my wife in fee; but in the confidence that at her death she will 
 bequeath all of her estate to the Law Library of the University 
 of Virginia."* 
 
 The same. — (3) Where the subject-matter to which the 
 precatory words apply is not sufficiently described, or the amount 
 is too uncertain to be judicially ascertained, no trust can result — 
 as no trust could result in like case even under an express decla- 
 ration of trust. The subject-matter of every trust, as of every 
 other transaction legal or eqiuitable, must be definite and certain. 
 
 Precatory words, continued — circumstances not deter- 
 minative but important. — (1) The presumption of a trust is 
 much strengthened where the alleged cestuis were dependents of 
 the testator at the time the will was executed, and he was un- 
 , der a moral duty to provide for them. This was the situation 
 of the celebrated case of Colton v. Colton,^ mentioned but in- 
 adequately stated in Text, § 182. 
 
 (2) Where an interpretation in favor of the trust would fur- 
 nish an immediate and needed support for the claimunts, the 
 
 ^ See May v. Joynes, (20 'Gratt. 692; 1 Va. 'Law Reg. 214 and note. 
 Full discussion by iProf. Graves in 3 Va. Law .Reg. 65. The Virginia 
 court has carried this principle to the extreme limit. See article in 
 8 Va. Law Reg. 705. In this connection see copy of the late President 
 McKinley's will in 7 Va. Law Reg. 440; Mayo v. Harrison (Ga.), 68 
 S. E. 497; Brant v. Va. Coal & L Co., 93 U. S. 391; Roberts v. Lewis, 
 153 U. S. 367. Conrad <v. ,Conrad, 133 Va. ,711 — a case in which the 
 testator, after devising his estate in fee simple, with full power of 
 disposition, added "at my wife's death my estate should be so appor- 
 tioned among my children as to give each an equal share of the 
 whole." Held, this clause was merely advisory (precatory), and the 
 children took nothing under the will. Compare Va. Code 1919, § 5147. 
 
 ■* See Text § 183, discussing these various tests of trust or no trust. 
 
 ' 137 U. S. 300. 
 
44 Notes on Equity Jurisprudence 
 
 presumption of a trust intent is naturally much stronger than 
 where the claimants are not needy, or where enjoyment is post- 
 poned to an indefinite titne (as after a life estate). 
 
 (3) Where the words are addressed to the donee personally 
 (as "I desire him to give at least $10,000 to the Law Library"), 
 the presumption of an imperative trust is less strong than in 
 the case where the precatory words are objective and attached 
 to the res itself — e. g. "my entire estate to A, but it is my desire 
 that at least $10,000 thereof shall go to the Law Library." « 
 
 Page 102, § 184. Express trusts by will defined by inde- 
 pendent writin^f. — [Alter the Text-title to read as here. In- 
 sert between §§ 183 and 184 "Chapter VIIIA"— since what fol- 
 lows here has no connection with Trusts Created by Precatory 
 Words discussed in Chapter VIII.] 
 
 The principle of the Text, that where the trust is set forth in 
 an independent writing, the writing must be in existence at the 
 date of the will, and clearly identified, is well illustrated in a 
 recent Connecticut case, in which the distinguished Democratic 
 statesman, William Jennings Bryan, figured, both as counsel and 
 beneficiary.'^ 
 
 This rule follows, as of course, from the rule that a will must 
 be complete at the time of its execudion — and hence, in order 
 that an independent writing may be incorporated into it by ref- 
 erence or otherwise, the writing must necessarily be in exist- 
 ence at the date of the execution of the will. 
 
 Page 103, § 185. Express trusts in wiUs defined orally.* 
 
 — The law of this subject may be briefly stated in the following 
 propositions, viz: 
 
 1. Where the trust character of the bequest is shown on, the 
 face of the will, but the purposes or the beneficiaries are not so 
 disclosed — for example, devise or bequest "to A in trust," or 
 "in trust for such purposes as I have orally communicated to 
 
 " Board of iForeign Missions v. Gulp (Pa.) 25 Atl. 17; In re Dickin- 
 son's Estate, (Pa.) 58 Atl. 120. 
 
 ' Bryan's Appeal (Conn.) 107 Am. St. Rep. 34; Bryan v. Bigelow 
 (Conn.), 107 Am. St. Rep. 64, and full note. 
 
 ' See luminous discussion, 12 Mich. Law Rev. 423. 
 
Trusts — in Wills — Parol Evidence 45 
 
 him:" Here the bequest fails and there is a resulting trust for 
 the heirs or next of kin. 
 
 To admit oral proof of the character of the trust intended 
 would violate the rule requiring the whole of a will to be in 
 writing. The enforcement of the rule here involves no oppor- 
 tunity for a fraudulent perversion of the testator's intent, since 
 the result is to vest the res in the testator's heirs and next of kin. 
 
 2. Where the trust character of the bequest does not appea/r 
 on the face of the will, and the gift is in absolute terms, but the 
 donee has been orally directed, or has orally promised to hold 
 in trust for another — for example, "to A in absolute estate," but 
 with oral directions, or agreement on A's part, to hold in trust 
 for the Law Library : Here if oral proof be not received the 
 trust will fail, and A will enjoy the gift contrary to the testa- 
 tor's intention, and thus a fraud be perpetrated, either on the 
 testator's estate, or on his intended beneficiary. To prevent 
 such a fraud, oral testimony is permitted to establish the trust, 
 and the absolute donee will be held as a trustee ex maleficio. 
 
 Under this rule, the statute requiring all wills to be wholly in 
 writing is not violated — since the estate passes, as the will di- 
 rects, to A. The will is in nowise altered by parol testimony. 
 But in order to prevent a gross fraud, equity, as in other cases 
 of fraud, treats the fraudulent devisee or legatee as a con- 
 structive trustee for the real beneficiary, as established by the 
 parol testimony. 
 
 Of course in such case the proof must leave no doubt of the 
 fact that the parol trust was created by the testator. 
 
 3. Where the trust character of the bequest is shown on the 
 face of the will and the beneficiary is named, but with no further 
 declaration of the terms of the trust, such beneficiary will enjoy 
 the estate free from any restrictions or limitations which the 
 testator may orally have communicated to the trustee; and this, 
 even though the will on its face indicates that there were such 
 oral limitations or restrictions. For example: "To A in trust 
 for the Law Library of the University of Virginia, on such 
 trusts and with such limitations and restrictions as I have orally 
 communicated to A." Here the rule requiring the whole will 
 
46 N'OTBs ON Equity Jurisprudence 
 
 to be in writing is applied, the trust is absolute, and the oral 
 restrictions fail. 
 
 It appears, therefore, from a consideration of these three 
 propositions, that a trust by will cannot be established by oral 
 testimony, save where to reject such testimony, would result in 
 the perpetration of a fraud.^ 
 
 Page 103, § 185. Heir as trustee ex maleficio. — A situa- 
 tion somewhat similar to that discussed in the preceding note 
 is presented where a presumptive heir or distributee induces the 
 ancestor not to make a will in favor of a certain beneficiary, on 
 a parol promise that when the estate shall vest in himself on the 
 ancestor's death, he will carry out the wishes of the decedent. 
 Where these facts appear and are clearly proved, a trust will 
 arise in favor of such beneficiary, and it may be proved by pa- 
 rol testimony — otherwise a palpable fraud will be perpetrated 
 under cover of the statute of frauds. i" 
 
 " See full note, 106 Am. St. Rep. 91; Sims v. Sims, 94 Va. 580; 
 Towles V. Burton (S. C.) 34 Am. Dec. 409 and note; note 20 Jl,. R. 
 A. 465; Amherst College v. Ritch, 151 N. Y. 382, 37 L,- iR. A. .305— 
 Fayerweather Will Case — as the result of which the University of 
 Virginia received a legacy ,of Jseveral hundred thousand dollars. 
 
 " In a recent Georgia case, it was held, on unsatisfactory reasoning, 
 that such a trust would not arise, unless there were proof that the 
 heir was guilty of fraudulent intent at the time of making such a promise. 
 Cassles v. jFinn (Ga.), 106 Am. St. Rep. 91. In a note appended to 
 this case, the decision is criticized by Mr. Freeman, the editor, with 
 a striking array of reason and authority to the contrary. See out- 
 author's views on this subject, in accordance with Mr. Freeman's, 
 post, § 255 of Text. Compare Ragsdale v. Ragsdale (Miss.), 11 L,. R. 
 A. 317; 9 Mich. Law Rev. 629; Amherst College z'. Ritch, 151 IN. Y. 
 282, 37 L. IR. A. 305; Gilpatrick v. Glidden, 81 Me. 137', 16 Atl. 464 
 (excellent discussion); Strickland v- Aldridge, 9 Ves. 516. 
 
Voluntary Trusts 47 
 
 CHAPTER IX. 
 
 TRusiTS BY Way op Gifts and Voluntary Settlements ^ — 
 
 Summary. 
 
 How these differ from other trusts. — After a voluntary 
 trust is actucdly created, precisely the same principles apply as 
 to other trusts ; that is to say, a gift to A in trust for B, without 
 consideraion, and a grant to A in trust for B for valuable con- 
 sideration, stand precisely on the same footing, so far as the 
 validity and character of the trust are concerned. 
 
 The difficulty in the case of a voluntary gift or trust (as with 
 the trust created by precatory words) is to ascertain whether a 
 complete gift or trust has been, created or not. No such diffi- 
 culty arises where there is a valuable consideration, because 
 here, if the intended grantor refuses to complete the transaction, 
 a court of equity will compel him to specifically perform his con- 
 tract. On the contrary, in the case of an incomplete voluntary 
 gift or trust, if the donor likewise refuse to complete the trans- 
 action, a court of equity cannot compel him to do so, because 
 his agreement, being without consideration, is not enforceable. 
 The only difficulty, therefore, that the voluntary transaction pre- 
 sents is in the question whether the transaction is complete or 
 not. If complete, and otherwise valid as a trust, it is good; if 
 incomplete, it fails, howsoever carefully the trust may have been 
 defined. 
 
 Hence it follows that 
 
 The question here is always; Is the transaction execu- 
 tory or executed? — This brings us to consider the several 
 ways in which a complete gift of real or personal estate may be 
 made, both at law and in equity. Knowing these essentials, we 
 shall be better prepared to determine whether or not a given 
 
 ' For authorities on this general subject, consult the following: 1 
 iVa. I^aw Reg. 871 !(article by iProf. .Graves); note 34 Am. St. Rep. 
 189-334; Elam v. Keen, 4 Leigh, 333; Ewing v. Ewing, 3 L,eigh, 337; 
 Mayo V. Carrington, 19 Gratt. 74; Tabb V. Cabell, 17 Gratt. 160, 173; 
 Yancey v. Field, 85 Va. 756; Spooner v. Hilbish, 93 Va. 333; Thomas 
 V. Lewis, 89 Va. 1; Bank v. Holland, 99 Va. 465; Ingersoll v. Pond, 
 108 Va.l79; and especially the brief of Judge Burks, of counsel, in 
 Thomas v. Lewis, reproduced in full in 89 Va. 1. 
 
48 NoTgs ON Equity Jurisprudence 
 
 state of facts is sufficient to establish the alleged trust by way of 
 gift or settlement. 
 
 Conflict in authorities — confusion in the Text. — The 
 
 student will find it impossible to reconcile the numerous author- 
 ities cited and discussed in the Text. There is little or no con- 
 troversy over the principles involved, but in their application the 
 results have been most inharmonious. There is, therefore, all 
 the more reason why the student should clearly grasp the princi- 
 ples rather than endeavor to reconcile the numerous conflicting 
 applications of these principles. 
 
 Gifts and voluntary settlements — (A) Requisites at 
 Law — (1) real property. — By statutes existing in ail the 
 States, title to real property can pass only by deed or will, 
 whether the transaction be a sale and purchase for value, or be 
 purely voluntary. 
 
 As questions discussed in this chapter cannot arise in the case 
 of devises and bequests by will, we need not here further con- 
 sider gifts by will. 
 
 Hence, at law, a gift of real property inter vivos can only be 
 consummated by a deed, didy signed, sealed and delivered. 
 
 Gifts — requisites at law, continued — (2) personal 
 property — (a) tangible chattels. — To pass title at law by 
 gift of a tangible chattel requires (1) actual or symbolical deliv- 
 ery; or (2) a deed delivered. 
 
 Symbolical delivery is permitted where from the situation, or 
 the nature of the property, actual delivery is impossible or in- 
 convenient— as a gift of the contents of a house, or trunk, or 
 safety deposit box, by delivery of the key thereto.^ 
 
 Gifts of tangible chattels — statutory provision in Vir- 
 ginia. — The Virginia statute ^ declares that "no gift of goods or 
 chattels shall be valid unless (a) hy deed or {h)will, or (c) un- 
 less possession shall have come to and remained with the donee 
 or some person claiming under him. 
 
 "If the donor and donee reside together at the time of the 
 
 ' See article by Prof. Graves, 1 Va. Law Reg. 871; Thomas v. Lewis, 
 89 Va. ]. 
 ° Va. Code 1919, § 5143. 
 
VoivUNTARY Trusts — Gifts 49 
 
 gift, possession at the place of their residence, shall not be a suf- 
 ficient possession within the meaning of this section. This sec- 
 tion shall not apply to the wife's paraphernalia." 
 
 This provision renders gifts not made in accordance with its 
 terms invalid, not only between donor and donee, but as be- 
 tween the donee, on the one side, and creditors of the donor on 
 the other. 
 
 The same statute — further provision as to creditors. — 
 
 The statute further provides that where the gift is by deed (i. e. 
 without change of possession), the gift shall be void as to 
 the donor's creditors unless and until recorded.* 
 
 Gifts of personalty at law, continued — (b) choses in ac- 
 tion. — With the exception of negotiable instruments — and cer- 
 tain gwcwj-negotiable instruments, such as bills of lading, ware- 
 house receipts, etc. — ^true legal title to choses in action cannot 
 be transferred from one person to another, either by way of 
 gift or of sale and purchase. But, as shown in Chapter V of 
 the Text, by virtue of the privilege which the assignee has of 
 suing in the name of his assignor, such transfers of choses in 
 action are in fact recognized and enforced in courts of law — 
 whether made for valuable consideration or merely as gifts. 
 
 In order that a gift of a chose in action may be good at law, 
 much the same principles apply as in the case of tangible chattels. 
 That is to say, there must be ( 1 ) Actual or symbolic delivery of 
 the instrument (if any) evidencing the chose in action; or (2) 
 A deed or writing, delivered to the donee or some one for him. 
 
 Thus it was held that a life insurance policy found among the 
 papers of the insured after his death, with a written assignment 
 to a named donee attached, and signed by the insured, was insuf- 
 ficient to establish a gift thereof, for la^k of delivery of the pol- 
 icy or of the assignment.^ But that where the obligee of a bond 
 — the latter being in the hands of counsel for suit thereon — de- 
 livered counsel's receipt to the donee, accompanied by an oral 
 
 " Va. Code 1919, § 5195; 1 Va. Law 'Reg. 876 (by Prof. Graves); 7 
 Va. Law Reg. 314. This statute does not apply to choses in action: 
 
 See infra. 
 ' Spooner v. Hilbish, 93 Va. 333 
 
50 Notes on Equity Jurisprudence 
 
 declaration of gift, there was at least a symbolical delivery, and 
 the gift was held good.* 
 
 The Virginia statute referred to in the previous section is 
 not applicable to choses in action.'^ 
 
 Having concluded this brief glance at the requisites of a valid 
 gift at law, we now proceed to a brief consideration of the situ- 
 ation in equity. 
 
 Gifts and voluntary settlements, continued — (B) Req- 
 uisites in Equity. — In equity there are three ways of making a 
 valid gift inter vivos, namely : 
 
 (1) By making it with all the essentials of the common law, 
 as explained above; that is, if it be real property, by a deed di- 
 rect to the donee (with some qualifications as to delivery; see 
 title "Undelivered Deeds" below). If the subject matter be 
 personal property, then by deed or delivery, actual or symbolical, 
 as at law — and subject to the Virginia statutes discussed ahove. 
 
 In short, any gift good at law is always good in equity. Eq- 
 uity here follows the law. 
 
 It should be clear to the student that where a gift is thus made 
 according to the common law, legal title passes directly to the 
 donee, and there is no trust involved. 
 
 (2) By transferring it in the ordinary common law way to a 
 trtistee, in trust for the proposed donee. 
 
 (3) By the proposed donor uneq|Uivocally declaring himself a 
 trustee for the proposed donee. The last two methods are un- 
 known to the law courts. 
 
 If the subject matter be real property, under the 7th section 
 of the statute of frauds this declaration of trust must be in 
 writing. Possibly in those States (including Virginia) in which 
 this 7th section has not been adopted, a mere parol declaration 
 under class (3) above may be sufficient — sed quere.^ 
 
 ° Elam V. Keene, 4 Leigh, 333. 
 
 ' Bank v. Holland, 99 Va. 495, 55 L. 'R. A. 155; 7 Va. Law Reg. 
 314. 
 
 ' See ante, note to § 160. 
 
Voluntary Teustsi — Incomplete Gifts 51 
 
 The same — selection of method. — It is a settled principle 
 here, that the gift must operate, if at all, according to that 
 method (of the three foregoing) which the donor has selected. 
 This means that while the donor has three methods by which 
 to make a gift, yet when he selects one of these, and attempts 
 to confer his bounty in that way, the gift must operate, if at alt, 
 according to the method selected, and no other. 
 
 For example, if I mean to confer personal property directly 
 upon A — ^that is, by an ordinary gift, good at law as well as in 
 equity — but fail to deliver it or to transfer it by deed, as the 
 common law requires, the gift fails, and will not be allowed 
 to operate as if I had declared myself a trustee for him, as I 
 might have done in the first instance. Or, again, if I mean to 
 interpose a trustee between the proposed donee and myself, but 
 fail to complete the transfer to the trustee, I may not be held 
 to have declared myself a trustee — and there is again a failure 
 of the gift. 
 
 The same — benevolent intent alone insufficient — unex- 
 ecuted intention. — Most of the litigated cases that arise in 
 connection with gifts and voluntary settlements are cases where 
 the proof is clear that the donor intended to confer the benefit 
 at some time, but has failed to completely carry out that in- 
 tention in one of the three methods already mentioned. 
 
 The donative spirit alone is not sufficient. There must first 
 be the intention to give then and there, and not merely in the 
 future; and, second, the actual giving, accompanied by words or 
 acts indicative of the intent of the alleged donor to make the 
 gift presently complete according to the method selected. The 
 donor must have so far committed himself that there remains 
 no locus penitentice, and no further control retained in himself 
 (save as trustee in case 3 above) ; and he must have consum- 
 mated his benevolent intent in one of the methods before de- 
 scribed. 
 
 Pages 109-111. Undelivered conveyances. — ^At law an un- 
 delivered deed (or other writing) has no more vitality as a con- 
 veyance, or other contract, than an unuttered thought. Gener- 
 ally speaking equity follows the law here. 
 
 But, under the doctrine of trusts, and the under influence of 
 
52 Notes on Equity Jurisprudence 
 
 the maxim that 'equity looks at substance and not at forms,' there 
 are certain instances in equity where actual delivery of deeds is 
 dispensed with. Examples follow: 
 
 The same — (1) donor as trustee — (2) deed direct to 
 donee, recorded. — Where the donor has in the deed declared 
 himself a trustee, non-delivery of the deed is not at all inconsis- 
 tent with the idea of a complete gift, since the grantor, as trus- 
 tee, is the proper custodian of the instrument. Here non-deliv- 
 ery to the donee is immaterial to the validity of the trust. 
 
 (2) Where the undelivered conveyance is direct, or to a third 
 person as trustee, (a) Deed recorded : If the conveyance has 
 been filed by the grantor in a public office for recordation, such 
 recordation is very generally held to be tantamount to delivery, 
 and therefore the gift is good. 
 
 (b) Deed neither delivered nor recorded: Even where the 
 grantor has retained possession of the deed and there has been 
 neither actual nor constructive delivery thereof, a prima facie 
 presumption arises in equity in favor of the donee. But this 
 presumption may be overcome by evidence, written or parol, of 
 an intention, by retaining the deed, not to make an absolute gift.' 
 
 Pages 119-122, §§ 210-215. Gifts of stocks and promis- 
 sory notes. — Whatever may ibe the rule in England, in a num- 
 ber of the American States it is held that these may be the sub- 
 ject of a voluntary gift without complete assignment — mere de- 
 livery being sufficient — even in the case of stock in terms trans- 
 ferable only on the books of the company in order to pass legal 
 title.io 
 
 ." See n. 34 Am. St. Rep. 312; Wadd >v. Hazelton, 137 N. Y. 
 215, 31 L,. R. A. 693, and note; Wigmore's Ev. § 3408. 
 
 '" See Bank v. Holland, 99 Va. 495; 2 Thompson on Corporations, 
 § 2390; n. 3 L. R. A. (N. S.) 804. 
 
Resulting Trusts. 53 
 
 We have now completed for the present, our review of the 
 Bxpress Trust. We have seen that the express trust, Hke the 
 express contract, is one created by the express declaration of 
 the grantor or donor. We have seen also that this declaration 
 may be made : ( 1 ) in plain language, expressing an intention to. 
 create a trust — though the word "trust" need not be used; (2) 
 in ambiguous terms, in the form of precatory language, provided 
 the court is satisfied that the language used was meant to be im- 
 perative and not discretionary; and (3) that if there be a con- 
 summation of the donative intent, by a complete transfer of 
 property in the subject matter, there need be no valuable consid- 
 eration passing to the donor — and what is termed a voluntary 
 trust results. 
 
 In the following two chapters we shall take up the other class 
 of trusts, namely Implied Trusts. These, as explained in the 
 following chapters, are Resulting Trusts (Chapter X) and Con- 
 structive Trusts (Chapter XI). 
 
 CHAPTER X. 
 Resulting Trusts. 
 
 Page 127, §§ 222-223. Distinction between the resulting 
 and the constructive trust. — Note the distinction, well stated 
 in the Text : The one is based on the presumed intention of the 
 parties — and the transaction, therefore, is an honest one between 
 the parties ; the other is forced upon the conscience of the de- 
 fendant regardless of intention, in order to prevent a fraud on 
 the plaintiff. Such a trust, therefore, usually suggests a dis- 
 honest transaction. Sometimes, however, as noted in the Text, 
 the line between the two is so close that it is difficult to distin- 
 guish the one from the other. Nor, in most instances, is the, 
 distinction of the slightest importance, as both, are, in the main, 
 governed by precisely the same principles. But for accuracy 
 of classification and of terminology, the distinction must be 
 made and observed. 
 
54 Notes on Equity Jurisprudence 
 
 The several instances of resulting trusts. — Resulting 
 trusts are usually said to arise in four several ways : ( 1 ) The 
 first is mentioned and discussed in the Text, §§ 225-241, namely, 
 Where one person pays, or assumes payment, of the purchase 
 money for an estate, but has title conveyed to another, with no 
 express mention of a trust on the face of the conveyance. 
 
 (2) The second (Text, §§ 242-246) is where two or more 
 persons occupy a fiduciary relation to each other, and have a 
 common interest in reference to a particular res or enterprise, 
 and one of theni acquires title to the res, or some outstanding 
 claim or lien against the same. Here a trust will result for the 
 common benefit of all, even though the party acqjuiring such in- 
 terest does so with his own funds. 
 
 (3) The third instance (Text, §§ 247-251), occurs in the case 
 of unexhausted trust funds — that is, where a trust is created for 
 a particular purpose (as to pay grantor's debts), and the purpose 
 is accomplished without exhausting the fund. Here a trust 
 naturally results for the grantor's benefit. 
 
 (4) The fourth (Text, §§ 252-253) occurs (or rather oc- 
 curred—as the doctrine is now obsolete) in the case of a con- 
 veyance from A to B (a stranger in blood) without considera- 
 tion. 
 
 We shall glance at each of these briefly. 
 
 The same — first class — purchase by one, title conveyed 
 to another. — Here, nothing else appearing, the title-holder is 
 prima facie presumed to hold the title in trust for him who pur- 
 chased and paid the purchase money. ^ This means that the so- 
 called 'purchaser' must have paid the purchase money as his 
 own,, and not as mere agent of the title-holder, nor as a loan to 
 the latter. The question here is not who drew the check, or 
 handed over the m^ney to the seller, but on whose credit was 
 the purchase made, and whose m,oney was it at the time of pay- 
 ment. If the payor of the money had already agreed to advance 
 the' amount to the (now) title-holder as a loan, it was of course 
 the tatter's money, and the other did not in fact purchase or pay 
 
 ' Straley v. Esser, 117 Va.- 135. 
 
Resuming Trusts — Purchase and L,oan 55 
 
 for the property. There is a nice distinction here, which the 
 student should not fail to note. 
 
 The same — first class continued — payment, or assump- 
 tion, thereof must be contemporaneous with purchase. — 
 
 It is obvious that if the plaintiff now asserting the trust did not 
 pay, nor assume to pay^ at the time of the purchase, any pay- 
 ment by him thereafter must have been in the nature of a loan or 
 a gift to the title-holder, or made under some special agreement 
 — in which case there is no presumption of a trust. ^ 
 
 The same — distinction between purchase and loan. — 
 
 As indicated in the preceding section, the resulting trust of the 
 class now under discussion, arises from a "purchase^' by one 
 person and a conveyance to another. In short, the person ad- 
 vancing the money, or assuming its payment, must be the real 
 purchaser and not merely a lender. 
 
 By the term "purchaser" here is meant, as already shown, 
 not necessarily the person who conducted the negotiation, or 
 handed over the purchase money, but the person upon whose 
 credit the sale was made, and whose money went to satisfy the 
 purchase price. 
 
 For example, if A makes a contract to buy a certain farm, and 
 B lends him the money with which to pay for it, the conveyance 
 being taken in A's name, here, even though B pays the money 
 over to the seller, there is no resulting trust for B — he is a mere 
 lender or creditor — A being the real purchaser. 
 
 Conversely, suppose that A makes a contract to buy a farm, 
 but, by arrangement between the two, B pays the purchase 
 money to the seller, taking the conveyance in his own. name, and 
 agreeing orally that it shall he treated as a loan to A, who shall 
 be entitled to the property on re-payment. Here, A may prove 
 the facts by parol ; and since he is the real purchaser, we have a 
 case of property purchased by one person, (A) but conveyed to 
 another (B) ; and B will be held as a trustee for A, subject to 
 
 ' The Text (§ 226) is in error in tlie statement that the money- 
 must actually have been paid at the time of the purchase. Jesser 
 V. Armentrout, 100 Va. 666; DeBaun v. DeBaun, 119 iVa. 85; Webb 
 V. Bailey, 41 W. Va. 463. 
 
 ' Lee V. Elliott, 113 Va. ms. 
 
56 NoTBs ON Equity Jurisprudence 
 
 the re-payment of the purchase money. In this case, while B 
 in fact paid the purchase money, he paid it for A, as a loan to 
 the latter, and not for himself as the real purchaser. Hence it 
 was in law, as well as in fact, A's money, and A was the real 
 purchaser.* 
 
 The same, continued — distinction between loan and op- 
 tion to repurchase. — If, in the foregoing illustration, instead 
 of a binding obligation on A's part to repay the purchase money 
 advanced by B, A had merely reserved the privilege of repur- 
 chasing the farm from B within a prescribed time, then there 
 is no trust — since the money paid was B's money from begin- 
 ning to end, and he was, therefore, the real purchaser. This 
 was but a mere parol contract, non-enforceable under the stat- 
 ute of frauds. 
 
 Page 129, §§ 227-228. Oral agreement to purchase for, 
 or jointly with, another. — The doctrine here stated needs ex- 
 planation. It is true that a mere oral agreement by one to pur- 
 chase with his own funds and to hold real estate for another 
 (subject of course to reimbursement of the purchase money) 
 of itself raises no trust in favor of the latter — in the absence of 
 a fiduciary relation, or of fraud. But it is equally tiue that if 
 there be an agreement between the two that the one shall pur- 
 chase with his own funds, and that such payment shall be re- 
 garded as a loan, so as to create the relation of debtor and cred- 
 itor between them, then, as we have seen in the previous note, the 
 money paid was really the money of the borrower — and we have 
 the typical case of one person (the borrower) paying for the 
 property, and title taken in the name of another (the lender). 
 Hence the former may establish this fact by parol, and thus es- 
 tablish a resulting trust in his own favor — subject, of course to 
 the repayment of the loan. This is subsequently stated in the 
 Text, § 230. 
 
 And it is settled that where there is a fiduciary relation be- 
 tween the parties (e. g., agency or partnership), the fiduciary 
 will not be permitted to betray his trust by taking advantage of 
 
 ' Kendall v. Mann, 11 Allen 15. This sound proposition seems not 
 to have been universally accepted: n. 5 L,. R. A. (N. S.) 133. 
 
Resulting Trusts — Wife or Child 57 
 
 the confidence reposed in him to the injury of the other. But 
 this would raise a constructive rather than a resulting trust. 
 The principle stated in § 228 is true, therefore, only in the ab- 
 sence of fiduciary relation, between the parties.^ 
 
 Page 129, § 229. Purchase money by several — title in 
 
 one. — The doctrine of the Text that in this case unless the 
 plaintiff has put some "aliquot part" of the purchase money into 
 the deal, the presumption of a trust fails, while sustained by 
 some authority, is not the better docrine. The better rule is that 
 a trust will result in favor of those who pay the purchase money, 
 in proportion to the amounts paid whether these be aliquot parts 
 of the whole or not.^ 
 
 Page 130, §§ 233-236. Resulting trusts of class 1, con- 
 tinued — exceptions to rule stated. — [Omit § 235]. It is im- 
 portant to notice that the rule that payment of the price by one 
 and conveyance of title to another, raises a prima facie presump- 
 tion of a trust in favor of the former, is subject to one highly im- 
 portant exception — an exception based on good sense, and in 
 keeping with the common experience of men. 
 
 This exception is that where the purchaser has the title con- 
 veyed (a) to his wife, or child,'' or other near relation in blood; 
 or (b) to one not a relation in blood but towards whom the pur- 
 chaser stands in loco parentis; or (c) to one who occupies a re- 
 lation of dependency upon him, and to whom he owes a legal or 
 moral duty of support — then, in each of these cases the presump- 
 tion of a trust gives pkuce to the presumption of a gift. 
 
 These exceptions, as suggested above, are based on sound 
 reason and have the universal sanction of the courts. 
 
 Page 132, §§ 237-238. The same— presumption of trust 
 prima facie only — ^rebuttable by parol evidence. — The stu- 
 dent who has, up to this point, received the impression that the 
 presumption of a trust in this first class of resulting trusts is a 
 
 " See Miller v. Ferguson, 107 Va. 249; Matney v. Yates, 121 Va. 
 506; infra, note to page 133, § 340, and note to pp. 136-138, §§ 343- 
 345. 
 
 "See Miller v. Miller, 99 Va. 138; Neathery v. Neathery, 114 Va. 
 650; Currence v. Ward (W. Va.), 27 S. E. 332 (where the question 
 is thoroughly discussed); note 51 Am. Dec. 753. 
 
 ' Clary v. Spain, 119 Va. 58. 
 
58 Notes on Equity Jurisprudence 
 
 conclusive one, and that the rule is a hard and fast one, has se- 
 riously misunderstood the situation. 
 
 Where the parties are strangers in blood, and there is no close 
 relationship of dependency or otherwise, the presumption of a 
 trust does arise — but this presumption is prima facie only, and 
 may be rebutted by parol testimony that no trust was contem- 
 plated, and that an outright gift was intended. 
 
 Conversely, where the grantee is wife, child or other depend- 
 ent, as already explained, the presumption of a trust gives Avay 
 to the presumption of a gift. But here, again, this presumption 
 of a gift is primM facie only, and, as in the other case, is sub- 
 ject to rebuttal by parol testimony that no gift was intended, 
 but that the intention was that the grantee (in spite of relation- 
 ship, howsoever close, or of dependency howsoever great) should 
 hold in trust for the payer of the purchase money. 
 
 The same — presumptions of trust, or of no trust, re- 
 buttable by parol testimony. — The admission of parol testi- 
 mony in these cases, to repel the presumption, whether of a trust 
 or of a gift, rests on the principle of evidence that every prima 
 facie presumption of fact is subject to contradiction by such 
 testimony. 
 
 It follows that where A purchases an estate, pays the pur- 
 chase money, and has title conveyed to B, a stranger, such trans- 
 action, unexplained, gives rise to a presumption that B holds in 
 trust for A. But B may prove, if he can, by parol or other tes- 
 timony, that A meant not a trust but a gift to him outright. A 
 may, of course, meet this testimony by counter-evidence, parol 
 or written, that a trust was contemplated. 
 
 So with the converse situation, where A, the purchaser, has 
 the title conveyed to his wife, or child, or dependent. Unex- 
 plained, the presumption of a gift arises. But, as in the other 
 case, A may repel this presumption by parol proof that the 
 transaction contemplated a trust in his own behalf. 
 
 In short, in these cases, the door is thrown Tvide open for the 
 admission of parol testim.ony — whether to repel the presumption 
 on behalf of one party, or to sustain it on behalf of the other. ^ 
 
 Clary v. Spain, 119 Va. 58. 
 
Resulting Trusts — Paroi, Evidence 59 
 
 The same — parol agreement to sustain or repel pre- 
 sumption. — It is agreed by all the courts that if the circum- 
 stances raise the implication of a resulting trust, the fact that 
 there was an express parol agreement for a trust, will in no- 
 wise serve to alter the presumption of the implied trust, even 
 in those jurisdictions in which section 7 of the statute pre- 
 vails. If a trust is implied from the surrounding circumstances, 
 it must follow that additional proof of an express parol agree- 
 ment for a trust (in real property) — non-enforceable (in most 
 states) because of the statute — cannot weaken the legal presump- 
 tion of an implied trust. Indeed, it is probable that in a large 
 majority of instances, resulting trusts of the first class, now un- 
 der consideration, are accompanied by such an oral agreement. 
 
 So, on the other hand, where the circumstances repel the pre- 
 sumption of a trust (as where the conveyance is to the wife or 
 child), and indicate an outright gift, the presumption of a gift 
 may, in turn, be repelled, and a trust established by proof of an 
 oral agreement that the wife or child took only as trustee for the 
 husband or father. 
 
 Thus, where a husband, without fraudulent intent, purchased 
 property with his own funds, and had title conveyed to his wife 
 (hence presumption of a gift), but with an express oral under- 
 standing that the property should be held for his benefit and not 
 hers, it was held that proof of this oral agreement could not 
 {under the statute of frauds) be received to establish an ex-' 
 press trust, yet that it might be received to repel the presumption 
 of a gift — and, with this presumption eliminated, all of the es- 
 sentials of a resulting trust were present, and such a trust was 
 established.® 
 
 Resulting trust as to bona fide purchasers from trustee 
 — secret equities. — It is a universal principle of equity that a 
 bona fide purchaser for value from the trustee takes the legal 
 title free of a resulting or other trust of which he has no notice. 
 
 We have already adverted to this universally accepted princi- 
 ple, in our chapter on Equitable Maxims. The rule applies not 
 
 ' Smithsonian Institution v. Meech, 169 U. S. 397. It may be 
 noted also that the statute of frauds excludes parol evidence to 
 prove an express trust in real property, but not to repel or disprove 
 a trust, whether express or implied. 
 
60 Notes on Equity Jurisprudence 
 
 to resulting trusts only, but to constructive trusts as well, and 
 to every other equitable claim to or charge upon property, not 
 appearing on the face of the title papers, and of which an hon- 
 est purchaser for value has no notice. 
 
 The resulting and the constructive trust are necessarily secret 
 equities, not shown in the documents of title — for if so shown, 
 the trust would be express. A conveyance of the legal title, 
 therefore, by the trustee, to a bona fide purchaser for value, cuts 
 off the cestui' s secret trust, and the purchaser acquires title un- 
 incumbered by the trust. 
 
 It must be carefully noted that it is the. acquisition of the le- 
 gal title that places the purchaser in this favored position. If 
 he acquires equitable title only, the rule is generally inapplica- 
 ble.io 
 
 Nor may any purchase, howsoever bona fide, ever cut off a 
 legal title. For example, the purchase of real property from a 
 vendor supposed to be unmarried, would not affect the dower 
 rights of his wife, even though her existence were unknown to 
 the purchaser — since dower is a legal and not an equitable right. 
 So the purchase of an estate from one supposed to be the sole 
 heir of the deceased owner, could not affect the rights of others 
 who were in fact co-heirs.^*'* 
 
 Resulting trusts as to creditors of trustee. — But it is 
 
 carefully to be observed that creditors stand on a wholly differ- 
 ent footing. The creditor, unlike the purchaser, not having 
 laid out his money on that specific property, but merely on the 
 general credit of his debtor, is bound by all the equities which 
 bind his debtor; or, as it is generally expressed, the creditor 
 stands in the shoes of his debtor. 
 
 Hence it follows that if A, holding legal title to real estate, 
 should become insolvent, and judgments be entered against him, 
 B, for whose benefit there is a resulting trust in the property, 
 (created without fraudulent intent) may intervene in a suit 
 
 '° Ann. Cas. 1918C, 455. 
 
 "a Fallon V. Chidester (Iowa), 26 Am. Rep. 164; n. 49 Am, 
 St. Rep. 127. 
 
Resulting Trusts — Bona Fide Purchaser 61 
 
 brought by A's creditors to subject the property, and his rights 
 will prevail over those of the creditors.!^" 
 
 The student is urged to take special note of the rule just stated, 
 as to the distinction between the status of a purchaser and that 
 of a creditor. The average student constantly overlooks the dis- 
 tinction, and as we shall have need of it throughout our equity 
 studies especial attention is called to it. 
 
 The same — who is a purchaser and who creditor? — ^A 
 
 bona fide purchaser for value in this connection is one who has 
 acquired the legal title, either in himself or in another for his 
 benefit and who has laid out his money on that specific property, 
 without notice of the trust. 
 
 Hence, not only is one a purchaser who has acquired the legal 
 title outright, under the circumstances just stated, but so also is 
 one who has taken a m,ortgage or deed of tru^t thereon to se- 
 cure a debt.^^" 
 
 In other words, a creditor who puts out his money specifically 
 on a particular piece of property, and secures f rorn the borrower 
 a conveyance of the legal title to the property, by way of pledge, 
 mortgage or deed of trust as security for the loan, is, in equity, 
 regarded as a purchaser for value to the extent of his debt. And 
 rightly so, since to the extent of his debt he is the owner, and has 
 legal title. "Where equities are equal, the law will prevail." 
 
 "Value." — In Virginia and a few other States, even though 
 the money was not originally lent on the faith and credit of that 
 specific property, yet if the creditor subsequently secures a vol- 
 untary lien such as is mentioned above, carrying legal title, he is 
 elevated to the higher and more advantageous position of a pur- 
 chaser for value.^'^ 
 
 On the other hand, the taking of such a lien to secure a pre- 
 
 "'•' Borst V. Nalle, 28 Gratt. 433; Coldiron v. Asheville Shoe Co., 
 93 Va. 364;' 6 Va. Law Reg. 645; 7 Va. Law Reg. 333; Nolting v. 
 Bank, 99 Va. 54; Straley v. Esser, 117 Va. 135; Charlottesville Hard- 
 ware Co. V. Perkins, 118 Va. 34; American Sugar Refining Co. v. 
 Fancher, 145 N. Y. 552. 
 
 "" In legal terminology, the term 'purchaser,' of itself, imports 
 one who has acquired title to property otherwise than by inheritance. 
 The term does not necessarily connote the payment of value. 
 
 ^ See infra, note to § 904; note 33 L. R. A. 305; Chapman v. Chap- 
 man, 91 Va. 400; Wasserman v. Metzger, 105 Va. 744. 
 
62 Notes on Equity Jurisprudence 
 
 existing debt, with no new consideration intervening, is held in 
 many States not to constitute the creditor a purchaser "for 
 
 value." 
 
 Page 133, § 238. Resulting trust, continued — ^husband 
 purchasing with wife's money. — The statement of the Text 
 that where the wife furnishes the consideration and the husband 
 takes title in himself, a trust prima facie results in her favor, ex- 
 presses a general truth where the estate is the wife's equitable 
 separate estate. But, by well established doctrine in Virginia 
 and many States, where the wife permits the husband to use her 
 money and to buy property in his own name (the money not 
 being her equitable separate estate) there is a strong, if not con- 
 clusive, presumption that she meant to give it to him, unless 
 contemporaneously with the transaction, there was an express 
 understanding to the contrary.^^ 
 
 Page 133, § 240. Agent to purchase, buying with his own 
 funds. — If, as we have seen i^ there may be a trust implied i* 
 in favor of one of whom advantage has been taken by a stranger, 
 not occupying toward him a fiduciary relation — a fortiori must 
 an agent to buy be held a trustee for his principal, where, in 
 fraud of the fiduciary relation, he purchases real property with 
 his own funds and in his own name, and repudiates the right of 
 the principal. It would seem immaterial whether the arrange- 
 ment was that the agent should advance "the funds, to be re- 
 imbursed by the principal, or whether the purchase money was 
 to have been supplied by the principal in the first instance.^^ 
 
 The question in such cases as this is, was there an existing 
 agency, and hence a fiduciary relation between the purchaser 
 and the claimant cestui; or was there merely an oral con- 
 tract by the one to purchase the (real) property and to convey, 
 or have it conveyed, to the other — the breach of which contract 
 
 ^ The authorities are collected in note to McConviile National 
 Bank, 5 Va. Law Reg. 695. See infra, note to § 536 (4). 
 
 " n. to '§ 236. 
 
 " Here, a 'constructive' rather than a 'resulting' trust. 
 
 ^ Halsey v. Monteiro, 92 Va. 581; Jackson v. Pleasanton, 95 Va. 
 614, and 101 Va. 382, 290 (the Text with approval) ; Johnson v. Hay- 
 ward (Neb.), 103 N. W. 1058, 5 L. R. A. (N, S.) 113; Schmidt v. 
 Beiseker (N. D.), 105 N. W. 1102, 51 ,L.. R. A. (N. S.) 133. The cases 
 are ccHected in note 5 L. R. A. (N. S.) 11'2 and 133. 
 
ResuIvTing Trusts — Criticized 63 
 
 is not actionable under the statute of frauds. The qiuestion in 
 each case is, of course, one of fact rather than of law. It is well 
 discussed by Kelly, P., in Matney v. Yates. i® 
 
 We have already seen that the same principle applies where 
 several persons agree by parol to purchase real estate as part- 
 ners. An implied trust arises in favor of one excluded by the 
 others, who purchase with their own funds and in their own 
 names. 1'^ 
 
 This resulting trust abolished in several states by stat- 
 ute. — The presumption upon which the trusts of this class rest, 
 namely that payment for conveyance to another who is a stranger 
 in blood, is presumed to be intended as a trust for the payor, has 
 never been entirely satisfactory to courts and lawyers. The rea- 
 son upon which this conclusion of trust is based is the improba- 
 bility that one would thus make a gift to a stranger. But the 
 answer is, that if the payor does not mean a gift, he should take 
 the precaution to set out the trust on the face of the convey- 
 ance. The recognition of such a trust, and the secrecy with 
 which it may be created, open the door for fraud in two direc- 
 tions : It enables the payor to secrete his ownership from, his 
 own creditors, and thus to defeat them of their just claims; and 
 it gives a false credit to the grantee, thus enabling him to work a 
 fraud on creditors, who have extended credit to him on the faith 
 of his apparent ownership of the trust property. 
 
 This class of resulting trusts in real property has been abol- 
 ished in several of the states. ^^ 
 
 Up to this point we have disposed of resulting trusts of the 
 first class, and sundry equitable principles applicable to all im- 
 plied trusts. We now come to glance very briefly at the remain- 
 ing three classes of the resulting trust. These are quite satis- 
 factorily treated in the Text. 
 
 " 121 Va. '507. 
 
 " Miller v. Ferguson, 107 iVa. 249. 
 
 " Namely in Indiana, Kansas, Kentucky, Michigan, Minnesota, New 
 York and Wisconsin. See Bogert on Trusts, 111. 
 
64 Notes on Equity Jurisprudence 
 
 Page 136, §§ 242-246. Resulting trusts of the second class 
 — parties in joint interest.— [Alter Text title to § 242 to con- 
 form]. This class requires but little comment. It is only im- 
 portant to point out that cases of fraud on the fiduciary relation 
 are not properly classifiable under this head — belonging to the 
 class of constructive trusts treated in the following chapter. 
 The 'resulting' trust here — all resulting trusts connote honest 
 dealings, and flow from intention, of the parties — is properly 
 confined to presumably honest conduct by parties occupying a 
 confidential or quasi-fiduciary relation to others, because of 
 their common interest in a particular res or enterprise. 
 
 The Text contains a number of proper illustrations of the 
 principle. The principle applies not only to the case stated in § 
 242, where one of the interested parties obtains an outstanding 
 title to the common property,i^ but to any case where a party in 
 common interest acquires title to, or a hostile claim against, or 
 any peculiar advantage over, his fellows, in that connection. In 
 every such case he will be held to hold in trust for all — subject, 
 of course, to reimbursement for his outlay. If done honestly 
 and in good faith, the trust implied will be classified as resulting 
 — if in bad faith, then constructive. 
 
 The principle applies to partners, co-owners, principal and 
 surety, co-sureties, promoters of corporations as among them- 
 selves, and as concerns share-holders, executors and the estate 
 of their testators, and to all persons jointly interested in a prop- 
 erty or an enterprise, or who are bearing a common burden. 
 
 The same — illustrations. — The case of a surety compromis- 
 ing the debt at less than its face value, is a typical illustration. He 
 may not look to the principal for exoneration beyond the amount 
 actually paid ; so with a surety and his co-surety. So, where one 
 co-tenant discharges a lien or other burden on the common prop- 
 erty, by compromise at less than face value, or acquires a hostile 
 title or claim thereto; or an executor buys in a claim against the 
 testator's estate ; or the treasurer of a corporation purchases a 
 claim against the corporation at a discount, or a trustee a claim 
 against the cestui; or an agent purchases at a discount a debt due 
 by his principal, etc. 
 
 '^ Goodloe V. Woods, 115 Va. 540. 
 
RESuivTiKfG Trusts^— Third Class 65 
 
 Page 138, §§ 247-251. Resulting trusts, continued— the 
 third class — unexhausted trust funds. — The Text treatment 
 of this third class seems sufficietit. Note the distinction (§§ 250- 
 251) between a trust and a mere charge on the estate passing. 
 In the former case, any portion of the fund left after discharg- 
 ing the trust, results to the grantor — whereas, in the second case, 
 the balance left remains the property of the grantee. There is a 
 manifest difference, in intent, between a conveyance "to A in 
 trust to pay my debts" and "to A, but charged with the payment 
 of my debts." In the first case A has no beneficial interest; in 
 the second, the whole interest is his, subject only to the charge. 
 
 Page 140, § 252. Resulting trust of fourth class — volun- 
 tary conveyance to stranger. — As indicated in the Text, the 
 doctrine that a voluntary conveyance to a stranger in blood is 
 presumed to be in trust for the grantor, if it was ever recognize! 
 in equity, is now obsolete and we need not notice it further. 
 
 Page 142, § 254. Resulting trust under a will. — This prin- 
 ciple has already been discussed at some length in a previous 
 note to p. 103, § 185, of Text. 
 
66 Notes on Equity Jurisprudence 
 
 CHAPTER XI. 
 Constructive Trusts. 
 
 Page 143, § 256. Constructive trusts— bulk of author's 
 treatment deferred to later chapter. — Observe that as most 
 cases of constructive trusts involve questions of fraud, the au- 
 thor defers full treatment to a later chapter on Eraud. But, as 
 will appear later in this chapter, equity uses the principle of the 
 constructive trust in many other cases in order to prevent the 
 unjust enrichment of one person at the expense of another. 
 
 The Vendor's Lien. 
 
 Page 144, § 257. Vendor's lien on real property for pur- 
 chase money. — The student will recall that the vendor of per- 
 sonal property has no lien for the purchase money, after he 
 has delivered possession. That doctrine should not he confused 
 with that here discussed — the vendor's lien on real property. 
 
 The same— of three kinds — ^importance of distinguish- 
 ing. — As the nature of the vendor's lien on real property to se- 
 cure payment of the purchase money is not stated in the Text 
 with the detail and accuracy needed to give the student a clear 
 understanding of it, what follows may be substituted for our au- 
 thor's discussion of this topic. 
 
 The vendor's lien may be divided into three classes, each 
 sharply distinguishable from the others. 
 
 The same. — The several kinds of vendor's liens mentioned 
 above may be thus designated: 
 
 (1) The vendor's equitable lien — implied after conveyance of 
 title to the vendee. 
 
 (2) The vendor's equitable lien, expressly reserved on the 
 face of the conveyance to the vendee. 
 
 (3) The vendor's legal lien — existing after the executory 
 contract of sale and purchase, but before conveyance is actually 
 made to the vendee. 
 
 Vendor's lien, continued (1) Implied equitable lien. — 
 
 Where a conveyance of the legal title to real property has been 
 
Constructive Trusts^ — Vendor's Liens 67 
 
 made by the vendor to the vendee, with no reserved or other 
 contractual lien to secure deferred installments of purchase 
 money, the vendor has no other remedy at law than an action 
 on the promise to pay. Since the vendee in the meanwhile may 
 have become insolvent and unable to pay, this remedy is a too 
 precarious one to be of much value. 
 
 But inasmuch as it is highly unjust that the vendor in such 
 case should lose recourse against the very property conveyed, 
 equity, in order to secure the purchase money therefor, raises an 
 implied trust for the benefit of the vendor. That is, equity 
 treats the vendee with legal title as holding for the benefit of the 
 vendor, to the extent of the unpaid purchase money — in other 
 words, regards the property as affected by an equitable lien in 
 favor of the vendor. 
 
 Implied equitable lien, continued — (a) cut off by sale 
 to a bona fide purchaser. — Since this is a secret lien, not ap- 
 pearing on the face of the title papers, it would manifestly be 
 unjust to permit it to be asserted against a subsequent honest 
 purchaser from the vendee — who, having legal title, has passed 
 legal title to the purchaser. Hence the rule is that while such 
 lien is good against the vendee hinuself, and those claiming as 
 volunteers under him — e. g., heirs or devisees, or his assignee in 
 bankruptcy, or attachment or judgment creditors — it cannot be 
 asserted against a bona fide purchaser for value from the vendee. 
 
 This lien, when it exists, can only be enforced by a 'bill in 
 equity. As indicated in the Text, it is not recognized at all in 
 some of the States. In Virginia it has been abolished by stat- 
 ute,^ unless expressly reserved on the face of the conveyance — 
 in which case it belongs to our second class treated below. 
 
 The same — ^(b) good against creditors. — The statement 
 of the Text (page 144) that attaching creditors of the vendor 
 are not bound by the lien here mentioned, and hence take pri- 
 ority over the vendee, contravenes the rule, already noted, ^ that 
 creditors stand in the shoes of their debtor, in the absence of a 
 statute to the contrary. 
 
 ' Va. Code 1919, § 5183. 
 ^ Supra, note to p. 130. 
 
68 Notes on Equity Jurisprudence 
 
 It follows, for example, that where A conveys Blackacre to 
 B at the price of $10,000 — one half cash, balance to be paid in 
 one year — and later, before payment of the deferred balance, a 
 judgment or attaching creditor of B attempts to subject Black- 
 acre to the payment of the credior's claim, A's implied lien for 
 the purchase money would take priority over the claim of the 
 judgment or attaching creditor. 
 
 The recognition of this implied and secret lien in favor of the 
 vendor, as superior to the claims of the vendee's creditors, fre- 
 quently worked a hardship on these creditors, who were possi- 
 bly induced to extend credit to B because of his apparent own- 
 ership of Blackacre, under an unincumbered title. The situation 
 clearly gave B a false credit — and it was largely for this reason 
 that the statute in Virginia abolished the lien altogether. The 
 statute seems a wise one. 
 
 Equitable vendor's lien, continued — (2) Expressly re- 
 served on the face of the conveyance. — Manifestly this sort 
 of a lien is far superior to the former, just treated. Here, hav- 
 ing expressly contracted for his lien, and had it written at large 
 on the face of the conveyance, the vendor is not dependent on 
 the grace of the court to raise an implied lien in his favor, fcut 
 may assert his express lien as a matter of right by bill in equity, 
 and against all comers. 
 
 And, since the lien appears on the face of the conveyance it- 
 self, it is superior even to the rights of a bona fide purchaser 
 for value, who is bound to take notice of everything appearing 
 on the face of the documents of title through which he must 
 necessarily claim — or, in lawyer's phrase, in his chain of title. 
 
 Notice imputed from chain of title. — As stated, this lien, 
 appearing as it does on the face of the vendor's deed to the 
 vendee, is good even against purchasers for value without actual 
 notice of its existence. This principle results from a fundamen- 
 tal rule of real property law, of which we shall see more here- 
 after, that a purchaser of real proprty is, by construction, con- 
 clusively bound with notice of the contents of every docmnent 
 constituting a part or link of his chain of title. 
 
 This means not only that the purchaser must take notice of 
 what appears in the deed of conveyance from his immediate 
 
Vendor's L,ien— Notice — ^Chain oj? Title 69 
 
 vendor, but also whatever appears in all the deeds, wills or other 
 title papers (a multitude it may be) through which the title has 
 been transmitted since the original grant from, the crown or 
 commonwealth, down to himself. Each of these makes up a link 
 in his chain of title. He is therefore dependent upon each for 
 the title he claims. Obviously, then, he will not be allowed to 
 claim title through a particular deed, and yet ignore some part 
 of it. He cannot be permitted to swing by a chain, and yet ig- 
 nore or reject one of its links. 
 
 It follows, therefore — and this rule applies not only to the 
 particular lien now under discussion, but is one of universal ap- 
 plication — that in equity there can be no bona fide purchaser of 
 real property, so as to cut off equitable rights, where these rights 
 appear on the face of any document constituting a link in the 
 chain of title. 
 
 The student will find the need of this principle throughout 
 his studies of trusts, and generally throughout the study of eq- 
 uity jurisprudence. His special attention is therefore invited to 
 the foregoing discussion. 
 
 The same — illustrations. — In a partition suit between A 
 and B, co-tenants, the decree directed that a described portion 
 of the estate be conveyed iby the master to A, and the other por- 
 tion to B ; but as A's portion was the more valuable, the master 
 was directed to reserve on the face of A's deed a lien for owelty 
 of partition, in favor of B, for a sum named. This the master 
 inadvertently omitted to do. Later, A sold and conveyed to C, 
 who had no actual notice of the lien. B sued C, asserting his 
 lien, whereupon C pleaded that he was a bona fide purchaser for 
 value. It was held, that as the master's deed was the source of 
 A's title, and as the court's decree was the source of the master's 
 authority, C was bound to take notice of these links in his chain 
 of title, and was therefore not a purchaser without notice.^ 
 
 Again, in Charlottesville Hardware Co. v. Perkins,* the owner 
 of real property conveyed the property to another, by deed re- 
 citing a cash payment, and the execution of the vendee's several 
 obligations for the deferred payments of purchase money, "all 
 
 ' Jameson v. Rixey, 94 Va. 342. 
 * 118 Va. 34. 
 
70 Notes on Equity Jurisprudence 
 
 secured by a deed of trust on the land itself, which deed and this 
 are parts of the same transaction." The deed of trust mentioned 
 was not recorded, and was therefore, under the registry statutes, 
 invalid as to purchasers for value without notice. Subsequently, 
 the vendee conveyed to a third person who paid value and was 
 ignorant of the unrecorded incumbrance. Held, the recital of 
 the deed of trust in the original deed of conveyance was notice 
 to the subsequent purchaser, who claimed title through that deed 
 as a necessary link in his chain of title.^ 
 
 Vendor's lien, continued — (3) Vendor's legal lien. — As 
 
 already shown, this lien arises only under an executory contract 
 to convey — where the legal title remains in the vendor, await- 
 ing payment of the purchase m,oney and conveyance of the legal 
 title. In the other two cases discussed, the vendee held the le- 
 gal title, but impressed with an equitable lien in favor of the 
 vendor. 
 
 In the present case, the vendor himself holds the legal title — 
 first, for his own benefit to secure the purchase money, and then 
 in trust for the vendee. 
 
 So long as the vendor thus holds the legal title, it is clear 
 that he has the whip hand — since he can be forced to surrender 
 it only after payment of the contract price. In this situation he 
 can, of course, defy the world. There could be no* cutting off 
 of his rights by a sale to a bona fide purchaser, since any pur- 
 chaser from the vendee would be bound to take notice, (see 
 preceding note) of the latter's title, which is equitable only. The 
 bona fide purchase of an equitable title does not cut off equities, 
 nor, a fortiori, legal title.* 
 
 This lien the vendor enforces by a bill in equity for specific 
 performance. In such proceedings the court, if necessary, will 
 enforce the lien by a sale of the property. 
 
 ° See infra, note to § 900; Roanoke Brick Co., v. Simmons (Va.), 
 20 S. E. 955; Bellenot v. Laube, 104 Va. 843; 8 Va. Law Reg. 735; 
 note to L,e Neve v. L,e Neve, 3 L. C. E. 168. Compare the duty of 
 the holder of negotiable paper to take notice of all equities appear- 
 ing on the face of the paper, and in every indorsement through which 
 he traces his title. Compare, again, the physiological rule that one 
 may not repudiate the tainted blood of an ancestor, howsoever remote, 
 nor deny the kinship. 
 
 ° See Southern Railway Co. v. Gregg, 101 Va. 308, and note 
 thereto in 8 Va. Law Reg. 873; Yancey v. Mauck, 15 Gratt, 390. 
 
Constructive Trusts 71 
 
 Pages 146-151. [Omit, as treated at large in our studies of 
 Private Corporations.] 
 
 Constructive trusts, continued. — Before leaving this topic 
 it may be vsrell to point out that it is largely through the doctrine 
 of constructive trusts that a court of equity applies its favorite 
 principle that, if possible to prevent it, one person rrnist not be 
 permitted unjustly to enrich himself at the expense of another. 
 The implied equitable vendor's lien discussed above illustrates 
 the principle. 
 
 An excellent illustration is afforded by the New York case of 
 West. Union Tel. Co. v. Shepherd.''' Here, 'W conveyed a lot to 
 T, reserving all claims for damages, past, present or future, 
 against an elevated railway company operating in the street upon 
 which the lot abutted, for injury to the property. Later, T con- 
 veyed to S, who was without actual notice of the reservation. 
 Later S recovered damages of the railway company. Held, S 
 will be held as trustee of the fund recovered, for W's benefit.* 
 
 Constructive trusts, continued — statute of limitations. 
 
 — 'While, as we have seen, the statute of limitations does not run 
 in favor of the trustee of an express, or, in general, a resulting 
 trust, the rule is otherwise in the case of the constructive trust. 
 The reason for this distinction is that in the former cases the 
 trustee does not hold adversely to the cestui — the trustee's title 
 and possession being a rightful one while in the case of the con- 
 structive trust the situation is otherwise. Here the trustee's ti- 
 tle is wrongfully acquired, and his possession of the trust res a 
 tortious possession. 5 
 
 ' 169 N. Y. 170, 63 N. E. 154. 
 
 ' See further: Manning v. Rippen, 86 Ala. 357, 5 South. 473; n. 2 
 L. R. A. (N. S.) 820. 
 
 ° Cochran I/. Hiden CVa.), 107 S. E. 708 (1931). See the Text, 
 § 338. 
 
72 Notes on Equity Jurisprudence 
 
 CHAPTER XII. 
 
 Incidents op Trust Estates. 
 
 [Alter Text chq-pter title to conform to ours.] 
 
 Preliminary. — ^We have now considered the various kinds of 
 trusts — their classification, and how arising. We come now to 
 consider the various incidents of trust estates, assuming their 
 trust character granted — for instance, curtesy and dower therein ; 
 nature and extent of trustee's title; rights of cestui therein, and 
 his right to transfer his equitable interest; liability to cestui's 
 debts, etc. 
 
 Page 152, § 272. Curtesy and dower in trust estates.— 
 
 Questions of curtesy and dower are treated at large in Profes- 
 sor Minor's course on Real Property. It is sufficient to say here 
 that, in absence of statute, the husband's curtesy in the wife's 
 equitable estate (not equitable separate estate) has existed from 
 earliest times. But the rule was the reverse in the case of the 
 wife's claim to dower. 
 
 The Virginia statute ^ places curtesy and dower in trust es- 
 tates on the same footing, by declaring that where other requi- 
 sites exist, trust estates are subject to curtesy and dower in the 
 same manner as legal estates. 
 
 Page 154, § 276. Quantum of trustee's estate. ^ — The doc- 
 trinehere stated as to the cessation of the trustee's title so soon 
 as the purposes of the trust have been fulfilled, seems to be sus- 
 tained by many authorities, but lawyers in practice assume the 
 rule to be otherwise, and whenever a trust has been satisfied, or 
 has otherwise ceased, and it is desired to revest the legal title 
 in the grantor or his heirs, careful lawyers require a deed from 
 the trustee (known as a "release"), reconveying the title.^ 
 
 ' Va. Code 1919, § 5158. 
 
 " Consult article by Paxton, 9 Va. Law Reg. 1; 10 Va. Law Reg. 
 491. 
 
 " See Ashley v. Coake (Ga.), 35 S. E. 89; authorities supra; n. 2 
 L. R. A. (N. S.) 180. 
 
FoLivOwiNG Trust Funds 73 
 
 Page 155, § 279. Following trust funds.*— The doctrine of 
 the Text appHes not only to misappropriation of trust funds by 
 a fiduciary, but generally to all cases where one person wrong- 
 fully appropriates the property of another — even where the 
 wrongdoer is a stranger, and obtains possession or title by fraud 
 or theft, and against the will of the real owner — and the rem- 
 edy at l?iw is not adequate and complete. 
 
 In the latter case, equity regards the wrongdoer as a construc- 
 tive trustee from the moment he becomes possessed of the prop- 
 erty, and his subsequent disposition thereof as a misappropria- 
 tion of trust funds. A few older cases have held otherwise, as 
 indicated in Text footnotes to § 279, but the modern view is 
 clearly opposed to this view.^ 
 
 The same — identity of fund — "earmarked. "^The whole 
 doctrine of following trust funds rests on the assumption that 
 the res is so earmarked that the cestui is able satisfactorily to 
 trace his property therein through the several transmutations 
 which it has undergone since its wrongful conversion, and thus 
 constructively to identify his own. If he cannot thus identify 
 the res no trust can be established. 
 
 The courts, however, are extremely liberal to the cestui in 
 the matter of the establishment of this identity, as we shall see 
 in the following pages. 
 
 Page 156, § 280. The same — funds mixed in bank deposit 
 by wrongdoer — ( 1 ) Where contest is between cestui and 
 creditors of depositor. — Where the proceeds of the misap- 
 propriated property are mixed by the wrongdoer with funds of 
 his own^as by deposit in bank, or, let us suppose, in a bag or 
 strongbox in which his own money is kept — the identity of the 
 precise bills or coins is of course lost. But it does not necessa- 
 raily follow that the cestui loses his right to subject the mixed 
 fund to his claim, in priority to other creditors of the wrong- 
 doer. Whether he may or may not insist upon impressing such 
 
 * See an illuminating article on this subject, by the late distinguished 
 Dean Ames, of the Harvard Law School, in 19 Harv. Law Rev. 511. 
 
 " American Co. v. Fancher, 145 N'. Y. 553; Menz v. Beebe, 103 
 Wis. 343; Nat. Bank v. Barry, 135 Mass. 30; Dean Ames' article, 
 supra; 37 Harv. L. Rev. 135; .Barksdale v. Finney, 14 Gratt. 338; 
 Brown v. Orr, 110 Va. 1; cases infra. 
 
74 Notes on Equity Jurisprudence 
 
 mixed fund with a trust or lien in his favor, will depend on cir- 
 cumstances, now to be considered. 
 
 Funds mixed in bank deposits, continued — (a) where 
 the trust fund is intact, though mixed. — It is clear that 
 where the wrongdoer thus mixes the trust fund with his own, in 
 a general bank deposit in his own name, equity at once attaches 
 a trust or lien in favor of the cestui on the whole fund. 
 
 If the depositor subsequently checks out a portion of the de- 
 posit, equity presumes that he has meant to draw on his own 
 funds rather than on those of the cestui. So long, then, as his 
 general balance in bank does not fall below the amount of the 
 trust fund — even though numerous fresh deposits be made, and 
 continuous checking out occur — the trust fund is presumed to 
 remain intact. 
 
 This presumption that a rascally trustee has meant to draw 
 on his own funds rather than those of the wronged cestui, is, 
 of course, pure fiction, and maybe discarded, and the same result 
 reached by simply treating the whole deposit as affected with a 
 lien or trust; which lien attaches to whatever is left of the mixed 
 deposit. This, however, only where it appears that the trust 
 res, under the presumption mentioned, remains intact. 
 
 The same — (b) trust res encroached upon — fresh de- 
 posits. — It is obvious that if the wrongdoer's general bala ue 
 ever falls below the amount of the trust fund, to that extent the 
 trust fund has been encroached upon, and the cestui's lien can 
 attach only to what is left. New deposits of the wrongdoer's 
 own funds thereafter, cannot revive the lien and extend it to the 
 new deposits — since the latter are in nowise affected by the 
 trust® — unless, of course, there be proof that such new deposits 
 were meant as a restoration of the depleted trust fund. 
 
 The same — tracing the withdrawn trust funds. — ^As 
 
 pointed out, the presumption that the trustee has drawn on his 
 
 " Knatchbull v. Hallett, 13 Ch. Div. (1879) 696; In re O. A. Brown 
 & Co., 189 Fed. 433; Humphreys v. Butler, ,51 Ark. 351; Harrison 
 V. Tierny, 354 111. 371; Englar v. Offutt, 70 Md. 78; Peters Shoe Co., 
 V. Murray (Tex.), 71 ,S. W. 977; Peters v. Bain, 133 U. S. 670; 
 Schuylgr v. Littlefield, 233 U. S. 707; 27 Harvard Law Rev. 135-136. 
 See Miller v. Norton, 114 Va. 609; Pennington v. Bank, 114 Va. 609. 
 
Following Trust Funds 75 
 
 own funds rather than on those of the cestui, is a mere fiction, 
 resorted to only in order to impress a trust upon the balance in 
 bank. Fictions are not permitted to work a legal wrong. Hence 
 where the trust fund in bank has been depleted, in whole or in 
 part, but the trust deposit so withdrawn can be traced into an in- 
 vestment which is still intact, the cestui may assert a lien on the 
 res represented by the new investment. '^ 
 
 The same — bank deposits — (2) Contest between de- 
 positors of insolvent bank. — In accordance with the doctrine 
 that the owner of trust funds may follow them regardless of 
 their mutation and transmutation, as long as they are earmarked 
 and capable of identification — and the further principle that the 
 mingling of funds in bank does not destroy the earmark — a well 
 settled principle of importance arises in controversies between 
 depositors of an insolvent bank. 
 
 Ordinarily the relation between a bank and its depositor is one 
 simply of debtor and creditor, and not that of trustee and cestui 
 que trust. Hence, the common rule, in case of insolvency of 
 the bank, is that depositors all share equally in the distribution 
 of its assets. 
 
 But the same doctrine of constructive trusts and the follow- 
 ing of trust funds applies as well between a bank and its deposi- 
 tor as between individuals. If the bank has received the de- 
 posit under circumstances that would induce a court of equity 
 to attach a constructive trust to the fund, had the transaction 
 been beween two individuals, the bank will be treated as a trus- 
 tee, and the fund a trust fund — thus giving the depositor in 
 whose favor the trust arises preference over the general deposi- 
 tors. 
 
 The same — when bank trustee. — Hence if the bank re- 
 ceives or collects the fund as agent only, and not as borrower, 
 the fund is a trust fund, and will be so treated, if properly, iden- 
 tified — as to which, later. 
 
 So, if the bank receive the fund through its oivn fraud — or 
 from a wrongdoer, knowing his lack of title, or his authority to 
 
 ' In re Otway (1903), 2 Ch. 35&; Lamb v. Rooney, 72 Neb. 322; 
 Primeau v. Granfield, 184 Fed. 480 (good discussion) ; In re O. A. 
 Brown Co., 189 Fed. 432; Brennan v.. Tillinghast, 201 Fed. 609. 
 
76 Notes on Equity Jurisprudence 
 
 make such a deposit — or expressly as trustee for the depositor 
 or another — in every such case, on insolvency of the bank, the 
 princial, or depositor, or cestui, as the case may be, will be pre- 
 ferred, as equitable lienor over the general creditors of the bank. 
 
 The same — illustrations. — Thus, money collected by a bank 
 on a bill or check deposited "for collection" only, with no inten- 
 tion of allowing the proceeds to remain on deposit — thus render- 
 ing the bank agent, or trustee, and not a debtor, as it would be 
 if the fund were meant for deposit—is regarded as a trust fund ; 
 and if the bank fails, the customer's claim will be treated as a 
 preferential one. To so treat it would manifestly be an advan- 
 tage to the owner of the fund, since if he were a mere creditor 
 he would be obliged to come into the distribution of the bank's 
 assets as a general creditor, and take his dividend, large or small, 
 with the other creditors. Treating the fund as a trust fund, 
 however, places the claimant on a plane superior to that of 
 creditors.* 
 
 So, where a bank receives a deposit with knowledge of its oim, 
 insolvency. When the depositor is ignorant of such condition, 
 such acceptance of the deposit is a fraud on the depositor, and 
 the bank will be treated as holding the deposit in trust. ^ 
 
 Again, where a banker received from one about to lease prop- 
 erty from another, money to be kept as security for the perform- 
 ance of the lessee's covenants, and executed to the lessee a writ- 
 ten receipt setting forth the terms of the trust on which the 
 money was to be held, on insolvency of the banker it was held 
 that the deposit was impressed with a trust in favor of the de- 
 positor, notwithstanding the fact that it had been mingled with 
 the general funds of the bank.i<> 
 
 The same — resume. — In short, whether a bank deposit is 
 to be treated as a trust fund or not, as between the depositor and 
 
 ' Miller v. Norton, 114 Va. 609; Pennington v. Bank, 114 Va. 674; 
 n. 32 I<. R. A. 715; n. 34 L. R. A. 533; Central Nat. Bank v. 
 Ins. Co., 104 U. S. 54; Peters Shoe Co. v. Murray (Tex.), 71 S. W. 
 977; authorities supra. 
 
 ° Pennington v. Bank, 114 Va. 674; Western German Bank v. 
 Norvell, 134 Fed, 724, 69 C. C. A. 330; Tiffany, Banks and Banking, 
 89; n. 25 L. R. A. 546. 
 
 " Woodhouse v. Crandall, 197 111. 104, 58 L. R. A. 385. 
 
Foivi^owiNG Trust Funds 77 
 
 other creditors of the bank, depends upon the question whether 
 the deposit was made and honestly received as an ordinary loan, 
 creating the mere relation of debtor and creditor; or whether the 
 bank was mere agent to collect or hold for a specified purpose, 
 under circumstances excluding the idea of a loan; or whether 
 acceptance of the deposit was in itself a fraud on the depositor; 
 or was otherwise made under circumstances such as would in- 
 duce a court of equity to construe the transaction as a trust be- 
 tween individuals. 
 
 The same — bank's assets diminished below trust de- 
 posit. — Here is applicable, again, the principle, already noticed, 
 that if the whole mixed fund ever becomes diminished to a point 
 below the amount of the trust fund, then the lien of the deposi- 
 tor attaches only to what is left, and the trust fund is depleted 
 by the amount of the diminution. Nor will subsequent accre- 
 tions to the bank's funds alter the situation in favor of the de- 
 positor asserting the lien. 
 
 The same — Dean's Ames' statement of the rule. — In the 
 
 luminous discussion by Dean Ames,^^ mentioned supra, the sit- 
 uation is so well presented as to warrant the following quota- 
 tion: "There is," says Dean Ames, "another class of cases il- 
 lustrating the confusion of funds. A bank receives money on 
 general deposit, knowing that it has no right to receive it, ei- 
 ther because of its known insolvency, or because the depositor 
 is an official who is prohibited by law from so depositing the 
 money he holds as an official. The bank fails soon afterwards, 
 having in the meantime received and paid out divers sums of 
 money. The money wrongfully received was mixed, of course, 
 with other money of the bank. Must the depositor, or the body 
 which he represents, come in with the general creditors, or is he 
 entitled to a preference? 
 
 "The answer depends upon the amount continuously in the 
 bank from the time of the bank's wrongful receipt of the deposit. 
 The moment the $1,000" [supposed to be deposited] "was mixed 
 with the other money of the bank, the depositor became cestui 
 que trust of that proportion of all the money then in the bank, 
 
 19 Harv. Law Review, 511, 520. 
 
78 Notes on Equity Jurisprudence 
 
 which $1,000 bore to the total money; or he might claim a lien to 
 the amount of $1,000 upon all the money in the bank. If the 
 total amount of the money in the bank was continuously, from 
 the moment of the deposit up to the time the bank closed its 
 doors, equal to or more than $1,000, the depositor would be 
 paid in full. If at any time the total amount dropped below 
 $1,000, the depositor's security would be reduced pro tanto, and 
 would not be increased by any subsequent receipt of money of 
 its own. 
 
 "The mixing of the depositor's money and the bank's money in 
 the vaults of the bank is not to be distinguished from the mixing 
 by the wrongdoer who puts his own gold eagles with those of 
 another in a bag, or, as in Kirby v. Wilson (98 111. 240) in his 
 pockets." 
 
 Following trust funds, continued — cestui has option to 
 claim either the new res or a lien thereon. — Where the 
 cestui has satisfactorily traced the trust fund into a particular 
 res, under circumstances proper to raise a trust therein for his 
 benefit under principles previously discussed, he has the option 
 to demand the entire thing so purchased with his funds, or to 
 claim a lien thereon, as he may prefer. This may, of course, 
 result in a profit to the cestui qui trust — as where the property 
 has enhanced in value since its acquisition by the wrongdoer.^^ 
 
 Page 158, § 284. [In the third line of this section, the words 
 "or a creditor" should be erased for reasons heretofore noticed.] 
 
