Chattel mortgage of a building on leasehold property, made to secure the amount of a judgment to be paid in two and four months from date of mortgage, and providing, also, that mortgagor might remain in possession for two years after the ' date of the mortgage, unless the mortgagee should sooner take possession, on condition broken. A part of the judgment was paid, and the mortgagees, after the four months had expired, assigned the mortgage and judgment to the complainant, who did not take possession, nor have any record made of the assignment. Afterwards the mortgagees caused an execution for the residue to be issued, and returned satisfied. Afterwards, and while the mortgagor was still in possession he executed another mortgage on the same property, under which the second mortgagee took possession, and assigned the mortgage and delivered possession to the assignee, who sold the property under the second mortgage. On the application of the assignee of the first mortgage and the judgment, the court set aside the entry of satisfaction of the judgment, as to the residue unpaid at the time of the assignment. The complainant filed his bill, to set aside the sale under the second mortgage, and to postpone it, till the first mortgage was paid, which bill the court below dismissed.
Two qúestions arise. First, was the neglect to take possession after the expiration of the four months, fraudulent per se, as to the second mortgagee. And second, did the entry of satisfaction by order of the judgment creditors, after the assignment which was not recorded, release the property from the first mortgage, as to the subsequent mortgagee ?
Whatever may be said of the first proposition, of the last we have no doubt. The secret assignment of the judgment cannot be allowed to entrap innocent parties. All who were not chargeable with notice of the assignment of the judgment, were justified in assuming that the judgment creditors were still the equitable owners of the judgment and first mortgage. And when they entered satisfaction of the judgment or caused the execution to be returned satisfied, everybody ignorant of the assignment, had a right to buy or treat the property as released from the first mortgage, which was given to secure that judgment. Otherwise the grossest frauds might be practiced upon the innocent, not chargeable with laches. Suppose the judgment debtor had paid the judgment to the judgment creditor, while ignorant of the assignment. Could the assignee come in and say, that the payment had been made without warrant of law, or that the judgment had been paid by property at a high price ? If the judgment debtor was authorized to treat the judgment creditor as authorized to receive satisfaction of the judgment, all others had a right to presume that he was authorized to enter satisfaction of the judgment, and causing the execution to be returned satisfied was equivalent to entering satisfaction, so far as this case is affected.
We think the court below decreed properly in dismissing this bill, and the decree must be affirmed.
Decree affirmed.