1. The debtor is generally allowed to set off against the assignee not only claims existing at the time of the assignment, but those arising subsequently prior to the debtor's notice of the assignment.5 On the other hand a claim against the assignor acquired after notice of the assignment cannot be set off. There are a number of cases qualifying in one or another kind of case the right of set-off against the assignee, but the decisions need not be examined here, for all that is of importance to the present argument is that certainly everywhere the general rule is admitted that a claim matured at the time of assignment may be set off against the assigned claim. There seems no possible ground on which to support this general rule, except that the legal title to the assigned claim still is in the assignor, and that therefore when sued upon, the claim still is subject to set-off of a claim against him unless it is inequitable for the defendant to assert the right. It is certainly inequitable if the set-off was acquired after notice of the assignment, and it may be urged that it is also inequitable in any case for the defendant to assert his set-off when the real plaintiff in interest, whether the nominal plaintiff or not, is an assignee, unless the assignor is insolvent, since the defendant might collect his claim from the assignor who

Cavendish v. Geaves, 24 Beav. 163, 174 (1857); but see Stoddart v. Union Trust, Ltd., [1912] 1 K. B. 181; Tuscumbia, etc. R. Co. v. Rhodes, 8 Ala. 206 (1845); Adams v. Leavens, 20 Conn. 73 (1849); Hall v. Hickman, 2 Del. Ch. 318 (1864); Guerry v. Perryman, 6 Ga. 119 (1849); Gardner v. Risher, 35 Kan. 93, 10 Pac. 584 (1886); Adams v. Webster, 25 La. Ann. 117 (1873); Hooper v. Brundage, 22 Me. 460 (1843); Collins. Campbell, 97 Me. 23, 28, 53 Atl. 837 (1902); McKenna v. Kirkwood, 50 Mich. 544, 15 N. W. 898 (1883); Hunt v. Shackleford, 55 Miss. 94 (1877); Ford v. O'Donnell, 40 Mo. App. 51 (1890); Lewis v. Holdrege, 56 Neb. 379, 76 N. W. 890 (1898); Sanborn v. Little, 3 N. H. 539 (1826); Wood v. Mayor, 73 N. Y. 556 (1878); First Nat. Bank v. Bynum, 84 N. C. 24 (1881); Metzgar v. Metzgar, 1 Rawle (Pa.), 227 (1829); Clement v. Philadelphia, 137 Pa. 328, 334, 20 Atl. 1000 (1890); Neal v. Sullivan, 10 Rich. Eq. (S. C.) 276 (1858). See also Bryne v. Dorey, 221 Mass. 399, 109 N. E. 146 (1915). Cf. Greene v. Darling, 5 Mason (U. S. C. C.) 201 (1868). So a particular credit item in a mutual account cannot be separately assigned. Heiliger v. Ritter, 78 N. Y. Misc. 264, 138 N. Y. Supp. 212 (1912).

• See cases supra, also Campbell v. Equitable Life Assur. Soc., 130 Fed. 786 (1904). And the debtor, if he had notice of a proposed assignment of a claim against him, and did not inform the person proposing to take the assignment of an existing right of setoff against the assignor, cannot set it up against the assignee. King v. Fowler, 16 Mass. 397 (1820). Cases involving the question of the right of the maker of negotiable paper to set off against a transferee after maturity claims against the payee or indorsee, though often decided as if depending upon the same principle, should be distinguished, since even after maturity the legal title to the note is transferable. As to such cases see: 23 L. R. A. 327, n; 39 L. R. A. (N. s.) 658, n.

really ought to pay it. This limitation, however, of the debtor's right of set-off does not seem to have prevailed. It seems rather to have been thought equitable for the debtor to be allowed to assert the right and thus to compel the assignee then to sue the assignor for reimbursement.

