CASES ON CERTAIN EQUITABLE DOCTRINES AND REMEDIES Selected and Annotated Bo William H. Loyd Professor of Law in the Law School of the University of Pennsylvania INTERNATIONAL PRINTING COMPANY PHILADELPHIA, PA. (Howell iGaui i^rljnnl ICthrary iJlaraljall lEquttg (Uollerttmt (gift of IE. 31. Marshall, E.S. 1. 1B94 CORNELL UNIVERSITY LIBRARY 3 1924 084 263 932 CONTENTS. - Page Chapter I. Penalties and Forfeitures I Chapter II. Equitable Conversion 71 Chapter III. Merger 132 Chapter IV. Satisfaction and Performance 186 Chapter V. Election 216 Chapter VI. Subrogation 249 Chapter VII. Marshaling Securities 292 Chapter VIII. Receivers 332 LIST OF CASES IN ORDER IN WHICH THEY APPEAR. I. PENALTIES AND FORFEITURES. Page Note, Cary's Reports I i Carter v. Cummins, 4 Viner Abr. 387 1 Tall v. Ryland, 1 Chan. Ca. 183 . .- 2 Peachy v. Somerset, 1 Str. 447 3 Mactier v. Osborn, 146 Mass. 399 9 Dodsworth v. Dodswortfh, 254 111. 49 . : 12 Baird v. -Tolliver, 6 Humph. (Tenn.) 186 14 Kemble p, Farren, 6 Bingh. 141 16 Chicago, B. & Q. R- Co. v. Dockery, 195 Fed. 221 18 Johnson v. Cook, 24 Wash. 474 22 Henderson v. Murphree, 109 Ala. 556 27 Kock v. Streuter, 218 111. 546 30 United Shoe Machinery Co. v. Abbott, 158 Fed. 762 : 33 Baldwin v. Van Vorst, 10 N. J. Eq. 577 ; 36 U. S. v. United Engn Co., 234 U. S. 236 42 Klein v". Insurance Co., 104 U. S. 88 46 Beury et al. v. Fay et al., 73 W. Va. 460 49 Graham v. Lebanon, 240 Pa. 337 : ; . . 52 Sparks v. Proprietors of Liverpool Water- Wks., 13 Ves. Jr. 428 53 Oil Creek R. R. Co. v. Atlantic & G. W. R. R., 57 Pa. 65 57 Clark v. Barnard, 108 U. S. 436 63 Summit v. Morris Co. Traction Co., 85 N. J. L. 193 68 II. EQUITABLE CONVERSION. Kettleby v. Atwood, 1 Vern. 298, 471 71 Scudamore et al. v. Scudamore, Prec. in Chancery 543 72 Fluke v. Fluke, 16 N. J. Eq. 478 74 Johnson v. Arnold, 1 Ves. Sr. 169 76 Lucas 4). Brandeth (No. 1), 28 Beav. 273 77 Hunt's & Lehman's Appeals, 105 Pa. 128 , . . 78 Greenman v. McVey, 126 Minn. 21 80 Doughty v. Bull, 2 P. Wms. 320 86 Davies v. Goodhew, 6 Sim. 585 88 Griffiths v. Ricketts, 7 Hare '299 91 Hammond v. Putnam, no Mass. 232 94 Keen v. Plume, 82 N. J. Eq. 526 '. '. 96 Barker v. Copenbarger, 15 111. 103 97 Eagan v. Mahoney, 24 Colo. App. 285 99 Ackroyd v. Smithson, 1 Brown Ch. 503 \ 101 Bagster v. Fackerell, 26 Beavan 469 104 Curteis v. Wormald, 10 Ch. D. 172 I0 6 Clarke v. Franklin, 4 K. & J. 257 no Given v. Hilton, 95 U. S. 591 • 113 Seeley v. Jago, 1 P. Wms. 389 ng McDonald v. O'Hara, 144 N. Y. 566 118 Prentice i>. Janssen, 79 N. Y. 478 120 Scott's Estate, 137 Pa.. 454 123 McLean v. Leitch, 152 N. Car. 266 ^ 125 Kolars v. Brown, 108 Minn. 60 X 28 Stinson's Estate (1910), 1 I. R. 13 I2 g ii LIST OF CASES— Cofttifiued. III. MERGER. Page Wilder v. Holland, 102 Ga. 44 132 McCreary v. Coggeshall, 74 S. Car. 42 134 Snow v. Boycott (1902), 3 Ch. no 143 Ingle v. Vaughan Jenkins (1900), 2 Ch. 368 146 In re Selous (1901), 1 Ch. 931 149 Asche v. Asche, 113 N. Y. 232 150 Forbes v. Moffatt, 18 Ves. 384 152 Wilcox & Barber v. Davis, 4 Minn. 197 156 Sellers v. Montgomery, 2 Pa. D. R. 551 , 159 Moffet v. Farrell, 222 111. 543 , 160 Frazee v. Inslee, 2 N. J. Eq. 239 163 Ann Arbor Savings Bank v. Webb. 56 Mich. 377 165 McCabe v. Swap, 96 Mass. 188 .- 168 In re Harvey ( 1906) , 1 Ch. 137 171 Barker v. Flood, 103 Mass. 474 174 Cole v. Beale, 8a. 111. App. 426 175 Goodwin v. Keney, 47 Conn. 486 178 Godley's Estate (1895), 1 I. R. 45 180 IV. SATISFACTION AND PERFORMANCE. Talbott v. Duke of Shrewsbury, Pr. Ch. 394 186 Strong v. Williams, 12 Mass. 390 187 In re Rattenberry (1906), 1 Ch. 667 190 In re Huish, 43 Ch. D. 260 193 Plunkett v. Lewis, 3 Hare 316 195 Sharp v. Wightman, 205 Pa. 28S 197 Hurst v. Beach, 5 Madd. 351 199 Wallace v. DuBois, 65 Md. 153 202 Fowkes v. Pascoe, L. R. 10 Ch. App. 343 205 In re Smythies (1903), 1 Ch. 259 . ., 208 In re Tussaud's Estate, L. R. 9 Ch. D. 363 210 Sowden v. Sowden, 1 Br. Ch. 582 , 213 Blandy v. Widmore, 1 P. Wms. 324 , , . , 215 V. ELECTION. Lacy v. Anderson, Choyce Cases 155 216 Anonymous, Gilbert Eq. Rep. 15 , 217 Beetson v. Stoops, 186 N. Y. 436 218 Sherman v. Lewis, 44 Minn. 107 222 Van Dyke's Appeal, 60 Pa. 481 225 In re Fowler's Trust, 27 Beav. 362 230 Waggoner v. Waggoner, in Va. 325 232 Reed v. Dickerman, 12 Pick. 146 237 Evans's Appeal, 51 Conn. 43s 238 Penhallow v. Kimball, 61 N. H. 596 240 Pike County v. Sowards, 147 Ky. 37 243 Colvert v. Wood, 93 Tenn. 454 244 Jones v. Knappen, 63 Vt. 391 247 VI. SUBROGATION. Randal v. Cockran, 1 Ves. Sr. 98 ; 249 Hackensack Brick Co. v. Bogota, 86 N. J. Eq. 143 251 Dunlop v. James, 174 N. Y. 411 253 iii LIST OF CASES— Continued. Page Look v. Horn, 97 Me. 283 256 Home Savings Bank v. Bierstadt, 168 111. 618 257 Fay v. Fay, 43 N. J. Eq. 438 262 Mercantile Trust Co. v. Hart, 76 Fed. 673 263 Skinner v. Tirrell, 159 Mass. 474 267 Pfeiler v. Penn Allen Portland Cement Co., 240 Pa. 468 - 270 Hampton v. Phipps, 108 U. S. 260 271 Knaffl v, Knoxville Banking & Trust Co., 133 Tenn. 655 274 Grand Council,.!'. Cornelius, 198 Pa. 46 278 Wilkinson v. Babbitt, 4 Dillon 207 280 U. S. Fidelity & G. Co. v. Carnegie Co., 161 N. Y. App. Div. 429 282 Evans v. Robertson, 54 Miss. 683 , 284 Powell & Powell, Inc., v. Wake Water Co., 171 N. Car. 290 286 VII. MARSHALING SECURITIES. Gibson v. Seagrim, 20 Beav. 614 , 292 Union Point G. & W. Co. v. Harriman N. Bk., 142 Ga. 727 294 Burgess v. Hitt, 21 Mo. App. 313 296 Howell v. Duke, 40 Ark. 102 297 Del. & H. Canal Company's Appeal, 38 Pa. 512 298 Reynolds v. Tooker, 18 Wend. 591 301 Barnes v. Racster, 1 Y. & Co. Ch. 401 304 Bank of Commerce v. First National Bank, 150 Ind. 588 307 Sternberger v. Sussman, 69 N. J. Eq. 199 312 Brown v. Cozard, 68 111. 178 313 Gaines v. Hill, 147 Ky. 445 315 Cater v. Tanners Leather Co., 196 Mass. 163 319 First National Bank v. Taylor, 69 Kan. 28 324 Mcllvain v. Mutual Assurance Co., 93 Pa. 30 328 VIII. RECEIVERS. Middleton v. Dodswell, 13 Ves. 266 332 Williamson v. Wilson, 1 Bland. Ch. (Md.) 418 334 Schlect's Appeal, 60 Pa. 172 342 . Vila v. Grand I. E. Co., 68 Neb. 222 345 Sternberg v. Wolf, 56 N. J. Eq. 389 352 Wiswall v. Sampson, 55 U. S. 52 357 Comm. v. Overholt, 23 Pa. Super. Ct. 199 365 Central Trust Co. v. East T. L. Co., 79 Fed. 19 366 Knight v. Lord Plymouth, 3 Atk. 48b ■ 367 Central Savings Bank v. Fanning Co., 118 la. 698 368 Fosdick v. Schall, 99 U. S. 235 375 Chicago & A. R. Co., v. U. S. & M. Trust Co., 225 Fed. 940 379 Raht v. Attrill, 106 N. Y. 423 384 Boehm v. Goodall (1911), 1 Ch. 155 390 Screven v. Clark, 48 Ga. 41 3g5 Southern G. Co. v. Wadsworth, 115 Ala. 570 396 Hills v. Parker, in Mass. 508 400 McDermott v. Crook, 20 App. D. C. 465 402 McNulta v . Lockridge, 137 111. 270, 141 U. S. 327 404 Olpherts v. Smith, 54. N. Y. App. Div. 514 4I0 Schwartz v. Keystone Oil Co., 153 Pa. 283 412 ALPHABETICAL LIST OF CASES. Page Ackroyd v. Smithson, i Brawn Ch. 503 101 Ann Arbor Savings Bank v. Webb. 56 Mich. 377 165 Anonymous, Gilbert Eq. Rep. 15 217 Asche v . Asche, 1 13 N. Y. 232 150 Bagster v. Fackerell, 26 Beavan 469 104 Baird v. Tolliver, 6 Humph. (Tenn.) 186 14 Baldwin v. Van Vorst, 10 N. J. Eq. 577 36 Bank of Commerce v. First National Rank, 150 Ind. 588 307 Barker v. Copenbarger, 15 111. 103 97 Barker v. Flood, 103 Mass. 474 '. '. . . 174 Barnes v. Racster, 1 Y. & Co. Ch. 401 304 Beetson v. Stoops, 186* N. Y. 456 218 Beury et al. v. Fay et ah, 73 W. Va. 460 .49 Blandy v. Widmore, 1 P. Wins. 324 215 Boehm v. Goodall (1911), 1 Ch. 155 '. 390 Brown v. Cozard, 68 111. 178 313 Burgess v. Hitt, 21 Mo. App. 313 296 Carter v. Cummins, 4 Viner Abr. 387 1 Cater v. Tanners Leather Co:, 196 Mass. 163 319 Clark v . Barnard, 108 U. S. 436 , 63 Clarke v. Franklin, 4 K. & J. 257 no Central Savings Bank v. Fanning Co., 118 la. 698 368 Central Trust Co. v. East T. L. Co., 79 Fed. 19 366 Chicago, B. & Q. R. Co. v. Dockery, 195 Fed. 221 18 Chicago & A. R. Co., v. U. S. & M. Trust Co., 225 Fed. 940 379 Cole v. Beale, 80 111. App. 426 175 Colvert v. Wood, 93 Tenn. 454 244 Comm. v. Overholt, 23 Pa. Super. Ct. 199 365 Curteis v. Wormald, 10 Ch. D. 172 106 Davies v. Goodhew, 6 Sim. 585 88 Del. & H. Canal Company's Appeal, 38 Pa. 512 298 Dodsworth v. Dodsworth, 2S4 HI- 49 I2 Doughty v. Bull, 2 P. Wms. 320 86 Dunlop v. James, 174 N. Y. 411 253 Eagan v. Mahoney, 24 Colo. App. 285 99 Evans's Appeal, 51 Conn. 435 238 Evans v. Robertson, 54 Miss. 683 284 Fay w. Fay, 43 N. J. Eq. 438 2 °2 First National Bank v. Taylor, 69 Kan. 28 324 Fluke v. Fluke, 16 N. J. Eq. 478 74 Forbes v. Moffatt, 18 Ves. 384 J S 2 V ALPHABETICAL LIST OF CASES-Continued. Page Fosdick v. Schall, gg U. S. 235 375 Fowkes v. Pascoe, L. R. 10 Ch. App. 343 205 Frazee v. lnslee, 2 N. J. Eq. 239 163 Gaines v. Hill, 147 Ky. 445 315 Gibson v. Seagrim, 20 Beav. 614 292 Given v. Hilton, 95 U. S. 591 1 13 Godley's Estate (1896), 1 I. R. 45 180 ' Goodwin v. Keney, 47 Conn. 486 178 Graham v. Lebanon, 240 Pa. 337 52 Grand Council v. Cornelius, 198 Pa. 46 278 Greenman v. McVey, 126 Minn. 21 80 Griffiths v. Ricketts, 7 Hare 299 91 Hackensack Brick Co. v. Bogota, 86 N. J. Eq. 143 251 Hammond v. Putnam, no Mass. 232 94 Hampton v. Phipps, 108 U. S. 260 271 Henderson v. Murphree, 109 Ala. 556 27 Hills v. Parker, in Mass. 508 400 Home Savings Bank v. Bierstadt, 168 111. 618 257 Howell v. Duke, 40 Ark. 102 297 Hunt's & Lehman's Appeals,- 105 Pa. 128 78 Hurst v. Beach, 5 Madd. 351 199 Ingle v. Vaughan Jenkins ( igoo) , 2 Ch. 368 146 In re Fowler's Trust, 27 Beav. 362 230 In re Harvey (1906), I Ch. 137 171 In re Huish, 43 Ch. D. 260 ._ : 193 In re Rattenberry (1906), 1 Ch. 667 190 In re Selous (1901), 1 Ch. 921 149 In re Smythies (1903), 1 Ch. 259 208 In re Tussaud's Estate, L. R. 9 Ch. D. 363 210 Johnson v. Arnold, 1 Ves. Sr. 169 76 Johnson v. Cook, 24 Wash. 474 22 Jones v. Knappen, 63 Vt. 391 247 Keen v. Plume, 82 N. J. Eq. 526 96 Kemble v. Farren, 6 Bingh. 141 16 Kettleby v. Atwood, 1 Vern. 298, 471 71 Klein v. Insurance Co., 104 U. S. 88 46 Knaffl v. Knoxville Banking & Trust Co., 133 Tenn. 655 274 Knight v. Lord Plymouth, 3 Atk. 48b 367 Kock v. Streuter, 218 111. 546 30 Kolars v. Brown, 108 Minn. 60 128 Lacy v. Anderson, Choyce Cases 155 216 Look v. Horn, 97 Me. 283 256 Lucas v. Brandeth (No. 1), 28 Beav. 273 yy vi ALPHABETICAL LIST OF CASES— Continued. Page McCabe v. Swap, 96 Mass. 188 168 McCreary v. Coggeshall, 74 S. Car. 42 134 McDermott v. Crook, 20 App. D. C. 465 402 McDonald v. O'Hara, 144 N. Y. 566 > 118 Mcllvain v. Mutual Assurance Co., 93 Pa. 30 328 McLean v. Leitch, 152 N. Car. 266 125 McNulta v. Lockridge, 137 111. 270, 141 U. S. 327 404 Mactier v. Osborn, 146 Mass. 399 9 Mercantile Trust Co. v. Hart, 76 Fed. 673 263 Middleton v. Dodswell, 13 Ves. 266 332 Moffet v. Farrell, 222 111. 543 160 Note, Cary's Reports 1 I Oil Creek R. R. Co. v. Atlantic & G. W. R. R, 57 Pa. 65 57 Olpherts v. Smitfi, 54 N. Y. App. Div. 514 410 Peachy v. Somerset, 1 Str. 447 3 Penhallow v. Kimball, 61 N. H; 596 240 Pfeiler v. Penn Allen Portland Cement Co., 240 Pa. 468 270 Pike County v. Sowards, 147 Ky. 37 243 Plunkett v. Lewis, 3 Hare 316 195 Powell & Powell, Inc., v. Wake Water Co., 171 N. Car. 290 286 Prentice v. Janssen, 79 N. Y. 478 120 Raht v. Attrill, 106 N. Y. 423 384 Randal v. Cockran, 1 Ves. Sr. 98 249, Reed v. Dickerman, 12 Pick. 146 237 Reynolds v. Tooker, 18 Wend. 591 301 Schlect's Appeal, 60 Pa. 172 342 Schwartz v. Keystone Oil Co., 153 Pa. 283 412 Scott's Estate, 137 Pa. 454 123 Screven v. Clark, 48 Ga. 41 395 Scudamore et al. v. Scudamore, Prec. in Chancery 543 y2 Seeley v. Jago, 1 P. Wms. 389 118 Sellers v. Montgomery, 2 Pa. D. R. 551 159 Sharp v . Wightman, 205 Pa. 285 197 Sherman v. Lewis, 44 Minn. 107 222 Skinner v. Tirrell, 159 Mass. 474 267 Snow v. Boycott (1902), 3 Ch. ,110 143 Southern G. Co. v. Wadsworth, 115 Ala. 570 396 Sowden v. Sowden, 1 Br. Ch. 582 213 Sparks v. Proprietors of Liverpool Water Wks., 13 Ves. Jr. 428 53 Sternberg v. Wolf, 56 N. J. Eq. 389 352 Sternberger v. Sussman, 69 N. J. Eq. 199 312 Stinson's Estate (1910), 1 I. R. 13 • ■ •" 129 Strong v. Williams, 12 Mass. 390 187 yii ALPHABETICAL LIST OF CASES— Continued. Page Summit v. Morris Co. Traction Co., 85 N. J. L. 193 68 Talbott v. Duke of Shrewsbury, Pr. Ch. 394 186 Tall v. Ryland, 1 Chan. Ca. 183 2 U. S. Fidelity & G. Co. v. Carnegie Co., 161 N. Y. App. Div. 429 282 Union Point G. & W. Co. v. Harriman N. Bk., 142 Ga. 727 294 United Shoe Machinery Co. v. Abbott, 158 Fed. 762 33 U. S. v. United Engr. Co., 234 U. S. 236 42 Van Dyke's Appeal, 60 Pa. 481 225 Vila v. Grand I. E. Co., 68 Neb. 222 345 Waggoner v. Waggoner, in Va. 325 232 Wallace v. DuBois, 65 Md. 153 202 Wilcox & Barber v. Davis, 4 Minn. 197 156 Wilder v. Holland, 102 Ga. 44 132 Wilkinson v. Babbitt, 4 Dillon 207 280 Williamson v. Wilson, 1 Bland. Ch. (Md.) 418 334 Wiswall v. Sampson, 55 U. S. 52 357 Vni CHAPTER I. PENALTIES AND FORFEITURES. NOTE. In Chancery (Circa 1557-1602). Cary's Reports, 1. If a man be bound in a penalty to pay money at a day and place, by obligation, and intending to pay the same, is robbed by the way ; or hath intreated by word some other respite at the hands of the obligee, or cometh short of the place by any misfortune; and so fail- ing of the payment, doth nevertheless provide and tender the money in a short time after ; in these, and many such like cases, the Chancery will compel the obligee to take his principal, with some reasonable consideration of his damages (quantum expediat), for if this was not, men would do that by covenant which they do now by bond. 1 The like favour is extendable against them that will take advan- tage upon any strict condition, for undoing the estate of another in lands, upon a small or trifling default. 