 " Francis v. Cline, 96 Va. 201; Bitzer v. Bobo, 39 Minn. 18, 38 N. 
 W. 609; Crawford v. Jones, 163 Mo. 578, 63 S. W. 838; Oliver v. 
 Piatt, 3 How. (U. S.) 333; Holmes v. Gilman, 138 N'. Y. 369; Green 
 V. Haskell, 5 R. I. 447; Shaler v. Trowbridge, ' 28 N. J. Eq. 595; 27 
 Harvard Law Rev. 125, 127. See Lehman v. Gunn, 134 Ala. 313, 27 
 So. 475, where an insolvent debtor insured his life for the benefit of 
 his parents as a gift to them, executing his note for the small amount 
 of the first premium. Shortly afterwards he died before actual payment 
 of the premium. It was held that this transaction amounted to a 
 gift of the policy to his parents; that this was in fraud of his existing 
 creditors; and that hence the parents held the entire proceeds in 
 trust for the creditors of the insured, to the full extent of his indebted- 
 ness, although the only sum which the debtor could be said to have 
 wrongfully diverted from his creditors was represented by the note 
 for the first premium. The proceeds of the note, namely, the in- 
 surance policy and its subsequent proceeds, were many times of 
 more value than the original amount thus constructively diverted. 
 
Spendthrift Trusts 79 
 
 Page 158, § 285. Notice that the title is fiduciary is suf- 
 ficient. — In accordance with the principle stated in the Text, 
 namely, that one who buys from a trustee, knowing that his 
 title is held in trust, must take notice of the limitations and 
 restrictions upon his authority, and buys at his peril, it was re- 
 cently h,eld in Virginia, under a deed of trust executed to secure 
 a debt, and containing the usual provision that the trustee should 
 sell "at the request of the creditor," that where the trustee sells 
 without such request, the purchaser, though obtaining legal ti- 
 tle, will take it encumbered with the trust. ^^ 
 
 Page 162, § 291. Spendthrft Trusts.— The student will 
 better understand this subject by bearing in mind a fundamental 
 rule of the English common law, still existing in England, Vir- 
 ginia (anterior to Code of 1919), and many of the States, that 
 the right of alienation and liability for debt are essential inci- 
 dents of the own.ership of property, real or personal — and, in 
 general, whether the owner have legal or equitable title. '^^ 
 
 That is to say, a gift directly to A, "but not to be subject to 
 sale by him or liable for his debts" — or to a trustee for A, with 
 the same restrictions — is really an endavor to accomplish two 
 inconsistent things, namely, to make A complete owner, without 
 the rights or incidents of complete ownership. Various meth- 
 ods have been attempted, more or less successfully, to evade 
 this settled rule, recognized as well in equity as at law. We 
 may mention the two most usual of these : 
 
 The same — First method. — (1) A conveyance to A, or to 
 a trustee for A, but his right to the property to cease imme- 
 diately upon his becoming insolvent, or bankrupt, or upon his at- 
 tempting to alienate — with limitation over to another. This ac- 
 complishes one purpose, namely, to prevent A from selling the 
 property or charging it with debt, but it fails to accomplish the 
 main purpose, namely, that notwithstanding his improvidence A 
 may continue, to enjoy the donor's bounty. For by the very 
 terms of the trust, he forfeits the estate the moment his spend- 
 thrift habits produce insolvency or an attack from his creditors. 
 
 " Wasserman v. Metzger, 105 Va. 744. 
 
 " Scott V. Patterson, 104 Va. 455; Petty v. Moore's Brook Sana- 
 torium, 110 Va. .815. 
 
80 Notes on Equity Jurisprudence 
 
 It is therefore, theoretically, a complete protection against alien- 
 ation, or liability for debt, but it is of little practical value to the 
 spendthrift himself. i'' 
 
 The same — Second method. — (2) A second method, and a 
 more practical one, operates on the theory that A may be pro- 
 vided for without giving him either legal or equitable ownership 
 of the property. The plan here is to convey the estate to a trus- 
 tee, in whose judgment and discretion the donor has confidence, 
 upon trust to pay over to A so much of the rents, issues, profits 
 or incom^e thereof, as the trustee may, in his uncontrolled discre- 
 tion, see fit. So much of the income as is not thus devoted to 
 A's support and maintenance is to be reinvested as a part of 
 the principal, and at A's death the entire corpus is to go over to 
 another designated beneficiary, according to the provisions of 
 the trust instrument. These provisions may even go to the ex- 
 tent of permitting A to designate by will how the principal shall 
 be disposed of at his death. 
 
 It is perfectly clear here that A can of right demand nothing 
 of the trustee. The latter has unlimited discretion to devote all 
 or none of the income to A's necessities. Since A has no vested 
 interest, and hence can detnand nothing, his creditors, who, as 
 we have seen, stand in his shoes, can likewise dem,and nothing. 
 This plan seems to answer fairly well, provided of course the 
 trustee feels interested enough in A to see that he actually gets 
 the benefit of the income, or enough of it, to maintain him com- 
 fortably. 
 
 The student will observe that the keynote in this plan is an 
 absolute and uncontrolled discretion in the trustee, as to the dis- 
 posal of the income, in its application to A's wants, with com- 
 plete lack of any vested property right in the latter.^" 
 
 The same — Third method — prevailing in a few states 
 only. — (3) In some of the American States, the fundamental 
 
 "' See Camp v. Cleary, 76 Va. 144. 
 
 " The leading case of Nichols v. Eaton, 91 U. S. 716, illustrates 
 this sort of a trust. The leading case on this subject in Virginia is 
 Hutcheson v. Maxwell, 100 Va. 169; 7 Va. Law Reg. 785 and note. 
 In this case the draughtsman of the trust instrument failed to ob- 
 serve this keynote, and by its omission, gave A the right to demXind 
 a "comfortable support," which right, as the court properly held, could 
 be sequestered by his creditors. 
 
Spendthrift Trusts 81 
 
 rule noticed previously, that the right of alienation and liability 
 for debt are essential accompaniments of the ownership of prop- 
 erty, has been relaxed; and in such States a third and simpler 
 method has been approved by the courts, namely, a gift to a 
 beneficiary, or to a trustee for him, zvith a simple declaration that 
 it shall not be alienable or liable for his debts. This rule exists 
 in Massachusetts, Kentucky, and a number of other States, in- 
 cluding West Virginia by recent decision.^'' 
 
 Page 164, § 296. Spendthrift trusts continued — for bene- 
 fit of grantor himself. — All of the authorities agree that the 
 owner of property cannot create a trust therein for his own 
 benefit, with restrictions upon his right of alienation or his power 
 to charge it with his debts — even where uncontrolled discretion 
 is vested in the trustee, as under our second method above. ^^ 
 
 The same — Virginia statute. — By the revisal of 191919 
 spendthrift trusts are declared valid within certain limits — the 
 value of the corpus of the trust estate not to exceed one hundred 
 thousand dollars. 
 
 The same — quasi-spendthrift trust under so-called fam- 
 ily settlements. — Something in the nature of a spendthrift 
 trust, arising out of trusts erected for the support and main- 
 
 " It was approved obiter by the Supreme Court of the United 
 States in Nichols v. Eaton, supra. Note 24 Am. St. Rep. 686 to 697, 
 where the cases are collected; Guernsey v. L,azear (W. Va.), 41 S. 
 E. 405; Jackson Square Association v. Bartlett (Md.), 93 Am. St. 
 Rep. 416 and note. This is the doctrine of the Text, § 294. 
 
 " This is regarded by the courts as a fraudulent effort on the part 
 of the owner to shield his property from his own debts, and con- 
 trary to public policy. Petty v. Moore's Brook Sanatorium, 110 
 Va. 815; Menkin v. Brinkley, 93 Tenn. 721, 31 S. W. 92; Bank v. 
 Windram, 133 Mass. 175; Mackason's Appeal, 42 Pa. 330, 83 Am. 
 Dec. 517; Ghormley v. Smith, 139 Pa. 584, 21 Atl. 135, 23 Am. St. Rep. 
 215, 11 h. R. A. 565. 
 
 " Va. Code 1919, § 5157. Equitable estates are declared subject to 
 debts of the cestui to the same extent as legal estates — "but any 
 such estate, not exceeding $100,000 in actual value, may be holden 
 or possessed in trust upon condition that the corpus thereof, and in- 
 come therefrom, or either of them, shall be appHed by the trustee 
 to the support and maintenance of the beneficiaries, without being 
 subject to their liabilities or to alienation by them; but no such 
 trust shall operate to the prejudice of any existing cerditor of the 
 creator of such trust." 
 
S2 Notes on Equity Jurisprudence 
 
 tenance of a fondly — or doubtless of any designated group of 
 persons — has long been recognized by the courts. 
 
 Instances of such trusts appear in settlements of property by 
 deed or will, on a trustee, the income to be used for the support 
 of a designated family, where it appears, in express terms or by 
 plain implication from the trust instrument, that the intention of 
 the settlor was that the entire subject is to be preserved by the 
 trusee for the common and joint maintenance of all members of 
 the family, or other designated group, so that no one of them 
 has such a separable interest therein as to authorize a separate 
 alienation by him, or the subjection of any portion thereof to the 
 payment of his debts. ^^ 
 
 CHAPTER XIII. 
 
 Trustee and Beneficiary.^ 
 
 Page 165, § 298. Security by trustee. — As the trustee is 
 not a public official, being appointed by the grantor of the in- 
 strument of trust, or by the court in substitution, he is not re- 
 quired to give bond unless there be a statute requiring it. In 
 Virginia, trustees may be required to give bond with good se- 
 security, if in the opinion of the court this is necessary for the 
 protection of the trust fund.^ 
 
 Page 166, §§ 300-309. New and substituted trustees. — As 
 to how legal title passes to new, or substituted trustees, see ante, 
 note to § 154. 
 
 Page 170, § 310. Trustee may not purchase the trust res. 
 
 — The rule, well stated in the Text, that a trustee's purchase of 
 the trust property may always be avoided by the cestui, is a fun- 
 damental principle of equity. The rule applies even though the 
 
 "" Markham v. Guerrant, 4 Leigh 279; Johnston v. Zane, 11 Gratt. 
 552 569-570. 
 ' See Va. Code §§ 6298-6304; id. Ch. 221. 
 ' Va. Code 1919, § 6301. 
 
Investments by Trustees 83 
 
 trustee acted in good faith, from laudable motives, and paid the 
 best price to be had.^ 
 
 Page 172, §§ 313-316. Investments by trustees.— The stu- 
 dent will note the conservative rule existing in England on this 
 subject. In America, there are two rules, known as (1) New 
 York Rule; and (2) Massachusetts Rule. 
 
 The same — 1. New York rule. — This rule is not so con- 
 servative as in England, and yet much more conservative than 
 the Massachusetts rule. Generally speaking, in the absence of 
 statute, or of provisions in the trust instrument to the contrary, 
 the trustee may invest only in (a) government securities; (b) 
 real estate mortgages, and (c) first mortgage bonds of estab- 
 lished corporations. 
 
 The same — 2. Massachusetts rule. — This rule is much 
 more liberal. Under this, the trustee may invest in such securi- 
 ties as prudent and intelligent business men regard as good for 
 an investment -meant to be permanent, and not merely specula- 
 tive. 
 
 Hence stocks in safe business corporations, as well established 
 banks, railroads, mnufacturing companies, insurance companies, 
 etc., are regarded as proper. But in no case may the trustee 
 invest in new enterprises just being established, and therefore 
 necessarily speculative, or on mere personal loans to individ- 
 uals, howsoever solvent, unless there be other security than the 
 mere personal promise to pay, nor in any security the value of 
 which is purely speculative. 
 
 Prior to the statute presently to be mentioned, the Massa- 
 chusetts rule probably prevailed in Virginia.* 
 
 The safest plan, however, is for the trustee to take the advice 
 of a court of chancery, and thus relieve himself of what fre- 
 quently proves to be a very serious responsibility. 
 
 The same — ^Virginia statute. — A very recent Virginia stat- 
 ute ° provides that executors, trustees or other fiduciaries may 
 
 Smith V. Miller, 98 Va. 535; Jackson v. Smith, U. S. (Jan. '31). 
 See Davis v. Harmon, 31 Gratt. 194, 301; Waller v. Catlett, 83 Va. 
 Va. Code 1919, § 5431. See also id. § 2595. 
 
84 Notes on Equity Jurisprudence 
 
 invest in Virginia state bonds* obligations of the United States 
 or for which its faith is pledged, including bonds of the District 
 of Columbia ; bonds issued by cities, towns or counties in Vir- 
 ginia, issued under certain conditions named ; bonds and negotia- 
 ble notes secured by first, lien (mortgage or deed of trust) on 
 real estate in this State, not to exceed eighty per centum of its 
 assessed valuation^ 
 
 Page 174, § 320. Trustee's liability for mingling trust 
 funds with his own. — The doctrine of the Text seems in the 
 main sound. The student will consult the additional authori- 
 ties * cited in the footnote. 
 
 The same — Virginia cases. — There are a number of cases 
 in Virginia which seem at first glance to run counter to the doc- 
 trine of the Text." 
 
 In all of these cases, the trustee, who had deposited trust 
 funds to his own credit, was exonerated from liability on failure 
 of the bank. This exoneration, however, was based on the ex- 
 press ground that the fund was lost, not primarily by the fail- 
 ure of the bank, but by the failure of the currency of the coun- 
 try, as the result of the Civil War — all these cases representing 
 ■transactions in Confederate money. As the court well said, the 
 fund would have perished whatever the form of the deposit. In 
 Davis V Harman, the court expressly disclaims any intention to 
 dispute the authority of the cases holding a trustee liable for 
 mingling funds with his own, under ordinary circumstances. 
 
 ° Limited to "Riddlebergers" and "Centuries." 
 
 ' The statute was probably not meant to be exhaustive. If not so 
 meant, it is subject only to the criticism that eighty per centum of 
 the assessed value of the security leaves too small a margin of safety. 
 No prudent lender would approve such a loan. If, on the other hand, 
 the statute js meant to be exhaustive, and by implication to exclude 
 other investments by fiduciaries (e. g. bonds of other states and of 
 cities, towns and counties of other states)' it is subject to serious ob- 
 jection. See criticism in 7 Va. Law Rev. (Oct. 1921). 
 
 ' Nolting V. Bank, 99 Va. 54; National Bank v. Insurance Co., 104 
 U. 3. 64; note 75 Am. Dec. 799-805; 2 Pomeroy's Equity 1067. The 
 case of Naltner v. Dolan (Ind.), 53 Am. Rep. 61, is interesting and 
 valuable in this connection. See also, Vaiden v. Stubblefield, 28 
 Gratt, 153. 
 
 " Davis V. Harmon, 21 Gratt. 194; Hale v. Wall, 22 Gratt. 424; 
 Parsley v. Martin, 77 Va. 376; Barton v. Ridgeway, 92 Va. 162. 
 
Sale by Trusted 85 
 
 Page 176, §§ 322-323. Tortious conveyance by trustee^ — 
 distinction between "authority" and "power" to sell — 
 
 The Text here confuses the two essentially distinct attributes of 
 power and authority. 
 
 It is elementary that when a trustee makes conveyance of the 
 legal title to trust property, the legal title passes to his grantee, 
 even though the conveyance be made in derogation of the trus- 
 .tee's authority as set out on the face of the deed. But, of course, 
 in such case the purchaser would take the property, subject to 
 the terms of the trust. 
 
 The student must therefore carefully note the diflference be- 
 tween the trustee's power to sell and his authority to sell. The 
 former always exists; the latter, never — unless it be contained 
 in the terms of the trust, or expressly conferred by a decree of 
 the court. 1*' 
 
 Trustee's authority to mortgage. — As the trustee has no 
 right to sell without express authority, and as a mortgage is an 
 inchoate sale — since it may result in a complete alienation by 
 foreclosure — it follows as a matter of course that he has no 
 right to mortgage the trust property, howsoever beneficial or 
 necessary the raising of funds may be, for the use or protection 
 of the trust property. He should apply to a court of chancery 
 for ad vice. 11 
 
 Even where the trustee has express power to "sell," this car- 
 ries with it no implied power to "borrow" or "mortgage." 
 
 Page 176, § 322. Sale or mortgage by court of equity. — 
 
 As just indicated, courts of equity possess inherent jurisdiction 
 to sell or incumber trust property when the necessities of the trust 
 demand it, and in the absence of a prohibitory clause in the trust 
 instrument. The exercise of this power is now regulated by 
 statute in most of the States, especially where the beneficiaries 
 are infants, or are otherwise under disability.i^ 
 
 Page 177, §§ 325-326. Suits by or against trustees.— The 
 
 statement is sometimes judicially made that wherever a trustee 
 
 " See Gibson v. Gibson, 5 Leigh, 370; Robertson v. Pierce (Ala.), 
 24 South, 984; Reece p. Allen, 5 Gilm. (111.) 336; n. 19 Am. St. Rep. 
 266; n. 92 id. 573-598. 
 
 " See Shirkey v. Kirby, 110 Va. 455. 
 
 " See Va. Code 1919, § 5335; Shirkey v. Kirby, supra. 
 
86 NoTEsI ON Equity Jurisprudence 
 
 is a necessary party, plaintiff or defendant, a court of equity will 
 take jurisdiction.^^ 
 
 But the rule is clearly, otherwise. It is settled, that a court of 
 equity will not assume jurisdiction of a purely legal claim, 
 merely because the claim is asserted by or against a trustee. 
 Here the remedy at law is usually plain and adequate, and there 
 is no occasion for equitable intervention. 
 
 For example, if Blackacre be hel-d by A in trust for B, who. 
 is in possession, and who is subsequently ousted by C, a wrong- 
 doer, the remedy is ejectment at law by the trustee, and not a 
 bill in equity by B, the beneficiary.^* 
 
 In order for the court of equity to take jurisdiction, there must 
 be some equitable right involved, not remediable at law, or some 
 needed equitable remedy — as, for example, a controversy be- 
 tween the trustee and the cestui que trust. 
 
 Claims of third persons against the legal estate, must be 
 brought against the trustee, and at law.^^ 
 
 Page 178, § 327. Trustee a principal not an agent — ^per- 
 sonal liability. — It should be observed that the trustee is not in 
 any sense an agent of the trust, with authority to bind the trust 
 res by his contracts — save in certain respects when authorized by 
 the trust instrument, or by a court of equity. At law, where the 
 very term 'trustee' is ignored, {descriptio personce') and equita- 
 ble titles are unknown, he is personally responsible for all his 
 contracts, whether concerning the trust estate or not. When 
 thus made personally liable at law, the question whether equity 
 wil permit him to recoup such liability out of the trust fundj, de- 
 pends on the circumstances stated in the following section. 
 
 Indemnity to trustee. — Where the trustee incurs a personal 
 liability or lays out his own funds in connection with the trust 
 estate, a court of equity will permit him to indemnify or reim- 
 burse himself out of the trust estate, provided the liability or 
 outlay was authorized (1) expressly or by implication, in the 
 trust instrument; or (2) by the court; or (3), though not so 
 
 "' Powle V. Lowrason, 5 Peters 495; Huff v. Thrash, 75 Va. 546. 
 " Hay ward v. Andrews, 106 U. S. 672; Clark v. Oliver, 91 Va. 
 431; 1 Va. Law Reg. 195 and note. 
 " Armstrong v. Pitts, 13 Gratt. 235; cases supra. 
 
Cestui's Controi, of Legal Estate 87 
 
 authorized, if not violative of the terms of the trust instrument, 
 and the transaction was manifestly in the interest of the trust 
 and its beneficiaries. In this last case, the court exercises its ju- 
 dicial discretion in approving or disapproving the trustee's out- 
 lays. 
 
 In providing such indemnity to the trustee, or to raise funds 
 for any necessary purposes of the trust, the court, as the guard- 
 ian of all trusts, has inherent power to authorize a sale or a 
 mortgage of the trust res.^^ 
 
 Page 179. Settlement of trustee's accounts. — In proba- 
 bly all the States, there are statutes requiring trustees, as well as 
 other fiduciaries, to make regular settlements of their accounts 
 before some court or official. In Virginia they are required to 
 account annually, or whenever a sale is made of the trust prop- 
 erty — before the commissioner of accounts.^''' 
 
 Page 181, § 335. Beneficiary's control of legal estate — 
 ending the trust. — It is important to observe that while the 
 legal estate is in the trustee, yet, unless it would clearly defeat 
 the plain intention of the trust instrument, the beneficiary, if 
 sui juris and sole beneficial owner, has in equity complete con- 
 rtol, not only of the res itself, but of the title as well — that is 
 to say, the trustee rriay be required by the cestui to make such 
 conveyance of the legal title as the latter may direct, and even a 
 conveyance to the cestui himself, thus putting an end to the 
 trust. 
 
 For example, "to A in trust for B" (passive trust). Here B, 
 if sui juris, may end the trust at his discretion. 
 
 Or, again, "to A in trust for B for life, remainder to C." C 
 then purchases B's life estate. Being now complete owner of 
 the equitable title, C may end the trust at pleasure, by reqiuiring 
 the legal title to be conveyed to him. So, where the trust has, 
 frorn any cause, come to an end, the beneficial owner is entitled 
 to a conveyance or release of the legal title by the trustee. 
 
 On the other hand, where the cestuis, or some of them, are 
 not sui juris, or where the instrument vests a discretion in the 
 
 " Shirkey v. Kirby, supra; n. 19 Am. St. Rep. 71. 
 " Va. Code 1919, §§ 5404-54O8. 
 
88 Notes on Equity Jurisprudence 
 
 trustee (i. e., an active trust), -which would be defeated by per- 
 mitting the cestui to control the title, then such control will not 
 be permitted. 1* 
 
 Page 184. Duty of purchser from trustee to see to the 
 application of the purchase money. — This subject is not 
 treated in the Text. It is meant here to discuss the duty of an 
 honest purchaser to see to the application of the purchase money, 
 where he buys from a trustee fully authorized by the terms of 
 the trust instrument to sell the trust res,hut who, by the terms 
 of the same instrument, is required to give the proceeds a par- 
 ticular direction — as to pay particular debts, or all debts, or to 
 reinvest in designated securities. If there be any such duty 
 resting on the purchaser, then the property so purchased from 
 the trustee continues burdened with the trust, in spite of full 
 payment to the trustee, unless and until the trustee gives to the 
 proceeds the indicated direction. In other words, the purchaser 
 must pay again in case of the trustee's default. 
 
 The same, continued. — We have already seen that one buy- 
 ing from a trustee lacking authority to sell, himself becomes a 
 constructive trustee, and, of course, is liable to indemnify the 
 trust fund against loss. 
 
 But the question whether an honest purchaser from a trustee 
 having ample authority to sell, and after payment of the pur- 
 chase money in full, is under further obligation to see to the 
 application of the purchase money, has been much confused by 
 ill-considered dicta to be found profusely scattered through the 
 reported cases in America. In England, the question is prob- 
 ably answered in the affirmative. There are also in America 
 numerous cases which seem to indicate that where it distinctly 
 appears from the trust instrument that the trustee is to reinvest 
 the fund, after a sale of the trust subject, in a particular class of 
 securities, or is to pay specific sums to creditors, or others-7-that 
 is to say, where the purchaser may distinctly see from- the trust 
 instrument what is to he done with the money — then there is 
 an obligation on him to see that it is so applied ; otherwise he 
 may be personally responsible if the trustee make default. 
 
 " Vass V. Scott, 3 Leigh 356; Armistead v. Hart, 97 Va. 316; Thorn 
 Thorn, 95 Va. 413; note by Prof. Burks, 3 Va. Law Reg. 733. 
 
Deed of Trust to Secure Debts 89 
 
 It is proper to say, however, that most of these statements 
 are made obiter. In an elaborate note discussing the question, 
 Mr. Freeman concludes with the statement that he has been un- 
 able to find a single American case in which an honest purchaser 
 from a trustee, under a sale made in a proper discharge of the 
 trust, has been held responsible for the default of the trustee in 
 the application of the purchase money; and he expreses grave 
 doubt whether the English rule to the contrary ever existed in 
 America. 1* 
 
 Page 184. Deed of trust to secure debts. — (Not dis- 
 cussed in Text.) Before leaving this chapter on Trustee and 
 Beneficiary, it may be well enough to call the student's atten- 
 tion to the modern method of securing debts by deed of trust 
 instead of mortgage. Under such an instrument, the borrower 
 conveys to a third party, agreed upon between him and the 
 creditor, the property upon which the security is to be given, 
 with a trust declared for the benefit of the creditor — but with 
 right of the grantor to remain in possession and enjoyment of 
 the property until default in payment. The instrument usually 
 provides that should the debtor fail to pay at maturity, the trus- 
 tee (who of course holds the legal title), at the request of the 
 creditor, shall, after due advertisement, expose the property for 
 sale at public auction; that he shall apply the proceeds, first to 
 the payment of the costs of executing the trust; second to the 
 payment of the creditor's debt, principal and interest ; the bal- 
 ance, if any, to be paid over to the grantor. 
 
 This form of security is more advantageous to the creditor 
 than a mortgage, since, in order to realize his debt, he need not 
 resort to the courts — he merely calls upon the trustee to sell, and 
 it is the duty of the latter, if the debt is not paid, to obey such 
 direction. 
 
 If the debtor pays the debt without making default and no 
 sale becomes necessary, this leaves the legal title still outstand- 
 
 " 19 Am. St. Rep. 381, 385. Mr. Bispham likewise repudiates the 
 English rule to the contrary (Bispham's Equity, 379); and Mr. Red- 
 field also doubts its soundness (3 Redfield on Wills, 235). It has 
 been abolished in England by act of Parliament. 33 and 34 Vict, 
 ch. 145, § 39. The rule is settled in Virginia that no such liability 
 rests on the purchaser. Redford v. Clarke, lOO Va. 115; and note 
 7 Va. Law Reg. 857. 
 
90 Notes on Equity Jurisprudence 
 
 ing in the trustee. In the absence of statute, the title can only 
 be divested out of the trustee and revested in the grantor, by 
 a deed, commonly known as a deed of release. In Virginia, 
 however, a statute ^^ provides that release may be made by a 
 simple endorsement by the creditor or his agent, on the margin 
 of the deed book where the original deed of trust is recorded. 
 It is further declared that such endorsement of payment in full 
 shall operate to revest legal title in the grantor, as efifectually as 
 if such endorsement were a deed of release. We shall see more 
 of this subject under the head of "Mortgages," post.^'^ 
 
 CHAPTER XIV. 
 Charitable, or Public, Trusts. 
 
 Conflicting authorities. — While the coutrs are fairly agreed 
 as to what constitutes a charitable trust, there is a most unhappy 
 division of opinion in the different States as to what charitable 
 trusts will be enforced. The law of this topic is largely case law, 
 and the decisions in one State are of comparatively little aid in 
 solving the question in another State. The student must there- 
 fore, carefully examine local precedents before advising on this 
 subject. 1 
 
 Peculiarities of the charitable trust. — Trusts of this char- 
 acter present several features unknown to the ordinary private 
 trust, and are governed in several respects by principles not ap- 
 plicable to such trusts. These features and principles are fairly 
 well set out in the Text. A resume of them will be found infra. 
 
 It is meant to point out in this preliminary section but one of 
 these features — and this in order that the student may appre- 
 
 " Va. Code 1919, § 5456. 
 
 ^ On the general subject of deeds of trust to secure debts, see 
 monographic note, 93 Am. St. Rep. 573-598. 
 
 ' An exhaustive collection of authorities from all the States will 
 be found in a monographic note, 64 Am. St. Rep. 745, and in a 
 voluminous brief of Judge Burks in the case of Protestant Epis. 
 Soc. V. Churchman, 80 Va. 718. See also 2 Pom. Eq. Jur. 1029. The 
 Virginia and West Virginia cases are collected in note to Kelly v. 
 I^ovell, 20 Gratt. 134, Va. Rep. Ann.; note 3 Va. Law Reg. 537. 
 
Charitabi,e Trusts 91 
 
 hend some of the reasons why these trusts have made difficulty 
 for the American courts. 
 
 In our studies of the private trust we have learned that one 
 of the essentials of an ordinary trust is the certainty of the bene- 
 ficiaries. Without this certainty, the trust fails, and there is a 
 resulting trust for the donor. On the other hand an essential 
 feature of the charitable trust is the uncertainty of the bene- 
 ficiaries. 
 
 An illustration of such a trust is the gift (hypothetical) of 
 $100,000 "to T and his successors in title, the corpus to be held 
 in perpetual trust, and invested in safe interest-bearing securi- 
 ties, and the income thereof to be used for the education, at the 
 University of Virginia, of six students, male or female, residents 
 of Albemarle county, to be selected annually as directed in the 
 following clause of this my will." 
 
 Here it is obvious that at the inception of the trust, the bene- 
 ficiaries are wholly uncertain. It is equally obvious that even 
 after the six beneficiaries are selected for the first year, the ben- 
 eficiaries for future years, in perpetuity, remain uncertain. So 
 that there is never a moment during the continuance of the trust, 
 when the whole beneficial interest can be represented in court for 
 the purpose of protecting trust rights, or of holding the trustee 
 accountable for the preservation of the corptis of the trust fund. 
 
 The same — effect of uncertainty of beneficiaries. — A 
 
 court of equity never sets its machinery in motion for the pro- 
 tection of any equitable right on its own initiative. There must 
 be a plaintiff, who has an equitable right to be protected, and 
 who must get the ear of the court by a bill filed — and all other 
 beneficiaries m,ust be parties to the proceeding . How is this 
 possible in the case of the charitable trust? Howsoever eager 
 the court may be to recognize and enforce so obviously worthy 
 a charity as that illustrated above, there seem insuperable diffi- 
 culties in the way. Hence the conflict of judicial view already 
 mentioned. 
 
 The same — how the difficulty solved — (1) in Engand. — 
 
 By the famious statute of 43 Elizabeth (1601), these trusts were 
 recognized, and the English court of equity displayed a liberal 
 disposition in the enforcement of the statutory mandate. 
 
92 Notes on Equity Jurisprudence 
 
 As these charities are manifestly most beneficial to the State, 
 proceedings for their protection and enforcement — in the ab- 
 sence of any other representative of the trust — naturally fell to 
 the crown itself, through the Attorney General. The result is 
 that today England abounds in institutions established by gen- 
 erous donors, in aid of such classes of persons as are mentioned 
 in the statute, and other numerous analogous classes. 
 
 The same — (2) in America generally. — Early in the his- 
 tory of America, the question arose as to the validity of the 
 charitable trust, in the absence of the statute of 43 Blizabeth, or 
 a similar enactment. 
 
 One of the earliest cases involving the question was Baptist 
 Association v. Hart,^ in the United States Supreme Court — the 
 case arising under the law of Virginia. The opinion was by 
 Chief Justice Marshall, and the validity of the trust was de- 
 nied, on the ground of the uncertainty of the beneficiaries and 
 the absence of a remedial statute like 43 Elizabeth. This case 
 was followed in several other states and fixed in those jurisdic- 
 tions the invalidity of these trusts. 
 
 The question first arose in the Court of Appeals of Virginia 
 in 1832, and the court followed Baptist Ass'n v. Hart without 
 qiuestion, since Virginia was without the statute of 43 Eliza- 
 beth.3 
 
 The same — new English precedents discovered. — After 
 the decision of these two cases, the publication of some of the 
 ancient chancery precedents found in Tower of London, ante- 
 dating 43 Elizabeth, proved conclusively that charitable trusts 
 had been recognized prior to that statute, and hence were not de- 
 pendent thereon for their existence — the statute being merely 
 declaratory of the existing law. This discovery, coming to the 
 attention of the court in the famous Girard Will Case,* the Su- 
 preme Court of the United States, in a learned opinion by Mr. 
 Justice Story, repudiated the doctrine laid down in Baptist Ass'n 
 V. Hart, and adopted the more ancient and more enlightened 
 doctrine, that a charitable trust mill be enforced even in. the ab- 
 
 4 Wheat (U. S.) 1. 
 
 Gallego V. Atty. Gen'l, 3 Leigh 450. 
 
 Vidal V. Girard's Executors, 3 Howard ,127 (1844). 
 
Charitabi,^ Trusts 93 
 
 sence of statute — and this is now the accepted doctrine in almost 
 every State of the Union. 
 
 The same — (3) in Virginia. — The Virginia court, however, 
 averring that it would rather be consistent than right, declined to 
 adopt the doctrine of the Girard Will Case, or to follow the 
 light shed by the discoveries before mentioned; and in a long 
 line of subsequent cases, affirmed the doctrine of Gallego v. 
 Atty. Gen'l. 
 
 Finally, however, in 1885, in the Churchman Case ^ the court, 
 in a strong opinion, seemed to repudiate the old error, and to 
 place Virginia in line with her sister States. This case was fol- 
 lowed later by the Guthrie Case ® where the court again repudi- 
 ated the erroneous doctrine of the Gallego Case. But in a still 
 later case ®^ arising in 1897, the court rejected the doctrine laid 
 down in the last two cases mentioned — asserting, as was doubt- 
 less true, that the queston was not there distinctly presented, 
 and hence that the outgivings of the court in these cases were 
 obiter and extra-judicial — and re-affirmed the old doctrine of 
 the Gallego Case. So that the law of that case remained the 
 law of Virginia, with slight statutory modifications,''' until 1914,^ 
 when the legislature finally awoke from its Rip Van Winkle 
 lethargy, and 'made provision for charitable trusts in the broad- 
 est and most liberal terms. We shall notice the statute presently. 
 
 The efifect of this judicial stubborness and legislative lotus 
 eating lost to the State innumerable charities which wealthy and 
 philanthropic persons had endeavored to establish for the bene- 
 fit of needy and deserving citizens' of the commonwealth.^^ 
 
 The same — 'Virginia statutes. — As indicated above, pro- 
 vision has long existed in this state for charitable trusts for lit- 
 erary and educational purposes ® and to a limited extent for re- 
 
 ' 80 Va. 718. 
 
 " (1889), 86 Va. 125. 
 
 "^ Field V. Vanwyck, 'Va. 
 
 ' Trusts for literary and educational purposes, and to a limited 
 extent for religious purposes. 
 
 ' Acts 1914, p. 411; Va. Code 1919, § 587. 
 
 ^ See the long list of failed charities in note to Kelly v. Dovell, 20 
 Gratt 124, in Va. Rep. Ann. 
 
 » Va. Code 1919, §§ 587-593. 
 
94 Notes on Equity Jurisprudence 
 
 Hgious purposes ;i" and finally (and happily!) by the statute of 
 1914," it is declared that "every gift grant, devise or bequest 
 hereafter made for charitable purposes, whether made in any 
 case to a body corporate or unincorporated, or to a natural per- 
 son, shall be as valid as if made to or for the benefit of a certain 
 natural person." 
 
 Further provision is made for the protection and enforcement 
 of such trusts by the attorney for the Commonwealth, and in 
 the name of the Commonwealth. ^^ go that after more than 
 a century's struggle, all good citizens of Virginia may rejoice 
 that it is now possible in this commonwealth for any generous 
 and affluent philanthropist to establish by his will ^* a home for 
 poor widows, a hospital for the sick, an asylum for the insane, 
 a sanatorium for the drug addict or the alcoholic inebriate — or 
 any other institution for the alleviation of human ills, or for the 
 comfort and happiness of those 'suffering in mind, body or es- 
 tate.' 
 
 Page 210. Liability of charitable funds for negligence 
 of trustee or agents. — In view of the public character of these 
 trusts, and the interest of the State therein, it is usually held 
 
 ^ As the Virginia Constitution prohibits the ineorporation of 
 churches in this state, necessarily all property of these bodies must 
 be held by trustees; and as the beneficiaries of these trusts for churches 
 are always uncertain, such trusts are typical examples of charitable 
 trusts. Such congregations may hold, through their trustees, not 
 more than two acres of land in a city or town, and not more than 
 seventy-five acres in the country — and personalty not to exceed 
 $30,000: Va. Code 1919, §§ 38-46. 
 
 " Now carried into Va. Code 1919, § 587. 
 
 "^ Id. § 590. 
 
 " The few charitable institutions already existing in this state (not 
 educational, literary or religious) owe their legal existence to the 
 state itself {e. g. the State Insane Hospitals, and the University 
 Hospital), or to legislative action in incorporating charitable organisa- 
 tions with authority to administer a designated charity, (e. g. St. 
 Vincent's Hospital, Norfolk, and similar hospitals erected on private 
 foundations). But it must be noted that the charitable gift could be 
 validly made only to an already existing corporation. So that after 
 incorporation — tantamount to legislative assent to the charitable trust 
 — gifts could be freely made by act inter vivoi or by will; but, in 
 absence of the existing corporation, the gift by will would be invalid 
 and title thereto would at once vest in the heirs or next of kin before 
 incorporation could be secured; so that subsequent incorporation would 
 not save the charity. See Jordan v. Richmond Home for Ladies, 
 106 Va. 710; Jordan v. Trustees, 107 Va. 79; Pirkey v. Grubb (Va.), 94 
 S. E. 344. 
 
Charitable Trusts 95 
 
 that charitable institutions enjoy (or should enjoy) the same 
 immunity from liability for the negligence of their trustees, of- 
 ficers and agents, as does the State,^* and as do public institu- 
 tions erected and maintained by the state — such as the Univer- 
 sity of Virginia, the Virgina Mlitary Institute, the several state 
 hospitals for the insane, etc. 
 
 Page 211, § 395. Control of charities. — The doctrine of 
 the Text that the State, through its Attorney General, is charged 
 with the protection and enforcement of public charities, is well 
 settled. 1^ It is scarcely true, however, that this is the preroga- 
 tive of the State alone, since any person who can clearly bring 
 himself within the class of beneficiaries under the trust may file 
 a bill for the enforcement of his rights. i® 
 
 It would seem, however, that where there is a complete dedi- 
 cation, and hence no possibility of a resulting trust, the grantor 
 himself, no longer having an interest in the trust, has no stand- 
 ing in court to have the trust enforced. ^'^ 
 
 And, of course, if there be a trustee or trustees of the fund, he 
 or they may sue for the protection of the fund or enforcement 
 of the trust. 
 
 Charitable Trusts — Resume. 
 
 This resume of the peculiar characteristics of the charitable 
 trust is meant rather as a skeleton for the guidance of the stu- 
 dent, than as a substitute for the Text, where these headings are 
 elaborated. 
 
 1. Uncertainty of beneficiaries. 
 
 2. Generally of indefinite and continuous duration; and 
 
 " Perry v. House of Refuge (Md.), 53 Am. Rep. 495; Nims v. 
 Boy's School, 160 Mass. 177; Powers v. Hospital, 109 Fed. 294; note, 
 23 L. R. A. 200; Mich. Law Rev. 553, 662; 9 id. 151; 34 Harv. Law 
 Rev. 332; 1 Va. Law Rev. But see contra Hospital of St. Vincent v. 
 Thompson, 116 Va. 101 — liable to strangers; Weston v. Hospital of 
 St. Vincent, 23 Va. App. 435 (1931) — not liable to beneficiaries. See 
 liability strongly asserted, in Tucker v. Mobile Infirmary Assn, 191 
 Ala. 572, 68 So. 4. 
 
 " In Virginia, the Commonwealth's Attorney — see supra. 
 
 " General Board State Hospital v. Robertson, 115 Va. 537. 
 
 " Clarke v. Oliver, 91 Va. 421; Emory and Henry College v. Shoe- 
 maker, 93 Va. 320; Wambersie v. Orange Humane Society; 84 Va. 
 446. See 6 Cyc. 968-71. 
 
96 Notes on Equity Jurisprudence 
 
 3. Therefore not subject to the rule against perpetuities. 
 
 4. Not subject strictly to the rule against restraints upon aliena- 
 
 tion. 
 
 5. Where a general charitable intent appears, the 'judicial' (not, 
 
 in America, the 'prerogative') cy pres doctrine is applied, 
 and hence there is no resulting trust should the precise pur- 
 pose of the trust fail. 
 
 6. The trust may fail for the want of a trustee, where the direc- 
 
 tion the trust is to take is left specifically to the personal 
 discretion of the trustees, and they refuse to accept the trust 
 or to designate the beneficiaries — e. g. "to such charitable 
 purposes as my friends A and B, trustees, may in writing, 
 recorded, appoint." 
 
 7. Not generally subject to the statute of limitations. 
 
 8. According to the better view, the funds are not liable to an- 
 
 swer in damages for the negligence of the trustees or their 
 agents. 
 
 9. In the case of the private trust, the donor selects his own 
 
 beneficiaries and generally by name — in the charitable trust 
 this is never possible, but the beneficiaries are selected by 
 the trustees or by other designated means. 
 
 10. In private trusts, if the donor so desired, title to the res 
 
 might in most cases, have been conveyed directly to the 
 beneficiaries, by name or by description — while in the chari- 
 table trust this is never possible. 
 
 11. In the private trust, as a general rule, the trustees, and ail 
 
 the beneficiaries, may be convened before the court at any 
 given period in the duration of the trust, for the purpose 
 of fixing their several rights and duties — whereas, in the 
 charitable trust the trustees are generally the only parties 
 that may thus be brought into court. Hence, as shown, the 
 state, through its Attorney General, (in Virginia, the Com- 
 monwealth's Attorney), is the peculiar guardian of these 
 trusts. Hence the term charitable, or public, trusts. 
 
Lost Instruments 97 
 
 CHAPTER XV. 
 
 Accident. 
 
 Page 211, § 397. Definition of "accident."— Substitute the 
 following for our author's definition: An unforeseen and in- 
 jurious occurrence, subsequent to the main transaction, not at- 
 tributable to the plaintiff's own agency or gross negligence or 
 misconduct, as the proximate cause, and against the consequence 
 of which a court of law affords no adequate redress. 
 
 The accident of making a note for $100 instead of $200, or 
 vice Tersa, being contemporaneous with the main transaction, is 
 classified, not as an "accident," but as a "mistake". But, if later 
 the note is lost or destroyed this misfortune, being subsequent 
 to the main transaction, is technically an "accident." The differ- 
 ence between accident and mistake is, after all, merely a ques- 
 tion of classification, and one of no practical value, since equity 
 relieves in either case. Relief from mistake is discussed in a 
 subsequent chapter. 
 
 Accident — author's treatment. — Under the unhappy but 
 accepted title of Accident, our author classifies and discusses : 
 
 1. Lost Instruments. 
 
 3. Relief from Forfeitures. 
 
 2. Relief from Penalties. 
 Let us take up these in order. 
 
 1. Lost Instruments. 
 
 Page 213, § 398. (a) Lost bonds, notes, checks, etc. — 
 [Alter Text section-title to correspond.] The student will note 
 from the Text why lost bonds could not be sued on at law (ne- 
 cessity for profert), and why, for a different reason, (viz. neces- 
 sity for indemnity) there was a similar difficulty in the case of 
 lost negotiable instruments. 
 
 The same — Virginia statute — action at law.— By statute 
 in Virginia,^ the courts of the law are given jurisdiction to en- 
 tertain actions on lost instruments, including bonds and negotia- 
 
 ' Va. Code 1919, § 6243; id. § 6083 abolishing necessity for profert 
 of sealed instruments. 
 
98 Notes; on Equity Jurisprudence 
 
 ble instruments. The statute removes the necessity for making 
 profert of sealed instruments, and authorizes courts of law to 
 require the necessary indemnity in actions on negotiable paper. 
 
 The same — effect of this statute on the equity jurisdic- 
 tion.— As this statute does not in terms exclude the equity ju- 
 risdiction in case of lost instruments, it follows (in accordance 
 with the principle, previously noted, that a legal remedy given by 
 statute does not exclude the already acquired jurisdiction, in 
 equity, unless so declared) that equity still has jurisdiction in 
 such cases. 2 
 
 (b) Lost conveyances — re-execution. — Here there is no 
 question either of profert or of indemnity, but the need of the 
 grantee is for the deed of conveyance as evidence of his title — 
 in short, re-execution of the lost deed. As a court of law lacks 
 the necessary machinery for directing such re-execution, equity 
 assumes jurisdiction for that purpose. This third instance of 
 lost instruments seems not to be mentioned in the Text.^ 
 2. Relief from~Penalties. 
 
 Penalty and forfeiture — distinction. — The Text does 
 not clearly distinguish between the nature of a penalty and of a 
 forfeiture, respectively. 
 
 1. Penalty. — A penalty is something exacted for his own 
 benefit of one contracting party of the other (thus far similar to. 
 a forfeiture; but it is always) by way of -an addition to the main 
 obligation — the penalty clause being added to secure satisfactory 
 performance of the main promise. For example, a promise to 
 pay $1000, or to do some other thing, at a named date, plus $100 
 more in case of default in prompt payment or performance. 
 Here the main undertaking is to pay $1000 — and the $100 is 
 something added, by way of security, or in. terrorem, over and 
 above the real debt assumed. 
 
 2. Forfeiture. — Forfeiture, on the other hand, does not con- 
 template any additional burden, but the surrendering of the 
 whole or some portion of the benefit or consideration of the main 
 
 " Kabler v. Spencer, 114 Va. 589. 
 ' See 13 A. & E. Enc. L. 555. 
 
Relief from Penalties 9^ 
 
 contract — i. e. some right, title or benefit already passed or pass- 
 ing under the contract out of which the forfeiture springs — the 
 forfeiture clause being inserted (as in case of the penalty) to 
 secure prompt and complete performance of the main undertak- 
 ing — as, for example, a clause in a lease, declaring that on fail- 
 ure to pay the rent promptly, the tenant shall forfeit {i. e. sur- 
 render) his tenancy — or where a builder agrees to forfeit a 
 named per diem of the contract price, in case of delayed com- 
 pletion of the building. 
 
 In the case, then, of the penalty the defaulting party is to pay 
 more — in case of forfeiture he is to receive or retain less. 
 
 Penalties — (1) at law. — The contrast between the common 
 law and the eqviity jurisprudence is nowhere more strikingly 
 presented than in the way in which the courts of the two sys- 
 tems deal with penalties. The theory of the common law is 
 that where both parties to a contract are sui juris, and there is 
 no fraud, they are free to make their own contracts, so long as 
 the contract is not illegal and violates no policy of the law. 
 Hence, at law, contracts for penalties, howsoever severe, if free 
 from the features mentioned, are enforced literally according to 
 their terms. A promise to pay one dollar, or in default thereof 
 to pay one thousand dollars, is a valid and enforceable contract 
 at law. 
 
 Penalties, continued — (2) how treated in equity. — 
 
 Courts of equity are extremely hostile to the exaction of a pen- 
 alty from one party to a contract by the other party. And 
 whenever opportunity is presented, the court will be astute to 
 condemn the extortion. 
 
 This opportunity presents itself in two forms: (1) where 
 the aid of equity is sought for the enforcem,ent of the penalty; 
 and (2) where the victim applies to the court for relief from 
 the penalty. 
 
 In case (1) equity uniformly refuses to enforce the penalty; 
 and in case (2), with like uniformity, relieves the victim of all 
 obligation to pay it. 
 
 The same — ground of relief. — Equity regards stipulations 
 for penalties in a contract as intended by the parties merely as 
 
100 Notes on Equity Jurisprudence 
 
 an additional incentive to pay, or to perform promptly, or as ad- 
 ditional security for prompt performance^ — and that therefore it 
 is unconscionable to exact literal performance of the stipulation. 
 If, therefore, the party claiming the penalty sues at law — where 
 the contract, howsoever severe, is enforceable literally accord- 
 ing to its terms — equity, looking at substance and not at form, 
 will enjoin the action at law, and will itself adjust the contro- 
 versy by eliminating the penalty. 
 
 The same — penalty in form only. — But we must proceed 
 cautiously here. The question whether a stipulation laying an 
 additional burden on one of the parties in case of default in per- 
 formance, is a true penalty or not, is determined not from the 
 words used only, but from the substance and manifest purpose 
 of the stipulation. The fact that the parties have themselves 
 designated the stipulation as a "penalty", is of little or no im- 
 portance. 
 
 The same — penalty or not? — (1) in contract to pay 
 money. — Where the main contract is to pay money, an addi- 
 tional stipulation increasing the amount in case of default, or 
 laying additional obligations on the debtor, in whatever form, 
 beyond payment of legal interest, is necessarily a penalty — since 
 the damages suffered by the creditor on default of payment can- 
 not, at law or in equity, be greater than the legal rate of interest 
 on the principal sum. No other damages can possibly flow from 
 nonpayment of money beyond the amount of the principal plus 
 interest thereon at the legal rate.* 
 
 The same — (2) contract to do collateral thing — diffi- 
 culty of determining whether penalty or not — liquidated 
 damages. — Where the main obligation is not to pay money, 
 but to do a collateral thing — as to perform service, to deliver 
 
 * Fidelity bonds, executed by sheriffs, state and county treasurers, 
 cashiers and other officers of corporations, are typical examples of 
 penal bonds. These bonds in terms bind the obligor and their sureties 
 to pay to the state or county, or to the corporation, as the case may 
 be, the entire amount named on the face of the instrument (generally 
 $10,000 to $100,000 or more) in case of any default whatsoever in 
 accounting for funds received — howsoever small the amount of 
 the deficit. A court of law will give judgment for the full 
 amount of the penalty of the bond, howsoever small the real amount 
 of the default; and, in absence of statute, the defendant is driven into 
 
Relief from PenaIvTies lOf" 
 
 \ V 
 
 goods, to construct a house, to refrain from engaging in a com-' 
 petitive business on sale of the promisor's business to another, 
 etc. — with an added provision, (in terms designated as a "pen- 
 alty" or not), that in case of default the defaulting party shall 
 pay to the other a named sum over and beyond the main obli- 
 gation, question at once arises whether the latter stipulation is 
 a penalty, or whether it is not an effort on the part of the par- 
 ties, in advance of any controversy, to agree on what damages 
 will flow from the breach, and thus, in advance, definitely to fix 
 the measure of such damages — legally to "liquidate" the dam- 
 ages. 
 
 If the court is satisfied that the clause, though penal in form, 
 was a bona fide effort on -the part of both parties thus to agree 
 on the measure of damages in advance of the default, and not 
 an effort on the part of one to punish the defaulting party, or 
 unjustly to enrich one at the expense of the other, then the court 
 will refuse to interfere. The damages thus agreed upon are 
 known as "liquidated or "stipulated" damages. The principles 
 governing contracts of the latter class are discussed in the sec- 
 tion following. 
 
 Page 218, § 408. Liquidated damages. — The distinction 
 between penalties and liquidated damages, is extremely close, but 
 the legal results, when the distinction is made out, are of great 
 importance — the rule being, that if the stipulation be a penalty, 
 equity will relieve, but if it be liquidated damages, the contract 
 m,ust stand as made. 
 
 It becomes important, therefore, to notice the methods by 
 which the one is distinguished from the other. Mr. Pomeroy ^ 
 has formulated some excellent rules on this subject, which fol- 
 low in abbreviated form: 
 
 a court of equity for relief against the penalty. In such case, equity 
 relieves from the penalty, but requires the obligor to do equity by 
 paying the amount really due. This inconvenient and shockingly 
 unjust and expensive procedure has probably been remedied in all 
 the states, (as in England by Statute 8 & 9 Wm. Ill) by statutes, 
 which authorize courts of law to enter judgments in such cases for 
 the amount actually due. This is true in Virginia — judgment to be 
 entered for the penalty of the bond, but "to be discharged by pay- 
 ment of the principal" [actually due] "and the interest thereon." 
 Va. Code 1919, § 6261. 
 
 " Equity Jurisp., §§ 441-447. 
 
102 Notes on Equity Jurisprudence 
 
 Liquidated damages — (1) promise to pay money. — If 
 
 the payment of a smaller sum of money be secured by the prom- 
 ise to pay a larger sum on default, the larger sum, to the extent 
 of the excess above the actual sum due, with interest, will always 
 be treated as a penalty and eliminated from the contract — since 
 here the court can fix with certainty the damages to flow from 
 breach of the contract, namely, the legal rate of interest — or the 
 conventional rate where statute permits. Here the law has it- 
 self liquidated the damages; and to permit the creditor to exact 
 more would throw wide open the door for evasion of the usury 
 laws. 
 
 The same — (2) agreement to perform a single collat- 
 eral act. — Where the agreement is for the performance or non- 
 performance of a single act, for the breach of which there is no 
 certain measure of damages, and the actual damages are. depend- 
 ent upon extrinsic considerations and circum,stances, a promise 
 to pay a stipulated sum, not out of all proportion to the probable 
 loss, in case of breach, will be deemed a contract for liquidated 
 damages. 
 
 Thus, where defendant sold his ibusiness as an expressman to 
 the plaintiff for $600, and agreed not to compete with the plain- 
 tiff, with the stipulation that if he broke his contract, he should 
 pay the plaintiff $900 — the latter sum was held to be liquidated 
 damages.® 
 
 But the rule is subject to the obviously sound exception that 
 if the case be one of a contract for sale of goods readily obtain- 
 able in the open market, since the law here provides a certain 
 measure of damages for failure to deliver, namely, the differ- 
 ence between contract price and the market price, a larger sum 
 agreed to be paid in case of breach, would not be liquidated 
 damages but a penalty.'^ 
 
 ° Gushing v. Drew, 97 Mass. 445. Green v. Price, 13 Mees. & 
 W. 695, was a similar case and similarly decided. See Sun Printing 
 and Pub. Ass'n v. Moore, 183 U. S. 642 — an extremely interesting 
 and illuminating opinion by Mr. Justice White, in which the leading 
 English and American cases are reviewed. The case involved the 
 charter of a ship, with a stipulation that if lost the charterer should 
 pay a specified sum, considerably larger than the probable value of 
 the vessel. The stipulation was held not a penalty. 
 
 ' Jemmison v. Gray, 39 Iowa 537; Lee v. Overstreet, 44 Ga. 507. 
 
Relief from Penalties — Liquidated Damages 103 
 
 The same — (3) contract for performance of several 
 acts. — Where the agreement is for the performance of several 
 acts of different degrees of importance, and a single sum is stip- 
 ulated to be paid for violation of any or of all, such sum will be 
 regarded as a penalty and not as liquidated damages. 
 
 For example, in Kemble v. Farren,^ the defendant, an actor, 
 had agreed to perform at the plaintiff's theatre during a stated 
 period, for which he was to receive a stipulated compensation. 
 The agreement contained a clause that the defendant should 
 conform to all the rules of the theatre. Another clause pro- 
 vided that if either party failed to fulfill the "said agreement or 
 any part thereof he should pay to the other il,000, as liquidated 
 damages. It was held that this was a clear case of a penalty 
 and not liquidated damages, since the damages to be paid were 
 the same whether the defendant failed utterly to perform any 
 part of his contract, or whether he broke a single rule of the 
 theatre. 
 
 The same — (4) agreement to perform one act, capa- 
 ble of separation into parts.— Where the agreement prp- 
 vides for the performance or non-performance of a single act, 
 which yet is of such a nature that it may be divided into parts, 
 from the performance or non-performance of any of which, the 
 other party will obtain a benefit, and there is a stipulation for 
 the payment of a single sum for breach of the contract or any 
 part of it, this sum will be regarded as a penalty and not as liq- 
 uidated damages. This rule is a corollary from — or practically 
 identical with — the third rule above. 
 
 For example, in Shreve v. Brereton,^' the seller agreed to de- 
 liver one thousand barrels of petroleum, for which the buyer 
 agreed to pay a certain price, and the parties bound themselves 
 in the sum of $10,000 for the performance of the contract. Here, 
 while in a certain sense, this was a contract to perform a single 
 act, it was yet separable into parts, that is to say, the seller 
 would violate his contract if he failed to deliver a single barrel 
 of the one thousand. As the court said, it was clearly not the 
 intention of the parties, that if default were made with respect 
 
 ' 6 Bingham 141. 
 ' 51 Pa. St. 175. 
 
104 Notes on Equity Jurisprudence 
 
 to a single barrel, that the $10,000 should be paid, and hence 
 the sum was held to be a penalty and not liquidated damages. 
 The two cases of Jemmison v. Gray, and Lee v. Overstreet, cited 
 above, were practically similar cases. 
 
 See also Hamaker v. Schroers,^*' where defendant agreed to 
 sell and deliver 100 grain drills at a certain time and at a certain 
 price, and to be liable to pay $1,600 if he made default. Here, 
 again, since by the terms of the contract the $1,600 were to be 
 paid whether the seller failed to deliver one of the drills or the 
 entire 100, the stipulated sum was held to be a penalty. 
 
 The same — in builders' contracts. — In the common case 
 of a contract with a builder for the erection of a house, this 
 last rule is most frequently relied upon by the defaulting con- 
 tractor. For instance, the builder agrees to erect and to turn 
 over to the owner, by a fixed day, a house built according to 
 certain specifications, at an agreed price. A stipulation is added 
 that if he make default in the time of completion, or other clause 
 of the contract, he shall pay to the owner a fixed sum, per diem 
 or otherwise. 
 
 Here if the stipulation be literally interpreted, and the agreed 
 sum be held to be liquidated damages, the builder would have 
 bound himself to pay the stipulated amount, whether he had 
 wholly failed to complete the building, so that no part of it could 
 be occupied or used by the owner, or whether he had left off a 
 single brick from a chimney, or a single pane out of a window, 
 or had failed to complete and have ready for occupancy a single 
 room in the building. Hence, it is argued, the sum agreed upon 
 is a penalty and not liquidated damages. 
 
 But the courts are not disposed to accept this argument as de- 
 cisive of the question. If the sum agreed upon as liquidated 
 damages is not, under all the circumstances of the case, unrea- 
 sonable, and, added to this, the sum agreed upon is expressly 
 termed liquidated or stipulated damages (though this is not es- 
 sential), the agreement will not be treated as a penalty, but will 
 be enforced as made.^^ 
 
 This note should be read in connection with that following. 
 
 ^ 49 Mo. 406. 
 
 " Crawford v. Heatwole, 110 Va. 358, 66 S. E. 46, 15 Va. Law Reg. 
 787, and excellent note; Peeskill, etc., R. Co. v. Peeskill, 165 N'. 
 
Liquidated Damages 105 
 
 Liquidated damages, continued — stipulation for unrea- 
 sonable amount.— The fact that the amount of the damages 
 stipulated for is disproportionate to the damage which would 
 naturally result from a violation of the contract, is not sufficient 
 of itself to condemn the stipulation as a penalty rather than 
 an agreement for liquidated damages. The fact of such dispro- 
 portion, however, will be taken into consideration in determin- 
 ing the real intention of the parties ; and, where the sum fixed is 
 grossly out of proportion to the actual damage likely to flow 
 from the breach, such disproportion may serve to turn the scale 
 in favor of a penalty, rather than of liquidated damages. ^^ 
 
 Debtor's promise to pay attorney's fees in case of de- 
 fault. — In England, the victorious litigant usually recovers from 
 his defeated adversary, not only the ordinary court costs (such 
 as clerk's fees, etc.,) but, in general, the fees paid to his coun- 
 sel and solicitor as well. But, it is a singular and interesting cir- 
 cumstance that, as a rule, attorney's fees (beyond an insignifi- 
 cant sum taxed by the clerk- — $2.50 to $15 in Virginia) are not 
 regarded in America as legitimate costs to be taxed against the 
 defeated adversary. 
 
 It is still more singular that even where the contract between 
 the parties embodies in plain terms a stipulation that the de- 
 faulting party shall pay a designated sum (or "a reasonable sum') 
 for counsel's fees of the other party, in case of default and the 
 necessity of instituting suit on the contract, such stipulation is 
 condemned ' by many American courts — :in some of these on 
 grounds of public policy, as opening the door for oppression of 
 the debtor by the creditor — in others as usurious, if the contract 
 be for the payment of money — while in still others it is treated 
 as a penalty.i^ 
 
 The same — in Virginia. — That such a stipulation for attor- 
 ney's fees is a penalty was for a long time the settled law of Vir- 
 
 Y. 628,' 59 N. E. 1138; Carter w. Kaufman, 67 S. C. 456, 45 S. E. 
 1017; Young v. Gaut, 69 Ark. 114, 61 S. W. 372; Wheeling Mould, 
 etc., Co. rf. Wheeling Steel, etc., Co., 58 W. Va. 62, 51 S. E. 139; 
 Sutherland on Damages, 391; 1 Pomeroy, Eq. Jurisp., § 443, n. (E.). 
 
 " 1 Pomeroy Equity Jurisp. 440; Sun Printing Ass'n v. Moore, 183 
 U. S. 642; Sutherland on Damages, 284; cases supra. 
 
 '^ Bullock V. Taylor, 39 Mich. 137; full note 55 Am. St. Rep. 438, 
 
106 Notes on Equity Jurisprudence 
 
 ginia.i* But under the influence of that provision of the Nego- 
 tiable Instruments Law.^^ later prevailing in this state, that such 
 provision for attorney's fees in a negotiable instrument shall not 
 affect the negotiability of the instrument (not that the stipulation 
 shall be valid), the Virginia court has recently over- ruled the 
 Virginia cases to the contrary, and sustained such stipulation 
 as valid, if reasonable." 
 
 Penalties, continued — accelerating time of payment on 
 default in payment of installment or of interest. — [Not in 
 Text]. It is a settled principle that where there is a promise to 
 pay money at a certain time in the future, with interest or in- 
 stallments of principal at fixed periods, a stipulation that the 
 whole debt, with accrued interest, shall become due, if default 
 be made in the payment of a single installment, is not a penalty, 
 but is a valid stipulation, both at law and in equity.^'' 
 
 Page 219, § 410. The same — no relief against statutory 
 penalties. — Where the penalty against which relief is sought 
 is one prescribed by statute, and not by contract of the parties, 
 courts of equity, being as much bound by statute as courts of 
 law, cannot absolve the defendant from payment of the penalty. 
 Not only will equity decline to relieve the defendant of such a 
 penalty, but, where equitable jurisdiction attaches, will itself en- 
 force the penalty. ^8 
 
 An illustration here is the case of a penalty inflicted by statute 
 for unlawful sale or possession of liquor — or upon a tax collec- 
 tor for failure to make prompt returns of taxes collected — or 
 the penalty laid by Federal and State governments for the tardy 
 payment of taxes. In late years Federal courts of equity have 
 been crowded with suits brought by the Government, and by in- 
 dividuals, to enforce statutory penalties against persons and 
 
 " Fields V. Fields, 105 Va. 714. 
 
 " N. I. L. 3 (5). 
 
 " Colley V. Summers-Parrott Hardware Co., 119 Va. 439.' See 
 Raleigh County Bank v. Poteet, 74 W. Va. 511, L. R. A. 1915B, 938, 
 collating the authorities. 
 
 " 1 Pomeroy's Equity, 439; Olcott v. Bynum, 17 Wallace 44; 
 Nickles v. Building Fund Ass'n, 93 Va. 380; 3 Va. Law Reg. 515 
 and note. 
 
 '" State V. Hall, 70 Miss. 678; State v. McBride, 76 Ala. 51. 
 
Relibf from Fori'eitures 107 
 
 corporations guilty of illegal restraint of trade, under the Sher- 
 man Act.i^ 
 
 In those states where, by statute, equitable pleas may be set up 
 in courts of law, as in Virginia ^^ in certain cases, of course re- 
 lief from penalties may be had in the law court under proper 
 pleadings. 
 
 3. Relief from, Forfeitures. 
 
 Forfeitures. — We have already noted the distinction between 
 a penalty and a forfeiture — the one a burden laid in addition to 
 the principal obligation — the other the surrendering of some 
 right, title or benefit to which the party incurring the forfei- 
 ture is entitled under the contract out of which the forfeiture 
 springs. 
 
 The same — (1) at law. — The law courts occupy the same 
 supine attitude toward the forfeiture as toward the penalty, and 
 exact the pound of flesh with the relish of Shylock himself. 
 The victim's only refuge is a court of equity. 
 
 The same — (2) in equity — use of terms. — The principles 
 applicable to the penalty are applicable, to a large extent, to the 
 forfeiture, with some qualifications to be noted. It is especially 
 to be observed that whether a particular stipulation is a penalty 
 or a forfeiture, is determined not by the terms used by the par- 
 ties, but by its inherent nature, according to the essential dif- 
 ference between the two, already pointed out. An agreement by 
 the borrower to "forfeit" $100, on default of prompt payment 
 of a debt, provides for a penalty and not a forfeiture. So an 
 ^agreement is a lease to pay the rent promptly, under "penalty" 
 of a surrender of the lease, is a stipulation for a forfeiture and 
 not for a penalty. 
 
 The same — (a) for failure to pay money. — Here equity 
 assumes the same attitude as toward the penalty — regarding the 
 stipulation for forfeiture as intended as mere security for the 
 prompt performance of the main obligation, and the effort of. the 
 
 " See, for example, the Standard Oil Co. v. U. S., 231 U. S. 1; 
 U. S. V. American Tobacco Co., 231 U. S. 106. 
 "^ Va. Code 1919, § 6145. See n. 4 infra. 
 
108 Notes on Equity Jurisprudence 
 
 creditor strictly to enforce the forfeiture as harsh and uncon 
 scionable. As in the case of the penalty for non-payment of 
 money, the damages here, flowing from a breach, are already 
 fixed by law, namely, legal interest on the debt, and equity finds 
 no difficulty in relieving from the forfeiture.^" 
 
 It follows that if the exaction be for non-payment of money, 
 it is immaterial whether the secondary stipulation be for a pen- 
 alty or a forfeiture. 
 
 The refusal of equity to relieve against forfeitures of life in- 
 surance policies, for failure to pay premiums ad diem, or of 
 corporate shares for non-payment of subscriptions, rest on the 
 peculiar character of these contracts, and is justified on soundest 
 principles. These are scarcely exceptions to the general rule. 
 
 The same — ^for failure to pay money, continued— op- 
 tions. — A familiar practice in real estate transactions, is the 
 purchase of an "option" — a phrase in common use in the real es- 
 tate market. Here the proposed purchaser, not yet prepared to 
 enter into a binding contract of purchase, secures from the pro- 
 posed vendor a written agreement, for a valuable consideration 
 paid, that the former shall have the exclusive privilege, for a 
 designated and limited period, of purchasing the particular par- 
 cel, at a price named. The effect of this is to give the proposed 
 vendee (optionee) an option to buy, which he may exercise or 
 not, within the agreed period. The contract here is purely uni- 
 lateral — the optionee not having, as yet, bound himself at all 
 by any contract whatsoever. If he accepts the option within the 
 period, and complies with its terms, including such payment of 
 money as it requires, a binding contract for the sale and pur- 
 chase of the property results ; but if he fails to accept, or other- 
 wise to comply with the terms of the option, within the tim^e lim- 
 ited, he "forfeits" all rights in the premises. This so-called for- 
 feiture is somtimes provided for in express terms ; but whether 
 so provided for or not, as a matter of law the vendee's option 
 has expired by its own limitation, and no contract results. Nor 
 
 ™ In accordance with this rule, and as noted in the Text, page 321, 
 § 415, equity will, in a proper case, relieve the tenant who has in- 
 curred a forfeiture of the lease by default in payment of the rent. 
 This application of the rule is recognized, and the method of pro- 
 cedure regulated, by statute in Virginia. Va. Code 1919, §§ .5.t31-5534. 
 
RELIEF FROM Forfeitures — Options 109 
 
 will equity afford the proposed vendee any relief from this re- 
 sult. 
 
 Here there is no semblance of a forfeiture. The holder of 
 the option has received and enjoyed precisely what he purchased, 
 namely the privilege of purchasing up to a fixed day — of which 
 privilege he has not seen fit to avail himself, and the privilege 
 has now expired. Here performance ad diem is a condition 
 precedent, and time is the essence of the contract. ^^ 
 
 The same — distinction between option and executory 
 contract of sale. — There is a manifest distinction between the 
 option to purchase, just noticed, and an actual contract of pur- 
 chase and sale. The one is purely unilateral, binding the vendor 
 only, the other is mutual and binds both parties. 
 
 If, for example, the holder of the option has exercised his 
 privilege ('closed the option'), and entered into a contract of 
 purchase, equity ('regarding that as done which ought to be 
 done' — and 'looking at substance not at form'), regards the pur- 
 chaser as (equitable) owner of the property, but the property 
 subject to a vendor's legal lien for the deferred installments of 
 purchase money. If, now, the contract of sale provides for a 
 forfeiture of any or all of the rights of the vendee, both as to 
 payments already made and as to the property purchased, or ei- 
 ther, in case of default in prompt payment of any installment, 
 then we have the instance of a true forfeiture for non-payment 
 of money, and a typical case for equitable relief. The situation 
 here differs only in form from that presented by a mortgage to 
 secure the payment of money. Nothing is more elementary than 
 the rule that no provision in the mortgage waiving or forfeiting 
 the mortgagor's right to redeem after default, will defeat the 
 right of redemption.22 
 
 Forfeiture, continued — (b) for failure to do a collateral 
 act. — Here a situation is presented wholly different from the 
 contract to pay money, discussed in the last note but one — since 
 here there is no certain measure of damages to flow from non- 
 performance, as in the money contract. 
 
 ^ See Keffer v. Grayson; 76 Va. 517; 1 Pomeroy, Eq. Jurisp. 455; 
 n. 104 Am. St. Rep. 365. 
 '^ See Mortgages, post. 
 
110 Notes on Equity Jueisprudbnce 
 
 Hence, in these cases of collateral undertakings, where the 
 parties have agreed upon a forfeiture of the whole or some por- 
 tion of the right title or benefit provided for in the main con- 
 tract, for failure to perform promptly or completely, we have a 
 situation quite similar to that presented by the stipulation for 
 liquidated damages, discussed under our title of penalties. 
 
 Examples of such stipulations are quite usual in leases of real 
 property — the tenant agreeing to forfeit his tenancy and to sur- 
 render the premises on failure to repair, or to insure, or for sub- 
 leasing, or for using the premises for prohibited purposes (as 
 gambling or the sale of liquor), and similar breaches of the 
 terms of the lease. In such cases equity is loath to interfere 
 with the enforcement of the contract according to its terms, un- 
 less there be special circumstances of fraud, mistake waiver, sur- 
 prise or accident calling for equitable intervention. 
 
 Thus, under a contract for personal service (a collateral un- 
 dertaking) in which the servant agrees to forfeit a specified sum 
 in case he leaves the employer's service before the expiration of 
 the term, without giving two weeks' notice of his intention, eq- 
 uity will refuse to interfere. ^^ 
 
 So in the case of an agreement on the part of the vendor to 
 forfeit all rights under the contract {i. e. agreement for rescis- 
 sion) and to repay the purchase money paid on failure to make 
 title to the vendee by a particular day — being a true forfeiture 
 for default in the doing of a collateral thing for which there is 
 no certain measure of damages — equity -will refuse to interfere. 
 
 We have already seen, on the other hand, that if the contract 
 had exacted a similar forfeiture from the vendee for default in 
 the payment of the purchase money, equity would intervene and 
 relieve from the forfeiture, on tender of the actual amount due 
 with interest and costs ; since here the damages are measured by 
 interest on the principal sum due. 
 
 The same — fraud, waiver, misconduct, mistake, acci- 
 dent or surprise. — In spite of the rule stated that equity will 
 not ordinarily relieve from a forfeiture for default in the per- 
 formance of a collateral act, it is yet true that forfeitures are 
 always odious to a court of equity, and the court will not hesi- 
 
 '^ Tennessee Mfg. Co. v. James, 91 Tenn. 154, 30 Am. St. Rep. 865. 
 
Time as Essence of Contract HI 
 
 tate to give relief where the case presents circumstances of 
 fraud, waiver, estoppel, or misconduct on the part of the claim- 
 ant, or of mistake, surprise, ignorance or accident whereby the 
 other party was prevented from performance, and where no in- 
 justice will result to the other party from such action on the 
 part of the court.^* In all such cases of relief from a forfeiture 
 the court requires equity to be done by making full compensation 
 to the' other party. 
 
 4. Time as Essence of the Contract. 
 
 Time as essence — forfeitures. — Thus far we have dealt 
 with forfeitures expressly contracted for. Under the present ti- 
 tle we shall glance briefly at a kindred question, but one for 
 which the contract makes no special provision, namely, the ef- 
 fect on the contract itself of failure of one party to perform on 
 the precise day fixed {ad diem.). In such case question arises 
 whether, on failure thus to perform ad diem, the other party may 
 rescind the entire contract — or, otherwise expressed, whether he 
 may exact a forfeiture of the defaulting party's rights under the 
 contract. The question may be presented in still another form, 
 namely. When in equity is performance ad diem, a condition pre- 
 cedent to enforcement of either party's rights under a contract? 
 
 The same — (1) at law. — At law, time is always the essence 
 of the contract, in the absence of countervailing circumstances 
 of fraud, waiver or estoppel. A failure, for example, on the part 
 of the purchaser of real estate, under an executory contract, to 
 pay the purchase money, or some installment thereof — or, per 
 contra^ of the seller's ability to make title, or to convey title — on 
 the very day fixed, entitles the seller in the one case, or the buyer 
 in the other, to rescind the entire contract,^^ or to maintain an 
 action for damages, according to the circumstances. 
 
 ^ See Hill v. Barclay, 18 Ves. 58; Bostwick v. Stiles, 35 Conn. 
 195; Kupper v. Dyer, 59 Vt. 477, 59 Am. Rep. 742, 13 Atl. 4 (an in- 
 structive opinion on the general subject); Wilson v. Mayor, 83 Md. 
 303, 55 Am. St. Rep. 339 — check deposited by bidder as a guarantee 
 that if contract is awarded to him he will enter into a formal con- 
 tract, with proper sureties — the check to be forfeited in default of 
 entering into the contract — held, after plaintiff received the award, 
 to be a forfeiture, but bidder relieved by requiring a return of the 
 check, on proof that he was unable to obtain proper sureties. 
 
 "= See Sachs v. Owings, 121 Va. 162. 
 
