characteristic of an equitable obligation in the latter sense is that it binds primarily a particular person, and binds others only when their relation to that person is such that in conscience they should be subject to his duties. The Court of Chancery has been the tribunal where such duties have ordinarily been enforced. But even in jurisdictions where the distinction between legal and equitable courts is still preserved, courts of law to-day enforce a great variety of such rights and duties without thereby changing their essential characteristics. Though legal ownership is conceived fundamentally as a right good against all the world, actual instances of such ownership are often much more narrowly limited. The owner of a chattel which has been stolen from him is likely to find his right against the world considerably qualified if the thief is in a place where the principles of market overt prevail. In the law of sales of chattels, the legal title passes to the buyer, without transfer of possession, if the parties so intend; yet in many jurisdictions the seller in possession can destroy the buyer's right by a resale, and even the seller's attaching creditors are often allowed a right superior to that of the buyer. On the other hand, where statutory provision is made for giving effective public notice of an equitable right, the equitable owner may acquire rights good against the world. The recording system thus enables one who has an equitable easement or other equitable right in real estate, based on contract, to protect himself against the world. It follows that one whose title is equitable may have in a particular case much more comprehensive ownership than another person who has a legal title. One who has a recorded contract for the transfer of Blackacre, especially if he has paid the price and the time for conveyance has come, has more comprehensive rights than the grantee under an unrecorded deed of Whiteacre who has not paid the price and whose estate is subject to a vendor's lien. Yet the former has an equitable and the latter a legal title. Doubtless the reasons which have led to limitations of legal ownership have often been fundamentally the same as those controlling the habitual limitations of equitable ownership. In the case suggested above of a purchaser of a chattel without delivery, the reason why a purchaser in good faith from the seller in possession has been protected by courts of law, is the same reason which has led equity habitually to protect purchasers for value. The limitations set by recording statutes on legal titles have a similar foundation. Nevertheless, the methods by which such results are obtained at law and in equity are fundamentally different. The law achieves the result by imposing limitations on a title which would otherwise be absolute. Equity achieves the result by extending to others, so far as is conscientious, an obligation which is primarily personal to one. It may be conceded that even this distinction of method is not always observed, and that instances may be found where equitable ownership is treated in a way analogous to legal ownership, but, nevertheless, the fundamental distinction exists. Whether in a theoretical system of jurisprudence it is worth while to have two roads by which the same result may be achieved is rather beside the point in England and America, for the two systems exist and the roots of the equitable theory of ownership sink too deep to make it possible to tear them up, and an attempt to do so is likely to cause more confusion and incorrect conclusions than advantages in a body of law which has developed for centuries with the double system. § 447. Whether the assignee's right is legal or equitable. The right of an assignee of a chose in action may be called equitable in this sense because of the following characteristics: 1. An assignee takes subject to all existing equities in favor of the debtor. 28 2. An assignee loses the benefit of his assignment if the debtor in good faith acquires a defence against the assignor even after the date of the assignment.29 3. The assignee also takes subject to rights of set-off existing in favor of the debtor at the time of the assignment, or acquired by the debtor prior to notice of the assignment. 30 4. A prior assignment though for value is subordinated to a subsequent assignment for value if the subsequent assignee in 28 See supra, § 432. 29 See supra, § 433. 30 See supra, § 432. good faith actually collects the claim or makes a novation with the debtor.31 5. In most jurisdictions the assignee takes subject to an equitable claim against the assignor existing at the time of the assignment in favor of a third person.32 6. A prior partial assignee (whose claim is everywhere held to be merely equitable) 33 is protected as against a subsequent assignment of the whole claim inade for value and in good faith.34 All of these characteristics of the assignee's right are explicable on the theory that his right is equitable in its nature. Most of them are not necessarily inconsistent with the view that his right is legal, but a few of them are inconsistent. In the transfer of chattel property it is often held that a subsequent purchaser with delivery is preferred to a prior purchaser without delivery; and yet the prior purchaser is regarded as having a legal right. So where real estate is conveyed to two purchasers, the second purchaser prevails if he first records his deed, and yet the first purchaser had a legal title. In these cases the legal title of the first purchaser is made defeasible by subsequent events. So it may be said the right of a prior assignee is defeasible by a subsequent