2. The effect of equities of third persons against the assignee seems also to depend upon the legal or equitable character of the assignee's rights. Though it is well settled that an assignee is subject to the equities of the obligor, it is a matter of dispute how far the assignee is subject to equities of third persons against the assignor; as, for instance, where the assignor was himself an assignee of the chose in action under an assignment which he had procured by fraud, or where for any reason the assignor held the assigned claim subject to a trust, actual or constructive, in favor of a third person. It would be everywhere agreed that an assignee who takes the assignment with notice of the claim against the assigned right, and still more clearly if he undertakes when the assignment is made to satisfy the claim, holds his right subject to the prior claim; but even though the assignee paid value with no knowledge of any outstanding claim, it is still true that the defrauded original owner or person beneficially entitled to the assignment has an equity prior in time and, therefore, superior to that of the ultimate assignee, if the latter's right is merely equitable. If, however, the latter could be regarded as the owner of a legal right, his right would be superior to the original equity. In fact, the latent or collateral equity against the assignor of an intangible chose in action has prevailed over the right of the subsequent purchaser in good faith, in the absence of an estoppel, in England and in a majority of the United States where the question has been raised. In

7 See cases cited supra, n. 5.

8

8 Buffalo Glass Co. v. Assets Realization Co., 133 N. Y. App. Div. 775, 117 N. Y. Supp. 1087 (1909).

• Cockell v. Taylor, 15 Beav. 103 (1851); Barnard v. Hunter, 2 Jur. (N. S.) 1213; Sutherland v. Reeve, 151 Ill. 384, 38 N. E. 130 (1894); Pearson v. Luecht, 199 Ill. 475, 65 N. E. 363 (1902); Brown v. Equitable Life Assur. Soc., 75 Minn. 412, 78 N. W. 103, 671, 79 N. W. 968 (1899); Tripp v. Jordan, 177 Mo. App. 339, 164 S. W. 158 (1913); Bush v. Lathrop, 22 N. Y. 535 (1860); Cutts v. Guild, 57 N. Y. 229 (1874); Owen v. Evans, 134 N. Y. 514, 31 N. E. 999 (1892); Central Trust Co. v. West India Improvement Co., 169 N. Y. 314, 62 N. E. 387 (1901); Culmer v. American Grocery Co., 21 N. Y. App. Div. 556, 48 N. Y. Supp. 431 (1897); State v. Hearn, 109 N. C. 150, 13 S. E. 895 (1891); Gillette v. Murphy, 7 Okla. 91, 54 Pac. 413 (1898); Downer v.

some States, however, the courts have followed an early statement of Chancellor Kent,10 which is now overruled in New York," to the effect that an assignee is not bound by equities in favor of third persons since, though he can make inquiries of the debtor before taking the assignment and thereby acquaint himself with any defences the debtor may have, no such procedure is possible in regard to equities of unknown third persons.12 A distinction must be taken where the chose in action has a tangible form, especially if it is by law assignable. The assignment of an overdue negotiable promissory note though often likened to that of an ordinary chose in action does not properly involve such a discussion as is contained in this article. Even after maturity the transfer of such a note by the holder unquestionably transfers a legal title and though the circumstance that the transfer is after maturity puts the taker of the note on inquiry as to any defence the maker may have (since if he had had no defence the instrument would presumably have been paid) yet the fact that the instrument is overdue gives no reason to suppose that there are collateral equities affecting the transferor's title. In such a case, therefore, the bonâ fide purchaser of the note is protected.13 A principle is applicable also to other choses in action having tangible form like certificates of stock, policies of insurance, non-negotiable bonds, somewhat similar to that which is

South Royalton Bank, 39 Vt. 25 (1866). See also Western Nat. Bank v. Maverick Nat. Bank, 90 Ga. 339, 16 S. E. 942 (1892); Osborn v. McClelland, 43 Ohio St. 284, I N. E. 644 (1885).