2 CARTER v. CUMMINS. In Chancery (Circa 1665). 4 Viner's Abridgment, 387. 1 C was tenant for life of a wharf, which was carried all away by an extraordinary flood, and he brought his bill to be relieved against the payment of his rent. But all the relief he had was only against the penalty of a bond which was given (and forfeited) for non- s payment of the rent; and the defendant was ordered to bring debt for his rent only. 2 1 "It is a common case to give relief against the penalty of such bonds to perform covenants, etc., and to send it to a trial at law, to ascertain the damages in a quantum damnificatus." 1 Eq. Ca. Abr. 91. Accord: Cook v. Orwell, 1 Choice Cases in Chancery, 136 (1579) ; Owen v. Jones, Cary 75 (iS79) J Earl of Oxford's Case, 1 Ch. Rep. 1 (1615), at p. 8 semble; Hill v. Highan, 3 Ch. Rep. 3 (1663) ; Friend v. Burgh, Finch 437 (1679) ; Cage v. Russell, 2 Vent. 352 (1681). See 2 Story's Eq. Jurisp. (13th Ed.), 1301 ei seq.; 29 Harvard Law Rev. 117. 'Baker v. Orlibeare, 2 Freem. 92 (1685) ; Hayward v. Angell, 1 Vern. 222 (1683) ; Bamardiston v. Fane, 2 Vern. 366 (1699) ; Grimston v. Bruce, 2 Vern. 594 (1707), s. c. 1 Salk. 156; Chipman v. Thompson, Walk. (Mich.) 405 (1844) ; Davis v. Gray, 16 Wall. (U. S:) 203 (1872) ; Mactier v. Osborn, 146 Mass. 399 (1888) ; Barrow v. Isaacs (1891), 1 Q. B. 417. "Cited by Maynard in Harrison v. North, 1 Ch. Cas. 83 (1667). "Spence's Equity, 630; Francis's Maxims of Equity, 44. In Sloman v. Walker, 1 Bro. Ch. 418 (1784), it appeared that S and W had agreed that S should continue their former business; that W should have a room in the building and a bond was entered into by S in favor of W in the penalty of £500. W on being refused the use of the room brought an action for PENALTIES AND FORFEITURES TALL v. RYLAND. In Chancery Before Sir Orlando Bridgman, Lord Keeper, 1670. 1 Chancery Cases, 183. The plaintiff and defendant were fishmongers; and had con- tiguous shops ; and differences having been between them they were made friends, B and by that mediation the plaintiff was to give, and did give the defendant a bond of £20 penalty, conditioned to behave himself civilly and like a good neighbour to the defendant, and not to disparage his goods. The plaintiff afterwards asked the defend- ant's customer, whilst cheapening a parcel of flounders, why he would buy of the defendant, and told him those fish stunk, and so the . defendant lost that customer; and the defendant having sued the bond, and assigned that for breach, had a verdict. And to be relieved against that verdict and the penalty of the bond was the prayer of the bill, which alleged that the damage was not consid- erable nor valuable, and therefore the plaintiff ought to be relieved against the verdict for the penalty! The defendant demurred, for that the bond was not conditioned for payment of money or performance of covenants, or for any matter for which damages in an action of debt, covenant or any . other action, was recoverable ; nor was there any way to measure the damages but by the penalty. And the bond being to preserve amity and neighbourly friendship, for the breach of which the plaintiff did submit to pay that penalty, and there can be no trial had to measure the damages for breach of the condition, other than the parties have submitted to. His lordship declared, that as this case was, the penalty being but £20, he did not think fit to put the defendant to answer, for that the costs of suit here and at law would exceed the penalty, and so the demurrer was allowed. But his lordship declared this was not to be a precedent in the case of a bond of iioo or the like; and though the demurrer was allowed, the defendant was to have no costs. 1 the penalty whereupon S filed this bill for an injunction and an issue quantum damnificatus. Lord Chancellor Thurlow in continuing the in- junction said : "The rule that, where the penalty is inserted merely to secure the enjoyment of a collateral object, the enjoyment of the object is con- sidered as the principal intent of the deed, and the penalty only as ac- cessional, and therefore only to secure the damage really incurred, is too strongly established in equity to be shaken." See also the Acts of 8 & 9 Wm. Ill (1697), Ch. 11, Sees. 8, and 4 Anne (170S), Ch. 16, Sees. 12 & 13; Hardy v. Bern, 5 T. R. 636 (.1794) ; Keating v. Pedrick, 240 Pa. 590 (1913) ; Jennings v. Wall, 217 Mass. 278 (1914). \ Accord: Blake v. East India Co., 2 Ch. Cas. 198 (1674); Taylor v. Rudd, 2 Ch. Cas. 241 (1677) ; Woodward v. Gyles, 2 Vern. 119 (1690) ; Small v. Lord Fitzwilliams,- Pre. Ch. 102 (1699) ; Lowe v. Peers, 4 Burr. 2225 (1768); Rolfe v. Peterson, 2 Bro. P. C. 436 (1772) ; Astley v. Weldon, 2 B. & P. 346 (1801) ; Barton v. Glover, Holt N. P. 43 (1815) ; Tayloe v. Sandiford, 7 Wheat. 13 (1822); Emery v. Boyle, 200 Pa. 249 (1901). SIR HARRY PEACHY v. THE DUKE OF SOMERSET SIR HARRY PEACHY v. THE DUKE OF SOMERSET. In Chancery, 1724. 1 Strange, 447. 1 The plaintiff brought his bill to be relieved against a forfeiture of his copyhold, by making' leases contrary to the custom of the manor, without license of the lord, felling timber, digging stones and grubbing up hedges; offering to make a recompense. And on the pleadings, the case was this : Sir Harry, being seised of a copy- hold estate of inheritance of £90 per annum, held of the manor of Petworth, of which the Duke of Somerset is lord, made a lease of part of it for seven years, without license, at £13 per annum. The duke, upon this, brings an ejectment against all the plaintiff's copy- hold, which occasioned the plaintiff to bring a bill in his own and his infant son's name, for relief. The duke, in his answer, insisting on other causes of forfeiture besides the making the lease without license, Sir Harry brought a supplemental bill of discovery and relief against those other forfeitures. Upon the plaintiff's giving judgment in ejectment, subject to the order of the court, an injunc- tion was granted; and now, upon the hearing, the case came out to be this: Upon Sir Harry's marriage, in 1693, alT the copyhold lands were surrendered to the use of Sir Harry for life, with remainder to the first and every other son in tail male, in pursuance of an agreement before marriage for that purpose ; but no admittance was ever taken upon that surrender. Before Sir Harry came into pos- session, there had been a quarry of stone in the freehold adjoining to the copyhold, and during Sir Harry's time it was worked in the copyhold; but whether it was first opened in the copyhold in the plaintiff's time did not appear. The avenue to the plaintiff's house, which consisted both of freehold and copyhold, was planted with timber trees by the plaintiff's father. The plaintiff had topped the trees that were on the copyhold part of the avenue, by which, from timber, they were become pollards. There were several hedges and boundaries of lands upon the copyhold, which the plaintiff had grubbed up and destroyed ; but whether they are boundaries between copyhold and freehold, or only between one part and another of the copyhold, did not appear. And in the year 1714, the plaintiff, as before mentioned, let part of the copyhold for seven years, without license, or any custom of the manor to warrant it. Upon this it came in question, whether any and which of these several acts are forfeitures at law; and if so, whether any and which of them are relievable in equity; and if not, whether the^ son's case is to be dis- tinguished from the father's. . 1 S. C, Pr. Ch. 568; a Eq. Ca. Abr. 227, 228, pi. 9 & 10; White & Tudor's Leading Cases in Equity. 4 PENALTIES AND FORFEITURES i. Whether these are forfeitures at law. Which were of four sorts: the digging the quarry, the topping the timber trees, the destroying the boundaries, and making the lease without license. As to the quarry, the plaintiffls counsel insisted, it was opened even upon the copyhold in his father's time, and so purged by the admittance ; and his digging it since was but like the case of a lessee, who may dig quarries and mines that were open at the time "of his lease, though he cannot open any new, ones. As to the topping of timber trees, which the plaintiff insisted was done only for the uniformity of his walk, and without design to injure the lord, it was answered, that it was voluntary waste, and the motives for doing it are rfot material to the lord. As to the destroying of the fences, a case was cited out of Litt. Rep. 264, etc., where grubbing up the fences and removing the boundaries upon copyholds were held to be forfeitures, without distinguishing between the outward boundaries and those within the copyhold, as it tends to the destroying of the evidence relating to the lord's interest in the estate; and it was said, it is on this foundation laid down, 1 Inst. 53, that though a tenant might cut down wood to repair fences as he found them, yet not to make new fences. As to the making of the lease without license, it was acknowl- edged on all sides to be a forfeiture at law. 2. The next question was, whether, supposing all these to be forfeitures, relief was proper in this court, either upon the general case of this sort of forfeitures, or any particular equitable circum- stances that may be in the present case. For the particular equitable circumstances of this case, one was, that the steward's deputy engrossed and was a witness to the lease. This was compared to the lord's being privy to or witness to such lease, which would be held in equity as a permission, a kind of license; and it has been held that license granted by a deputy steward was good. But answered, that this rather aggravated the injury, by making the lord's servant a party in the confederacy to injure him. Another circumstance was the plaintiff's not having notice of this custom. But this is not material, for the tenant comes in under the customs of the manor, and is bound to take notice of them; and besides, this is common law. But if those circumstances were not sufficient to ground a relief upon, whether the general nature of those forfeitures will not admit of relief. In'favour of the plaintiff it was argued, that it was a sort of maxim that all forfeitures' were odious. That copyholds are now become a more fixed and established estate than they were formerly, and the law itself has been altering these hundred years very much in their favour, and therefore a court of equity ought to go as much in their favour, to kee^b them out of that vassalage and subjection which the original nature of their estates laid them under, which their present fixed condition seems inconsistent with. That for- feitures were intended to secure the lord's rents and services, and therefore very proper for a court of equity to interpose and prevent SIR HARRY PEACHY v. THE DUKE OF SOMERSET 5 . his having more than that security. And this is agreeable to the common cases of relief against the penalty of a bond, and upon mortgage, and conditions of re-entry on nonpayment of rent, and nomine poenae, in which cases this court will not allow the parties to take any other advantage of the forfeiture than what is necessary to satisfy the original intent of the agreement. The law has annexed these conditions in the cases of copyholds ( ? to the estate) instead of the parties; but as it had something else in view by them than the gaining the land to the lord, this court may make amends to the lord, and fulfill the - design of the law, and save the estate to the party. In the case of making a lease without license, the intent of the law in making that forfeiture is to prevent the lord's being dis- inherited of his interest in the copyhold, and to secure the fine due on a license; both of which may easily be secured, by obliging the tenant either to accept a license or make surrender and admittance and pay the fine ; which will be a compleat recompense for any injury the lord may Rave suffered; and then it comes within the common rule, that this court will relieve against forfeitures, whenever a compleat .satisfaction can be made for the injury which is the cause of forfeiture. Several cases were cited: Shelley v. Mason (5 Car. 1), 6 Vin. Abr. 114; in Lord Coventry's time; Cox v. Hickford, 2 Vern. 664 ; Rowland v. Dean of Exon; Nash v. Lord Derby, 2 Vern. 537 ; Cudmore v. Raven , cited 2 Vern. 664, 6 Vin. Abr. 114; Cox v. Brawn, 1 Ch. R. 170 ; Tho-mas v. Porter, 1 Ch. Ca. 95 ; 1 