assignment to one who collects the claim, or, under the English rule, 35 who first gives notice to the debtor. If this were the true way to look at the matter, however, the burden of proof should be upon one who asserted that the legal title of the assignee had been defeated, whereas it has been held that if the debtor has paid the assignor, after the assignment, the burden is upon the assignee to show that the debtor had notice of the assignment prior to the payment.36 It may also be regarded as consistent with a legal right in the assignee that he should take subject to equities in favor of the assignor. This may be considered as a mere definition or limitation of the size of the legal right assigned; though confusion is likely to arise from this method of regarding the matter. As title to a horse obtained by fraud will pass free of the defrauded seller's equity if sold to a bona 31 See supra, § 435. 32 See supra, § 438. 33 See supra, §§ 442, 443. 34 See supra, § 435 ad fin. 35 See supra, § 435. 36 Burritt v. Tidmarsh, 1 Ill. App. 571; Heermans v. Ellsworth, 64 N. Y. 159. fide purchaser for value without notice, so it will naturally seem that if the legal title to a chose in action passes to an assignee that the assignee ought similarly to take free of the debtor's defence of fraud or from any other equitable defence.37 However this may be, certainly the allowance of set-off against the assignee of claims the debtor has against the assignor, especially claims acquired subsequently to the assignment, and the enforcement of latent equities in favor of third persons, are both inconsistent with the theory of a legal right. The only explanation of the debtor's right to set off against the assignee a totally separate claim against the assignor is that the legal right to the assigned claim is still in the assignor. In a system of law where the smaller of two mutual debts cancels the other pro tanto 38 it would not be necessary to deny the assignee legal ownership of the assigned claim in order logically to reach this result; but in the common law a crossclaim is not payment or part payment of the original claim, 39 the right of set-off is rather in the nature of a cross-action. 37 In Stoddart v. Union Trust, Ltd., [1912] 1 K. B. 181, the assignee of a sum of money to fall due under a contract for the sale of a newspaper sued to recover the money. The defendant claimed that the contract was induced by fraud of the assignor, and being unable to offer to rescind the contract, set up a counter-claim against the assignee for damages; the court held that the counter-claim could not be supported because the subject-matter of it was not sufficiently connected with the original contract; but Vaughan Williams, L. J., at page 189 said: "I think that a debtor sued by the assignee of a debt might set up the defence that the contract under which the debt arose ought to be set aside and cancelled on the ground of fraud, but whether that could have been done in the present case is immaterial, for the defendants have not sought to do that, for the reason that they have so acted with regard to the subject-matter, the sale of which was the consideration for the debt, that they could not repudiate 38 As in the Civil Law. See infra, $859. 39 Ibid. Certainly it seems impossible to say, that it is a legal limitation of the claim, and if it is only an equity, it would be cut off by the assignment if the assignee became the legal owner of the claim. So in the case of latent equities, if the assignee were really the legal owner of the assigned claim, he could not be affected by an equity which a third person had against the assignor; as for instance, if the assignor had procured the claim by fraud from a third party. The assignee as bona fide purchaser of a legal title would prevail over the prior equity of the defrauded original owner. However opposed this result may be to the weight of authority some may may think it desirable. Indeed, perhaps the chief reason (other than a blind revolt at the assertion that choses in action are not transferable when in fact they are transferred every day) why the view is often taken that the assignee of a chose in action acquires legal ownership is because thereby so-called latent equities against the claim would be cut off, and it is thought unfair to subject the assignee to equities which he is unable to discover. On the other hand, it is to be observed that intangible choses in action are not primarily intended for merchandising, as chattels are. The rule in regard to latent equities has no importance not only where negotiable paper is concerned, but where choses in action having tangible form like policies of insurance, savings bank books, or non-negotiable notes are in question. The delivery of the document will cut off the equity. If, therefore, the parties desire to put an obligation in a merchantable form they can (if they wish) do so, and can do so without making the obligation negotiable. For such property, then, as an intangible chose in action, there seems little reason to prefer the assignee to a previously defrauded owner of the claim. Where the sale of property is a necessary function of commercial activity, it is socially desirable to protect the new purchaser at the expense of a former innocent victim; but the desirability of this policy seems limited to that class of property. Finally, it is also inconsistent with the view that the assignee of a chose in action acquires a right legal in its nature if his assignment though subsequent in time is not given precedence over any prior assignment which was confessedly merely equitable. Consequently, if the assignment of an entire |