112 Notes on Equity Jurisprudence 
 
 The same — (2) in equity. — Equity, on the other hand, look- 
 ing at the substance rather than form, is much less strict in re- 
 quiring the performance of contracts ad diem, and therefore 
 time as the essence of a contract. Equity is, in general, content 
 with substantial performance, if compensation be made for the 
 loss resulting from the delay. 
 
 The same — in equity, continued — (A) promise to pay 
 money. — 1. Optional Contracts: We have already seen that 
 where a contract is purely unilateral, as in contracts giving one 
 party the privilege of entering into a particular contract or not, 
 while the other party has bound himself (for a special considera- 
 tion) to leave the offer or privilege for a specified period, accep- 
 tance of the offer, or the exercise of the option, strictly accord- 
 ing to its terms, ad diem, is a condition precedent to any rights 
 under the unilateral optional contract, in equity as well as at 
 law; and this whether the option contract expressly so provides 
 or not. The making of a money payment, therefore, ad diem,, 
 if required by the terms of the option, would be of the essence 
 of the contract. 
 
 The same — in equity, continued. — (2) Mutual contracts: 
 If, as we have already seen, under a contract no longer unilat- 
 eral (or optional) but one under which each party has acquired 
 a right and incurred an obligtaion — and hence payment of the 
 money is a condition subsequent, a forfeiture cannot be exacted, 
 even though stipulated for iri express terms, it follows, a for- 
 tiori, that in equity payment of the money ad diem is not a con- 
 dition precedent to the enforcement of the contract by the de- 
 faulting party, and that time is not the essence of the contract. 
 
 Hence, under an executory contract to sell and purchase real 
 property — payments to be made at stipulated periods — the ven- 
 dee does not forfeit his right to specific performance by having 
 defaulted in one or more payments — provided he tenders the 
 amount with ir)terest within a reasonable time thereafter. Here, 
 failure of prompt payment cannot possibly have damaged the 
 seller beyond legal interest on the money due.^^ 
 
 So, in the case of the mortgage, as we shall see later in more 
 
 " See Booten v. Scheffer, 21 Gratt. 474, 492; Powell v. Berry, 91 
 Va. 568; McAllister v. Hannon, 101 Va. 17. 
 
Time; as Essence of Contract 113 
 
 detail. In substance, the mortgage contract binds the debtor to 
 pay on a fixed day, with no right of redemption thereafter ; and 
 yet equity regularly permits the redemption at any time within 
 twenty years, on tender of principal, interest and costs. 
 
 The same — (B) Contracts to perform collateral acts. 
 
 — Where, however, the stipulation does not concern the payment 
 of money, but concerns some collateral act or circumstance — as, 
 for example, the removal by the vendor, of a lien on the prop- 
 erty sold, or the conveyance of a proper title by the vendor, or 
 delivery of possession to the vendee — all or any of these on or 
 before a day named — equity is less willing to relieve than in the 
 case of default in the payment of money, since the damage re- 
 sulting from the breach is not so easily measured. But even 
 here, equity will not regard time as of the essence of the con- 
 tract, save (1) where the parties have expressly so agreed, (in 
 which case we have the case of a forfeiture expressly provided 
 for — already discussed supra) or (2) the circumstances render 
 it inequitable not to do so.^'^ 
 
 Thus, it is the common practice in suits for specific perform- 
 ance of contracts concerning real property, where there is no 
 ■ stipulation to the contrary, to give the vendor further time to 
 make title, if unable to do so on the stipulated day. Whether or 
 not this will be done depends upon the particular circumstances 
 of each case. It will never be done where this would work in- 
 justice to the vendee, or where the parties have expressly agreed 
 otherwise. See authorities supra. 
 
 We shall see later, in connection with the topic of specific per- 
 formance, that not only is time not always the essence of a 
 contract in equity, but that in connection with sales of real prop- 
 erty, quantity of acreage and other details contracted for, are 
 not always of the essence — and that in a proper case, the vendee 
 may be required to accept less than he contracted for, with com- 
 pensation for the shortage. This is known as "performance 
 with a variation." 
 
 " As, for example, where the property is of a speculative value — 
 or, to the knowledge of the vendor, the vendee's purposes require 
 prompt performance, or there are other circumstances rendering it 
 unjust to require the vendee to accept performance beyond the day 
 named. 
 
114 Notes on Equity Jurisprudence 
 
 Relief from penalties and forfeitures — compensation 
 required. — In leaving this brief discussion of equitable relief 
 against penalties and forfeitures, and in giving further time for 
 the performance of contracts beyond the day fixed by the par- 
 ties, the student need hardly be reminded that in giving such re- 
 lief equity applies its favorite maxim that 'he who wants eq- 
 uity must do equity' — and requires the relieved party, as a con- 
 dition of such relief, to make full compensation to the other 
 party. 
 
 Page 228, § 249. Accidents not relievable — loss of public 
 funds by public officials. — Under the rule prevailing in many 
 States, a public official who receives money in the course of his 
 official duty, and which, under his official bond, or under statu- 
 tory provisions, he is required to account for and pay over, is 
 regarded as a debtor for the amount coming into his hands, and 
 not as a mere bailee of the money. This seems to be the settled 
 rule in the Fede'ral Courts. The authorities in the State courts 
 are badly divided. ^^ 
 
 Accordingly, such official is held liable for public funds lost, 
 even though by violence or unavoidable misfortune — as by rob- 
 bery, or failure of a bank in which the funds are deposited — and • 
 a court of equity is without power to relieve him of this liabil- 
 ity. 
 
 The case of Smythe v. U. S. {supra), "^^ was a particularly 
 hard case — the superintendent of the United States Mint, at 
 New Orleans, being held liable for money lost by the destruc- 
 tion of the building by fire, without negligence on his part. 
 
 "* See 2 Va. Law Reg. 457 ; Smythe v. U. S., 188 U. S. 156 ; Van Trees v. 
 Territory (Okla.), 54 Pac. 497 (full discussion); n. 67 Am. Dec. 
 365-373. 
 
 ^ So postmasters are held responsible for losses due to burglary 
 of the post office, or to thefts by their assistants — without relief in 
 equity, howsoever innocent of wrong or of negligence themselves. 
 
Mistake — Rescission 1 1 5 
 
 CHAPTER XVI. 
 
 Mistake Caw,ing for Rescission. 
 
 The student will observe that the author divides his discus- 
 sion of the subject Mistake into two parts or chapters, and that 
 this first chapter deals with mistake of such a character as calls 
 for rescission of the contract, and not reformation. The stu- 
 dent will further carefully observe that in the case of Mistake 
 calling for Rescission, there has never been any real contract 
 between the parties — their minds not having met on the same 
 thing at the same time, and hence rescission is the natural and 
 only relief possible. 
 
 On the other hand, the equity of Reformation implies two 
 things, to-wit : ( 1 ) A valid contract, well understood by both 
 parties; (2) A subsequent reduction thereof to writing and a 
 mistake in thus reducing it to writing. The latter is dealt with 
 in the next chapter. 
 
 In spite of this classification of the two phases of mistake, our 
 author does not observe his own classification, and constantly 
 runs from one class to the other, in both chapters. The reader 
 should carefully note, in the various instances of mistake illus- 
 trated in this and the succeeding chapter, whether the mistake 
 is of the one kind or the other. 
 
 Page 233, § 436. Mistake of law.— The student should ob- 
 serve the precise form of the maxim, "ignorance of the law ex- 
 cuses no man." This is sometimes misquoted as "everybody is 
 supposed to know the law." There is no such rule, either in 
 law or in equity, as last quoted. This is strongly and strikingly 
 illustrated by the case of Ryan v. State, ^ where a rascally attor- 
 ney defrauded an ignorant negro woman, whose husband was 
 in jail on a conviction of a misdemeanor, by representing to her 
 that he could secure the prisoner's release on payment to him- 
 self of a sum of money. On trial of the attorney for obtaining 
 money under false pretenses, he defended on the ground that 
 "everybody was presumed to know the law", and hence that the 
 prosecuting witness, knowing the law governing the situation. 
 
 ' (Ga.), 30 S. E. 678, 4 Va. Law Reg. 397. 
 
116 Notes on Equity Jurisprudence 
 
 was not deceived by the false statement — a defense, it is need- 
 less to say, which the Georgia court rejected, as based on a false 
 conception of the maxim. 
 
 Page 233, § 437. The same — ^exceptions to the general 
 rule — (1) Title to property. — The cases referred to in this 
 section were all cases where there was a mistake of law, result- 
 ing in a mistake as to the title to property — or, to express the 
 situation in another form, where there was a mistake of fact ais 
 to the ownership of property, due to a mistake of law. 
 
 Such cases form a striking exception to the rule that mistake 
 of law is not a proper ground for equitable relief. ^ 
 
 Pages 237-238. The same — exceptions, continued — (2) 
 Money paid to court official, or trustee, in pending pro- 
 ceedings. — The meaning of this exception, noted in the Text, 
 is, that while courts of equity will not relieve one who has vol- 
 untarily paid money to another under a pure mistake of law, the 
 court will yet not take advantage of such a rule, when the court 
 itself is the payee of the money, in proceedings pending before 
 it. This indicates on the part of the court, an extremely delicate 
 sense of the moral and ethical situation presented in such a case. 
 
 Mistakes of law — exceptions, continued — (3) Misstate- 
 ment of the law by one party. — A third exception to the gen- 
 eral rule exists, where the parties are not on equal footing, and 
 one intentionally misleads the other as to the legal effect of a 
 proposed contract between them, or consciously takes advantage 
 of the other's ignorance of the law under circumstances that 
 render it inequitable that such advantage should be retained. 
 This principle is especially applicable where there is a fiduciary 
 relation between the parties, or in cases of invited confidence. 
 It belongs, however, rather under the head of fraud than of mis- 
 take. 
 
 ^ To the authorities cited in the Text may be added, Webb v. City 
 Council, 33 Gratt. 168; Throckmorton v. Throckmorton, 91 Va. 42, 
 50; Burton v. Hayden, 108 Va. 51; note 15 Am. Rep. 171, 184; note 
 55 Am. St. Rep. 495-530; 2 Va. Law Reg. 63 (by Prof. Graves); 
 Hutchinson v. Fuller (S. C), 44 S. E. 164; Hoy v. Hoy (Miss.), 136 
 Am. St. Rep. 548; 32 Harvard Law Rev. 283. 
 
 In Kentucky, the courts make no distinction between mistakes of 
 law and of fact, whether in connection with titles, or otherwise, and 
 both are relievable. Georgia Co. v. Gaines, 49 S. W. 462. 
 
Mistake — Rescission 117 
 
 Thus, where the holder of a time-barred note sold it to a 
 woman, representing that it was not barred by limitation, it v/as 
 held that the purchaser was entitled to relief.^ 
 
 A fourth exception is noted infra, note to § 442. 
 
 Page 236, § 440. Money paid under mistake of law as to 
 the payer's liability. — Subject to the exceptions before men- 
 tioned, it is settled that money voluntarily paid, under a pure 
 mistake of law, cannot be recovered. 
 
 The reasons upon which this rule rests are indicated at length 
 in the opinion of Tucker, P., in Mayor of Richmond v. Judah,* 
 from which the following brief extract is made : "It is for the 
 peace and happiness of society" says the learned President, "that 
 it" [the law] "declares that no man who has made a voluntary 
 payment shall be permitted to allege it was made under a mis- 
 take of law, since this is so easy to affirm, and so difficult to dis- 
 prove such ignorance. It is better that here and there an indi- 
 vidual should suffer injury from the very rare occurrence of his 
 paying what he was not bound to pay, than that we should at 
 one blow annihilate all finality in the transaction of business. 
 Men's affairs, instead of being settled by payments, would be 
 still left open and unsettled. The payer would not be bound by 
 his payment, nor the creditor by his release ; for, pari ratione, 
 he too must be entitled to the benefit of this noxious principle of 
 unravelling transactions whenever he can show, or fancy he can 
 show, that he has mistaken his obligations. And thus it would 
 happen that the payment of money would soon become but the 
 parent of a suit, and the settlement of an account the harbinger 
 of litigation" (p. 322). 
 
 The stronger reason is that first assigned by Judge Tucker, 
 namely, the practical impossibility of disproving the plea that 
 the defendant was ignorant of the law. To permit such a de- 
 fence generally, would, as suggested by the court, unsettle all 
 business transactions, and furnish to dishonest persons a ready 
 escape from their obligations. 
 
 ' Brown v. Rice, 26 Gratt. 467. See also a striking illustration in 
 Griswold v. Hazard, 141 U. SI 284; infra, note § 505. 
 
 ' 5 Leigh 305, 33 8. See also Barrow v. County of Prince Edward, 
 121 Va. 1. 
 
118 Notes on Equity Jurisprudence 
 
 The same — involuntary payment — duress— protest. — 
 
 The principle first mentioned applies to voluntary and not to 
 imuoluntary payments of money. 
 
 Wherever, therefore, one is called upon to pay money, his lia- 
 bility for which rests upon a question of law as to which he is 
 in doubt, if he desires to save the question and litigate it after- 
 wards, he should be careful not to pay voluntarily or without 
 protest against the demand. The proper way is to decline pay- 
 ment until there is im,min.ent duress of person or goods. Such 
 duress would occur, for example, where the other party is in 
 possession of plaintiff's goods and refuses to deliver possession 
 without payment; or where a tax collector or sheriff threatens 
 immediately to levy in default of payment. In such cases, the 
 money may be paid under protest, and in an action thereafter- 
 wards brought to recover it, the plaintiff's rights will be held not 
 to have been waived by such payment. Payment under protest 
 alone, without the duress, is not sufficient.^ 
 
 In some States, it is held that if the property to which the du- 
 ress applies be real property, and hence not possible of loss or 
 destruction by reason of the unlawful seizure and sale thereof, 
 payment under protest is not sufficient, since there is in fact no 
 duress, because a sale of the property under the illegal process 
 would be void. It is therefore, mere brutum fulmen. But since 
 a void sale would cast a cloud on the title, the principle seems 
 unsound.® 
 
 Page 238, §§ 442, 467, 472. Mistake as to legal effect of 
 contract as made. — The doctrine of the Text, that where the 
 contract conforms precisely to the actual agreem,ent of the par- 
 ties, although one or either would not have entered into it had 
 he understood its legal effect, equity, in the absence of fraud 
 (see exception 3 above) will not relieve, is well settled. This 
 was the situation in the great case of Hunt v. Rousmanier.'' 
 
 But, conversely (forming a fourth exception to the rule that 
 relief cannot be granted for a mistake of law), where the real 
 
 '■ Note 45 Am. Dec. 145-160; 5 Va. Law Reg. 370; Va. Brewing 
 Co. V. Com., 113 Va. 145. 
 
 " See Hoke v. Atlanta (Ga.), 33 S. E. 412; 5 Va. Law Reg. 270. 
 
 ' 1 Pet. 1 — by mistake of law, power of attorney taken as security 
 instead of a mortgage; the borrower died, thus revoking the power — 
 held, equity will not reform and convert into a mortgage. 
 
Mistake — Compromises 119 
 
 intention of the parties is not expressed in the instrument, al- 
 though this is due to a mistake of law in drafting the instrument, 
 equity will reform. The distinction between this proposition 
 and that which immediately precedes it, is pointed out in § 472 
 of the Text. The student should note the distinction, which is 
 clear but quite fine. 
 
 Thus, if in Hunt v. Rousmanier the parties had agreed" upon 
 a mortgage, but by mistake of law the attorney (or justice of 
 the peace) had drawn a power of attorney, equity would have 
 reformed the instrument to conform to the real intention of the 
 parties ^ — since here they did not get the character of instru- 
 ment desired. In the actual case, the one party executed, and 
 the other party accepted, the precise form of instrument agreed 
 upon — whereas, in the supposed case, the reverse occurred; the 
 parties desired a mortgage, but by mistake of law accepted a 
 power of attorney. 
 
 Page 241. Gompromises. — The rule that mistake of fact, 
 and in certain cases, of law, may be relieved against, is inap- 
 plicable to the case of compromise of rights known., or believed, 
 to be doubtful. In compromising, each party consciously takes 
 the chance of being mistaken, and hence of getting more or less 
 than he is entitled to; and he intentionally waives the right of 
 further inquiry. Every compromise is, therefore, in the nature 
 of a speculation, the result of which winner or loser must abide 
 by, when fairly entered into. 
 
 If such were not the rule — if, after compromising a claim as- 
 serted by the one party to a controversy and denied by the other, 
 the compromise agreement were subject to be defeated by the 
 discovery that one of the parties had entered into it in ignorance 
 of material facts — the result would be to leave the controversy 
 in as unsettled a condition after the compromise as it was be- 
 fore, thus defeating the very purpose of every compromise.* 
 
 The same — mistake as to collateral fact. — But where the 
 compromise is based upon the mutually presumed existence of 
 certain material facts, collateral to the main facts in dispute, 
 
 ' See note to p. 254 infra. 
 
 ° Moore v. Fitzwater, 3 Rand. 444; Smith v. Penn, 23 Gratt. 402; 
 full note, 99 Am. Dec. 493. 
 
120 Notes on Equity Jurisprudence 
 
 and a mistake is made as to the existence of such collateral facts, 
 then the compromise may be set aside on the ground of mistake' 
 of fact. 
 
 Suppose, for example (hypothetically) that there is a contro- 
 versy between A and B as to the amount due on a certain bond, 
 held by one against the other, and that a compromise is reached, 
 by which the debtor agrees to pay so much in settlement; and 
 that after the compromise, it turns out that A had meant one 
 bond and B had in mind another. Here, it is clear that there has 
 really been no contract of compromise, and the attempt at com- 
 promise will fail on the ground of mistake of fact. 
 
 Or, again, suppose that A, as assignee of B, has a controversy 
 with C, a"! to the amount of C's debt to B, and a compromise is 
 made between the two, in which C promises to pay A, say, $150, 
 in full of the claim. It is subsequently discovered that A was 
 not assignee of this particular debt, though in good faith he be- 
 lieved himself to be. Here, again, the compromise was based 
 on a mistake of the collateral fact and will be set aside. What 
 the parties meant to compromise was, not the question of A's ti- 
 tle to the claim, but the amount of it.^'' In short, a compromise 
 settles only such matters as are in dispute. 
 
 But the student must carefully notice that any subsequently 
 discovered mistake as to facts actually in dispute, howsoever 
 grievously the mistake may operate upon one or the other, and 
 howsoever clear the proof of its existence, will, in the absence 
 of fraud or misrepresentation, or other inequitable conduct, af- 
 ford no ground for relief at law or in equity — since, as said at 
 the beginning, in entering into the compromise the parties con- 
 sciously took the chance of being mistaken, and speculated upon 
 the result. 
 
 Page 242. [Between § 448 and § 449 there should be inserted 
 §§ 460-466 of the Text.] 
 
 Page 243, § 449. Mistake, continued — Rescission for 
 failure of title — (1) personal property. — That portion of § 
 449 found on this page has reference to personal property only, 
 though this is not made entirely clear in the Text. 
 
 2 Pomeroy's Equity, 855; 3 Min. Inst. 635. 
 
Mistake — Rescission 121 
 
 Page 243, § 450. The same— (2) real property.— While 
 
 it is generally true, as stated in the Text, that equity will not 
 take jurisdiction where damages at law would be recoverable on 
 the warranty of title — or where, as on a quitclaim conveyance, 
 no damages could be recovered at law, since the vendee, by ac- 
 cepting such a conveyance, has no ground of complaint against 
 the vendor for failure of title — yet where title has failed, in 
 whole or in part, by reason of a material mistake of fact, — such 
 fact assumed by both parties to be otherwise, ^nd hence a mu- 
 tual mistake — equity will take jurisdiction to remedy the mis- 
 take, even where there is a warranty on which the vendee might 
 base an action at law, for damages. 
 
 The same— real property, continued — (a) executory 
 contracts. — It is settled in the case of executory contracts for 
 the sale of real property, that there is an implied warranty of ti- 
 tle. Hence if the title fail, whether from mistake or otherwise, 
 not only will equity not compel specific performance, but it will 
 entertain a bill on the part of the vendee to rescind the contract, 
 and require the repayment of such purchase money as has been 
 paid, and the cancelling and delivery up of any securities that 
 the vendee may have executed in fulfillment of the contract." ^^ 
 
 The same — (b) Executed contracts. — Here, if the con- 
 veyance contains warranties of title, under which a court of law 
 might award damages for failure of title, the exercise of the 
 equitable jurisdiction is by some authorities denied. But the 
 greater liberality with which equity deals with the rules of evi- 
 dence in cases of mistake, and its ability to mould the relief to 
 suit the peculiar circumstances of each case, seem clearly to 
 warrant the exercise of the jurisdiction in many cases of exe- 
 cuted conveyances with warranty. ^^ 
 
 " Cabell V. Christian, W Gratt. 82; Matney v. Ratliff, 96 Va. 
 231; Clark v. Hutzler, 96 Va. 73; Pomeroy's Specific Performance 
 204. All these are cases of specific performance. See Morrison v. 
 Waggy, 43 W. Va. 405, 27 S. E. 314; Bailey v. James, 11 Gratt. 468; 
 Clark V. Hargrave, 7 Gratt. 399; Pack v. Whitaker, 110 Va. 123; 
 Warden v. Birdsong (Va.), 78 S. E. 564; Renick v. Renick, 5 
 W. Va. 285. 
 
 ^ See 2 Pomeroy's Eq. Jurisp. 468; Lee v. Laprade, 106 Va. 594, 
 56 S. E. 719, 117 Am. St. Rep. 10'21, 10 Ann. Cas. 303; Pack v. 
 Whitaker, 110 Va. 122; Hall v. Graham, 112 Va. 560; cases supra. 
 
122 Notes on Equity Jurisprudence 
 
 Page 245, § 455. Duty on part of buyer to disclose ad- 
 vantages. — The doctrine of the Text that the vendee is under 
 no obligation to disclose facts in his possession, enhancing the 
 value of the property which he seeks to buy, is settled — but with 
 the important qualification that he must not actively conceal the 
 facts, or otherwise mislead the vendor. The case is such a hard 
 one on the vendor, that the court is anxious to grant him relief 
 from the harsh bargain, and will do so, save where the vendee 
 has done nothing more toward concealing the discovery than 
 merely keeping his mouth closed; and in most of the reported 
 cases reb'ef was granted because of the inability of the vendee 
 to observe this golden rule of silence.^^ 
 
 But, according to principles heretofore noticed, even mere 
 failure to disclose is a ground for rescission where there is a 
 confidential relation between the parties, or where for any other 
 reason the duty of disclosure rests upon the vendee. 
 
 The principle stated above, denying the vendor relief on the 
 ground of mistake, where he; was ignorant of facts materially 
 enhancing the value of the property sold, means that the con- 
 tract or conveyance will not be rescinded on that ground, at the 
 suit of the vendor. It does not mean that where the contract is 
 still executory, a court of equity would necessarily enforce the 
 contract specifically, at the suit of the vendee. Indeed, the re- 
 verse seem= to be the case, under the influence of the principle 
 that specific performance is peculiarly an act of grace on the 
 part of the' court, and will not be granted in the case of hard or 
 unconscionable bargains.'-* 
 
 Page 248, §§ 460-466. [As heretofore indicated, these sec- 
 tions should be carried back into the preceding chapter, (XVI) 
 since the relief was not reformation, but rescission.] 
 
 Compare Kager v. Kain, 5 Leigh 606; Max Meadows, etc., Co. v. 
 Brady, 92 Va. 71. 
 
 " One of the leading cases on this subject is the L,uray Caverns 
 Case — Merchant's Bank v. Campbell, 75 Va. 455. 
 
 " Trigg V. Ready, 5 Humph. (Tenn.) 539, 43 Am. Dec. 447; Bow- 
 man V. Irons, 3 Bibb (Ky.) 78, 4 Am. Dec. 686; Wollums v. Horsley, 
 93 Ky. 582, 20 S. W. 781; Banaghan v. Malaney, 200 Mass. 46, 85 
 N. E. 839, 138 Am. St. Rep. 378, and monographic note 383-414, and 
 especially pp. 407-408. 
 
Mistake — ^Unilateral 123 
 
 Page 249, §§ 462-463. Unilateral mistake. — As already in- 
 dicated, "mutual" mistake, as that term is used by courts and 
 commentators in this connection, is generally important only 
 where there is no mistake in the original agreement — that is 
 where the minds of the parties have completely met — but an er- 
 ror has occurred in the subsequent reduction, of the contract to 
 writing, whether the error be due to the mistake of a third per- 
 son, acting as scrivener, or of one or both of the parties. 
 
 Even here it is not material that the party profiting by the er- 
 ror actually knew of the mistake — since if he knew of it but 
 keeps silent, and endeavors to take advantage of it, he is guilty 
 of a fraud. Hence the term "mutual" 'seems scarcely applicable, 
 though regularly used by law writers and courts to describe a 
 mistake of this character — i. e. in subsequently reducing the con- 
 tract to writing. The remedy here is, of course, reformation.^^ 
 
 The kind of mistake termed "unilateral," is a mistake made 
 solely by one of the parties — as the result of which he has 
 bound himself by a contract to the terms of which he has not 
 meant to assent, while the other contracting party, understand- 
 ing, and in good faith assenting to, the contract as made, is ig- 
 norant of the other's mistake. The remedy here, if any, is, of 
 
 " This use of the term 'mutual' mistake seems in most cases to be 
 as useless as it is confusing. Cases in which mutuality of mistake 
 is necessary to relief are rare. If, for example, A intends to oflfer, 
 in writing, Blackacre for sale to B, but by a slip of the pen or a 
 mental lapse, he offers Whiteacre, which offer B at once accepts, no 
 mutual mstake has occurred. A has made a grievous mistake, but B 
 has accepted and bargained for the very tract that he meant to bar- 
 gain for. And yet, on proper proof, A would be relieved because of 
 the .mistake. What is really presented here is not a mututal mistake, 
 but the lack of mutuality of agreement, or meeting of minds. 
 
 The term 'mutual' is probably appropriate where the contract, as 
 made, is based on the mistaken assumption by both parties of the 
 existence, or nonexistence, of a material fact, or group of facts, 
 with reference to which both parties have contracted. Thus, the pur- 
 chase of a life estate from an assignee, both parties believing the 
 life-tenant still alive, both contracting on that assumption, and neither 
 meaning to speculate on the uncertainty of the fact whether the 
 life tenant be alive or dead. If in fact the life tenant is already 
 dead, a case of mutuality of mistake is presented. If the seller 
 knew of the death already, a case of fraud would be presented. Other 
 illustrations are found in the sale of insurance policies, both parties 
 believing the insured" alive, and the price fixed on that assumption, 
 when in fact the policy has already matured by the insured's death. 
 
124 NoTes ON Equity Jurisprudence 
 
 course, rescission, since the minds of the parties have only ap- 
 parently and not really met. 
 
 Such cases — that is where the mistake is due solely to the 
 oversight, carelessness or mental lapse of the complaining party 
 — in no wise contributed to by the defendant who has acted in 
 good faith throughout — have given the courts much difficulty. 
 
 The same — illustrations. — Thus, in Steinmeyer v. Schroep- 
 pel,!" the plaintiff offered by written bid to supply the defend- 
 ant with a specified bill of lumber for $1,446, which bid was ac- 
 cepted by defendant. Subsequently discovernig that a mistake 
 of $400 had been made in. the bid by the error of the plaintiff's 
 clerk in adding up a column of figures, plaintiff refused to com- 
 ply with the contract, and filed a bill in equity to enjoin an action 
 at law instituted by the defendant, and for rescission on the 
 ground of mistake. Relief was refused, though in its opinion, 
 the court seems not sure on what ground its refusal should be 
 based. Negligence of the plaintiff in making the addition, ab- 
 sence of mistake in the substance of the contract, and instability 
 in commercial transactions as the result of such relief, are all 
 advanced as reasons for the conclusion. 
 
 On the other hand, in Board of School Com'rs v. Bender,^'' 
 a similar mistake, made, as the court found, under excusable 
 circumstances, was held to justify an annulment of the bid.i® 
 
 The same — illustrations, continued. — In the Georgia case 
 of Werner v. Rawson.^^ (opinion by Bleckley, C. J.), defendant 
 had authorized his agent to sell two lots belonging to defendant 
 at $2,500 each. The agent, misunderstanding the terms, offered 
 the lots to the plaintiff at $2,500 for the two, which offer plaintiff 
 accepted, in ignorance of the agent's mistake. The plaintiff's 
 attorney prepared the deed of conveyance of both lots, reciting 
 the consideration of $2,500, and presented it to defendant for his 
 signature. Defendant still believing that the sale had been made 
 in accordance with his original instructions, executed and de- 
 livered the deed and accepted the check for $2,500, without then 
 
 " 226 111. 9, 80 N. E. 564. 
 " (Ind. App.), 72 N. E. 154. 
 
 " The case of Moffett v. Rochester, 178 U. S. 373, was a case of 
 similar character with a like decision. 
 " 79 Ga. 9, 15 S. E. 813. 
 
Mistake — Unilateral 125 
 
 and there reading either the check or the recital of considera- 
 tion in the deed, or the description of the property conveyed. 
 Subsequently, on the same day, having discovered the mistake, 
 defendant applied to plaintiff's agent, who had possession of the 
 deed, for permission to read it. On its being handed to him, 
 he discovered the mistake, explained it to the agent, laid the 
 check on the agent's desk, put the deed into his own pocket, and 
 refused to re-deliver it. 
 
 In a suit by the vendee to establish a copy of the deed and 
 to obtain possession of the land, defendant asked for the equi- 
 table relief of rescission on the ground of mistake. 
 
 The court found that the evidence abundantly established the 
 mistake, and the good faith of both parties; that the failure of 
 the defendant to read the deed was, under the circumstances 
 (which are recited), not culpable negligence; and affirmed the 
 ■action of the lower court in decreeing a rescission of the con- 
 veyance. 
 
 In each of these cases in which relief was granted, the com- 
 plaining party acted TJuith great promptness in notifying the other 
 of the error, and before the latter had changed his position for 
 the worse. 
 
 The same. — The case of Harris v. Pepperell, (cited in Text, 
 p. 250), is scarcely in point here, since the facts in that case 
 show a previous contract, which both parties understood alike, 
 but the mistake was made in its subsequent reduction to writing. 
 So in Gerrard v. Franklin, cited on the same page of the Text. 
 The case of Webster v. Cecil, commented on in the Text, was 
 not a suit for rescission, but for specific performance, to which 
 dififerent principles are applicable. 
 
 Page 251, § 465. Unilateral mistake, continued — culpa- 
 ble negligence precluding relief. — On^the question as to 
 what amount of care equity exacts of him who asks for rescis- 
 sion of a contract into which he has entered, by reason of his 
 own mistake, unaided by and unknown to the other contracting 
 party, we cannot do better than to quote the following statement 
 of the equitable rule from Mr. Pomeroy.^** 
 
 "It has sometimes been said in very general terms that a mis- 
 
 2 Eq. Jurisp. 856. 
 
126 Notes on Equity Jurisprudence 
 
 take resulting from the complaining party's own negligence will 
 never be relieved. This proposition is not sustained by the au- 
 thorities. It would be more accurate to say that where the mis- 
 take is wholly caused by the want of that care and diligence in 
 the transaction which should he used by every person, of reason- 
 able prudence, and the absence of which would be a violation of 
 legal duty, a court of equity will not interpose its relief ; but 
 even with this more guarded mode of statement, each instance 
 of negligence must depend to a great extent on its own circum- 
 stances. It is not every negligence that will stay the hand of the 
 court. The conclusion from the best authorities seems to be, 
 that the neglect must amount to the violation of a positive legal 
 duty. The highest possible care is not demanded. Even a 
 clearly established negligence may not of itself be a sufficient 
 ground for refusing relief, if it appears that the other party has 
 not been prejudiced thereby." ^^ 
 
 Page 263, § 488. Mistake, continued — diligence required 
 after discovery of mistake. — Howsoever lenient a court of 
 equity may be toward the party complaining of a mistake by 
 which he has unwittingly, or even negligently, permitted himself 
 to become bound on a contract which he had no intention of en- 
 tering into, the court rigidly insists upon the rule that the com- 
 plainant must act with the utm,ost prom^ptness and diligence in 
 the repudiation of the contract upon discovery of the mistake. 
 "Delay or vacillation," as quoted in the Text, "are fatal to the 
 right which had before subsisted. This is especially true where 
 rescission is the relief sought." 
 
 The reasons for this insistence upon diligence and prompt ac- 
 tion are (1) the possibility of injustice to the other parjy, if pro- 
 ceedings to rescind for mistake are delayed ; and (2) the aversion 
 that equity has for him who maintains a position in which he 
 may blow either hot or cold, or who, in homely phrase, is en- 
 deavoring to 'ride both sides of a sapling.' Here a party to the 
 contract will not be permitted to allow the voidable contract to 
 stand, awaiting future results — meaning to keep silent should the 
 transaction turn out to be advantageous to himself, or to disaf- 
 firm should the result prove unprofitable. In short, he may not 
 speculate on the result of the mistake. 
 
 See Solenberger v. Strickler, 110 Va. 373, 65 S. E. 566. 
 
Mistake — Reformation 127 
 
 CHAPTER XVII. 
 
 MisiTAKE Calling for Reformation. 
 
 Preliminary. — Thus far we have dealt with mistake calling 
 for Rescission of the transaction — on the ground that as the 
 minds of the parties have not met on the same thing, there is no 
 mutuality of agreement and hence no contract. 
 
 We come now to consider mistake calling for Reformation 
 of the contract — the ground of relief being that while the par- 
 ties in fact came to an agreement, understood by both parties 
 alike, yet in subsequently reducing it to writing the real con- 
 tract was, by mistake, not expressed in the writing. 
 
 By the term 'reformation' here is meant a re-writing (actual 
 or constructive) of the instrument, either by insertion of what 
 has unintentionally been omitted, or by elimination of what has 
 unintentionally been included. Equity cannot, of course, make a 
 new contract for the parties — a contract to which both parties 
 have not freely assented ; but it can and does reform the written 
 evidence of a valid contract previously entered into, on the same 
 principle that it will decree re-execution of a lost or mutilated 
 document. 
 
 Page 250, § 463. Reformatioii iUustrated. — The case of 
 Harris v. Pepperell,^ here mentioned (insufficiently stated in the 
 Text) -was the case of an oral agreement for the sale of one 
 parcel of land, but by error of counsel two parcels were in- 
 cluded in the conveyance. The court reformed the conveyance 
 by eliminating the erroneously included parcel. 
 
 In Garrard v. Frankel,^ (similarly confused in the Text) by 
 the oral agreement the rental was fixed at £230, but the lease, 
 as written, called for only £130. The court reformed the lease 
 to correspond with the actual agreement. 
 
 Page 254, § 472. Writing not expressing intention of 
 parties, because of mistake of law. — As pointed out in the 
 preceding chapter, there is a manifest diflference between the sit- 
 uation presented in Hunt v. Rousmanier ^ — where the parties. 
 
 " L. R. 5 Eq. Cas. 1. 
 ' 30 Beav. 445. 
 ' 1 Pet. 1. 
 
128 NoTEis ON Equity Jurisprudence 
 
 through a mistake of law, deliberately agreed upon a power of 
 attorney instead of mortgage, and deliberately accepted the for- 
 mer — and the converse of that case, namely, where the parties 
 agree to execute an instrument of a particular character (e. g. a. 
 mortgage) but by a mistake of law an instrum-ent of a differ- 
 ent character is ignorantly accepted. In the first case the power 
 of attorney was the expression of the real intention, of the par- 
 ties — though such intention was caused by a mistake of law ; 
 whereas, in the second case, the parties agreed upon one instru- 
 ment but by mistake of law accepted one of a different kind, ig- 
 norantly believing it to be the expression of their mutual inten- 
 tion. In the one case, the instrument embodied their intention 
 — in the other it did not. Hence, in the one case, reformation 
 was refused, while the other is a clear case for reformation.* 
 
 Page 258, § 476. Right of bona fide purchaser.^ — Mistake 
 in a conveyance, though relievable in equity in a proper case be- 
 tween the parties, is an equity which, like all other equities, is 
 cut off by a transfer to a bona fide purchaser for value, howso- 
 ever gross the mistake may be.^ 
 
 Page 260, §§ 483-485. Reformation. — mistake in written 
 contracts for real property — statute of frauds. — The cor- 
 rect doctrine on this subject is well stated in the Text, except 
 that the doctrine of Glass v. Hulbert (page 261) is local to 
 Massachusetts and one or two other states, and does not' prevail 
 generally in this country. It probably also represents the Eng- 
 lish doctrine. We shall examine this doctrine more carefully 
 later. We may state the general doctrine as to the effect of the 
 statute of frauds, under this title, as follows, noting carefully 
 the distinction between rescission and reformation : 
 
 The same — statute of frauds, continued — (1) suit for 
 rescission. — Where the plaintiff, whether vendor or vendee, 
 sues to rescind the contract for mistake — or where either of the 
 parties, on the same ground, defends a suit for specific perform- 
 ance brought by the other — all the authorities agree that the mis- 
 take may be shown by parol evidence. 
 
 Here the introduction of parol evidence does not violate the 
 
 * See Inge v. Inge, 120 Va. 329. 
 f Snyder v. Grandstaff, 96 Va. 473. 
 
Mistake — ReS'ormation 129 
 
 statute of frauds, since the purpose of such evidence is to de- 
 feat and not to enforce the contract. The statute merely prohib- 
 its the enforcement of contracts not in writing. 
 
 The same, continued — (2) suit for reformation. — (a) 
 
 Taking out. — The plaintiff vendor may also, in a bill for refor- 
 mation and spcific performance, prove a mistake by which more 
 was inserted in the written contract than the agreement called 
 for, and have this eliminated, and the contract reformed so as to 
 show the real contract of the parties, and then have specific per- 
 formance. 
 
 Here, again, the statute of frauds is clearly not violated, since 
 the effect of the parol evidence is to nullify so much of the con- 
 tract as it relates to, and hence there is no enforcement of an 
 oral contract. 
 
 The receipt of the parol evidence, however, does violate the 
 unwritten rule of evidence, that a written contract cannot be 
 contradicted by contemporaneous parol testim,ony. The admis- 
 sion of parol testimony here is one of the few instances in which 
 equity refuses to follow the common law rules of evidence. The 
 departure is justified by the demands of justice, to prevent the 
 unjust enrichment of one party at the expense of the other. 
 
 (b) Putting in,. — May the plaintiff vendee set up a mistake in 
 reducing the contract to writing, and by parol evidence have 
 additional advantages inserted into the writing, as for example, 
 a greater acreage or area than the written contract calls for? 
 This is the only difficulty presented in this connection. 
 
 To state a concrete case: Suppose A orally agrees to sell B 
 tivo lots of ground, and that by mistake of the scrivener in re- 
 ducing the contract to writing, only one lot is called for by the 
 writing, B's right to set this mistake up in defense to a suit by A 
 for specific performance — or to maintain a suit to rescind — is 
 clear. But may B, the vendee, by parol evidence, have the 
 omdtted lot inserted in the written contract, and then specific 
 performance? 
 
 As shown in the Text, it is held otherwise in the Massachu- 
 setts courts. The English rule is probably contra also. But by 
 the great weight of American authority, even in this case, parol 
 evidence may be received to insert the omission into the written 
 contract, which will then be specifically enforced, notwithstand- 
 
130 Notes on Equity Jurisprudence 
 
 ing the statute of frauds. In short, the American rule may be 
 said to be, in cases of mistake in connection with contracts for 
 the sale of real property, that the statute of frauds imposes no 
 impediment, either in case of rescission or of reformation, and, 
 in the latter case, of specific performance.^ 
 
 The same — rules of evidence. — In all these cases, it is clear 
 enough that the introduction of parol evidence to alter the writ- 
 ten contract violates the common law rule of evidence that parol 
 testimony may not be received to contradict or alter a written in- 
 strument, and, in the case last mentioned (i. e. insertion) the 
 statute of frauds as well. But, as we have seen elsewhere, when 
 equity assumed the jurisdiction in any case to afford relief be- 
 cause of a mistake in a written instrument, it necessarily adopted 
 the principle of not permitting these rules of evidence to stand 
 in the way of such relief. 
 
 The exercise of this jurisdiction in cases of mistake rests 
 upon the same ground as where similar relief of reformation is 
 granted, where the failure of the writing to express the real 
 agreement results from the fraud of one of the parties. Such 
 relief is always granted in the latter case. So it should likewise 
 be granted in cases of mistake — since the effect on the complain- 
 ing party is precisely the same in the one case as in the other.'' 
 Of course, in all of these cases of mistake, in which a writing 
 signed by the complaining party is sought to be contradicted by 
 parol testimony, the burden is on the plaintiff to establish the 
 mistake clearly, by overwhelming testimony.^ 
 
 " The subject is discussed with a wealth of authority in 3 Pomeroy, 
 Eq. Jurisp. 860 and following. See also. Beach v. Bellwood, 104 
 Va. 171. Mr. Wigmore justifies the reception here of parol testimony, 
 and the exercise of the jurisdiction to reform by insertion, in spite 
 of the statute of frauds, or of the parol evidence rule, on the same 
 ground that similar relief would be afforded should some portion of 
 the writing become illegible because of the fading of the ink, or 
 of mutilation by accident. 2 Wigmore's Ev. § 2417. 
 
 ' See 3 Pomeroy's Eq. Jurisp. 867 n. 
 
 ' Inge V. Inge, 120 Va. 329. 
 
Fraud — Between the Parties 131 
 
 CHAPTER XVIII. 
 
 Actual Fraud as between Parties to Contracts. 
 
 [Alter Text chapter title to correspond.] 
 
 Fraud at law and fraud in equity — contrast. — We must 
 begin this chapter with a clear-cut conception of the diifer- 
 ence between the constituents of fraud at law, in an action for 
 damages for the deceit, and fraud in equity, in a suit for rescis- 
 sion. This is especially important, since our author seems to 
 have confused the two throughout his chapter. 
 
 In so far as the fraud has originated in misrepresentations, 
 as it generally does, the chief difference between the legal and 
 the equitable essentials of fraud is in connection with the scienter, 
 or knowledge on the part of the defendant that his representa- 
 tions were in fact false. 
 
 Fraud at law — necessity of the scienter. — The accepted 
 rule at law is, that a misrepresentation of a fact by one party, 
 howsoever material, and howsoever inflential upon the mind of 
 the other party in inducing him to enter into the contract, is not 
 fraudulent, unless made with knoivledge of its falsity {scienter) 
 — or else recklessly, without knowing or caring whether the state- 
 ment be true or false. This principle was settled in England in 
 the great case of Derry v. Peek,i and prevails quite generally in 
 America. 
 
 Fraud in equity — scienter immaterial. — In equity, on the 
 other hand, it is immaterial whether the party making the mis- 
 representation knew it to be false, or made it recklessly or in 
 complete innocency — the inquiry being, not did the one party 
 know it to be false, but did the other party believe it to be true.^ 
 
 Advantages of rescission over action at law for dam- 
 ages. — These advantages are twofold: (1) In equity there need 
 be no proof of the scienter. (2) If the defendant should be in- 
 solvent, and unable to meet his liabilities in full, a judgment 
 against him for damages would be of little value to the injured 
 
 ' 14 App. Cas. 337. The question is fully treated in Flight v. 
 Booth, 1 Bing. (N. C.) 375, 6 Eng. Rul. Cas. 746, n. 
 ' Owens c. Boyd Land Co., 95 iVa. 560. 
 
132 Notes on Equity Jurisprudence 
 
 plaintiff. Whereas, by rescission the plaintiff recovers the prop- 
 erty itself, unless the legal title has, in the meantime, passed into 
 the hands of an innocent purchaser for value — in which case, 
 of course, the equity of rescission is cut off. 
 
 I. Fraud by Misrepresentation. 
 
 Page 267, § 495. Misrepresentation. — In view of the con- 
 trast drawn above between misrepresentation at law and in eq- 
 uity, respectively, let us endeavor to improve somewhat upon our 
 author's definition of misrepresentation, as constituting ground 
 for rescission of a contract in equity, .namely : To entitle an in- 
 jured party to a rescission in equity, the representation must be 
 (1) of a fact (present or past) ; (2) the fact must be a material 
 one; (3) reasonably relied upon by ilaintiff; (4) false in, fact; 
 and (5) injurious to the deceived party. 
 
 The same — 'future fact' — promissory representations. 
 
 — The student will further observe that the misrepresentation 
 must relate to a presint or past fact,^^ otherwise it is what is 
 called a promissory representation, which, when resolved into its 
 elements, must be a promise, an opinion, or a statem,ent of inten- 
 tion. Such statements ordinarily do not in law constitute mis- 
 representation. 
 
 There may be, of course, a misrepresentation of existing fact 
 expressed in the form of an opinion, or in the future tense. A 
 statement, for example, that a certain farm "will produce" fifty 
 bushels of wheat to the acre, is a statement, by implication, that 
 the farm is good wheat land, and capable, in its present condi- 
 tion, of growing fifty bushels to the acre. The representation is, 
 therefore, one of fact. 
 
 Promissory representation, continued — (1) as a con- 
 tract. — If the representations be in the nature of promises, and 
 are embodied in the contract between the parties in a legal way, 
 then the plaintiff may have relief by an action at law, or appro- 
 priate equitable relief, according to circumstances — on the con- 
 tract itself. But unless such promises are embodied in the writ- 
 
 ^ This is implied ex vi termini. 'Fact' (Latin factum) connotes 
 something done, or already existing. A 'future fact' is therefore a 
 contradiction in terms. 
 
Fraud — Promissory Representations 133 
 
 ten contract (as usually they are not), so as to form a part of 
 it, the rules of evidence exclude parol testimony as to prior or 
 contemporaneous agreements. Mere failure to perform a prom- 
 ise (even where it is in the form of a binding contract) cannot 
 constitute fraud or misrepresentation. If so, every breach of 
 contract would be remediable by rescission.^ 
 
 Page 268, § 497. The same— ( 2 ) as statements of opin- 
 ion or intention. — Since one's intention, or opinion, is a mere 
 state of mind, subject to change, either with or without cause, 
 the existence or nonexistence of a particular intention or opin- 
 ion in the mind of one party can scarcely be said to be a mate- 
 rial inducement to the other party to enter into a contract in re- 
 liance thereon. It may be true that "the state of a man's mind 
 is as much a fact as the state of his digestion," but it is generally 
 not a material fact, for the reasons stated. 
 
 Hence such statements on the part of either vendor or vendee, 
 even though false, are by the better authority not sufficient to 
 call for rescission in equity. 
 
 Where the intention is expressed as that of a third person 
 over whose actions the speaker has no control, the case becomes 
 all the weaker for the complainant, since in the nature of things 
 this is nothing more than a mere prophecy. 
 
 Hence, where a land company exploits its lots by advertising 
 an intention to lay out improved streets, to supply water, light, 
 etc., or to establish industrial and other enterprises on portions 
 of the property — or a vendor of one lot enhances its price to the 
 vendee by expressing his intention of building a handsome resi- 
 dence for himself on the adjoining lot — all such statements are 
 regarded as promissory only, or as mere statements of intention, 
 and failure to make them true is not a misrepresentation enti- 
 tling a disappointed purchaser to rescission. 
 
 The same — statements of intention, continued. — The 
 
 facts in Edgington v. Fitzmaurice (cited in the Text, p. 268), in 
 which Lord Justice Bowen drew a parallel between the state of 
 one's mind and the state of his digestion, were peculiar, in that 
 
 ^ Watkins v. Wytheville, etc., Co., 92 Va. 1; Max Meadows, etc., 
 Co. V. Brady, ,9a Va. 71; Owens v. Boyd L,and Co., 95 Va. 560. See 
 the "Blue Sky Law" (criminal), Va. Code 1919, § 4465; Acts 1918, 
 p. 676. 
 
134 Notes on Equity Jurisprudence 
 
 under the guise of an intention to apply the subscribed funds to 
 improving the company's property, there was concealment and 
 an impHed misrepresentation of the true condition of the com- 
 pany's affairs — and by the officers of the company, who stood in 
 a fiduciary relation to the subscribers, and who were therefore 
 under obligation, if not to make a full disclosure of the situation, 
 at least not actively to conceal it by a false statement of the pur- 
 pose of the subscription.* 
 
 Where the suit is for specific performance, instead of rescis- 
 sion, it seems that false expressions of intention may sometimes 
 become of importance as a defense. This is due, however, to the 
 peculiar nature of suits for specific performance, as hereafter 
 will appear. 5 
 
 To whom misrepresentation made. — It is not always es- 
 sential that the misrepresentation should have been made directly 
 to the injured party, if it be meant to be communicated to him. 
 Thus, a misrepresentation made to a m,ercantile agency, for the 
 information of the mercantile world, is fraudulent as to sub- 
 scribers to the agency who have relied upon the statement so 
 made.* 
 
 Page 269, § 498. Duty of injured party to investigate. — 
 
 The statement of the Text that whenever the property is equally 
 open to the inspection of both parties, the vendee must inspect, 
 and if he -does not he cannot complain of the vendor's misrep- 
 resentation, is no longer the correct rule.^ It does not lie in the 
 mouth of one who has misled another by false representation, to 
 assert that the other should not have believed him to be telling 
 the truth, and should have investigated for himself. One party 
 to a contract, therefore, may not deceive the other and then com- 
 plain that the other honestly took him at his word, although the 
 
 * See Wilson v. Carpenter, 91 Va. 183; Watkins v. Wythe ville, 
 etc., Co., 92 Va. 1; Sawyer v. Prickett, 19 Wall. 146; Tacoma v. 
 Tacoma, etc., Co., 16 Wash. 305, 47 Pac. 743; Pine Mountain Iron 
 Co. V. Lord (Ky.), 50 S. W. 28; note, 8 Va. Law Reg. 646; 2 
 Pomeroy's Equity Jurisp. 885, and following. 
 
 ° See authorities in n. 128 Am. St. Rep. 407. 
 
 " Eaton V. Avery, 83 N. Y. 31. 
 
 ' The true doctrine is stated in footnote 2 to this section. See 
 Brown v. ;Rice, 26 Gratt. 473; Hull v. Field, 76 Va. 607; note by 
 Professor Graves, 2 Va. Law Reg. 694; n. 128 Am. St. Rep. 404; 
 Marshall on Corp. 649. 
 
Fraud — The Scienter 135 
 
 deceived party might have discovered the falsehood by investi- 
 gating for himself. Hence, a party to a contract falsifies at his 
 peril. 
 
 Page 271, § 503. Scienter not necessary.— The English 
 cases referred to in this section were cases at law, and not in 
 equity. We have already disposed of the question of the 
 scienter, in a note to a previous section. Our author continu- 
 ally nods over the scienter. 
 
 Page 272, § 504. Reliance upon the statement. — It is es- 
 sential as stated in the Text, that the other party must have re- 
 lied upon the false statement and been misled by it, but we must 
 add: If the statement was material, the law presumes, in the 
 absence of proof to the contrary, that the other party did rely 
 upon it.^ 
 
 Page 272, § 505. Misrepresenation of law. — While it is 
 doubtless true, as stated in the Text, that equity does not relieve 
 for a mere misrepresentation of law, yet this rule is to be ap- 
 plied with great caution, and is subject to exceptions sufficient 
 almost to obscure the rule. The rule is applicable where the 
 parties deal on equal footing — where one is supposed to know as 
 much about the law of the subject as the other — and there is no 
 invited confidence, and no fiduciary relation between the parties. 
 Whether the relief granted here be under the head of fraud or 
 mistake is not material in the result, though many courts and 
 text-writers place the relief on the ground of mistake, rather 
 than of fraud. 
 
 When a mistake of law by one party is induced or aided by 
 the other, or is accompanied by conduct of the other more posi- 
 tively inequitable, and containing elements of wrongful intent, 
 such as misrepresentation, imposition, concealment, undue in- 
 fluence, breach of confidence reposed, mental weakness, or sur- 
 prise, a court of equity will lend its aid and relieve from the 
 consequences of the error.^ 
 
 " Wilson V. Carpenter, 91 IVa. 183. 
 
 ° 2 Pomeroy's Eq. Jurisp. 847. See Brown v. Rice, 26 Gratt. 467; 
 Griswold V. (Hazard, 141 U. S. 260; ante, note to pp. 337-238. 
 
136 Notes on Equity Jurisprudence 
 
 II. Fraud by Concealment. 
 
 Pages 274-276, §§ 507-509. Concealment.— Thus far we 
 have dealt with fraud arising from active misrepresentation, by 
 words or conduct. We come now to deal with fraud arising not 
 from express affirmation by words, or by implied affirmation by 
 conduct, but from the silence of the defendant when it was his 
 duty to speak. The maxim here is, qui tacet clamat — in English 
 (liberally), he who keeps silent when it is his duty to disclose 
 the truth, is held to have spoken an untruth. 
 
 This makes it necessary to inquire when such duty to speak 
 the truth, and not conceal it, rests upon a party to a contract. 
 The Text (§ 508) may be followed here; and, as there pointed 
 out, the two situations calling for a full disclosure are: (1) The 
 existence of a fiduciary or confidential relation between the par- 
 ties; and (2) Cases of invited confidence — where the wrong- 
 doer secures the confidence of the other by assurances that the 
 latter may rely upon the former's, statement, or that the wrong- 
 doer is disclosing, or will disclose, the whole truth about the 
 subject-matter of the contract. 
 
 Page 274, § 507. The same — no fiduciary relation. — As 
 
 shown in the Text, where no fiduciary relation exists, and no 
 misrepresentation in fact, by words or by conduct other than 
 mere silence, and no invited confidence, appear, one party is un- 
 der no obligation to disclose to the other the advantages the one 
 is securing for himself, or the disadvantages of the contract to 
 the other. ^^ But even here circumstances may convert mere si- 
 lence into a false pretense — as where one purchases goods on 
 credit, not meaning to pay for them, or with knowledge that he 
 will not be able to paji for them. Such a transaction is a fraud 
 even at law.^^ 
 
 Page 275, § 508. The same— fiduciary relation.— The 
 doctrine of the Text may be followed here. To the Hst of fi- 
 duciaries there mentioned, may be added attorney and client; co- 
 
 " See ante, note to i§ 455. 
 
 ™ Donaldson v. Farwell, 93 U. S. 631; Houghtaling v. Hills, 59 
 Iowa 287; 8 Va. Law Reg. 429; Benjamin on Sales, (Bennett's 6th 
 ed.) 442-443 — full collection of authorities. 
 
Fraud — Undue Influence 137 
 
 partners ;i^ co-tenants; executor and legatee; directors and cor- 
 poration; directors and individual shareholders to a limited ex- 
 tent ; 1* receiver and court ; and all other persons occupying a 
 relation of confidence to another. 
 
 III. Praud by Undue Influence — Surprise. 
 
 Page 276, § 510. Fiduciary relation, continued — pre- 
 sumption of undue influence. — We may state the doctrine 
 here somewhat more strongly than it is stated in the Text, 
 namely, that wherever a relation, of confidence exists, and the 
 person so trusted possesses himself of any benefit from the 
 other, without paying an adequate consideration, a presumption 
 of undue influence arises, and the burden of proof rests on. the 
 person receiving such benefit to disprove it. 
 
 Thus, where the confidential agent of an elderly woman owed 
 her a debt, and obtained from her, in her lifetime, a release of 
 the debt, reciting that it was on account of faithful services ren- 
 dered her by him, the court held, after her death, that a pre- 
 sumption of undue influence existed, and that the burden was 
 on him to remove this presumption.^^ 
 
 Undue influence, continued — surprise. — Many cases un- 
 der this title have arisen, in which the fiduciary or confidential 
 relation is not so manifest, or not so strongly accentuated by the 
 courts, as was the unfair advantage taken by one party over the 
 other, made possible either by the relations of the parties or by 
 the special mental, physical or financial condition of the com- 
 plaining party — constituting what is known in legal phraseology 
 
 " Well illustrated by the case of Tennant v. Dunlop, 97 Va. 335, 
 where a surviving partner, who bought from the executrix of a de- 
 ceased partner certain trade-marks belonging to the firm, at a price 
 below their real value, was held to have owed the executrix the duty 
 of full disclosure las to the value of the subject bought. 
 
 " See Strong v. Repide, 213 U. S. 419; Wilgus, 8 Mich. Law Rev. 
 267; Stewart v. Harris, 69 Kan. 498, 77 Pac. 277,166 L. R. A. 261, 105 
 Am. St. Rep. 178, 2 Ann. Cas. 873. 
 
 " Triplett v. Woodward, 98 Va. 187, reported also with note 5 
 Va. Law Reg. 835. See also the two striking cases of Statham. v. 
 Ferguson, 25 Gratt. 38, and Davis v. Strange, 86 Va. 793. /The latter 
 case is of special interest because of its dramatic circumstances. The 
 transaction here was between a father and his illegitimate negro 
 daughter. A case for relief on two grounds was established — the 
 confidential relation and surprise. 
 
138 Notes on Equity Jurisprudence 
 
 as "surprise." Relief is more frequently granted, and a much 
 stronger case is made in such cases, where the one party, by 
 reason of extreme youth or old age or of mental or physical in- 
 firmity; or unfamiliarity with business; or dullness of intellect 
 (as a very ignorant person) ; or of the particular sitution, was a 
 fit subject for the exercise of the improper influence alleged.^* 
 
 In cases of this character, a second important question is, did 
 the party who is alleged to have been defrauded have the bene- 
 fit of independent advice and time for deliberation, or was the 
 transaction a hasty or secret one between the parties. 
 
 It would be more difficult to establish a case for relief here 
 where the complaining party labored under no special disability 
 or embarrassment of mind, or body, or estate, or where both 
 stood on an equal footing in the transaction.^'^ 
 
 Fraud at law — fraud in equity — a second contrast. — In 
 
 an earlier note to this chapter, a brief contrast was drawn be- 
 tween fraud at law and fraud in equity. It was pointed out that 
 equity relieves one party from a contract into which he has been 
 induced to enter by the misrepresentation of the other, even 
 though the misrepresentation were made honestly — thus indicat- 
 ing equity's more delicate sense of the ethical situation. 
 
 We are now prepared to carry the contrast a little further. 
 The student will recall from his studies of the law of contracts 
 that, according to common law conceptions, an agreement in- 
 volving nothing of illegality, based on a valuable consideration, 
 mutually understood and assented to by both parties, who are 
 mentally capable of contracting, is a valid contract; and may be 
 defeated only by establishing conscious fraud on the part of one 
 of the parties ; and this fraud must have been an actual m^isrep- 
 resentation of a material fact. Bargain-making is regarded at 
 law as a battle of wits; and, the bargain once made, the losing 
 party may not set up the superior bargaining qualities of his 
 
 " The circumstances under which Jacob purchased Esau's birth- 
 right is a good illustration — Jacob, according to the biblical story, 
 having taken advantage of his brother's hunger and fatigue to drive 
 the hard bargain. A modern court of equity would have had little 
 hesitation in setting the bargain aside on the two grounds of surprise 
 and as being a 'catching bargain with an expectant heir.' See Statham 
 V. Ferguson, and Davis v. Strange, both supra. 
 
 " Huguenin v. Baseley, 14 Ves. 273, is the leading English case. 
 It is cited and the facts stated on p. 277 of the Text. 
 
Fraue) — Surprise 139 
 
 adversary, due to his own inferior wit, if short of lunacy. That 
 the other party took advantage of his pressing need, his mental 
 inferiority, his inexperience, his incapacity for business, tem- 
 porary or permanent, his mental disturbance — due to grief, sick- 
 ness, drunkenness, anxiety or other emergency — is no defence to 
 the contract. We have just seen the vast difference in the eq- 
 uitable conception of the same situation. Here one's mental 
 state, or lack of bargaining wit, need not have reached the stage 
 of lunacy in order that it may be set up as ground of rescind- 
 ing the vicious transaction. 
 
 Memorandum for student: With § 516, the Text begins a 
 new chapter as "CHAPTER XIX— COiNSTRUCTIVE 
 FRAUD." There is no need of any new chapter here, nor of 
 the title. Strike out the entire chapter-heading, so as to include 
 the matter thereunder as a continuation of the present chapter 
 XVIII. Then, on page 286, immediately before § 526, insert a 
 new chapter-heading: "CHAPTER XIX, FRAUD ON CRED- 
 ITORS. 
 
 Page 282, §§ 519-522. . [The contracts referred to in these 
 sections are not fraudulent, actually or constructively. They are 
 merely based on illegal considerations, or are against the policy 
 of the law, and will not be enforced either at law or in equity. 
 They have no place in this discussion and may be omitted.] 
 
 Page 283, § 523. Antenuptial conveyances in fraud of 
 marital rights — effect of modern statutes. — The Text ac- 
 curately states the common law of the subject. Since fraud 
 alone does not constitute a cause of action unless damage fol- 
 lows, there can of course be no relief to husband or wife, where 
 the antenuptial conveyance deprives the other of no legal right. 
 Under modern statutes, the interest of husband and wife in each 
 other's property has been largely taken away. If the antenup- 
 tial conveyance be of property, to which the complainant con- 
 sort would have had no claim had the conveyance not been made, 
 then the transaction is valid. ^^ 
 
 " "Surely," says Corliss, J., in Arnegaard v. Arnegaard, 7 N. Dak. 
 475, 75 N. W. 797, 41 L. R. A. 358, "it would not be fraudulent for 
 the husband to do secretly before marriage that which he could do 
 either openly or secretly after marriage." See Butler v. Butler 
 (Kan.), 30 Am. Rep. 441; 3 Pom. Eq. Jurisp. 930; 7 Va. Law Reg. 
 833. 
 
140 Notes on Equitv Jurisprudence 
 
 Page 284, § 524. Bargains with expectant heirs. — The 
 
 Text states the doctrine of the EngHsh courts and those of 
 Massachusetts, Kentucky and a few other States. In most of 
 the States of the Union, such transactions, while void at law 
 (because nothing passes at the time), will be upheld in equity, 
 if fairly made and based on adequate consideration. ^^ 
 
 The same — heir's release to ancestor. — It is held by nu- 
 merous authorities that an heir may release his expectancy to his 
 ancestor, and thus be excluded from participation in the distri- 
 bution of the latter's estate upon his death. ^o 
 
 In the Virginia case cited, the court quotes with approval the 
 following statement from the opinion in Camell v. Nowell,^^ 
 "Heirs take by positive law when the ancestor dies intestate, and 
 the course of descent cannot be altered by words excluding par- 
 ticular heirs, or by any agreement of parties. Suppose the fa- 
 ther to have had no other children at his death but the plaintiff. 
 Being the sole heir, he must have taken the whole of the de- 
 scended land, ex necessitate. There must, therefore, be a dispo- 
 sition to another so as to break the descent, otherwise the land 
 descends according to law — ^that is, in this case, to the heirs in 
 general, subject to the provision of bringing advancements into 
 hotchpot." 
 
 The same, continued. — The Virginia court, continuing, asks : 
 "Where would the estate of Jacob Headrick, the ancestor who 
 died intestate, have gone if W. C. Headrick, the son, who re- 
 leased his interest, had died without issue in the lifetime of his 
 father?" The court adds that of course the releasing heir or dis- 
 tributee who comes into the division of the estate, notwithstand- 
 ing his release, must account to his co-heirs or co-distributees 
 (if any), for the consideration which he has received from the 
 
 "' The subject is discussed at great length in note to McCall v. 
 Hampton (Ky.), 56 Am. St. Rep. 339, 361; n. 65 L. R. A. 578'. 
 
 " See cases cited in note, 56 Am. St. Rep. 345-347. In other States, 
 including Virginia, it is held that such a release has not the effect 
 indicated. See Headrick i;. 'McDowell, 102 Va. 124, and note thereto, 
 65 Iy. R. a. 578. Compare the case of the Prodigal Son, who received 
 his "portion" before embarking for a far country. 
 
 ^ 51 N. C. 437. 
 
Fraud — Conveyances in Consideration of Support 141 
 
 ancestor — which consideration the court will treat as an ad- 
 vancement to the releasing heir or distributee.^^ 
 
 Conveyance in consideration of care and support of 
 iprantor — grantee in default. — Though not belonging strictly 
 to the subject of fraud, it may be not inappropriate here to call 
 attention to the peculiar situation presented in cases described 
 in the title to this note. In certain sections of the country, and 
 particularly in agricultural communities, it is not unusual for 
 a landowner, whose age or condition of health suggests the ar- 
 rangement, to convey to one of his children, or to a near rela- 
 tive, or even to a stranger, his entire holdings, in consideration 
 of the grantee's supporting the grantor during the remainder of 
 his life. 
 
 Where such conveyances are skillfully drawn, the obligation 
 of the grantee to furnish the support is secured by an express 
 charge on the property conveyed; or its faithful performance 
 is made an express condition subsequent; or the conveyance is 
 given the form of a trust for the purpose indicated. In such 
 cases, the question of the grantor's remedy presents no special 
 difficulty. Equity enforces the charge or the trust on familiar 
 principles — and a court of law affords an adequate remedy by 
 re-entry for breach of condition. 
 
 The same— rescission for grantee's default. — But more 
 frequently such conveyances are inartistically drawn by the par- 
 ties themselves, or by the village justice, and the obligation to 
 support is merely mentioned as the consideration for the con- 
 veyance, or assumes the form of a mere covenant on the part of 
 the grantee. In such a case, where the grantee fails or refuses 
 to comply with his undertaking, the question of a proper rem- 
 edy on behalf of the grantor presents some difficulty, since no 
 court, of law or equity, rescinds a conveyance for mere failure 
 of the grantee to pay or perform the consideration promised. 
 
 ^ The Virginia doctrine is upheld in Denson v. Autrey, 31 Ala. 
 205, and in other authorities cited in the monographic note 56 Am. 
 St. Rep. 339 uhi supra, and seems to be the sounder doctrine. This 
 doctrine is, of course, not based on any idea of fraud on the ancestor, 
 since the latter is himself a party to the transaction. The real ground 
 Is stated in the opinion of the North Carolina court, as quoted, 
 namely, the impossibility of sustaining such a proposi)ton under the 
 statute of descents and distributions. See n. 65 L,. R. A. 578. 
 
142 Notes on Equity Jueisprudbnce 
 
 The property in question has become a part of the mass of the 
 grantee's general estate, and, in ordinary cases, the grantor ha& 
 no more claim against the estate passing than against other es- 
 tate of his grantee. 
 
 It is settled, also, in the special case presented, that specific 
 performance cannot be decreed, since the contract involves serv- 
 ices of a character impossible of proper enforcement where the 
 parties occupy an attitude of mutual hostility — or, indeed, under 
 any circumstances. A court of equity refuses to perform spe- 
 cifically contracts for inerely personal services, or any other con- 
 tract the enforcement of which would require the constant super- 
 vision of the court, or which presents practical difficulties in the 
 determination of the question of proper performance.^^* 
 
 The same — inadequacy of remedy. — The grantor might, 
 of course, su.e the grantee at law for breach of hi? covenant, but 
 such remedy is manifestly inadequate for purposes of complete 
 justice. The estimation of the amount of damages would be 
 difficult, and, besides, damages are scarcely adequate compensa- 
 tion for the injury suffered. Moreover, as the grantee's cove- 
 nant to support has not been made a charge on the property, a 
 sale of the latter to a bona fide purchaser, or the insolvency of 
 the grantee, might result in the grantor's finding himself a pauper 
 with no means of support whatsoever. 
 
 In view of the peculiar situation, and the inadequacy of other 
 remedies, equity will generally interpose and rescind the entire 
 contract, by requiring a reconveyance of the property to the 
 grantor, in spite of the general rule that an executed conveyance 
 will not be rescinded at the suit of the grantor for failure of 
 consideration.^* 
 
 Before leaving the subject it may be well to say that while 
 the courts substantially agree that the situation here is peculiar 
 and demands a peculiar remedy, they are not agreed as to the 
 reasoning upon which relief is afforded. In some states the 
 mere covenant for support is treated as a charge or trust ; in 
 
 " Mowers v. Fogg, 45 N. J. Eq. 120. 
 
 ^ Lowman v. Crawford, 99 Va. 688, 7 Va. Law Reg. 551 and noter 
 Glocke V. Glocke (Wis.), 57 L. R. A. 458; Walfgong v. Johnson, 41 
 W. Va. 383; 7 Va. Law Reg. 601 (a luminous article by Judge R. 
 C. Jackson); Davis v. Davis (Vt.), 130 Am. St. Rep. 1035, and mon- 
 ographic note. 
 
Fraud on Creditors 14-3 
 
 others relief is granted on the ground of fraud or mistake; and 
 in still others as a condition subsequent. It is believed, how- 
 ever, that the true ground on which it should be granted is as 
 first indicated above. ^^ 
 
 Rescission, continued — mining leases. — Relief similar to 
 that mentioned in the foregoing note, and for the same reason, 
 is frequently administered in connection with mining leases, 
 where the lessee fails reasonably to begin or to continue mining 
 operations, upon which the lessor is dependent for royalties.^^ 
 
 CHAPTER XIX. 
 
 Fraud on Creditors. 
 
 Preliminary. — Thus far we have been dealing with fraud as 
 between the parties to a particular contract. We now come to 
 consider conveyances and transfers of property between two 
 parties, which operate as a fraud on third persons, not parties to 
 the transaction, namely, creditors of the grantor. 
 
 The eflfort of debtors, hopelessly in debt, to save something 
 for themselves and their families, out of the general wreck of 
 their estates, is a fertile source of litigation; and few titles of 
 the equity jurisdiction are more frequently represented on the 
 dockets of the courts. It behooves the student, therefore, to give 
 special attention to the very just and equitable principles ap- 
 plied in these cases. 
 
 Page 286, § 526. Conveyances in fraud of creditors. — 
 
 The statute of 13th Elizabeth, substantially reproduced in most 
 States, prohibits not only "conveyances and transfers" with in- 
 tent to defraud, etc., but applies as well to "bonds, suits, judg- 
 ments and executions" made, given or suffered, with intent to 
 "hinder, delay or defraud" creditors. 
 
 Rights of bona fide purchaser. — It is to be carefully noted. 
 
 ^ See monographic note 130 Am. St. Rep. 1035; Pownall v. Taylor, 
 ]0 Leigh 172 (as to condition subsequent). 
 
 ™ See Cowan v. Iron Co., 83 Va. 547; Coal Co. v. Hise, 92 Va. 238; 
 Laurel Creek Coal Co. v. Browning (Va.), 39 S. E. 156 (where 
 lessee's covenants were construed as conditions subsequent). 
 
144 Note;s on Equity Jurisprudence 
 
 however, that howsoever fraudulent may be the intent of the 
 grantor or debtor, if the purchaser from him, or from his col- 
 luding grantee, have no knowledge of such fraudulent intent, and 
 pays adequate value for the property, he is not affected by the 
 fraud. This is fundamental in the law of this topic. This state- 
 ment is made in § 528 of the Text and again in § 531. The omis- 
 sion of this qualification in the language of § 530 must not mis- 
 lead the student. 
 
 This means that if A conveys his property to B, in order to 
 cheat the former's creditors — whether B secretly agrees to hold 
 the property for A, or whether he pays value, knowing of A's 
 purpose — such conveyance, while good between the parties, is 
 avoidable by A's creditors. But if B transfers the property to 
 C, a bona fide purchaser for value, before A's creditors assail 
 the transaction, the property passes to C, free of the creditors' 
 claims — the only recourse of the creditor being a personal claim 
 against A and B. 
 
 Page 289, §§ 534-540. Statute of fraudulent conveyances 
 — voluntary conveyances thereunder. — The Statute of 13th 
 Elizabeth substantially followed in a majority of the States, 
 makes no reference, in terms, to "voluntary" conveyances, and 
 is confined to "fraudulent" conveyances. Under these statutes, 
 the mere fact that the conveyance is voluntary will not invali- 
 date it, unless it appear further that the donor was insolvent 
 at the time, or was made insolvent as the effect of the gift. That 
 is to say, under these statutes, a gift ('merely' voluntary — that 
 is made without actually fraudulent intent), by a debtor, is voida- 
 ble as to his existing creditors (and these alone — since those who 
 become creditors afterwards are not injured by the previous vol- 
 untary transfer), and only then where the debtor has failed to 
 retain enough property to satisfy his existing debts, with no rea- 
 sonable improbability that the retained assets will be so applied. 
 In short, a case of constructive fraud must be made out. 
 
 Statute of "voluntary" conveyances. — In a few of the 
 
 States, including Virginia, Alabama and others, an additional 
 statute has been enacted, known as the statute of "voluntary 
 conveyances." Under this statute, as to existing creditors, debt- 
 ors are forbidden to give away their property, even though they 
 
Fraud on Creditors — Voluntary Conveyances 145 
 
 may retain an abundance with which to meet their existing obli- 
 gations; or, otherwise expressed, voluntary conveyances are de- 
 clared invalid as to existing creditors, regardless of any fraudu- 
 lent intent, and regardless of the amount of property retained by 
 the debtor.^ 
 
 The same — what is a voluntary conveyance? — "By "vol- 
 untary" conveyance, is meant, not one in which there is a to- 
 tal absence of consideration — since a conveyance made for a pal- 
 pably inadequate consideration is (as to creditors of the gran- 
 tor) voluntary in part. Such a conveyance, if made in good 
 faith on the part of the grantee, will be permitted to stand to the 
 exent of the consideration paid {"pro tanto"), and will be set 
 aside as to the residue, when attacked by existing creditors. 
 
 Notice of fraudulent intent. — Notice of the grantor's 
 fraudulent purpose is only necessary where the grantee is a pur- 
 chaser for value. If he is a volunteer, he does not come within 
 the protection of the statute, and attacking creditors need not al- 
 lege or prove notice to him in such case. If he paid nothing, no 
 one knows it better than he. 
 
 The same — allegation and proof of notice. — Except in 
 the case of husband and wife (where, as we shall see presently, 
 the presumption of fraud places the burden of proof on the 
 wife), if the purchaser has paid value, the attacking creditor 
 must both allege and prove notice to him of the grantor's fraud- 
 ulent intent. 
 
