delivered the opinion of the court:
The question presented in this record is, whether the proceeds of certain accounts alleged to have been assigned by the James H. Walker Company, a corporation, to appellant, in trust for certain creditors, shall be applied on the claims of those preferred creditors or retained by the receiver, who was appointed on the same day but subsequent to that assignment, and by it to. be distributed as a part of the general fund, on all the debts. The distribution to' be made by a receiver is under the supervision of the chancellor appointing him, and his duties and powers are referable to equitable rules and principles. The assignment of the accounts in this case, if valid, is an equitable assignment, the law affording a. remedy for collection in the'name of the original payee. The right to assign a chose in action, even though not a negotiable instrument, has long been recognized, the rigid rules of the common law having been generally relaxed in that respect. Such equitable assignments of choses in action in modern times have received a large protection in courts of law as well as in courts of equity. Where notice is given the debtor of the assignment, he is precluded from doing any act to prejudice the rights of the assignee. Payment by him to the nominal creditor, after such notice of assignment, without the consent of the assignee, will be no defense to an action brought for the benefit of the assignee; neither can the original parties, after such notice, make any compromise or adjustment of the cause of action as against the assignee. Chapman v. Shattuck, 3 Gilm. 49; Carr v. Waugh, 28 Ill. 418; Morris v. Cheney, 51 id. 451; Littlefield v. Story, 3 Johns. 426; Andrews v. Becker, 1 id. 411; Jones v. Witter, 13 Mass. 304; Leigh v. Leigh, 1 Bos. & Pull. 477.
Whilst the assignee of a non-negotiable chose in action takes the interest assigned subject to all legal and equitable defenses, it is essential that such defenses exist at the time of or before notice of such assignment. It is said in Perry on Trusts (sec. 593): “If an assignment not fraudulent is made to trustees for the benefit of creditors, their assent is not necessary; or their assent will be presumed in all cases, if it is for their benefit, and contains no unusual clauses or restrictions.” The author cites many authorities which sustain that proposition. It is said in Burrill on Assignments, (5th ed. sec. 484): “Where the assignment is to a trustee for the benefit of creditors not parties to the deed, it may be laid down as a general rule in American law that the assent of creditors is not necessary to its validity, and the legal estate or title will pass to the assignee without such assent, so as to prevent a judgment creditor from acquiring a lien, if real, by his judgment, or if personal, by his execution, unless upon the ground of fraud. This rule is said to be founded on the established principle of the common law that it is not necessary to the creation of a trust by deed in favor of any persons, that the cestui que trust should either be a party or assent to it. If the trust be for his benefit, the law presumes his assent until the contrary is shown.” In Gibson v. Rees, 50 Ill. 383, it was said (p. 401): “While we might, in accordance with the rule adopted in some American courts, hold that when such a conveyance is executed and recorded we would presume the assent of the creditor, as it would appear to be for his benefit, yet we must hold that such a presumption is liable to be rebutted, and that it would be rebutted by proof that the creditors had refused, upon learning of the conveyance, to avail themselves of its provisions, or if they should delay for a length of time so long as to create a counter presumption to that of assent.” The rale being in equity, the assignee will always be protected from any act of the parties after notice, and the former owner and debtor can do nothing, after notice, to defeat the rights of the assignee. Hughes v. Trahern, 64 Ill. 48.
The filing of the bill by A. D. Juilliard and the John B. Claflin Company was for the purpose of winding up the affairs of the corporation and the appointment of a receiver. The bill filed by Lawrence A. Carton was for the same purpose. To both these bills the corporation is made a party defendant. The appellant in this case was the receiver under those bills, which were consolidated in one suit. A receiver’s possession is subject to all valid and existing liens upon the property at the time of his appointment, and does not divest a lien previously acquired in good faith. (Gere v. Dibble, 17 How. Pr. 31.) He cannot have the right to take possession of property and hold the same where the owner of the estate for which he is receiver would have no right to do so. A court of equity is bound to respect legal rights and preferences lawfully acquired, and make distribution accordingly. (Roseboom v. Whittaker, 132 Ill. 81.) The meeting of the board of directors was called in proper form, and the resolution adopted by the board authorized all to be done which was done as to the transfer of the accounts to the trustee for the purpose for which they were so transferred. The assignment was made and noted on the books of the corporation, and the trustee, in writing, accepted the trust, and by telegraph or letter notified the parties whose accounts were assigned to him, and also notified the persons for whom he was acting as trustee. The receiver, when he entered on the discharge of his duties, subsequent to the assignment of these accounts, proceeded to collect the same, and by an arrangement between the receiver and trustee these accounts were, on the books of the receiver, carried on the suspense account. We hold the transfer of these accounts, with notice shown, etc., vested the right to the money derived therefrom in the trustee.
It is urged by the appellant that by section 25 of chapter 32 of the Revised Statutes provision is made for winding up the business of corporations by suits in equity, brought within the provisions of the act by means of a receivership and for the dissolution of the corporation, and it is urged that the maxim, equality is equity, should be applied in the distribution to creditors of the assets of such estate. Whilst equity requires equality in distribution to general creditors, courts of equity must also recognize another equitable maxim, which is, “where there are equal equities the first in order of time must prevail,” and where the assignment of these accounts is validly made, an equity exists in those creditors to have the proceeds of those accounts applied to the satisfaction of their debts. We hold that the provisions of the chapter entitled “Corporations” do not defeat the preferences made by this assignment of those accounts.
It is next contended that section 13 of the Assignment act, which provides that preferences under that act shall be void where an assignment is made, etc., will govern the question here presented. It is not every assignment of property, even by way of preference to creditors, that will bring the estate of such assignor within the provisions of the general Assignment act. In Weber v. Mick, 131 Ill. 520, it was said (p. 533): “Such assignments have always been understood to be instruments voluntarily executed by a failing debtor, by which he assigns to some third person, as assignee or trustee, the whole, or sometimes thé bulk, of his property, to be by such trustee distributed among the assignor’s creditors in satisfaction of their demands.” In this case a small fraction of the estate of the corporation was assigned to a trustee. There was not, at that time or since, any disposition on the part of the corporation to make a general assignment under the Insolvent Debtors act, and place the whole jurisdiction in the court, where the statute places the jurisdiction of that subject matter. The general Assignment law is not here involved, nor are its provisions applicable to or controlling on the questions here before the court. A court of chancery, exercising general chancery jurisdiction as at common law, does not have its power limited or practice controlled by an act applying to another forum, and by a subject matter by that act largely removed from its jurisdiction. The effect of a partial voluntary assignment, as discussed in Farwell v. Cohen, 138 Ill. 216, is not applicable to the questions presented on this record.
The judgment of the Appellate Court for the First District is affirmed.
Judgment affirmed.