10 In Murray v. Lylburn, 2 Johns. Ch. (N. Y.) 441 (1817). See also Livingston v. Dean, 2 Johns. Ch. (N. Y.) 479 (1817).

11 See New York decisions stated supra, note 9.

12 First National Bank v. Perris Irrigation District, 107 Cal. 55, 40 Pac. 45 (1895); Ohio Life Ins. Co. v. Ross, 2 Md. Ch. 25 (1848); Duke v. Clark, 58 Miss. 465 (1880); Williams v. Donnelly, 54 Neb. 193, 74 N. W. 601 (1898); DeWitt v. VanSickle, 29 N. J. Eq. 209 (1878); Mifflin County Nat. Bank's Appeal, 98 Pa. 150 (1881); Huber's Assigned Estate, 21 Pa. Sup. Ct. 612, 615 (1902). In a few of these decisions which relate to mortgages and judgments, it is not clear how far the court intended to lay down broadly a principle covering all non-negotiable choses in action.

Moore v. Moore, 112 Ind. 149, 13 N. E. 673 (1887); Eversole v. Maull, 50 Md. 95 (1878); Etheridge v. Gallagher, 55 Miss. 458 (1877); Lee v. Turner, 89 Mo. 489, 14 S. W. 505 (1886); Neuhoff v. O'Reilly, 93 Mo. 164, 6 S. W. 78 (1887); Osborn v. McClelland, 43 Ohio St. 284, 1 N. E. 644 (1885); Kernohan v. Durham, 48 Ohio St. 1, 26 N. E. 982 (1891); Patterson v. Rabb, 38 S. C. 138, 17 S. E. 463 (1892). See also Combs v. Hodge, 21 How. (U. S.) 397 (1858), and the argument in POMEROY, EQUITY JURIS., § 707 et seq. But see Foley v. Smith, 6 Wall. (U. S.) 492 (1867); Owen v. Evans, 134 N. Y. 514, 31 N. E. 999 (1892).

14

applied to them when they are made the subject of gift. The owner of the document is regarded as possessing if not a kind of legal ownership to the chose in action represented by it, at least a legal ownership of a paper which necessarily accompanies legal ownership, and the lack of which is notice of an infirmity of title. Accordingly a bonâ fide purchaser of a certificate of stock, a non-negotiable bond or note,1 or a policy of insurance,16 is preferred to one having an equitable right against his assignor. Furthermore, it has been held that a written assignment of a chose in action by one who seeks to avoid the assignment later on equitable grounds estops the claimant as against a bonâ fide purchaser who bought the chose in action on the faith of that writing.17 An assignor who has no legal title but is a mere bailee of a non-negotiable tangible chose in action it need hardly be said can give no right even to a bonâ fide purchaser which can stand against the depositor's claim.18

3. It is almost, if not quite, universally admitted that a partial assignee has merely an equitable right. If then, the total assignee has a legal right, a subsequent total assignment prevails over a prior partial assignment. This monstrous result has actually been reached on this reasoning, under the Georgia Code, which is held.

14 Colonial Bank v. Cady, L. R. 15 A. C. 267 (1890); Ambrose v. Evans, 66 Cal. 74, 4 Pac. 960 (1884); Arnold v. Johnson, 66 Cal. 402, 5 Pac. 796 (1885); Otis v. Gardner, 105 Ill. 436 (1883). But see Taliaferro v. First Nat. Bank, 71 Md. 200, 214, 17 Atl. 1036.

15 Rimmer v. Webster, [1902] 2 Ch. 163; Cowdrey v. Vandenburgh, 101 U. S. 572 (1879); Adams v. District of Columbia, 17 Ct. Cl. 351 (1881); International Bank v. German Bank, 71 Mo. 183 (1879); Putnam v. Clark, 29 N. J. Eq. 412 (1878); Grocers Bank v. Neet, 29 N. J. Eq. 449 (1878); Combes v. Chandler, 33 Oh. St. 178 (1877); Taylor v. Gitt, 10 Barr (Pa.) 428 (1849). But see Blackman v. Lehman, 63 Ala. 547 (1879); Covell v. Tradesman's Bank, 1 Paige (N. Y.) 131 (1828); Patterson v. Rabb, 38 S. C. 138, 17 S. E. 463 (1892).