 It is not for the grantee to establish lack of notice, but for the 
 attacking creditor to prove its existence affirmatively. This 
 seems clearly deducible from the language of the Virginia stat- 
 ute, viz., "This section shall not affect the title of a purchaser 
 for valuable consideration, unless it appear that he had notice 
 of the fraudulent intent," etc. It is also sustained by the deci- 
 sion of the courts. 2 
 
 ' Va. Code 1919, § 5185. 
 
 ' Hickman v. Trout, 83 Va. 478; Hazlewood v. Forrer, 94 Va. 703; 
 American Net, etc., Co. v. Mayo, 97 Va. 183. See post, Ch. xxxiB. 
 
 But the notice need not be proved by direct testimony — ^it may 
 be proved like any other fact, by circumistantial evidence. Fergu- 
 son V. Daughtrey, 94 Va. 308; Todd v. Sykes, 97 Va. 143. So it 
 may be proved by a bill taken for confessed, in which notice is dis- 
 tinctly charged. Price v. Thrash, 30 Gratt. 515; 1 Va. Law Reg. 546. 
 
146 Notes on Equity Jurisprudence 
 
 Mortgagees and deed of trust creditors as "purchas- 
 ers." — We have already seen ^ that creditors who have secured 
 the legal title to the res in question, are elevated to the high 
 plane of purchasers; and that when such transactions are bona 
 fide, and for value, all equities of other parties are cut off. 
 Hence where a debtor has conveyed his property to a confeder- 
 ate in fraud of his creditors, a bona fide purchaser (including a 
 mortgagee, or deed of trust creditor, to the extent of his debt) 
 from such confederate will hold the property free from any 
 claims on the part of the debtor's general creditors.* 
 
 Another term in common use in this connection, is "assignee" 
 — to designate the trustee in a general deed of assignment. Such 
 an instrument is in fact a deed of trust to secure debts — but 
 when the debtor thus throws up his hands and surrenders all of 
 his estate for the benefit of his creditors, the instrument by 
 which this is done is termed a general deed af assignment. The 
 assignee (or trustee) here is, of course, a purchaser. But 
 whether a purchaser "for value," is a disputed question, to be 
 considered in the section following. 
 
 Mortgagees, trustees and assignees as purchasers "for 
 value." — A moment's consideration will make it clear that one 
 may be a "purchaser" and yet not a purchaser "for value." We 
 shall glance briefly here at the question as to what constitutes 
 value in transactions of the sort under consideration. 
 
 (1) Contem,poraneous debt. — One who lends money and takes 
 a contemporaneous mortgage or deed of trust as security, is uni- 
 versally conceded to be a purchaser for value; and rightly so, 
 since he has put his money out on the direct credit of the partic- 
 ular property covered by the mortgage, or like lien. 
 
 (2) Pre-existing indebtedness. — One who extends credit to 
 another but takes no special security therefor, lends on the gen- 
 eral personal credit of the debtor. The taking of a mortgage, or 
 other lien, at a later date, to secure the credit, without any new 
 consideration, while it converts the creditor into a purchaser 
 (since he obtains the title), is held by the great weight of Amer- 
 ican authority not to make him a purchaser for value. And 
 
 " Ante, note to page 130. See 33 L. R. A. 305, note. 
 * See Vicars v. Weisiger Co., 121 Va. 679. 
 
Fraud on Creditors — Bona Fide Purchasers 147 
 
 rightly so, because he .did not put his money out originally on the 
 property now included in the mortgage. Hence the rule, that a 
 mortgage, or similar lien, given to secure a pre-existing indebt- 
 edness is not based on valuable consideration — and the mortga- 
 gee takes the security encumbered with all the equities with 
 which it was previously affected. This rule is quite generally ap- 
 plied to assigfnees under a general deed of assignment made by 
 a failing debtor.^ 
 
 The same — Virginia rule. — The rule last stated does not ex- 
 ist in Virginia, and several other states. Here, security for 
 previous indebtedness is regarded as constituting value, equally 
 with the contemporaneous Becurity.^ 
 
 Deeds fraudulent in law. — Conveyances, assignments and 
 other transfers of property, are said to be fraudulent in law 
 when they contain provisions rendering them on their face fraud- 
 ulent, without any proof aliunde. This occurs more frequently 
 in general deeds of assignment by insolvent debtors for the bene- 
 fit of creditors, than elsewhere.'' The following are illustrations 
 of deeds of assignment deemed fraudulent in law: 
 
 (a) Inconsistent reservations.— The rule is thus stated by 
 Riely, J., in Hurst v. Leckie,^ "A deed of assignment for bene- 
 fit, of creditors, which reserves any benefit to the grantor him- 
 self, or which introduces limitations and contingencies such as 
 will give him control of the property or its proceeds, so as to 
 enable him in effect to defeat the conveyance, or which reserves 
 to the grantor power to revoke it, or which stipulates for the 
 
 ° Authorities n. 3, supra. 
 
 ^ See n. 3, supra. As the trustee in such case is the representative 
 and quasi-agent of the creditor secured, notice to the trustee is 
 notice to the secured creditor. Oberdorfer v. Myer, 88 Va. 384; King 
 V. Levy (Va.), 22 S. E. 492; Alsop v. Catlett, 97 Va. 364; Peters 
 V. Bain, 133 U. S. 670; note to § 904, infra. 
 
 And where the trustee is affected with notice, the fact that he was 
 made trustee without his knowledge, and that he declined the trust as 
 soon as it came to his knowledge, will not prevent the beneficiaries 
 in the deed from being affected with notice, though they acted in 
 good faith. Merchants Bank v. Ballou, 98 Va. 112, 6 Va. Law Reg. 
 339. 
 
 ' Where the deed is fraudulent, as a matter of law, on its face, the 
 grantee will have constructive notice of the fraud, and will not be 
 heard to tieny it. Long v. Meriden, etc., Co., 94 Va. 594. 
 
 ' 97 Va. 550. 
 
148 Notes on Equity Jurisprudbnce 
 
 maintenance of the grantor or his family, or for his employment 
 at a fixed salary, is void" (voidable). 
 
 (b) Deed of trust on stock of goods. — A mortgage or deed of 
 trust on a shifting stock of goods, in which it is stipulated that 
 the grantor may remain -in. possession and continue his sales as 
 before, gives the grantor power to defeat the security, and, be- 
 being inconsistent with the avowed purpose of the transaction, 
 while doubtless good as between the parties, is fraudulent on its 
 face as to other creditors of the grantor. 
 
 Nor, by the better authority, is the objectionable feature re- 
 moved by a provision that the grantor shall account to the trus- 
 tee or creditors for the proceeds of sales, or shall keep the stock 
 up to a certain standard of value.^ 
 
 Of course, if the deed provides or contemplates that the trus- 
 tee himself shall take possession of the stock of goods, and close 
 them out for the benefit of creditors, the objection mentioned 
 does not exist. i" 
 
 (c) Power of trustee to sell on credit. — The statute of fraud- 
 ulent conveyances expressly condemns conveyances intended to 
 "hinder, delay or defraud" creditors; so that a conveyance that 
 "hinders" or "delays" creditors, is as objectionable as one that 
 "defrauds." Creditors have a right to demand that when the 
 property of their debtor is put beyond the reach of an execution, 
 by the assignment thereof for the benefit of creditors, it shall 
 be sold for cash. Hence, a clause in a general deed of assign- 
 ment whereby the trustee is authorized to sell on credit, will 
 render the assignment fraudulent in law.^'^ 
 
 It must be carefully noted, however, that in Virginia, our Su- 
 preme Court of Appeals from earliest times, seems to have lost 
 
 ° Robinson v. Elliott, 23 Wall. 513; full note, 15 Am. St. Rep. 913; 
 Wray v. Davenport, 79 iVa. (19; Perry v. Shenandoah Nat. Bk., 37 
 Gratt. 755; Hughes v. Epling, 93 !Va. 434; 3 iVa. Law Reg. 63; 3 Va. 
 Law Reg. ■297, i849; |Ross v. Wilson, 7 Bush 39; Loth v. Carter, 85 
 Ky. 591. The authorities are collected in 30 Cyc. (550, from which it 
 appears that in a minority of the States, the doctrines of the fore- 
 going note, and especially that asserted in the last paragraph, are 
 somewhat modified. 
 
 " See Hurst v. Leckie, 97 Va. 550. 
 
 " Burrill on Assignments, 230 et seq.; Keep v. Sanderson (Wis.), 
 60 Am. Dec. 404 and Inote; Brahmstadt v. McWhirter (Neb.), '31 Am. 
 Rep. 396, and full note; Nicholson v. Leavitt (N'. Y.), 57 Am. Dec. 
 499, and note; 3 Va. Law iReg. 60. 
 
Featjd — Generai, Deeds of Assignment 149 
 
 sight of the "hinder or delay" clause of the statute, and has al- 
 lowed, without question, provisions postponing sales under gen- 
 eral deeds of assignment which in other States would not be 
 countenanced. Our Virginia reports teem with cases where as- 
 signments have been upheld which postponed the sale for sev- 
 eral years, and in the meanwhile reserved to the grantor the 
 continued use of the property.^^ 
 
 (d) Release clauses. — In most of the States, a clause in a gen- 
 eral deed of assignment, stipulating for the debtor's release from 
 further liability, as a condition precedent to participation, by any 
 creditor in the benefits of the deed, renders the deed fraudulent 
 on its face.i* 
 
 But in Virginia, unfortunately, the contrary doctrine was es- 
 tablished in early times; and though the Supreme Court of Ap- 
 peals has several times deprecated the doctrine of these early 
 cases, the rule yet continues in this State. But it is subject to 
 this qualification, namely, that the insolvent must convey sub- 
 stantially the whole of his property (not exempt under 
 the "homestead" and "poor law"). He will not be permitted, 
 even in Virginia, thus to divide his property into two parcels — 
 reserving the one and assigning the other — and, by force of the 
 release clause, compel his creditors to choose between the two. 
 The creditors have the right to subject both.^* 
 
 Release clauses, continued. — This effort on the part of the 
 insolvent to escape further personal liability on his indebtedness, 
 by the insertion of the release clause, is a device to obtain all 
 the benefits of a technical adjudication in bankruptcy without the 
 sanction of a court of bankruptcy — 'self made' or 'home-made' 
 bankruptcy, some of the courts have termed it. It is rightly 
 condemned by the great majority of the courts. 
 
 (e) Other clauses. — If the deed of general assignment give 
 
 " See Brockenbrough v. Brockenbrough, 31 Gratt. 508; Paul v. 
 Baugh, 85 Va. 955; 3 Min. Inst. 679, et seq.; 2 Va. Law Reg. 60-63; 
 Taylor v. Mahoney, 94 Va. 508. 
 
 " Bump on Fraudulent Conveyances, 323, 429; 2 Perry on Trusts, 
 592, and note; Dugan v. Bliss (Col.), 34 Am. Rep. 80; Greely v. 
 Dickson (P'la.), 58 Am. Rep. 674; IGrover v. Wakeman (N. Y.), 11 
 Wend. 300. 
 
 ■** Skipwith V. Cunningham, 8 Leigh 274; Quarles v. Kerr, 14 Gratt. 
 48; Long v. Meriden, etc., Co., 94 Va. 594. i 
 
150 Notes on Equity Jurisprudence 
 
 the trustee power not only to continue the former business of 
 the grantor, but to subject the trust property to the casualties 
 incident thereto — casuahies of a character reasonably tending to 
 jeopard the fund by subjecting it to charges superior to the debts 
 secured — the deed is fraudulent on its face, as containing provi- 
 sions adequate to defeat the security.^^ 
 
 Assignment of merchant's stock of goods — permissible 
 clauses. — It frequently happens, especially when a stock of 
 merchandise is assigned to a trustee for the benefit of creditors, 
 that a much better result will be obtained by selling out the stock 
 in the usual course of trade, and by retail, than by closing it out 
 at once, under the hammer. It is, therefore, permissible for the 
 deed to give the trustee discretionary power, if he deem it best, 
 to continue the sale of goods by retail, in the usual course of 
 trade for a limited time (say, for one year if the stock be large) ; 
 and for that purpose to employ all necessary clerks and assist- 
 ants; and to purchase such staple articles as may be necessary 
 in order to retain customers and work off the entire stock to 
 advantage. 
 
 Nor is there any objection to the trustee's employing the gran- 
 tor himself as a clerk or assistant, provided there be no stipula- 
 tion that he shall do so. The grantor will often prove an in- 
 valuable assistant to the trustee, since generally he will be the 
 person most familiar with the value and quality of the goods, 
 and knows the customers. 
 
 The young practitioner, undertaking to draw a general deed 
 of assignment in Virginia, before inserting any special or pe- 
 culiar clauses, should carefully examine the two cases of Marks 
 V. Hill,i® and Hurst v. Leckie.^^ The deeds in each of these 
 cases contained elaborate provisions with reference to working 
 off a stock of goods to advantage, and both were held not to in- 
 fringe the statute against fraudulent conveyances — though in the 
 
 " Catt V. Wm. Knabe Co., 93 Va. 736 — a case where the trustee 
 was authorized to continue the grantor's school, hiring teachers and 
 paying all other expenses out of the trust fund. 
 
 So where the grantor in a deed of trust to secure deferred bonds 
 retained the power to sell the trust subject and reinvest in other 
 property to be held on the same trusts. Consolidated Tramway 
 Co. V. Germania Bank, 121 Va. 331. 
 
 " 15 Gratt. 400. 
 
 " 97 Va. 550. 
 
Fraud on Creditors — Postnuptial Settlements 151 
 
 former there was in fact a provision that one of the grantors 
 should be employed by the trustee.^^ 
 
 Lien creditors only may assail conveyance as fraudu- 
 lent. — By the unwritten law, a general creditor (that is, one 
 whose claim has not been reduced to a judgment — or is not oth- 
 erwise converted into a lien on the res in controversy) has no 
 standing in a court of equity to assail a fraudulent transfer of 
 property by his debtor. The transfer may be a fraud on him, it 
 is true, but as such general creditor he may not assail it, because 
 he has no claim against the res itself. The proper proceeding for 
 him is to sue in a court of law, obtain a judgment, have execu- 
 tion returned "no effects," and then file his bill in equity. 
 
 This is a tedious process, and frequently results in the eloign- 
 ment of the property before the creditor is in a position to move 
 against it. Hence in many states, including Virginia, statutes 
 have been passed permitting general creditors to assail these 
 fraudulent transfers. 
 
 The same — rule in Virginia. — By statute in Virginia,!^ a 
 general creditor may assail a fraudulent or voluntary transfer of 
 property by his debtor, without the necessity of a judgment, and 
 even before the debt is due. 
 
 The same — priorities among attacking creditors. — 
 
 Where the common debtor is insolvent, it is important that a 
 wide-a-wake creditor should move very promptly — the rule of 
 equity being that he who first assails the transaction secures pri- 
 ority of lien on the res — subject, of course, to prior existing liens. 
 The practice here is somewhat complicated, and will be dealt 
 with when we come to study the subject of equity procedure. 
 
 Postnuptial Settlements — Fraud on Husband's creditors. 
 
 Page 290, § 536. Postnuptial settlements — fraud on cred- 
 itors. — ^Probably a majority of the suits brought to set aside 
 fraudulent conveyances are between creditors of the husband. 
 
 " See also Taylor v. Mahoney, 94 Va. 508. The practitioner should 
 also examine in this connection, and guard against the features con- 
 demned therein, Lang v. Lee, 3 Rand. 410 and Catt v. iKnabe, 93 Va. 
 736. See also note by Prof. Burks, 3 Va. Law Reg. 297-8. 
 
 " Va. Code 1919, § 6186. 
 
152 Notes on Equity Jurisprudence 
 
 on the one side, and the wife to whom the husband has con- 
 veyed property, on the other. The rule of the unwritten law is, 
 that a man's first duty is to his creditors, and not to his wife and 
 children, harsh as this rule may seem. The various homestead 
 exemption statutes, existing in all the States, to some extent 
 ameliorate the hardship of this doctrine; but unless debarred by 
 these statutes, creditors have the first right of resort to a debtor's 
 property. Hence, when a husband has conveyed property to his 
 wife, leaving existing creditors unpaid, it becomes important to 
 consider the equitable situation: 
 
 The same — conveyance for adequate consideration. — 
 
 The case of a conveyance to the wife, for adequate considera^ 
 tion, presents no difficulty where the proof is clear; but, as we 
 shall presently see, the burden of proving that the consideration 
 actually passed, and belonged to the wife, is on her, since the 
 law presumes, as to the husband's creditors, that such transac- 
 tions are voluntary, notwithstanding the recital of a considera- 
 tion in the conveyance. 
 
 The same — conveyance voluntary. — It follows from what 
 has been said, that a husband who is in debt cannot voluntarily 
 settle property upon his wife, nor indeed upon any other person, 
 without first providing for the payment of his existing indebted- 
 ness. If he attempts to do so, creditors whose debts exist at the 
 time may assail the transaction. 
 
 The same« — presumption — burden of proof. — As before 
 stated, where a husband conveys property to his wife, and the 
 transaction is assailed by creditors whose debts then existed, the 
 transaction is presumed to have been without consideraition, 
 and the burden of proving adequate consideration rests on the 
 wife."^" 
 
 Proof of consideration by wife. — It is not sufficient merely 
 to prove that the wife paid money or transferred other prop- 
 
 " Flynn 'v. Jackson, 93 Va. 341, and numerous cases there cited. 
 Harr v. Shaeffer (W. iVa.), 43 S. E. 89; note, 90 Am. St. Rep. 970'. 
 See Spence v. Repass, 94 Va. 716. In jMorrisette v. Cook, etc., Co., 
 123 Va. 588, the conveyance from husband to wife (recited a valuable 
 consideration, but was in fact voluntary. It was held that the false 
 recital, unexplained, was proof of actual fraud, and hence the con- 
 veyance was subject to attack by subsequent creditors as well. 
 
Fraud on Creditors — Postnuptiai, Settlements 153 
 
 erty to the husband as a consideration for the conveyance. It 
 must distinctly appear that such money paid, or property con- 
 veyed, was in. fact the wife's and not the husband's — the pre- 
 sumption being, in the absence of proof to the contrary, that 
 all money or property acquired by the wife of an insolvent hus'^ 
 band, even from a stranger, is the husband's, or was purchased 
 with money furnished by him.'^^ 
 
 Page 288, § 532. Marriage as a valuable consideration 
 — Virginia statute. — The doctrine of the Text, that a convey- 
 ance by husband to wife, in consideration of a valid antenuptial 
 agreement to make such settlement upon her, is regarded, both 
 at law and in equity, as based on a valuable and adequate con- 
 sideration; and, in the absence of actual fraud, participated in 
 by the wife, is unassailable even by existing creditors, who thus 
 find themselves with no recourse for their debts, is the accepted 
 rule. 
 
 This unwholesome rule, under which much injustice was per- 
 petrated upon creditors, has been abolished in Virginia by stat- 
 ute, as to the husband's existing creditors. ^^ 
 
 The unwritten rule was even extended to the case where a 
 marriage engagement already existed anterior to the promise 
 of a settlement.^^ 
 
 Payment out of wife's separate estate. — In the absence 
 of actual fraud, participated in by her, if the wife is able to 
 prove that she in fact paid an adequate consideration for the 
 husband's settlement upon her (and the burden is on her to es- 
 tablish it), whether out of her separate estate or out of funds 
 supplied by friends, or from sources other than the husband, 
 the conveyance will be sustained. 2* 
 
 Husband using wife's money — (a) statutory separate 
 estate. — Where, with the wife's acquiescence or consent, the 
 
 '^ Seitz V. Mitchell, 94 U. S. 560; Hoge v. fTurner, 96 Va. 624; Burt 
 V. Timmons (W. /Va.), 6 Am. St. Rep. 664, note; 4 Va. Law Reg. 848, 
 quoted with approval in Johnson v. Abies, 119 Va. 593, 601. 
 
 " Va. Code 1919, § 5185. 
 
 ^ Appleby v. Appleby |(Minn.), Ill N. W. 305; McN'utt v. McNutt, 
 116 Ind. 545, 2 .L. :R. A. 372; 2 Cyc. 1246. 
 
 " Flynn v. Jackson, 93 Va. S41; Stonebraker v. Hicks, 94 Va. 618; 
 Spence v. Repass, 94 Va. 716. 
 
154 Notes on Equity Jurisprudence 
 
 husband has used her money (not his by marital right), or the 
 proceeds of her statutory separate estate, the law presumes this 
 to have been intended as a gift from the wife, tmless an express 
 antecedent or contemporaneous contract by the husband to re- 
 pay can be established. 
 
 Hence, a subsequent settlement by the husband upon the wife 
 cannot be sustained as to existing creditors, by proof that it was 
 made in compensation for such funds of the wife used by the 
 husband, unless it be also proved that prior to or contempo- 
 raneously with the wife's assent, the husband expressly bound 
 himself to repay.^^ 
 
 The same — (b) income of equitable separate estate. — 
 
 The same principle applies where the money of the wife, used 
 by the husband with her consent, was derived as income from 
 her equitable separate estate, even though the husband be trus- 
 tee of the corpus thereof.^® 
 
 The same — (c) corpus of equitable separate estate. — 
 
 But if the husband be the trustee, express or implied, of her 
 equitable separate estate, and uses the corpus of such estate, 
 this will be regarded prima facie as a debt due the wife, even in 
 the absence of an express contract to pay. The husband has in 
 fact so contracted in accepting the trust. ^'' 
 
 The same — (d)~ earnings of the wife — services to hus- 
 band. — Proof that the wife paid for the property out of her 
 own earnings, is not sufficient to shield it from the husband's 
 creditors, where, as at common law — it is otherwise now by 
 modern statutes — the husband is entitled to her earnings.^^ 
 
 ^ Beecher v. Wilson, 84 Va. 813; Hannon v. Hounihan, 85 Va. 429; 
 Throckmorton v. Throckmorton, 91 Va. 42; New South, etc., Ass'n 
 V. Reed, 96 Va. 345; Bennett v. Bennett (W. IVa.), 16 S. E. 638; 
 Sewing Machine Co. v. Radcliffe, 63 'Md. 496; McClure v. Lancaster, 
 24 So. Car. ^73, l58 Am. Rep. 259; Liskey v. Liskey, 2 Tenn. Ch. 
 5. See ante, note to § '238. 
 
 "" 2 Pomeroy's Eq. Jurisp. p. 1103 (n.) ; 2 Perry on Trusts, 665; 
 Bispham's Equity, 108. 
 
 " McConville v. National Valley Bank, 98 iVa. 9; 5 Va. Law Reg. 
 695; Walker v. Walker, 9 Wall. 753; 2 Perry on Trusts, 666; Bispham's 
 Equity, 84; Burks' Prop. Rights of Mar. Women, 18-19. The same 
 rule should apply equally where he is trustee of her separate statu- 
 tory estate. 
 
 ™ Campbell v. Bowles, 30 Gratt. 652, 653; Grant -u. Sutton, 90 iVa. 
 771. See cases cited supra, under paragraph (a). 
 
Fraud on Creditors — Postnuptiai^ Settlements 155 
 
 But neither at common law nor under the statutes, can the 
 husband, as against his creditors, settle property upon his wife 
 in payment for her ordinary household and conjugal services 
 to him. Under modern statutes, equally as at common law, the 
 husband is entitled to the wife's services in the household; and 
 an agreement to compensate her therefor is without considera- 
 tion.29 
 
 The same — (e) wife becoming surety for husband. — 
 
 Where the wife assumes a personal obligation, or incumbers her 
 own property with a lien, as surety for her husband, she is en- 
 titled to the rights of a surety; and the law implies a promise on 
 his part to indenmify her against loss thereby. Hence, where 
 she has thus become surety for him, she is entitled to exonera- 
 tion, and he may make a valid settlement on her, to the extent 
 of the liability she has thus validly assumed or paid.^" 
 
 Wife as surety, continued — contingent right of dower 
 released in mortgage to secure husband's debt. — The prin- 
 ciple just stated is not applicable to the wife's contingent right of 
 dower. The wife who unites with her husband in a mortgage or 
 other incumbrance on his real estate, thereby releasing her dower 
 right, is not treated as a surety, in the absence of an express prior 
 or contemporaneous promise of exoneration on his part — on the 
 same principle that when she permits him to use her money she 
 is not treated as a creditor, in absence of express contract.®^ 
 Though, somewhat inconsistently, as we shall hereafter see, if 
 she discharges an incumbrance on his estate, in which incum- 
 brance she has released her contingent right of dower, she is en- 
 titled to subrogation. *2 
 
 Wife as surety, continued — release of dower under ex- 
 press contract. — But as her contingent right of dower is a 
 
 ™ See Richmond Railway, etc., Co. v. Bowles, 92 Va. 738, 744; 
 note to Mich. Trust Co. v. Chapin (Mich.), i58 Am. St. Rep. 490, 
 493-499, collating the authorities. 
 
 " Filler v. Tyler, 91 Va. 1458; Flynn v. Jackson, 93 Va. 341; Bank 
 of Albion v. Burns, 46 N. Y. 170; Huntington v. Huntington, 3 L,. C. 
 E. 1932, notes; 1 Bishop ton iMarried Women, 604. 
 
 " See 8 Va. Law Reg. 165, 170, 1666; Land v. Shipp, 100 Va. 337; 
 Hoy V. Varner, 100 Va. 600. 
 
 " Gatewood v. Gatewood, 75 Va. 411; Lamb v. Montague, 113 
 Mass. 353. 
 
156 Notes on Equity Jurisprudence; 
 
 property right, paramount to the claims of her husband's cred- 
 itors, he may make a vahd settlement upon her in consideration 
 of a release of her contingent right of dower in his lands — ■ as on 
 a sale or mortgage thereof — provided the settlement be made 
 contemporaneously with the release, or in pursuance of a prior 
 or contemporaneous promise on his part, and provided further 
 that the settlement is not grossly in excess of the value of the 
 right released.^* 
 
 Page 292, § 539. Relative rights of creditors and family. 
 
 — The doctrine of the Text is unsound, as we have already 
 abundantly indicated, and as will further appear in notes to 
 follow. 
 
 Page 292, § 539. Life insurance — payment of premiums 
 by insolvent debtor.— The doctrine of the Text that an in- 
 solvent debtor may insure his life for the benefit of his wife 
 or family, and pay the premiums out of his earnings or other- 
 wise, without giving just cause of complaint to his existing 
 creditors, while sustained by respectable authority, seems to 
 have its foundation rather in judicial sympathy for the wife 
 and children than in any sound principle of equity. The pay- 
 ment of such premiums, while insolvent, is manifestly a volun- 
 tary transfer of property without providing for existing debts — 
 and seems clearly within the terms of the statute. We have al- 
 ready seen that if the insolvent settles houses and lands, or 
 money, or securities, directly upon his wife, when not bound 
 thereto by antenuptial contract, equity will let in existing credi- 
 tors upon the property. No difference is perceived where he 
 settles an insurance policy upon her, and devotes money which 
 should go to his creditors to the payment of premiums on the 
 policy. 
 
 The same. — In Virginia it is settled that under our statute of 
 voluntary conveyances, premiums thus paid on a ' policy of in- 
 surance for the benefit of another, are within the purview of the 
 statute; and that existing creditors of the insured may subject 
 the proceeds of the policy after death of the insured, to the ex- 
 tent of the premiums so diverted and within the period per- 
 
 Lewis V. Caperton, 8 Gratt. 166; Runkle v. Runkle, 98 Va. 663. 
 
Fraud on Creditors — Gifts of Labor 157 
 
 tnitted by the statute of limitations (five years in Virginia, in 
 the case of a purely voluntary conveyance.^*) 
 
 In Lehman v. Gunn ^^ — a case where the first premium was 
 paid (or assumed) while the insured was insolvent — it was held 
 that the existing creditors were entitled to subject the entire 
 proceeds of the policy to the payment of their debts. It will be 
 observed that in Alabama there is a statute of 'voluntary^ con- 
 veyances, as in Virginia.^" • 
 
 Fraud on creditors, continued — permanent improve- 
 ments on another's land by insolvent debtor. — Where such 
 improvements are made voluntarily by the expenditure of money 
 or otherwise out of the assets of the insolvent debtor, and, of 
 course, with the knowledge and acquiescence of the owner of 
 the property thus improved, probably no court of equity would 
 deny the right of an existing creditor of the improver to sub- 
 ject the property improved, to the extent of the value thus he- 
 stowed — whether such expenditure be made for a wife or for a 
 stranger. Such a transaction is plainly a gift at the expense of 
 creditors. 
 
 But where such improvements are made by the gift merely 
 of the personal services of the debtor, the courts are not fully 
 agreed as to the right of creditors to claim the value of services 
 thus gratuitously bestowed.^^ 
 
 On principle, however, there is no difference between the two 
 cases. The courts will not compel a debtor to work, but if he 
 
 " Stigler V. Stigler, 77 Va. 163. 
 
 '' (Ala.), 51 h. R. A. 112, 81 Am. St. Rep. 159. 
 
 "■ See also, Roberts v. Winton (Tenn.), 41 L. R. A. 275. The 
 authorities are collected in 20 Cyc. 361-366. 
 
 The decision of the Supreme Court of the United States in Central 
 Nat. Bank v. Hume, 128 U. S. 195, in which it was held that an in- 
 solvent debtor might devote a reasonable amount of his earnings 
 toward the maintenance of a life insurance policy in favor of his 
 family, has been justly criticized, and was expressly disapproved in 
 Merchants, etc., Transp. Co. v. Borland, 53 N. J. Eq. 282, 31 Atl. 
 272. See article by Prof. WilHston, in 25 Am. Law 'Rev. 185; Pullis 
 V. Robison, 73 Mo. 201, 39 Am. Rep. 497; Pence v. Makepeace, 65 
 Ind. 345; Vance on Insurance, 408. The case in question arose under 
 the statute of the District of Columbia, where the statute of voluntary 
 conveyances is not in force. 
 
 °' See 20 Cyc. 358-361, 396; Abbey v. Deyo, 44 N. Y. 344; Osborne 
 V. Wilkes (N. C), 13 S. E. 285; 'Nance v. Nance, «4 Ala. 375, 5 Am. 
 St. Rep. 378. 
 
158 Notes on Equity Jurisprudence 
 
 does work, his existing creditors should have the right to the 
 proceeds of his labor— ^save in so far as statutes may afford him 
 exemption. The law requires him to be 'just before he is gen- 
 erous.' Especially is this the sound rule in those states where 
 statutes of voluntary conveyances exist, as in Virginia. Many 
 of the cases where relief was denied, were attempts to subject 
 the property at law; others required proof of fraudulent intent, 
 either because the complaining creditors became creditors after 
 the services were rendered, or because merely voluntary convey- 
 ances were not within the condemnation of the local statute.^* 
 
 Further of fraudulent conveyances — failure of grantee 
 to have conveyance recorded. — Statutory requirements, ex- 
 isting in all the States, with reference to registry of convey- 
 ances, incumbrances, executory contracts of sale, etc. (particu- 
 larly where the subject-matter of the transaction is real prop- 
 erty), afford additional protection to creditors of the grantor and 
 bona fide purchasers from him. 
 
 These statutes are based on the wise public policy of requir- 
 ing all transactions affecting the title to real property (and, to 
 a more limited extent, personal property also), to appear on 
 record in some designated public office, in the county or city in 
 which the property is situated, for the information of possible 
 creditors and purchasers. 
 
 As a rule, non-registry does not affect the transaction as be- 
 tween the parties, but only as to bona fide purchasers for value 
 from, and creditors of, the grantor. 
 
 Registry, continued. — The usual provision is that all con- 
 veyances of real property, and all voluntary liens created thereon 
 (as by mortgage, deed of trust, mechanic's lien, etc.) and all 
 executory contracts for the sale thereof, shall be invalid as to 
 creditors of the grantor (prior or subsequent, and whether with 
 
 " The following authorities may be consulted with profit: Penn 
 V. Whitehead, 13 'Gratt. 74, s. c. 17 'Gratt. 503 (value of husband's 
 services, in conducting a mercantile business, held subject to cred- 
 itors' claims); Catlett v. Alsop, 99 Va. 680, 7 Va. Law IReg. «35, and 
 note; iNational Valley Bank v. Hancock, 100 Va. 101, 7 Va. Law Reg. 
 744, and note; Burt v. Timmons, 29 W. Va. 441, 6 Am. St. Rep. 664; 
 Boggess V. Richards, 39 "W. (Va. 567, 45 Am. St. Rep. 938; >Glidden 
 V. Taylor, 16 lOhio iSt. 509, 91 Am. Dec. 98; Shackelford z: Collier, 6 
 Bush 156; editorial note, 3 Va. Law Reg. 430; extensive discussion 
 43 Cent. L. J. 444. 
 
>Fraud on Creditors — Non-registry 159 
 
 or without notice) and as to subsequent bona fide purchasers 
 for value from the grantor, "until and except from the time such 
 instruments are duly admitted to record" in some designated of- 
 fice — in Virginia, the clerk's office of the county or corporation 
 where the property is situated.*® 
 
 Sundry transactions aflfecting the title to personal property 
 are likewise required to be registered, under like penalty. 
 
 Registry, continued — non-registry as fraud. — Inasmuch 
 as the invalidity of the unregistered instrument arises from the 
 express provision of the statute, regardless of the good faith of 
 the grantee, it is usually immaterial to inquire, except for pur- 
 poses of classification, whether such failure to record should be 
 treated as fraudulent or not. The better view is, that, in the ab- 
 sence of actual intent to defraud, the unrecorded instrument is 
 not invalid because fraudulent, but merely as the consequence 
 of the statutory declaration. 
 
 The last proposition becomes important in Virginia, however, 
 in consideration of the statute already noticed permitting a gen- 
 eral creditor, even before his debt has matured, to assail fraudu- 
 lent and voluntary conveyances by the debtor. Anterior to the 
 Code of 1919, it was settled by the decisions in Virginia that the 
 validity of an unregistered conveyance could not be assailed 
 merely on the ground of nan-registry, by any other creditor than 
 a lien creditor — as by judgment, attachment, etc.*<* 
 
 By the recent revision, the right to assail an unregistered con- 
 veyance is extended to the general creditor as well — but the 
 ground of invalidity of the unrecorded instrument remains as 
 before, namely, non-registry under the registry statutes,*^ and 
 not fraud under the statute of fraudulent conveyances.*^ 
 
 The same — non-registry as part of scheme to defraud. 
 
 " See chapter 210 of the Virginia Code, for details. The general 
 subject of registry will be treated in detail in connection with the 
 student's study of the law of 'Real Property. 
 
 *° Dulany v. Willis, 95 Va. 606, 64 Am. ,St. IRep. 815; 2 Minor, iReal 
 Prop. 1404. 
 
 " Va. Code 1919, § 5194. 
 
 '^ Va. Code 1919, §§ 5184-5186. It would seem, therefore, that while 
 a general creditor may assail a conveyance (recorded or not), by 
 his debtor, as fraudulent under §§ 5184-5186, even before his •debt is 
 due; but that if he proceeds under § 5194, because of non-iregistry, he 
 may do so only after the debt is 'due and payable. 
 
160 Notes on Equity Jurisprude;nce; 
 
 — It seems clear, however, that where registry of a conveyance 
 is intentionally omitted, as a part of a scheme to defraud cred- 
 itors of the grantor, by collusion between grantor and grantee — 
 thus giving an undeserved credit to the grantor by creating the 
 false impression of continued ownership in him — such non-reg- 
 istry would be held actually fraudulent; and thus the convey- 
 ance might be assailed in Virginia by the grantor's general cred- 
 itors, under Virginia Code, §§ 5184-5186, whether before or 
 after maturity of the debt.** 
 
 Fraud on creditors, continued — sale of merchandise in 
 bulk. — The sale by small merchants of their entire stock of 
 goods in bulk, and usually at a large discount, in order quickly 
 to convert their assets into cash for the purpose of concealing 
 them from their creditors, having become a qiuite common evil, 
 recent legislation has been enacted in many of the States to safe- 
 guard the rights of creditors from such frauds. 
 
 These statutes differ in details, but in substance their provi- 
 sions are largely similar. Under these provisions, such sales in 
 bulk are prohibited until and unless certain prescribed notice is 
 served on the creditors, certain inventories and appraisals 
 made, etc.** 
 
 Page 292, § 541. What creditors may assail fraudulent 
 and voluntary conveyances — resume. — To recapitulate what 
 has already been pointed out in the foregoing chapter, as to what 
 creditors may assail fraudulent and voluntary conveyances : 
 
 1. Conveyance actually fraudulent.^— Rtrt the assailing cred- 
 itor need not have been such at the time of the fraudulent trans- 
 fer — whether under 13 Elizabeth, and similar statutes, or under 
 the Virginia statute. So that both existing and subsequent cred- 
 itors have a locus standi in equity to have the transaction set 
 aside — but, in any case, not until the debt of the assailing credi- 
 
 " See 30 Cyc. i553-553. 
 
 " See iVa. Code |1919, § 5187; Trimble v. Covington Grocery Co., 
 112 Va. 829. Such statutes have been assailed as unwarranted en- 
 croachments upon the liberty of the citizen, but their constitutionality 
 has very generally been upheld. Lemieux -v. Young, 311 U. S. 
 489; monographic notes 3 L. R. 'A. '(N. S.) 388, and 20 'L. R. A. 
 (N'. S.) 160; Kidd Dater & Price Co. v. Mussellman G. Co., 317 U. 
 S. 461; 16 Va. Law Reg. 218. 
 
Fraudulent and Voluntary Conveyances — Resume 161 
 
 tor has been converted into an in rem claim, by judgment, attach- 
 ment or otherwise, unless, of course, as in Virginia, the statute 
 specifically gives this right to the general creditors. 
 
 2. Voluntary conveyances made in good faith — (») under 13 
 Elizabeth. — A "voluntary" conveyance in this connection, is not 
 necessarily one wholly without value, but one made for a mani- 
 festly inadequate consideration. In howsoever good faith such 
 a gift be made, it is invalid as to existing creditors of the gran- 
 tor, unless he retains enough to satisfy all existing indebtedness. 
 If he does so retain assets sufficient to discharge all existing lia- 
 bilities, with no reasonable improbability that they will be so ap- 
 plied, then no one is injured, and (under 13 Elizabeth and sim- 
 ilar statutes) the gift is valid. If he does not retain sufficient 
 estate for the purpose, then it is clear that existing creditors 
 are injured, and may complain accordingly — and equally clear 
 that subsequent creditors have no ground of complaint, since 
 when they extended the credit the gift had already been made. 
 Existing creditors, therefore, may alone complain of a voluntary 
 transfer of a debtor's property, made in good faith. If not 
 made in good faith, of course, the transaction is fraudulent, 
 and in category (1) above. 
 
 But here, again, in absence of special statute, the assailing 
 creditor must first cohvert his claim into an in rem claim, by 
 judgment or otherwise. 
 
 3. Under supplemental statutes of "voluntary" conveyances. — 
 In Virginia, and a few other states, as shown, the statute of 13 
 Elizabeth has been supplemented by what is known as the statute 
 of voluntary conveyances. These statutes refer only to voluntary 
 conveyances m,ade in good faith. Although in fact voluntary, 
 if infected with actual fraud, the transaction is governed by the 
 statute of fraudulent conveyances, mentioned in category (1) 
 above, and subject to be assailed by subsequent as well as exist- 
 ing creditors.*^ ' 
 
 These statutes, however, go a bow-shot beyond 13 EHzabeth, 
 by declaring, in substance, that all gifts and conveyances made 
 without consideration deemed valuable in law, (construed by the 
 courts to mean not merely 'valuable' but 'fairly adequate') shall 
 
 Consolidated, etc., Co. v. Germania Bank, 131 Va. 331. 
 
162 Notes on Equity Jurisprudence 
 
 be voidable as to all existing (but not subsquent) creditors of 
 the donor or grantor, regardless of the value of the estate re- 
 tained, or of any actual injury to existing creditors in conse- 
 quence of the gift.*^ 
 
 We now pass from the special topic of Fraud on Creditors, 
 and return to the general topic of Fraud as between the Parties. 
 
 CHAPTER XX. 
 
 Fraud on the Confidential Relation. 
 [Memorandum: Alter Text chapter-title to correspond.] 
 
 Pages 297-301, §§ 552-562. (These sections are largely repe- 
 tition of principles already treated in previous chapters — espe- 
 cially in connection with constructive trusts and fraud.) 
 
 Pages 297-298, §§ 552 et seq. Fiduciaries purchasing the 
 subject-matter of the trust. — The Text may be followed 
 here. The question in all such cases is not whether in that par- 
 ticular case the transaction resulted in detriment to the bene- 
 ficiary of the trust, or to the principal of the disloyal agent, or 
 to the ward of the guardian, or to the attorney's client, but 
 whether the countenancing of such dealings would not make it 
 possible for those occupying fiduciary positions, in future trans- 
 actions to betray their trusts. 
 
 Accordingly, the circumstance that at a fair sale of the trust 
 property, the fiduciary, acting in good faith and for what he 
 supposed the best interests of the beneficiaries, purchased the 
 same at the highest price obtainable, will not eliminate the vice 
 from the transaction, nor prevent the beneficiary from avoiding 
 the sale.^ 
 
 " Va. Code 1919, § 5185. The authorities have already been cited 
 supra. 
 
 ' Smith V. Miller, 98 Va. 535; Jacobson v. Smith, 41 Sup. Ct. 20O 
 (1921) — an especially interesting illustration of the rule. 
 
Fraud on Confidential Relation — Wills 163 
 
 Page 301, § 563. Dealings between attorney and client 
 — fees. — The question of transfers of property from client to 
 attorney is discussed in the Text. We mean here briefly to no- 
 tice the question of contracts for fees between the two. The 
 correct rule would seem to be this : Before the relation of at- 
 torney and client is formed, the parties deal with each other at 
 arm's length and as strangers; hence, they may make any con- 
 tract as to fees that they may agree upon, in the absence of im- 
 position or fraud. But as soon as the relation is formed, it at 
 once becomes confidential ; and a court of equity will exercise the 
 same supervision over contracts for fees made after the relation 
 is formed, that it exercises with respect to other transactions be- 
 tween counsel and client. Hence if such contract savors of un- 
 fairness, or of oppression, the court will set it aside, allowing the 
 attorney to recover or retain only what is reasonable under the 
 circumstances.- 
 
 Page 306, § 571 d. Relief against fraudulent judgment. — 
 
 To the authorities cited here, add: Adams v. Hubbard, 25 
 Gratt. 132; Wynne v. Newman, 75 Va. 84; Thomas v. Jones, 98 
 Va. 323. 
 
 Page 308. (Footnote) Fraudulent wills. — Attention is 
 called to the doctrine stated in the footnote, that a court of eq- 
 uity has no inherent jurisdiction to set aside wills on the ground 
 of fraud. 
 
 This arises from the circumstance that originally in England, 
 the ecclesiastical courts had jurisdiction of all matters of probate 
 and administration — a jurisdiction exercised generally in Amer- 
 ica by special courts of probate and administration, or by the 
 common law courts.^* 
 
 In Virginia, by statute, a will which has been admitted to pro- 
 bate, ex parte, may, within a limited time, be assailed by bill in 
 equity, whether on the ground of fraud, or other ground which 
 would invalidate it.^ 
 
 ' Thomas v. Turner, 87 Va. 1; Cullop v. Leonard, 97 Va. 256; 
 Bruce v. Bibb (Va.), 105 S. E. 570; Story's Eq., 310. The rule here 
 stated, however, seems by no means universal in America. Mr. 
 Pomeroy's summary of the situation indicates that such transactions 
 are rarely impeached in the absence of undue influence or fraud on 
 the part of the attorney. 2 Pomeroy's Eq. Jurisp. 960. 
 
 ^ Queensburg v. Vial, 123 Va. 319. 
 
 ' Va. Code 1919, § 5359. 
 
164 Notes on Equity Jurisprudence 
 
 Page 309, § 574 (2). Sealed instruments — fraud in the 
 inducement or consideration.— The rule here stated, that no 
 fraud in the inducement or failure of consideration, may be set 
 up at law by the defendant obligor in a sealed instrument, and 
 that the remedy of the defendant is in equity, has very generally 
 been altered by statute in the American states — statutes which 
 permit equitable defenses to be pleaded at law.* 
 
 CHAPTER XXI. 
 This chapter has been carried over to the end of the volume. 
 
 CHAPTER XXII. 
 Contribution and Exoneration — Subrogation. 
 
 Page 321. Meaning of terms — contribution and exoner- 
 ation. — The equities of "contribution" and "exoneration" are 
 practically the same, save that the one applies as among co-sure- 
 ties, and the other between the surety and his principal. When 
 one surety pays more than his share of the debt, he calls upon 
 his co-surety for contribution — that is, he demands that the co- 
 surety shall help to bear the common burden; in short, "contrib- 
 ute" his proper share of the common debt. On the other hand, 
 where the surety who has paid the debt, in whole or in part, calls 
 upon his principal for relief, he does not ask his principal to 
 "contribute" to his relief, but to bear the whole burden, and to 
 "exonerate" the surety from it. 
 
 ' Page, 324, § 607. Subrogation. — Whenever one person is 
 compelled to pay a debt or discharge an obligation for which he 
 is only secondarily liable, in person or in property, and hence ha.» 
 recourse over against the person or the property primarily liable, 
 for exoneration or contribution, a court of equity will subrogate 
 the person thus secondarily liable to the position of the creditor 
 
 ' See Va. Code 1919, § 6145. 
 
Subrogation 165 
 
 whom he has satisfied, as to every lien, preference or other spe- 
 cial advantage possessed by the latter at the time of such pay- 
 ment. 
 
 The student will observe, therefore, that subrogation is not 
 so much an equity in itself, as it is a remedy for working out the 
 benefit of the antecedent equity of exoneration or contribution. 
 
 For example, as we have just seen, where a surety pays his 
 principal's debt, he has the right to call upon the lattef for exon- 
 eration. Here the real equity that the surety has is to be exon- 
 erated. Now if the creditor have in his possession any securities 
 of the principal, or any lien on, the principal's property, or oc- 
 cupy any special position of vantage, the surety who has satisfied 
 the creditor is entitled, in order to secure the exoneration which 
 the principal owes him, to be subrogated to such securities or 
 other lien or advantage possessed by the creditor. Or, as we 
 may otherwise express it, it is through the medium of subroga- 
 tion that the rights of contribution and exoneration are secured 
 and enforced — just as a debt is the substantial equity of a cred- 
 itor, and the mortgage securing it the mere means of realizing 
 the debt.i 
 
 The same — does not rest in contract — a beneficence of 
 equity. — The doctrine of subrogation is one of the most benefi- 
 cent in the entire range of equity jurisprudence. It is not a 
 technical principle, nor does it rest in contract, express or im- 
 plied. It is one of the benevolences of equity, created and en- 
 forced in the interest of justice. In no State has the principle 
 been fostered with more zeal or enforced with more wisdom and 
 liberality than in Virginia. The fine saying of Judge Carr, in 
 Enders v. Brune,i^ has been accepted by the Virginia courts, and 
 by the American courts generally, as expressing the spirit which 
 should guide them in enforcing this right, namely : "It has noth- 
 ing, of form, nothing of technicality, about it ; and he who in ad- 
 ministering it would stick in the letter, forgets the end of its 
 creation and perverts the spirit that gave it birth. It is the crea- 
 ture of equity, and real essential justice is its object." 
 
 ' Powell V. White, II Leigh 309; Pace v. Pace, 95 Va. 793; note 6 
 Va. Law Reg. 353. 
 ■« 4 Rand 447. 
 
166 Notes on Equity Jurisprudijnce 
 
 Mr. Sheldon i" in his classic treatise thus explains the doc- 
 trine : "It is a legal fiction by force of which an obligation ex- 
 tinguished by a payment made by a third person, is treated as 
 still subsisting for the benefit of this third person, who is thus 
 substituted to the rights, remedies and securities of another. The 
 party who is subrogated is regarded as entitled to the same 
 rights, and, indeed, as constituting one and the same person, 
 with the creditor whom he succeeds." ^^ 
 
 The same — in cases of mistake or fraud. — Not only is 
 the equity of subrogation recognized and enforced in the case of 
 sureties, but in many other cases where to refuse it would result 
 in the unjust enrichment of one person at the expense of another. 
 
 Thus, where one pays off an incumbrance by mistake, or in- 
 duced by fraud, or where the money of a purchaser at a void 
 judicial sale is used to pay off liens on the property sold, a court 
 of equity will subrogate the person paying the money to the 
 rights of the creditor or creditors whose claims he has satisfied. ^ 
 
 I. Subrogation of Surety. 
 
 Discharge of lien at law — ^kept alive in equity. — The 
 
 principles to follow will be more readily understood by the stu- 
 dent when he understands that, at law, payment of a debt, secured 
 or unsecured, by any party to the obligation, principal or surety, 
 completely discharges the debt, and all liens securing it. The only 
 leg upon which the paying surety stands is his right of action 
 (usually assumpsit) against the principal or co-surety, on an 
 implied contract by the principal to exonerate him, or by the co- 
 surety to contribute to his relief. Even where the debt is a bond 
 debt, the paying surety's claim against the principal — being an 
 
 ''■ Sheldon on Subrogation 3. 
 
 '<= The Virginia and West Virginia authorities are collected in 
 Janney v. Stephens, 3 P. & H. 11 (Va. Rep. Ann.). See editorial note 
 to Sands v. Durham, 6 Va. Law Reg. 253. 
 
 = Coudert v. Coudert, 43 N. J. Eq. 407; Butler to. Rice, 103 L. T. 
 R. 94; iBolman v. Lohman, 74 Ala. 507; Zinkeison v. Lewis (Kan.), 
 66 Pac. 644. So where the insurer, under a fire policy issued to a 
 mortgagee, makes good the loss to the mortgagee, the former is 
 subrogated to the mortgagee's rights under the mortgage. 
 
Subrogation 167 
 
 implied contract only — is not as on a sealed instrument but on 
 an implied assumpsit.^ 
 
 We have just seen, however, that where a case for subroga- 
 tion is presented, equity keeps both the original obligation and 
 any lien ("collateral") securing it, alive for the benefit of the 
 surety. 
 
 Page 325. § 609. Subrogation where there is no lien or 
 other advantage. — Where the original claim paid by the surety 
 is not a lien on any property of the principal, and the creditor 
 occupies with respect to the claim no special coign of advantage, 
 equity will not subrogate — or, otherwise expressed, equity will 
 not place the surety in the shoes of the creditor, when the sure- 
 ty's position in his own shoes is as advantageous as if he were 
 in the creditor's shoes. 
 
 Thus, where a surety pays an ordinary, unsecured claim, like 
 a bill or note, there is no special advantage to him in being sub- 
 rogated to the creditor's place, and his remedy is ordinarily at 
 law in assumpsit against his principal or his co-surety, on the 
 implied contract to exonerate or contribute. 
 
 But if there be collateral security, or other lien, or other ad- 
 vantage to be gained by the subrogation — in short, if the creditor 
 occupies a special vantage ground— ^then there may be subroga- 
 tion. 
 
 Thus, if the debt paid by the surety be a judgment or execu- 
 tion debt — or one secured by mortgage, pledge or other lien — or 
 if it be payable in gold with paper money at a discount — or if it 
 be a preferential debt (as, for instance, due the United States, 
 in administration proceedings) — then equity places the surety 
 who has satisfied the creditor in the latter's shoes, with all the 
 advantages that the creditor would have possessed, had the credi- 
 tor himself, instead of the surety, been prosecuting the claim 
 against the principal. 
 
 " Thus in Grizzle v. Fletcher (Va.), 105 S. E. 457, it was held that 
 execution on a judgment at law against principal and surety, could 
 not be kent alive at law for the benefit of the surety who discharged 
 the execution and took an assignment thereof from the creditor. 
 
 * See Henningsen v. U. S. Fidelity and iG. Co., 308 U. S. 403; Pace 
 V. Pace, 95 Va. 793; Sands v. Durham, 99 Va. 363, 86 Am. St. Rep. 884; 
 Acer V. Hotchkiss, 97 N. Y. 395. 
 
168 Notes On Equity Jurisprudence 
 
 Page 325, § 609. Is surety subrogated to collateral se- 
 curity only? — The rule in England, until altered by statute, as 
 noted in the Text, was that where there was no collateral se- 
 curity for the primary obligation, there was no subrogation for 
 the surety — the latter being subrogated to secondary or collateral 
 security only. 
 
 Thus, where a bond was secured by a mortage, payment by 
 the surety extinguished the bond (the primary obligation), but 
 the surety was subrogated to the lien of the collateral, namely 
 the mortgage; but where the bond was, for example, a preferen- 
 tial claim, or had been merged into a judgment — in both of 
 which cases there is no collateral security — payment by the surety 
 extinguished the entire claim, and no subrogation was permitted. 
 
 Comparatively few of the American courts have followed the 
 narrow English rule, and consequently in most of the States sub- 
 rogation in nowise depends on the existence of collateral secu- 
 rity — but, as shown (supra), is enforced for the surety's benefit 
 wherever the creditor's position is a more advantageous one 
 than that of the surety.^ 
 
 Page 323, § 605. Subrogation as between partners and 
 other co-contractors. — Since each partner or other co-con- 
 tractor is principal for his own part of the debt, and surety for 
 his fellow, should he pay more than his portion his right of con- 
 tribution is clear; and his right to subrogation, to enforce this 
 contribution, is equally clear.^ 
 
 Page 325, § 608. Suretyship — (1) in persona. — The dis- 
 cussion of the surety's rights in this chapter will be more readily 
 understood, if the student comprehends the different ways in 
 which one may become a surety. The simplest way is where one 
 personally engages as surety for another to pay a debt, or per- 
 form some other obligation. Here, of course, the surety is bound 
 personally. This we may term suretyship in persona. 
 
 ° 3 Pomeroy's Eq. 1419, n.; Powell v. White, 11 Leigh 309; Sands 
 V. Durham, 99 Va. 363. 
 
 ° Some doubt has been cast upon this proposition by an erroneous 
 statement to the contrary in Bispham's Equity, S37, followed by the 
 Virginia court in Sands v. Durham, 96 Va. 393, reported in 6 Va. 
 Law Reg. 348, with an extensive annotation criticising the decision. 
 On rehearing, the error was corrected and the true doctrine announced. 
 See the opinion in the re-hearing in 99 Va. 363. 
 
Subrogation — Surety in re 169 
 
 Another suretyship in persona arises, where two persons are 
 originally bound as principal for a common debt, and one of 
 them agrees with the other, for valuable consideration, to assume 
 the debt and relieve the latter from the obligation. Here, al- 
 though originally the parties were both principals, the retiring 
 party becomes a surety for the other, who thus becomes, as be- 
 tween the two, sole principal — and the creditor, though not 
 bound by this arrangement unless a party to it, must, if he knows 
 of this change in their relations, respect the surety's riglits. 
 
 The same situation is presented where one person alone is 
 bound for a debt or other obligation, and later, for a valuable 
 consideration, another person assumes payment — agreeing, ex- 
 pressly or impliedly to indemnify the former against the obliga- 
 tion. Thus where A sells out his business to B, and the latter 
 assumes all of A's indebtedness in connection with the business. 
 Here A (originally principal) becomes surety and B principal. 
 Of course, if the creditor consents to accept B as his debtor in 
 A's stead, there is a novation and A is dischai^ed. 
 
 The same — (2) in re. — Another sort of suretyship arises 
 where the surety is not bound in person, but only in his prop- 
 erty. For instance, where one or two cotenants unites with the 
 other in a mortgage on the joint estate, to secure a personal ob- 
 ligation of his fellow — himself assuming no personal liability; 
 or where one purchases an estate subject to a mortgage, or other 
 incumbrance, against which his vendor, covenants, or is other- 
 wise bound, to indemnify him — or where he simply purchases 
 the equity of redemption in a mortgaged estate. In the first of 
 these cases the debtor co-tenant, and in the second the vendor, 
 is the principal obligor, and personally bound, while there is no 
 personal liability on the co-tenant — who merely lent his property 
 as security for his fellow — nor, in the second case, on the pur- 
 chaser, who did not personally assume the incumbrance; but, as 
 to both, the debts are charges on their property only. Their 
 position is not that of true suretyship, but of suretyship sub 
 modo, yet with many of the rights of suretyship. This we may 
 term suretyship in re. 
 
 Suretyship in re, continued. — If, for example, in the case 
 of the co-tenant, before stated, the surety in. re should discharge 
 
170 Notes on Equity Jurisprudence; 
 
 the lien in order to prevent foreclosure, he would be entitled 
 to be subrogated to the mortgagee's rights under the mortgage. 
 So where a purchaser under a second mortgage paid off the 
 first mortgage (for which he was not personally bound) it was 
 held that he was entitled (as against the mortgagor's widow, who 
 had united in the first, but not in the second mortgage) to be 
 subrogated to the rights of the creditor under the first mortgage, 
 and to that extent to defeat the widow's claim to dower.'' 
 
 Subrogation, continued — purchaser of equity of re- 
 demption — (1) assuming payment of mortgage. — Where 
 one purchases an estate under mortgage, and (expressly or im- 
 pliedly) assumes payment of the mortgage, he becomes, as be- 
 tween himself and the mortgagor, the principal debtor, while the 
 mortgagor (originally principal debtor) becomes surety, with 
 all of a surety's rights. 
 
 For example, extension of time, for valuable consideration, 
 by the mortgagee to the purchaser, or other change in the terms 
 of the contract, with knowledge of the sittiation, and without 
 consent of the mortgagor will release the latter from further lia- 
 bility. Or should the mortgagor be sued on his personal cov- 
 enant and be compelled to pay the debt, he is entitled to subro- 
 gation to the lien of the mortgage.* 
 
 The same — ( 2 ) not assuming payment of the mortgage. 
 
 — Where the purchaser of the equity of redemption does not 
 personally assume payment of the incumbrance (expressly or 
 impliedly)* but simply purchases the equity, for example, un- 
 der a second mortgage, or from the owner of -the equity, with 
 no warranty by the vendor against the incumbrance, and hence 
 
 ' Land V. Shipp, 100 Va. 337; 8 Va. Law Reg. 170, and note. 
 
 ' Halsey v. Reed, 9 Paige (N. Y.) 446; Calvo v. Davies, 73 N. Y. 
 211; George v. Andrews, 60 Md. 26, 45 Am. Rep. 706; Pratt v. Conway, 
 148 Mo. 291, 71 Am. St. Rep. 602; Miller v. Kennedy (S. Dak.), 81 
 N. W. 906; Union Stove, etc., Works v. Caswell (Kans.), 16 L. R. A. 
 85; Planning v. Murphy (Wis.), 4 L. R. A. (N. S.) 666, and monographic 
 note, where a few cases contra are cited; note 5 L. R. A. (N. S.) 276; 
 note 22 L. R. A. (N. S.) 492; 8 Va. Law Reg. 844. 
 
 As to the liability of the purchaser in such case, directly to the 
 creditoir (and hence subrogation of the creditor to his debtor's rights), 
 see note 75 Am. St. Rep. 178; Thacker v. Hubard, 122 Va. 379. 
 
 " See 3 Pomeroy's Eq. 1225; Litchfield v. Preston, 98 Va. 230, 37 
 S. E. 6. 
 
Subrogation — Pace v. Pace 171 
 
 subject to the prior mortgage (the amount of which is consid- 
 ered in the fixing of the purchase price) — the situation becomes 
 slightly more complicated. 
 
 Here it is clear, not only in favor of the mortgagee, but of the 
 mortgagor as well, that the entire mortgaged estate stands as 
 security for the debt, and that the vendor-mortgagor may look 
 to this security as indemnity against any personal liability on his 
 covenant to pay. The purchaser of the equity is not personally 
 liable, but his property is bound. The property, however, is not 
 surety but principal.^^ 
 
 The situation now resolves itself into this : The original mort- 
 gagor has become surety for the debt, arid the property has be- 
 come the principal. This surety-mortgagor, in case he is com- 
 pelled to pay, has no personal recourse on his vendee (since, ex 
 hypothese, the latter has not personally assumed payment) but 
 he is entitled to subrogation, against the mortgaged estate. This 
 right of subrogation, the creditor (with knowledge of the situ- 
 ation) must not impair by any dealings with the security with- 
 out the surety's consent, under the penalty of discharging the 
 surety (mortgagor) to the extent of the value of the security.^^ 
 
 And, e converse, should the vendee pay off the mortgage, he 
 would be subrogated to the mortgagee's rights, if necessary to 
 protect him against intervening incumbrances — -since he is a 
 surety in re. 
 
 The same — Pace v. Pace. — The principle of subrogation is 
 strikingly illustrated by the case of Pace v. Pace.^^ The numer- 
 ous references to the same case in the same volume of the Vir- 
 ginia Law Register indicate the stir that the decision made 
 among the lawyers of the State. The facts of this case were 
 briefly these : 
 . A and B were sureties for P on a note for $16,000. P. became 
 utterly insolvent, and the entire burden of the note rested upon 
 the sureties. Of course, as between themselves each owed 
 $8,000, but as to the creditor, each was bound to him for the 
 
 " 5 L. R. A. (N. S.) 276, n. 
 
 " Murray v. Marshall, 94 N. Y. 611; Bunnell v. Carter (Utah), 46 
 Pac. 755. Compare Land ^. Shipp, 100 Va. 337, 8 Va. Law Reg. 170 
 and note; Lynchburg, etc., Co. v. Fellers, 96 Va. 337. 
 
 ^ 95 Va. 792, 4 Va. Law Reg, 171; Id., 257, 398, 502, 489, 855. 
 
172 Notes on Equity Jurisprudence 
 
 whole $16,000. B then died insolvent, but able to pay his cred- 
 itors, say, fifty cents on the dollar. A, being a man of means, 
 and knowing that he was bound to the creditor for the whole 
 amount, paid it in full, and hence had a claim against B's estate 
 for the latter's one half, $8,000. 
 
 A now observed that if he went, in his own right, into the pro- 
 ceedings in which B's estate was being administered, he would 
 prove against the decedent's estate a claim of $8,000, and would 
 receive a SO per cent, dividend, or $4,000 — the result of which 
 would have been that A would have paid $12,000 of the debt, 
 and B's estate $4,000. If, however. A, instead of paying the 
 debt, had refused to pay, thus leaving the creditor himself to 
 come into the administration proceedings, the creditor would 
 have proved against B's estate a debt, not of $8,000, but of 
 $16,000 — a fifty per cent, dividend upon which would have been 
 $8,000-^thus making B's estate pay one-half of the debt, and 
 leaving A bound for the other one-half. 
 
 Now, if A could come into the administration proceedings, 
 not in his own right, or in his own shoes, but in the right and in 
 the shoes of the creditor^ — in Other words, if he could be subro- 
 gated to this special advantage which his creditor possessed — he 
 would compel the decedent's estate to pay its full half of the 
 debt. He therefore filed his bill asking to be thus subrogated, 
 and the court held, in a convincing opinion, that he was entitled 
 to the right of subrogation. 
 
 Pace V. Pace, continued. — The references above contain 
 communications from sundry lawyers discussing the decision 
 pro and con. The decision seems eminently sound. Any other 
 ruling would have penalized A for coming bravely up as an hon- 
 est man and paying the whole debt for which he was bound, in- 
 stead of delaying the creditor by breaking his promise to pay, 
 and manceuvering for position, so as to force the creditor into 
 the administration proceedings. 
 
 The decision becomes the plainer if we suppose this entire 
 debt to have been a preferential one, due, for example, to the 
 United States government. Clearly it would have been imma- 
 terial in the result, whether the government came into the ad- 
 ministration proceedings as creditor, or whether A, the surety 
 
Subrogation — Paetiai,i.y Secured Creditor 173 
 
 who had satisfied the government, had come into the proceed- 
 ings. In the latter case, the surety would have been subrogated 
 to the rights of the government, the debt would have been held 
 to be a preferential one, and the surety would have received 
 payment in full, before any inferior creditor would have received 
 any dividend whatsoever. 
 
 Partially secured creditor — for how much may he prove 
 in administration proceedings? — A question quite similar to 
 that involved in Pace v. Pace^^ arises where a creditor, already 
 partially secured (e. g. by pledge, mortgage or other lien), comes 
 into proceedings under which the estate of his insolvent debtor 
 is to be distributed among creditors — for instance administra- 
 tion proceedings, or under a general deed of assignment for 
 the equal benefit of all creditors. 
 
 The question is, must he first exhaust the collateral or other 
 security, or, what is tantamount thereto, credit the value thereof 
 on his debt, and prove for, and receive dividends only on, the 
 residue — or may he prove for the whole of his debt, and receive 
 dividends on the full amount, but not to exceed the amount due 
 him? 
 
 The better authorities adopt the latter view, and permit the 
 partially secured creditor to prove for the full amount of his 
 debt, regardless of the value of his security — but always with 
 the qualification that he shall in no case actually receive more 
 than the amount of his debt. 
 
 The same. — This principle is well illustrated by the case of 
 Merrill v. National Bank.^* In that case, the plaintiff, creditor 
 of an insolvent national bank, held certain collaterals belonging 
 to the latter, partially securing the debt. In the process of liqui- 
 dating the affairs of the debtor bank, plaintiff offered to prove,, 
 and claimed dividends on, the full amount of his debt, without 
 exhausting or crediting the value of the collaterals. The receiver 
 denied this right and required the plaintiff first to exhaust the 
 collaterals and credit the proceeds on the debt; and allowed div- 
 idends only on the residue. 
 
 This ruling was reversed by the United States Circuit Court, — 
 
 ^' Supra. 
 
 " 173 U. S. 131. 
 
174 Notes on Equity Jurisprudence 
 
 a reversal which was sustained on appeal, both by the Circuit 
 Court of Appeals and the Supreme Court of the United States. ^^ 
 
 Subrogation, continued — bond debts — statute of limi- 
 tations. — When the surety pays a debt of his principal, which 
 is represented by an instrument under seal, question arises 
 whether his claim against the principal is in simple contract, or 
 whether he is a bond creditor. The courts are divided on the 
 subject. Logically, and in accordance with principles heretofore 
 stated, he ought to be held to be a bond creditor, since there is 
 some advantage in occupying that position — especially in con- 
 nection with the statute of limitations, and the presumption of 
 consideration. 
 
 The Virginia court has held, however, that if there be no lien, 
 to which the surety may be subrogated, payment by the surety 
 of a bond debt, in the lifetime of the principal, makes the surety 
 a simple contract creditor — and not only is he not a bond cred- 
 itor but his claim is regarded as being one nat in writing under 
 the statute of limitations, and hence barred in three years, the 
 period applicable (in Virginia) to oral contracts.^® 
 
 Bond debts, continued. — If, however, the payment be made 
 after the principal's death, then, since there is a lien (all of a de- 
 cedent's debts becoming liens on his estate immediately upon his 
 death) the surety is subrogated to the creditor's shoes and is 
 treated as a bond creditor. 
 
 In Comer v. Comer ^'' the surety on a guardian's bond paid 
 a liability for his principal in the latter's lifetime. After the 
 principal's death, the surety claimed that since the debt of the 
 guardian to the ward was a fiduciary one, and hence, by the stat- 
 ute, a preferential one in the administration of the decedent's es- 
 tate, he was entitled to be subrogated to the ward's rights, and 
 
 ^' See 3 Va. Law Reg. 130; People v. Remington, 121 N'. Y. 328; 
 Green v. Jackson (R. I.), 30 Atl. 963; Citizens Bank v. Hendrick 
 (Tenn.), 36 Am. St. Rep. 96, and note; n. 23 Am. St. Rep. 435. 
 As shown in the authorities cited, there is quite a respectable dis- 
 sent from the doctrine stated, but it seems the sounder view. The 
 rule seems to be otherwise in proceedings in bankruptcy. 
 
 " Comer v. Comer, 29 Gratt. 280; Tate v. Winfrey, 99 Va. 255; 
 6 Va. Law Reg. 337, and note. See Faires v. Cockrill (Tex.), 28 
 L. R. A. 528 — an exceptionally fine opinion. 
 
 " Supra. 
 
Subrogation — Creditor First 175 
 
 therefore was a preferred creditor. But this claim was rejected 
 by the court. ^ 
 
 The ruling was doubtless right. The debt was not a preferred 
 debt at the time it was paid, since the principal was then alive. 
 
 From this, the sound principle would seem to follow that if 
 there be no right of subrogation at the time the surety, pays, the 
 right will not arise by reason of some subsequently occurring 
 event which would render subrogation of advantage to the 
 surety, In short, the question of the surety's right to subrogation 
 is to be determined by the sitiiation, as it existed ai the time of 
 paym,ent. 
 
 Safest course for surety who pays]. — The effect of sub- 
 rogation, as we have heretofore discussed it, is practically to 
 make the surety an assignee of the debt which he has satisfied to 
 the creditor. If the surety have proper legal advice, instead of 
 merely taking a receipt for the payment from the creditor, he 
 would take an assignm^ent of the debt (without recourse). 
 
 Such assignmnent will doubtless avail him little in a court of 
 law, since at law one may not purchase his own debt; and pay- 
 ment, even by the surety, discharges the obligation at law, in 
 spite of the attempted assignment.^^ A written assignment, 
 however, while probably of no special potency as an equity, 
 gives the. assignee-surety quite satisfactory evidence in support 
 of his application for subrogation in equity. 
 
 Subrog'ation never enforced to creditor's injury. — The 
 
 right of subrogation, being a creature of equity, is never enforced 
 to the injury of prior or superior equities. Hence, it is a funda- 
 mental rule that it will not be. enforced against the creditor him- 
 self until he has received the whole of his debt — that is, the debt 
 for which the lien or collateral was bound at the time the surety 
 became such, but no other. In other words, the surety will not 
 be put into the creditor's shoes until the creditor has voluntarily 
 stepped out of them. 
 
 This means that whatever be the value of the security held 
 
 " See Grizzle v. Fletcher (Va.), 105 S. E. 457— holding that the 
 assignment to the surety of a judgment against principal and surety, 
 did not authorize an execution thereon to be levied thereafterwards 
 on the principal's property for the surety's benefit. 
 
176 Notes on Equity Jurisprudence; 
 
 by the creditor, over and above the amount of the debt, no par- 
 tial payment of the debt by the surety, will entitle him to de- 
 mand the surrender of any part of the security. 
 
 It does not mean, however, that where the creditor has other 
 claims against the principal — not meant to be secured by the par- 
 ticular lien, or collateral, securing the surety-obligation at the 
 time such lien was created, or such collateral was deposited — 
 such other claims must be satisfied in preference to the surety's 
 claim to subrogation. 
 
 The same — illustration. — The principle that subrogation is 
 never enforced to the injury of the creditor is well illustrated by 
 the case of Grubb v. Wysor.^' In this case, the creditor held 
 three bonds of A, secured by mortgage on real property. On 
 one of the bonds (that first maturir\g), B had become A's surety. 
 A having failed to pay this first bond at maturity, B (the surety) 
 paid it. Default having been made in payment of the other two, 
 the mortgage was foreclosed, with the result that the proceeds 
 were less than sufficient to pay the three bonds. B came into the 
 foreclosure suit demanding subrogation, and the repayment to 
 him of the amount of the first bond out of the proceeds of sale 
 — thus leaving the creditor unsatisfied. The court rightly de- 
 nied B's demand, on the ground that he could not be subrogated 
 to the creditor's place until the creditor's place had - been va- 
 cated by the satisfaction of his entire debt. 
 
 The same, continued. — The soundness of this ruling be- 
 comes the more apparent when we remember that, at the outset, 
 the creditor had two securities for his money, namely, (1) B's 
 personal obligation m the first bond, as surety; and (2) the 
 mortgage covering all three bonds. If we admit the principle 
 that as soon as he paid the debt for which he was surety, B 
 might be subrogated to the creditor's rights, then B's suretyship, 
 instead of being an advantageous security to the creditor, is 
 worth nothing, since the surety pays with one hand and demands 
 back what he has paid with the other — thus depriving the cred- 
 itor of any benefit from the suretyship. ^i 
 
 "° 32 Gratt. 127. 
 
 "" See Exchange Bank v. Bayless, 91 Va. 134, 21 S. E. 279. 
 
Subrogation — Bail Bonds 177 
 
 Page 328, § 613. Bail bonds — exoneration. — The attention 
 of the student is called to the principle, correctly stated in the 
 Text, that one who gives bail for another in a criminal case, has 
 no claim for exoneration against his principal, in case he has 
 the amount of the bond to pay. 
 
 The reason of this (not stated in the Text) is that the pur- 
 pose of bail is to secure the prisoner's appearance at the trial, 
 and not to give the accused the option of either appearing or 
 paying the amount of the bond; and the object in requiring a 
 surety on the bond is that the surety may see to it that such ap- 
 pea/rance on the part of his principal is made. If the surety 
 knows that even if the bond be forfeited, and he have the 
 amount thereof to pay, he may recover the same from his princi- 
 pal, he has not the same incentive to alertness in seeing that his 
 principal appears, as he would have when he knows that he will 
 have no recourse should the bond be forfeited. 
 
 This doctrine is carried even further, and it is held that where 
 the surety takes a pledge or morgage from his principal to in- 
 demnify him against loss by reason of going bail, such security 
 is contrary to the policy of the law, and cannot be enforced. ^^ 
 
 The same — indemnity by third person. — Where the bail 
 takes indemnity from a third person, not the accused, the au- 
 thorities seem to uphold the transaction, on the ground that in 
 such case the third person stands in the shoes of the original 
 bail, with the same incentive to compel the appearance of the 
 accused as an unindemnified bail would have.^^ 
 
 Page 328, § 615. Creditor must respect surety's right of 
 subrogation. — The special duties which the creditor owes to 
 one known to be a surety, are two, namely : ( 1 ) Not to extend 
 the time of payment, by binding contract with the principal, Tvith- 
 
 "^ See 5 Va. Law Reg. 863; U. S. v. Green, 163 Fed. 442; Leary v. 
 U. S., 184 Fed. 433, 107 C. C. A. 37; Leary v. U. S., 334 U. S. 567— 
 where the U. S. Supreme Court (two judges dissenting) in a rather 
 inconclusive opinion seems to hold contra. See Carr v. Davis, infra; 
 n. 20 L. R. A. (N. S.) 58; 7 Mich. Law Rev. 274; 33 Harv. Law Rev. 
 530. 
 