Eq. Ca. Abr. 121, pi. 18. If it is a difficult matter to ascertain damages in any of these cases, it is because there is really no damage ; and surely it is no reason against relief, that the person who seeks it has done no injur\-. For the defendant, these distinctions, as to relief against for- feiture, were insisted on : Whether the forfeiture was for non- feasance or malfeasance. Whether the condition was annexed by law or the party. Whether there were any particular circumstances of equity or not. As to the difference between nonfeasance and malfeasance, as where a tenant refuses to pay a fine upon admittance, this court will relieve on doing that which ought to have been done. The differ- ence is only as to the circumstance of time, which this court easily supplies. So where there is only permissive waste the court has relieved; but if by obstinate refusal this forfeiture is aggravated, the court will look upon it as voluntary waste, and not jjrant relief, as in the case before cited of Cox v. Hickford. All the instances of forfeiture in the present case are of -voluntary acts. One is of making a lease without license, which is a disseisin of the lord and an attempt to disinherit him. The others are all voluntary wastes. The next distinction is between conditions in law and by the party. The intention of the parties is easy to be discovered, and you answer the end of the contract, if you give them everything they expected, which may in many cases be easily done. This is the case of all mortgages, conditions of re-entry or nonpayment of rent, etc. But even in conditions of the parties, where the ascertaining the 6 PENALTIES AND FORFEITURES damage is not plain and clear, the court will not relieve against such conditions or penalties. It was never known that this court relieved against a nomine poenae for ploughing up ancient meadow. It was denied in the Duchy of Lancaster: Eyre v. Hatton. But in cases of forfeiture on conditions in law this court seldom relieves. If tenant for life makes a feoffment, or levies a fine sur conusance de droit come ceo, etc., it was never pretended this forfeiture could be relieved in equity. Or if the reversioner brings waste on the statute for recovery of the place wasted, equity would not interpose. Those conditions in law are a sort of limitation of the' estate of the party, and though the intent of the party is never so plain, equity will not alter the legal construction of the words : as where by will one gives an estate to A for life, remainder to the heirs male of A, equity will not give the son of A a remainder, and confines A's to a life estate, though the intent was plainly so. But though this is generally the state of forfeitures, yet there may be some circumstances of equity to ground relief upon; and wherever the court has granted relief, it is upon some such circum- stances, as where the party who is to take advantage of the condi- tion is himself the means of its being broke. It was said by Lord Somers in the case 'of Bertie v. Falkland, 3 Ch. Ca. 129, 134, Salk. 231, that conditions precedent are not relievable, unless some indirect means be used by the party to prevent the performance. So in the case of Hammond v. Ainge, before the present chancellor, where a lord of a manor tejls one that had a freehold held of his manor that it was copyhold and he must be admitted by copy of court roll, and pay a fine : the lord was in this court obliged to erase the admittance and pay the fine. The third question related to the infant plaintiff, whether he was in any better condition than the father. 2 Lord Chancellor Macclesfield: This is a point of so great consequence, that if relief could be given in this court, it is strange it should not have been found out long ago. The forfeitures in those cases arise purely from the imbecility of the copyholder's estate. He was originally merely tenant at will, and is so still on all accounts but as to the continuance of his estate. There have been, indeed, very favourable constructions for the copyholder in that particular, because he is called tenant at will, secundum, consuetudinem manerii; it has been held, the lord cannot determine his will but according to that custom. The true meaning of those words, secundum con- suetulinem manerii, was not to bound the lord's pleasure in the deter- mination of his will, but that the tenant, as long as he continued tenant, was to hold his land under those terms and conditions which the custom had established. These matters, which are mentioned as forfeitures, are indeed limitations of the estate; such as determined it when they happen. Tenant for life making a greater estate than his own, gives up or * The arguments on this question are omitted. SIR HARRY PEACHY v. THE DUKE OF SOMERSET 7 surrenders the right he had before, and yet he does no damage to the remainderman. So, tenant by copy, taking upon him to make a greater estate than by law he may, and contrary to the nature of his estate, does by that determine his estate; the law has made it so; and what is there in this case to ground relief upon, and require me to set aside the law ? It is a hard law, and therefore the party must not be subject to it ; but is not this directly repealing the law ? In an action of waste for recovery of the place wasted, it is certain and admitted this court cannot relieve ; and yet this may be called a very unconscion- able thing. But is it so* to take advantage of a law which is known and equal to all? Nor can I see any difference, whether the stat- utes make this condition or the common law makes it. It is not sufficient to say, here is no damage in this case, and therefore it is there can be no recompense given by this court; for it is the recompense that gives this court a handle to grant relief. The true ground of relief against penalties is from the original intent of the case, where the penalty is designed only to secure money, and the court gives him all that he expected or desired ; but it is quite otherwise in the present case. These penalties or for- feitures were never intended by way of compensation, for there can be none. But even in the case of copyholds there are some cases of for- feitures intended for a different purpose; as for nonpayment of rent or fines ; which are only by way of security of the rent or fine ; and, therefore, when these are paid afterwards, with interest, the money itself is paid according to the intent, only as to the circum- stance of time; which is the true foundation of the relief which this court gives in those cases. Cases of agreements and conditions of the party and of the law are certainly to be distinguished. You can never say the law has determined hardly, but you may that the party has made a hard bargain. Thus it stands on the general state of these kind of forfeitures. But what equitable circumstances are there peculiar to this case ? It is certain there may be circumstances which may make it fit and equitable for this court to relieve, either in these cases or in actions on the Statute of Waste. If the lord should give the tenant encour- agement, by parol only, to pull down a messuage, and he did it accordingly, this might induce the court to prevent the lord's taking advantage of a fraudulent act of his own. In the present case, if the lord had been present at the making of the lease, and advised it, relief might be reasonable; but the steward's standing by, or even engrossing the lease, is rather a circumstance against relief, as it looks like a confederacy to cheat the lord and break the customs of the manor. As to the other cases of forfeiture relating to the quarry, the topping of the trees, and the destroying of the boundaries, there does not enough appear to determine whether they are legal forfeitures or not; but if they are, I think they are all, as the making of the 8 PENALTIES AND FORFEITURES lease under the same consideration in this court, and not proper for relief. As to the infant, his case does not seem as yet ripe for this court; but it may be a question how far his equitable interest will entitle him to be secured against these forfeitures. I am apprehensive the lord must always have such a tenant upon his lands as may be sufficient to answer all demands, and capable of committing for- feitures. Suppose one lets a trustee be admitted for him, who com- mits a forfeiture; no doubt the estate would be forfeited, and the cestui que trust would have no equity against the lord. Suppose the trustee should die without heir, the lord would be entitled by escheat, without being entitled to. the trust. 3 The person who is the legal tenant is subject, with regard to that estate, to all the imbecilities of that estate; if not, by the means of a trust, a copyhold would be entirely discharged from all those imperfections it labors under, and the lord's interest be taken away ; for the lord can take advan- tage of nobody's acts but those of his tenant. He* is not at all con- cerned with the private agreements or trusts of the parties.. In the present case, suppose Sir Harry admitted according to the surrender, the infant is then tenant in remainder, and the father's act cannot prejudice the son, who is now admitted as a distinct tenant. But till admittance the son is no tenant ; and suppose, when he comes of age, he should release to his father, there would be no occasion for any admittance at all, but Sir Harry would continue tenant upon his old admittance. The lord is not bound to take notice of anything but what appears on the court rolls. I am, therefore, apprehensive it will be a hard case to relieve the son. But I agree that if the lord's fine for admission be paid, though there was no actual admittance, since the lord received all the advantage that could be had from the admittance, it might be a good reason for relieving the son ; and then it might be proper, per- haps even now, for the son to bring a bill against his father and the lord, in order to have his father admitted pursuant to the surrender. But it does not appear whether the fine was paid. I should, therefore, for these reasons, dismiss the bill absolutely. But since the points of law are disputed as to all the forfeitures, excepting the making of the lease, which concern other parts of the copyhold, and since judgment in ejectment is given, which would take in other lands as well as those comprised in the lease, I think the bill should be retained till the points of law are tried at law upon the ejectment, which the plaintiff shall immediately receive declara- tions in, and plead to trial. As to costs, they shall wait the event of the trial; and, as to them, I think the equity of them will depend upon the issue of that ; if the plaintiff recovers there, he should pay costs here, because he had no occasion to come into this court, excepting as to the discov- ery. If the duke gets the better, I think, as this is a point of equity 1 But see now 4 & 5 Wm. IV, Chap. 23, Sees. 2, 3. CATHERINE O. MACTIER v. HANNAH OSBORN 9 that has not been fully settled before, and in such case it is natural for a man to struggle the most to retain his estate, it would be too hard to make him lose his estates and pay costs likewise. As to the infant, I will not dismiss the bill absolutely, but with- out prejudice, because, being an infant, he may not have made the best of his case.* CATHERINE O. MACTIER v. HANNAH OSBORN. Supreme Judicial Court of Massachusetts, 1888. 146 Massachusetts, 399. Morton, C. J. : This is a writ of entry to recover an undivided third part of- a parcel of real estate in Boston. On November 7, 1873, Edward J. Holmes and William E. Per- kins, trustees, being the owners of the land, executed a lease thereof to Levi B. Gay for the term of twenty years from the first day of January, 1874. The estate subject to the lease is now held by con- veyances from said trustees and others, one third by the demandant, one third by the tenant and one sixth each by Julia M. Dehon and Sarah A. Treilhard. The tenant is now the lessee, holding the title of Gay by deed from him and by mesne conveyances. The lease, contains the covenant that the lessee "will keep all buildings upon said premises during said term properly and fully insured, at all times during said term, in safe offices to be approved by said parties of the first part, and in such manner that the insurance money shall be payable to said parties of the first part, who shall deposit the same with the New England Trust Company or some safe bank; and such money shall be used in paying the expenses, as far as may be, of repairing or rebuilding said building or buildings by the party of the second part, and shall be drawn from the said company or bank at times arid in amounts as needed for said purpose ; and after said building or buildings shall have been so repaired or built, the remainder of such money, if any, shall be paid to said party of the second part. In case of failure by said party of the second part to 4 Accord : Wadman v. Calcraft, 10 Ves. 67 (.1804) ; Hill v. Barclay, 16 Ves. 402 (1810), 18 Ves. 56 (1811) ; Reynolds v. Pitt, 19 Ves. 134 (1812) ; Bracebridge v. Buckley, 2 Price 200 ( 1816) ; Baxter V. Lansing, 7' Paige (N. Y.) 350 (1838) ; Hills v. Rowland, 4 DeG. M. & G. 430 (1853) ; Nokes v. Gibbon, 3 Drew. 681 (1856) ; Brown v. Vander grift, 80 Pa. 142 (1875) ; Munroe v. Armstrong, 96 Pa. 307 (1880) ; Parsons v. Smilie, 97 Cal. 647 (1893) ; Gordon v. Richardson, 185 Mass. 492 (1904) ; United States v. Oregon R. Co., 189 U. S. 116 (1903); Willmott v. London R. Co. (1910), 2 Ch. 525; Trustees of St. Charles College v. Carroll, 121 Md. 464 (1913)- Compare: Bowen v. Whitmore, 2 Freem. 