16 Plummer v. People's Nat. Bank, 65 Iowa 405, 21 N. W. 699 (1884). But see Brown v. Equitable Life Assur. Soc., 75 Minn. 412, 78 N. W. 103, 671, 79 N. W. 968 (1899); Culmer v. American Grocery Co., 21 N. Y. App. Div. 556, 48 N. Y. Supp. 431 (1897).

17 See Cowdrey v. Vandenburgh, 101 U. S. 572 (1879); Campbell v. Brackenridge, 8 Black. (Ind.) 471 (1847); Thurston v. McLellan, 34 App. D. C. 294 (1910); Cochran v. Stewart, 21 Minn. 435 (1875); Moore v. Metropolitan Nat. Bank, 55 N. Y. 41 (1873); Mifflin County Nat. Bank's Appeal, 98 Pa. 150 (1881); State Bank v. Hastings, 15 Wis. 75 (1862). But see Owen v. Evans, 134 N. Y. 514, 31 N. E. 999 (1892); Central Trust Co. v. West India Improvement Co., 169 N. Y. 314, 324, 62 N. E. 387 (1901).

18 Blackman v. Lehman, 63 Ala. 547 (1879); Midland Railroad Co. v. Hitchcock, 37 N. J. Eq. 549 (1883). See also Combs v. Hodge, 21 How. (U. S.) 397 (1858).

to give the total assignee legal ownership.19 Whatever may be the necessity of the decision under the Georgia Code, the case would probably not be generally followed even in jurisdictions which allow or require an assignee of an entire claim to sue in his own name.20 The result of the three classes of cases just referred to may then be considered under the headings of what the law actually is, and of what it ought to be. As to the first it seems impossible to doubt that the great weight of authority supports results which involve the conclusion that the assignee's right is not legal but equitable; and this conclusion is supported also by decisions relating to the effect of statutes permitting the assignee to enforce his rights in his own name.

The statutes fall into several classes, providing respectively that, 1. An assignee under a written assignment may enforce his rights in his own name or at law. Under such a statute the effect of oral assignments is unchanged.

2. The real party in interest must be plaintiff in any litigation. 3. A chose in action is assignable so as to vest title therein in the assignee.

How far a particular statute works a change other than one merely of procedure, is open to argument in each case. It would seem certainly that a mere provision that the real party in interest must bring suit in his own name can effect only a change of procedure. As to statutes in a different form the matter is not so clear. The power of the legislature to make the assignee a legal owner must, of course, be conceded; but generally the change effected by modern statutes has been held procedural only and does not alter the substantial rights of the parties.21

19 King Bros. & Co. v. Central of Georgia Ry. Co., 135 Ga. 225, 69 S. E. 113 (1910). See also The Elmbank, 72 Fed. 610 (1896).

20 In Fairbanks v. Sargent, 104 N. Y. 108, 9 N. E. 870 (1887); 117 N. Y. 320, 22 N. E. 1039 (1889), it was held after elaborate consideration, that a prior partial assignee prevailed over a subsequent assignee of the whole claim who took in good faith and without notice. The same result was reached in Gillette v. Murphy, 7 Okla. 91, 54 Pac. 413 (1898). In Bridge v. Connecticut Mut. Life Ins. Co., 152 Mass. 343, 25 N. E. 612 (1890), a prior partial assignee would apparently have been preferred over a subsequent total assignee had he not been guilty of laches.

" Carozza v. Boxley, 203 Fed. 673 (1913); Glen v. Busey, 5 Mackey (D. C.) 233 (1886); Leach v. Greene, 116 Mass. 534 (1875); Beckwith v. Union Bank, 9 N. Y. 211 (1853); Myers v. Davis, 22 N. Y. 489 (1860); Fuller v. Steiglitz, 27 Oh. St. 355, 358, (1875); Bentley v. Standard Fire Ins. Co., 40 W. Va. 729, 23 S. E. 584 (1895); Watkins v. Angotti, 65 W. Va. 193, 63 S. E. 969 (1909).