 Such indemnity by express contract, is permitted in New York 
 by statute. Leary v. U. S., 234 U. S. 567. 
 
 '^ See Carr v. Davis (W. Va.), 63 S. E. 336; Maloney v. Nelson, 
 144 N. Y. 182, 39 N. E. 83; 16 Am. & Eng. Enc. L. 173. 
 
178 Notes on Equity Jurisprudence 
 
 out the surety's consent; and (2) Not to release any of the se- 
 curities of the principal, held by the creditor, nor negligently to 
 allow them to be rendered less valuable to the surety, in case he 
 becomes erititled to subrogation^. 
 
 If the creditor violate duty number (1), the surety is irrnne- 
 diately discharged, whether he be actually injured or not. If he 
 violate duty number (2), the surety is discharged only to the ex- 
 tent of the loss suffered by reason of the creditor's wrong-doing. 
 These are elementary principles, and the books abound in au- 
 thority 
 
 The same — application to different kinds of suretyship. 
 
 — The doctrine last stated applies not only to the plain case where 
 the surety became such in the original transaction, but to all 
 cases of suretyship heretofore noticed, whether the suretyship be 
 in persona or in re. 
 
 Thus, where A and B are partners, and A sells out to B, who 
 assumes to pay all the debts of the firm, such contract renders A 
 the surety and B the principal, although originally both were 
 principals. Now if the creditors of the concern know of this 
 arrangement, the duties heretofore mentioned, i. e., not to ex- 
 tend the time, nor to give up or impair securities, at once arises, 
 under the penalties already mentioned. 
 
 So, again, if A, owning Blackacre, executes to C a mortgage 
 thereon to secure a debt, and subsequently sells the farm to B, 
 who assumes payment of the mortgage to C — here, although A 
 was the original principal, he is now a mere surety, and B has 
 become the primary debtor. Hence C, on learning of this new 
 relation of the parties, must respect it, under the penalty of re- 
 leasing A, in whole or in part, according to the principles before 
 stated 
 
 Estate subject to paramount lien, sold in parcels to va- 
 rious purchasers^how subjected to paramount lien. — A 
 
 still more complicated situation is often manifested: Thus, Q, 
 owning Blackacre, subject to a mortgage which is duly recorded 
 —or there is recorded against him a judgment, creating a lien 
 on the entire estate — sells the estate off in parcels, with warranty 
 of title, to various purchasers (A, B, C, D and E), each of whom 
 
Subrogation — Inverse Order of Alienation 179 
 
 buys with actual or constructive notice of the incumbrance— Q 
 himself retaining parcel number six. Whether the purchasers 
 had actual notice of the paramount lien or not, is immaterial, ex- 
 cept that we may assume that if they had had actual notice, they 
 would not have purchased. Q is insolvent and personally unable 
 to discharge the debt. The creditor, of course, is unaflfected' by 
 any of these transactions, since his lien was on record. Not 
 having assumed payment, none of the purchasers is personally 
 liable to the creditor — but the parcel bought by each is charged 
 with the lien, thus presenting a case of suretyship in re. 
 
 The same — (1) no excess of value over the mortgage. 
 
 — If the value of the mortgagee! estate here does not exceed the 
 amount due under the mortgage, of course the whole estate will 
 be subjected; and all the purchasers of the several parcels will 
 share the same fate in: losing the benefit of their several pur- 
 chases. 
 
 The same — (2) value of estate in excess of mortgage. 
 
 — Where the value of the mortgaged estate is appreciably in ex- 
 cess of the mortgage debt, and there is, therefore, a valuable 
 equity of redemption, a clash of interests arises at once among 
 the several purchasers, with respect to priority in the surplus, 
 or as to the order in which their several parcels shall be sub- 
 jected to the payment of the paramount mortgage. 
 
 There are two aspects of the situation in which the question 
 of priorities may be presented: (a) where the several pu'rchases 
 were made contemporaneously — as at a public sale; and (b) 
 where the purchases were not contemporaneous. 
 
 The same — (a) contemporaneous purchases.^Where 
 
 the several purchases were contemporaneous, it is clear that no 
 one purchaser has priority over any other; here equality is eq- 
 uity, and all must share the burden equally — each contributing 
 his pro rata share, according to the values of the respective par- 
 cels. ^^ 
 
 The same — (b) purchases not contemporaneous — in- 
 verse order of alienation. — Where the purchases of the vari- 
 
 Alley V. Rogers, 19 Gratt. 366, 388-389. 
 
180 Notes on Equity Jurisprudence 
 
 ous parcels have been made at different times, the rule long es- 
 tablished by equity in such cases is, to subject the parcels in the 
 inverse order or alienation — that is, the parcel last aliened is first 
 subjected, and so on back, in reverse order, until the dominant 
 lien is satisfied. 
 
 This is perfectly just, since, in the case illustrated above, 
 when A purchased the first parcel, clearly the remaining unsold 
 portion of the estate retained by the debtor Q, ought first to go 
 to satisfy the encumbrance covering the whole; then when the 
 second parcel is sold to B, it is equally clear that the four par- 
 cels still held by Q should be first subjected to the lien; so with 
 C, who takes subject to the equities of A and B, but with an 
 equity superior to Q in the remaining three lots ; and so with the 
 later purchasers D and E, respectively. Hence we have here 
 several instances of suretyship in re, with the several sureties oc- 
 cupying different degrees of safety. The result is that Q's lot 
 goes first toward satisfying the lien, and the rest in the inverse 
 order of alienation.^* 
 
 The same — ^non-contemporaneous purchases, contin- 
 ued. — Looking at the situation from another view point will 
 make clearer the principle of subrogation here involved. When 
 A purchased his parcel, the remaining unsold parcels belonging 
 to the principal debtor Q constituted a security belonging to the 
 principal debtor, held by the creditor. Now if A's parcel is first 
 taken (the other five unsold), and the creditor then subjects 
 enough of the remaining parcels still belonging to the principal 
 debtor to discharge his debt, A would at once be entitled to sub- 
 rogation to such parcels still retained by the principal. While A 
 is not a surety in persona, he is such in re, because his parcel is 
 bound for the debt. But a court of equity, instead of permitting 
 the creditor thus to subject A's lot, and forcing A over against 
 the remaining parcels, will, as the old chancellors expressed it, 
 "put the saddle on the right horse" at the beginning, by com- 
 
 " Conrad v. Harrison, 3 Leigh 532; Harman v. Oberdorfer, 33 
 Gratt. 497; Whitten v. Saunders, 75 Va. 563; 3 Va. Law Reg. 826; 
 note 5 L. R. A. (N. S.) 276; 3 Pomeroy's Eq. Jurisp. 1306, 1225. 
 This has been made the statutory rule in Virginia, in cases where 
 the dominant lien is a judgment. Va. Code 1919, § 6476. See the 
 statute for details. 
 
Subrogation — Inverse Order of Alienation 181 
 
 pelling the creditor first to subject the principal debtor's re- 
 tained parcels. And so down the Hne, with respect to the lat- 
 rer purchases of B, C, D and E. 
 
 Of course, the same principle is applicable where the dominant 
 mortgage covers not a larger tract, later subdivided and sold off, 
 as illustrated, but several independent and separate parcels — as 
 houses and lots, having different locations, and whether in the 
 same geographical locality or not. 
 
 The same, continued — mortgagee releasing a later sold 
 parcel. — Again, suppose different parcels sold to A, B, C, D and 
 E, in the order named — and none retained by the mortgagor- 
 vendor. Here A has the parcels of B, C, D, and E between him 
 and harm; B has the parcels of C, D and E between him and 
 harm; C, parcels D and E for his protection; while D has only 
 E's parcel for his protection; and E is without any protec- 
 tion, save an action against his vendor on his warranty of title. 
 Now suppose the creditor, knowing of this situation, should re- 
 lease the parcels of D and E from all liability, and should un- 
 dertake to subject the parcels of A, B and C. Here the creditor 
 would have violated one of the fundamental duties above men- 
 tioned, namely, not to release securities to which the sureties (A, 
 B and C) would have had recourse had their property been taken 
 for the debt. The latter are therefore released in such case, to 
 the extent that the act of the creditor has Injured them, namely, 
 to the extent of the value of the parcels of D and E so released. ^^ 
 
 The same, continued — registry as notice to prior lien- 
 ors. — But this last doctrine applies only where the creditor has 
 notice of the situation. Nor is mere registry of the subsequent 
 alienations notice to him of their existence. Registry is notice, 
 not to prior, but to subsequent lienors ; and a lienor who has duly 
 recorded his instrument of lien is under no obligation to watch 
 the record in the future to see whether subsequent alienations 
 take place. 28 
 
 ^ See authorities, infra, n. 27. 
 
 '" Blakemore v. Wise, 95 Va. 269, 3 Va. Law Reg. 744, 28 S. E. 
 333; Bridgewater, etc., Co. v. Strough, 98 Va. 721, 6 Va. Law Reg. 
 626; 1 Mich. Law Rev. 687. 
 
182 Notes on Equity Jurisprudence 
 
 The same — assumption of lien by purchaser. — Of course, 
 in the cases under discussion, if any purchaser of these parcels 
 personally assumes payment of the mortgage or other lien, or 
 buys expressly subject to the lien^deducting the amount there- 
 of from the purchase price, or under other circumstances indica- 
 tive of an intention to relieve the vendor of liability thereioT — 
 then he, in the one case personally, and in the other his lot, be- 
 comes the real principal, and all the rest of the purchasers, even 
 those who bought subsequently, are sureties, so far as their re- 
 spective parcels are concerned ; and, owing each of them the duty 
 of exoneration, his parcel must go first toward paying the debt.^'^ 
 
 Page 330, § 619. Surety cannot interfere with creditor's 
 legal remedy. — A careful distinction here must be noted. So 
 far as the creditor is concerned, the personally bound surety is 
 as much bound to pay the debt as his principal. Ordinarily, his 
 promise is, not that he will pay the debt if his principal does not, 
 but absolutely that he unll pay at maturity. Now the rule at 
 law is, that the creditor owes the personally bound surety no duty 
 of proceeding first against the principal ; nor, having obtained 
 judgment against both, is he bound to levy his execution first on 
 the principal's property; nor, again, is he bound to exhaust se- 
 curities which he holds of the principal, before taking legal re- 
 recourse against the surety. ^s Nor will a court of equity ordi- 
 narily entertain a bill by the surety to stay the hand of the cred- 
 itor who is proceeding at law against him, notwithstanding the 
 solvency of the principal, and notwithstanding the possession by 
 the creditor of securities belonging to the principal, am,ply suffi- 
 cient to satisfy the debt. 
 
 The same — ^putting creditor on terms — saddling the 
 pight horse." — If, however (and here the distinction is some- 
 what fine, but fundamental, and to be carefully noticed), the 
 creditor comes into equity, and asks its assistance in compelling 
 the surety to pay — or where the parties are already in equity 
 on other grounds — 'the court applies the maxim that "he who 
 seeks equity must do equity," and that "the saddle should be put 
 
 " 3 Pomeroy's Eq. 1225; Litchfield v. Preston, 98 Va. 230, 37 
 S. E. 6. 
 "» See Grizzle v. Fletcher (Va.), 105 S. E. 457. 
 
Subrogation of Creditor 183 
 
 on the right horse" — and will refuse to subject the estate of the 
 surety until that of the principal is first exhausted — unless there 
 be special circumstances rendering it inequitable to apply this 
 rule, such as, for example, that the principal's estate is insolvent, 
 or is involved in other litigation and so tied up, or otherwise in- 
 capable of immediately meeting the demands of the creditor, 
 that the delay would be unconscionable. 
 
 The distinction in short is this : That while equity will not 
 entertain a surety as plaintiff to stay the creditor's hand at law, 
 it will protect the surety's rights where the creditor himself be- 
 comes plaintiff, seeking the aid of the court of equity — or where 
 the equity court has acquired jurisdiction of the cause and the 
 parties on some other ground. ^^ 
 
 II. Creditor's Right of Subrogation.. 
 
 Page 333, § 623. Subrogation, continued — reversing the 
 situation— creditor's right of subrogation to securities 
 held by surety. — Up to this point we have discussed the sure- 
 ty's subrogation to securities held by the creditor. We come now 
 to consider the reverse situation — where the surety holds securi- 
 ties of the principal, to which the creditor desires subrogation. 
 
 The same — (A) Where the securities are to secure the 
 debt. — All the authorities concede that where the securities are 
 deposited with the surety not merely as personal indemnity to 
 him, but for the further purpose of securing the debt, an ex- 
 press trust arises at once in favor of the creditor, with all the 
 incidents of a trust. But this is not 'subrogation.' 
 
 The same — (B) to indemnify surety only. — The case here 
 is where the security is deposited by the principal, not to secure 
 the debt, as in the last section, but merely to indemnify the 
 surety. The books are full of general statements, such as in the 
 
 "^ Humphrey v. Hitt, 6 Gratt. 509; Walker v. Com., 18 Gratt. 13; 
 Shannon v. McMullin, 25 Gratt. 211, 229. See Horton v. Bond, 28 
 Gratt. 815; Wytheville Ice Co. v. Frick, 96 Va. 141. In accordance 
 with the principles stated, it was held in a recent case in Virginia, 
 that a suit in chancery against the estate of a deceased endorser 
 (surety) could not be maintained until the principal was brought 
 into the suit and his estate first exhausted. Tidball v. Bank, 98 
 Va. 768. 
 
184 Notes on Equity Jurisprudence 
 
 Text, that as the paying surety is subrogated to all securities held 
 by the creditor, so, conversely, the unpaid creditor is entitled to 
 subrogation to all securities of the principal held by the surety 
 for his own indemnification; and that the surety owes the same 
 duty to the creditor in the preservation of securities as the cred- 
 tor owes the surety. 
 
 This broad statement is not sustained by principle nor by au- 
 thority. The question calls for analysis and discrimination. 
 
 We may begin with the observation that next to the bona fide 
 purchaser, the surety is the most favored plaintifif in the law — 
 an observation inapplicable to a mere creditor. 
 
 A second principle is that the relation between surety and 
 creditor is merely that of debtor and creditor. The creditor 
 stands in the shoes of his debtor, and hence may subject for the 
 payment of the debt all the property and property rights to 
 which the surety is himself entitled, but no more. Hence in 
 seeking to ascertain the rights of the creditor as against the se- 
 curities of the principal held by the surety for the latter's in- 
 demnification, we must ascertain what the rights of the surety 
 himself are in such securities. These rights ascertained, we 
 have cleared the way for the ascertainment of the creditor's 
 right against the same securities. 
 
 The same — *(1) surety's liability contingent, and con- 
 tingency fails. — Here, as the creditor claims only through the 
 surety, it is clear that where the surety's liability, originally con- 
 tingent, never becomes absolute, so that at no time has the 
 surety any claim for exoneration by the principal — as, for ex- 
 ample, where the securities in his hands are to save him harm- 
 less as the endorser of a note for the accommodation of the prin- 
 cipal, and the endorser is discharged by failure of the holder to 
 give notice of dishonor — there is no equity of subrogation in be- 
 half of the creditor. 
 
 The reason is, that as the creditor must claim through the 
 surety — since ex hypothese the security is to indemnify the 
 surety only — and, as the consequence of his discharge, the surety 
 has not been damnified, there is no ground upon which the cred- 
 itor's right of subrogation may be based. In short, it avails 
 
SUBROGATlr'.tK OF CREDITOR 185 
 
 the creditor nothing to be placed in the shoes of the surety who 
 has no equity whatsoever.^** 
 
 Of course, here, after the discharge of the surety, he has no 
 further claim upon the securities in his hands, and they become 
 ordinary unencumbered assets of the principal, liable to be sub- 
 jected by any creditor of the principal who first secures judg- 
 ment and execution against them — or who sequesters them by 
 process of garnishment, or other proceeding. 
 
 The same — (2) surety's liability absolute. — The doc- 
 trine now under criticism is that securities placed in the surety's 
 hands by the principal for indemnity against loss by reason of 
 the suretyship, are held by the surety (before payment) in trust 
 for the creditor — and hence that immediately upon acceptance of 
 such securities by the surety a specific lien, or trust, attaches in 
 favor of the creditor, which must be respected both by the surety 
 and all subsequent lienors or purchasers. It rests upon the au- 
 thority of the old English case of Mawer (or Maure) v. Har- 
 rison.^i But in the more recent case of In re Walker,*^ t^g doc- 
 trine was re-examined and wholly repudiated. 
 
 In the latter case Stirling, J., who delivered the opinion, took 
 the pains to go through the original records of the case of Mawer 
 V. Harrison, in the Registrar's office, resulting in the discovery 
 that no such question, was involved in that case. The opinion in 
 the later case contains a detailed account of the facts and the 
 decision in Mawer v. Harrison, and demonstrates the inaccu- 
 racy of the brief report of the case in Equity Cases Abridged. 
 
 Creditor's subrogation to surety's indemnity, continued 
 ^the true principle. — The sounder doctrine is that the surety 
 does not hold such securities in trust for the creditor from the 
 moment he receives them — nor at any time until the creditor files 
 his bill to subject them, or otherwise secures a voluntary or in- 
 voluntary lien thereon. In the meanwhile the surety (certainly 
 where either principal or surety is solvent), may release the se- 
 
 " Hopewell v. Cumberland Bank, 10 Leigh 206; Bank of Virginia 
 V. May, 13 Leigh 387; Clay v. Freeman (Miss.), 20 South. 871. 
 
 '' 1 Eq. Cas. Ab. 93 (1692), 20 Vin. Abr. 102, tit. "Surety," and on 
 a dictum of Sir William Grant in Wright v. Morley, 11 Ves. 32. 
 
 "" 1 Ch. Div. 621 (1893). 
 
186 Notes on Equity Jurisprudence 
 
 curities to the principal debtor or to his assignee — or they may 
 be subjected by any competing joint creditor of principal and 
 surety, who first secures an in rem claim against them, without 
 infringing any right of the creditor in the surety obligation — 
 who, as shown, has no lien on or specific claim to such securities 
 merely by virtue of his being the creditor in the surety obli- 
 gation.^^ 
 
 No separate creditor of either principal or surety could sub- 
 ject such securities (beyond the equity of redemption therein), 
 since neither principal nor surety has complete title. Separate 
 creditors of the principal may not subject them, since the surety 
 has a prior claim for his indemnity. Separate creditors of the 
 surety could not subject them, since this would be an application 
 of the principal's property to the payment of the surety's sep- 
 arate creditors. But it seems clear that the securities may be 
 subjected by any joint creditor who is diligent enough to secure 
 a lien thereon by judgment or otherwise. 
 
 The same, continued — equity of redemption in the se- 
 curities. — Inasmuch as the surety, even before paying the debt, 
 may, after default in payment of the debt, foreclose the security 
 for the purpose of payment — filing a bill for that purpose if nec- 
 essary — it follows that the .creditor in the surety-obligation, 
 after judgment at law, or after otherwise converting the debt 
 into an in rem claim, is likewise entitled to subject the securities 
 in the surety's hands — on the settled principle that a creditor 
 may subject any asset, legal or equitable, belonging to either 
 principal or surety. This subjection of the security in the sure- 
 ty's hands may be termed "subrogation," as it frequently is in a 
 loose sense, but it is rather the application of the familiar princi- 
 ple that social assets shall go first to pay social creditors — the 
 creditor in the surety-obligation securing a preference over other 
 creditors of the principal, not because of any equity of his own, 
 but because of the equity of the surety who, equally with the 
 principal, in his debtor.^* 
 
 "^ In re Walker (1893), 1 Ch. Div. 631; Chamberlain v. St. Paul, 
 etc., R. R., 93 U. S. 399, 306; Cunningham v. Macon and Brunswick 
 R. Co., 156 U. S. 409, 43 9; Jones v. Quinnepaik, 29 Conn. 35. 
 
 " See Cralle v. Meem, 8 Gratt. 496; iHauser v. King, 76 Va. 731; 
 Burwpll V. Fauber, 21 Gratt. 446, 463; Jennings v. Taylor, 102 Va. 
 191; Hampton v. Phipps, 108 U. S. 260, 263; cases sup<ra and infra. 
 
Subrogation of Creditor 187 
 
 The same — compared with partnership assets — effect 
 of insolvency. — The situation noted in the last section is much 
 like that arising in connection with the distribution of assets of 
 a partnership. Each partner has an equity to demand that the 
 partnership creditors be paid out of partnership assets, in pref- 
 erence to the individual creditors of any partner. This indirectly 
 gives social creditors a preference over individual creditors — not 
 because of any equity, or lien, or trust, to which the social credi- 
 tor is entitled in his own right, but because of the equity of the 
 other partners to have the the social assets applied for the dis- 
 charge of social debts, for their protection. 
 
 This equity of the social creditors does not arise, however, 
 so long as the partners are solvent and in control of their own 
 affairs — but only where the assets of the partnership are being 
 administered by the court — as in bankruptcy, administration or 
 other judicial proceedings which displace the individual control 
 of the partners. Until their control is thus displaced, the other 
 partners (if solvent) may waive the equity in their own behalf, 
 and thus deprive partnership creditors of the preference to 
 which they would otherwise be entitled. ^^ 
 
 So with securities in the hands of the surety. No lien or trust 
 attaches to them for the benefit of the creditor, so long as the 
 principal and surety are in control of their own affairs — and in 
 the meanwhile the surety may release the securities to the princi- 
 pal, or to the latter's transferee, without violating any duty to 
 the principal creditor.^^^ 
 
 III. Subrogation of Volunteers. 
 
 Page 335, § 624, (6) Subrogation of volunteer — Gatewood 
 
 V. Gatewood. — A court of equity never sets its machinery in 
 motion to establish subrogation in favor of a mere volunteer — 
 
 ^ Millhiser v. McKinley, 98 Va. 207, 6 Va. Law Reg. 309, note. 
 
 °° This was precisely the case in the Connecticut case of Jones v. 
 Quinnepaik, 29 Conn. 25. See also Cunningham v. Macon & Bruns- 
 wick R. Co., 156 U. S. 409, 419. 
 
 The student will find much confusion in the authorities, and many 
 statements by the courts (usually extrajudicial) not in harmony with 
 the views here presented. 
 
 See, on the subject generally, 2 Brandt on Suretyship & Guar., 
 320-326; Sheldon on Subrogation. 160-162; Importers & Traders 
 Bank v. McGhee (Ga.), 16 S. E. 27; Paul v. Doster, 59 Miss. 258. 
 
188 Notes on Equity Jurisprudence 
 
 that is, one who intermeddles and pays a debt for which he is 
 bound neither in person nor in property. But, as we have seen, 
 he who pays a debt which is a charge either upon his person or 
 his property, and for which another is primarily liable, is in a 
 plenary sense a surety, with all the rights of such. 
 
 The latter doctrine is well illustrated by the case of Gatewood 
 V. Gatewood. 2^ In that case, the husband of the plaintiff had 
 executed a mortgage on his farm, in which the wife had united, 
 thus releasing, or encumbering, her dower right. Subsequently, 
 other liens accrued against her husband's interest in the same 
 property — the aggregate amount of which was far in excess of 
 the value of the property. The farm being advertised for sale 
 under the first encumbrance, the plaintiff, in an effort to save 
 the home for herself and children, raised a sum of money out 
 of her separate estate, and, instead of purchasing this first en- 
 cumbrance, and procuring an assignment thereof to herself, very 
 imprudently paid it off and discharged it. 
 
 Thereupon, the subsequent lienors, finding this large prior en- 
 cumbrance now discharged, endeavored to subject the property 
 to their debts. In this contest between the wife and creditors, 
 the vital question was, whether she was entitled to be subrogated 
 to the prior lien so paid off and discharged, and to that extent 
 secured against loss for the money she had paid. This question 
 of subrogation hung, as the court said, upon the question whether 
 she was a volunteer or not. But inasmuch as her contingent 
 dower right in the land was encumbered by the lien which she 
 had discharged, it was properly held that she was not a volun- 
 teer, and was therefore entitled to subrogation (as a surety in 
 re) — and hence that her claim constituted a first lien upon the 
 farm. 
 
 The same — who is a volunteer? — The question, who is a 
 volunteer in this connection, often presents difficulty. It is clear 
 that where one, at the request of the debtor, pays, or advances 
 money to pay, a debt secured by a mortgage or other lien — a 
 debt for which he is in nowise bound — there being no express 
 agreement that he shall become assignee of the debt, nor circum- 
 stances from which such an understanding may be implied — such 
 
 75 Va. 411. 
 
Subrogation of Voi,unteh;r 189 
 
 payment, generally speaking, is a voluntary payment, and no 
 right of subrogation arises.*^ 
 
 The same. — The question becomes of especial importance 
 where there are junior liens on the same property. Refusal to 
 subrogate the lender whose money discharged the first lien has 
 the inequitable result of giving the junior lienors preference over 
 him, and thus unjustly enriching them at his expense. 
 
 Hence the courts, anxious to prevent this injustice, are dis- 
 posed to extend the equity of subrogation to such lender if pos- 
 sible — and to that end will easily imply the necessary intention 
 on the part of the lender not to discharge the lien in making pay- 
 ment. 
 
 Thus, an agreement between the lender and the debtor, or be- 
 tween lender and creditor, with the assent of the debtor, that 
 the lien shall not be extinguished by payment, will suffice to 
 keep the lien alive. Nor need such agreement be express, but it 
 may be implied from circumstances.^^ 
 
 On principle, where one thus pays the debt of another at his 
 request, the payer Should be entitled to all the rights of a surety, 
 unless it be apparent that this was not the intention of the pxar- 
 ties. The technical surety is himself but a volunteer at the time 
 he assumes the obligation — and (on a new consideration) he 
 may become surety long after the original debt was created. If 
 one who voluntarily assumes the position of surety today and 
 pays tomorrow, is entitled to the equity of subrogation, as is 
 conceded, no reason is perceived why the result should be other- 
 wfse where there is no such interval of time between assumption 
 and payment. 
 
 IV. Subrogation of Owner. 
 
 Page 336, § 625. Subrogation of owner — purchaser of 
 equity of redemption — dower rights. — The subrogation of 
 the owner of property to liens thereon, which he has discharged, 
 but for which he was not personally bound, discussed in this 
 
 "' See Clevinger v. Miller, 87 Gratt. 740. 
 
 " See Sheldon on Subrog., 245-248; Clark v. Moore, 76 Va. 262; 
 Repass v. Moore, 98 Va. 377; 26 Harvard Law Rev. 261; Bankers, 
 etc., Co. V. Hornish, 94 Va. 608; Meeker v. Larson (Neb.), 57 L,. 
 R. A. 901. 
 
190 Notes on Equity Jurisprudence 
 
 and the following sections of the Text, is the same as that which 
 we have previously discussed under the head of suretyship in re. 
 
 An interesting case under this head recently arose in Virginia 
 in the case of Land v. Shipp.*" The facts are a little complicated, 
 and the student should give them close attention. The case was 
 practically this: Husband and wife mortgaged husband's farm 
 to A. By a later mortgage, the husband alone executed a sec- 
 ond lien on the same property to B, the wife not uniting. Up 
 to this point, therefore, the wife had released her right of dower, 
 so far as the first mortgage was concerned, but not as to the 
 second. 
 
 Subsequently, by arrangement between the parties, the land 
 was sold under the second mortgage to C, who, out of the pur- 
 chase money, discharged the first mortgage . in full, obtaining a 
 release of the first mortgage from the creditor, and applied the 
 balance in discharge of the second mortgage. Inasmuch as the 
 first mortgage, in which the wife had united, was now fully dis- 
 charged, and, as she had not united, in the second mortgage, she 
 appeared to be entitled to dower in the whole; and, on the death 
 of her husband, she made claim accordingly. 
 
 It was held, however, that since the purchaser, buying under 
 the second mortgage, was a surety in re for the first mortgage 
 (that is, the property purchased was bound for it) he was en- 
 titled, on discharging the first mortgage, to be subrogated to the 
 rights of the mortgagee whom he had satisfied, thereby defeat- 
 ing the wife's right of dower, pro tanto — that is, to the extent of 
 the first mortage. It was held further, and properly, that as to 
 the value of the equity of redemption after payment of the first 
 mortgage, the wife was entitled to dower therein, since she had 
 not united in the second mortgage to release her dower.*i 
 
 The same. — If, in the case just stated, the purchaser, buying 
 the equity of redemption alone, under the second mortgage, had 
 personally assumed to pay off the first mortgage, as a part of the 
 contract of purchase, he would then have stood, not in the posi- 
 tion of a surety, but of primary debtor; and on discharging the 
 
 " 100 Va. 337. 
 
 ■" The case is reported also, in 8 Va. Law Reg. 170, with note. 
 See Strong v. Converse (Massr), 85 Am. Dec. 732, and note. 
 
Marshalling 191 
 
 first mortgage it would not have been kept alive by way of sub- 
 rogation for his benefit, so as to protect him against the dower 
 right of the wife of the mortgagor in the whole property. ^^ 
 
 The Text (§ 628) states the doctrine of this section, but with- 
 out the quahfication last mentioned, namely, that there is no 
 subrogation of a purchaser of an equity of redemption, where 
 he has personally assumd, by contract with the original mort- 
 gagor, to pay off the prior encumbrance. The reason is that 
 by assuming payment of the mortgage he becomes the principal 
 debtor. 
 
 CHAPTER XXIIA. 
 Marshalling of Securities. 
 Memorandum. — This is a continuation of Text-chapter XXII. 
 Marshalling of Securities. 
 
 Page 342. Marshalling. — As we have before seen, subroga- 
 tion is not so much an equity in itself as it is a remedy for secur- 
 ing the equities of contribution and exoneration. So we may 
 say of marshalling that it is not so much an equity in itself, as it 
 is a means of working out the remedy of subrogation, with the fi- 
 nal purpose of obtaining the equity of exoneration or contribu- 
 tion. Indeed, marshaUing is but subrogation in a slightly dif- 
 ferent aspect. 
 
 What is marshalling? — The term marshalling here means 
 'arrangement' — the marshalling of securities therefore, is the ar- 
 ranging of the securities held by several creditors of a common 
 debtor, so that the securities may go as far as possible toward 
 discharging the several debts secured, in so far as this may be 
 done without ' violating superior equities, or doing inj ustice ei- 
 ther to the secured creditors or to the common debtor. 
 
 ■"^ 1 Scribner on Dower, 519 to 532, 550; 2 Pomeroy's Eq. Jurisp. 
 793, 796-8; Carter v. Goodin, 3 Ohio St. 76; Selb v. Mutagne, 103 
 111. 445; Everson v. McMullen, 113 N. Y. 293, 10 Am. St. Rep. 445; 
 Text, § 628. 
 
192 Notes on Equity Jurisprudence 
 
 We have already seen a striking illustration of what practi- 
 cally is marshalling, in connection with the rule that where a 
 larger area of land is subsequently subdivided and smaller par- 
 cels are sold off to various purchasers, at various times, the court 
 will thus marshal, or arrange, the several security-lots, by sub- 
 jecting them in the inverse order of alienation. 
 
 The same — application of the principle. — A case for mar- 
 shalling occurs where one creditor has a lien, or other claim in 
 rem against two funds, or estates, belonging to the same person, 
 and a subsequent lienor or purchaser has such recourse against, 
 or claim to, but one of the same funds or estates. In such case 
 equity will either compel the doubly-secured creditor first to ex- 
 haust the singly-charged fund, or else, if he exhausts the doubly- 
 charged fund, will subrogate the singly-secured creditor or pur- 
 chaser to the other fund. Sundry illustrations are presented in 
 later sections of this chapter. 
 
 The same — origin and policy. — The earliest application of 
 this doctrine was in connection with the winding up of dece- 
 dent's estates. The rule of the common law was that a decedent's 
 real property could be subjected only to the payment of spe- 
 cialty (or 'bond') debts (i. e. under seal), and debts of record. 
 For debts of such high dignity, both realty and personalty were 
 bound ; whereas, sintple contract creditors could look only to the 
 decedent's personal estate for payment of their debts. Cases fre- 
 quently arose where the specialty creditors, either whimsically or 
 by collusion with the heir, enforced payment of their debts, as 
 the law permitted, out of the personalty, leaving a balance insuf- 
 ficient to discharge the simple contract creditors — by reason of 
 which the latter's debts went unpaid. To remedy this vicious 
 practice, equity, very early in its history, began to protect the 
 simple contract creditors, by compelling the specialty creditors 
 first to exhaust their recourse against the real property in the 
 hands of the heir — or else, if application were made too late 
 thus to conserve the personalty for the simple contract creditor 
 — or where there were special reasons, in a particular case, for 
 permitting the personalty to go in discharge of the specialty 
 debts — the simple contract creditors were then let in on the real 
 property. This was tantamount to subrogating the simple con- 
 
Marshalling 193 
 
 tract creditor — whose only security had been diminished or ex- 
 hausted by the preferred (or doubly-secured) class — to the shoes 
 of the now satisfied specialty creditors. This principle, known 
 as the marshalling of a decedent's assets, came in time to be ap- 
 plied to all analogous cases, where it lay in the power of one 
 creditor capriciously to deprive a less favored creditor, or claim- 
 ant, of his only security. It is an application, in equity, of the 
 maxim of the law of torts, sic utere tuo ut alienum non laedas. 
 
 Marshalling, continued — principles applicable. — This is 
 an equitable doctrine, and is never enforced to the injury of the 
 doubly-secured creditor, or of third persons with superior equi- 
 ties.^ 
 
 This equity must be taken notice of by subsequent lienors and 
 purchasers, if the situation appear on the record, or they other- 
 wise have knowledge of it.^ 
 
 The same — notice to subsequent purchasers. — Accord- 
 ing to the English doctrine, the equity of marshalling did not 
 arise at the time of the occurrence or transaction creating the 
 equitable situation, but was an inchoate right, and became fixed 
 only on the filing of the hill to enforce it. Hence the right to 
 have the securities marshalled might be. cut off by a subsequent 
 sale or mortgage of the res, even to one having notice of the real 
 situation. 
 
 In Virginia and most of the American states, this narrow view 
 has been repudiated, and the equity is regarded as complete 
 from its inception, and cannot be affected by a subsequent lien, 
 purchase, or right, acquired with notice. 
 
 It follows that subsequent purchasers and lienors must take 
 notice of this equity of subrogation, or marshalling, if it is in- 
 dicated in conveyances or incumbrances of record, or if they 
 otherwise have notice of it.* 
 
 ^ Guggenheimer v. Martin, 93 Va. 634, 35 S. E. 881; Blakemore 
 V. Wise, 95 Va. 269; Bridgewater Mills v. Strough, 98 Va. 721; 
 6 Va. Law Reg. 636, and note; 2 Va. Law Reg. 701. 
 
 ■ Conrad v. Harrison, 3 Leigh 533; 2 Va. Law Reg. 701. 
 
 ' This question was thoroughly considered by the judges, seriatim, 
 in Conrad v. Harrison, 3 Leigh 533, affirmed in McClung v. Beirne, 
 10 Leigh 394; Jones v. Phelan, 20 Gratt. 329, 341. See editorial note, 
 collecting the authorities, in 2 Va. Law Reg. 701; notes to Aldrich 
 V. Cooper, 3 L. C. E. (marg. p.) 107; Clowes v. Dickinson, 5 Johns. 
 Ch. 335. 
 
194 'Notes on Equity Jurisprudence 
 
 Illustrations of Marshalling. 
 
 All liens are supposed to be recorded, and in the order as num- 
 bered. 
 
 Bond creditors (£20,000) v. 
 
 Decedent's realty— value i20,000. 
 Decedent's personalty — value 
 
 £10,000. 
 Decedent's personalty — value 
 
 Other creditors (£10,000) v. J 
 
 Here we have the simplest form of marshalling assets. If the 
 bond creditors subject the personalty, other creditors will be let 
 in on the realty. 
 
 II. 
 
 ■ Blackacre (X's) — value 
 
 $10,000. 
 Whiteacre (X's) — value 
 $5000. 
 2. B has mortgage ($5,000) on Whiteacre. 
 
 1. A has mortgage ($10,000) on ■< 
 
 This is the simplest form of the marshalling of securities. A 
 must subject Blackacre — or, if he should subject Whiteacre, B 
 will be subrogated to A's mortgage on Blackacre. 
 
 III. 
 
 1 A ^ /d-innor^N I Blackacre (X's) — value $7,000. 
 
 1. A-mortgage ($10,000) on j ^^^.^^^^^^ ( X's) -value ^6.500. 
 
 2. B— mortgage ($5,000) on Whiteacre. 
 
 Here the situation is slightly more complicated. A will ex- 
 haust Blackacre, ($7,000), and be let in on Whiteacre for $3,000, 
 the balance of his debt — thus leaving only $3,500 of the proceeds 
 for B, who loses the remainder, so far as this security is con- 
 cerned. 
 
 IV. 
 
 The same case as the last, except that B purchases Whiteacre 
 at $5,000. The same result follows. Both parcels are sold — the 
 
Marshalling 195 
 
 proceeds of Blackacre are paid to A, and a sufficient amount of 
 the proceeds of Whiteacre to discharge his mortgage — the bal- 
 ance going to B. 
 
 V. 
 
 f Blackacre— value $10,000. 
 
 1. A-mortgage ($10,000) on | whiteacre-value $10,000. 
 
 2. B — purchases Whiteacre 
 
 3. C — purchases Blackacre 
 
 The situation is slightly more complicated here, but the solution 
 is simple. A, as first lienor, exhausts Blackacre, and thus sat- 
 isfies his mortgage. B holds Whiteacre, free. C insists that B 
 has no equity to force A uf>on Blackacre, since -this injures him 
 (C), and that marshalling will not be enforced to the injury of 
 those with superior or equal equities. But it is clear that before 
 C came into the transaction, B already had a complete equity of 
 marshalling, apparent on the record. Hence when C appeared 
 and purchased, he did so with notice of B's prior equity. 
 
 If, however, here, the value of Blackacre had exceeded the 
 amount of A's mortgage, then clearly C might have claimed the 
 surplus. 
 
 VI. 
 
 A— mortgage ($12,000) on 
 
 { 
 
 Blackacre— value $10,000. 
 Whiteacre-value $10,000 
 
 B — mortgage ($5,000) on Whiteacre. 
 
 C — mortgage ($5,000) on Blackacre. 
 
 D — ^purchases Whiteacre 
 
 A still further complication, but not difficult. We must begin 
 with the several equities in the order in which they arose. 
 
 ( 1 ) B's right : When B took his mortgage and recorded it, he 
 was perfectly safe. Then nothing that other parties may subse- 
 quently do can dislodge him from his coign of vantage — for they 
 necessarily take with notice. A exhausts Blackacre ($10,000) 
 leaving a balance due of $2,000, for which he is let in on White- 
 acre. This leaves B with a mortgage of $5,000, secured on, and 
 
196 Notes on Equity Jurisprudence 
 
 to be paid out, of $8,000 ($10,000— $2,000) of Whiteacre funds. 
 
 (2) C's right : Blackacre, on which C's debt was secured, has 
 been completely exhausted, as well as $7,000 of Whiteacre funds, 
 in discharge of superior equities ($2,000 to A, and $5,000 to Bj. 
 So that when C took his mortgage on Blackacre, there was an 
 equity of marshalling in his favor against whatever balance was 
 left of Whiteacre funds. ' The balance was ($10,000— $7,000) 
 $3,000. C will receive this $3,000— leaving an unpaid balance 
 due of $2,000. 
 
 (3) D's rights: It is obvious that when D appeared first on 
 the scene, both of these parcels were already charged with su- 
 perior liens in excess of their value — and being charged with no- 
 tice of the situation, he has no equity whatsoever in the prem- 
 ises. 
 
 VII. 
 
 r Blackacre (Principal's). 
 1. A vA Whiteacre (Surety's). 
 
 
 2. B V. Blackacre. 
 
 No marshalling here. The two estates are not the property of 
 a common debtor, as required by the principle of marshalling. 
 When B asks for marshalling, he is met by the superior equity 
 of the surety. Before B's appearance on the scene, the surety's 
 right to demand that the principal's property be first exhausted 
 (or subrogation), was already a complete equity, of record, and 
 therefore staring B in the face when he acquired his claim 
 against Blackacre, whether as a mortgagee or as an absolute pur- 
 chaser. 
 
 The same result would have followed had the principal and 
 surety, instead of expressly occupying that position as here, been 
 co-partners or co-contractors, and as such had executed the first 
 mortgage. A partner or other co-contractor, is principal for his 
 portion of the joint debt, and surety for the portion due by his 
 fellow. 
 
 VIII. 
 
 1. A V. X and Y, copartners or co-contractors (personally). 
 
 2. B «/. X only. 
 
Marshalling 
 
 197 
 
 Here there is no semblance of a case for marshalling. There 
 is nothing to marshal. The claims are simply claims against 
 the persons of the defendants. Nor are there two funds belong- 
 ing to a common debtor. Even if there were two funds (as 
 might be the case if X and Y were both dead and their estates 
 were being administered in equity), Y's equity of contribution 
 . from X would be superior to B's equity to have the funds mar- 
 shalled — as in VII above.* 
 
 IX. 
 
 Blackacre (X's) is mortgaged to A for $10,000; the whole 
 property is worth $18,000; it is sold off in parcels, at different 
 times — say lots 1, 2, 3, 4 and 5— X retaining 6. Thus : 
 
 A— $10,000 V. 
 
 Marshalling will be enforced in this case by compelling A, 
 who has the paramount lien, to go against the several parcels in 
 inverse order of alienation — that retained by the debtor-vendor 
 to be first subjected. The order is therefore: (1) X; (2) F; (3) 
 E ; and (4) D for the remaining $1000 — leaving C and B harm- 
 less. But the cast would have been altered had any purchaser 
 assumed payment of the lien. If any purchaser assumes pay- 
 ment of the lien, he becomes principal debtor, and the others 
 sureties. Hence his parcel would go first. This is but an ap- 
 plication of "inverse order of alienation," discussed previously 
 in this chapter. 
 
 X. 
 
 J Blackacre (X's)— value $5,000. 
 
 1. A-mortgage ($10,000) on | ^j^j^^^^^^ (x's)-value $12,000 
 
 2. B— mortgage ($7,000) on. . .Whiteacre 
 
 3. 'C — purchases (at $5,000) ... Blackacre. 
 
 
 1 
 
 2 
 
 3 
 
 
 B 
 
 C 
 
 D 
 
 ^ 
 
 $3,000 
 
 $3,000 
 
 $3,000 
 
 
 4 
 
 5 
 
 6 
 
 
 E 
 
 F 
 
 X 
 
 
 $3,000 
 
 $3,000 
 
 $3,000 
 
 ' See Guggenheimer v. Martin, 93 Va. 634. 
 
198 Notes on Equity Jurisprudence 
 
 4. A now releases in C's favor, his mortgage ($5,000) on Black- 
 acre, relying on his first mortgage on Whiteacre (value 
 $12,000). 
 The complication here requires careful analysis of the several 
 equities. If A enforces his mortgage ($10,000) against White- 
 acre (value $12,000), this will leave but $2,000 of the Whiteacre 
 fund for B, whose mortgage is for $7,000. May B insist, then, 
 upon being let in on Blackacre in C's hands, in spite of the re- 
 lease? It would seem so, since C acquired both the conveyance 
 of Blackacre from X, and A's release of his mortgage, -with no- 
 tice of B's equity of marshalling. 
 
 The same, continued. — In Bridgewater Mills v. Strough,^ 
 the facts of which were substantially as in the foregoing illus- 
 tration, the question was not whether B might be let in on Black- 
 acre in C's hands, but whether, in a controversy over the pro- 
 ceeds of Whiteacre only, A should take priority over B. No 
 claim seems to have been made as to Blackacre — neither that par- 
 cel, nor its purchaser C, appearing to have been brought into 
 the suit. 
 
 It was held that if A, when he released to C his mortgage on 
 Blackacre, had notice of B's mortgage, and therefore of B's eq- 
 uity of marshalling, he must credit on his mortgage, so far as 
 Whiteacre wa^ concerned, the value of the released security 
 (Blackacre, $5,000), and look to Whiteacre for the balance only. 
 This, on the principle that the creditor must not release securi- 
 ties in his hands belonging to the principal debtor (X, the mort- 
 gagor) to the injury of the surety B (surety in re as mortgagee 
 of Whiteacre), at the peril of discharging the surety to the ex- 
 tent of the value of the released security. But that if the credi- 
 tor A had no notice of B's equity, then so far as A was concerned 
 his release in no wise affected his rights against the remaining 
 security, Whiteacre. It was further held that registry of B's 
 mortgage on Whiteacre was not notice to A, a prior and not a 
 subsequent purchaser. This, on the principle already adverted to 
 in an earlier part of this chapter, that one who has registered his 
 paramount incumbrance, is under no duty to watch the records 
 
 98 Va. 731, 6 Va. Law Reg. 626. 
 
Marshalling 199 
 
 for future junior incumbrances — ^the registry being notice to 
 subsequent not to prior purchasers and lienors.® 
 
 XI. 
 1. A ($10,000 V. Bank stock (X's), worth $5,000. 
 
 X's general assets 
 ($10,000) in adminis- 
 tration proceedings, or 
 under a general deed of 
 assignment without 
 preferences — or in the 
 winding up of the af- 
 fairs of banking and 
 other insolvent corpora- 
 tions. 
 
 A (same debt). 
 
 B $5,000. 
 
 C $5,000. V. 
 
 D $5,000. 
 
 This case presents a new situation, in that the claim of A, 
 the doubly-secured creditor, is a superior lien only on the 
 singly-charged fund (bank stock). This fund being insufficient 
 to discharge the debt, A must come in upon the general as- 
 sets — which, of course, he shares pari passu with the other cred- 
 itors. 
 
 The question the case presents is whether A must first ex- 
 haust his collateral ($5000), and prove for the residue only, or 
 whether he may prove for, and receive dividends on, the full 
 amount of his debt. We have already seen that by the better 
 authority, he may prove for the ftill amount, without exhausting 
 or crediting the value of his collateral — but with the qualifica- 
 tion that the doubly-secured creditor must not receive more 
 than the amount justly due him.** 
 
 From the example given, the student may easily work out for 
 himself the material difference in results from the application of 
 the two rules. 
 
 ' See post, note to § 698; 6 Va. Law Reg. 636, n; Blakemore v. 
 Wise, 95 Va. 369; 3 Va. Law Reg. 744; 1 Mich. Law Rev. 687; 
 Vanorden v. Johnson, a McCart. (N. J.) 376, 83 Am. Dee. 1354. 
 
 ' Merrill v. National Bank, 173 U. S. 131; Bank t-. Trigg, 106 Va. 
 337. 
 
200 Notes on Equity Jurisprudence; 
 
 CHAPTER XXIII. 
 
 Mortgages — Deeds of Trust. 
 
 Page 343. Contrast between mortgage and deed of 
 trust. — The purpose of a mortgage and of a deed of trust as 
 security is the same, namely, to secure the payment of a debt or 
 the performance of some obligation. They dififer widely, how- 
 ever, both in form and remedy. 
 
 Mortgages — form. — In a mortgage, there are but two par- 
 ties, grantor and grantee, or debtor and creditor. The debtor 
 (grantor) conveys the property upon which the mortgage is to 
 be given directly to the creditor (grantee) on condition that it 
 shall again become the property of the debtor in case he makes 
 no default. In short, title vests in the mortgagee instantly, to 
 be divested by payment of the debt. 
 
 The same — remedy. — The modern remedy of the creditor 
 (mortgagee) is by foreclosure,, and this is accomplished by a 
 suit in equity. Originally, where the debtor made default, the 
 property became at once and finally the property of the mort- 
 gagee, regardless of the relative values of the debt and the prop- 
 erty. Subsequently, equity intervened and compelled the mort- 
 gagee to restore the premises to the mortgagor on payment of 
 the debt secured and interest, and required the mortgagee to 
 account for rents and profits during his occupancy. This right 
 of the mortgagor to redeem, is known as his "equity of redemp- 
 tion." 
 
 ' In more modern times (though it seems from the Text that 
 it is otherwise in Massachusetts), the practice is for the mort- 
 gagee, instead of taking possession, to file a bill to foreclose the 
 mortgage. 
 
 In such foreclosure suit, the court gives the debtor another 
 day within which to satisfy the debt, (usually six months after 
 the decree) with a provision in the decree that if he do not pay 
 within that time, then the property shall he sold. The proceeds 
 of sale are applied, first, to pay the costs of the suit, and then 
 to the debt, principal and interest, the balance, if any, being 
 paid over to the debtor. 
 
Mortgages — Deeds op Trust 201 
 
 The practical objection to a mortgage, is the delay and ex- 
 pense of foreclosure. As we shall see presently, the deed of 
 trust is usually more advantageous as a security for money. For 
 the history of the law of foreclosure and the modern remedy by 
 way of sale of the jproperty, see Larring v. Gallet, 9 Cow. (N. 
 Y.) 346. 
 
 Deed of trust — form. — We have heretofore explained what 
 deed of trust to secure a debt is. Here, there are three persons, 
 namely, the grantor (debtor), the grantee (trustee), and the 
 creditor. The debtor conveys the property to a disinterested 
 third person as trustee, to secure the creditor, with a provision 
 in the instrument of grant, that if default be made in payment 
 of the debt, the trustee shall, after prescribed advertisement, ex- 
 pose the property for sale by public auction, on such terms of 
 payment as the instrument prescribes, but usually for cash, and 
 shall apply the proceeds, after payment of costs and commis- 
 sions, to the payment of the creditor's debt, — the balance, if any, 
 to be paid over to the grantor. The legal title, of course, is in 
 the trustee, and remains in him although the debt be actually dis- 
 charged by the debtor — in which case, there should be a deed 
 from the trustee back to the grantor, known as a deed of re- 
 lease ?- 
 
 The same — remedy. — If default be made in the payment of 
 the debt at maturity, the creditor notifies the trustee of such de- 
 fault, and calls upon him to execute the trust by selling the 
 property according to the terms of the instrument. This sale 
 the trustee may make without any proceeding whatever in court. 
 The instrument of trust usually makes careful provision with re- 
 spect to how the sale shall be made; that is, after advertisement 
 for a certain time and in a certain manner; and that the sale 
 shall be for cash, or on certain terms of credit. The trustee must 
 be careful to follow the directions of the trust instrument, else 
 the title of the purchaser may be encumbered with the trust, and 
 much embarrassment, both to the purchaser and the trustee, will 
 
 ^ In Virginia, by statute, this release may be made by endorsement 
 of the creditor, or his agent, on the margin of the deed book where the 
 deed is recorded. Va. Code 1919, § 6456. 
 
202 Notes on Equity Jurisprudence 
 
 result; although, as we have heretofore seen, even a wrongful 
 conveyance by the trustee will convey the legal title.^ 
 
 The difference between the mortgage and the deed of trust 
 is well illustrated by a recent case in Virginia, where property 
 was conveyed to trustees to secure certain creditors named, 
 among whom were the trustees themselves. This, the court held 
 to be a mortgage.* 
 
 There is, of course, no equity of redemption after a sale under 
 the deed of trust — since the sale operates propria vigore as a 
 foreclosure. 
 
 Mortgages with power of sale. — In modern times, some of 
 the disadvantages of the mortgage have been eliminated by the 
 insertion of a clause giving the mortgagee himself power to sell 
 in case of default, without applying to a court of equity. Prob- 
 bly in most states, such a clause is unobjectionable, so far as the 
 mortgage may relate to personal property; but in many states 
 such power is not permitted to be exercised in the case of mort- 
 gages of real property. Such clauses are objectionable on prin- 
 ciple, since they put it into the power, of the creditor himself to 
 make the sale, thus opening the door for oppression of the deb- 
 tor. This objection does not apply to deeds of trust, since there 
 the sale is made by a third person, who is supposed to be indif- 
 ferent between the parties. 
 
 In Virginia, mortgages with power of sale have been upheld 
 in cases of personal property, but it is doubtful whether they 
 would be upheld where the mortgage covers real property.* 
 
 Page 236, § 646. Mortgage and conditional sale con- 
 trasted. — ^^[ Alter the Text section-title to correspond]. The dis- 
 tinction pointed out in the Text between the mortgage and the 
 conditional sale is important and fundamental. 
 
 A mortgage connotes ( 1 ) a debt, usually evidenced by a bond 
 or note; and (2) the mortgage securing the debt. The execu- 
 
 ' See n. 93 Am. St. Rep. 573-598; Wasserman v. Metzger, 105 
 Va. 744. 
 
 ' Morgan v. Glendy, 92 Va. 86. 
 
 * See Floyd v. Harrison, 2 Rob. 178; Goddin v. Vaughan, 14 Gratt. 
 129; Gordon v. Cannon, 18 Gratt. 387, 401; Morgan v. Glendy, 92 
 Va. 86. Mortgages with power of sale are discussed in Chapter XXV 
 of the Text. See also monographic note, 92 Am. St. Rep. 573. 
 
Mortgages — Conditional Sai<h;s 203 
 
 tion of these instruments is a common transaction of almost 
 daily occurrence in every community. 
 
 On the other hand, the true conditional sale is a wholly differ- 
 ent thing, and is a comparatively rare transaction. In its true 
 character, it is a perfectly valid contract, and will be upheld, at 
 law and in equity, as freely as other valid contracts. 
 
 The true conditional sale — not to be confused with the tech- 
 nical "estate on condition" in real property law — occurs where 
 the owner of property voluntarily sells and conveys it to an- 
 other, intending an absolute sale and not a security for a debt, 
 but retains an. option to re-purchase within a stipulated period, 
 and at a stipulated price. Here, as in the case of other optional 
 contracts, the vendor-optionee must close the option by perform- 
 ance of the stipulated terms ad diem — that is, time is the essence 
 of the contract. 
 
 The coaditional sale, continued — as a cover for a mort- 
 gage. — The difficulty arising in connection with conveyances of 
 this nature is that shrewd and tricky lenders of money often 
 give to what is in fact a loan transaction, the form of a condi- 
 tional sale — which, if the oppressed debtor does not seek sound 
 professional advice, will result in his losing the estate, regardless 
 of its real value over and above the amount of the loan, by fail- 
 ure to tender payment on the very day of maturity. The form 
 of the agreement into which the borrower has entered places 
 him merely in the position of holding an option to purchase his 
 own estate, by tendering a stipulated sum on a stipulated day. 
 
 If, on the other hand, the borrower had executed a mortgage 
 instead, failure to pay on the stipulated day would still have 
 left him with a valuable equity of redemption, with the right 
 to redeem at any time within twenty years — or, if the mortgagee 
 moved against him earlier, at any time within six months after 
 a decree of foreclosure. 
 
 The same — equity looks at the substance, not the form. 
 
 — Naturally, a court of equity, that delights to disregard form 
 for substance, and especially where form is a cover for uncon- 
 scionable or fraudulent practices, will tear away the mask, and 
 view the situation here in its true colors. If satisfied that the 
 form of a conditional sale was adopted to disguise the real sub- 
 
204 Notes on Equity Jurisprxtoence 
 
 stance of the transaction, and with the purpose on the part of the 
 lender (the so-called 'vendee') of depriving the borrower (ven- 
 dor) of his equity of redemption, equity will be astute to declare 
 the transaction a mortgage, and will treat it as such. Nor does 
 the court make any difficulty in receiving parol evidence to es- 
 tablish the real purpose of the instrument. 
 
 The same — betrayed by surrounding circumstances. — 
 
 Difficulty is often encountered in the court's efforts to get at the 
 true nature of such transactions, by reason of conflicting testi- 
 mony, or lack of testimony due to death of one or more of the 
 parties or of the witnesses. Hence the courts have found that 
 where the transaction was in fact meant as security for a loan, 
 and was not a true conditional sale, the particular circumstances 
 of the transaction will generally, of themselves, betray the hid- 
 den mortgage, and give the contract its true color. In this in- 
 quiry, as stated, the doors are thrown wide open for the receipt 
 of parol evidence. These circumstances are well set out in the 
 Text.5 
 
 Page 352, § 653. Absolute deed as mortgage. — Practically 
 the same situation is presented here as in the case of the con-. 
 ditional sale, discussed in the preceding section — and the same 
 principles apply here as there. Parol evidence is freely admitted 
 to show the real intention.^ 
 
 Mortgage and deed of trust — advantages compared. — 
 
 So far as concerns the safety of the debt secured, neither of 
 these forms of security offers an advantage over the other. 
 
 The same may be said of mortgages with power of sale, in 
 those states in which such mortgages have complete recognition. 
 
 But as between the deed of trust and the ordinary mortgage, 
 the former possesses many advantages over the latter, from the 
 
 ° §§ 648-652. See Holliday v. Willis, 101 Va. 374. 
 
 ° See monographic note, L. R. A. 1916B, 18; Holliday v. Willis, 
 101 Va. 374, The introduction of parol evidence here, as in the case 
 of the conditional sale, to contradict the plain language of the con- 
 veyance, has been much criticized, but the principle is sound, and 
 the practice too thoroughly established to be shaken. To exclude 
 parol evidence in these cases would call for like exclusion In other 
 cases of fraud, constructive trusts and mistake — all bearing a close 
 analogy. 
 
Mortgages — Lien Theory 205 
 
 creditor's stand point, in the economy of time and expense. To 
 foreclose the mortgage requires the employment of an attorney, 
 the institution of a suit in equity, with its accompanying delays; 
 and the still further delay, always provided for in the decree of 
 foreclosure, of six months of grace within which the debtor may 
 redeem. On the other hand, the deed of trust may be foreclosed 
 in pais — that is without the employment of counsel or any pro- 
 ceedings in court — by simply notifying the trustee to sell the 
 property according to the terms prescribed in the deed itself. 
 
 It also happens that where the instrument is to secure an is- 
 sue of corporate bonds, usually payable to bearer, the mortgage 
 is impracticable, because at the time of its execution the creditors 
 (future bondholders) are unascertained and unascertainable; 
 and if ascertained they are too numerous, and their ownership 
 too ephemeral, to render a mortgage a practicable instrument for 
 the purpose. The consequence is that all such issues of bonds 
 are secured by deeds of trust — a trust company usually being 
 named as trustee. In commercial circles such bonds are termed 
 "mortgage bonds", and the instrument securing them a "mort- 
 gage," but technically they are not such. 
 
 Mortgages — the legal title— the lien theory. — Before 
 leaving this subject it may be well to point out that while the 
 legal title vests in the mortgagee immediately upon the execution 
 of the instrument — of course leaving only an equitable title in 
 the mortgagor — the situation has been lost sight of in most of 
 the American States ; and, save as against the mortgagee himself, 
 the legal title is regarded as remaining in the mortgagor. In 
 short, the mortgage is treated as a mere lien on the estate, even 
 at law — thus borrowing the equitable theory of a mortgage.'^ 
 
 ' Mr. Pomeroy's treatment of the varying conceptions of a mort- 
 gage in the several states is full and complete. 3 Pomeroy's Eq- 
 Jurisp. 1186, et seq. 
 
 In Virginia, the distinction between the legal title of the mortgagee 
 and the equitable title of the mortgagor — or what is the same thing, 
 between the equitable title of the grantor and the legal title of the 
 trustee in a deed of trust to secure debts — has been sharply maintained. 
 Faulkner v. Brockenbrough, 4 Rand 345; Claytor v. Anthony, 6 Rand. 
 285; Coutts V. Walker, 2 Leigh 268, 280; 4 Minor's Inst. (3d. ed.) 1018. 
 But see Spence v. Repass, 94 Va. 716, 4 Va. Law Reg. 355 (editorial 
 note); Van Ness v. Hyatt, 13 Pet (U. S.) 294; Va. Code 1919, §§ 5472, 
 2742 (prohibiting mortgagee to recover in ejectment "where the debt has 
 
206 Notes on Equity Jurisprudence 
 
 CHAPTER XXIV. 
 
 Mortgages — Deeds of Trust (Continued). 
 
 Page 356, § 657. Equitable mortgage by deposit of title 
 
 deeds. — The English doctrine in this respect, while upheld in 
 a few states, is very generally rejectd in America.^ 
 
 Page 357, § 658a. Mortgage to secure future advances. 
 — A mortgage or deed of trust may be given, not only to secure 
 an existing debt, but to secure future, and even contingent, lia- 
 bilities. Not only may a definite sum be thus secured, but an 
 
 ' Bloomfield Bank v. Miller (Neb.), 70 Am. St. Rep. 381, where 
 the subject is fully discussed. 
 
 been paid"). But in the more recent case of Gravatt v. Lane, 121 
 Va. 44, the Virginia court has adopted, inadvertently as is be- 
 lieved, the 'lien theory' of the mortgage, in holding that an out- 
 standing deed of trust, unsatisfied, offers no impediment to the main- 
 tenance of ejectment by the debtor-grantor against an adverse tenant. 
 The Virginia case cited as authority, (Watkins v. Ward, 6 Munf. 38) 
 was the case of a satisfied trust — a wholly different situation. It is 
 an accepted theory that an action of ejectment by the former holder 
 of the legal title, may not be defeated by proof of an outstanding 
 satisfied trust. See Young v. Bradley, 101 U. S. 783; Robinson v. 
 Pierce (Ala.), 24 So. 984. But in the case under criticism the 
 trust was an unsatisfied one. Should the trustee of the unsatisfied 
 trust now bring ejectment against the prevailing plaintiff, the 
 court would be driven to hold that the trustee could not recover, in 
 spite of historical analogies in Virginia, and of the implication of 
 Va. Code 1919, § 5473, that in such case the trustee of a satisfied 
 trust shall not recover in ejectment against the mortgagor or grantor. 
 
 The lien theory of a mortgage or deed of trust, is supposed to have 
 originated in the so-called "Code States," where the question whether 
 title is legal or equitable is of little or no consequence. But the 
 question is a vital one in those states, as in Virginia, where the 
 distinction between law and equity, and legal and equitable titles, has 
 been rigidly maintained from earliest times. See the more recent 
 case of Grizzle v. Fletcher (Va.), 105 S. E. 457, where the Vir- 
 ginia court held that the equitable owner (and the mortgagor, or 
 grantor, in an unsatisfied mortgage is but equitable owner) of an 
 insurance policy, could not maintain an action at law thereon, because 
 of his merely equitable title — a highly technical but quite sound rul- 
 ing. 
 
 The conflict between the "legal title theory" and the "lien theory", 
 in the case of outstanding unsatisfied mortgages and Ideeds of trust, 
 is of special importance in actions on the case at law, for tortious 
 injury to the mortgaged property. If, in Virginia, for example, the 
 mortgagor or (grantor-debtor in a deed of trust) may maintain an 
 action at law against a railway company for the burning of fences or 
 houses, or forests, on the mortgaged estate, what defence may the 
 railway company make, when the mortgagee or trustee later institutes 
 his action for damages for the same injury, standing on his own 
 
Mortgage to Secure Future Advances 207 
 
 indefinite sum — e. g. any advances that the creditor may make 
 to the grantor within the next twelve months, or to indemnify 
 one against loss by reason of some act done or to be done on 
 behalf of the grantor. 
 
 If such an instrument be recorded, it is notice to subsequent 
 purchasers, and is good against creditors; that is, good for the 
 amount advanced thereunder up to the time that the party mak- 
 ing the advances has notice of such subsequent purchases or 
 liens. But it is generally held that recordation of such subse- 
 quent liens and encumbrances is not notice to the prior mortga- 
 gee — registry being notice to subsequent, not prior purchasers.^ 
 
 The same — when prior lienor must cease further ad- 
 vances. — ^While authorities are not uniform, yet by the bet- 
 ter rule if the making of further advances is optional with the 
 first creditor, he continues them at his peril after receiving no- 
 tice of a subsequent lien; but if further advances are obligatory 
 upon him under his contract with the debtor, then he may con- 
 tinue to make such advances, without detriment to his stipulated 
 preference; for all advances made and to be made, in spite of no- 
 tice of subsequent liens.* 
 
 legal title? This question becomes all the more important where the 
 injury done reduces the value of the security to a point below the 
 amount of the debt secured. 
 
 On the whole, this departure from ancient landmarks is to be dep- 
 recated as likely to open the door to innumerable difficulties in the 
 future, practical as well as theoretical. To illustrate: A executes to 
 T, a deed of trust, on his house and lot to secure B $20,000 — 
 the house worth $15,000 and the lot $10,000. By the negligence 
 of X, the house is destroyed by an explosion: Who, under the doc- 
 trine of Gravatt v. Lane, may sue at law for the destruction of the 
 house? If the debtor may sue and recover the full amount of damages 
 suffered, the creditor's rights are seriously impaired. If, on the 
 other hand, the trustee is the proper plaintiff, the rights of all par- 
 ties are properly protected, and ancient landmarks of the law are 
 preserved. How may we reconcile this conclusion with Gravatt v. 
 Lane? 
 
 ' See Jones on Mortgages, 364, 378; Driver fe/. McLaughlin (N. Y.), 
 20 Am. Dec. 655 and note; Didier v. Paterson, 93 Va. 534; note 11 
 Am. St. 'Rep. 288; Union Bank v. Milburn, etc., Co. (S. D.), 73 
 N. W. 527 (excellent opinion); post, n. to p. 378; Jones, Chattel Mort- 
 gages, §§ 94-98. 
 
 ' But doubtless the inferior creditor would have some sort of 
 equity to prevent further advances, Iby a bill filed for that specific 
 purpose. Any principle that would permit the debtor to continue 
 to draw the advances in defiance of later creditors, cannot be a 
 
208 Notes on Equity Jurisprudence 
 
 Mortgage oti after-acquired property. — As a mortgage 
 securing future advances by the creditor is valid, so there may 
 be a valid mortgage covering future property — that is property 
 thereafter to be acquired by the debtor. Such mortgages of chat- 
 tels thereafter to be acquired, in connection with a particular 
 business or location, are quite common — but the principle is 
 equally applicable to real property. 
 
 In such cases, the mortgage is invalid at law (save possibly as 
 an executory contract), since no title passes at the time of the 
 execution of the mortgage. But they are upheld in equity, as 
 valid equitable mortgages. 
 
 Being equitable only, the lien is inferior to the title of a bona 
 fide purchaser for value. 
 
 Whether the registry of such instruments is notice to sub- 
 sequent purchasers, depends upon the question whether the reg- 
 istry is authorized by the statute.* 
 
 Page 362, § 670. Who may redeem? — The question as to 
 who may redeem a mortgage, and the order of exercising this 
 right, stated in the Text, is of little practical importance in mod- 
 ern times, since on a bill to foreclose, a court of equity requires 
 a sale of the property and payment of the debt. We may say 
 in brief, that any person, who has an interest in the estate mort- 
 gaged, may redeem. 
 
 Page 367, footnote 1. Proceeding at law and in equity at 
 the same time. — It is a singular but well settled rule that one 
 who holds a mortgage for his debt may bring an action at law 
 for a judgment on the debt, and at the same time pursue his 
 
 sound rule of law. Creditors stand in the shoes of their debtor, 
 and are entitled to all of the debtor's rights. If the debtor may claim 
 the advances under his mortgage-contract why may not a later 
 creditor, substantially subject such advances, by equitable garnishment, 
 expressed in the form of an injunction against the debtor's further 
 increasing his indebtedness to the first lienor? 
 
 ' See Braxton v. Bell, 92 Va. 229; 5 Va. Law 'Reg. 873; 30 Am. and 
 Eng. Enc. Ij. 916; Hickson Lumber Co. v. Gay Lumber Co. (N'. C.), 
 63 S. E. 11015, 21 L. R. A. 843, n; Jones, Chattel Mortgages, §§ 138- 
 169 (at law), 170-175 (in equity). Clauses covering after-acquired 
 property are very commonly inserted in mortgages by railroad com- 
 panies to Isecure an issue of bonds, and are quite generally upheld in 
 equity. Jones, Chattel Mortgages, § 175. The same is true of 
 mortgages by industrial companies covering plant and equipment. 
 
Mortgages — Statute of Limitations 209 
 
 remedy in equity for a foreclosure. Of course, the creditor is 
 entitled to but one satisfaction.^ 
 
 Page 368, § 681. Statute of limitations. — In Virginia, a 
 mortgage or deed of trust is barred in twenty years from ma- 
 turity, except where such instruments are executed by corpora- 
 tions. The same statute makes provision for the extension of 
 mortgages and deeds of trust, by endorsement on the margin of 
 the deed book where recorded. Va. Code 1919, § 5827. 
 
 Page 368, § 683. Debt barred while mortgage alive. — The 
 
 doctrine of the Text here stated is well settled; that is, that al- 
 though the debt secured may be barred at law by the statute of 
 limitations, yet if the mortgage securing it be not barred, the 
 creditor may still proceed upon his mortgage. 
 
 On a debt secured by mortgage, the creditor has two remedies, 
 namely, (1) an action at law on the principal obligation (note or 
 bond) for judgment, and (2) foreclosure in equity. The fact 
 that he is barred as to the one, does not afifect his remedy upon 
 the other. So, if instead of a mortgage, the instrument of se- 
 curity had been a deed of trust, the fact that the note secured is 
 barred by the statute, does not affect the right of the creditor 
 to call upon the trustee to execute the trust by a sale of the prop- 
 erty and the payment of his debt. 
 
 Of course, it would be otherwise, if the effect of the statute of 
 limitations were to invalidcUe the debt. But it is elementary 
 that the effect of the statute of limitations is only, as it were, 
 to shut the doors of the courthouse on the creditor, in the pro- 
 ceeding mentioned in the statute. The debt is still an existing 
 debt, though barred; and if the creditor have other means of 
 realizing thereon, he may resort to such means.® 
 
 ° The Text footnote cites the authorities. Priddy v. Hartsook, 
 81 Va. 67. 
 
 " Coles V. Withers, 33 Gratt. 186; Gibson v. Green, 89 Va. 524; 1 
 Va. Law Reg. 854. So far is this doctrine carried, that it was held 
 in a recent New York case, that though the mortgage itself be barred 
 by the statute of limitations, yet if it contain a power of sale, the 
 mortgagee may enforce his claim by exercising the power of sale-^ 
 since, as held, the effect of the statute is merely to bar a bill to fore' 
 close. House v. Carr r(N. Y.), 78 N'. E. 171. See Guldfrank v. 
 Young, 64 Tex. 432; Loney v. Courtney (Neb.), 39 N'. W. 616; 5 
 Mich. Law Rev. 136. This will, however, depend upon the peculiar 
 language of the statute. 
 
210 Notes on Equity Jurisprudence 
 
 CHAPTER XXV. 
 
 Registry of Mortgages and Deeds of Trust (Concluded). 
 
 Section 687. Mortgage with power of sale.— We have 
 discussed this sort of mortgage, in a previous chapter. 
 
 Page 377, § 698. "Tacking."— In view of the registry sys- 
 tem in America, this is of no particular importance with us. 
 
 Page 378, § 698 (last paragraph)— The effect of registry as 
 notice. — The statement of the Text that the recording of the 
 instrument is constructive notice of its existence "to all the 
 world," is one frequently found in the books, and occurs in 
 numerous places in the Text. It is a loose statement, and this is 
 a good place to present the correct doctrine. 
 
 Registry of an instrument made in due form of law is notice 
 to all the world, so far, and so far only, as may be necessary to 
 protect the beneficiary under the registered instrument, against 
 subsequent competing claims, or other (though prior) claims de- 
 clared by the statute (because of non-registry or otherwise) to 
 be inferior to the registered instrument. That is to say, all per- 
 sons who, after such registry, acquire the property in question, 
 or claims against the same, do so with constructive notice of the 
 prior registered instrument so far as concerns rights secured or 
 vested under that instrument. 
 
 In short, no one may set up notice by registry except the 
 beneficiary in the registered instrument and his privies in es- 
 tate. It is to the latter, and the latter alone, that registry is no- 
 tice to "all the world." 
 
 The same — illustrations. — This can be made plainer by ex- 
 amples : A has a mortgage on B's house and lot, duly recorded. 
 B now takes out a fire policy on the house, containing a provision 
 that if there be a mortgage on the property, imthout notice to 
 the company, the policy shall be void. The house subsequently 
 burns, and the company sets up breach of this condition. B 
 replies that registry of the mortgage was notice to the insurance 
 company. Such contention must fail, since the rights of the 
 mortgagee, whose interests registry was intended to protect, 
 
Equitable Liens 211 
 
 were in no way involved in the controversy.^ So again, where 
 one takes a lien by mortgage or deed of trust and duly records it, 
 he is not affected with notice of subsequent encumbrances or 
 alienations of the same property, though duly recorded.^ 
 
 So, the grantor in a duly registered conveyance or incum- 
 brance, who, concealing its existence, induces a second person 
 to purchase the same property from himself, may not, in an ac- 
 tion by the defrauded purchaser to recover damages for the 
 fraud, plead the registry of the earlier instrument as notice to the 
 plaintiff of its existence, and, therefore, that he was not in fact 
 deceived. The constructive notice with which the second pur- 
 chaser was charged, was not for the grantor's protection, but 
 only for the protection of the first purchaser under the registered 
 instrument. 
 
 CHAPTER XXVI. 
 
 Equitable Liens. 
 
 Page 383, § 712. Equitable liens. — The definition, or de- 
 scription, of an equitable lien in the Text, is scarcely correct, 
 confined, as the definition is, to liens arising out of express con- 
 tract. There are numerous well rcognized instances of equitable 
 liens, where there was no contract whatsoever for such a lien, 
 but where the lien is recognized because good conscience de- 
 mands it — for example, a vendor's lien on real estate, after con- 
 veyance made, already discussed. Other illustrations will ap- 
 pear in the following paragraphs. 
 
 Banker's lien — (1) at law. — It is a settled principle that 
 a bank has a lien on the depositor's general balance, to secure 
 any debt due it by the depositor. This lien exists at law, where 
 the depositor's debt to the bank is already due. Here the bank 
 
 ' Trader's Insurance Co. v. Cassell (Ind.), 56 N. E. 259. 
 
