Where a promissory note is secured by insurance of the property of the maker, who is insolvent, a subsequent holder is entitled to the avails of the policy in the hands of the original payee, as against the latter's creditors. Where the payee of a note transfers it in good faith and for a valuable consideration, his creditors cannot thereafter charge the maker as trustee of such payee, on the ground that they had no knowledge of the transfer when their action was begun.
PARSONS, C. J.
The liability of the Orient Insurance Company, trustee, to the defendant Woodward existed only through the order given by the Burbank Company and accepted by the Insurance Company. The consideration of the order was the indebtedness of the Burbank Company upon the $6,000 note upon which the proceeds of the order were to be applied. The order therefore was a provision made by the signers of the note for its payment. Their stock is stated to be worthless and it could be found that they are insolvent. Prior to the giving of the order, Woodward had pledged the $6,000 note to the claimant Bartlett. He, as the creditor of an insolvent debtor, may in equity avail himself of any subsisting provision made by his debtor for the payment of the debt. Hunt v. Association, 68 N.H. 305, 308; Barton v. Croydon, 63 N.H. 417; Holt v. Bank, 62 N.H. 551; Keene etc. Bank v. Herrick, 62 N.H. 174. Trustee process is an equitable proceeding. Roberts v. Norcross, 69 N.H. 533. With certain exceptions not here material, the plaintiff can charge the trustee for what the defendant could hold and which he could recover against the trustee. Nashua etc. Co. v. Company, 74 N.H. 511; Libby v. Company, 67 N.H. 587; Forist v. Bellows, 59 N.H. 229, 232. While upon the order, as between the parties thereto, Woodward may have had sufficient equity in the $6,000 note to have enabled him to recover against the acceptor the sum held by the receiver, he could not have prevailed against the equitable claim of Bartlett, the owner of the note, to the proceeds of the order to the extent of his interest. Woodward's pledge to Bartlett as collateral was of the whole note — every dollar of the indebtedness; consequently each dollar paid to Woodward by the debtor was in equity Bartlett's until his claim was fully paid.
It is immaterial that the plaintiff when he brought his suit had no knowledge of the transfer of the note to the claimant. It was transferred in good faith for a valuable consideration before the service of the writ. This is all that is necessary to sustain the owner's title. P.S., c. 245, ss. 22, 23. "The subject for inquiry in all cases is, to whom did the property actually belong, regardless of the question whether at the time of service the trustee had notice of the adverse claim." Corning v. Records, 69 N.H. 390, 397. As the trustee could not be charged for $1,948.76 of the fund in the hands of the receiver which was the equitable property of Bartlett, the plaintiff cannot except to the order directing its payment to the claimant, apparently made under section 32, chapter 245, Public Statutes.
Exception overruled.
All concurred.