193 (1693); Nash v. Derby, 2 Vera. S37 (1705) ; Cox v. Higford, 1 Eq. Ca. Abr. 121, pi. 20 (1710), s. c, 2 Vern. 664; Sanders v. Pope, 12 Ves. 282 (1806) ; Davis v. West, 12 Ves. 47S (1806") ; Ludin v. Schoefield, 167 Mass. 46s (1897). ro PENALTIES AND FORFEITURES repair or rebuild as aforesaid, said money, or so much thereof as may remain, shall belong or remain to the use of said parties of the first part." The lease contained the usual condition for re-entry on breach of any of the covenants, without notice or demand. At the time the lease was assigned to the tenant there was insur- ance upon the building by several policies to the amount of thirty thousand dollars, payable in case of loss to the lessors, which was satisfactory to them. These policies were assigned to the tenant. At their expiration in March, 1886, one Osborn, acting for the tenant, took out, through a firm of insurance brokers, policies to the same amount, but they were made payable in case of loss to the Suffolk Savings Bank for Seamen and Others, to which bank the tenant was indebted to the amount of twenty thousand dollars for money bor- rowed to purchase the lease. In September, 1886, the demandant, having ascertained the form in which those policies were taken out, entered on the premises for an alleged breach of the covenant, to insure, and on October 12, 1886, brought this suit to enforce the alleged forfeiture. It appeared at the trial that neither the tenant nor the said Osborn had any knowledge until after the said entry by the demand- ant as to the form in which said policies were written, and both meant in good faith that the covenants in the lease relating to insur- ance should be observed to the same extent that they were observed in the first policies. It also appeared that the demandant prior to the entry made no demand upon the tenant, and gave her no notice that the insurance was not satisfactory, and after the entry refused to consult with the tenant as to changing the form of the policies. The case comes before us on a report which provides that, if there has been no breach of the covenant in the lease as to insurance, or if there has been a breach but it is one which equity will relieve against, then judgment may be entered for the tenant. The statement of the case shows that the claim of the demand- ant is strictissimi juris. She seeks to enforce a forfeiture for an alleged breach of covenant, which has arisen from an accident or mistake such as is likely to occur innocently, particularly in the case of a woman not accustomed to business affairs, and which did not arise from any wilful default or culpable negligence on the part of the tenant. The covenant in question is a peculiar one. It does not create a clear and exactly defined duty on the part of the lessee, as would be the case if it had been a covenant to keep the building, insured in an amount and office named, by policies payable to the lessors. The amount, the office and the form of the policy are not fixed, and the covenant clearly contemplates that these are to be arranged by a conference between the parties. Under such a covenant, it may fairly be argued that, if a lessee m good faith procures insurance intending to observe the requirements of the covenant, but fails to do so, the lessor could not, without notice, enforce a forfeiture. But however this may be, and assuming that the lessee must at his own risk, see to it that he observes the* covenant, and therefore that there CATHERINE O. MACTIER v. HANNAH OSBORN n has been a breach of covenant and a forfeiture at law in this case, we are of opinion that it is a case in which equity ought to furnish relief. The demandant cites many cases, mostly English, to the point that courts of equity will not grant relief from a forfeiture for breach of a condition to insure. This may be so where there is a wilful and intentional neglect to insure according to the covenant. But where the failure to insure is the result of accident or mistake, each case must be determined by the circumstances of the particular case. Judge Story states the rule in England to be, that "in all cases of forfeiture for the breach of any covenant, other than a covenant to pay rent, no relief ought to be granted in equity, unless upon the ground of accident, mistake, fraud or surprise." Story Eq. Jur., Sec. 1323. It has been held in this court that equity will grant relief from a forfeiture for the nonpayment of rent on the day it was due. Atkins v. Chilsop, 11 Met. 112. And the same principle was applied where there had been a forfeiture for breach of a condition to indem- nify a grantor in a deed against an outstanding mortgage and interest on it. Sanborn ,v. Woodman, 5 Cush. 36. In Mancock v. Carlton, 6 Gray 39, there had been a forfeiture for breach of a condition to indemnify against a mortgage. The court refused equitable relief, but it was upon the ground that the forfeiture was caused by the laches of the party seeking relief ; and the intimation of the opinions is clear that relief would be granted upon the ground of accident or mistake if proved. We see no reason why the same principle should not apply to a breach of a covenant to insure, caused by accident or mistake, where no actual damage has been sustained by the lessor. The result of the authorities, supported by sound principle, is, that where there has been a breach of a covenant to pay rent equity will relieve against a forfeiture, although the breach is wilful on the part of the lessee ; and where there has been a breach of a cove- nant to perform some collateral duty, such as to repair or insure, which has been caused by accident or mistake, equity will relieve if the lessor can by compensation or otherwise be placed in the same condition as if the breach had not occurred. Sanders v. Pope, 12 Ves. 282, and note; Livingston v. Tempkins, 4 John, Ch. 415, 431 ; Henry v. Tupper, 29 Vt. 358. In the case at bar, where the former policies, which were satis- factory to the lessors, expired, the lessee in good faith intended to have them renewed in the same amounts and form. By accident, or by a mistake of the insurance brokers, they were renewed in a form which does not fairly meet the requirements of the covenant. This was not wilful or voluntary on her part. It was not an accidental forgetfulness to renew the policies. The property has been all the time fully insured. It was an occurrence not anticipated by her, and not known to her until after the demandant entered to enforce a for- feiture. No misconduct or culpable fault can be attributed to her. The lessors have not in fact been injured by the accident, and can now be put in statu quo. It is against equity and good conscience 12 PENALTIES AND FORFEITURES that the demandant should insist upon a forfeiture of a valuable leasehold estate. We do not think that the tenant's acts in making a change in the policies after the demandant's entry have any important bearing upon the case. She applied to the demandant for a conference as to the form of the policies, but the demandant refused to treat with her. The tenant is willing to make insurance in a form which will comply with the covenant. Under all the circumstances of this case we are of opinion that equity should relieve the tenant from the forfeiture, and that, accord- ing to the terms of the report, there should be judgment for the tenant. 1 J. RALPH DODSWORTH vl WILLIAM T. DODSWORTH. Supreme Court of Illinois, 1912. 254 Illinois, 49. Carter, C. J. : This is an appeal from a decree entered in the Circuit Court of Morgan County removing a cloud from the title to 140 acres of land in Morgan and Scott Counties, Illinois. June 11, 1906, Sarah Dodsworth, a widow, then the owner of said land, con- veyed it to appellee, J. Ralph Dodsworth, her grandson. The con- veyance was in the usual statutory form of a warranty deed, the consideration being one dollar and love and affection. The deed also contained the following clause : "Provided, however, that the grantee shall not sell, convey nor encumber said real estate, or any part thereof, for a period of ten years from and after this date, and shall pay all taxes and assessments thereon; and in the event that the grantee . . . shall fail to pay all taxes and assessments thereon, then this deed shall be null and void and said real estate shall revert to the grantor, her heirs or assigns." Appellee took possession of the land and rented it to one Kitchen. The grandmother died prior to 191 1, leaving as her only heir-at-law and sole devisee under her will her son, William T. Dodsworth, the appellant and father of the appellee. After the farm was deeded to appellee the taxes were all paid by him previous to. those due in 191 1. Appellee resided in Kan- sas. On April 14, 191 1, he wrote his lawyer at Jacksonville request- ing him to ascertain the amount of taxes on the Morgan County real estate. It appears that appellee supposed that the tax laws of Illinois 'Accord: Henry v. Tupper, 29 Vt. 358 (1855) ; Giles v. Austin, 62 N. Y. 486 (1875) ; Tibbets v. Cate, 66 N. H. 55° (1891) ; Noyes v. Anderson, 124 N. Y. 175 (1891) ; Lynch v. Versailles G. Co., 165 Pa. 518 (.1895) ; Bendy v. Evans (1910), 1 K. B. 263; Bergdoll v. Spalding, 234 Pa. 588 (1912) ; Palmer & Co. v. Barney E. Co., 149 N. Y. App. Div. 136 (1912) ; Rahr v. Buckley, 159 Wis. 589 (1915). Compare: Griggs v. Landis, 21 N. J. Eq. 494 (1870) ; Barrow v. Isaacs (1891), 1 Q. B. 417; Bacon v. Park, 19 Utah 246 (1899) ; Piano Co. v. Hal- berg, 130 Term. 650 (1914) ; Brewster v. Lanyon Z. Co., 140 Fed. 801 (1905). J. RALPH DODSWORTH v. WILLIAM T. DODSWORTH 13 were the same as those of Kansas, where no penalty attaches until July and the tax sale is held in September. Not hearing from the attorney, the appellee again wrote him on July 12, 191 1, asking him to ascertain the amount of taxes and pay them. On looking up the matter, the attorney found that the premises had already been sold for taxes, the amount necessary for redemption being $68.40. Within a day or two thereafter the attorney met appellant and in the course of their conversation mentioned the fact that he had received a letter from appellee inquiring about the taxes. Appellant thereupon went to the office of the county clerk of Morgan County and paid the amount necessary to redeem the land in that county, the payment being endorsed as from appellant on the tax judgment, sale, redemp- tion and forfeiture record. That day or the next appellee's attorney went to the county clerk's office to redeem the land and was informed that the redemption had already been made by appellant. The amount necessary to redeem being offered to the clerk by the attor- ney was refused. Thereafter appellee sent the county clerk a draft for $70 to redeem, and also made a tender, through the attorney, of $70 in cash, both of the tenders being refused. He also sent his father a draft for $70, which was returned, with a letter' reading in part: "Dear Son — The deed from mother to you provides that if you default in the payment of taxes the land shall revert to the grantor or her heirs or assigns. You are in default in the payment of the taxes and the land went to sale. I then re'deemed it, and as I now understand the matter, the land now reverts to me. I therefore claim the title from the date of redemption and shall expect to rent the land the coming year and collect the rent myself." Appellee then sent his father $70 in cash by registered letter, which was returned without explanation. The decree finds that the appellant had notified Kitchen, the tenant, not to dispose of any crops or to pay rent to appellee. It further finds that appellant had no interest in the prem- ises, and that appellee had tendered $76 in open court to appellant, which was refused, and that the $70 was ordered paid to the clerk for appellant's benefit. Appellant's first contention is that a court of equity has no jurisdiction, as his claim is not a cloud on the title to the land in question. A cloud on a title is a semblance of a title, either legal or equitable, or a claim of an interest in lands, appearing in some legal form, but which is, in fact, unfounded. (Allott v. American Straw- board Co., 237 111. 55, and cases cited.) If there be any basis for appellant's contention that the land in question was forfeited because of the nonpayment of taxes, then surely that claim is based upon matters of record amounting to such a semblance of title as would justify the filing of a bill to remove the claim as a cloud. On this record equity rightly assumed jurisdiction. It is further insisted that the facts did not justify a decree reliev- ing appellee from his failure to pay the taxes. Forfeitures are not regarded with favor, and their prevention is within the protecting care of equity wherever wrong or injustice will result from their enforcement. (Springfield Traction Co. v. Warrick, 249 111. 470, 14 PENALTIES AND FORFEITURES and cases cited.) It is well settled that where the agreement is simply one for the payment of money, a forfeiture of land incurred by its nonperformance will be set aside on behalf of the defaulting party, or relieved against in any other manner made necessary by the circumstances of the case, on the payment of the debt, interest and costs, unless complainant has debarred himself by his own con- duct. This doctrine is applied when the failure has been caused by ignorance and was not wilful. ( i Pomeroy's Eq. Jur., 3d Ed., Sees. 450, 451, and cases cited.) This rule was followed in Tibbetts v. Cate, 22 Atl. Rep. (N. H.) 559, where a condition in a will related to the payment of taxes and a forfeiture was claimed as to lands for nonperformance. (See, also, Giles v. Austin, 62 N. Y. 486; Buckley v. Beigle, 8 Ont. 85 ; Hagar v. Buck, 44 Vt. 285.) Under the circum- stances shown here it would be a great wrong and injustice to appellee to enforce a forfeiture in this case. 1 Decree affirmed. BAIRD v. TOLLIVER. Supreme Court of Tennessee, 1845. 6 Humphreys, 186. This is an action of covenant which was brought in the Circuit Court of Wilson County by Baird against Tolliver, George and C Cummings, on the following instrument: 1 Equity, on principles of compensation, may relieve from forfeitures for breach of conditions. In the case of conditions subsequent the juris- diction is generally conceded. In the case of conditions precedent the juris- diction is both affirmed and denied. Where time is of the essence of the contract relief is refused. For the older cases, see 29 Harv. L. Rev. 130. Compare relief granted: Vernon v. Stephens, 2 P. Wms. 66 (1722) ; Walker v. Wheeler, 2 Conn.. 299 (1817) ; Decamp v. Feay, 5 S. & R. (Pa.) 323 (1819) ; Chipman v. Thompson, Walk. (Mich.) 405 (1844) ; Rogan v. Walker, 1 Wis. 527 (1853); Hancock v. Carlton, 72 Mass. 39 (1856); Henry v. Tapper, 29 Vt. 358 (1857); Clark v. Lyons, 25 111. 105 (i860); Grigg v. Landis, 21 N. J. Eq. 494 (1870) ; Steele v. Branch, 40 Cal. 3 (1870) ; Davis V. Gray, 16 Wall. (U. S.) 203 (1872) ; Donnelly v. Eastes, 94 Wis. 390 (1896) ; Selden y. Camp, 95 Va. 527 (1808) ; Wort hen v. Ratcliffe, 42 Ark. 330 (1883) ; Larking v. French, 187 Mass. 9 (1903) ; Wheeling & E. G. R. Co. v. Triadel- phia, 58 W. Va. 487 (1905) ; Holmes v. Brooks, 84 Conn. 512 (1911) ; John v. McNeal, 132 N. W. 508 (Mich. 1911) ; Milwaukee B. Store v. Katz, 153 Wis. 492 (1913) ; Kansas City C. Cr S. R. Co. v. Young, 152 S. W. 118 (Kan. 1912). With relief refused: Fry v. Porter, 1 Mod. 300 (1670) ; Bene- dict v. Lynch, 1 Johns. Ch. (N. Y.) 370 (1815) ; Bucks v. Jouitt, 3 Litt (Ky.) 229 (1823) ; City Bank v. Smith, 3 G. & J. (Md.) 265 (1831) ; Wells v. Smith, 2 Edw. Ch. (N. Y.) 78 (1833), affirmed 7 Paige Ch. (N. Y.) 22; Barnet v. Passumpsic Tp. Co., 15 Vt. 757 (1843) ; Dunklee v. Adams, 20 Vt' 415 (1848); Remington v. Irwin, 14 Pa. 143 (1850); Grey v. Tubbs,' 43 Cal 359 (1872) ; Brown v. Vander grift, 80 Pa. 142 (187s) : New York & N R Co. v. Providence, 16 R I. 746 (1890); Hitkill v. Guffey, 37 W. Va. 425 (1892); Maginnis v. Knickerbocker I. Co., 112 Wis. 385 (1901) ; Woods v McGraw, 127 Fed. 914 (1904) ; Shannon v. Long, 60 So. 273 (Ala. 1912). BAIRD v. TOLLIVER 15 "Received of Selden Baird four five per cent. State bonds, which we promise to return to him in twelve months, or pay him $4000, in current Tennessee Bank notes. 25th January, 1842. "C. Cummihgs, L.S. "G. Cummings, L.S. "Z. Tolliver, L.S." It was tried by Judge Caruthers and a jury, on the plea of cove- nants performed. It appeared on trial, that the bonds delivered on loan, and specified in the receipt, were for $1000 each, and that they were not delivered by the obligees according to the covenant, and that the market value of them, from the execution of the covenant till the twenty-fifth day of January, 1843, was from $550 to $800, the witnesses differing as to the value. The presiding judge charged the jury, that the sum of $4000 agreed to be paid was a penalty, and that the measure of damages was the value of the bonds on the twenty-fifth day of January, 1843. The jury returned a special verdict, ascertaining the market value of the bonds to be $750 each ; and that in the event the court should regard the sum of $4000 as stipulated damages, they returned a verdict for the plaintiff for that sum; but in the event that it should be regarded as a penalty, they found a verdict for the plaintiff for the sum of $3000. The judge gave a judgment for the plaintiff, and both parties appealed. 1 Reese, J. : The plaintiff's cause of action is stated in the decla- ration to be a covenant, in which the defendant, acknowledging that he had received from the plaintiff, on loan, four five per cent, state bonds, for one thousand dollars each, stipulates that, within twelve months, he would return to the plaintiff the said bonds, or pay four thousand dollars. At the date of the covenant, and at the expiration of twelve months, and in the intermediate period, the market value of such bonds had been from six to eight hundred dollars. The main question discussed, both in the circuit court and here, was, whether the four thousand dollars was to be regarded as a penalty to enforce the return of the bonds, or to be recovered as liquidated damages. We are of opinion, upon principle, and the authority of the cases referred to, that the sum mentioned is to be regarded as a penalty; because the bonds have an ascertainable market value; because that value was, during the whole period of the loan, greatly below the sum of four thousand dollars; because that is an aggregate sum in gross, compelling the return of all four bonds, and not permitting the return of one, two or even three of them; because, to hold, in such case, that the sum stated is liquidated damages, would furnish an easy device to evade the usury laws ; because, finally, when there is any doubt, whether the stipulated sum be a penalty or liquidated 1 The arguments of counsel are omitted. i6 PENALTIES AND FORFEITURES damages, the legal principle is, for courts to incline to hold it to the former. 2 The other question discussed is, whether the court erred in refusing to the defendant a new trial, upon the ground that the jury placed a higher value upon the bonds than the proof would warrant. We would have been satisfied with a smaller verdict ; but we cannot say that there is not proof in the record upon which the verdict of the jury can rest and be sustained. This being so, and the circuit court having refused a new trial, the judgment will not be disturbed. KEMBLE v. FARREN. Court of Common Pleas, 1829. 6 Bingham, 141. Assumpsit by the manager of Covent Garden Theatre against an actor, to recover liquidated damages for the violation of an engagement to perform at Covent Garden for four seasons. At the trial the jury gave a verdict for the plaintiff for £750 damages, sub- ject to a motion for increasing them to fiooo, if the court should be of opinion that, upon this agreement, the plaintiff was entitled to the whole sum claimed as liquidated damages. 1 Tindal, C. J.: This is a rule which calls upon the defendant to show cause why the verdict, which has been entered for the plaintiff for £750, should not be increased to £1000: The action was brought upon an agreement made between the plaintiff and the defendant, whereby the defendant agreed to act as a principal comedian at the Theatre Royal, Covent Garden, during the four then next seasons, commencing October, 1828, and also to conform in all things to the usual regulations of the said Theatre Royal, Covent Garden ; and the plaintiff agreed to pay the defendant £3 6s. 8d. every night on which the theatre should be open for theat- 2 Accord: Dermis v. Cummins, 3 Johns. Co. (N. Y.) 297 (1803) ; Perkins v. Lyman, 11 Mass. 76 (1814) ; Robeson v. Whitesides, 16 S. & R. (Pa.) 320 (1827); Watts v. Sheppard, 2 Ala. 42s (1841) ; Moore v. Platte Co., 8 Mo. 467 (1844); Curry v. Larer, 7 Pa. 470 (1848) ; Haldeman v. Jennings, 14 Ark. 329 (1854) ; Gower v. Carter, 3 la. 244 (1856) ; Nash v. Hermosilla, 9 Cal. 584 (1858) : Cairnes v. Knight, 17 Ohio St. 68 (1866) ; Kuhn v. Myers, 37 la. 351 (1873); Bradstreet v. Baker, 14 R. I. 546 (1884"): Condon v. Kemper, 47 Kan. 126 (1891) ; Gates v. Parmly, 93 Wis. 294 (1806) : McCann v. Albany, 11 N. Y. App. Div. 378 (1896) ; Radio ff v. Haase, 106 111. 365 (1902); Northwest P. Co. v. Kelbourne & C. Co., 128 Fed. 256 (1904); Daniel v. Day, 26 Ky. L. Rep. 940 (1904) ; F.I. Case Co. v. Fronk, T17 N. W. 229 (Minn. 1908) ; Dopp v. Richards, 135 Pac. 98 (Utah IQ13) ; Miller v. Duntley, 182 111. App. 205 (1913) ; Greenblatt v. McCall, 64 So. 748 (Fla. 1914). Compare Lichettiv. Conway, 44 Pa. Super. Ct. 71 (1910) with Sher- burne v. Hirst, 121 Fed. 998 (1903). 1 Part of the statement of. facts and the arguments of counsel are omitted. KEMBLE v. FARREN 17 rical performances during the next four seasons, and that the defend- ant should be allowed one benefit night during each season, on certain terms therein specified. And the agreement contained a clause, that if either of the parties should neglect or refuse to fulfil the said agreement, or any part thereof, or any stipulation therein contained, such party should pay to the other the sum of £1000, to which sum it was thereby agreed that the damages sustained by any such omis- sion, neglect or refusal, should amount ; and which sum was thereby declared by the said parties to be liquidated and ascertained damages, and not a penalty or penal sum, or in the nature thereof. The breach alleged in the declaration was, that the defendant refused to act during the second season, for which breach the jury, upon the trial, assessed the damages at £750, which damages the plaintiff contends ought by the terms of the agreement to' have been assessed at £1000. It is, undoubtedly, difficult to suppose any words more precise or explicit than thase used in the agreement ; the same declaring not only affirmatively that the sum of £1000 should be taken as liquidated damages, but negatively also that it should not be considered as a penalty, or in the nature thereof. And if the clause had been limited to breaches which were of an uncertain nature and amount, we should have thought it would have had the effect of ascertaining' the damages upon any such breach at £1000. For we see nothing illegal or unrea- sonable in the parties, by their mutual agreement, settling the amount of damages, uncertain in their nature, at any sum upon which they may agree. In many cases, such an agreement fixes that which is almost impossible to be accurately ascertained; and in all cases, it saves the expense and difficulty of ( bringing witnesses to that point. But in the present case, the clause is not so confined; it extends to the breach of any stipulation by either party. If, therefore, on the one hand, the plaintiff had neglected to make a single payment of £3 6s. 8d. per day or, on the other hand, the defendant had refused to conform to any usual regulation of the theatre, however minute or unimportant, it must have been contended that the clause in ques- tion, in either case, would have given the stipulated damages of £1000. But that a very large sum should become immediately pay- able, in consequence of the nonpayment of a very small sum, and that the former should not be considered as a penalty, appears to be a contradiction in terms ; the case being precisely that in which courts of equity have always relieved, and against which courts of law have, in modern times, endeavoured to relieve, by directing juries to assess the real damages sustained by the breach of the agreement. It has been argued at the bar, that the liquidated damages apply to those breaches of the agreement only which are in their nature uncertain, leaving those which are certain to a distinct remedy, by the verdict of a jury. But we can only say, if such is the intention of the parties, they have not expressed it; but have made the clause relate, by express and positive terms, to all breaches of every kind. We can- not, therefore, distinguish this case, in principle, from that of Astley 18 PENALTIES AND FORFEITURES v. Weldon, 2 in which it was stipulated, that either of the parties neglecting to perform the agreement should pay to the other of them the full sum of £200, to be recovered in his majesty's courts at West- minster. Here there was a distinct agreement, that the sum stipu- lated should be liquidated and ascertained damages; there were clauses in the agreement, some sounding in uncertain damages, some relating to certain pecuniary payments; the action was brought for the breach of a clause of an uncertain nature; and yet it was held by the court, that for this very reason it would be absurd to construe the sum inserted in the agreement as liquidated damages, and it was held to be a penal sum only. As this case appears to us to be decided on a clear and intelligible principle, and to apply to that under con- sideration, we think it right to adhere to it, and this makes it unneces- sary to consider the subsequent cases, which do not in any way break in upon it. The consequence is, we think the present verdict should stand, and the rule for increasing the damages be discharged. 3 Rule discharged. CHICAGO, B. & Q. R. CO. v. DOCKERY. Circuit Court of Appeals, U. S., Eighth Circuit, 1912. 195 Federal, 221. Reed, J. : This action is by the defendants in error, who will be called the plaintiffs, to recover of the railroad company five thousand dollars as liquidated damages for an alleged breach of a contract made by its predecessor to maintain a depot and stockyards or pens upon land acquired for that purpose from the remote grantor of the plaintiffs, with whom, said contract was made. The defendant may '2 Bos. & Pill. 346 (1801). 3 Accord: Davies v. Penton, 6 B. & C. 216 (1827) ; Homer v. Flintoff, M. & W. 678 (1842) ; Lord Elphinstone v. Monkland T. & C. Co.. 11 App. Ca. 332 (1886); Willson r. Love (1806), 1 Q. B. 626. Compare Wriqht v. Tracey. It. Rep. 7 C. L. 134 (1873) ; Wallis v. Smith, 21 Ch. D. 243 (1882). Among the many cases see — Liquidated Damages: Reynolds v. Bridge, 6 E. B. & E. 528 (1856): Monmouth Park Ass'n v. Wallis Iron Works. 55 N. J. L. 132 (1892) ; Curtis v. Van Bergh. 161 N. Y. 47 (1809) ; Kunkel v. Wherry, 189 Pa. 198 (1899); Robinson v. Centenary Fund, 68 N. J. L. 723 (1902) ; Sun Printing Co. v. Moore, 183 U. S. 642 (1902) ; Clydebank E. Co. v. Ramos (1005), A. C. 6; United States v. Bethlehem Steel Co., 205 U. S. 105 (1907) ; York v. York R. Co., 229 Pa. 236 (1910) ; Baltimore B. Co. v. United Railways Co.. 128 Md. 208 (1915) : Parker W. Co. v. Chicago, 267 111. 136 (1915) ; Board of Commerce v. Security T. Co., 225 Fed. 454 (1915). Penalties: Bignall v. Gould, 119 U. S. 495 (1886) ; Chicago H. W. Co. v. United States, 106 Fed. 385 (1901) ; Davidson v. Smith, 18 Pa. Dist. R. 709 (1909); O'Brien v. Illinois S. Co., 203 Fed. 436 (1913) ; Stoner v. Schults. 69 Wash. 687 (1912) ; Van Kammel v. Highley, 172 111. App. 88 (1912) • Evans v. Moseley, 84 Kan. 322 (1911), s. c, 50 L. R. A. N. S. 889 and note. See also 1 Amer. Dec. 328; 108 Amer. St. Rep. 46; 63 U. of Pa. L. Rev. 220. CHICAGO, B. & Q. R. CO. v. DOCKERY 19 be considered as the company with whom the agreement was made, for it assumed the obligations of its predecessor. The cause was tried to the court without a jury, and resulted in a judgment for the plaintiffs for the full amount claimed. The defendant brings error. 1 In March, 1909', the plaintiffs brought this action to recover of the defendant, as liquidated damages, the five thousand dollars stipu- lated in the right-of-way deed of Hilbert, because of its failure to maintain the depot and stockyards at Hilberton as it had agreed. No evidence was offered of any damage sustained by the plaintiffs because of such failure. The defendant maintains: (1) That the five thousand dollars is a penalty only, and that In the absence of any proof as to the amount of damages sustained by the plaintiffs, no recovery can be had beyond nominal damages ; and (2) that inasmuch as the station was closed before Hilbert made his deed of assignment for the ben- efit of creditors, he or his assignee, and not the plaintiffs, would be entitled to recover the damages, whatever they are. The principal question for determination is : Was the five thou- sand dollars stipulated in the right-of-way deed of Hilbert to be paid by the company, intended as and for liquidated damages should it fail to perform any of its agreements therein contained, or was it intended as- a penalty to cover such damages as Hilbert or his grantees might sustain because of such failure? It is the contention of the plaintiffs that the deed upon its face shows that the five thousand dollars was intended as and for liqui- dated damages because it is specified as such, and they rely mainly upon the case of the Sun Printing & Publishing Ass'n v. Moore, 183 U. S. 642, 22 Sup. Ct. 240, 46 L. Ed. 366, in support of that contention. It is true that one of the syllabi in that case reads : "The naming of a stipulated sum to be paid for the nonperformance of a covenant is conclusive upon the parties in the absence of fraud or mutual mistake." But the opinion does not sustain the rule thus broadly stated, for it clearly appears therein that the question is to be determined from the meaning of the contract fairly construed in the light of its subject-matter and the circumstances under which it was made. It then holds that the agreement made by the parties fixing the value of the boat, about which that controversy arose, at seventy-five thou- sand dollars to be paid to its owner if the boat was not returned, was conclusive as between them upon the question of its value. The syllabus might indicate that in all cases an amount stipulated to be paid as liquidated damages for the breach of a contract is conclusive 1 Part of the opinion is omitted. The deed of the right of way con- taining the agreements in question was made May 26, 1902. The railroad completed its works about February 1, 1903. The depot was maintained with an agent in charge until June 14, 1904, when the agent was removed. In February or March, 1907, the company removed the depot buildings and stockyards. 20 PENALTIES AXD FORFEITURES upon the amount of the recovery for such breach, but the opinion does not so hold; and the general rule is that, if the amount stated is denominated as "liquidated damages" or as a penalty, it is not con- clusive, and if the contract leaves the intention of the parties in doubt as to the amount to be paid for its breach, and the amount specified is beyond all reasonable proportion to the damages that may actually be sustained, the contract will be construed as a penalty only and not as liquidated damages, though it be specified as such. McCall v. Deuchler, 174 Fed. 133, 98 C. C. A. 169; Union Pacific R. R. Co. V. Mitchell-Critenden Co. (C. C. A.), 190 Fed. 544-545, and the cases there cited; Sco field v. Tompkins, 95 111. 190, 35 Am. Rep. 160; Foley v. McKeegan, 4 Iowa 1, 66 Am. Dec. 107; Mclntire v. Cagley, 37 Iowa 677-678; note 1 Am. Dec. 331, and the English and Ameri- can cases cited in 6 Eng. Rul. Cas., p. 554 et seq. In some cases it is held that if the subject-matter of the con 1 tract is of uncertain value, or if the damages to be paid for its breach are incapable of definite ascertainment by any fixed rule of law, the amount stipulated will be construed as settled or liquidated damages. Whether or not a case falls within this rule must of course depend upon its particular facts. The authorities also quite generally hold that, where there are several undertakings or agreements in a contract, the damages for the nonperformance of some of which are readily ascertainable, and for others not, and one sum is named as damages for a breach of any of them, such sum will be regarded as a penalty only, and not as liquidated damages for the breach of any single stipulation. Bignall v. Gould, 119 U. S. 495, 7 Sup. Ct. 294, 30 L. Ed. 491; McCall v. Deuchler, above ; Trower v. Elder, jj 111. 452 ; Foley v. McKeegan, 4 Iowa i, 66 Am. Dec. 107, and the cases cited. With these rules in mind the contract in question may be considered. The agreements to be performed by the defendant, in addition to the payment of two thousand two hundred and fifty dollars for the right of way, are : ( 1 ) To erect and maintain a solid grade of uniform height of at least four feet above the level of the surface of the right of way, without openings therein for some two and one- half miles ; (2) to leave a solid strip of earth one hundred feet from the center of the channel of Blackbird Creek, to which the grantor shall have the right to attach a levee of the same height; (3) to put in the required gates and crossings for passageways across the rail- road ; (4) to build a depot to cost not less than five hundred dollars ; (5) to build stockyards and pens; and (6) to maintain the depot and stockyards for a period of ten years after they shall be built. And in the event that any of said conditions are not f ulfilTed and kept by the company, then its successors and assigns shall pay to the first party, or to his heirs or assigns, liquidated damages in the amount of five thousand dollars, which said sum is made a charge upon the lands conveyed for the right of way. There are at least six things which the company by accepting CHICAGO, B. & Q. R. CO. v. DOCKERY 21 - this deed agreed to do; and for its failure to' "fulfill and keep'' any of them it is to pay as "liquidated damages" five thousand dollars. Was it intended by this instrument, fairly construed in the light of the circumstances under which it was made, that for a failure on the part of the company to perform any of these agreements that it should pay to the grantor five thousand dollars without diminution ? We think not. The body of land over which the road was built is low land in the valley of the Chariton River and near to Blackbird Creek in Adair County, and subject to frequent overflow from these streams. There is no evidence as to which of the agreements was regarded as of the most importance as to this land or to its owner ; but it is obvious they were of different values. The company has performed and kept all of them except that to maintain the depot and stockyards for the full period of ten years. If it had main- tained these for a period of nine and one-half years, and then removed them, would it be seriously contended that it was the inten- tion of the parties in making this contract that defendant should pay five thousand dollars for failing to maintain them for the remainder of the ten years ? Or, if the company had maintained the depot and discontinued the stockyards and pens a few months before the expira- tion of the time stipulated, or if it had refused to put in the requisite" crossings and gates for passageways over the railroad, would the company in either of such events be liable for the full five thousand dollars ? Clearly not, and yet that is the ultimate result to which the contention in behalf of the plaintiffs, if it is sound, unavoidably leads. Counsel for the plaintiffs do not contend that defendant agreed to maintain an agent in charge of the station, or that a breach of the agreement occurred when the agent W£s removed. If a depot building was all that was necessary to protect the plaintiffs from damage, one to cost five hundred dollars was all that was required under the terms of the agreement ; and if the maintenance of stock- yards without an agent would have been a performance upon the part of the company, it is obvious a small amount woflld have replaced them; and though there is no evidence of their cost, there would have been little or no difficulty in showing their value under the ordinary rules of evidence. On the other hand, if the two and one-half miles of embankments should be washed away and not replaced, or maintained at the height required, the damages to the landowner might possibly be even more than five thousand dollars. Looking at the situation as it existed when this contract was made, we are of opinion that it was not then the intention of the parties to consider the five thousand dollars as "liquidated damages" for a failure on the part of the company to perform each of its agree- ments ; but that it was intended as a penalty to insure the perform- ance of them all, and to pay only such damages as the grantor might sustain within said amount, because of a breach of any of them. Whether the plaintiffs, or the grantor, Hilbert, would be entitled to recover the actual damage, if any there be, for the failure to main- 22 PENALTIES AND FORFEITURES tain the station and stockyards, we do not determine, as there must be a new trial. The judgment of the Circuit Court is reversed, and the cause remanded to the United States District Court for the Eastern Dis- trict of Missouri, with directions to grant a new trial. 2 RACHEL C. JOHNSON v. HARL J. COOK ET AL. Supreme Court of Washington, 1901. 24 Washington, 474. 1 . Mount, J. : This action was brought by plaintiff against defend-' ants to recover upon a bond. The complaint, omitting the formal parts and paragraphs not necessary to a determination of the ques- tions presented here, is as follows : "1. That the defendants Harl J. Cook and Mara S. Cook being desirous of obtaining a loan from the plaintiff, for the sum of $3750, and which said loan was to be secured by a mortgage upon various lots situated in Liberty Park addition, and upon lot 15, block 3, Cook & Byer's addition to the city of Spokane, Wash., as an inducement to the plaintiff to make the said loan aforesaid said defendants agreed to construct upon lots 22 and 23 of block 6, in Liberty Park addi- tion to the city of Spokane, Washington, and which said lots were included in said mortgage, a house which, exclusive of the founda- tion then built thereon,, was tp cost not less than the sum of $2000, and to be completed within six months from said April 26, 1892. "3. That to insure the erection and completion of said house, which was to cost the sum of $2,000, and to be completed within the six months hereinbefore referred to, and to secure this plaintiff against any loss or damage on account of the failure to thus build said house, and to expend the said sum of $2,000 in the building "Accord: Daily v. Litchfield, 10 Mich. 29 (1862); Wallis v. Carpenter, 95 Mass. 19 (1866) ; White field v. Levy, 35 N. J. L. 149 (1871) ; Hough v. Kugler, 36 Md. 186 (1872) ; Trower v. Elder, 77 111. 452 (1875) ; March v. Allabough, 103 Pa. 335 (1883) ; Bignall v. Gould, 119 U. S. 495 (r886) ; Carter v. Storm, 41 Minn. 522 (1889) ; Wilhelm v. Eaves, 21 Ore. 194 (1891) ; Keck v.. Bieber, 148 Pa. 645 (1892) ; Monmouth P. Ass'n v. Warren, 55 N. J. L. 598 (1893) ; El Reno v. Cullinane, 4 Okla. 457 (1896) ; East Moline Co. v. Wier P. Co., 95 Fed. 250 (1899) ; Mansur & T. Co. v. Tissier A. Co., 136 Ala. 597 (1902) ; Stillwell v. Paepche L. Co., 73 Ark. 432 (1904) ; Boulware v. Crohn, 122 Mo. App. 571 (1906) ; Raymond v. Edelbrock, 15 N. Dak. 231 (1906); Floding v. Floding, 137 Ga. 531 fign) ; Gibbs v. Cooper, 90 Atl. 1115 (N. J. 1914) ; Gougar v. Buffalo S. Co., 141 Pac. 511 (Colo. 1914). Compare: Bagley v. Peddie, 5 Sandf. (N. Y.) 192 (1851) ; Clement v. Cash, 21 N. Y. 253 (i860) ; Brownold v. Rodbell, 130 N. Y. App. Div. 371 (1909) ; York v. York Ry. Co., 229 Pa. 236 (1910). 1 Part of the opinion is omitted. RACHEL C. JOHNSON v. HARL J. COOK et al. 23 thereof, the defendants herein, in consideration of making said loan and the advancement of the sum ol $3,750 by this plaintiff, made, executed and delivered to the plaintiff, this written obligation as follows, to- wit : " 'Know all men by these presents : That we, Harl J. Cook and Mara S. Cook, his wife, as principals, and J. W. Chapman and E. M. Lownes, as sureties, are holden and firmly bound unto Rachel C. Johnson of New York City in the sum of Three Thousand Dollars, for the payment of which to the said Rachel C. Johnson, or her executors, administrators or assigns, we hereby jointly and severally bind ourselves, and our heirs, executors, and administrators firmly by these presents. " 'The condition of this obligation is such that if the above bounden Harl J. Cook and Mara S. Cook shall well and truly build, or cause to be built, a house upon the premises known as lots 22 and 23 of block 6, in Liberty Park addition (so-called), within six months from date hereof, and to be completed within said time, and which shall cost not less than the sum of two thousand dollars ; and shall well and truly pay, or cause to be paid, all liens, incumbrances, claims 6r demands of any kind, name or nature against the said property which may be prior, or threaten to become prior, liens or claims to the mortgage of the said Rachel C. Johnson, dated April 11, 1892, and'acknowledged on that day, and shall save and keep harmless the said Rachel C. Johnson of and from the payment of all moneys by reason of any liens or incumbrances upon said property existing, or which are likely to exist or be made, against said property, together with any interest paid on any such sums, then this obligation to be null and void ; otherwise, to remain in full force and effect. " 'In witness whereof we have hereunto set our hands and seals this April 26, 1892. (Signed) " 'Harl J. Cook. " 'Mara S. Cook. " 'J. W. Chapman. " 'E. M. Lownes. " 'Signed and sealed in presence of " 'Martin B. Connelly. " 'Walter E. Mariner.' "4. That said plaintiff, relying upon said agreement, advanced to the defendants Cook the sum of $3,750, but neither of said Cooks, nor any one else for, or in their behalf, erected, within six months from said April 26, 1892, or have ever erected, a house upon the said premises hereinbefore described, and the said premises have remained in the same condition that they were in at the time said agreement was/entered into. "5. That no part of the said sum of $3,750 has ever been paid, nor the sum of $3,000 agreed to be paid by virtue of the instrument hereinbefore set out, this to the damage of this plaintiff in the sum 24 PENALTIES AND FORFEITURES of $3,000 with interest thereonj^rom April 26, 1892, at the rate or 10 per cent, per annum." Defendant Chapman, answering separately, denied the para- graphs above mentioned, except that he admitted the execution of the bond, and that the house named therein was never erected ; and, further answering, alleged : "1. That this plaintiff loaned said defendants Cook the sum of three thousand seven hundred fifty ($3,750) dollars, taking as secur- ity therefor a mortgage on various lots in Liberty Park addition to the city of Spokane, in said county, and the said parties Cook also agreed to construct a house upon lots twenty-two (22) and twenty- three (23) of block six (6) of said addition, being two of the lots described in said mortgage, and the bond set out in the complaint was given as additional security for said loan. "2. That the plaintiff did, on various occasions, give extensions of time to said defendants Cook for the payment of their said indebtedness, and parts thereof, without the knowledge or consent of this defendant, to his damage and injury and thereby released this defendant as a surety upon any and all obligations under said bond." And further alleged : "5- For further answer, and by way of defense, this defendant alleges, that an action has been commenced by the plaintiff and is now pending in the above entitled court for the foreclosure of the mortgage referred to in the complaint; that the property described in said mortgage is of great value, and, in case a decree of fore- closure is granted, may sell for enough to pay said indebtedness in full." Plaintiff in her reply admitted paragraphs 1 and 2 of the fourth defense and all of the fifth defense, except that the property was of great value, and alleged that the same was not worth to exceed one thousand dollars. When the cause was called for trial, defendant moved for judgment upon the pleadings, which motion was by the court sustained, and judgment of dismissal entered. Plaintiff appeals. The principal question presented upon this appeal is whether the sum named in the bond, viz., three thousand dollars, is a penalty or liquidated damages. If the said sum named is liquidated damages, the plaintiff is entitled to recover the whole thereof ; if a penalty, she is entitled to recover the actual damages suffered by reason of the violation of the terms of the bond. The pleadings concede the exe- cution of the bond and its violation ; also that the mortgage given at the time the bond was given had not, at the time of the bringing of this action, been foreclosed. The complaint was prepared upon the theory of liquidated damages. Mr. Pomeroy, in his work on Equity Jurisprudence, after stating that it is well settled that if the intent of the parties to the contract is at all doubtful, the tendency of the courts is in favor of the interpretation which makes the sum a penalty, and that it is impossible to formulate a general rule by which RACHEL C. JOHNSON v. HARL J. COOK et al. 25 the question of penalty or liquidated damages can be determined in every instance, gives the following as rules which have been estab- lished by judicial authority : ''First. Wherever the payment of a smaller sum is secured by a larger, the larger sum thus contracted for can never be treated as liquidated damages, but must always be considered as a penalty. "Second. Where an agreement is for the performance or non- performance of only one act, and there is no adequate means of ascertaining the precise damage which may result from a violation, the parties may, if they please, by a separate clause of the contract, fix upon the amount of compensation payable by the defaulting party in case of a breach ; and a stipulation inserted for such purpose will be treated as one for 'liquidated damages,' unless the intent be clear that it was designed to be only a penalty. "Third. Where an agreement contains provisions for the per- formance or nonperformance of several acts of different degrees of importance, and then a certain sum is stipulated to be paid upon a violation of any or of all such provisions, and the sum will be in some instances too large and in others too small a compensation for the injury thereby occasioned, that sum is to be treated as a penalty, and not as liquidated damages. "Fourth. Whether an agreement provides for the perform- ance or nonperformance of one single act, or of several distinct and separate acts, if the stipulation to pay a certain sum of money upon a default is so framed, is of such a nature and effect that it neces- sarily renders the defaulting party liable in the same amount at all events, both when his failure to perform is complete and when it is only partial, the sum must be regarded as a penalty, and not as liquidated damages. 2 "Fifth. Finally, although an agreement may contain two or more provisions for the doing or not doing different acts, still, where the stipulation to pay a certain sum of money upon a default attaches to only one of these provisions, which is of such a nature that there is no certain means of ascertaining the amount of damages resulting from its violation, or where all of the provisions are of such a nature that the damages occasioned by their breach cannot be measured, and a certain sum is made payable upon a default generally in any of them — in each of these cases, the sum so agreed to be paid may be considered as liquidated damages, provided, of course, that the language of the stipulation does not bring it within the limitations of the preceding fourth rule. . . ." Pomeroy, Equity Jurispru- dence, Sees. 441-445. It seems from these rules that where the damages are uncertain, and cannot be determined with accuracy, then the sum named* in the bond may be considered as liquidated damages. This case certainly does not fall within this rule, because a house costing two thousand 'Pomeroy adds: "This rule plainly ■ rests upon the same ground as the third, and may be considered a particular application thereof."' 26 PENALTIES AND FORFEITURES dollars would certainly be worth no more than it cost, and "liens, incumbrances, claims and demands" must of necessity become cer- tain and capable of accurate determination. These items are not like damages arising from loss of business occasioned by failure to deliver certain goods at a particular time or place, or like damages arising from delay in performing contracts and items of this nature. The agreement, then, must fall within one of the rules which con- strues the same to be a penalty, and we have no doubt that the fourth rule fully covers the contract in question here. This bond provides for the erection of a house costing not less than two thousand dollars, and also for the payment of liens, etc. After the house had been erected it was still the duty of the obligors to pay the liens, etc., and a violation of any of these obligations would have subjected defend- ants to the same kind of an action ; for the bond cannot be inter- preted to be for "liquidated damages" as to the house, and for a "penalty" as to the other liens. The complaint makes no allegation of any breach except the failure to erect the house ; presumably there was no other. If the house had been erected as provided, and one hundred dollars in liens filed against the property, could any one seriously contend that the defendants would be liable for three thousand dollars under the bond, because of failure to pay one hun- dred dollars? Assuredly not. And yet this principle must apply with less force, when it is claimed, as here, that for failure to erect the house defendants must pay three thousand dollars. Plaintiff alleges in paragraph 3 that the bond was executed and delivered to secure the erection and completion of the house, "and to secure this plaintiff against any loss as damages on account of the failure to thus build said house." If there could be any doubt as to whether or not the sum named should be construed to be a penalty, this alle- gation would certainly settle the doubt in favor of such construction. The sum named in the bond must be held to be a penalty. See, also, 1 Sedgwick, Damages (8th Ed.), Sec. 408 et seq,.; 2 Story, Equity Jurisprudence (13th Ed.), Sec. 1314 et seq.; 1 Sutherland, Damages (2d Ed.), Sec. 283 et seq.; Long v. Pierce County, 22 Wash. 330 (61 Pac. 142).* 'Accord: Shreve v. Bereton, 51 Pa. 175 (1865); Jemmison v. Gray, 29 la. 537 (1870) ; Lee v. Overstreet, 44 Ga. 507 (1871) ; Haymaker v. Schroers, 49 Mo. 406 (1872) ; Dullaghan v. Fitch, 42 Wis. 679 (1877) ; Heatwole v. Gorrell, 35 Kan. 692 (1886) ; Squires v. Ellwood, 33 Neb. 126 (1891) ; Gay M. Co. v. Camp, 65 Fed. 794 (1895); Public Works Commissioner v. Hills (1906), App. Ca. 368; Evans v. MoseHey, 84 Kan. 322' (.1911), s. c, 50 L. R. A., N. €., 889; Mount Airy M. Co. v. Runkles, 118 Md. 371 (1912). ■Where A was employed as superintendent of a factory by a written contract, which was to run ten years, and the parties bound themselves in the sum of $10,000 liquidated damages, the sum was held a penalty. It could not be believed, said the court, "that the parties intended that the same amount should be paid for a breach in the last month of the tenth year, as for one in the first month of the first year." Ex parte Pollard 2 Lowell's Dec. 4" (r875)- HENDERSON v. MURPHREE 27 HENDERSON v. MURPHREE. . Supreme Court of Alabama, 1905. 109 Alabama, 556. Appeal from the Chancery Court of Pike. Heard before the Hon. Jere N. Williams. This was a bill by W. H. Murphree against J. D. Henderson and J. C. Henderson, for a partnership settlement and accounting. The bill shows that the complainant, who had no capital of his own, was taken into partnership by the defendants, at the time and under the circumstances stated in the opinion ; and that the partnership con- tract was modified in June, 1894, as indicated in the opinion, the stipulation there referred to being as follows : "It is expressly under- stood and agreed that this partnership is formed for the purpose of carrying on a mercantile business, and each of the managing mem- bers thereof (J. D. Henderson and W. H. Murphree) is expected to do what he can to promote its interests. And it is further agreed and expressly understood that, as the said Wm. H. Murphree is strongly addicted to the excessive use of spirituous, vinous and malt liquors, he, the said Wm. H. Murphree, shall abstain altogether from the use and indulgence in the same in any form or quantity. And if, in this respect, the said Wm. H. Murphree shall violate this agree- ment, it is hereby expressly agreed that he shall forfeit to the said J. D. & J. C. Henderson all of his rights and interests in the profits that may have accrued in the said business up to, the date of the violation thereof, or any profits that may accrue thereafter, and any or every interest he may have in said business, and shall cease to have any connection with the said business in any manner; but he is to receive for the services he may have rendered in the said business the sum of $83.33-100 per month, commencing from Octo- ber 1 st, 1893, up to the time he violates this contract, less what he may have already drawn out of said business. And in addition thereto, it is agreed that the said J. D. & J. C. Henderson shall pay the unpaid assessment of $47.50 due the Building & Loan Associa- tion in which the said W. H. Murphree's house is encumbered pre- ceding the said violation." The bill further averred that the firm did a large and profitable business, and that on December 1, 1894, the net profits of the firm were about 1$ 12,000; that a few days after December 1, 1894, the complainant again became intoxicated, but was, at the time, away from his place of business ; and his intoxica- tion was of short duration, and that no injury or damage resulted from said drunkenness to the business ; that after he became sober he returned to the place of business of the firm, and was notified by J. D. and J. C. Henderson that he had forfeited his rights under said contract in the partnership business, and they denied and refused to allow him to participate in the business as a partner. It was fur- ther averred in the bill that it was the object and intention of incor- 28 PENALTIES AND FORFEITURES porating the fourth paragraph in the said contract "to secure said J. D. & J. C. Henderson against loss or injury to the said business by the use of intoxicating liquors by complainant, and when it accom- plished that end all purposes for which it was inserted in said con- tract were met, and he (the complainant) avers that if any injury resulted by reason of his intoxication in December, 1894, it was so small, and of so little consequence, that it would be against all good conscience and equity to allow the same t6 warrant a forfeiture of complainant's interest in said profits." The defendants demurred to the bill on the following grounds: "1st. Complainant admits that he voluntarily entered into and executed the partnership agree- ment or contract dated June nth and 12th, 1894, by which the old partnership agreement was altered and changed. 2nd. Complainant admits that a few days after December 1st, 1894, he became intoxi- cated, and thereby violated the partnership contract. 3rd. Com- plainant does not anywhere in his bill show any reason why he should be exempt from his liability for the violation of his contract, which is fixed in said contract. 4th. The contract provides for the termination of the partnership agreement, if W. H. Murphree shall use intoxicating liquors to any amount prior to the time fixed in said agreement. For aught the court could know, the complainant elected to take the $83.33 per month and the payment of $47.50 on the mort- gage on his house as a certain compensation, rather than take his chances of realizing anything out of the profits of the business." The defendants appeal from a decree overruling the demurrer. 1 Haralson, J. : The main facts in this case are so certain and undisputed that there can be no possible uncertainty or ambiguity about them. The defendants had reasons to believe that complain- ant had reformed from his former habits of intemperance. They had, from the 1st of October, 1892, as it would seem, been employing him as a clerk. They proposed on the 14th of March, 1894, to inter- est him in their business, not for the purpose of encouraging him, simply, to keep sober, though that might have been incidental to the arrangement, but to secure his interest in and services to their busi- ness. The supposed pecuniary benefit to accrue to each was evidently the moving consideration. This conclusion finds support in the fact that on March 14, 1894, the date of the partnership, he was offered an interest in a business with J. M. Henderson, another relative. The offer of defendants, therefore, may be regarded as having been made from a pecuniary and business point of view, to keep him from leaving them and going into the service of another. It cannot be said that the provisions in the contract against complainant's use of intox- icating liquors was merely to secure his sobriety for his own benefit, and that this must be considered as the principal intent of the agree- ment, and that the forfeiture provided was merely accessory thereto, intended as a penalty to secure only the damages to defendants that omitted. 1 The arguments of counsel and part of the opinion of the court are tted. HENDERSON v. MURPHREE 29 might accrue from complainant's breach of the agreement. Defend- ants knew that complainant had been addicted to the destroying vice of intemperance, and had, as he himself avers in the bill, lost and squandered a handsome fortune in consequence. So, after having, from interested pecuniary motives, taken him in as a partner, and having every expectation, no doubt, that he would continue to remain sober and attentive to business, how great must have been their dis- appointment when, on the 1st of June, following their partnership contract in JMarch, he should have turned up intoxicated, just at the wrong time? Defendants could not stand that. It portended too much damage to them; and when complainant had sobered, they made the plain, fair proposition to him we find embodied in their mutual written agreement, which he accepted. In this, they required that he should abstain altogether from the use and indulgence in spirituous, vinous or malt liquors in any form or quantity as a con- dition to his continuance in the partnership, and this independent of any damage he might or might not occasion to the defendants by his violation of the contract in this respect. This was a condition they had a right and an interest to provide against. They knew the dis- aster that might come from a drunken partner, who had already squandered his estate in a dissipated life, and that he might do, in a day or night, or in a short time, far more- damage than his services were worth in a year. They made, and he, in good faith no doubt, accepted the proposition submitted in the alternative, that he should bind himself to drink no more, and if he did, the contract of partner- ship was to be thereby terminated; that, in such case, he should thereafter have no interest in the partnership, whatever, and would accept, in lieu thereof, the wages of an employee for his services, at $83.33 P er month, from October 1, 1893, when the business com- menced, up to the time of his violation of the contract, less what he might have drawn out from the business meantime, and $47.50 to pay for the mortgage on his house. He violated the agreement on the 1st of November, 1894, and defendants simply stood on the letter of the contract, to hold him as no longer interested in any of the business or profits of the partnership, but to pay him for his services as provided, which sum, by his deliberate violation of the agreement, he elected to take, in the place of profits. The agreement was fair, on a valuable consideration, so plain that no man in the world can construe it to be doubtful or ambiguous, and on every principle of justice he must abide by it. To hold otherwise would be to set aside the agreement the parties intended to make and did make, and make another for them, which they did not make. This cannot be done. The damages to accrue from plaintiff's violation of his agreement were not certain. They may have been very great, or very small, or none at all, owing to circumstances. In view of the possible or prob- able injury he might occasion by its violation, the requirement that he should give up his interest in the partnership and accept the pay stipulated, in that event, for his services as a clerk, was not unrea- sonable or unconscionable, but just and wise to have been made. No fraud or imposition is suggested, the intention is clear, and every 30 PENALTIES AND FORFEITURES reason, therefore, under the authorities referred to, for holding this provision as a penalty in the nature of a security for no more than the actual damage that might accrue to defendants from a violation by complainant of his agreement departs, and the theory on which the bill is filed is without foundation. That such was the intention of the parties is absolutely foreclosed by the writing itself. The demurrer interposed to it was good, and should have been sustained, or the bill dismissed for want of equity. If there is any way to amend it, under the agreement set out, so as to give it equity, we fail to discover it. A decree will be here rendered reversing the decree of the chancery court overruling the motion to dismiss for want of equity, and dismissing the bill. 2 Reversed and rendered. GEORGE KOCH v. HENRY STREUTER. Supreme Court of Illinois, 1965. 218 Illinois, 546. This is a bill, filed by the appellant against the appellee to reform a contract for the sale or exchange of certain lands, and for a specific performance of the contract when so reformed. The appellee here, defendant below, demurred to the bill. The demurrer was sustained, and the appellant, complainant below, elected to stand by his bill. Thereupon a decre or order was entered dismissing the bill. The present appeal is prosecuted from such order or decree of dismissal. 1 Magruder, J. : The only question in this case is whether the court below properly sustained the demurer to the bill. The appellee urges three reasons why the bill was demurrable; first, that no spe- cific performance would lie, because the contract provided for liqui- dated damages in case of failure of either party to perform his part of said contract ; and this was the only remedy appellant was entitled to ; second, that the appellant was not entitled to have the contract 2 Accord: .Woodward v. Gyles, 2 Vern. 119 (1690); Rolfe v. Peterson, 2 Bro. P. C. 436 (1772) ; Slosson v. Beadle, 7 Johns. (N. Y.) 72 (1810) ; Allen v. Brazier, 2 Bailey S. Car. L. 293 (1831) ; Pearson v. Williams, 24 Wend. (N. Y.) 244- (1840), affirmed 26 Wend. (N. Y.) 630 (1841) ; French v. Macale, 2 Dr. & War. 269 (1842) ; Fisher v. Shaw, 42 Me. 32 (1856) ; Parfitt v. Chambre, 15 Eq. 36 (1872) ; Penna. R. Co. v. Reichert, 58 Md. 261 (1882) ; Smith v. Bergengren, 153 Mass. 236 (1891) ; Dills v. Doebler, 62 Conn. 366 (1892) ; Taylor v. Smith, 24 N. Y. App. Div. 519 (1897) ; Gallup v. Sterling, 22 N. Y. Misc. 672 (1898) ; Burgoon v. