3 Pomeroy, Equity Jurisprudence, 2370, § 1044. In Reeves v. Evans (N.J.Ch.) 34 A. 477, it was held: "The trust follows the legal estate wheresoever it goes, except it comes into the hands of a purchaser for valuable consideration, without notice." The defendants Myrtle and Rodney King cannot benefit by the evident fraud of Letitia and Michael Enot.
"It is upon the principle of the transmission by the contract of an actual equitable estate, and the impressing of a trust upon the legal estate for the benefit of the vendee, that the doctrine of the specific performance of contracts for the sale and conveyance of lands mainly depends." In Beeves v. Evans (ch.) 34 Atl. 477, Vice Chancellor Reed says: "The trust follows the legal estate wheresoever it goes, except it comes into the hands of a purchaser for valuable consideration, without notice" —citing Lewin, Trusts, 823; that reference being as follows:
In such circumstances defendant cannot be accorded the rights of a purchaser for value as to the preceding debt as against the superior equity of complainant. This view has been adopted by this court in Reeves v. Evans, 34 Atl. 477 (Reed, V. C.), and Martin v. Bowen, 51 N. J. Eq. 452, 26 Atl. 823. See, also, Wheeler v. Kirtland, 24 N. J. Eq. 552, 555; Mingus v. Condit, 23 N. J. Eq. 313; Tate v. Security Trust Co., 63 N. J. Eq. 559, 52 Atl. 313; 1 Bigelow on Frauds, 406.
But the taking of a bond secured by mortgage in extinguishment of an existing debt, without more, does not create the holder a purchaser for value, for the reason that in the merger the form of the debt only, and not the substance, is changed—it is the same debt—and under the settled rule a mortgage taken for a precedent debt does not constitute the mortgagee a purchaser for value. Reeves v. Evans, 34 Atl. 477; Martin v. Bowen, supra. If, however, in the novation, a mortgagee creditor parts with anything of value, or changes his position for the worse, it entitles him to the status of a bona fide purchaser for value. Allaire v. Hartshorne, 21 N. J. Law, 665, 47 Am. Dec. 175; Mingus v. Condit, 23 N. J. Eq. 313.