 ' Bridgewater, etc., Mills v. Strough, 98 Va. 721. See also Hulvey 
 V. Hulvey, 92. Va. 182, 187; Lynchburg, etc., Co. v. Fellers, 96 Va. 
 337; Vanorden v. Johnson, 1 McCarter (N. J.) 376, 82 Am. Dec. 354 
 and note; 6 Va. Law Reg. 58, 632; ante, n. to § 658. 
 
212 Notes on Equity Jurisprudence 
 
 simply sets off the amount due it against its debt due the deposi- 
 tor — that is, charges it up to the depositor's account. 
 
 But if the debt to the bank be not due, it cannot be set off at 
 law, since set-off is in the nature of a cross-action, and no ac- 
 tion, direct or cross, can be brought until the claim on which it 
 is based has matured. In such case, the bank will be driven into 
 equity. 
 
 The same — (2) in equity. — The rules enforced in equity 
 are these: (1) Depositor's debt to bank mutured. — Here, the 
 remedy at law is plain, as shown in the paragraph preceding. 
 The bank simply sets off its debt against the depositor's balance 
 — or, in banking phrase, merely "charges up" the note, check, 
 overdraft, or other form of debt, to the depositor's account, on 
 its books. Here, then, equity does not interfere. 
 
 (2) Depositor's debt to bank not matured. — (a) Debtor-de- 
 positor solvent: Here the debtor-depositor being solvent, there 
 is no need of equitable intervention; the bank must honor the 
 depositor's checks to the full extent of his balance, and await 
 the maturity of its own debt against the solvent depositor. 
 
 (b) Debtor-depositor insolvent : This is a situation where 
 equity illustrates the superiority of its principles and practices 
 over those of the law. The debtor is insolvent; the bank holds 
 his note, not yet due, and, therefore, no suit may be brought 
 upon it; the depositor has a balance on his deposit account with 
 the bank, which balance he now proposes to draw out without 
 making provision for payment of the note to fall due in the fu- 
 ture — or, some other creditor of the depositor has served a gar- 
 nishment on the bank, in the effort to subject the balance to his 
 own debt. It is clear, here, that if the bank pays out the depos- 
 itor's balance, its own debt will be lost, because of the deposi- 
 tor's insolvency. It is equally clear that in equity and good con- 
 science the bank has first claim to the balance in its hands. Here, 
 therefore, equity interposes, and gives the bank a lien on the 
 balance, for the full amount of its debt, {i. e., a right to charge 
 up the immature note, or other claim, to the depositor's account), 
 with such rebate of unearned interest, or discount, as the situa- 
 tion demands.! 
 
 ' Thomas v. Exchange Bank (Iowa), 68 N. W. 780; note 47 Am. 
 St. iRep. 584; Ford v. Thornton, 3 Leigh 695; Feazle v. Dillard, 5 
 
Banker's Lien 213 
 
 The same — lien not confined to banks. — The principle of 
 this equitable banker's lien is by no means confined within the 
 narrow compass of the banking business. It is equally applica- 
 ble to all other persons, where a like situation is presented. 
 Thus, if A owes B $500, already due, and B owes A $500 (or 
 more, or less) not yet due, and B is insolvent, A will be per- 
 mitted, in equity, to set off his claim, in spite of its immaturity. 
 
 Page 384. Other equitable liens — illustrations. — The list 
 of illustrations following is by no means exhaustive. Indeed, 
 the compilation of an all-inclusive catalogue of such liens is im- 
 possible. As before indicated, such a lien will be recognized in 
 all cases where equity and good conscience demand it, and where 
 its enforcement will not violate superior rights. 
 
 Thus, where one co-tenant makes repairs to the common prop- 
 erty, necessary for its preservation, he has an equitable lien on 
 the property for contribution from his co-tenant. ^ 
 
 So, where a life policy is payable to several beneficiaries, one 
 of whom pays the premiums for several years, so as to keep the 
 policy alive, the person so paying premiums has an equitable 
 lien on the proceeds of the policy for the re-payment of his 
 premiums.* 
 
 In Williamson v. Gayle,* a farmer who had kept a mare for 
 another, was held entitled to an equitable lien on the animal as 
 against the attaching creditors of the owner, not only for her 
 keep, but for a stud-fee and other expenses incurred by the 
 farmer in that behalf — ^though the farmer, being neither a liv- 
 eryman nor an agister, was not entitled to a lien at law. 
 
 In Dulaney v. Willis,^ A borrowed money of B, and executed 
 what was thought to be a deed of trust to secure the debt. By 
 some misake, the name of the trustee was omitted, and hence no 
 
 Leigh 30; Scott v. Armstrong, 146 U. S. 499; n. 78 Am. St. Rep. 
 431-436; 1 Morse on Banks and Banking, 329; 1 Va. Law Reg. 780. 
 The right seems to have been denied in Merchants National Bank 
 V. Robinson '(Ky.), 29 L. 'R. A. 760 — a case in which the facts were 
 somewhat peculiar, but the decision in which is believed to be 
 unsound. 
 
 ' Alexander v. Allison, 79 Ky. 148. 
 
 ' Stockwell -V. Mutual Life Ins. Co. (Cal.), 73 Pac. 833. 
 
 * 7 Gratt. 152. 
 
 ' 95 Va. 606. 
 
214 Notes on Equity Jurisprudence 
 
 legal title passed out of the grantor, since there was no grantee. 
 It was held that a good equitable lien resulted. 
 
 So, it is a settled principle of equity, as we have seen, that 
 where a purchaser of an estate pays the whole or any part of 
 the purchase money, and the vendor is unable to make title, the 
 purchaser has a lien on the vendor's interest in the property for 
 the purchase money so paid. 
 
 Again, where an attorney has a valid contract with a client 
 for a certain percentage of the recovery in a suit, the object of 
 which is to recover money, and the recovery is had, and the 
 client, in the course of the proceeding, purchases the debtor's real 
 property from the court, paying therefor with the fund so re- 
 covered by the attorney, the latter has an equitable lien on the 
 land so purchsed.® 
 
 A particularly striking illustration of this lien is found in a 
 recent case in the United States Supreme Court.'' Here, a firm 
 in New York, by arrangement with their foreign correspondent, 
 deposited in their own safety deposit box certain negotiable 
 stocks and bonds, indorsed in blank or payable to bearer, to se- 
 cure drafts to be drawn by them from time to time on the for- 
 eign correspondent. The package of securities was so marked 
 as to indicate that it was held in escrow. By consent of the for- 
 eign creditor, the firm retained, and from time to time exercised, 
 the privilege of withdrawing portions of the securities and sub- 
 stituting others. On the bankruptcy of the debtor-firm, the for- 
 eign creditor was held to have an equitable lien, in preference to 
 the trustee in bankruptcy. Here there was no lien ait law, be- 
 cause of the retention of the securities in the debtor's own pos- 
 session. 
 
 Equitable liens, continued — assignments — orders on a 
 fund. — The principles applicable to the assignment of funds in 
 the hands of a third person {e. g. a debt), and of orders drawn 
 on such funds {e. g. on the debtor) may be thus briefly stated: 
 
 (1) "Order" and "assignment." — An order on a designated 
 fund in the hands of another in favor of a third person, though 
 
 ° Fitzgerald v. Irby, 99 Va. 81. See also Ruffners v. Putney, 12 
 Gratt. 541. 
 ' Sexton 7'. Kessler, 325 U. S. 90. 
 
Equitable Liens — Orders on a Fund 215 
 
 unaccepted, operates as if the drawer of the order had used 
 words of assignment. That is, where the creditor. A, draws an 
 order on his debtor, B, directing the latter to pay to C the whole, 
 or a part, of the debt, the order will operate as if A' had used 
 words of assignment, instead of the language of request or com-: 
 mand. Hence "pay C the $100 you owe me" or ("$S0 out of the 
 $100 you owe me") operates as if the language had been "I 
 hereby assign to C the $100 owed me by B" (or $50 out of the 
 $100 due me by B"). 
 
 (2) Effect of such orders and assignments. — As both the or- 
 der and the assignment operate alike, the question now is. How 
 effective is either, in transferring title to the chose to which they 
 refer ? The answer depends on the following principles : 
 
 (a) Assignment of the whole fund: There is no difficulty 
 here — whether the transfer be in the form of an assignment or 
 of an order. Such an assignment or order for the whole of the 
 fund, will transfer complete ownership (on due notice to the 
 debtor), whether consented to or accepted by the debtor or not. 
 Such assignments are valid, even at law.^ 
 
 (b) Assignment of part of the fund: Courts of law do not 
 permit such partial assignments— since they may subject the 
 debtor to several suits, whereas he was originally liable to but 
 on<e. Hence, assignment of a portion of a debt only — or orders 
 "payable out of" a designated fund, — not consented to by the 
 debtor (by acceptance or otherwise) are invalid at law. 
 
 Equity on the other hand, will treat such a transaction as valid 
 — either as an assignment in fact {pro tanto) or, through its doc- 
 trine of equitable liens, as operating as such a lien on the fund 
 in question. The objection on which the law court refuses rec- 
 ognition of the partial assignment is eliminated in equity, since 
 that court may settle the whole controversy in a single suit. 
 
 The assignment of a part of a debt, or an order "payable 
 out of" a designated debt or fund, not consented to by the deb- 
 tor, is therefore, invalid at law, but valid in equity.^ 
 
 ' The student is reminded that he has learned in his studies of 
 negotiable instruments that this principle is not applicable to bank 
 
 " S. V. R. R. Co. V. Miller, 80 Va. 831; Heulings v. Heulings 
 (W. Va.), 18 S. E. 630; Chesapeake, etc., Ass'n v. Coleman, 94 Va. 
 433. But a mere "promise to pay out of" a particular fund will not 
 
216 Notes on Equity Jurisprudence 
 
 Page 386, § 716. Creditors stand in shoes of the debtor. 
 
 — We have already seen ^^ that a purchaser and a creditor stand 
 in different positions — the former putting out his money on the 
 specific property purchased, while the creditor trusts to the per- 
 son of the debtor. But that if the creditor takes a mortgage, or 
 pledge, or other specific security, he likewise puts his money out 
 on the specific property, and, in law, is a purchaser pro tanto.^^ 
 If the creditor does thus stand in the shoes of his debtor, eq- 
 uitable liens or claims held by others against the property of the 
 debtor are good as against the creditor, whether he has notice 
 of them or not — on the principle that being good against the 
 debtor they must be good against those who stand in his shoes. 
 The Text places creditors and purchasers on the same footing, 
 and to this extent is incorrect. ^^ 
 
 ordinarily have this effect. 'Rogers v. Hosack, 18 Wend. 319; Hicks 
 V. Roanoke iBrick Co., 94 Va. 741; Christmas v. Russell, 14 Wall. 
 69. Compare Fourth St. Nat. Bank v. Yardley, 165 U. S. 634. An 
 assignment of a fund not yet in existence, but txpected to come into 
 existence in the future, cannot operate at law, but is a good equitable 
 assignment. Chesapeake Co. v. Coleman, supra. 
 
 " Ante, note to p. 130. 
 
 " Post, note to § 904. 
 
 " Of course, if there is a statute requiring such equitable liens to 
 be registered, and rendering them void, not only as to purchasers but 
 creditors as well if not registered, then the creditors stand on the 
 same footing with purchasers. See authorities heretofore cited ante, 
 note to p. 130; Borst v. Nalle, 28 Gratt. 433; Coldiron v. Asheville 
 Shoe Co., 92 Va. 364; 6 Va. Law Reg. 645; 7 Va. Law Reg. 343. 
 
Creditors' Bills 217 
 
 CHAPTER XXVIA. 
 
 Creditor's Bills — Suits to Enforce Payment of Debts. 
 
 [Memorandum. — With § 719 of the Text, entitled "Creditors 
 Bills," a new chapter should begin. We have numbered this 
 new chapter XXVIA]. 
 
 Page 387, § 719. Ordinary remedy of creditor. — The rem- 
 edy of a creditor who holds an ordinary pecuniary claim against 
 his debtor, not in rem but in personam only, is generally at law, 
 and not in equity. Nor is this rule altered by the fact that the 
 creditor has a multitude of dissimilar claims against his debtor; 
 nor by the fact that there is a multitude of creditors having 
 claims against the same debtor. The student must carefully note 
 the general rule, in order to appreciate the peculiarity of the 
 creditors' bill, now to be noticed. 
 
 Creditors' bill — in rem proceeding, — The peculiarity of a 
 creditors' bill is that it is rather a proceeding in rem, than in 
 personam. Its purpose is not to obtain a personal decree against 
 the debtor, but to subject property of the debtor to the payment 
 of the debt, by virtue of some existing lien or other in rem claim, 
 on which there is no remedy ait law.''- 
 
 The same — general creditors — ^laen creditors. — A gen- 
 eral creditor has no right to proceed against his debtor's prop- 
 erty, legal or equitable, as a rule, until he has proceeded against 
 the person, by obtaining judgment at law — or has otherwise re- 
 duced his claim from one in personam to one in rem. If then 
 the assets to be subjected are equitable and not legal, or the le- 
 gal remedy is inadequate, a case for the creditors' bill is pre- 
 sented. 
 
 The same — why general creditors may not maintain 
 bill.— It is a settled principle both at law and in equity (save 
 where the rule is changed by statute, as has been done in a few 
 
 ^ See Spaden v. Davis, 2 Johns. Ch. 280; 3 Kent's Com. 483; Hol- 
 lins V. Brierfield Coal Co., 150 U. S. 371; Va. Passenger & Power 
 Co. V. Fisher, 104 Va. 121. 
 
218 Notes on Equity Jurisprudence 
 
 cases), "that every debtor, until his property is specifically bound 
 to the satisfaction of his debt by his own agreement, or by some 
 judicial or other proceeding, has an absolute right to dispose of 
 it at pleasure; a power which no tribunal whatever has author- 
 ity to control or limit. The obligation of a debtor is purely per- 
 sonal, and in no way affects his property or any portion of it. 
 To this rule no solitary exception can be found, nor can one ex- 
 ist, until the principles of our law are so changed as to author- 
 ize courts of equity to administer the estates of living persons 
 as if they were dead."^ 
 
 It follows, therefore, that if the claims asserted in a creditor's 
 bill are not already specific charges on the property of the debtor, 
 there must first be judgment at law, followed by execution 
 and return of "no effects." 
 
 The same. — But where the claim has thus been reduced to 
 one in rem, either by contract or by hostile proceedings at law, 
 and there are no legal assets upon which execution at law may be 
 levied, but equitable assets exist, then a court of equity will take 
 hold of the res and dispose of it for the benefit of such creditors 
 as have fixed claims thereto. 
 
 In such a proceeding, inasmuch as the court is to dispose of 
 the whole res, it follows that all other in rem creditors and other 
 persons who have in rem claims thereto, are proper parties to 
 the suit. For this reason, not only may one creditor file such 
 a bill, in a proper case, but any number of creditors may unite 
 in the same bill, howsoever diverse their claims, provided the 
 claims are all against the same property of the same debtor. 
 
 Numerous creditors are permitted thus to unite in a single 
 suit, not so much for the purpose of preventing a multiplicity 
 of suits, as from the convenience, if not the necessity, of having 
 a convention of the creditors in order to fix the priorities of 
 their respective conflicting claims, and to distribute the assets 
 of the common debtor among them in accordance with their 
 several rights.* 
 
 The same — illustrations. — ^Examples of proper cases for 
 creditors' bills, would be: 
 
 ' Green, J., in Tate v. Liggatt, 2 ILeigh 84, 99. 
 ' Almond v. Wilson, 75 Va. 613. 
 
Creditors' Bills 219 
 
 1. Debts against a decedent. At death, all the debts constitute 
 liens on the entire estate of the decedent, real or personal, and 
 any number of creditors may unite in a single suit in chancery to 
 have the estate administered and their debts paid; 
 
 2. Judgment liens on real property, where, as in Virginia (it 
 is otherwise in many States) execution cannot be levied on real 
 property. 
 
 3. Mechanics' liens on real property; 
 
 4. Debts secured by mortgage; or by deed of trust where, by 
 reason of conflicting claims of creditors as to their respective 
 priorities, the aid of equity is required; 
 
 5. Claims against insolvent corporations after reduction to 
 judgment ; 
 
 6. Suits to set aside fraudulent conveyances — after judgment, 
 €xcept where statute otherwise provides, as in Virginia.* 
 
 7. To enforce equitable liens; or constructive trusts; and to 
 reach equitable assets generally — as wife's equitable separate es- 
 tate — a partner's interest in a copartnership — a legacy in hands 
 of the executor — the mortgagee's interest under a mortgage — 
 the mortgagor's equity of redemption — the trust estate of a 
 cestui in real or personal property, etc.^ 
 
 Page 288, § 722. The same — Is judgment always neces- 
 sary? — Of course if there be a lien already (for example, by 
 contract or by construction of law, or a trust in the creditor's 
 favor) no judgment is necessary to sustain a creditor's bill; 
 T)ut where there is no such pre-existing lien, and no judgment, 
 a court of equity will not take jurisdiction of a creditors' bill 
 merely because judgment and execution at law would be una- 
 vailing. The Text in this section seems to indicate the contrary. 
 The case cited as authority" is scarcely authority for the propo- 
 sition. If the claim be a legal one, it is the right of the defend- 
 
 * See ante, "Fraudulent Conveyances."' 
 
 ' This list is not exhaustive, but merely illustrative. On the gen- 
 eral subject, see note 90 Am. Dec. 388, 300; note 63 L.. R. A. 673; 
 note to Suckley v. Rotchford, 12 Gratt. 72 (Va. Rep. Ann.); note 
 to § 736, infra. 
 
 " Case V. Beaureguard, 101 U. S. 688. 
 
220 Notes on Equity Jurisprudence 
 
 ant to insist that justice of the claim be first established by the 
 verdict of a jury in a law courtJ 
 
 The same — when judgment not necessary — exceptional 
 cases. — But where the reason ceases the rule ceases. Hence 
 where, from the peculiar circumstances of the particular case, 
 no judgment at law can be obtained — e. g. where the debtor is a 
 non-resident, and the local attachment statutes do not provide a 
 remedy — then the general creditor may proceed with his cred- 
 itor's bill, without the necessity of a judgment at law.* 
 
 Page 389, § 723. Priority of creditors. — The doctrine or 
 the Text that where the creditor or creditors sue merely for 
 their own benefit — and not, as is usual, "on behalf of themselves 
 and all other creditors similarly situated, who will come in and 
 contribute to the costs of this suit" — such plaintiffs will be en- 
 titled to a lien from the filing of the bill ^^ — a lien prior to other 
 non-suing creditors — is a sound principle, but with the obvious 
 qualification that such lien, if arising only from the filing of the 
 bill, will be inferior to other valid liens already affecting the 
 property when the bill is filed.^ 
 
 So the further statement in the same section of the Text, that 
 if the plaintiff sues in behalf of himself ''and all other creditors 
 who may elect to come in," creditors who accept the invitation 
 and do come into the suit are entitled to share pari passu in the 
 fund, is subject to the same qualification, namely, that all valid 
 liens already existing at the time of the filing of the bill — 
 whether such liens are in favor of the original plaintiff in the 
 
 ' Freedmans Sav. Bank v. Earle, 110 U. S. 710; Gates v. Allen, 149 
 U. S. 449; Overmire v. Hayworth (Minn.), 31 Am. St. Rep. 660, and 
 note; Tate v. 'Liggatt, 3 ,'Leigh. :84; Wallace v. Treakle, 27 Gratt. 479; 
 Va. Pass. & Power Go. v. Fisher, 104 Va. 121; Mixon v. Dunklin, 48 
 Ala. 455; Parish v. L,ewis, Freeman (Miss.) 299. See Donovan v. 
 Finn (N. Y.), 14 Am. Dec. 531, for an illuminating discussion of 
 the question of equity jurisdiction over matters of debtor and cred- 
 itor. Gompare McMillan v. Knapp, 76 Ga. 171, 2 Am. St. Rep. 29. 
 
 ' Merchants Nat. Bank v. Paine, 13 R. I. 592 (full discussion); 
 Farrar v. Haselden, 9 Rich. Eq. (S. G.) 331; Pendleton v. Perkins, 
 49 Mo. 565; O'Brien v. Goulte, 2 Blackf. 421. See Peay v. Morrison, 
 10 Gratt. 149. 
 
 ^ Under Virginia Gode 1919, § 5186 "from' the time of brining 
 his suit." 
 
 ° Wallace v. Treakle, 27 Gratt. 479. 
 
Creditors' Bills 221 
 
 suit or of subsequently petitioning creditors who come in — will 
 retain their former priority. 
 
 In other words, the principle of sharing ratably in the fund 
 applies only to the rare cases of liens arising ^31 virtue of filing 
 the bill and not to prior existing liens. ^^ 
 
 Page 390, § 724. Creditor's bill to set aside fraudulent 
 
 conveyance. — In the absence of statute, such a suit may be 
 brought only after judgment obtained against the fraudulent 
 debtor. But, as we have heretofore seen, in Virginia, by stat- 
 ute, the creditor may proceed before obtaining judgment, and 
 even before his debt is due.^^ 
 
 Page 391, § 726. Subjecting equitable interests. — Atten- 
 tion is called to the principle announced in this section that where 
 the debtor has equitable property or interests, upon which an ex- 
 ecution at law cannot be levied, the remedy is by creditor's bill 
 in equity, after putting the claim in judgment, unless it is al- 
 ready in the nature of a lien or trust. The student will notice 
 that legal executions cannot be levied on equitable interests, and 
 that the equity of redemption of the debtor is an equitable in- 
 terest and can only be reached in equity. 12 
 
 Page 391, § 727. Property reached by creditor's bill — 
 real property. — In most of the states, real property is as much 
 
 " Wallace v. Treakle, supra — a case where the fund was applied 
 (1) to existing liens; (2) to liens of plaintiffs in the bill (who sued 
 for their own benefit only) — liens originating by the filing of the 
 bill; and (3) to creditors who subsequently came into the suit. In 
 Johnson v. Waters, 111 U. S. 640, 673-674, the plaintiffs sued on be- 
 half of themselves and all other creditors who might elect to come 
 in. There being no liens prior to the filing of the bill, it was held that 
 the fund should be distributed pro rata among all the creditors, 
 whether original plaintiffs or those coming in later. A suit to set 
 aside a fraudulent conveyance before judgment recovered (as per- 
 mitted by the iVirginia statute) is an illustration of the case of the 
 lien 'arising only from the filing of the suit.' 
 
 " Va. Code 1919, § 5186. In the absence of statute, see Gates v. 
 Allen, supra. 
 
 " The Court of Appeals of Virginia seems to have held otherwise, 
 by inference, in Spence v. Repass, 94 Va. 716, although the rule is 
 settled by a line of cases in Virginia and other states. The ruling 
 was expressly made in Claytor v. Anthony, 6 Rand. 285. See Spence 
 V. Repass criticised, 4 Va. Law Reg. 255. See Mr. Freeman's elaborate 
 discussion of the subject, in note 97 Am. Dec. 303-15. See especially, 
 Van Ness v. Hyatt, 13 Peters (U. S.) 294; supra, note to § 719. 
 
222 Notes on Equity Jurisprudence 
 
 subject to levy by execution at law as is personalty; but by a pe- 
 culiar rule existing in Virginia, real property cannot be levied on 
 under execution. The method of procedure is first to obtain a 
 judgment against the debtor at law; this by force of the statute 
 becomes a lien on all the debtor's real property. In order to sub- 
 ject this, a creditor's bill must then be filed in equity; and by 
 another peculiar rule — arising from the language of the statute — 
 such bill may be maintained, without issuing execution, or ex- 
 hausting personal property — contrary to the general rule that a 
 creditor's bill cannot be maintained where there is a remedy at 
 law.'^^ 
 
 Choses in action — garnishment — "trustee process." — 
 
 The Text mentions numerous choses in action which may be 
 reached by creditors's bill, because of the impossibility of sub- 
 jcting these by execution at law. But in most states there now 
 exist statutes known as Garnishment Statutes, by means of 
 which, choses in action in the nature of liquidated debts, may be 
 reached at law. Under these statutes, the creditor has a sum- 
 mons issued against his debtor and against the garnishee (debtor 
 of his debtor), and on proof of a debt due by the garnishee, the 
 creditor is entitled to a judgment requiring the latter to pay the 
 debt, or so much thereof as is owed by the judgment debtor, to 
 the plaintiff creditor, instead of to the original debtor. i* 
 
 In Virginia, by statute, an execution is a lien on all choses in 
 action belonging to the debtor, from the time of issuing the exe- 
 cution, though from their nature they are incapable of being lev- 
 ied on.i^ Certain exceptions are made for the protection of 
 innocent third persons. 
 
 We shall study the creditors' bill in more detail in connection 
 with Equity Procedure. 
 
 The student will observe that we have now completed the first 
 grand division of equity jurisprudence, as made by our author 
 at the outset, namely. Equitable Subject-matter, and that we now 
 enter upon the second division, namely, Eqititable Remedies. 
 
 " Va. Code 1919, §§ 6470-6472; Price v. Thrash, 30 Gratt. 513; 
 Stovell V. Border Grange Bank, 78 Va. 188. 
 " Va. Code 4919, § 6510. 
 "^ Id. §§ 6501-6502. 
 
Specific Performance 223 
 
 CHAPTER XXVII. 
 
 Specific Performance.^ 
 
 Page 397, § 733. Foundation of specific performance of 
 contracts for sale of real property. — Probably stronger rea- 
 sons than those assigned by our author, for the exercise of the 
 jurisdiction to require specific performance of contracts for the 
 purchase and sale of real property, are: 
 
 (1) Not only because damages are generally inadequate to 
 compensate the vendee for the breach of such a contract, but be- 
 cause of the peculiar measure of damages prevailing in many 
 states for the resulting injury to the vendee. This rule (in the 
 absence of fraud), denies to the disappointed vendee damages 
 for the loss of his bargain. He may not recover (save in ex- 
 ceptional cases) the difference between the contract price and 
 the market value, as in the case of a broken contract for the sale 
 of personal property — but nominal damages only. There seems 
 no sound reason for such a rule, but its existence prevails 
 widely.^ 
 
 (2) Because nothing else than specific performance will sat- 
 isfy the buyer's plans, purposes and tastes — as no other lot or 
 parcel, in conformation, location, surroundings and outlook, and 
 other features, is substantially the same as that contracted for. 
 
 Page 401, § 740. Implied warranty of title. — The student 
 will carefully note that under an executory contract to convey 
 real property, (but not under an executed conveyance) there is 
 always, in equity, an implied warranty of title, though not men- 
 tioned in the contract — it being a settled rule of equity never to 
 force a bad title upon an innocent purchaser.^ 
 
 Indeed, as before noted in connection with the topic of Mis- 
 take, not only will specific performance be refused for defect 
 
 ' For an excellent compendium of the essentials of a case for specific 
 performance, see 3 Pomeroy's Eq. Jurisp. 1404, n. 
 
 " See 3 Sedgwick on Diamages l(9th ed.), 101, et seq; Stuart v. 
 Pennis, 100 Va. 612, 8 iVa. Law Reg. 564, n; id. 764. 
 
 ' Christian v. Cabell, 23 Gratt. 8; ante, note to page 243; note, T 
 L. R. A. (N. :S.) ^45. As to what a "marketable title" is, see Sachs v. 
 Owings, 121 Va. 162. 
 
224 Notes on Equity Jurisprudence 
 
 of title in such case, but the court will give the vendee affirma- 
 tive relief, either by setting aside the sale and requiring a return 
 of the purchase money already paid, or decreeing compensation 
 for the defect, as may seem just. 
 
 Page 402, § 742. Signature. — Observe that the contract 
 need only be signed "by the party to be charged;" that is, the 
 defendnt. . Where A signs a written contract, agreeing to sell 
 Blackacre to B, who does not sign, but who orally accepts, B 
 may maintain a bill for specific performance against A, because 
 the contract is signed by the "party to be charged," namely, A ; 
 but A may not maintain such a bill against B, because the con- 
 tract is not signed by the party to be charged.* 
 
 Page 406, § 750. Specific performance discretionary. — 
 
 The most striking feature of the remedy of specific performance 
 is, that it is not regarded as a strict right which the court is 
 bound to enforce, but as an extraordinary act of grace on the 
 part of the court, to be granted only where the plaintiff makes 
 out his case fully, and there is not only no acttial fraud or mis- 
 take, but there is no hardship or oppression, even though these 
 do not amount to legal or equitable wrong. We have heretofore 
 seen that a court of equity is accustomed to lay terms upon the 
 plaintiff as a prerequisite to relief, in any case where this seems 
 necessary to do complete justice. This is peculiarly so in bills for 
 specific perfiormanice.S' 
 
 Page 408, § 753 (second paragraph). Duty of purchaser 
 to investigate. — The doctrine of Slaughters v. Guison, here 
 stated, is no longer the law.^ 
 
 Page 410, §§ 755-6. Mistake.— The subject discussed in 
 these sections, namely, whether equity will correct a mistake in 
 a written contract for the sale of real property, by inserting 
 
 " This is more distinctly brought out in the Text, § 758. See 
 Central Land Co. v. Johnston, 95 Va. 233; Cummins v. Beavers, 103 
 Va. 230; 6 L. R. K. (N. S.) 397, n. 
 
 " IngersoU v. iPond, 108 Va. 179; Colonna, etc., Co. v. Colonna, 108 
 Va. 330; Barnett v. Cloyd, 125 Va. 546; Bonaghan v. Maloney (Mass.), 
 128 Am. St. Rep. 378, and full note. 
 
 ° See foot note 2, page 269 of Text, and our note thereto, anU. 
 
Specific Performance — Mutuality 225 
 
 something omitted, on merely oral proof, has been heretofore 
 fully discussed^ 
 
 Page 411, §§ 757-758. Mutuality of contract.— As we have 
 just seen in note to sec. 742, the written contract need be signed 
 by the defendant only, and oral acceptance by the plaintiff is 
 sufficient. The Text considers this as an exception to the rule 
 requiring mutuality of obligation. As a matter of fact, it does 
 not constitute an exception, since the effect of the statute of 
 frauds is not to render the contract void, but merely nonrcn- 
 forceable. It touches the evidence and not the right. Hence, 
 where the contract is signed by the defendant only, and is orally 
 accepted by the plaintiff, we have coniplete mutuality of obliga- 
 tion. The non-signing party is as much bound as the signing 
 party, but the non-signing party has the statutory evidence of 
 his right, whereas the signing party has no such evidence. It 
 follows that the apparent lack of mutuality is not in the obliga- 
 tion, but in the remedy. The circumstance, however, that the 
 remedy becomes mutual the moment the non-signing party at- 
 tempts to utilize it, supplies the required mutuality of remedy. 
 By filing his bill he becomes as firmly bound as the defendant. 
 Hence, while the Text reaches the right conclusion, its reasoning 
 is not quite satisfactory.''* 
 
 Mutuality of remedy. — An important principle in connec- 
 tion with specific performance of contracts is, that where the 
 defendant could not have compelled the plaintiff to perform — as 
 where the plaintiff was an infant at the time the contract was 
 made, or that the wife of the plaintiff-vendor could not have 
 been compelled to unite with him in the conveyance — the de- 
 fendant will not be compelled to perform on his part, howsoever 
 good a title the infant, in the one case, or the husband-vendor, 
 in the other, may be able to convey at the time the suit is 
 brought. '''' 
 
 ' See note to pages 260-1 ante, where the doctrine of Glass v. 
 Hulbert was examined and declared not sound. 
 
 'a Cummins v. Beavers, 103 Va. 330; 6 L. R. A. (N'. S.) 397 n. 
 
 '" Evans V. Kingsbury, 3 Rand. 130, 14 Am. Dec. 779; Watts v. 
 Kenny, 3 Leigh. 373, 33 Am. Dec. 366; Haden v. Falls, 115 Va. 777, 
 787-788. Text, p. 411, n. 
 
226 NoTp;s on Equity Jurisprudence 
 
 Page 412. Optional contracts for the sale of real estate. 
 
 — The student is supposed to be familiar with the nature of op- 
 tional contracts, from his studies of the law of contracts; and 
 we cannot here discuss the elementary learning of that subject. 
 But assuming that the plaintiff has a binding option for the pur- 
 chase of the defendant's real property, evidenced by proper writ- 
 ing, will a court of equity specifically enforce the contract, when 
 it has been accepted within the stipulated time by the plaintiff, 
 who performs, or offers to perform, all conditions precedent un- 
 der it ? Some doubt has been suggested, and possibly a few cases 
 have decided the question in the negative. But by the great 
 weight of authority, such a contract will be specifically enforced, 
 under the circumstances stated, where it presents a case other- 
 wise proper for the exercise of this extraordinary jurisdiction.* 
 
 Page 412, § 760. Time as essence of the contract. — We 
 
 have already discussed this in note to page 224, where the doc- 
 trine of the Text is somewhat modified. 
 
 Page 416, § 765. Compensation for defect of title.— The 
 general rule is well stated in the Text, namely, that where the 
 vendor is unable to make complete title, the court, on a bill by 
 the vendee, will, if so desired by the vendee (but not otherwise), 
 compel the vendor to convey such title as he has; and will either 
 deduct from the purchase money such sum as seems fair, in or- 
 der to compensate the vendee for the defect, or will require in- 
 demnity to secure the vendee against loss — if the vendee is will- 
 ing to accept the title on these terms. 
 
 The same — exception — wife refusing to unite. — There is 
 one striking exception to the rule last stated, namely, where the 
 vendor's wife refuses to unite in the conveyance to release her 
 contingent right of dower. Here, by the better authority, the 
 court will not compel the vendor-husband to convey subject to 
 
 ' See note 31 L. R. A. 127; 'Ross v. Parks (Ala.), 30 Am. St. Rep. 
 47; Johnston v. Trippe, 33 Fed. 530 (full discussion); Weaver v. 
 Burr, 31 W. Va. 743; Hogdon v. Mansfield, 147 Mass. 304; note 6 
 L. R. A. (N. iS.) 403; note' 118 Am. St. Rep. 592. In an ill-considered 
 opinion in Graybill v. Brugh, 89 Va. 695, the Virginia court cast some 
 doubt upon the proposition, but the law is now settled otherwise in 
 Virginia. Cummins v. Beavers, 103 Va. 230. 
 
Specific Performance — Suit by Vendor 227 
 
 his wife's dower, and make compensation for the dower right 
 unreleased. 
 
 The reason is, that pressure thus brought to bear upon, the 
 husband iiill produce pressure upon the wife, and practically 
 force her to execute a deed, howsoever unwilling she may be 
 in fact. Such pressure a court of equity is unwilling to lay upon 
 the wife, and hence the vendee will be required to take the prop- 
 erty with the dower right outstanding, and pay the full contract 
 price, or else rescind the contract.^ 
 
 Page 416, § 766. Who may bring the bill— suit by vendor. 
 
 — It may seem to the student an anomalous principle that the 
 vendor may bring the bill, as well as the vendee, even though he 
 hold the bonds or notes of the vendee, who is solvent, and 
 against whom a remedy at law by judgment and execution would 
 be plain and adequate. Nevertheless, it is settled that the ven- 
 dor may maintain such a bill. The object of such a suit is not 
 only to collect the purchase money but to compel vendee to ac- 
 cept the title, and thus to relieve the vendor of the responsibility 
 of the ownership of the property. 
 
 Another and better reason is that the suit by the vendor is, in 
 effect, a suit to enforce his vendo/s lien — as will appear in the 
 following section. 
 
 Suit by vendor, continued — his vendor's lien. — In a suit 
 for specific performance by the vendor, the court is not content 
 merely to give him a personal decree against the vendee for the 
 purchase money, but, regarding that as done which ought to be 
 done, the court treats the land as belonging to the vendee, sub- 
 ject to the payment of the purchase money. The legal title being 
 still in the vendor, the court treats him as a trustee of the legal 
 title for the vendee — thus in effect, giving the vendor a vendor's 
 
 " See Clark v. Reins, 13 Gratt. 98, 114; McCann v. James, 1 Rob. 
 (Va.) 256; Dunsmore v. iLyle, 87 Va. 391; note, 70 Am. Dec. 458; 
 Aiple-Hemmeman, etc., Co. v. 'Spelbrink (Mo.), Ill S. W. 480, 14 
 Ann. Cas. 652, full note; 9 iMich. Law Rev. 333. Many cases contra. 
 Note 24 L. R. A. 765. In Haden v. Falls, 115 Va. 779, quoting Shars- 
 v/ood, J., in (Riesz's Appeal, 73 Pa. St. 490, the court said: "The wife 
 is not to be wrought upon by her love for her husband and sympathy 
 in his situation, to do that which ,her judgment disapproves as con- 
 trary to her interest, nor is he to be tempted to use undue means 
 to procure her consent. The vendee must be left in such cases to 
 his action 'at law to recover damages." 
 
228 Notes on Equity Jurisprudence 
 
 leffal lien (not the vendor's equitable lien), for his money; and 
 in this suit for specific performance the court enforces the lien, 
 if necessary, by selling the property, paying over to the vendor 
 his purchase money, with interest and costs, and the overplus, if 
 any, to the vendee." ^° 
 
 In short, a suit for specific performance, when brought by the 
 vendor for the purchase money, is rather a suit to subject real 
 property to a vendor's lien — a lien not properly enforceable ex- 
 cept in equity — than technically a suit for specific performance. 
 
 Specific performance of contract to make a will in 
 plaintiff's favor. — 'While it is, of course, impossible to compel 
 specific performance of a contract to make a will in another's fa- 
 vor, equity will accomplish justice in such cases — assuming the 
 contract based on a valuable consideration and otherwise valid — 
 by attaching a constructive trust to the subject-matter of the con- 
 tract, in the hands of the heirs or devisees, or personal represen- 
 tative of the deceased contractor.^* 
 
 " See Ayres v. Robins, 30 Gratt. 105. 
 
 " Burdine v. Burdine, 98 Va. S15, 6 Va. Law 'Reg. 389 n; Printz 
 V. McLeod, 128 Va. 471 (contract for mutual wills). 
 
Lis Pendens 229 
 
 CHAPTER XXVIIA. 
 
 The Doctrine of Lis Pendens. 
 
 {New Chapter here) 
 
 Page 417, § 768. Lis pendens — meaning and general ap- 
 plication. — Lis means suit, and hence lis pendens means pend- 
 ing suit. Pendente lite means during the pendency of the suit. 
 The judgment or decree is the result of the suit.^ 
 
 By the rule of the unwritten law, one who purchases or oth- 
 erwise acquires an interest in property, during the pendency of 
 proceedings (at law or in equity )2 directed against, or directly 
 aflfecting, such property, or after the rendition of a judgment or 
 decree in similar proceedings — the purchase being made from a 
 party to the suit, or from one in privity with him — will take the 
 same, subject to the judgment or decree, whether the purchaser 
 had actual knowledge of the pendency of the suit, or of the 
 judgment or decree therein, or not. 
 
 The same — applicable to in rem, or quasi in rem, pro- 
 ceedings only. — ^The doctrine of lis pendens has no application 
 to proceedings merely against the person of the defendant {in 
 personam), and not directly involving the res purchased. The 
 suit must be in rem, or quasi in rem? 
 
 Thus, the actions of debt, assum,psit, trespass, and trover, 
 (not accompanied by attachment proceedings) are merely to 
 recover a judgment for money, and therefore are purely in per- 
 sonam, and in nowise in rem. On the other hand, the actions of 
 detinue, or replevin or ejectment, are m' rem — being directed 
 against a particular res, carefully described in the plaintiff's dec- 
 laration. 
 
 "• In this discussion, the term lis pendens, when not otherwise in- 
 dicated, is used as including the judgment or decree for the plaintiff 
 — that is, not only the suit pending, but the result of the suit ended 
 in the plaintiflf's favor. So pendente lite connotes not only the pei-iod 
 while the legal controversy is pending, but during which the plain- 
 tiff's judgment or decree retains its vitality. 
 
 " 25 Cyc. 1447. 
 
 ' Houston V. Timmeman, 17 Or. 499, 11 Am. St. Rep. 848, 4 L. 
 R. A. 716; Newman v. Chapman, 3 Rand. (Va.) 93, 14 Am. Dec. 766. 
 
230 Notes on Equity Jurisprudence 
 
 So, a bill in equity for divorce, with no prayer directly affect- 
 ing the defendant's property, or a suit merely for an accounting 
 from a trustee or co-partner, would be in personam only; where- 
 as, a suit to trace plaintiff's funds into a particular res and at- 
 tach a constructive trust thereto; for specific performance; for 
 partition; to establish an equitable lien; to set aside a convey- 
 ance, for fraud or mistake, or to reform it for mistake; a cred- 
 itor's bill to subject described equitable assets — are all examples 
 of in rem, proceedings, to which the doctrine of lis pendens is 
 applicable. 
 
 The same — foundation of the doctrine. — All the authori- 
 ties substantially agree that the pendente lite purchaser occupies 
 the uncomfortable position stated, howsoever innocent he may 
 be in fact, but there is some lack of harmony touching the ra- 
 tionale of the principle. It is sometimes placed on the conclu- 
 sive presum-ption of notice as a matter of law ; and, again, on 
 grounds of public policy, since, in the absence of the rule, a 
 judgment or decree for the plaintiff, in any case, might be ren- 
 dered completely barren by a sale of the res to a third person 
 pendente lite* But, after all, this divergency of view is of 
 slight importance, since the presumption of notice itself rests 
 upon grounds of public policy. On the one theory, notice is con- 
 clusively presumed in order to prevent the defendant from con- 
 verting plaintiff's judgment into a barren victory, by a sale to 
 another, pendente lite. On the other theory, a pendente lite pur- 
 chaser is held to take subject to the result of the pending suit, 
 because public policy demands such a rule to prevent the same 
 miscarriage. In practical results, therefore, the distinction 
 seems academical only. 
 
 The same — applicable to real and personal property. — 
 
 The authorities are in entire harmony in applying the doctrine of 
 lis pendens to real property, and, generally, to personal prop- 
 
 * Newman v. Chapman, 2 Rand. (Va.) 93, 14 Am. Dec. 766; Watson 
 V. Wilson, 2 Dana (Ky.) 406, 26 Am. Dec. 459; 35 Cyc. 1451. 
 
Lis Pendens 231 
 
 erty ; ^ but a respectable minority, including our Text, denies its 
 application to the latter.? 
 
 All the authorities, however, for obvious reasons, deny the ap- 
 plication of the rule to negotiable instruments, bonds, and (gen- 
 erally) to corporate stocks, as tending unduly to hamper com- 
 mercial transactions.'^ 
 
 The same — more particularly of the application of the 
 rule. — Analyzing the rule that a pendente lite purchaser takes 
 subject to the result of the suit, the following are some of the 
 more important subordinate principles applicable: 
 
 (1) Strict application. — The rule is a harsh one, and is ap- 
 plied strictissimi juris when affecting an honest purchaser for 
 value. 
 
 (2) Vendor a party to the suit. — The vendor must have been 
 a party to the suit, or in such privity with a party as to be bound 
 by the judgment. 
 
 (3) Description of res in pleadings.— ^h& res affected must 
 be so described in the pleadings as to be capable of identifica- 
 tion by the purchaser, had he known of and examined the record 
 of the suit.® 
 
 (4) Jurisdiction. — The court must have jurisdiction of the 
 reSj and of the person of the defendant — or at least have so pro- 
 ceeded against him as to acquire jurisdiction to dispose of the 
 res. 
 
 (5) When, lis pendens begins. — The suit is regarded as lis 
 pendens from the time of the filing of the plaintiff's declaration 
 or bill, after service of process, or after voluntary appearance.^** 
 
 (6) B^etent of notice. — The notice extends only to such facts 
 as are disclosed by the pleadings at the time of the pendente lite 
 purchase — and the purchaser is not affected by amendments to 
 the pleadings, extending the scope of the suit. He takes subject 
 
 " 25 Cyc. 1453; Freeman, Judgments, 194; Boiling v. Carter, 9 Ala. 
 931; Swanz v. Pillow, 50 Ark. 300, 7 Am. St. Rep. 98; Thomas v. 
 Southard, 2 Dana (Ky.) 475, 26 Am. Dec. 467. 
 
 ° Text, 768 (3), n. 3; 25 Cyc. 1453. 
 
 ^ 25 'Cyc. 1453. 
 
 ' Va. Coal & iron Co., 103 Va. 661. 
 
 ° Leavell v. Poore, 91 Ky. 321, 15 S. W. 858. 
 
 " as Cyc. 1463. 
 
232 Notes on Equity Jurisprudence 
 
 only to the judgment or decree which might have been, rendered 
 at the time of his purchase}'^ 
 
 (7) Who affected. — The notice implied from the existence of 
 the lis pendens affects all the world dealing with the res in liti- 
 gation, i^ 
 
 (8) Notice of judgment or decree. — The doctrine applies not 
 only to purchases made pendente lite, but to those made after 
 judgment entered for the plaintiff. The whole foundation of 
 the rule rests on the policy of securing to the plaintiff the fruit 
 of his judgment. If he is protected only so long as the suit is 
 pending, and immediately upon judgment in his favor loses that 
 protection, the rule would be brutum fulm,en. It is the judgment 
 to be finally entered that constitutes the plaintiff's only interest 
 in. the suit. The rule of lis pendens was established for the sole 
 purpose of protecting that interest. It follows that a purchaser 
 of property, whether pendente lite or after judgment therefor 
 for the plaintiff, takes subject to the judgment. '^ 
 
 Lis pendens, continued — statutory provisions. — The 
 
 harshness of the rule that thus charges an honest purchaser with 
 notice of judicial proceedings, pending perhaps in a distant 
 county, of which proceedings he has never heard, and of which 
 he has no means of acquiring information, has led to statutory 
 enactments throughout the several States, looking to the safe- 
 guarding of the rights of honest pendente lite purchasers, and at 
 the same time protecting the interests of litigants. The stat- 
 ute of Virginia may be taken as a fair sample of such legislation. 
 
 The same — Virginia statute. — The statute in this state ^* 
 provides that "no lis pendens, or attachment, shall bind or affect 
 
 " Va. Coal & Iron Co. v. Roberts, 103 Va. 661. 
 
 " Steinman v. Clinchfield Coal Corp., 121 Va. 613. 
 
 " "There would be no end of litigation," says Burks, J., in Stein- 
 man V. Clinchfield Coal Corp., 121 Va. 611, "if the effect of a judgment 
 or decree could be avoided by a simple transfer of the property by 
 the unsuccessful litigant as soon as an adverse judgment or decree 
 was rendered. Decrees are rendered every day, construing deeds, 
 wills and other documents, and such decrees bind not only the parties 
 to the litigation, but all persons claiming under them, with or without 
 notice of the decree. The privies can stand on no higher footing than 
 their principals." 
 
 " Va. Code 1919, § 6469. 
 
Lis Pendens — Statutory Provisions. 233 
 
 a subsequent bona fide purchaser for value of real or personal i-* 
 estate, for valuable consideration, and without actual notice of 
 such lis pendens, or attachment, until and except from the time 
 a memorandum setting forth (a) the title of the cause or at- 
 tachment; (b) the general object thereof; (c) the court wherein 
 it is pending; (d) the amount of the claim asserted by the plain- 
 tiff; (e) a description of the property; and (f) the name of the 
 person whose estate is intended to be affected thereby, shall be 
 admitted to record in the clerk's ofSce of the circuit court of the 
 county, or the corporation court of the city, wherein the prop- 
 erty is, or, if it be in the City of Richmond, in the clerk's office 
 of the chancery court of such city." i® 
 
 The same — further of Virginia statutes — lis pendens as 
 substitute for registry. — The statute just quoted unfor- 
 tunately applies only to pending suits (or attachments), and njt 
 to judgments or decrees subsequently entered in such suits. ^^ 
 Other sections of the code, however, require certain judgments 
 and decrees, viz., for land or for specific personal property,^^ or 
 requiring the payment of money,^^ to be docketed, in a pre- 
 scribed manner and court, and declaring them otherwise invalid 
 as to subsequent purchasers for value without notice, unless so 
 docketed. ^^ 
 
 It follows that in Virginia a judgment or decree in an in rem, 
 or quasi in rem proceeding not 'for land', or 'specific personal 
 property', or 'for money', is not required or permitted to be dock- 
 eted under the statutes cited. Such judgments and decrees, 
 therefore, continue to be notice to subsequent purchasers, as un- 
 der the common law rule. The decree in Steinman v. Clinchfield 
 Coal Corporation ^i was entered in a suit to set up a lost deed, in 
 which suit the decree declared the plaintiff entitled to the prop- 
 erty; but no re-execution thereof appears to have been ordered 
 
 ^ Anterior the revision of 1919, personal estate was not included. 
 *° See further provisions as to authenticating and indexing the 
 memorandum. 
 " Steinman v. Clinchfield Coal Corp., 121 Va. 611. 
 ^ Va. Code 1919, § 6459. 
 " Id. §§ 6459, 6461 et seq. 
 " Id. § 6471. 
 -' Supra. 
 
234 NoTjjs ON Equity Jurisprudence 
 
 or had. The court held that a subsequent purchaser was bound 
 by notice of this decree.^^ 
 
 The same — the present situation as affected by statute. 
 
 — The ruling in Steinman v. Clinchfield Coal Corporation read in 
 the light of the statutes, and of existing common law rules, 
 seems to justify the following propositions : 
 
 1. The lis pendens of itself, is of no effect as notice, whether 
 it concerns real or personal property, unless notice thereof is 
 duly registered as required by statute. But when so registered, 
 it operates as notice, as effectually as the lis pendens at common 
 law. 
 
 2. The judgment or decree entered in the pending suit, if "for 
 land", or "specific personal property" or for payment of 
 "money", is not notice to subsequent purchasers, unless docketed 
 as required.23 But when so docketed, such docketing super- 
 sedes the necessity of a previous registry of the notice of the 
 lis pendens. 
 
 3. But if the judgment or decree be not for land, nor specific 
 personal property nor for money, the common law rule, already 
 stated, is in full force; and subsequent purchasers are bound by 
 notice of the judgment or decree, whether there has been a pre- 
 vious registry of notice of the lis pendens, or of docketing of 
 such judgment or decree, or not. 
 
 The same — ^lis pendens as rendering registry of deed or 
 mortgage unnecessary. — Pursuing further the question of the 
 effectiveness of a lis pendens, as notice to subsequent purchasers, 
 it seems to follow from the principle of Steinman v. Clinchfield 
 Coal Corporation,^* just discussed, that, both under the common 
 law and under the statutory modifications noticed, the plaintiff 
 
 "^ See accordant, and under a similar statute, Sheridan v. Andrews, 
 49 N. Y. 478. The decree held to be notice in Steinman v. Clinchfield 
 Coal Corporation {supra) was, in fact, ordered by the court rendering 
 it to be recorded in the deed book in which the original deed should 
 have been recorded, and such registry was actually so made. But it 
 was properly held that since the recordation was unwarranted by the 
 statute, it was ineffective as notice. In short, the Us pendens, and the 
 decree subsequently entered therein, were of themselves notice, un- 
 aided by the subsequent unauthorized registry of the decree. 
 
 ^ Unless, in the case of a recovery of land or specific personal 
 property, notice of the lis pendens has been previously registered. 
 
 " 131 Va. 613. 
 
Lis Pendens — As Substitute; for Registry 235 
 
 (or his privies in title) who has failed to record his deed or 
 mortgage, may in many instances escape the penalties of the reg- 
 istry statutes for non-registry. In Steinman v. Clinchfield Coal 
 Corporation itself this result seems to have occurred. Here A 
 had lost the deed of conveyance from B, his grantor, before rec- 
 ordation. Later, having filed a bill for the purpose of setting 
 up the lost instrument, he secured a decree accordingly, but ap- 
 parently without requiring the execution of a duplicate convey- 
 ance. On the registry books, therefore, B appeared to be owner 
 and holder of the legal title. Later, C purchased from B, and 
 received and recorded his deed. In spite of A's failure to re- 
 cord his original deed, and of the non-registry of the notice of 
 lis pendens to set up the lost deed, or of inability to have lawful 
 registry or docketing of the decree in his favor (for want of 
 statutory warrant) — and in spite of C's ignorance of A's equity 
 — C was held to be charged with notice of A's equity under the 
 decree. We have, therefore, an apparently clear case of the 
 common law doctrine of lis pendens protecting, as against a sub- 
 sequent honest purchaser for value, a vendee of real property 
 who has failed to record his deed, declared by the statute of reg- 
 istry to be invalid as to such subsequent purchaser. 
 
 No unfavorable criticism of the decision is intended. It seems 
 sound. While the unregistered deed was invalid, the decree 
 setting up that instrument after its loss, was an equity — and an 
 equity with notice of which the subsequent purchaser was 
 charged, because of the common law rule that a judgment or 
 decree (not required nor permitted to be docketed) directly af- 
 fecting a particular res, is notice to all the world who thereafter 
 purchase the subject-matter of the suit. 
 
 Lis pendens as superseding necessity for registry, con- 
 tinued. — The principles discussed in the preceding section are 
 not wholly new in Virginia. Thus, in Glazebrook v. Ragland,^^ 
 a conveyance of real property in trust, in the nature of a family 
 settlement, went unrecorded. Later, in a friendly suit between 
 the cestuis, the land was sold under the court's decree, and un- 
 der orders of the court a conveyance by a substituted trustee was 
 made to the purchaser, and duly recorded. Later, in an action 
 
 8 Gratt. 333. 
 
236 Notes on Equity Jurisprudence 
 
 on the purchaser's bond for deferred payments of purchase 
 money, question arose whether a judgment subsequently recov- 
 ered against the grantor in the original (unrecorded) deed, was 
 not a lien on the trust property. It was held that it was not. 
 "I regard the institution of the suit in chancery" said Moncure, 
 J., * * * "for the execution of the trust, the rendition of 
 the decree in that suit; and the sale and conveyance under the 
 decree; and the recordation of such conveyance, as equivalent 
 to the recordation of the deed of trust." ^^ 
 
 '"' The case did not involve the rights of subsequent purchasers, 
 but it did involve the rights of a judgment creditor, who, under the 
 registry statutes, occupies an even more advantageous position. See 
 the opinion of Baldwin, J., in the same case, in which the proposi- 
 tion was announced that the requirement that a deed of trust to se- 
 cure a debt must be recorded, applies only to such incumbrances 
 while they are executory; "but not after they have ceased to be in- 
 cumbrances; nor after they have been executed and extinguished 
 by a sale or foreclosure, and a conveyance of the title to the pur- 
 chaser." This doctrine was afterwards repudiated in Campbell v. 
 Nonpariel, etc., Co., 75 Va. 294, where it was held that an unrecorded 
 deed of trust to secure debts was invalid as to a judgment creditor 
 of the grantor, in spite of the circumstance that the deed of trust 
 was foreclosed {in pais) and conveyance made to the purchaser be- 
 fore the recovery of the judgment, but recorded afterwards. In this 
 case Judge Staples confines the principle to the case where all the 
 parties in interest are before the court, so that the purchaser under 
 the decree need not trace his title through the unrecorded deed of 
 trust, but through the decree only, which necessarily binds all the 
 parties in interest. Where there is thus a judicial enforcement of the 
 unrecorded instrument, the same situation is presented as if the deed 
 to the purchaser at the judicial sale were an original transaction, 
 title passing direct from the original debtor-grantor, with a release of 
 all interest by the trustee and creditor in the unregistered and there- 
 fore invalid deed of trust. 
 
Injunctions 237 
 
 CHAPTER XXVIII. 
 
 Injunctions.! 
 
 Page 424, § 780. "Pure" bills— bills for "injunction and 
 relief." — In addition to the classification of injunctions into (1) 
 prohibitory and mandatory, and (2) preliminary and perpetual, 
 we may add a third class, referring rather to the character of 
 the relief sought, namely (3) "pure hills" of injunction, and 
 bills for "injunction and relief." 
 
 "Pure bill/' of injunction are those in which no other relief is 
 sought, beyond the injunction; for example, to enjoin and re- 
 strain a nuisance or a trespass. 
 
 Bills for "injunction and relief are those in which an injunc- 
 tion alone is not a sufficient remedy, and where the plaintiff de- 
 sires, not only to enjoin some threatened act, but to compel the 
 defendant to perform some additional act, as to pay money, or 
 to deliver up papers for cancellation — in other words where the 
 injunction is merely ancillary to other relief. For instance, a 
 bill to enjoin the infringement of a patent or of a copyright, 
 seeks not only to stop defendant from continuing the infringe- 
 ment, but prays an accounting from the defendant of his profits. 
 So, a bill to enjoin the negotiation of a promissory note tainted 
 with fraud, usually prays for the additional relief of cancella- 
 tion. 
 
 A restraining order is an order in the nature of an injunction, 
 but by its terms operative only during a very brief period, fixed 
 in the order itself, looking to an early hearing of both parties, 
 on the application of the plaintiff for a temporary injunction. 
 
 A bond of indemnity is generally required of the plaintiff, as 
 a condition of the temporary injunction, conditioned to pay all 
 costs and damages incurred by the defendant in case the injunc- 
 tion shall be dissolved. ^ 
 
 Page 430, § 788. Injunction against trespasser as substi- 
 tute for action to try title.— Effort is often made to try title 
 to real property under cover of an injunction to prevent injury 
 
 ' See Va. Code 1919, Chapter 365. 
 ' See Va. Code 1919, § 6334. 
 
238 Notes on Equity Jurisprudence 
 
 to the property in dispute. To prevent this attempt to evade a 
 jury trial at law, and to perpetrate a fraud on the equitable ju- 
 risdiction, courts of equity have been driven to formulate cer- 
 tain stringent rules to v^^hich the pleadings and proof must con- 
 form in such cases. Hence the practitioner before filing his bill 
 to enjoin a trespass, especially where the defendant is in pos- 
 session, should carefully examine the local decisions.^ 
 
 Pages 432-441. Memorandum. — The wrongs here discussed 
 belong rather to the Law of Torts than to Equity Jurisprudence. 
 The student will read, merely as a review of his studies of 
 Torts 
 
 CHAPTER XXIX. 
 
 Injunctions (Continued). 
 
 Page 443. Injunction against breach of contract for per- 
 sonal services.^We have already seen that the court will not 
 ordinarily decree specific performance of contracts for personal 
 property — not because of any special difficulty in enforcing such 
 a decree, but because, in the large majority of cases, the plaintiff 
 may go into th^". market and purchase other property of a like 
 kind; and for the additional reason that, even if the thing con- 
 tracted for be not procurable on the market, damages recoverable 
 at law will usually compensate the plaintiff for his lost bargain. 
 
 But, again, if neither of these categories is presented, and the 
 chattel cannot be procured on the market, and damages will not 
 compensate the plaintiff — circumstances which could only occur 
 where the chattel is of a highly unique character, and its ac- 
 quisition is of special importance to the plaintiff — then equity 
 relaxes the rule, and grants the relief of specific performance. 
 
 A somewhat analogous situation is presented where applica- 
 tion is made to compel the performance of personal services — 
 though the difference in the relief granted is quite marked. 
 
 Equity uniformly declines to decree specific performance of 
 
 ° See Bledsoe v. Robinette, 105 Va. 733; Woolfolk v. Graves, 113 
 Va. 182; Eskridge v. Eskridge, 51 Miss. 522; C. & O. Canal Co. v. 
 Young, 3 Md. 480; 4 Columbia Law Rev. 72. 
 
Injunctions — Unique Personal Services 239 
 
 contracts for personal services — howsoever unique or howsoever 
 irreparable the damages resulting from default in performance — 
 for the very excellent reason that the court cannot undertake to 
 supervise the performance, in order to determine whether the 
 services are being properly performed or not. And, again, per- 
 haps, the court recoils from the attitude of coercing the defend- 
 ant into a state so strongly suggestive of involuntary servitude.^ 
 
 The same — injunction against rendition of similar 
 services to another. — But while the court will not thus decree 
 specific performance of the contract for personal services, it does 
 not always leave the plaintiff remediless. Where the services 
 are of so unique and individual a nature that they cannot be 
 duplicated by others, and damages will not adequately compen- 
 sate for the breach of the contract, equity will, in a proper case, 
 approximate specific performance by enjoining the defendant 
 from performing similar services for another. 
 
 Such cases are presented in contracts for services purely in- 
 tellectual or individual or personal, — as in the case of distin- 
 guished actors, singers, teachers, lecturers, artists, authors, and 
 highly skilled specialists generally — even of specially skilled base- 
 ball players. 2 
 
 The same — more particularly. — As indicated in the Text, 
 the authorities are not uniform in applying the principle of in- 
 
 ^ In refusing specific performance of a contract to sing in Italian 
 opera at the plaintiff's theatre, Chancellor Walworth, in D« Rivafinoli 
 V. Corsetti, 4 Pai. Ch. (N. Y.) S64, 25 Am. Dec. 532, expressed the 
 reasons for his refusal in humorous vein as follows: "I am not 
 aware that any officer of this court has that perfect knowledge of 
 the Italian language, or possesses that exquisite sensibility in the 
 auricular nerve which is necessary to understand and enjoy with 
 proper zest, the particular beauties of the Italian opera, so fascinating 
 to the fashionable world. There might be some difficulties, there- 
 fore, even if the defendant was compelled to sing under the direc- 
 tion and in the presence of a master in chancery, in ascertaining 
 whether he performed his engagement according to its spirit and in- 
 tent. It would also be very difficult to determine what effect coercion 
 might produce upon his singing, especially in the livelier .^irs, al- 
 though the fear of imprisonment would unquestionably deepen his 
 seriousness in the graver parts of the drama. But one thing at least 
 is certain, his songs will be neither comic nor even semi-serious 
 while he remains confined in that dismal cage, the debtor's prison 
 of New York." 
 
 ' See Philadelphia Ball Club v. Lajoie, 202 Pa. St. 210, 90 Am. St. 
 Rep. 637, 55 L. R. A. 227. The authorities are noted and discussed 
 in the Text, p. 443, n. 2; 32 Cyc. 857-859. 
 
240 Notes on Equity Jurisprudence 
 
 junction in such cases. The English courts, after much waver- 
 ing, seem to take a narrower view of the plaintiff's equity here, 
 than that taken by the majority of the American courts.^ The 
 view finally adopted by the English courts appears to be that 
 where, in cases of the character described, the defendant cov- 
 enants to serve the plaintiff, and not to render similar sendees 
 for another (negative covenant express), the plaintiff, in an 
 otherwise proper case, may have his injunction. But where the 
 covenant is merely to serve the plaintiff during the stipulated pe- 
 riod (affirmative covenant only), the negative covenant im-plied 
 {i. e. not to serve another) is not sufficient for purposes of an in- 
 junction. 
 
 By the large preponderance of American authority, the ex- 
 press negative covenant is not required, provided it be clearly 
 implied in the contract.* The American view seems the more 
 reasonable, and more in keeping with the spirit of equity. 
 
 For a long time, the same difficulty was made in connection 
 with the mandatory injunction, to compel performance of af- 
 firmative acts which the defendant was under a legal duty to 
 perform — as to open a church, to deliver church records, to re- 
 move obstructions from chimney-pots, ^ and the abatement of 
 nuisances generally. The mandatory injunction might not issue 
 to compel affirmative action, but the same end was accomplished 
 by expressing the order in prohibitory or negative form — that is, 
 by enjoining the defendant from keeping the church closed, from 
 retaining the church records, from obstructing the chimney-pots, 
 and from allowing the nuisance complained of to continue. The 
 court might not require the defendant to clear away obstructions 
 from the chimney-pots, but it could and would prohibit him 
 from permitting the chimney-pots to remain obstructed. To the 
 credit of equity, such playing upon words is no longer practiced 
 — and the mandatory injunction has long held its proper place 
 in the equity procedure. ^ 
 
 " Lumley v. Wagner, 1 De G., M. & G. 604, requiring the negative 
 covenant, overruled by Montague v. Flockton, L,. R. 16 Eq. 189, which 
 is, in turn, overruled by Whitwood Chemical Co. v. Hardman (1891), 
 2 Ch. 416. 
 
 * 22 Cyc. 857-859, 4 Va. Law Reg. 470; Id. 840. 
 
 ' Text, § 780, n. 1. 
 
Injunction — Trademarks 241 
 
 Page 444, § 809. Injunctions in patent suits. — The rules 
 followed by the Federal courts (which have exclusive jurisdic- 
 tion of all matters involving patent rights), and here set out se- 
 rially, will be more readily understood by the student, when he is 
 reminded that the granting of a patent by the United States 
 Patent Oiffice, is not only not a judicial determination, of the va- 
 lidity of the patent, but, on application for a temporary injunc- 
 tion, is, standing alone, not even prima facie evidence of the pat- 
 entability of the invention. Nor is the establishment of the va- 
 lidity of the patent in a suit against A, conclusive of the question 
 in a subsequent suit against B, until that question has been passed 
 on finally by the United States Supreme Court. The claimant of 
 a patent, therefore, must establish its validity against all comers, 
 whenever and wherever and by whomsoever attacked or in- 
 fringed. 
 
 The rules here listed in the Text, by which the courts are gov- 
 erned in passing upon applications for temporary injunctions in 
 such cases, are, in substance, but a resume of circumstances that 
 suffice to make out a prima facie case of patentability, suificient 
 to entitle the plaintiff to a temporary injunction. 
 
 The first line of rule (2) should read: "If a patent, new or 
 old, has been established in a former suit against a third person, 
 on final hearing", etc. 
 
 Page 447, §§ 810-823. Protection of trade-marks— unfair 
 competition. — Not only does equity protect technical trade- 
 marks, but it goes immeasurably further, and by injunction will 
 protect the plaintiff against any unfair competition on the part 
 of the defendant, whereby the plaintiff's trade or manufacture 
 suffers serious injury — as where, for example, the defendant by 
 words or conduct endeavors to deceive the unwary public into 
 believing that his goods are the same as those of the plaintiff. 
 Numerous illustrations will be found in the authorities cited. ^' 
 
 '» Singer Mfg. Co. v. June Mfg. Co., 163 U. S. 169; 10 Harvard Law 
 Rev. 275; Baker v. Baker, 3 Va. Law Reg. 583; Chas. S. Higgins Co. 
 V. Higgins Soap Co. (N'. Y.), 43 Am. St. Rep. 769, n.; Donnell 
 V. Herring-Hall Safe Co., 208 U. S. 265, 554; Pocahontas Coal Co, 
 V. Bullitt, 178 U. S. 168 (right to use geographical names); n. 2 L. 
 R. A. (N. S.) 708. See sundry statutory provisions in Va. Code 
 1919, § 1460. 
 
242 NoTSS ON Equity Jurisprudence 
 
 Page 464 (footnote 2). Right of privacy. — The doctrine of 
 the footnote has been the subject of considerable judicial dis- 
 cussion in recent years. The right of privacy was most out- 
 rageously violated in the well known case of Robertson v. Fold- 
 ing Box Co. 8 and in A'ficinson v. Doherty.'^ 
 
 The most illuminating case on the subject is Pavesich v. New 
 England Life Ins. Co.,* where the defendant was enjoined from 
 using the plaintiff's likeness as an advertisement. The opinion 
 by Cobb, J., reviews all the authorities on the subject, and the 
 right seems to be thoroughly vindicated by a wealth of unan- 
 swerable logic* 
 
 Page 465, § 837. Injunction to protect trade secrets and 
 secret inventions. — Not only will secret inventions be pro- 
 tected by injunction, as stated in the Text, but similar protec- 
 tion will be extended to important trade secrets, by enjoining 
 their disclosure by one who has acquired such secrets hy fraud, 
 or through confidential relations with the plaintiff — as, for ex- 
 ample, the secret formulae and processes of manufacturers of 
 medicines, perfumery, 'soft' drinks, paints, cosmetics, and other 
 proprietary mixtures, processes, and methods of manufacture; 
 the private costs-marks of merchants; the furnishing of the 
 names and addresses of the plaintiff's customers to a competi- 
 tor; and similar frauds upon a competitor's business, or treach- 
 eries by his confidential employees in collusion with others.®^ 
 
 Page 466, § 838. Injunction against libel. — Many of the 
 most respectable authorities hold, rather curiously, that an in- 
 junction will not lie against a libel, whether it affect merely the 
 personal reputation of the plaintiff or business}^ 
 
 The strongest argument in favor of the rule denying the in- 
 
 " (N. Y.), 89 Am. St. Rep. 845. 
 
 ' (Mich.), 80 N. W. 285. 
 
 ' (Ga.), 50 S. E. 68, 69 L. R. A. 101. 
 
 ° By recent statute in Virginia, the right is recognized in so far 
 as it protects one against the use of his name or portrait for advertising 
 puirposes, without his consent. Va. Code, § 5782. 
 
 See further on the subject, Peck v. Tribune Co., 214 U. S. 185; 4 
 Harv. Law Rev. 193; Foster, Milburn & Co. v. Chinn (Ky.), 120 S. 
 W. 364; 10 Va. Law Reg. 91, 834; 11 id. 63, 938. 
 
 "a See 3 Va. Law Reg. 535. 
 
 *° See Marlin, etc., Co. v. Shields (N. Y.), 64 N. E. 163. The au- 
 thorities are collected in 89 Am. St. Rep. 853, and 33 L. R. A. 839. 
 
Injunction against Libel 243 
 
 junction is probably the constitutional right of free speech, "sub- 
 ject to responsibility for the abuse of that right" — the clause 
 quoted seeming to imply that a publication, howsoever libelous, 
 cannot be forestalled by injunction, but the person libelled is 
 confined to an action for damages, or to prosecution of his de- 
 famer in the criminal courts. ^^ 
 
 The same. — This seems an extremely contracted co'.i-:eption 
 of the situation presented where the defendant is threatening the 
 destruction of the plaintiff's business, or irreparable injury 
 thereto, by the publication of a libel, wholly unjustified in fact. 
 The equity of the plaintiff becomes all the stronger, where the 
 defendant is insolvent — the remedy at law in an action for dam- 
 ages being, of course, completely fruitless. 
 
 It seems also an unwarranted interpretation of the constitu- 
 tional guaranty of free speech. The same constitution guarantees 
 the liberty of the citizen, and prohibits involuntary servitude; 
 yet our jails and penitentiaries are crowded with citizens who 
 have so far transgressed the laws of the land as to forfeit the 
 protection of these guaranties. The right of the freedom of 
 speech surely is not so sacred as the right of freedom of dispos- 
 ing of one's person and property as one pleases. And yet the citi- 
 zen's person is incarcerated and his property is seized, to an- 
 swer for his breach of the law, criminal or civil. 
 
 Oh principle, therefore, supported by the best authorities, an 
 injunction will be issued against a threatened libel, seriously in- 
 jurious to the plaintiff's business — even if denied for the pro- 
 tection of his reputation only.^^ 
 
 Injunction ag'ainst crimes. — Equity has consistently de- 
 clined to enjoin the commission of crimes, as such. But the cir- 
 cumstance that the particular wrong for which the injunction is 
 sought happens to be a criminal as well as a civil wrong, spe- 
 cially injurious to the plaintiff, will not deprive the plaintiff of 
 his right to an injunction.!^ 
 
 " See Va. Const., § 12; U. S. Const., Amendment I; Jeans Cloth- 
 ing Co. V. Watson (Mo.), 67 S. W. 391; Howell v. Bee Publishing 
 Co. (Neb.), 158 N. W. 358. 
 
 '" See authorities supra; Dean Pound in 29 Harvard Law Review 
 640; 30 Id. 173-175; 4 Pomeroy's Eq. Jurisp. 1353. 
 
 " 3 Va. Law Reg. 549, 625, 684, 869; Re Debs, 158, U. S. 564; 35 
 
244 Notes on Equity Jurisprudence 
 
 Page 467 (footnote). Injunctions against strikers. — The 
 jurisdiction to enjoin trespass by one individual, or a few in- 
 dividuals, has long been recognized. But in recent years the ques- 
 tion has bcome of great importance by reason of the courts' 
 having undertaken to enjoin large numbers of strikers from in- 
 terfering with the business of their employer. 
 
 While the exercise of this jurisdiction in the case of strikers 
 has been much declaimed against by politicians, the law is well 
 settled that the injunction will be granted, regardless of the num- 
 ber of wrong-doers, where necessary to protect the property of 
 the employer from serious injury by trespassing strikers. The 
 strike itself is not unlawful, and will not be enjoined — it is the 
 invasion of the plaintiff's premises, or the intimidation of those 
 of his employees who desire to continue at work, that consti- 
 tutes the gravamen of the wrong. The reports abound in cases, 
 and the law journals in articles, discussing the question. i'' 
 
 Injunctions against boycotting.if^ 
 
 Page 471, § 844. Enjoining judgment at law for false 
 return of service of process. — Whether a court of equity will 
 enjoin a judgment at law by default, where the return of proc- 
 ess is regular on its face, but where the process was in fact never 
 served on the defendant, is a question on which the courts ;are 
 divided. The weight of authority is probably in favor of an 
 injunction in such case. 
 
 It is held, however, in Virginia and other states, and in the 
 Supreme Court of the United States, that if the plaintiff did not 
 collude with the sheriff in having the false return made, since 
 
 Am. St. Rep. 670, n. For example, all public nuisances are misde- 
 meanors, and indictable. But if specially injurious to the plaintiff, 
 he may recover damages for the nuisance, or, in a proper case, have 
 his injunction. 
 
 " See Re Debs, 158 U. S. 564; note 35 Am. St. Rep. 670. See an 
 unreported Virginia case where the Court of Appeals issued the in- 
 junction. 3 Va. Law Reg. 684; n. 28 L. R. A. 464. See infra "Contempt 
 Proceedings." 
 
 '° See Loewe v._ Lawler, 208 U. S. 274 (under Sherman Anti-Trust 
 Act); Casey v. Cincinnati Typographical Union, 45 Fed. 135; Ameri- 
 can Federation of Labor v. Bucks Stove & Range Co. (C. C. A.), 32 
 L. R. A. (N. S.) 748, and note; Gompers v. Bucks Stove & Range 
 Co., 221 U. S. 418, 34 L. R. A. (N. S.) 874, and note. 
 
Injunctions — Judgments on False Return . 245 
 
 the sheriff is a sworn public officer, his return, for the purposes 
 of that case, is conclusively presumed to be true; and the sole 
 remedy of the injured defendant is an action for damages on 
 the sheriff's bond. Hence an injunction will not be awarded.^® 
 The Virginia Court has carried the doctrine to an extreme and 
 probably unwarranted limit, by holding that even where the de- 
 fendant appears in the case before final judgment, and offers to 
 controvert the truth of the return, he will not be permitted to 
 do so, unless fraudulent collusion with the plaintiff be alleged 
 and proved. 1'^ 
 
 The same — arguments pro and con. — There is much to be 
 said on both sides of the question. In favor of the affirmative 
 view, it may be said that to hold the defendant bound on a judg- 
 ment in a proceeding of which he had no notice, seems to violate 
 the fundamental doctrine that "every mmi is entitled to his day 
 in court" — that is, due process of law under the United States 
 Constitution. 
 
 The argument for the negative view is, that since the sheriff 
 is a sworn and bonded officer, the court has a right to presume 
 that his official return is true ; and to permit a judgment entered 
 on such return to be afterwards set aside on mere oral testimony 
 would open the door to fraud, and render judgments far less se- 
 cure than the law regards them. The contrary rule would prac- 
 tically require the sheriff to take witnesses with him in every 
 case to establish the fact of service. 
 
 The same — foreign judgment. — The right thus to assail 
 the truth of the return seems to be settled in all the courts, 
 where the judgment in question is the judgment of a foreign 
 state or country.^* 
 
 " See Preston v. Kindrick, 94 Va. 760; Knox County v. Harshman, 
 133 U. S. 15S; Miedrick v. Lovenstein, 232 U. S. 236. The authorities 
 are collected in a learned note to 19 Am. Dec. 135. See editorial 
 note, 3 Va. Law Reg. 435-9; note 54 Am. St. Rep. 245. 
 
 " Sutherland v. Peoples Bank, ill Va. 515; contra Fowler v. Mosher, 
 85 Va. 421. Notwithstanding the fact that the Supreme Court of the 
 United States is committed to the negative view, it has approved 
 an injunction in just such a case. Earle v. McVeigh, 91 U. S. 503. 
 
 " See Knowles v. Gas Light Co., 19 Wall. 58. 
 
246 Notes on Equity Jurisprudence 
 
 Page 471. Injunctions against criminal proceedings. — 
 
 Save under special and peculiar circumstances, equity never en- 
 joins criminal proceedings. ^^ 
 
 Injunction against suing in a foreign jurisdiction. — The 
 
 ease with which transitory actions (in contract or tort) may be 
 instituted and prosecuted in a state other than that in which the 
 cause of action arose, and the consequent temptation to disrep- 
 utable attorneys to institute actions in distant states, in order to 
 embarrass the defendant in enforcing the attendance of his wit- 
 nesses, and in the increased expense of making defence, has 
 produced in some sections of the country an evil that has met 
 with the severe condemnation of the courts. Where it appears 
 that such an action is contemplated, or has been already insti- 
 tuted, from sinister motives, the courts of the proper jurisdic- 
 tion will not hesitate to enjoin the plaintiff from instituting or 
 continuing the action. 2" 
 
 Page 472, § 845. Injunction against judgment at law on 
 discovery of new evidence. — There are numerous grounds 
 on which judgments at law will be enjoined, as pointed out in 
 the Text. This note is confined to that indicated in the section- 
 title, namely, the discovery of new and material evidence after 
 judgment at law, and after it is too late, under the rules of prac- 
 tice, to move for a new trial in the law court. In such case, 
 where the after-discovered evidence would have been suificient 
 to induce the law court to grant a new trial had the evidence 
 been discovered in time, equity will enjoin the judgment, and 
 will itself re-try the case.^^ 
 
 Punishment for breach of injunction — contempt pro- 
 ceedings. — Equity, from the very beginning, has protected the 
 
 " 1 Va. Lav/ Reg. 80; Harkrader v. Wadley (U. S.), 172 U. S. 148; 
 Fitts V. McGhee, 173 U. S. 516; n. 21 L. R. A. 84; n. 2 L- R. A. (N. S.) 
 631. Compare Georgia, etc., R. Co. v. Atlanta (Ga.), 45 S. E. 256; 
 ■4 Columbia Law Rev. 72. 
 
 ^ H. D. Minor, 4 Va. Law Review, 21. So, it is common practice 
 for the courts of the proper jurisdiction to enjoin husband or wife 
 from instituting divorce proceedings in a foreign state, in which 
 neither is domiciled. 
 
 " See Billups v. Sears, 5 Gratt. 31, 50 Am. Dec. 105; Rust v. Ware, 
 6 Gratt. 50, 53 Am. Dec. 100; Wynne v. Newman, 75 Va. 811; Pick- 
 ford V. Talbott, 225 U. S. 651, L. Ed. 121, n; 31 L. R. A. 747, note. 
 
Injunctions — Contempt Proceedings 247 
 
 jurisdiction and the dignity of the court by punishing for con- 
 tempt any breach of its prohibitory mandates. This it does in a 
 summary manner — the court itself trying the question of con- 
 tempt, without a jury and with little formality.22 
 
 Memorandum.. — The foregoing instances in which injunctions 
 will be granted are in no sense meant to be exhaustive. They are 
 mere illustrations of the general principle that an injunction is 
 the approved proceeding for the prevention of threatened irre- 
 mediable wrongs to property or property interests, of whatso- 
 ever nature the wrong may be. 
 
 '^ Hence arose the outcry in recent years against ''government by 
 injunction," put forth by labor unions, when balked by injunction 
 from destroying the property of the employer, or invading or picket- 
 ing his premises bent on forcing non-striking workmen, by violence 
 or by threats and intimidation, to quit the service. 
 
 This clamor quite ignores the fact that the defendant, in contempt 
 proceedings for violating the injunction, is tried by the court, not 
 for the crime of destroying property, or for assaults on other work- 
 men, but merely for disobedience of the judicial order, and for the pur- 
 pose of vindicating the dignity and maintaining public respect for 
 the court. The crime committed is a matter for the criminal courts; 
 and punishment for the contempt in nowise relieves the defendant of 
 subsequent conviction for his criminal acts. 
 
 In response to propaganda against this so-called "government by 
 injunction," the legislatures of several of the states have, from time 
 to time, attempted to deprive the equity courts of their ancient and 
 inherent power to punish contempts without the presence of a jury; 
 but these statutes have been quite generally held to be unconstitu- 
 tional when affecting courts established by the constitution itself. 
 It is not within the power of the legislative department to deprive 
 the judicial department of powers conferred by the constitution; 
 and when the constitution erects a court, without limiting its powers, 
 such court is held to possess all those attributes which characterized it 
 at the time of its creation — and certainly those attributes without which 
 the court would be an emasculated tribunal, without inherent power of 
 itself to vindicate its own dignity and compel obedience to its law- 
 ful mandates. 
 
 The student who desires to look further into this interesting field, 
 may consult: 3 Va. L,aw Reg. 549, 635, 684; 4 Id. 39, 281, 345, 393; 
 Carter v. Commonwealth, 96 Va. 791, 4 Va. Law Reg. 823, and note; 
 Bx parte Robinson, 19 Wall 505; supra n. to p. 467, "Injunction 
 against strikers." See also Va. Const. § 63; Va. Code 1919, § 4531. 
 
248 Notes on Equity Jurisprudence 
 
 CHAPTER XXX. 
 
 Bills of Discovery. 
 
 Discovery — rationale of the proceeding. — Bills of dis- 
 covery, discussed in this chapter, are bills filed in equity by one 
 of the parties to a litigation, threatened or pending, in a court 
 of law, with the object of compelling the adversary to disclose 
 facts and produce papers needed by the party filing the bill, as 
 evidence in his behalf. 
 
 The need for such a bill becomes obvious when the student 
 learns the common law rule of evidence that no party to an ac- 
 tion at law was competent or compellable to testify as a witness 
 in the action, whether for or against himself. 
 
 This singular rule prevailed in equity, as well, in so far as no 
 party to the equity suit was a competent witness, in the ordi- 
 nary sense. But early in its history, equity established the rule, 
 which still prevails unless abolished by statute, that any party 
 may be compelled to answer on oath, interrogatories propounded 
 to him by his adversary through the medium of a bill in equity 
 filed for the purpose, and to produce books and papers in his 
 possession, bearing on the case. Such a bill is known as a bill 
 of discovery. 
 
 Modern statutes have abolished the rule excluding the parties 
 as witnesses, but the right to file a bill of discovery continues, 
 unless the statute forbids it. 
 
 The term "discovery" is here used in its original sense of "un- 
 covering" or "disclosing"', and not in the more modern sense 
 of "finding", or getting first knowledge of a hitherto unknown 
 truth, or fact, or thing. 
 
 The practice in connection with such bills will be reserved for 
 our studies in Equity Procedure. The chapter may therefore be 
 omitted here. 
 
Interpleader 249 
 
 CHAPTER XXX. 
 Further Remedies in Equity. 
 
 In addition to the remedies mentioned in the Text, there are 
 a number of others, generally recognized, among them: 
 
 1. Suits for partition oi real property. See Freeman on Co- 
 tenancy. 
 
 2. For assignment of a widow's dower. See Scribner on 
 Dower. 
 
 3. Cases of disputed boundaries. See 3 Pomeroy's Eq. Jurisp. 
 1378, et seq. 
 
 4. Suits for divorce. See Bishop on Marriage, Divorce and 
 Separation. 
 
 5. Suits to sell lands of infants and lunatics (generally con- 
 ferred by statute). 
 
 CHAPPER XXXI. 
 
 Equitable Parties. 
 
 Page 501, § 89. Interpleader. — The most striking feature of 
 the remedy of interpleader in equity, is the necessity for privity 
 between the several claimants — that is to say (as stated in the 
 second paragraph of § 892) the claimants must be in privity with 
 each other, or both must claim under the same title. This re- 
 quirement has made the remedy by interpleader less useful than 
 it might otherwise have been, and the courts in modern times are 
 disposed to relax the rule requiring this privity. ^ 
 
 The same — Virginia statute. — In Virginia, resort in such 
 cases may be had to a statutory proceeding, by which the contro- 
 versy may be disposed of in a summary way at law, without the 
 
 ' See extensive note in 91 Am. St. Rep. 593; Boyle v. Marion 
 (Miss.), 21 South. 530. Dicta in the recent Virginia case of Runkle 
 V. Runkle, 112 Va. 788, approve the rule requiring privity. 
 
250 Notes on Equity Jurisprudence 
 
 interposition of equity. But the statute is inapplicable until after 
 one of the claimants has brought his action.^ 
 
 Interpleader, continued — plaintiff must be both inno- 
 cent and disinterested. — Not only must the plaintiff have ac- 
 quired possession of the disputed res without wrong, or legal 
 fault, on his part, but he must have no other interest in, or con- 
 nection with, the subject-matter in controversy than that of a 
 mere stakeholder, desiring that the stake in his hands be re- 
 stored to its rightful owner. He may not claim a lien thereon, 
 for storage or keep, or other expenses incurred in the premises. 
 He must be in a position (by the consent or order of the court) 
 to withdraw at once from the suit, as soon as the claimants have 
 been convened, and the issue made up between them. Hence 
 he may not only not assert any claim for himself, but he must be 
 under no possible legal liability to any of the claimants. If he 
 is bound by contract with one of the claimants, touching the 
 thing in controversy, he may not force the several claimants to 
 interplead, save where one of the claimants asserts title to the 
 thing through the other — that is, is in privity of title with the 
 former. Illustrations will follow later. 
 
 Interpleader continued — Why privity required. — The 
 reason why the so-called "privity" is required as a pre-requisite 
 to a bill of interpleader is, that if such privity does not exist, then 
 the parties are really not making claim to the same thing. If 
 the several claims be to the identical thing, then, ex necessitate, 
 the thing must be traceable to a common source of title, since 
 title to the same thing cannot come from two distinct sources. 
 
 An illustration may make this clearer: The stakeholder has 
 found a watch, to which two claimants assert title. One al- 
 leges that the watch is one that his grandfather purchased, new, 
 from a Swiss watch-factory, and that the watch has been in his 
 family evey since — ^passing from grandfather to father, and from 
 father to son, the present claimant, who lost it. 
 
 The other claimant alleges that this watch was one given by 
 General LaFayette to his great-grandfather at Yorktown — ^and 
 title is traced down to the present claimant. 
 
 " Va. Code ]919, § 6151. In the statutory proceeding, privity of 
 title seems not required. The statute has not taken away the equitable 
 remedy, if the plaintiff prefers to resort to the latter. 
 
InterplBadhjr 251 
 
 Here, it is obvious that the parties are really not claiming the 
 same thinq. It is a clear case of mistaken identity. One is 
 claiming a watch bought by his grandfather in Switzerland, 
 while the other traces his title from an entirely different source, 
 and to a wholly different watch. 
 
 The same— illustration continued. — If, on the other hand, 
 instead of claiming title from the source indicated, the latter 
 claimant admits that his adversary's ancestor acquired the watch 
 as the adversary alleges, but asserts a purchase by himself, or by 
 some predecessor in title, from the other's grandfather, we now 
 have- title traced to a common source, namely the grandfather, 
 and it becomes transparently clear that the parties are claiming 
 the same thing. 
 
 It appears, therefore, that the insistence upon privity of title 
 means nothing more than that the controversy must be over the 
 sam,e thing, concerning the identity of which there is no dispute. 
 
 The same — privity continued. — There seems no sound rea- 
 son, however, why equity should not extend the scope of the 
 remedy of- interpleader to cover either of the cases used in our 
 illustration. So far as the stakeholder is concerned — and it is 
 for his benefit alone that the remedy by interpleader is given — 
 his position in the one case is as embarrassing as it is in the 
 other. Where he finds himself thus innocently in the posses- 
 sion of property to which he makes no claim, the question 
 whether or not the case is one of mistaken identity, is not of the 
 slightest concern to him. So far as he is concerned, there is but 
 one watch involved in the controversy. To grant relief in the 
 one case, and to refuse it in the other, seems scarcely in accord- 
 ance with justice or the common practice of equity in other di- 
 rections. Hence, as indicated above, the tendency of the courts 
 is toward the relaxation of the strict rule.^ 
 
 Interpleader continued — foundation of the jurisdiction. 
 
 Where the case is a proper one for interpleader under the fore- 
 
 " Full note, 91 Am. St. Rep. 593. Where the strict rule is applied 
 and interpleader denied, doubtless the stakeholder might protect 
 himself against possible double liability in separate actions against 
 him by the several claimants, by serving notice on the other claim- 
 ant, of the pendency of the action by the first claimant, and giving 
 the other opportunity to defend the action. 
 
252 Notes on Equity Jurisprudence 
 
 going principles, equity takes jurisdiction because of the very 
 embarrassing situation in which the innocent stakeholder would 
 find himself, in case he were sued at law by either or both claim- 
 ants. The recovery by one could not be pleaded as a defense 
 to a recovery by the other because of the established rule, both at 
 law and in equity, that a judgment or decree binds only the par- 
 ties to the action or suit. Hence the stakeholder might find him- 
 self held liaible to hath claimants — each recovering in different 
 actions, before diflferent juries, and perhaps in different courts. 
 
 The same — further illustrations. — The situation \yhere 
 equitable interpleader is proper has already been illustrated. It 
 may prove helpful to illustrate the reverse situation — where the 
 stakeholder will not be entitled to require the several claimants 
 to interplead. 
 
 Thus where, on the death of the insured, several persons set 
 up conflicting claims to the proceeds of the same policy, the 
 insurer is entitled to compel them to interplead — and such is the 
 quite common practice. But where the insurer, at the request 
 of the insured, has accepted the surrender of one policy payable 
 to A, and has issued another policy to B in its place, and each 
 claims the proceeds for himself, interpleader will not lie, be- 
 cause the insurer may be liable to both — since the surrender of 
 the former policy may have been invalid as to A, and the new 
 policy may be valid as to B. In such cases, the possible liability 
 to each excludes the right to require the parties to interplead. 
 Here, after all, the parties are not claiming the same thing^one 
 claims under the first policy and the other under the second.^ 
 
 So where A deposited with a bank, collateral bought of B, to 
 secure a loan from the bank, and the latter was notified by C, 
 wife of B, that the collateral was her proprty, not derived through 
 the husband B, it was held that the case was not one for inter- 
 pleader by the bank — since if the collateral was in fact C's, the 
 pledgee-bank was a tort-feasor, and liable to C in an action of 
 
 * Connecticut Life Ins. Co. v. Tucker (R. I.), 91 Am. St. Rep. 590 
 and monographic note. That the conflicting claims of the parties 
 are to portions of the res only, does not exclude the right to inter- 
 pleader — nor does the circumstance that one claims the whole and 
 the other a part only. 3 Poraroy's Eq. Jurisp. 1322, n. 2; School 
 District V. Weston, 31 Mich. 85; Newhall v. Kastens, 70 111. 156. 
 
Bills of Peace 253 
 
 tort for conversion. Nor, if the property was in fact C's, was 
 the bank an innocent stakeholder, but a wrongdoer from the be- 
 ginning. ^ 
 
 So where A sells a chattel to C, who, before payment, is noti- 
 fied of B's claim to the property, C may not have interpleader; 
 not with respect to the chattel, because, if B's in fact, C is a 
 wrongdoer; and not with respect to the unpaid purchase money, 
 because the parties are not claiming the same thing — ^^B's claim 
 is for the value of the chattel, by reason of the conversion, while 
 A's claim is to the purchase money under the contract of sale. 
 
 CHAPTER XXXIA. 
 
 Bills of Peace — :Multiplicity of Suits. 
 
 (New chapter here.) 
 
 Page 506, § 898. Prevention of multiplicity of suits — 
 "Bills of peace." — In addition to the instances mentioned in 
 the Text, there are numerous other situations where equity in- 
 terposes to prevent a multiplicity of suits. Bills for this purpose 
 are frequently termed "bills of peace." 
 
 Mr. Pomeroy discusses the subject at length and with great 
 learning,^ and finds four classes of cases in which the jurisdic- 
 tion attaches. These are mentioned below, briefly, in order. 
 
 The same — first class. — Where the injured party, in or- 
 der to obtain all the relief to which he is entitled, is obliged to 
 bring a number of actions, successively, against the same wrong- 
 doer, all growing out of the one wrongful act and involving the 
 same questions of law and fact. 
 
 Examples of this case would be continued nuisance or waste, 
 repeated trespasses, etc. 
 
 Here equity will enjoin the repetition or continuance of the 
 wrong, and thus relieve the plaintiff permanently from the ne- 
 cessity of repeated actions, and the annoyance and expense inci- 
 dent thereto. 
 
 First Nat. Bank of Morristown v. Bininger, 126 N. J. Eq. 345. 
 1 Pomeroy's Eq. Jurisp. 243 et seq. 
 
254 Notes on Equity Jurisprudence 
 
 This class, it will be observed, includes cases only between the 
 same plaintiff and the same defendant; and the relief granted 
 redounds solely to the benefit of the plaintiff at law. 
 
 Second class. — ^Where the dispute is between two persons, 
 and one of them has instituted, or is about to institute, numer- 
 ous actions, simultaneously or successively, against the other, all 
 depending on the same issues of law and fact. 
 
 For example, where, wantonly or maliciously, A has brought 
 repeated actions of ejectment against B for the recovery of the 
 same tract of land, the latter may have the controversy settled in 
 equity and further actions enjoined. 
 
 So where seventy-seven actions at law were brought by the 
 same plaintiff against the same defendant, for the recovery of 
 as many penalties for violations of the same city ordinance.^ 
 
 The same — contrasted with first class. — Here, contrary 
 to the situation presented in class one, it is the defendant (at 
 law) who is complaining in equity of being harassed by a mul- 
 tiplicity of actions, all brought by the same plaintiff (at law), 
 and all based on the same cause of action. But, as in class one, 
 the injunction benefits only the plaintiff in the equity suit, and 
 no other persons are in anywise interested. 
 
 Third class. — Where a number of persons have separate and 
 individual claims and rights of action against the same person, 
 all arising from a com-m,on cause, all governed by the same rule 
 of law and all involving similar facts, so that the whole matter 
 might be settled in a single suit by one person suing alone or 
 on behalf of himself and the rest. 
 
 An example of this class would be where a municipal corpora- 
 tion assesses an illegal tax on separate parcels of real property 
 belonging to separate and distinct owners.^ 
 
 Other illustrations are the case of mill-owners on the same 
 stream, all affected alike by the wrong of some upper proprietor 
 in diverting the water or decreasing the flow ; * and obstructions 
 by a wrong-doer of a private way over which a number of abut- 
 
 ' Third Ave. R. R. v. Mayor of N. Y., 54 N. Y. 159. 
 ' See Richmond v. Crenshaw, 76 Va. 936; Roper t. McWhorter, 77 
 Va. 314; Johnson v. Black, 103 Va. 477. 
 * Ballou V. Hopkinton, 4 Gray (Mass.) 324. 
 
Bills of Peace 255 
 
 ting proprietors, claiming under independent titles, have an ease- 
 ment of passage.^ 
 
 The same — contrasted with first and second classes. — 
 
 As in classes one and two, the injunction, or other relief, here, is 
 sought by those who would be plaintiffs at law. But, unlike the 
 situation in the former classes — where the litigation, both at law 
 and in the subsequent equity suit, was solely between one plain- 
 tiff and one defendant, or several plaintiffs in joint and identi- 
 cal interest (such as co-owners or co-partners) and several de- 
 fendants in similar joint interest — the interests of the several 
 plaintiffs are not joint, but distinctly several. Since, however, 
 the rights of all depend upon precisely the same facts and the 
 same rule of law, there is at least a strong community of interest. 
 
 The same — illustrated. — Thus, in the case of the millown- 
 ers illustrated above, the owner of one of the affected mills may 
 have no property interest whatsoever in the mill of his neighbor. 
 Nor is any one mill-property affected by the defendant's wrong 
 in identically the same way, or in the same degree, as the others. 
 Inasmuch, however, as the injury to each is the same in kind, 
 and flows from precisely the same fact (namely the diversion of 
 the water), and the rights of each proprietor depend on the 
 sam^ rule of law, there is such a community of interest, as en- 
 titles the several owners to make common cause in a single bill 
 filed to enjoin the common wrong. 
 
 In this third class of cases, it will be observed that even had 
 the suit been brought by a single plaintiff, instead of by a num- 
 ber of plaintiffs, all persons in common interest would have 
 shared the benefit of the injunction. That is, if, in the same il- 
 lustration, mill-owner A alone had brought the suit and secured 
 a permanent injunction against diversion of the water, mill- 
 owners B, C, D and E would have shared in the benefits of the 
 plaintiff's injunction. 
 
 " Cadigan v. Brown, 120 Mass. 493. The familiar example, noticed 
 in a previous chapter, of numerous lien creditors uniting in a single 
 suit to set aside a fraudulent conveyance by the common debtor, or 
 to subject other equitable assets to the payment of their respective 
 liens, scarcely belongs in this category, since such jurisdiction really 
 rests on the necessity of a convention of the creditors, in order that 
 the court may administer the entire res. See Almond v. Wilson, 75 
 Va. 613; Brinkerhoff v. Brown, 6 Johns. Ch. 139. 
 
256 Notes on Equity Jurisprudence 
 
 The courts are fairly agreed with respect to the propriety of 
 equitable intervention in the three foregoing classes of cases. 
 But with respect to the fourth and last class, now to be consid- 
 ered, the authorities are "like Swiss troops fighting on both sides" 
 — with a strong tendency toward denying the exercise of the 
 equitable jurisdiction, especially where the several claims are for 
 damages for a single tort of the defendant, from which all the 
 claimants have suffered. 
 
 The same — fourth class. — Where the same person claims a 
 common right, arising from the same facts, and dependent on 
 the same rule of law — whether as an affirmative cause of action 
 or as a defence — against a number of persons, the establishment 
 of which claim or defence would regularly require a separate ac- 
 tion against each, or a separate action of each against him, he 
 may have the right established in a single suit in equity to which 
 they are all co-defendants. 
 
 Thus where the treasurer of a railroad company fraudulently 
 issued, from time to time to divers persons, certificates of stock 
 of the company, which certificates came into the hands of more 
 than a hundred separate bona fide holders — each issue being ac- 
 complished by the same fraudulent contrivances — it was held 
 that the railroad company might maintain a single suit in equity 
 against all of the holders, to test the legality of the certificates.® 
 
 The rule is well illustrated in the Alabama case of Southern 
 Steel Co. V. Hopkins. '^ 
 
 In that case, more than one hundred actions at- law were in- 
 stituted by diflferent plaintiffs (employees) against the same cor- 
 poration, to recover damages resulting from a single accident in 
 its works. Thereupon the defendant corporation filed a bill in 
 equity against all the plaintiffs at law to enjoin all legal pro- 
 ceedings, in order that the defendant might establish, in a single 
 suit, the perfect defence which the bill alleged the defendant 
 could establish. The bill was sustained on the first appeal, but 
 
 ° New York & N. H. R. Co. v. Schuyler, 17 N'. Y. 593. 
 
 ' 157 Ala. 174, 30 L. R. A. (N. S.) 848 and n., 131 Am. St. Rep. 
 20, 16 Ann. Cas. 690, 47 So. 374 — subsequently overruled in Roanoke 
 Guano Co. v. Saunders (Ala.), 35 L. R. A. (N". S.) 491 n., 56 So. 198; 
 and later itself reversed on a second appeal, 57 So. 11, 40 L,. R. A. 
 (N. S.) 464, n. 
 
Equitable Defenses — ^Bona Fide Purchaser 257 
 
 the decision was subsequently overruled, as indicated in the foot- 
 note. ^ 
 
 The same — conflict of authorities. — As admitted by Mr. 
 Pomeroy ® in his masterly vindication of the conclusions an- 
 nounced by him, and as appears from the authorities already 
 cited and others cited in the footnote,!" there are numerous au- 
 thorities that deny relief in equity in his third and fourth classes, 
 unless there is privity or mutuality (not mere community) of in- 
 terest among the several claimants. 
 
 CHAPTER XXXIB. 
 
 Equitable Defenses. 
 (Begin new chapter here with § 903.) 
 
 Equitable defenses. — The equitable defenses mentioned in 
 the Text are: (1) Bona fide purchaser for value; (2) Laches; 
 and (3) Equitable Estoppel — to which may be added (4) De- 
 fences to Actions on Sealed Instruments; and (5) Other de- 
 fences purely equitable. 
 
 Most of these have already been considerd in previous chap- 
 ters. They will, therefore, be but briefly noticed here. 
 
 1. Bona Fide Purchaser for Value. 
 
 Page 508, § 903. Who is a purchaser? — This question has 
 already been discussed in our Chapter on Resulting Trusts. It 
 was there pointed out that the term "purchaser'' does not neces- 
 sarily imply one who has paid value.^ In the law of real prop- 
 erty, a 'purchaser' is one who has secured legal title by deed or 
 
 * Supra, n. 7. 
 
 ° 1 Eq. Jurisp. 243-275. 
 
 '° The Mississippi court, after denying Mr. Pomeroy's view, and 
 then adopting it (Gulf and S. I. R. Co. v. Barnes, 94 Miss. 484, 48 
 So. 823) has later followed the Alabama court in rejecting the 
 soundness of that view, as applicable to tort actions. ' Cumberland 
 Tel., etc., Co. v. Williamson, 57 So. 559. A full collection of the 
 authorities will be found in the cases cited above, and especially in 
 the L. R. A. and Am. St. Rep. annotations ubi supra. 
 
 '■.Ante, p. 61. 
 
258 Notes on Equity Jurisprudence 
 
 Tjuill, as contrasted with title by inheritance. As a defense, how- 
 ever, in equity, the term excludes a devisee under a will — except 
 in the rare case where the devise is for value — since the defense 
 in question is available only to one who has paid value. 
 
 A purchaser such as is now under consideration, is one who 
 has taken title — whether in himself or in another for his bene- 
 fit. Hence not only is the grantee in an absolute conveyance a 
 purchaser, but so likewise is a mortgagee, a deed of trust credi- 
 tor and a pledgee — the three last-mentioned being purchasers to 
 the extent of the debt secured {pro tanto). 
 
 Purchaser — legal title not alwrays necessary. — In order, 
 however, to occupy the favored position of a bona fide pur- 
 chaser for value, it is not always essential that such purchaser 
 should have actually acquired the legal title, and thus be a com- 
 plete purchaser. If he has paid all the purchase money before 
 receiving notice of the antecedent and competing claim — and 
 because of non-registry or other negligence on the part of the 
 earlier claimant, which, in equity and good conscience, should 
 operate as an estoppel against him — ^^then the equity of the later 
 purchaser is superior, in spite of his non-acquisition of the le- 
 gal title. He has the best right to call for it, and that is suffi- 
 cient.^ 
 
 Purchaser with notice from purchaser without notice. 
 
 It is a settled principle of equity, as it is of the law of negotiable 
 instruments, that one who claims through a purchaser for value 
 without notice, though himself huving notice, or not having 
 paid value, stands in the same favored position as the former. 
 Any other rule would prevent the first purchaser, who, ex hy- 
 pothese, has a perfect title, from having the whole world for a 
 
 ' Preston v. Nash, 76 Va. 1; 3 Minor, Real Property, § 1409 et seq. 
 The Virginia statute has carried this principle still further by the 
 provision that as against an unregistered instrument, a purchaser 
 who has paid part only of the purchase money before receiving 
 notice, shall have a lien on the property to the extent of the pur- 
 chase money so paid. Va. Code 1919, § 5300. The purchaser under 
 an executory contract is further protected in Virginia by the provision 
 that if his contract is duly recorded, it shall be as valid, as against 
 creditors and purchasers, as if the contract were a deed conveying 
 the property. Va. Code 1919, § 5193. 
 
Equitable Defenses — ^Bona Fide Purchaser 259 
 
 market.^ The equity of the antecedent claimant has already been 
 cut off by conveyance to the original, bona fide purchaser — and 
 once cut off, it has ceased to exist against that particular res.* 
 
 Distinction between purchasers and creditors. — A pur- 
 chaser, if for value (see infra) occupies a much higher plane in 
 equity than a mere creditor. The one lays his money out on the 
 credit of the specific property, while the other extends credit on 
 the mere person of the debtor. 
 
 If therefore one is a mere jvidgment creditor, or an attaching 
 creditor, and there is no statute declaring otherwise, he is in no 
 sense a purchaser, entitled to superior equities, but stands in the 
 shoes of his debtor, and bound by all the equities by which his 
 debtor is bound. In short, the rule is, "creditors stand in the 
 shoes of their debtors." ^ 
 
 The same — how affected by registry statutes. — It must 
 be carefully noted, however, that in all of the states there are 
 statutes requiring practically all transactions relating to real 
 property, and many concerning personal property, to be re- 
 corded, and declaring that if not recorded such transactions shall 
 be void "as to purchasers for value without notice and to credi- 
 tors." Of course, wherever the creditor can bring himself 
 within the terms of such statutes, then he does not stand in the 
 shoes of his debtor, but occupies the higher position along with 
 the purchaser. Indeed, the Virginia statute of registry, pro- 
 tects creditors (in the cases covered by the statute) whether 
 they have notice or not, and whether they be prior or subsequent 
 creditors, — whereas the purchaser, jn order to be protected un- 
 der the statute, must be a subsequent bona fide purchaser — that 
 is, one without notice.® 
 
 ■■ e Minor, Real Prop., § 1406. 
 
 * Save where the property comes again into the hands of the 
 grantor against whom the equity existed. 
 
 ° See Coldiron v. Asheville Shoe Co., 93 Va. 364, and other author- 
 ities cited ante, note to page ,130; Borst iv. Nalle, 38 Gratt. 423; 
 433; Brown v. Pierce, 7 Wall. 205; Baker v. Morton, 12 Wall. 150; 
 White V. Carpenter, 2 Paige 217; Robinson v. Robinson, 22 Iowa 427. 
 Ante, note to § 716. 
 
 ° See Va. Code 1919, chapter 210, and the cases cited in the an- 
 notations thereto. See ante, note to § 698. 
 
260 Notes on Equity Jurisprudence 
 
 Who is a purchaser for value? — What constitutes value is 
 to be determined largely by the ordinary law of contracts, mod- 
 ified to some extent by equitable principles. It is clear that 
 money paid, services rendered, obligations assumed, etc., con- 
 stitute value.'^ 
 
 Purchaser for value, continued — (1) payment of pre- 
 existing debt. — It is universally conceded that the transfer of 
 property in payment of an existing indebtedness, in whole or in 
 part to another, constitutes the grantee a purchaser for value. 
 
 The same — (2) security for pre-existing debt. — 
 Whether a conveyance by way of mortgage or deed of trust to 
 another, by way of security (and not by way of payment) for a 
 pre-existing debt, without new consideration, renders the latter 
 a purchaser for value, so as to cut off antecedent and unknown 
 equities, is a controverted question. The weight of authority 
 doubtless agrees with the Text, namely, that such a transaction 
 renders the grantee a mere volunteer, and not a purchaser for 
 value.* 
 
 It is settled otherwise, however, by a long line of decisions in 
 Virginia.** 
 
 The same — (3) security for contemporaneous debt.— 
 
 It is also settled that one who takes a mortgage or deed of trust, 
 or other lien, to secure a debt then and there created, is a pur- 
 chaser for value — of course only to the extent of the debt se- 
 cured. 
 
 Page 510, § 906 (footnote). Notice — possession of real 
 property as notice to purchasers. — It seems a singular rule 
 of law that where a purchaser examines the title of his proposed 
 vendor, and finds it clear on the record, yet if the property be in 
 the possession of another, in whole or in part, the proposed pur- 
 chaser may not safely buy until he has inquired of every tenant 
 whether he has any legal or equitable claim to the property. Yet 
 
 ' If bona fide, the purchase need not be for adequate vahie. Stein- 
 man V. CHnchfield Coal Corp., 121 Va. 611. 
 
 ' See note 33 L. R. A. 305. 
 
 ° See Oberdorfer v. Myer, 88 Va. 384; Chapman v. Chapman, 91 
 Va. 400 — citing the previous Virginia cases;- Arbuckle v. Gates, 95 
 Va. 802; ante, n. to § 698. 
 
Notice — In Chain of Title 261 
 
 the doctrine that "possession is notice" leads to this result, and 
 such is the rule enforced in most jurisdictions in America. 
 
 The rule is borrowed from England, and is unobjectionable 
 there, since in England there is no such registry system as we 
 have in America. The doctrine practically cuts up the registry 
 system by the roots. It was, however, recognized in Virginia, 
 and, as stated, is generally recognized throughout the United 
 States, save where otherwise provided by statute.i** 
 
 Shortly after the Virginia decision above referred to, the leg- 
 islature abolished the doctrine, by the provision that the posses- 
 sion of any such estate or term, without notice of other evidence 
 of title, shall not be notice to subsequent purchasers for valuable 
 consideration. 11 
 
 Notice in chain of title. — As indicated in a previous chap- 
 ter, it is an elementary principle that one is charged with notice 
 of the contents of every instrument constituting a link in his 
 chain of title, from the time he acquired title back to the orig- 
 inal grant by the crown or commonwealth. As one cannot 
 repudiate any link of a chain by which his own weight is sup- 
 ported, so one cannot claim through an instrument and yet dis- 
 claim notice of what appears on its face. 
 
 For example, in a partition suit, a decree for owelty of parti- 
 tion was entered in favor of one of the co-tenants. This decree 
 became an equitable lien on that portion of the land assigned to 
 the other co-tenant. The latter subsequently sold her portion to 
 a purchaser who had no actual notice of this lien, nor was the 
 lien docketed. It was held that since this purchaser necessarily 
 relied upon the decree of partition as an essential part of his mu- 
 niments of title, he must be charged with notice of the lien 
 therein mentioned. ^^ 
 
 " See Chapman v. Chapman, 91 Va. 397; Kirby v. Tallmadge, 160 
 U. S. 379; Knox v. Thompson (Ky.), 13 Am. Dec. 246, and note; 
 note 89 Am. Dec. 167; note 19 Am. St. Rep. 338; 1 Va. Law Reg. 204; 
 note 13 L. R. A. (N. S.) 49. 
 
 "' Va. Code 1919, § 5194. 
 
 " Jameson v. Rixey, 94 Va. 342. See further, Roanoke Brick Co. 
 V. Simmons (Va.), 20 S. E. 955, where a purchaser was held charged 
 with notice of an unrecorded deed of trust by the mere words 
 "save as to the deed of trust aforesaid," appearing in the covenants 
 of warranty contained in the conveyance under which his grantor 
 
262 Notes on Equity Jurisprudence 
 
 Notice — what constitutes — Resivme. 
 
 Notice 1^ — classification,.^ — We may classify notice which 
 defeats the plea of "purchaser from value without notice" as 
 three kinds: (1) Actual notice; (2) constructive notice; and 
 (3) notice implied by law. 
 
 (1) Actual notice. — Actual notice is knowledge howsoever 
 acquired. Actual notice of another's equity exists where the 
 party to be affected by the notice had such knowledge of the 
 equity that as an honest man he must have respected the other's 
 rights, and refused to make the purchase. 
 
 (2) Constructive notice. — Constructive notice is notice 
 with which the purchaser is charged through the knowledge of, 
 or notice to, his agent, acting in his behalf in the transaction to 
 be affected; or notice with which one is charged by having been 
 put on inquiry — on the trail of the adverse equity — and having 
 failed to pursue the trail, which would have led him to the dis- 
 covery of the equity in question. 
 
 In practical results, there is no substantial distinction be- 
 tween these two kinds of notice. Each of them connotes hfld 
 faith — and in order to impress the purchaser's conscience with 
 notice in these two cases, and thus to defeat his plea of pur- 
 chaser without notice, there must be such proof, by direct or cir- 
 cumstantial evidence, of bad faith on his part. 
 
 In such cases, the burden of proof is on the purchaser to 
 establish the payment of value, but on the other party to estab- 
 lish the notice. These are elementary principles and the books 
 abound in authorities. i* 
 
 Notice implied by law. — Notice implied by law is that no- 
 tice with which the purchaser is bound, regardless of his inno- 
 cence in fact. We have already considered the instances of no- 
 tice of this character, namely, (1) Registry of the instrument 
 
 claimed. See full note to LeN'eve v. LeNeve, 2 L. C. E. 168, 169; 
 Burwell v. Fauber, 21 Gratt. 446, 463; Bellenot v. Laube, 104 Va. 843; 
 8 Va. Law Reg. 735; Charlottesville Hardware Co. v. Perkins, 119 
 Va. 34; Brush v. Ware, 15 Pet. 93, 114. 
 
 " See 2 Minor, Real Property, 1418 et seq. 
 
 " See Steinman v. Clinchfield Coal Corp., 121 Va. 611. 
 
Notice — Equitable Estoppel 263 
 
 evidencing the competing equity — when such registry is author- 
 ized by statute; (2) Lis pendens affecting the res in question — 
 including the judgment or decree rendered therein; but if stat- 
 ute so requires, (but only in that case) notice of the lis pendens 
 must be recorded, or the judgment docketed. 
 
 (3) Possession of real estate, as indicated above in this chap- 
 ter. 
 
 (4) Notice from facts appearing in the documents consti- 
 tuting the chain of title to the res in question — as previously in- 
 dicated in this chapter. 
 
 2. Laches. 
 
 The defence of laches has been fully treated in a previous 
 chapter. 15 
 
 3. Equitable Estoppel. 
 
 The Text may be followed here. The law courts have grad- 
 ually adopted the i rinciples of equitable estoppel, so that the 
 defence is now made almost as freely at law as in equity — the 
 maxim of both courts being that "he who does not speak when 
 he ought to speak, shall not speak when he ought to keep silent." 
 
 Most of the American courts have adopted the view that by 
 operation of the doctrine of estoppel, legal title may pass from 
 the party estopped to the party in whose favor the estoppel oper- 
 ates. The Virginia court has refused to adopt this view ; ^^ but 
 in the late code revision it has been made the statutory rule 
 in at least one case, viz., where a conveyance with general war- 
 ranty of title is made, of property not then owned by the grantor, 
 but which he subsequently acquires. ^'^ 
 
 The student has already encountered many illustrations of the 
 principle of estoppel at law in his studies of agency, sales and in- 
 surance. This principle plays an extremely important role in 
 the daily administration of justice in the courts, both of law 
 and equity. 
 
 '= Ante Ch. IX, p. 22. 
 
 '■'' Burtners v. Keran, 24 Gratt. 65. 
 
 " Va. Code 1919, §§ 5171, 5203, and revisors' annotations. 
 
264 Notes on Equity Jurisprudence 
 
 CHAPTER XXI. 
 
 {Transferred from its sequence in the Text.) 
 
 Bills for Account. 
 
 Preliminary.! — In the field of equity jurisprudence there 
 probably is no single topic presenting such difficulties as techni- 
 cal Bills for Accounting. These difficulties arise not so much 
 from the inherent nature of the subject as from what Professor 
 Langdell, in his luminous discussion of such bills, "^ terms the ig- 
 norance of equity lawyers and judges, who, while the common 
 law action of account existed, had little concern with such bills, 
 and who, when the common law remedy became obsolete, and 
 equity assumed the jurisdiction, have never learned the princi- 
 ples on which the jurisdiction rests. 
 
 No cases found in the books are more elusive of analysis, for 
 the purpose of fixing their precise value as precedents, than 
 those involving bills for account. The courts are often uncer- 
 tain of the real ground upon which the jurisdiction in any par- 
 ticular case should be assumed or denied; and it is common to 
 find the judicial mind groping for more than one ground upon 
 which to rest the decision, with no especial emphasis on any one. 
 Principles are still further obscured by numerous and confusing 
 dicta. These observations are especially applicable to bills by 
 principal against agent, and bills for the settlement of so-called 
 mutual accounts. 
 
 Secondary writers have usually taken their cue from the courts, 
 and have ventured very cautiously and timidly into these judici- 
 ally troubled waters. Their treatment of the topic is character- 
 ized by broad general statements, with little effort at discrimi- 
 nation or concreteness ; and in the voluminous list of cases cited, 
 the investigator finds comparatively few that are enlightening.^ 
 
 ' Brief Survey of Eq. Jurisp. 74-124 — under designation of "True 
 Bills of Account." 
 
 ' The scholarly discussion of Prof. Langdell, already referred to, 
 and that of Judge Story, 1 Eq. Jurisp. §§ 443-459, are striking excep- 
 tions. The reader may also consult, on the general subject: 3 
 Pomeroy's Eq. Jurisp. 1421 — two sections only devoted to this topic: 
 and for a generous, if not discriminative, collection of the cases, 1 
 Cyc. 351; 1 Enc. PL and Pr. 83; 1 Corp. Jur. 588. 
 
Bii,i<s FOR Account — The Several Kinds 265 
 
 It<is, therefore, with some misgiving that the present modest 
 attempt is made to clear up for the busy practitioner some of 
 the perplexities likely to confront him in the effort to maintain 
 or to resist a bill for an accounting. 
 
 Exclusive jurisdiction — concurrent jurisdiction. — At the 
 
 outset, we must distinguish between bills for account of legal (as 
 distinguished from equitable) demands, of which equity has ex- 
 clusive jurisdiction — or at least inherent jurisdiction independ- 
 ent of any other equity — Professor Langdell's "True Bills of 
 Account" — and demands purely equitable, or those over which 
 the jurisdiction of the law and equity courts is concurrent, or, 
 again, where the equitable jurisdiction is exercised as ancillary 
 to some other equity. This distinction is vital to a clear appre- 
 hension of determining principles. 
 
 As presently to be indicated, accounting is sought more fre- 
 quently than otherwise as merely ancillary to the enforcement of 
 some other equitable demand, or by reason of the inadequacy of 
 the legal remedy, because of the less efficient machinery of the 
 law courts to do justice between the parties. 
 
 Such cases, of course, do not involve the question of inde- 
 pendent jurisdiction; and one must carefully guard against be- 
 ing led astray by the many obiter expressions which are encoun- 
 tered in the opinions in such cases, touching the independent ju- 
 risdiction. 
 
 We cannot hope, in our brief discussion, to remove all of the 
 difficulties which are inherent in the subject, or which courts and 
 text-writers have imported into it, but, with Professor Lang- 
 dell's masterly exposition as a guide, we may hope to segregate 
 and emphasize some of the pertinent principles by which courts 
 of equity are supposed to be guided in determining the question 
 of jurisdiction of suits of this nature. 
 
 Probably every account taken in an equity suit is embraced in 
 one or other of the following categories : 
 
 I. Account of purely equitable demands. 
 II. Account of legal demands as ancillary to other equitable 
 relief. 
 III. Account because of inadequacy of legal remedy — under the 
 concurrent jurisdiction. 
 
266 NoTfis ON Equity Jurisprudence 
 
 IV. Account as an independent equity. * 
 
 V. Mutual accounts. 
 Taking these up in order: 
 
 I. Account of purely equitable demands. 
 
 Equitable demands. — That a court of equity should take 
 jurisdiction of demands purely equitable, and compel the de- 
 fendant to do justice in the premises, seems scarcely to need ex- 
 planation or justification, since it is for the purpose of enforc- 
 ing equitable rights that courts of equity exist. 
 
 If, therefore, to secure to the plaintiff his equitable rights, 
 whether these require the payment of money or the doing of 
 other things by the defendant, an account needs to be taken, 
 such account will be ordered, regardless of the relations of the 
 parties or the nature of the account. 
 
 Here the plaintiff is in equity not primarily for an account- 
 ing as an independent equity — nor because, by reason of com- 
 plexity or need of discovery, the remedy at law is inadequate, 
 nor because of defendant's legal duty to account — but on the 
 broader ground that, becaU'se of the equitable nature of the de- 
 mand, there is a complete absence of remedy elsewhere. Such 
 cases make no difficulty. 
 
 The same — ^^illustration. — The most familiar illustration of 
 this class of accounts is, of course, that between the trustee and 
 cestui, and generally between those occupying a strictly fiduciary 
 relation. 
 
 So, in any other case where plaintiff asserts demands cogniza- 
 ble only in equity, as in connection with constructive trusts, re- 
 scission of contracts and of conveyances for fraud or mistake, 
 foreclosure or redemption of mortgages, subrogation of sureties, 
 controversies among lienors as to their respective priorities, de- 
 rivative suits by minority shareholders on behalf of the corpo- 
 ration 2" — none of which demands are remediable at law since 
 they are purely equitable in their nature — and an account seems 
 
 '" As shareholders here sue on behalf of the corporation whose 
 claim is legal, the jurisdiction rests rather in the absence of a rem- 
 edy at law. 
 
Bills for Account — Account Ancillary 267 
 
 necessary, it is ordered as a matter of course. But here the need 
 of accounting is not essential in point of jurisdiction. 
 
 //. Account of legal demands as ancillary to other equita- 
 ble relief. 
 
 Account as ancillary. — A further familiar principle of eq- 
 uity is that when the court properly assumes jurisdiction of a 
 cause for one purpose, it will proceed to do complete justice be- 
 tween the parties, even to the administering of relief otherwise 
 purely legal. Here, again, little difficulty is encountered in vin- 
 dicating the equity jurisdiction, independent of the accounting. 
 
 Injunction — complete relief. — Thus, where the plaintiff is 
 properly in equity seeking an injunction against continued tres- 
 passes or other wrongs — such as the wrongful cutting of tim'ber 
 or working of mines, infringement of patent-rights, copyrights 
 or trade marks — equity is not content with granting the injunc- 
 tion only, but will proceed to administer complete relief by re- 
 quiring an account of the damages, or profits.^ Here the juris- 
 diction rests on the necessity for the injunction and not on the 
 right to an accounting. 
 
 Discovery. — Again, where the plaintiff comes into equity to 
 obtain discovery essential to his proofs, and discovery is ob- 
 tainedj equity may retain the bill and proceed to give complete 
 relief although the claim asserted be purely legal. And if an 
 accounting is necessary to such complete relief, an account will 
 be ordered. Here, again, jurisdiction having attached for pur- 
 poses of discovery, it attaches for all purposes, including an ac- 
 counting.* 
 
 ' Miller v. Willis, 95 Va. 337; Coons v. Coons, 95 Va. 434; Hig- 
 ginbotham v. Hawkins, L. R. 7 Ch. App. 676; iRoot v. Railway Co., 
 105 U. S. 189; Porter v. Spencer, 2 Johns. Ch. 169; Hawley v. Cramer, 
 4 Wend. 717, .728; Williamson v. Jones, 43 W. Va. 562, 27 S. E. 411, 
 64 Am. St. Rep. 891, 38 L. R. A. 694. 
 
 ' Corporation of Carlisle v. Wilson, il3 Ves. 279; Sturtevant v. 
 Goode, 5 Leigh, 83; Lyons v. Miller, 6 Gratt. 437, 438; Simmons v. 
 Simmons, ;33 Gratt. 451; Wilson v. Miller, 104 (Va. 446; Woolfolk 
 V. Graves, 113 Va. 182; Fowle v. Lawrason, 5 Pet. 495 (per Marshall, 
 C. J.); 1 Story, Eq. Jurisp. \456. !As the jurisdiction here rests in 
 the jieed of discovery, jurisdiction will of course be ousted if no 
 discovery be had, or if the answer deny the essential allegations of 
 the bill, or if answer under oath be waived: McFarland v. Hunter, 8 
 
268 Notes on Equity Jurisprudence 
 
 III. Account because of inadequacy of legal remedy — concur- 
 current jurisdiction. 
 
 Inadequacy of legal remedy. — A third and equally familiar 
 principle is, that where the remedy at law is for any reason not 
 plain and complete, equity will supply a remedy and make it 
 complete. 
 
 Hence, where the controversy between plaintiff and defend- 
 ant, for whatever reason, cannot be satisfactorily adjusted in a 
 jury trial at law, the equity jurisdiction attaches.^ 
 
 Complexity. — Probably the commonest cases in which the 
 equity of jurisdiction is invoked on the allegation of inadequacy 
 of the legal remedy, are those in which the accounts between 
 the plaintiff and the defendant are so complex as to render a 
 trial by jury impracticable. If the controversy involve the set- 
 tlement of accounts of too complex a nature in fact for adjust- 
 ment by a jury at law, it is in accordance with established prac- 
 tice for equity, on a proper case made, to assume jurisdiction of 
 the controversy, whether legal or equitable, and to require an 
 accounting if this be necessary to complete relief.^ 
 
 It is to be observed that in these cases the jurisdiction does 
 not rest on the relations of the parties, nor on the legal duty to 
 account, nor on the equitable subject-matter, but is based solely 
 on the ground that because of the complicated nature of the ac- 
 counts, their settlement in a jury trial would be impracticable — 
 in shorty the inadequacy of the legal remedy. The equity juris- 
 diction over mutual accounts seems mainly thus to rest in the 
 complexity of such accounts, or in the need of discovery. The 
 treatment of such accounts, however, is deferred to a later sec- 
 tion. 
 
 Leigh, 489, 501; Smith v. .Smith, 92 Va. 696; 7 Va. Law Reg. 107-117; 
 Roanoke Street Railway Co. v. Hicks, 96 Va. 510; Johnson v. Mundy, 
 123 Va. 730; Blood v. Blood, 110 Mass. 545; whereas, waiver of the 
 verified answer is immaterial to the jurisdiction where the jurisdic- 
 tion is not dependent on discovery: U. S. v. Asheville Nat. B'k., 73 
 Fed. 379; Cochrane v. Adams, 50 Mich. 16, 14 N. W. 681. 
 
 ° Cases collected in 1 Cyc. 420 et seq. 
 
 " Taff Vale Railway Co. t;. Nixon, 1 H. L. Cas. Ill; O'Connor v. 
 Spaight, 1 Sch. & Lef. 309; Lafever v. Billmyer, ,'5 W. Va. 33; Fowle 
 V. Lawrason, 5 Pet. 494; Wilson v. Miller, 104 Va. 446; Davis v. 
 Marshall, 114 Va. 193; iOglesby Co. v. Ould Co., 117 Va. 546. 
 
Bills for Account — Concurrent Jurisdiction 269 
 
 How much complexity must appear in order to warrant the 
 exercise of the jurisdiction in a particular case, is a question 
 for the sound discretion of the court, and each case must de- 
 pend on its own peculiar circumstances. '^ 
 
 It is clear, on the authorities, that the mere circumstance that 
 there are numerous items of debit and credit on one side does 
 not of itself create such complexity as to confer equity juris- 
 diction. If so, every merchant's ledger account against his cus- 
 tomer might thus be tried.* 
 
 Complexity, continued — how charged.— Where the plain- 
 tiff thus seeks the assistance of a court of equity to compel de- 
 fendant to render an account on the ground of complexity, it is 
 not sufficient to allege in general terms that the account between 
 the parties originated in many transactions, and, as a legal con- 
 clusion, is of too complex a nature to be settled by a jury; but 
 the bill must state specific facts from which, on a demurrer by 
 the defendant, the court may determine, from the face of the 
 
 ' For illustrative cases, see n. 6 supra; Governor v. McEwen, 5 
 Humph. (Tenn.) 241 — a case which might have been sustained under 
 our 4th class, infra; Kirby v. Lake Shore, etc., R. R., 120 U. S. 130; 
 Gaines v. New Orleans, 17 Fed. 1&; Paciiic R. Co. v. Atlantic R. 
 Co., 20 Fed. 277; Colonial, etc., Co. v. Hutchinson, 44 Fed. ,319— an 
 instructive opinion — jurisdiction maintained under our 4th head, infra; 
 Lyman v. Long Dock Co., 20 N. J. Eq. 396; Blood v. Blood, 110 Mass. 
 ■545; Ward v. Feck, 114 Mass. 121; Pierce v. Eq. Ass. Soc, 145 
 Mass. 56; Bank of Scotland v. Christie, 8 CI. & F. 214; Jackson v. 
 King, 82 Ala. 432, 3 So. 232 — a case of peculiar interest. The action 
 was assumpsit at law, and the plea non-assumpsit. The appellate court 
 held that the claims and counterclaims presented were too complex 
 to be settled by a jury, and that the lower court (apparently ex 
 mero motu) should, for that reason, have instructed the jury to find a 
 verdict for the defendant, and the higher court itself directed a dis- 
 missal of the action. The case is unique as an illustration of a court 
 of law (not exercising a jurisdiction under the code system of plead- 
 ing), admitting its inability to enforce a confessedly legal claim, and 
 recognizing the superior remedy afforded by its ancient rival, the 
 court of equity. Cf. Reeside's Ex. v. Reeside, 49 Pa. St. 322, 88 Am. 
 Dec. 503. Prof. Langdetl (ubi supra, 106) expresses the more persua- 
 sive view that the jurisdictional objection cannot be raised 
 in the common law court; but that plaintiff or defendant must 
 invoke the aid of the equity court. The reason Iwhy it can- 
 not be made in the law court is that the complexity will naturally 
 not appear from the plaintiff's declaration, but only on the defend- 
 ant's filing his cross-demands. The declaration, therefore, setting out 
 a proper case for trial in the law court, that court, under established 
 rule, must try it. A court of law cannot decline to try a case of 
 which it has jurisdiction. Langdell, ubi sup., 106-109. 
 
 ' Bassett v. Cunningham, 7 Leigh 302; Langdell, 108-109. 
 
270 Notes on Equity Jurisprudence 
 
 bill, whether or not such complexity does in fact exist.^ The 
 burden here of establishing the necessary complexity rests on 
 the party invoking the equity jurisdiction. 
 
 Multiplicity of parties. — Another common instance of the 
 equitable jurisdiction under this head is presented where the 
 parties plaintiff are so numerous as to render the legal remedy 
 inconvenient. In such cases, equity will assume jurisdiction and 
 will permit one or more of the parties to maintain a bill on be- 
 half of themselves and their associates for the assertion of a 
 demand otherwise proper for a court of law — including, of 
 course, an accounting where necessary for complete relief.^" 
 Here the burden of establishing the necessary multiplicity is on 
 the plaintiff. 
 
 Purpose of foregoing discussion. — In the treatment of 
 bills for account, under the three classifications already noticed, 
 the main purpose has been to eliminate these bills from the field 
 of discussion, in order to clear the way for a more careful study 
 of the fourth class, namely, accounting as a primary and inde- 
 pendent equity, or, in Professor Langdell's apt phrase, 'True 
 Bills of Account.' No effort has been made, therefore, to ex- 
 haust the instances in which the first three classes of bills will 
 lie, or to elaborate the principles controlling them. 
 
 IV. Account as an independent equity — True bills of account. 
 
 Preliminary. — It is in connection with this class of bills that 
 Professor Langdell, as quoted at the beginning of this chapter 
 deplores the circumstance that when the common law action of 
 account became an inheritance of the equity courts, the equity 
 judges and equity lawyers did not inherit along with ihe juris- 
 diction a clear-cut notion of common law principles governing 
 this action. The consequence has been, as already indicated, a 
 distressing confusion of professional and judicial thought, re- 
 
 ° Davis V. MarshalU, 114 Va. 193; Beggs v. Edison El. 111. Co., 96 
 Ala. 295, 38 Am. St. Rep. 94; Lafever v. Billmeyer, 5 W. Va. 33. 
 
 " Berkshire v. Evans, 4 iXreigh 233; Coffman v. Sangston, 21 Gratt. 
 263; Perkins v. Siegfried, 97 Va. 444. 
 
Bii,LS i?OR Account — True Bins 271 
 
 suiting in a notable lack of harmony in the decisions of the 
 courts. 
 
 The question under inquiry. — Excluding, then, the three 
 classes of bills already discussed, the present inquiry is, When. 
 is there original and independent jurisdiction of bills for ac- 
 counting in equity? That is, when -has equity jurisdiction of 
 bills for an account where the controversy is legal and not 
 equitable; where there is no other equitable relief sought, to 
 give color to the jurisdiction; where there is no complexity, no 
 multiplicity of parties, and no need of discovery? 
 
 The origin of the equity jurisdiction of account. — The 
 
 authorities seem at least agreed that the equity cours have suc- 
 ceeded to the jurisdiction exercised by the common law courts in 
 the now obsolete action of account — and that wherever the lat- 
 ter action lay at common law, its modern substitute, the bill for 
 account, will lie.^^ And not only so, but, in the absenc of spe- 
 cial circumstances to be noted later, the remedy in equity is prac- 
 tically exclusive. When v/e have considered the nature of the 
 cases in which the jurisdiction is exercised, we shall perhaps be 
 better able to see why the common law courts provided the spe- 
 cial remedy of account, why it was exclusive of any other com- 
 mon law action, and why equity found little difficulty in gradu- 
 ally drawing the exclusive jurisdiction to itself. 
 
 In order, therefore, to determine the question of equitable ju- 
 risdiction by virtue of this inheritance, it is necessary to hark 
 back to the now obsolete common law action of account. The 
 learning that clusters about this archaic action is somewhat re- 
 fined and technical, and too voluminous for present purposes; 
 and we can hope here to do little more than to present some of 
 the more important principles pertinent to the topic. 
 
 The duty to account — no liability until account taken. — 
 
 As we shall see a little later, the right of the plaintiff, under the 
 
 " Beggs V. Edison El. Ill Co., 96 Ala. S95; Huff v. Thrash, 75 Va. 
 54-6; Fowie v. Lawrason, 5 Pet. 495; Colonial, etc., Co. v. Hutchin- 
 son, 44 Fed. 319; 1 Story lEq. Jurisp. 442-445; authorities collected in 
 1 Cyc. 416-419. Especial reference is made to Prof. Langdell's 
 scholarly essay, in his Brief Survey of Equity Jurisdiction, 75 et seq., 
 which has been freely drawn upon in the preparation of the present 
 chapter. 
 
272 NoTgs ON Equity Jurisprudence 
 
 present head, to demand an accounting of the defendant, and 
 the right of the defendant to exemption from liabiHty to pay un- 
 til an accounting has been had and a balance struck, are not 
 founded on contract, but on the legal duty on defendant's part 
 to account, as well as the legal right of the defendant to present, 
 in the fojm of an account, .all the credits to which he is entitled. 
 The common law raises this duty and this right, and equity af- 
 fords the remedy. A contractual duty to account will sustain an 
 action for damages, but not a bill for account.^^ 
 
 Contrast with other equitable accounting. — There are 
 several striking contrasts between other bills for account and the 
 true bill for an account. For instance, in the former the burden 
 is ordinarily on the plaintiff to establish the amount due, whereas 
 in the latter the burden is uniformly on the defendant to present 
 the account, and to sustain its correctness by proper evidence. 
 Again, the main purpose of the former, ordinarily, is to recover 
 money due from the defendant to the plaintiff in the nature of a 
 debt due — that is, the money sought to be recovered is the de- 
 fendant's money, until actual payment — and the accounting is 
 merely an ancillary proceeding by which to ascertain the 
 amount due^^ — whereas, in the latter the accounting and the 
 striking of the true balance are the principal objects sought, and 
 the decree for payment follows, incidentally, to prevent a multi- 
 plicity of suits. Furthermore, in the latter, the money to be paid 
 in settlement of the balance found due is, and has always been, 
 rightly the money of the plaintiff and never rightly the defend- 
 ant's. 
 
 These principles should become clearer when their application 
 is illustrated by concrete examples to follow. 
 
 Classes of agencies subject to account. — Seeing that the 
 jurisdiction of the bill for an account here rests exclusively on 
 the duty and right to account, as an implication of law, and not 
 the result of contract, it becomes necessary to inquire in what 
 
 " Langdell, 74-75. The right of the defendant to discharge him- 
 self, in whole or in part, by his sworn answer, is to him as valuable 
 a right as that of filing the bill for the accounting is to the plain- 
 tifif. 
 
 '" This, of course, is not always true in the case of the cestui against 
 the trustee. 
 
Bills for Account — Receivers and Bailiffs 273 
 
 cases this duty is implied. The instances are comparatively few, 
 and include three classes of persons only, namely guardians, 
 receivers and bailiffs}* As the term guardian here needs no 
 special comment, it will suffice briefly to notice the other two 
 classes, namely, receivers and bailiffs. Executors were not held 
 to account in the common law courts, but were exclusively un- 
 der the jurisdiction of the ecclesiastical courts. Their accounta- 
 bility is now largely a matter of statute, as is that of the guard- 
 ian. 
 
 1. Receivers. — A receiver, in the sense here used, is one who 
 receives money of another, with the owner's consent or rati- 
 fication, for the sole purpose of keeping it safely for such time 
 as may be fixed by contract or course of business, and at the 
 proper time paying it over to the owner — less agreed charges 
 only — but who is not under the duty of restoring the identical 
 bills or coin in which it was received, and yet without the right 
 to make himself a mere debtor of his principal by mingling the 
 fund with his own and crediting the owner with the amount. ^^ 
 
 The receiver has no right to use the money as his own, by 
 debiting himself and crediting his principal with the amount, 
 for then he would be a mere debtor — e. g., a bank receiving a 
 deposit. The money must remain rightfully the money of the 
 principal. 
 
 If there be a duty of investing, or otherwise paying out, the 
 money on behalf of the owner, the defendant is not a receiver 
 but a bailiff. 
 
 If he receives the money merely for immediate transmission 
 to the principal, and not for safe-keeping, he is a mere servant, 
 collector, agent or carrier. 
 
 If he is bound to restore the identical bills or coin he is a 
 mere bailee.^^ 
 
 " 1 Story, Eq. Jurisp. 445; Langdell, 75; Bacon, Abr. Accom/'t, A; 
 2 Roll. Abr. 161. Actions of account between merchant and mer- 
 chant were scarcely exceptions, since the defendant in such cases 
 was charged as bailiff or receiver. 
 
 '^ Langdell, 76; Bacon, Abr. Accompt, B; 1 Co. Litt. 172a; 1 Story, 
 Eq. Jurisp. 445. 
 
 " Langdell, 76-80; Fowle v. Kirkland, 18 Pick. 299-action of ac- 
 count by partner against co-partner, after dissolution, for an account 
 of partnership funds received by defendant since the dissolution — > 
 
274 Notes on Equity Jurisprudence 
 
 2. Bailiffs. — A bailiff is one who by consent or subsequent 
 ratification of the owner, receives money, or the possession or 
 control of the property of another, for the purpose of using it 
 or its proceeds (as by investing, converting, managing, selling, 
 leasing, hiring, laying out, exchanging, or otherwise dealing with 
 it) for the profit of the owner. He is entitled to an allowance 
 for his reasonable charges and expenses; but, like the receiver, 
 without right to become a debtor for the proceeds or profits by 
 debiting himself and crediting his principal with the amount 
 thereof. 1^ Here again the money or property must remain the 
 property of the principal. 
 
 The bailiff — illustrated. — The typical illustration of a bail- 
 iff, though the term is of a wider significance, is the agent, or 
 steward, or superintendent, or manager — or by whatsoever des- 
 ignation known — who has charge of landed estates, with power 
 and duty of making contracts with tenants, collecting rents, pur- 
 chasing machinery, selling farm products, making repairs, pay- 
 ing taxes and other charges, and at stated intervals rendering an 
 account of his stewardship, and paying over the net balance to 
 his principal. Such broad agencies are more common in Eng- 
 land than with us in America, though real estate agents, with 
 some, if not all, of these powers, are quite common in our own 
 country. But economic and commercial activities in America 
 
 defendant held accountable as receiver; Cf. Kelly v. Kelly, 3 Barb. 
 (N. Y.) 419, A2Z. Vid. authorities collected in 1 Cyc. 404. The 
 term "receiver", as here used, contemplates appointment by the act 
 or ratification of the owner in pais, and is carefully to be distinguished 
 from a court receiver, whose duties and responsibilities rest upon 
 different principles. In America little or ino use is made of the term 
 receiver, except in reference to a court receiver, and instances of a 
 receivership in pais are comparatively rare. 
 
 " Langdell, uii sup; Co. L,itt. 17a; Bac. Abr. Accompt, B; 1 Story, 
 Eq. Jurisp. 446. Cf. Reeside's Ex'r. )v. Reeside, 49 Pa. St. 322, 88 
 Am. Dec. 503. It is not sufficient that the bailiff or receiver have the 
 mere custody of the money or property as servant of the owner. 
 The distinction between possession and custody is well illustrated, 
 as pointed out by Prof: Langdell, in the domain of the criminal law, 
 in the distinction between embezzlement and larceny. A true re- 
 ceiver or bailiff may be guilty of embezzlement of the res of which 
 he is receiver or bailiff, but not of larceny (Langdell, 79 n.); and 
 possession by the bailiff is not possession by his principal. The 
 office of bailiff, therefore, contemplates the exercise of large dis- 
 cretionary powers, and, in large measure, operations not under the 
 immediate eye of the principal. 
 
Bills for Account — Bailiffs 275 
 
 present many illustrations of analogous agencies under various 
 names, upon whom there rests the duty to account.i^ and hence 
 of bailiffs, though not so termed. Concrete examples will be 
 noticed later. 
 
 The same — equitable jur^sdictiou. — The statement that 
 bailiffs and receivers are subject to account, means not only that 
 they are thus subject to account (at common law, in the action 
 of account, and later in equity), but that in point of jurisdiction, 
 every such agent is thus accountable. That is to say, the juris- 
 diction rests not in the equitable title of the plaintiff, since ex 
 hypothese he has the legal title; not in complexity of accounts, 
 for no such complexity need exist; not in necessity of discovery, 
 since the plaintiff may be full-handed with his proofs.^"* In 
 short, where the duty to account thus exists by implication of 
 law — ^and it exists only in the instances mentioned — this duty of 
 itself is sufficient to confer the jurisdiction.^^ The reasons will 
 appear later. 
 
 While the jurisdiction exists in every such case, it is proba- 
 ble that where the plaintiff's claim concerns a single item, or but 
 few items, with no items of discharge set up, and he is thus 
 full-handed with his proofs, and there is no complexity or other 
 special ground for equitable intervention — in short, where the 
 remedy at law is plain, adequate and complete — equity, though 
 possessing the jurisdiction, would decline to exercise it, on 
 the same principle on which it declines jurisdiction in cases 
 of fraud, of which it has concurrent jurisdiction, where the rem- 
 edy at law is adequate.^^* 
 
 Bailiffs accountable — why not other agents? — It is of 
 
 interest to inquire why the action of account (or the modem 
 bill in equity) lies against the bailiff or receiver, and indebitatus 
 assumpsit or other appropriate action against other agents — and, 
 in the former case, even in the absence of complexity or need of 
 discovery. The answer lies in the difference in the relations 
 of the parties in the two cases, in the nature of the agencies 
 
 ^' See cases infra; Mitchell v. Gt. Works, etc., Co., Fed. Cas. 96&3. 
 
 "" See following paragraph. 
 
 " 1 Story, Eq. Jurisp. 463-464. 
 
 "» 1 iStory, Eq. Jurisp. 464. See Green v. Spalding, 7 6 Va. 411. 
 
276 Notes on Equity Jurisprudence 
 
 themselves, and especially in the peculiar character of the claim 
 asserted. 
 
 The office of bailiff, for example, contemplates not only cus- 
 tody and control of the principal's property, with wide discre- 
 tionary powers, but dealings with third persons not under the 
 immediate instructions or supervision of the principal; the re- 
 ceipt of funds of the principal from the sale or other disposition 
 or use of the latter's property; disbursements on the principal's 
 account out of the principal's funds ; and an unliquidated bal- 
 ance in the hands of the bailiff, not in the nature of a debt, but 
 consisting of funds already belonging to the principal, and hence 
 substantially, though not technically, trust funds. The relation, 
 therefore, is one of highly fiduciary character, though not 
 amounting to a technical trust relation, because the legal title 
 remains in the real beneficiary , the principal. The bailiff, there- 
 fore, occupies an intermediate position between the ordinary 
 agent and the trustee of an active trust. While these considera- 
 tions of themselves are sufficient in point of jurisdiction to sus- 
 tain the bill for an account, in actual practice most suits of this 
 nature will present other features, in themselves sufficient to 
 justify the equity jurisdiction — as the need of discovery, or the 
 presence of too great complexity for adjustment in a jury trial. 
 Indeed the practical necessity of discovery in bills for account- 
 ing, and complexity in the account, usually present, are fre- 
 quently suggested by courts and textwriters as the real founda- 
 tion of the equity jurisdiction of true bills of account. But the 
 point to be emphasized here is that neither of these is essential 
 to the jurisdiction. 
 
 The same, continued. — Such being the nature of the bail- 
 iff's office, it is not difficult to understand why the common law 
 raised the duty of accounting, and the correlative right on his 
 part to insist that before he might be molested as a debtor, he 
 should have opportunity to present an account showing not only 
 the items of charge but of discharge as well. 
 
 And since, as shown, the money or property for which he was 
 accountable was the property of his principal — for which the 
 bailiff could not be held a debtor until the true state of the ac- 
 count and the balance due were ascertained — and since the or- 
 
BiLi^s FOR Account — Bailiff and Trustee 277 
 
 dinary machinery of the law courts was not suitable for the tak- 
 ing of such an account, the reason why the principal could 
 hold the bailiff or receiver to an accounting of his stewardship 
 only by the action of account seems clear.^o 
 
 It necessarily followed, therefore, that not only might indeb- 
 itatus assumpsit not be maintained against the bailiff or receiver 
 anterior to the accounting and striking of a balance, but that the 
 action of account was the sole remedy in such case — as its sub- 
 stitute, the bill in equity, still is. It is therefore not the nature 
 of the account — whether complex or otherwise — that confers 
 the present equitable jurisdiction, but the peculiar character of 
 the relation, the peculiar nature of the plaintiff's claim, and 
 (since the passing away of the action of account) the complete 
 absence of any legal remedy. 
 
 Distinction between bailiff and trustee. — This descrip- 
 tion of the bailiff indicates how closely his office approaches that 
 of the trustee of an exp'ress active trust. The latter, as does the 
 bailiff, holds and controls the money or the property of another, 
 to be used for the benefit of the owner, and without the right of 
 mingling the funds so held with his own funds and thus making 
 himself a debtor for the money or the proceeds of the property, 
 by charging himself and crediting the same on his books. What, 
 then, is the distinction between the two? Why, at the original 
 common law, must the principal have sued the bailiff in an ac- 
 tion of account at law, while the cestui que trust must have sued 
 the trustee (as he still must) in equity? A search of the books 
 yields little or no light on the subject. The answer, however, 
 seems clear. In the case of the bailiff legal title remains (nor- 
 mally) in the principal, howsoever broad the powers of the bail- 
 iff, whereas, in the case of the trust (normally) legal title is in 
 the trustee, with equitable title only in the principal or cestui. 
 The cestui's remedy, therefore, was necessarily in equity, while 
 the remedy of the principal against the bailiff was, for precisely 
 the opposite reason, at law. 
 
 Bailiff and trustee — contrast continued. — This close kin- 
 ship between the bailiff and the trustee doubtless made easy the 
 
 "" Reeside's Ex'r v. Reeside, 49 Pa. St. 322, 88 Am. Dec. 503. To 
 maintain indebitatus assumpsit, the defendant must be shown to have 
 been a debtor at the commencement of the action. 
 
278 Notes on Equity Jurisprudence 
 
 merger of the action of account at law into the bill for an ac- 
 count in equity. 21 The circumstance that in actions of account 
 there were presented normally, though not necessarily, both com- 
 plexity and the need of discovery, as already mentioned, afforded 
 an additional incentive to the equity courts to assume the gen- 
 eral jurisdiction of these cases. ^^ 
 
 The true foundation of the jurisdiction — resume. — 
 
 While, then, the jurisdiction of the true bill of account in equity 
 courts may have been quickened by the features, normally pres- 
 ent, of complexity, need of discovery, and kinship to trusts, in 
 its last analysis the real foundation of the jurisdiction is the le- 
 gal duty of the agent to account, the corresponding right of the 
 principal to require specific performance of that duty, and de- 
 fendant's right to an accounting as a condition precedent to be- 
 ing held as a debtor in an action of indebitatus assumpsit, or in 
 any other form of action.^^ 
 
 Illustrations, continued — (1) managers of estates — 
 managing- agencies generally. — ^As shown in preceding sec- 
 tions, the term bailiff includes persons, by whatsoever title known, 
 who have the management and control of landed estates, and 
 
 " The trust relation between the principal and his bailiff is made 
 the chief, though not the sole, basis of jurisdiction in Virginia cases 
 of Zetelle v. Myers, 19 Gratt. 63; Thornton v. Thornton, 31 Gratt. 
 213; Simmons v. Simmons, 33 Gratt. 451, and Wilson v. Miller, 104 
 Va. 446, but in none of them is the agent termed bailiff — though in 
 each the defendant was a typical example of the bailiff. 
 
 =^ In Reeside's Ex'r v. Reeside, 49 Pa. St. 322, 88 Am. Dec. 503, 
 it is held that in such cases no other than the action of account 
 will lie at law against the bailiff, since there is no cause of action until 
 the account is settled and the balance due is ascertained. The court 
 says: "The question is not, as it is sometimes supposed, whether a 
 jury can as conveniently settle the account as auditors, but it ad- 
 heres to the right of the defendant to render his account before he 
 can be molested by an action to refund. The law will not imply a 
 promise to repay before his liability to refund has been ascertained." 
 Cf. Jackson v. King, 8S Ala. 432, 3 South. 232. 
 
 ^ The bailiff or receiver may, of course, make himself a debtor — 
 for example, by wrongfully converting the fund to his own use and 
 refusing to account therefor — and thus subject himself to liability 
 in indebitatus assumpsit at the plaintiff's option. But he may not 
 thus by his own wrong deprive the plaintiff of his right to an account- 
 ing in equity. 
 
Bills of Account — Factors — Auctioneers 279 
 
 whose duties require them to control, manage, receive and pay 
 out the intake thereof on behalf of the owner.^* 
 
 The term would necessarily include also managers or agents 
 of commercial, manufacturing, financial, or transportation, and 
 similar enterprises, of charitable, social and other institutions, 
 individual or corporate, whenever the powers and duties of the 
 agency are those of a bailiff as described in previous sections. 
 
 (2) Sales agents — factors — commission merchants.— A 
 
 bill will lie by the owner against an agent for the sale of prop- 
 erty (real or personal) for an account and payment over of the 
 net proceeds, as well as against factors and commission mer- 
 chants and auctioneers to whom the plaintiff has consigned per- 
 sonal property for sale — since each of these agencies constitutes 
 the relation between the owner and the agent one of principal 
 and bailiflf.25 
 
 The same, colitiuued — bailiff making himself a debtor. 
 
 — But, as pointed out by Professor Langdell,^® the agents men- 
 tioned in this section who make it their reqular business thus to 
 
 ^ Such were the defendants in the cases of Zetelle v. Myers, 19 
 Gratt. 63; Thornton v. Thornton, 31 Gratt. ai2; and Simmons v. 
 Simmons, 33 Gratt. 451 — in all of which cases bills for accounting 
 were sustained, but rather on other grounds of equitable jurisdiction, 
 and without a distinct recognition of defendants as bailiffs. See 
 cases in preceding footnote. Makepeace v. Rogers, 11 Jur. (N. 
 S.) 215. 
 
 "^ McKenzie v. Johnston, 4 Madd. 373 (consignment of goods for 
 sale) ; Townes v. Birchett, 13 Leigh 173 — auctioneer held to an ac- 
 count of a stock of goods sold for principal — ^jurisdiction upheld on 
 the ground that the items of the account were "in the knowledge of 
 the auctioneer exclusively" — hence the need of discovery. The court 
 here lost-the opportunity of recognizing the relation of principal and bailiff, 
 and of vindicating the independent jurisdiction, even tn absence of need 
 of discovery or of complexity in the account. In Vilwig v. B. & 
 O. R. Co., 79 Va. 449 — a suit by a railroad company to require an 
 account from its station agent (a typical bailiff) — the court came 
 very near reaching the true principle, though throwing in, for good 
 measure, as the same court, with practical uniformity, has done in 
 similar cases, enough of 'need of discovery', 'complexity', 'mutuality 
 of account' and 'trusteeship' and 'fiduciary relations', to obscure the 
 real basis of the jurisdiction assumed. In McLin v, McNamara, 3 
 Dev. & Bat. 82, an auctioneer (bailiff again) was held subject to 
 account, but on the untenable ground that the existence of partial 
 payments rendered the account mutual. The American cases cited 
 in this and the preceding footnote, not to mention others, seem to 
 justify Langdell's criticism, noted at the beginning of this chapter. 
 
 " TJhi supra, 92-93. 
 
280 Notes on Equity Jurisprudence 
 
 sell for others, by common usage and for convenience in book- 
 keeping generally make themselves debtors to their customers by 
 treating the proceeds of the customers' property, not as the prop- 
 erty of the customer, but as their own, by mingling the proceeds 
 vi^ith their own bank-deposits. But for this custom, such agen- 
 cies would be driven to open a separate deposit account for 
 every customer. 
 
 Where the agent has thus become the debtor, indebitatus as- 
 sumpsit, will lie, but the principal has the option of regarding the 
 money so deposited as still his own, and of filing a bill for an ac- 
 count.^''' 
 
 (3) Principal and agent — solicitor and client — banker 
 and customer. — In spite of numerous dicta to be found in ju- 
 dicial opinions to the contrary, it is clear in principle, and on au- 
 thority, that the ordinary relation of principal and agent, or of 
 solicitor and client, in the absence of powers and duties coinci- 
 dent with those of the bailiff or receiver as heretofore indicated, 
 does not warrant equitable jurisdiction of a bill for accounting 
 by the principal or client against the agent or solicitor.^s 
 
 So, the ordinary relation between a bank and its customer is 
 one of debtor and creditor. The moment a general deposit is 
 made, the deposit becomes completely the property of the bank; 
 and for the reason that the money thus becomes the property of 
 the bank, the latter cannot be a receiver or bailiff.^^ 
 
 Principal and agent, continued. — While, as stated, the 
 mere relation of principal and agent will not sustain a bill by the 
 principal for an accounting, yet if the plaintiff is able to bring 
 his case within any of our first three classes above — ^that is, 
 where the claim is equitable merely; or the account is ancillary 
 
 "' P'id. Com V. Stearnes, 2 Met. (Mass.) 343 — auctioneer failing to 
 pay over proceeds of goods sold, held not guilty of embezzlement 
 "since the money was his own". See Com v. Foster, 107 Mass. 221. 
 
 "* Hemmings v. Pugh, 9 Jurist (N. S.), 1124. See Padwick v. 
 Hurst, 18 Beav. 375. 
 
 ^ Foley V. Hill, 8 H. L. Cas. 28. Nor is such an account neces- 
 sarily or ordinarily mutual. 'Deposits made are !but loans to the 
 bank, and checks paid are but partial payments. See LangdeU's 
 ingenious suggestion that payment of the customer's check gives 
 rise Ito a cross demand, and is not the payment of a debt. 'Langdell, 
 115. See Mutual Accounts, infra. 
 
BiL,LS FOR Account — Royalties 281 
 
 to other equitable relief ; or where, because of complexity or the 
 necessity of discovery, the remedy at law is inadequate — or, 
 again, where the agent is a receiver or a bailiff, under definitions 
 of those terms in preceding sections — or where the accounts are 
 mutual, as defined in subsequent sections — then it is clear enough 
 that the equity jurisdiction for an accounting will attach. 3" 
 
 (4) Royalties to authors — patentees — lessees, etc. — 
 
 Whether account lies in these cases depends on the precise na- 
 ture of the contract. Where, under the contract, the publisher, 
 or lessee, becomes the owner of the proceeds or product, and a 
 debtor to the author, licensor, or lessor, for the latter's royalties 
 or other agreed compensation, under the principle already ex- 
 plained a true bill of account does not lie — since the relation of 
 the parties is that of debtor and creditor. But when, under the 
 terms of the contract, the plaintiff is entitled to a specific share 
 of the net proceeds, the rule is the reverse — since here the rela- 
 tion becomes fiduciary and the defendant a bailiff.^^^ 
 
 The same — (5) Partners. — Equity has long been regarded 
 as the proper tribunal for the settlement of the accounts of a 
 copartnership. The jurisdiction rests on several gounds — the 
 complexity of the accounts; the fiduciary relation; the lack of 
 complete legal title in any partner to any part of the partnership 
 assets ; the necessity of accounting to ascertain the true state of 
 the account between the several partners; and, finally, as an- 
 cillary to a dissolution and partition of the net assets — ^the last 
 in itself justifying equitable intervention. 
 
 Professor Langdell asserts that the last is the true ground, 
 since courts of equity usually decline to settle such accounts in 
 the absence of a prayer for dissolution and partition — or, where, 
 after dissolution, the account is taken as ancillary to a division 
 
 "" Padwick v. Hurst, 18 Beav. 375 (client against solicitor) ; Barry 
 V. Stevens, 31 Beav. 1258, 31 L. J. Ch. 785; Marvin v. Brocks, 94 N'. 
 Y. 71; Cofifman f. Sangston, 31 Gratt. 363; Thornton v. Thornton, 31 
 Gratt. 212; Simmons v. Simmons, 33 Gratt. 451, 456; Wilson k/. 
 Miller, 104 Va. '446; Herrell v. Supervisors, 113 Va. 594; Davis v. 
 Marshall, 114 Va. 193 (bill by agent against principal dismissed for 
 want of special equity) ; cases collected in 1 Cyc. 416, et seq. Com- 
 pare dictum in Zetelle v. Myers, 19 Gratt. 62, 70. Circumstances un- 
 der which the agent may maintain a bill for accounting against the 
 principal, are discussed in a later section. 
 
 "' Langdell, 93-94; Pratt v. Tuttle, 136 Mass. 233. 
 
282 Notes on Equity Jurisprudence 
 
 of the assets. ^2 If this be true, as it seems to be, it follows that 
 a bill for settlement of partnership accounts is not a true bill for 
 account; since, in absence of special equities, such bills can be 
 maintained only as ancillary to the relief of dissolution and a 
 division of assets — or of the latter only where the firm is already 
 dissolved.*^ 
 
 (6) Go-tenants. — Where one co-tenant has received the 
 rents or profits of the common property by consent of the other, 
 he may be held to an accounting in equity, on the ground that he 
 is a receiver or bailiff. If he has received the profits without his 
 co-tenant's consent, and has appropriated them to his own use, a 
 bill for accounting will lie as ancillary to partition proceedings, 
 but not otherwise — in the absence, of course, of other grounds 
 of equity jurisdiction as heretofore discussed. In the first case, 
 he is a bailiff, but not in the second. This unsatisfactory rule 
 of the common law was altered in England by statute of 4 Anne, 
 (Ch. 16 A. D. 1706). It was substantially adopted in Vir- 
 ginia ** by the revision of 1792, and carried into the Code of 
 1887, but for some unaccountable reason was omitted from the 
 revisal of 1919, with the unhappy consequence of restoring 
 the inconvenient and unjust rule of the common law.*^ The 
 omission is noted in the table of sections as "omitted", but, 
 
 ^ Langdell, 96-97. 
 
 '^ See Lindley on Partnership (4th ed.) lOaa n; 30' Cyc. 461 et seq. 
 Compare Tillar v. Cook, 77 Va. 477; Jones v. Murphy, 93 Va. 214; 
 Clarke's Admr. v. Clarke, 135 Va. 68; 'Fowle v. Kirkland, 18 Pick. 
 299 — action of account by partner against copartner for funds col- 
 lected after dissolution; defendant held accountable as receiver. 
 
 ** "An action of account may be maintained against the personal 
 representative of any guardian, bailifi or receiver, and also by one 
 joint tenant, or tenant in common, or ,by his personal rep- 
 resentative, against the other, as bailiflf, for receiving more than 
 comes to his just share or proportion, and against the personal repre- 
 sentative of any isuch joint tenant or tenant in common." Va. Code 
 1887, § 3294. 
 
 '" See Early tv. Friend, 16 Gratt. 21 — construing the statute; New- 
 man V. Newman, 27 Gratt. 714; Adkins v. Adkins, 117 Va. 445; Wil- 
 liamson 'II. Jones, 43 W- Va. B62, 27 S. E. 411, '64 Am. St. Rep. 891, 
 38 L. R. A. 694; Hayden v. Merrill, 44 Vt. 336, 8 Am. Rep. '373; Pico 
 V. Columbet, IZ Cal. 414, 73 Am. Dec. 550, and n. — an excellent 
 opinion by Field, J.; 1 Minor, Real Property, 891, 922. See Kirkman- 
 V. Voulier, 7 Ala. 318 — sustaining bill for account by part owner of 
 ships against his co-partner; 6 Pomeroy, Eq. Jurisp. 1430-1421; 1 
 Cyc. 404; monographic note, 38 L. R. A. 829-864. 
 
Bii,LS FOR Account — Agent against Principal 283 
 
 without explanation. The effect was probably overlooked by the 
 revisors. 
 
 Bailiff's right to maintain the bill. — As a general rule, the 
 proper plaintiff in bills for accounting is naturally the principal 
 and not the agent, since the duty of accounting normally rests 
 Vipon the latter. Even where the principal is proceeding against 
 the agent at law, in indebitatus assumpsit, the agent may not, on 
 principle, invoke the interposition of equity on the allegation that 
 he is a bailiff and not accountable in indebitatus assumpsit, and 
 that the remedy at law is inadequate. The defence of liability to 
 account as bailiff only, is a plea in bar of the action in the law 
 court, and should be made in that court.*® 
 
 The chief instance in which the agent, subject to account, may 
 sustain a bill for accounting against the principal (in the absence 
 of special circumstances of complexity, etc.) is where the former 
 claims to be in surplusage to the latter — that is, that he has not 
 only paid out all monies of the principal in his hands, but has ex- 
 pended additional funds of his own. If in such case the agent 
 could not maintain the bill, he would be without remedy, since 
 naturally the principal is not likely to move for an accounting.*''^ 
 
 So, also, where the agent is entitled to a specific share or in- 
 terest in the proceeds of the subject matter- of the agency, and 
 these are under control of the principal, so that the obligation to 
 account rests on the latter — as in the case of a salesman entitled 
 to a specific share of the proceeds or profits, and not merely to 
 a sum measured by a percentage thereon. The situation here is 
 analogous to that of author and publisher already noticed.*® 
 Here, the employer is, with respect to the salesman's commis- 
 sions or percentage of profits, the bailiff, and the salesman the 
 principal. 
 
 Indebitatus assumpsit against bailiff — equity jurisdic- 
 tion exclusive. — As the res in the hands of the bailiff is the 
 property of the principal, and the obligation to account does not 
 
 "' Langdell, 305. See infra, Indebitatus Assumpsit against bailiff. 
 See Davis v. Marshall, 114 Va. 193. 
 
 "' See Langdell, 90 — noting the singular dearth of direct authority. 
 
 '^ See Royalties to Authors, supra; Pratt v. Tuttle, 136 Mass. 233; 
 Harrington v. Churchwood, 6 Jur. (N. S.) 576; Albaugh v. Wood, 45 
 N. J. Eq. 153, 16 Atl. 676. 
 
284 Notes on Equity Jurisprudence 
 
 create the relation of debtor and creditor, until account taken 
 and balance struck, it follows that, as a general proposition, in- 
 debitatus assumpsit cannot be maintained against the obligor to 
 account in advance of the actual accounting. 
 
 If therefore the bailifiE is sued at law, before account taken, 
 he may set up the relation of bailiff to the plaintiff, and the un- 
 settled state of the account, in bar of the action. Nor is evi- 
 dence of money or property received as bailiff admissible to es- 
 tablish an indebitatus assumpsit prior to the settlement of the 
 account — certainly where it appears that there are items both of 
 charge and discharge. ^^ 
 
 It follows that, by the common law, no action lies against a 
 bailiff for an accounting of monies in his hands except the action 
 of account — and that, since equity assumed the jurisdiction, the 
 equity jurisdiction is exclusive.*" 
 
 Defences to the bill. — Defences peculiar to a true bill of ac- 
 counting are: (1) That defendant is not under obligation to ac- 
 count — because not occupying the necessary relation of bailiff or 
 receiver to the plaintiff. This issue, decided in favor of the de- 
 fendant, and in the absence of other circumstances justifying the 
 jurisdiction, will result in the dismissal of the bill. This de- 
 fence, of course, challenges the jurisdiction. (2) That defend- 
 ant has already accounted to the plaintiff — or that the account 
 has otherwise been adjusted by agreement of parties (plene 
 computavit). This plea established will likewise call for a dis- 
 missal of the bill. Nor need the plea here allege payment of the 
 balance found to be due, since the jurisdiction is based on the 
 obligation to render the account, and not on the obligation to 
 pay the balance found due. The latter once ascertained, the 
 remedy for its recovery is at law, except where the account is 
 taken in the equity suit — in which case plaintiff is entitled to a 
 decree for the payment of the balance, to prevent a multiplicity 
 
 '^ Langdell, 86-88, 105; See Thomas v. Thomas, 5 :Exch. 38, and 
 Langdell's coinments, 88. Compare 'Beggs v. Edison El. '111. Co., 
 196 Ala. 295. ' 
 
 " Subject to the 'exception, already noticed, of conversion of the 
 money or property by the defendant, and to the added suggestion 
 elsewhere made, that where, from the circumstances, there is an 
 adequate remedy at law, equity may decline the jurisdiction. 1 
 Story, Eq. Jurisp. 464. 
 
Bills for Account — ^Mutual Accounts 285 
 
 of suits. This plea, in the first instance, is a challenge not to the 
 jurisdiction, but to the merits of the cause. (3) That the res 
 in the bailiflf's hands has been lost or destroyed by inevitable ac- 
 cident, or by. the wrong of third persons, without fault of the 
 defendant. That such a loss or destruction is a complete dis- 
 charge (or pro tanto, if the loss be partial only) follows from 
 the postulate that the res in question belongs to the plaintiff, and 
 the agent is not a debtor therefor. Such a plea likewise goes not 
 to the jurisdiction but to the merits. 
 
 CHAPTER XXIA. 
 
 Bills for Account (continued). 
 
 V. Mutual Accounts. 
 
 Preliminary — Is the equitable jurisdiction inherent or 
 concurrent? — While the authorities quite generally assert that 
 equity has jurisdiction of mutual accounts, they throw rather 
 scant light on the basis of the jurisdiction. The question 
 whether the jurisdiction is inherent, as in the case of the bailiff 
 and receiver, or whether it rests on the inadequacy of the rem- 
 edy at law, because of complexity or need of discovery, is rarely 
 discussed. This omission may largely be attributed to the cir- 
 cumstance that practically, though not necessarily, every suit 
 for the settlement of such accounts presents complexity or need 
 of discovery, or both. And, as the mutual account is generally 
 complex, so the complex account is not infrequently mutual, and 
 the necessity for discovery is a normal accompaniment of either. 
 And so, the jurisdiction being thus safely assured, the courts 
 have found little occasion to fortify it by further inquiry. 
 
 Cases may arise, however, where neither of these special equi- 
 ties is present, and where, therefore, the jurisdiction of mutual 
 accounts, if it exists, must be vindicated on other grounds. 
 
 The few commentators who have ventured to expound the ju- 
 risdiction seem inclined to place suits of this nature in our third 
 category above — that is. the concurrent jurisdiction, and there- 
 
286 Notes on Equity Jurisprudence 
 
 fore to be exercised only where the remedy at law is inadequate.^ 
 If this be true, then, in spite of the constant reiteration by courts 
 and commentators of the assertion that mutuality of accounts 
 is, of itself, ground of equitable jurisdiction, the situation is just 
 the reverse. 
 
 To put the question in its simplest form, and to apply it to an 
 extreme case, does the jurisdiction attach where there is no com- 
 plexity whatsoever and no discovery is required — where there 
 are, for instance, two items on one side and two on the other, 
 and both plaintiff and defendant are full-handed with their 
 proofs ? 
 
 If the answer to this last question be in the negative, then it 
 would appear, after all, that complexity or need of discovery, or 
 some special diificulty in proceeding at law is the real warrant 
 for the exercise of the equitable jurisdiction — and the jurisdic- 
 tion does not attach merely on the ground of mutuality of ac- 
 counts. 
 
 If, on the other hand, the answer be in the affirmative, then 
 the inherent jurisdiction must be conceded, and the only question 
 remaining to plague us is, On what ground does the conceded 
 jurisdiction rest? 
 
 Mutual accounts — ground of jurisdiction, continued. — 
 
 The solution of the problem is not easy, and we are not sure 
 it is possible of solution. Indeed, it may be that the equitable 
 jurisdiction rests on a combination of the difficulties confronting 
 the plaintiff at law — this combination consisting of inherent com- 
 plexity and the practically uniform need of discovery, plus the 
 peculiar nature of such accounts, as explained later. It is quite 
 likely, also, that there is here much overlapping of the jurisdic- 
 tion at law and in equity, respectively. 
 
 Perhaps at this point we may profitably make a brief digres- 
 sion to inquire into the characteristics of a mutual account, for 
 the settlement of which equity is supposed to lend its assistance. 
 
 ^ See Langdell, pp. 108-114. Story's discussion is scholarly and in- 
 teresting, 'though rather noncommittal on the question of inherent 
 jurisdiction hererl Eq. Jurisp. 457-459. Pomeroy, devotes but two 
 sections to ithe topic of bills for account, and three lines only to 
 mutual accounts. jFreeman's monographic note to Norton v. 'L,arco, 
 30 Cal. 126, in '89 Am. Dec. 70 is also enlightening. 
 
MuTUAi. Accounts — English View 287 
 
 and thus be the better prepared to pursue the question of juris- 
 diction. 
 
 Mutual accounts — characteristics. — Here we again en- 
 counter difficulties. The case law abounds in attempted defini- 
 tions of mutual accounts, and in efforts to portray characteristics 
 of such accounts, but with a disconcerting conflict of view. The 
 American courts appear not only to differ, rather as a whole, 
 from the English courts, but among themselves, as to the legal 
 significance of the expression. 
 
 The same — (1) English view. — The view of the English 
 courts seems best expressed in Phillips v. Phillips,^ where Vice- 
 Chancellor Turner takes some pains to describe the character- 
 istics of such an account. The allegations of the bill were (and 
 it is important to observe these carefully), that the plaintiff had 
 from time to time advanced to defendants various sums of 
 money, and defendants, on their part, had from time to time paid 
 out divers sums "to, for and on account of" the plaintiff. These 
 allegations were very properly held not to disclose a mutual ac- 
 count. The advancements by the defendants were simply mere 
 set-offs, or cross demands. 
 
 English view, continued. — "I understand," says the Vice- 
 Chancellor in that case, "a mutual account to mean not merely 
 where one of the parties has received money and p^id it on ac- 
 count of the other, but where each of two parties has received 
 and paid on the other's account. 
 
 "I take the reason of that distinction to be that in case of pro- 
 ceedings at law, where each of two parties has received and paid 
 on account of the other, what would be recovered would be 
 the balance of the two accounts; and the party plaintiff would 
 be required to prove, not merely that the other party had 
 received money on his account, but also to enter into evidence 
 of his own receipts and payments — a position of the case which, 
 to say the least, would be difficult to be dealt with at law. 
 
 "Where one party has merely received and paid monies on 
 account of the other it becomes a simple case. The party plain- 
 tiff has to prove that the monies have been received, and the other 
 
 9 Hare 471. 
 
288 Notes on Equity Jurisprudence 
 
 party has to prove his payments. The question (in this case) 
 is only as to receipts on one side and payments on the other, and 
 it is a mere question of set-off; but it is otherwise where each 
 party has received and paid." ^ 
 
 The same — English view, continued. ^^The later case of 
 Padwick v. Hurst,* was quite similar in its facts, and a similar 
 conclusion was reached on the authority of the previous case. 
 Here the plaintiff charged that he had received and paid out 
 large sums of money "on account of" the defendant, and had 
 made large loans to him, and that defendant had paid "to" plain- 
 tiff (not "on plaintiff's account") large sums of money, and 
 that the account was mutual; and, further, that defendant was 
 suing plaintiff at law for a large sum, without allowing credits 
 to which the plaintiff was entitled. 
 
 Lord Romilly, Master of the Rolls, said there was no doubt 
 of the equity jurisdiction if the accotmt were a mutual one, or 
 were one-sided only if proper allegations of complexity were 
 made. But that, according to the definition of a mutual account 
 
 ° The learned Vice-Chancellor may have entertained a clear con- 
 ception of the essential elements of ia mutual account, but his lan- 
 guage does not convey such a conception to the less learned reader. 
 The carefully chosen expressions "received and paid" (not .received 
 or paid) "on account of the other" (not received from and paid to 
 the other) become significant in the light of the facts of the case al- 
 ready recited; Normally the terms "received" and "paid" are cor- 
 relative terms. If defendants "paid" money to plaintiff, the plain- 
 tiff must have "received" it. But these terms are followed by the 
 clause "on account of 'the other" — the entire phrase (twice used by the 
 court) being "ivhere each 'of two parties has received and paid on account 
 of the other." It would seem therefore — and this interpretation re- 
 moves the suggested inconsistency, and supplies the need for equi- 
 table intervention — that what is meant is, that each party has liad 
 dealings with third persons on the other's account, of which the other 
 is ignorant. According to this view, if the items of charge (money 
 or merchandise) on |the part of the plaintiff were paid or delivered 
 directly to the defendant (as the plaintiff's advances in this case 
 were) the account is not mutual, even though 'the items of charge in 
 the defendant's account were for advances (in money or merchandise) 
 paid or delivered ^o third persons on account of the plaintiff. A 
 fortiori would the account not be mutual, according to this view, 
 where it consists of money or goods paid or delivered by the plain- 
 tiff directly to the defendant, and the latter's account consisted of 
 similar charges against the plaintiff. The claim of each against the 
 other would be, in the language of the Vice-Chancellor, "a mere 
 set-off" in case of suit on either claim. 
 
 * 18 Beav. '575. 
 
Mutual Accounts — English View 289 
 
 as laid down in Phillips case, the bill failed to make a case of 
 mutual account. It was added that "if the principal were on his 
 side paying moneys on behalf of the agent" [as well as the agent 
 on his side paying on behalf of the principal] "so that there 
 would be accounts to be taken on both sides, then there would 
 be cross demands or a case of mutual accounts." The learned 
 Master of the Rolls obviously does not mean to imply that the 
 mere existence of cross demands would make the account a mu- 
 tual one — except under the circumstances previously stated in 
 the opinion. 
 
 Perhaps the distinction insisted upon in these two cases be- 
 tween money paid directly to the other party, and that paid to 
 a third person on his account, arises out of the circumstance 
 that money paid directly by one to the other is entered on the 
 latter's own accounts, as a credit, and operates at once as a pay- 
 ment, and extinguishes pro tanto any balance due the payee from 
 the payor, and is therefore no longer a cross-demand. Nor is 
 there necessity for discovery in such case. But payments made 
 by one of the parties to a third person on account of the other 
 will appear as a charge on the former's account against the lat- 
 ter, rather than as a credit on the latter's account, — and are, • 
 therefore, cross demands rather than payments, — and hence ac- 
 counting is essential to show the real balance. ^ But whatever 
 may be the reason, we have in these two cases careful descrip- 
 tion of a mutual account from the English viewpoint. 
 
 ' The ordinary account of a dealef with his customer is a familiar 
 illustration. The dealer debits the customer with goods sold, and 
 credits him with payments taade. The true state of the account is, 
 therefore, easily ascertainable from the creditor's own books, without 
 the necessity of discovery, or the settlement of the account, other 
 than the isimple process of 'deducting the aggregate of the credits 
 from the sum of the charges, and striking the balance. Of course 
 such an account has no semblance of a mutual account— ^though there 
 are authorities which, seem to hold that where the credits consist of 
 property (instead of money) delivered by the customer, to be applied 
 on the account, with no express direction to apply as specific pay- 
 ment, such account will be a mutual one. See |Hickman to. Stout, '3 
 Leigh 6 — jurisdiction sustained on the ground of need of discovery, 
 but treated also as a mutual account; iGreen v. Disbrow, 79 N. Y. 1, 
 35 Am. Rep. 496 — the decision possibly affected by the peculiar lan- 
 guage of Ithe statute of limitations there involved; Norton v. Larco, 
 30 Cal. 126, 89 Am. Dec. 70, with comments on the suggested dis- 
 tinction. Compare Haywood v. Hutchins, 65 N. C. 574. 
 
290 Notes on Equity Jurisprudence 
 
 (2) The American conception of mutual account.— One 
 
 in search of the true nature of the mutual account finds no 
 beaten highway under the guidance of the text books. Pom- 
 eroy's scholarly treatise® devotes but a single sentence to the sig- 
 nificance of the expression, describing it as applicable "where 
 each of two parties has received and paid on account of the 
 other, as distinguished from matters of set-ofif, and accounts on 
 one side only" — practically the English conception already no- 
 ticed. 
 
 Professor Langdell '' seems to have made no reference to mu- 
 tual accounts by name, though he points out in very scholarly 
 and helpful fashion the distinction between mere set-ofifs or 
 cross demands on the one hand — each in itself constituting an 
 independent cause of action, but in no wise affecting the plain- 
 tiff's claim, unless and until the defendant sees fit to set them up 
 in the plaintiff's action — and, on the other, the same cross de- 
 mands or set-offs held by either party, which, by express agree- 
 ment, or agreement implied from course of business, operate as 
 counter-credits (pro tanto) as soon as acquired. 
 
 Where the latter situation is presented, no cause of action ex- 
 ists in favor of either party on any several item of the account, 
 but the only existing cause of action is the right to recover the 
 balance due on the striking of the balance on the two accounts. 
 So long as the mutual dealing continues, there is no cause of ac- 
 tion at law until such balance is struck, since until then there is 
 no debt due. For this reason, the statute of limitations is gen- 
 erally held to run on such balance only after a cessation of the 
 mutual dealings or from the date of the last item of the ac- 
 count.^ 
 
 This distinction betvveen cross demands, or set-offs, as several 
 distinct items of charge (in nowise reducing the amount of the 
 plaintiff's claim until utilized as set-offs in the plaintiff's action), 
 and reciprocal cross demands operating (by custom or agree- 
 ment of parties) to extinguish each other, and thus to create a 
 constantly varying balance which represents a single item of in- 
 
 3 Pomeroy, Eq. Jurisp. 1421. 
 Ubi supra, 111-115. 
 See infra. 
 
Mutual Accounts — Characteristics 291 
 
 debtedness, seems to be the true distinction between mutual and 
 non-mutual accounts, as viewed by the American courts. 
 
 The same — When is the account mutual? — resume. — ^^A 
 
 mutual account, then, is one arising from reciprocal dealings be- 
 tween two parties, out of which dealings have arisen reciprocal 
 cross demands, for money advanced, goods sold or services ren- 
 dered, in reliance on an express agreement, or on the course- of 
 dealing between the parties, or on trade custom, that the several 
 items of demand and cross demand shall operate, not as sepa- 
 rate and actionable demands, but reciprocally to exitnguish each 
 other (pro tanto) as they accrue. It is therefore the every vary- 
 ing balance that constitutes the debt.* 
 
 Ordinary cross demands— no extinguishment. — According 
 to the rule of the civil law, and to that in universal use among 
 merchants, cross demands automatically extinguish each other, 
 pro tanto, as they accrue; and the balance due on a settlement of 
 the accounts is the only existing debt at any moment during the 
 period covered by the mutual dealings. This is known as com- 
 pensatio in the civil law. 
 
 The rule of the common law is just the reverse. Instead of 
 extinguishing each other reciprocally, each cross demand not 
 only constitutes a separate cause of action, but must be so en- 
 forced. i" Indeed, without consent, they may not even be pleaded 
 as set-offs in an action brought by the other party. True, stat- 
 utes now quite generally permit the set-oflf, but until so utilized 
 in a pending action, cross demands continue to constitute sepa- 
 rate and independent causes of action. Such demands are, 
 therefore, to be sharply distinguished from payments — or from 
 
 ' Accounts between co-partners, in ' connection with partnership 
 transactions, though scarcely mutual accounts |in the sense in which 
 here used, well illustrate the feature of the constantly varying balance 
 characteristic of the mutual account. 
 
 On the general subject of mutual accounts, see Smith v. Marks, 2 
 Rand. 449; Hickman v. Stout, 2 Leigh 6; McLin 'fv. McNamara, 3 
 Dev. & Bat. (N. C.) 83; Beggs v. Edison lEl. 111. Co., 96 iAIa. 295, 38 
 Am. St. Rep. 94; Rogers v. Yarnell, 51 Ark. |198, 10 S. W. '622; Power 
 V. Reeder, 9 Dana (Ky.) 6; Goldthwaite v. Day, 149 Mass. 185; Abbot 
 V. Keith, 11 Vt. 525; Green v. Disbrow, 79 N. Y. 1, 35 Am. Rep. 496; 
 1 Cyc. 424; 1 Corp. Jur. 59S; 1 Rul. 'Cas. Law 305; 5 Words & 
 Phrases, 4646; authorities cited supra, n. 52. 
 
 " Subject to the right of joinder of the several demands. 
 
292 Notes on Equity Jurisprudence 
 
 the same cross demands under a reciprocal agreement, such as 
 mentioned in the preceding section. 
 
 The same— illustrations. — Thus, where A owes B $500, for 
 money from time to time lent, and B owes A $300 for goods 
 from time to time sold, the common law does not treat the $200 
 of balance that would be due to B on a settlement between them, 
 as' the only existing debt, but. regards A as still owing B $500, 
 and B as owing A $300 — both cross demands separately actiona- 
 ble, and (in absence of modern statutes) with no right of A, in 
 B's action against him, to set-ofif B's indebtedness of $300 to 
 himself. The statutes of set-off now give A this privilege, but 
 he is under no obligation to exercise it, and may allow judgment 
 to go in B's favor for the full amount of the latter's claim, with- 
 out in anywise affecting his right thereafter to prosecute his 
 own smaller claim in an independent action. The result, of 
 course, would have been otherwise had the $300 been a payment 
 from A to B, or had the account, by agreement of parties, ex- 
 press, or implied from course of dealings, been a mutual one. 
 
 The same — extinguishment by agreement or custom — 
 true mutual account. — Having seen that neither by the com- 
 mon law, nor by that law as modified by statutes of set-off, do 
 cross demands extinguish each other as they accrue, the distinc- 
 tion between mere cross demands of this nature and those cross 
 items of a reciprocal account which do extinguish each other, 
 (pro tanto) at the moment of their accrual, becomes clear. It 
 is accounts presenting the latter characteristics that are con- 
 noted by the term mutual accounts. 
 
 Since neither the law, ipso jure, nor the courts, ex mero motu, 
 can produce this extinguishment of demands on one side by cross 
 demands on the other, the only way of producing such a result 
 is by agreement of the parties. This agreement, as stated, may 
 be express — either at the commencement of the reciprocal deal- 
 ings, or during their progress, or at their close. Such agreement 
 is more often implied, however, from the course of dealing, or 
 from the custom of trade, than from express stipulation. It is 
 regularly presumed in accounts between merchant and merchant. 
 
 But whenever the agreement does exist, then what is practi- 
 
Mutual Accounts — Statute of Limitations 293 
 
 cally the civil law rule of compensatio governs the situation. 
 Here there is but one debt, namely, the balance due on a settle- 
 ment of the accounts, and but one cause of action, howsoever 
 numerous the cross items and howsoever long the period cov- 
 ered by the dealing. Such an account constitutes a true mutual 
 account. In the language of the Vermont court "it is the con- 
 stantly varying balance which is the debt." ^^ 
 
 The same — when action for balance accrues — statute 
 of limitations. — The mutuality or non-mutuality of accounts 
 is important, not only on the question of equitable jurisdiction 
 but on the question of the maturity of the clavm for the balance 
 due, under the plea of the statute of limitations. Indeed, prob- 
 ably a majority of the judicial decisions involving the mutuality 
 of accounts have arisen in connection with this plea. Certainly 
 the question in the latter aspect has produced fuller judicial dis- 
 cussions of the true nature of the mutual account. The ques- 
 tion of the applicability of the statute of limitations to such ac- 
 counts is beyond the scope of this discussion, except in so far as 
 this may serve to illustrate the nature of such an account. 
 
 The general rule seems to be that where not otherwise pro- 
 vided, the statute begins to run from the cessation of the mu- 
 tual dealings, or, as it is stated by most of the authorities, from 
 the date of the last item of the account. A few of the leading 
 authorities are cited in the footnote. ^^ 
 
 "" Abbot V. Keith, 11 Vt. 525. 
 
 '^ Green v. Disbrow, 79 IN. .(Y. 1, 35 Am. Rep. 496 — a full discussion 
 by Earl, J; Wilson v. Calvert, 18 Ala. 374; McNeill v. Garland, 27 
 Ark. 1343; Kingsley (z/. Delano, 169 Mass. ,|a85, |47 N. E. 1013; Norton 
 V. Larco, 30 Cal. 126, 89 Am. Dec. 70 — an excellent opinion, with an 
 extensive and scholarly note iby iFreeman; Hodge v. Manley, 25 Vt. 
 210, 60 Am. Dec. (253; Gunn v. Gunn, 74 Ga. '555, 58 Am. iRep. 447; 
 Wagner v. Steele, 117 Ga. 145, 43 S. 'E. 403; McMartin v. Bingham, 
 27 Iowa 234, 1 Am. Rep. 265. See Words and Phrases, 4646, for a 
 distressingly long list of inconsistent definitions of mutual account. 
 
 Of course the question when the statute begins to run in such 
 cases will depend to a large extent on the precise provisions of the 
 statute. In Virginia, mere payments made ion an account do not toll 
 or clog the running of the statute: Code 1919, § 5818; Cole's Ex'r *. 
 Martin, 99 Va. 233; and the only provision with reference to mutual 
 accounts {id. § 5810) is: "Every action to recover money which is 
 founded upon . . . any contract . . . shall be brought within 
 the 'following number of years next after the night to bring the same 
 shall have first accrued, that is to say: . . . unless it be an action 
 . . . upon accounts concerning the trade of merchandise between 
 
294 Notes on Equity Jurisprudence 
 
 Mutual account — the equitable jurisdiction — finally. — 
 
 Returning from the digression into which discussion of the na- 
 ture of the mutual account has led us, we now return to the 
 question of equitable jurisdiction mooted in an earlier section. 
 Is there anything in the inherent nature of such an account to 
 justify the equitable jurisdiction, in the absence of complexity, 
 need of discovery or other special equity? 
 
 In the case of the bailiff, as shown, until settlement of his ac- 
 counts there is no debt due — ^Until then the balance in his hands 
 already belongs to the principal ; hence indebitatus assumpsit 
 will not lie for the balance, even if the principal were able to 
 prove the balance in that action. To support the action of in- 
 debitatus assumpsit, the money must be due as a debt at the time 
 of action brought. Hence the exclusive jurisdiction in equity. 
 
 In the case of the mutual account, on the other hand, the bal- 
 ance due, whatever it be, is not the money of the creditor in sur- 
 plusage, the plaintiff, but the sole property of the debtor defend- 
 
 merchant and merchant, their factors or servants, in either of which 
 cases the action jtnay be brought until the expiration of five years 
 from the cessation of the dealings in which they are (interested to- 
 gether, but not after". This statute clearly fixes the Iperiod at which 
 the statute begins to run as "between merchant and merchant", but 
 apparently leaves untouched the question as to when the limitation 
 begins to run on ordinary mutual 'accounts. The two (cases of Moore 
 V. Mauro, 4 Rand. 488 and Wortham v. Smith, 15 Gratt. 487, involved 
 accounts only tetween merchant and merchant, though the opinions 
 contain dicta that this particular clause is to be confined to its quite 
 definite language, and should not be extended ito ordinary mutual ac- 
 counts. That is, that (the five years saving clause is inapplicable to 
 accounts of the latter character. This may be true, iand doubtless 
 is true, yet the question remains wJten does the statute begin to run 
 against such kccounts? By its express language, the statute becomes 
 operative from the accrual of ,jthe right of action and- not before. 
 Hence the question of the time of 'such accrual is Ithe test^and this 
 is fixed 'by most of the authorities (supra) as the date of the last cross 
 item. Margarity v. Shipman, .|93 Va. 64, was not a case of mutual 
 accounts, as the parties had settled their accounts, and the action was 
 . on an account stated. The opinion, however, points out the difference 
 between the Virginia statute 'and other statutes, in that, under the 
 former, part payment does not clog the running lof the statute. But 
 as cross items of a mutual account, are, ex hypothese, not payments, 
 the difference seems immaterial on the question, 'in Virginia, not 
 within what time the istatute bars the action, Ibut when the statute 
 begins to run against a mutual account. The point of time from which 
 the period of limitation is to be reckoned would seem to be the time 
 of the cessation of mutual dealings, or, what is practically the same 
 thing, the date of the last item. 
 
Mutual Accounts — Equitable Jurisdiction 295 
 
 ant against whom the balance is. Whatever the amount of the 
 balance it is a debt due to the party in whose favor it exists. 
 There is no legal obligation on the defendant to account — he may- 
 render an account of his cross credits or not as he pleases. If 
 the parties have not stated their account and ascertained the 
 balance, and the defendant does not see fit to appear in the ac- 
 tion and set up credits claimed, or to file a bill alleging that the 
 accounts are of such a nature as to be unfit for settlement be- 
 fore a jury, the plaintiff will recover such sum as he may be able 
 to convince the jury that he is entitled to. No plea may be made 
 in a common law court that the accounts involved are mutual, 
 or complex, or that the case is otherwise unfit for trial by a jury. 
 This defense is equitable only, and to be made by a bill filed by 
 the defendant at law, to enjoin the action at law, on the ground 
 that the accounts between the parties are of such a nature as to 
 be unfit for settlement in a common law court. 
 
 The same. — So, if the defendant appears in the action and 
 sets up his counter-credits, as the result of which complexity for 
 the first time appears, the plaintiff may, on his part, dismiss his 
 action at law and file a bill with proper allegations of complexity 
 — or, if by the filing of the defendant's counter-credits, the plain- 
 tiff, under the rule of practice, is denied the right to dismiss his 
 action, then he may ask for an ancillary injunction against de- 
 fendant's assertion of his counter-claims in the law court, and 
 pray for a complete settlement of the account in equity. 
 
 If not thus incapable of settlement by a jury, and there is no 
 need of discovery, or other grounds of equitable interposition, 
 there is no reason why the controversy may not be settled in the 
 law court. If this be true, it necessarily follows that the bill in 
 equity for the settlement of mutual accounts, is not a true bill 
 for account, of which equity has inherent and independent ju- 
 risdiction, but is properly to be classified under the concurrent 
 jurisdiction (Langdell's "equitable assumpsit") — that is, equity 
 has jurisdiction, of mutual accounts only in cases where the rem- 
 edy at law is not plain, adequate and complete. ^^ 
 
 '" See Langdell, ubi supra, 112-1] 5. 
 
 Thk End. 
 
INDEX 
 
 [eEFErencbs are to pages.] 
 
 ACCIDENT— See Mistake. pace 
 
 Definition 97 
 
 Loss of public funds by public officials 114 
 
 Lost Instruments. 
 
 Bonds, notes and checks 97 
 
 Conveyances 98 
 
 Virginia statute 97-98 
 
 ACCOUNTS— See Bills for Account. 
 
 ACTIONS. 
 
 Common law 2 
 
 Enumerated 3 
 
 Legal title necessary to maintain 2 
 
 ADEQUATE REMEDY AT LAW. 
 
 Illustrations , 11 
 
 Remedy at Jaw must te plain and adequate 11 
 
 Specific performance 11 
 
 Where the ground for equitable relief fails, will a court of 
 
 equity give legal relief? 14 
 
 Judgment. 
 
 Validity of judgment where court of equity takes jurisdiction 
 of a matter with respect to which there is an adequate rem- 
 edy at law ; 16 
 
 ADVICE. 
 Advice to the student 8 
 
 AGENCY. 
 
 Resulting Trusts. 
 
 Agent to purchase, buying with his own funds 62 
 
 Issue out of chancery. 
 
 Reversal with direction to chancellor to submit issues to a 
 jury 9 
 
 APPEAL AND ERROR. 
 
 Reversal with direction to chancellor to submit issues to a 
 jury 9 
 
 ASSUMPSIT. 
 Action of 2 
 
298 Notes on Equity Jurisprudence 
 
 BILLS FOR ACCOUNT. page 
 
 Ancillary, account as 267 
 
 Equitable demands 266 
 
 Generally 264 
 
 Jurisdiction 265 
 
 Inadequacy of legal remedy. 
 
 Complexity 268-269 
 
 Multiplicity of parties 670 
 
 Mutual Accounts. 
 
 Account mutual, when 291 
 
 Action for balance, when accrues 393 
 
 American view 290-291 
 
 Cross demands and mutual accounts distinguished 292 
 
 Cross demands — explained — illustrated 291-8(93 
 
 English view 287-288-,289 
 
 Equitable jurisdiction 285-286-294-295 
 
 Statute of limitations 393 
 
 True bills — independent equity. 
 
 Account, duty to — no" liability until taken 371 
 
 Agencies subject to account. 
 Bailiffs. 
 
 Defined and illustrated 374 
 
 Equitable jurisdiction 275 
 
 Banker and customer 280 
 
 Co-tenants 282 
 
 Equitable jurisdiction, foundation of 278 
 
 Managers of estates 278 
 
 Other agents, why not accountable 375-276 
 
 Partners 381 
 
 Principal and agent 380 
 
 Receivers 273 
 
 Royalties to authors — patentees — lessees 281 
 
 Sales agents 279 
 
 Solicitor and client 280 
 
 Trustee and bailiff contrasted 277 
 
 Contrast with other equitable accounting 273 
 
 Defenses 284 
 
 Equity jurisdiction, origin of 271 
 
 Generally 370 
 
 Indebitatus assumpsit not maintainable 383 
 
 Parties — bailiff's right to maintain bill 283 
 
 BILLS, NOTES AND CHECKS. 
 Gifts and promissory notes ;'i2 
 
 BILLS OF PEACE— See Multiplicity of Suits. t 
 
 BILL TO REMOVE CLOUD— See Cloud upon Title. 
 
Index 299 
 
 BONA FIDE. PURCHASER— See 'Bquitiable Defenses; Vendor 
 and Purchaser. I page 
 
 Bona fide purchasers from trustee 59 
 
 Equitable vendor's lien 67 
 
 Who is a purchaser? 61 
 
 CHANCERY— See Issue out of Chancery. 
 
 "Equity" and "chancery'' synonymous 1 
 
 CHARITABLE TRUSTS. 
 
 American doctrine generally 92 
 
 Enforced, when 90 
 
 English doctrine 91 
 
 Liability for negligence of trustee or agents 94 
 
 Peculiarities 90 
 
 Protection and enforcement of 95 
 
 Resume 95 
 
 Uncertainty of beneficiaries 91 
 
 Virginia doctrine and statute 93 
 
 CHOSES IN ACTION. 
 
 Gifts 49-52 
 
 CLEAN HANDS. 
 
 "He who comes into equity, must do so with clean hands" 34 
 
 CLOUD UPON TITLE. 
 
 Title-holder in possession 12 
 
 Title-holder out of possession 12 
 
 Title of plaintiff in possession 12 
 
 COMMISSIONER IN CHANCERY— See ■Master in Chancery. 
 
 COMMON LAW— See Law. 
 
 Actions, enumerated 2 
 
 Common law and equity compared 6 
 
 Concurrent jurisdiction with equity 10-17 
 
 Procedure at law and equity contrasted 5 
 
 COMPLETE RELIEF. 
 
 "Equity gives complete relief" 36 
 
 CONCURRENT JURISDICTION— See Common Lazv; Jursdiction. 
 
 CONDITIONAL SALES— See Mortgages. 
 
 CONDITIONS. 
 
 "Putting plaintiff on terms'' 26 
 
 CONFLICT OF LAWS. 
 
 Disposition by equity of extraterritorial estate, where it has 
 jurisdiction over the parties 31-32 
 
 CONFUSION OF GOODS— See Pollowing Trust Funds. 
 
•500 NoTgs ON Equity Jurisprudence 
 
 CONSENT. PAGE 
 
 Consent cannot confer jurisdiction 15 
 
 CONSTRUCTIVE TRUSTS— See Fraud; Vendor's Lien. 
 
 Distinction between resulting and constructive trusts 53 
 
 Statute of llimitations 71 
 
 Unjust enrichment at expense of another 71 
 
 CONTRACTS— See Specific Performance. 
 
 CONTRIBUTION. 
 
 Defined 164 
 
 CONVERSION. 
 Doctrine of 28 
 
 CONVEYANCE— See Fraud; Fraud on Creditors. 
 
 CORPORATIONS.— See Stock and Stockholders. 
 
 COURTS. 
 
 Equity and law, in what courts administered 1 
 
 COVENANT. 
 
 Action of 3 
 
 CREDITORS — See Creditors' •Bills; Fraud on Creditors. ) 
 
 Implied ^vendor's lien 67 
 
 Remedy of, ordinarily 113 
 
 Who is a creditor? 61 
 
 CREDITORS' BILLS. 
 
 Equitable interests — how subjected 231 
 
 Fraudulent conveyances — when set aside 231 
 
 General creditors may not maintain 317-318 
 
 Illustrations 317-219 
 
 In personam claim of creditor — ordinary remedy 317 
 
 In rem claim 'necessary 217 
 
 Judgment, when necessary to sustain 319-330 
 
 Nature of proceedings 317 
 
 Priority of creditors 320 
 
 Property reached by. 
 
 Choses in action 333 
 
 Real property 221 
 
 Virginia rule 322 
 
 CURTESY. See Trust Estates. 
 
 DEBT. 
 
 Action of 2 
 
 DEEDS.— See Mortgages. 
 
 Delivery 51 
 
iNDgX 301 
 
 DEEDS OF TRUST. page 
 
 Default in payment — remedy 201 
 
 Defined and explained 89 
 
 Form ■ ^ . . . , 201 
 
 Mortgages contrasted and compared 200-204 
 
 Registry, effect of 210 
 
 Chancery 1 
 
 DEFINITIONS. 
 
 Equity 1-7 
 
 Exoneration 164 
 
 Issue out of chancery 8 
 
 Lis pendens 230 
 
 Marshalling 191 
 
 Misrepresentation 132 
 
 Representations, promissory 132 
 
 Subrogation 164 
 
 DELIVERY. 
 Instruments 51 
 
 DETINUE. 
 Action of 2 
 
 DISCOVERY, BILLS OF. 
 
 Purpose and characteristics 248 
 
 Subject of equitable cognizance 4 
 
 DOWER— See Trust Estates. 
 
 EJECTMENT. ' , ' - 
 
 Action of . 2 
 
 EQUAL EQUITIES. 
 Maxim ^of 35 
 
 EQUITABLE CONVERSION. 
 Doctrine of 28 
 
 EQUITABLE DEFENSES. 
 
 Enumerated ' ^57 
 
 Estoppel '• 263 
 
 Laches 2i63 
 
 Bona fide purchaser for value. 
 
 Creditors and purchasers — distinguished 259 
 
 Legal title, when necessary 358 
 
 Notice, purchaser with, from purchaser without 358 
 
 Notice, what constitutes. 
 
 Chain of title, notice in 261 
 
 Possession of real property 260 
 
 Resume 262 
 
302 Notes on Equity Jurisprudence 
 
 EQUITABLE DEFENSES— (corefrnw^rf). page 
 
 Purchaser, who is 257 
 
 Registry statutes — effect on purchasers and creditors 259 
 
 Value, what constitutes. 
 
 Contemporaneous debt, security for. ...... .t 260 
 
 Pre-existing debt, payment of '. . 260 
 
 Pre-existing debt, security for ? . 260 
 
 EQUITY. ' 
 
 "Chancery" and "equity" synonymous 1 
 
 Common law compared and contrasted 6-7 
 
 Foundation of 8 
 
 Origin and history 2-3 
 
 Procedure at common law contrasted 5 
 
 Subjects of cognizance i 
 
 EQUITY FOLLOWS THE LAW. 
 
 Application of maxim 18 
 
 Legal title, how considered in equity 19 
 
 To what extent 18 
 
 Statute of limitations — See Statute \of limitations. 
 
 EQUITY JURISDICTION— See '•Jurisdiction. 
 
 ESTOPPEL— See 'Equitable 'Defenses. 
 
 EVIDENCE— See Parol Evidence. 
 
 EXONERATION. 
 
 Bail bonds — exoneration on payment 177 
 
 Defined .^ 164 
 
 FEIGNED ISSUE— See Issue Out of Chancery. 
 FIDUCIARIES— See Fraud. 
 FOLljOWING TRUST EUNDS. 
 
 Option of cestui 78 
 
 Identity of fund. 
 
 "Earmarked" 73 
 
 Funds mixed in bank. 
 Contest between cestui and creditors of depositor. 
 
 Trust fund intact 73-74 
 
 Trust res encroached upon 74 
 
 Contest between depositors of insolvent bank. 
 
 Bank's assets diminished below trust deposit 77-78 
 
 When bank trustee 75-76 
 
 When (bank trustee — illustrations '. 7fi 
 
 Tracing withdrawn trust funds 74 
 
Index 303 
 
 FORFEITURES— See Penalties and iForfeitures. page 
 
 FORMS. 
 "Equity looks at substance, not at forms" 37 
 
 FRAUD — See Fraud on Creditors. 
 
 Antenuptial conveyances 139 
 
 At law land in equity — contrast 131-138 
 
 Attorney and client — fees 163 
 
 Concealment. 
 
 No fiduciary relation 136 
 
 Equity (jurisdiction 4-10 
 
 Fiduciaries purchasing trust res 162 
 
 Heirs — bargains with 140 
 
 Judgment — fraudulent— relief against 163 
 
 Misrepresentation. 
 
 Duty of investigation 134 
 
 Of law 135 
 
 Reliance (upon statement 135 
 
 Rescission for , 133 
 
 To whom made 134 
 
 Promissory representations. 
 
 As a contract 132 
 
 Defined 132 
 
 Statements of opinion or intention 133 
 
 Rescission for — advantages jover action for damages. 
 
 Sealed instruments 164 
 
 Undue influence. 
 
 Fiduciary Relation 137 
 
 Surprise 137 
 
 Wills — fraudulent 163 
 
 FRAUD ON CREDITORS. i 
 
 Assignment of stock of goods 150 
 
 Attacking creditors — priority 151 
 
 Conveyances — who may assail as ifraudulent or voluntary. 151-160-161 
 
 Deeds fraudulent in law 147-148-149 
 
 Fraudulent conveyances — statute of 143-144 
 
 Improvements on author's land — debtor insolvent 157 
 
 Intent, fraudulent 145 
 
 Life insurance — payment of 156 
 
 Premiums — debtor insolvent 156 
 
 Non-registry 'of 'conveyances as fraud 159-160 
 
 Non-registry of conveyances — effect of 158 
 
 Purchasers for value 1461-147 
 
 Sale of merchandise in bulk 160 
 
 Postnuptial settlements 155 
 
304 Notes on Equity Jurisprudence 
 
 FRAUD ON CRRDITOR^— (continued). page 
 
 Consideration. 
 
 Wife surety for husband 155 
 
 Husband's use of wife's money 153-154 
 
 Marriage 153 
 
 Wife's separate estate, payment from 153 
 
 In general 151-153 
 
 Voluntary conveyances. 
 
 Statute of 144 
 
 What constitute 145 
 
 FRAUDS, STATUTE OF. 
 Trusts, affecting 39 
 
 GARNISHMENT. 
 Statutes 223 
 
 GIFTS— See Trusts. 
 
 Choses !in action 49-52 
 
 Delivery 48-49 
 
 Equity 50 
 
 Personal property 48 
 
 Promissory notes 53 
 
 Real property 48 
 
 Requisites 48 
 
 Stock 52 
 
 Unexecuted intention 51 
 
 HUSBAND AND WIFE— See iFraud on Creditors; Resulting .Trusts.^ 
 
 IMPLIED TRUSTS— See Constructive Trusts; Resulting Trusts. 
 
 INJUNCTIONS. 
 
 Bond of indemnity 237 
 
 Boycotting, against 344 
 
 Breach of — punishment for 246 
 
 Contract for personal services, against breach of 238-339-240 
 
 Crimes, against 243 
 
 Criminal proceedings, against 246 
 
 Enjoining proceedings at law 33 
 
 "Injunction and relief," bills for 237 
 
 Judgments, against 13-241 
 
 Libel, against 243 
 
 Patent suits 341 
 
 Privacy, right of 342 
 
 "Pure hills" 237 
 
 Restraining order 337 
 
 Service of process, false return of — enjoining judgment.. 344-245 
 
 Strikers, against 244 
 
 Subjects of equitable cognizance 4 
 
Index 305 
 
 INJUNCTIONS— (co»<m«?d). page 
 
 Suits in foreign jurisdictions, against 346 
 
 Trade-marks 341 
 
 Trade secrets and secret inventions 343 
 
 Trespass, yenjoining 337 
 
 Unfair competition 241 
 
 INTERPLEADER. 
 
 Illustrations of 253 
 
 Jurisdiction, foundation of 251 
 
 Plaintiff must be innocent and disinterested 350 
 
 Privacy between claimants required 340-350-251 
 
 Virginia statute 349 
 
 ISSUE ;OUT OF 'CHANCERY. 
 
 Appeal and error 9 
 
 Court's power to direct 9 
 
 Definition 8 
 
 General rule 8 
 
 Virginia practice 9 
 
 JUDGMENTS — See Adequate Remedy at Law; fraud. 
 
 Enjoining domestic and foreign judgments 13 
 
 Jurisdiction, effect of iwant of Ijurisdiction on judgments 16 
 
 JURISDICTION— See Fraud; Specific Performance. 
 
 Consent cannot confer 15 
 
 Equity jurisdiction when adequate remedy at law 10 
 
 Judgments — effect of want of jurisdiction 16 
 
 Law and equity — when concurrent 10 
 
 Mistake, when equity takes jurisdiction by 16 
 
 Parties, when equity has jurisdiction 'of — extra territoral estate. 31-33 
 
 Subjects of equitable cognizance 4 
 
 Test of equity jurisdiction 4-10 
 
 "Venue" distinguished from "jurisdiction" 16 
 
 JURY. 
 
 Issue to jury — See Issue Out of Chancery. 
 
 LACHES. 
 
 Doctrine of ' 31-33-24 
 
 Illustrations 33 
 
 Presumption of — when overcome 24 
 
 LAW — See Common Law; Equity Follows the Law. 
 
 Law and equity administered in the :same or different courts. . . 1 
 "Where equities are equal the law will prevail" 85 
 
 LEGAL TITLE— See 'Title. 
 
306 Notes on Equity Jurisprudence 
 
 LIENS— See Fendor'i Lien. 
 
 Bankers. page 
 
 At law 211 
 
 In equity 213 
 
 Equitable. 
 
 Assignments — orders on a fund 314-215 
 
 ■Creditors, good as against 216 
 
 Defined 211 
 
 Illustrations 213 
 
 LIMITATION !OF ACTIONS— See Statute of Limitations. 
 
 LIS PENDENS. 
 
 Defined and explained 239 
 
 Doctrine — foundation of 230 
 
 In rem proceedings only — applicable \o 229 
 
 Notice to 'subsequent purchasers — registry i of deed or mort- 
 gage 234-235-236 
 
 Principles applicable 231 
 
 Property, to what applicable 330 
 
 Registry — as substitute for — in iVirginia 233 
 
 Statute — as affected by — in Virginia 334 
 
 Statutory provisions in general 232 
 
 Virginia statute 232 
 
 LOST INSTRUMENTS— See Accident. 
 
 MARSHALLING OF SECURITIES. 
 
 Defined and explained 191-192 
 
 Illustrations 194-195-196-197-198-199 
 
 Origin and policy 192 
 
 Principles applicable 193 
 
 Subsequent purchasers and lienors 193 
 
 MASTER IN CHANCERY. 
 
 Conveyance by foreign master 33 
 
 MAXIMS— See Equity Follows the Law. 
 
 "Between equal equities time shall prevail" 35 
 
 "Equality is equity" 30 
 
 "Equity deals with the individual" 31 
 
 "Equity gives complete relief" 36 
 
 "Equity looks at substance, not at forms" 37 
 
 "Equity treats that as done which ought to be done" 28 
 
 "Equity will never allow 'a trust to fail for want of a trustee". . 38 
 
 "Equity will suffer no wrong to be without a remedy" 5 
 
 "He who comes into equity, must do so with clean hands".... 34 
 
 "He who seeks equity must do equity" 26 
 
 "Where equities are equal the law will prevail" 25 
 
Index 307 
 
 MISTAKE— See Accident. . page 
 
 Bona fide purchaser — rights of 138 
 
 Equitable jurisdiction, subject of 4 
 
 Real property — written contracts for — statute of frauds. .128-139-130 
 Reformation for. 
 
 Generally 127 
 
 Illustrations 127 
 
 Intention of parties not expressed in writing — naistake of law. 137 
 Rescission for. 
 
 'Compromises 119-120 
 
 Disclosure of advantages by vendee, duty as to 132 
 
 Failure of Title. 
 
 Personal property 120 
 
 Real property 131 
 
 Mistake of Law. 
 
 "Ignorance of the law excuses no man" 115 
 
 Legal Jeffect of contract, as to 118 
 
 Misstatement of law 116 
 
 Money paid to court officials or trustees 116 
 
 Payer's liability, mistake as to 117-118 
 
 Title of property 116 
 
 Unilateral Mistake. / 
 
 Diligence required in seeking relief 136 
 
 Generally 123 
 
 Illustrations 124-135 
 
 Negligence precluding relief 135 
 
 Jurisdiction, when court of equity takes by mistake 16 
 
 MORTGAGES. i 
 
 After-acquired property, covering 308 
 
 Conditional sales as cover for 203-304 
 
 Conditional sales contrasted 203 
 
 Debt barred while mortgage alive 20% 
 
 Deeds as '. , 204 
 
 Deeds of trust contrasted and compared 200-304 
 
 Deposit of title deeds 206 
 
 Foreclosure 200 
 
 Form 200 
 
 Future, advances securing 206-207 
 
 Legal title — lien theory 205 
 
 Power of sale in mortgagee 202 
 
 Redemption 308 
 
 Registry, effect of 210 
 
 Remedies )of mortgagee 208 
 
 Statute of limitations 209 
 
 "Tacking" 310 
 
308 Notes on Equity Jurisprudence 
 
 MULTIPLICITY OP SUITS. page 
 
 Bills of peace 353-254-255-256-257 
 
 MUTUAL ACCOUNTS— See Bills for Account. 
 
 NOTICE. 
 Lack of notice prevents the statute of limitations in equity. ... 32 
 
 PAROL EVIDENCE. 
 
 Presumption of trust 57 
 
 PATENTS— See Injunctions. 
 
 PENALTIES AND FORFEITURES. 
 
 Equitable cognizance 4 
 
 Forfeitures. 
 
 At law — relief from 107 
 
 Definition ; 98 
 
 Equitable relief. 
 
 Failure to do a collateral act 109-110 
 
 Failure to pay money. 
 
 Generally 107-108 
 
 Options 108 
 
 Options and executory contracts of sale distinguished.. 109 
 Time as essence of the contract. 
 
 At law , ,111 
 
 In equity. 
 
 Payment- of money 112 
 
 Performance of collateral acts 113 
 
 Penalties. 
 
 Accelerating time of payments 106 
 
 At law — relief from 99 
 
 Compensation required for relief from '. 114 
 
 Definition 98 
 
 Equitable relief 99 
 
 Statutory, relief against 106 
 
 Attorney's fees in case of default 105 
 
 Generally 105 
 
 Virginia doctrine 105 
 
 Liquidated damages — how distinguished 104 
 
 Builders' contracts 104 
 
 Performance of one act capable of separation into parts . . . 103 
 
 Performance of several acts , 103 
 
 Performance of single collateral act 102 
 
 Promise to pay money 101-102 
 
 Stipulation for unreasonable amount 105 
 
 What constitute. 
 
 Contract to do collateral thing .■ 100 
 
 Contract to pay money 100 
 
Index , 309 
 
 PERSONAL PROPERTY. page 
 
 Gifts 48 
 
 POSSESSION— See floud upon Title. 
 
 PRECATORY WORDS— See Trusts. 
 
 PROMISSORY NOTES— See Bills, Notes and Checks. 
 
 PUBLIC TRUSTS— See Charitable Trusts. 
 
 PURCHASER— See Vendor 'and Purchaser. . 
 
 REAL PROPERTY. 
 
 ■Gifts 48 
 
 REFORMATION OF INSTRUMENTS— See Mistake. 
 
 REGISTRY OF CONVEYANCES— See Fraud on Creditors. 
 
 REMEDY AT LAW— See Adequate Remedy at Law. ', 
 
 REMOVAL OF CLOUD— See Cloud upon Title. 
 
 REPLEVIN. 
 
 Action of 2 
 
 RESCISSION— See Mistake. 
 
 Conveyance in consideration of support of grantor 141-143 
 
 Mining leases 143 
 
 RESULTING TRUSTS. 
 
 Constructive trusts distinguished '53 
 
 Illustrations 54 
 
 Parties in joint interest 54-64 
 
 Purchase by one, title conveyed to another. 
 
 Abolished in several states by ^tatute 63 
 
 Agent to purchase, buying with his own funds 62 
 
 Bona fide purchasers from trustee 59 
 
 Distinction between loan and option to repurchase 56 
 
 Distinction between purchase and loan 55 
 
 Exceptions to rule 57 
 
 Husband purchasing with wife's money 62 
 
 Oral agreement to purchase for, or jointly with, another.... 56 
 
 Parol agreement to sustain or repel presumption 59 
 
 Payment must be contemporaneous with purchase 55 
 
 Presumption of trust prima facie only 57 
 
 Purchase money by several — title in one 57 
 
 Rebuttable by parol evidence 57 
 
 Resulting trusts as to creditors of trustee 60 
 
 Secret equities ,. 59 
 
 Who is purchaser .and who creditor?. 61 
 
 Unexhausted trust funds 65 
 
 Voluntary conveyance to stranger 65* 
 
 Wills 65 
 
310 Notes on Equity Jurisprudence 
 
 SAI^ES. PAGE 
 
 Specific performance of contract of sale of shares in corporation. 11 
 
 SPECIFIC PERFORMANCE. 
 
 Adequate remedy at law 11 
 
 Contracts for sale of real property. 
 
 Defects of title — compensation — exception 336 
 
 Jurisdiction — why exercised 323 
 
 Mistake — correction by court 234 
 
 Mutuality of contract 335 
 
 Mutuality of remedy 335 
 
 Optional contracts 336 
 
 Signature 224 
 
 Vendor's lien 327 
 
 Vendor, suit by 237 
 
 Warranty of title implied 333 
 
 Discretionary with court 334 
 
 Shares in corporations 11 
 
 Subjects of equitable cognizance 4 
 
 Will, contract to make 228 
 
 SPENDTHRIFT TRUSTS. 
 
 Family settlements 81 
 
 Virginia statute 81 
 
 Methods of creation. 
 
 Discretion in the trustee 80 
 
 Grantor's own benefit, created for 81 
 
 Inalienability or non-liability for debts 81 
 
 Insolvency or bankruptcy terminates 79 
 
 ■STATUTE OF FRAUDS— See Frauds, Statute of. 
 
 STATUTE OP LIMITATIONS— See Laches. 
 
 Claims purely equitable 21 
 
 Concurrent jurisdiction 20 
 
 Constructive trusts 71 
 
 "Equity follows the law" 19-20-21 
 
 Notice, lack of, prevents the statute of limitations in equity. . . 23 
 
 STOCK AND STOCKHOLDERS. 
 
 Gifts of stock 52 
 
 Specific performance of contract of sale of shares in corporation. 11 
 
 SUBROGATION— See Marshalling of Securities. 
 Creditor partially secured— amount provable in administration 
 
 proceedings 173 
 
 Creditor's injury — never enforced to 175-176 
 
 Defined 164 
 
 * Mistake or fraud 166 
 
Index 311 
 
 SUBROGATION— (conimw^d). page 
 
 Object 165 
 
 " Partners, as between 168 
 
 Purchaser of property discharging liens, when entitled 
 
 to 189-190-191 
 
 Volunteers— right to 187-188-189 
 
 Creditor's right against surety's securities. 
 Securities indemnifying surety. 
 
 Absolute liability of surety 185-186-187 
 
 Contingent liability of surety 184 
 
 In general 183 
 
 Securities securing the debt of surety 183 
 
 Estate sold in parcels — paramount lien — how subjected !to. 
 
 Assumption of lien by purchaser 183 
 
 Registry as notice to prior liens 181 
 
 Release of a later sold parcel by mortgagee 181 
 
 Value of estate in excess of mortgage. ' 
 
 Contemporaneous Ipurchases 179 
 
 Non-contemporaneous purchases — inverse order of aliena- 
 tion 179-180 
 
 Value of estate not exceeding mortgage 178-179 
 
 Surety. 
 
 Assignment of debt — safest course 175 
 
 Bail bonds — exoneration 177 
 
 Bond debts'. 174 
 
 Co-contractors, as between 168 
 
 Collateral security only, when 168 
 
 Creditor must respect 'surety's right 177-178 
 
 Creditor put on terms 183 
 
 Interference with creditor's legal remedy 182 
 
 L,ien kept alive for 166 
 
 Lien or other advantage absent 167 
 
 Pace V. Pace, doctrine of 171-172 
 
 Purchaser of equity of redemption. 
 
 Payment of mortgage assumed 170 
 
 Payment of mortgage not assumed 170 
 
 Suretyship. 
 
 In persona 168 
 
 In re 16i9-170-li89-] 90-191 
 
 SURETYSHIP— See Subrogation. 
 
 TITLE — See Cloud upon Title; Resulting Trusts. 
 
 Action at law — condition precedent to 2 
 
 "Equity follows the law" 19 
 
 Passing legal title 33 
 
312 Notes on Equity Jurisprudence 
 
 TRADE-MARKS— See Injunctions. page 
 
 TRESPASS. 
 
 Action of 2 
 
 TRESPASS ON THE CASE. 
 
 Action of 2 
 
 TROVER AND pONVERSION. ' 
 
 Action of 3 
 
 TRUSTEE — See Deeds of Trust; Resulting Trusts; Trust Bstates. 
 
 Indemnity to .;'.". 86 
 
 Liability for contracts 86 
 
 Mortgage of trust res 85 
 
 Purchase of trust res 82-162 
 
 Security by S2 
 
 Settlement of accounts 87 
 
 Substitution 39-82 
 
 Suits by or against 85 
 
 Tortious conveyance by .... .^ 85 
 
 Investments by. 
 
 Massachusetts rule 83 
 
 New York rule 83 
 
 Virginia statute 83 
 
 Mingling trust funds. 
 
 General doctrine 84 
 
 Virginia casesi 84 
 
 TRUST ESTATES — See following Trust Funds; Trustee. 
 
 Conveyance hy trustee 85 
 
 Curtesy and doA^er 72 
 
 Notice that title is fiduciary 79 
 
 Purchaser from trustee — duty to see to application of purchase 
 
 money 88 
 
 Sale or mortgage by court of equity 85 
 
 Trustee's authority to mortgage 85 
 
 Trustee's estate , 72 
 
 TRUSTS — See Constructive Trusts; Resulting Trusts; Spendthrift 
 Trusts; Trust Bstates; 'Trustee. 
 
 Creditors of trustee, resulting trusts as to 60 
 
 Declaration of trust 40 
 
 "Equity will never allow a trust to fail for want of a trustee". . 38 
 
 Express trusts 38-53 
 
 Express trusts by will defined by independent writing 44 
 
 Express trusts in wills defined orally 44 
 
 Gifts and voluntary settlements. 
 
 Choses in action 49 
 
Index 313 
 
 TRUSTS — (continued). page 
 
 Executory or executed 47 
 
 How these differ from other trusts 47 
 
 Requisties at law — personal property 48 
 
 Requisites at law — real property 48 
 
 Requisites in equity 50 
 
 Tangible chattels 48 
 
 Heir as trustee ex maleficio 46 
 
 New trustee 39 
 
 Parol trusts 39 
 
 Precatory words. 
 
 Circumstances not determinative but important 43 
 
 Circumstances that conclusively repel the presumption of a 
 
 trust 42 
 
 Created, how 42 
 
 Discretionary or imperative 42 ' 
 
 Gift to wife and children 41 
 
 Statute of frauds. 
 
 Parol trusts in realty 39 
 
 Proof of trust 39 
 
 Subjects of equitable, cognizance 4 
 
 Trustee, who may be 38 
 
 Undelivered conveyances. 
 
 Deed neither delivered nor recorded 52 
 
 Deed recorded 52 
 
 Donor in deed declared trustee 53 
 
 UNCONSCIONABLE BARGAINS. 
 
 Equitable cognizance, subjects of 4 
 
 UNFAIR COMPETITION— See Injunctions. 
 
 VENDOR AND PURCHASER— See Vendor's Lien. 
 
 Bona fide purchasers from trustee 59 
 
 Bona fide purchaser. 
 
 Equitable vendor's lien 67 
 
 Who is a Jjurchaser? 61 
 
 Purchase by one, title conveyed to another — See .Resulting Trusts. 
 
 Classification ' 66 
 
 VENDOR'S EIEN. 
 
 Equitable vendor's lien , 66-68 
 
 Expressly reserved on face of conveyance 68 
 
 Implied equitable lien. 
 
 Creditors, good against 67 
 
 Cut off by sale to a bona fide purchaser 67 
 
 When lien arises 66 
 
 Legal lien 70 
 
 Personal and real property 66 
 
314 Notes on Equity Jurisprudence 
 
 VENUE. PAGE 
 
 Jurisdiction distinguished 16 
 
 VOLUNTARY CONVEYANCES— See Fraud on Creditors. 
 
 VOLUNTARY SETTLEMENTS— See Trusts. 
 
 WILLS — See Fraud; Trusts. 
 
 Express trusts by will defined by independent writing 44 
 
 Express trusts in wills defined orally 44 
 
 Heir inducing ancestor not to make a will 46 
 
 Jus disponendi 42 
 
 Resulting trusts. 65 
 
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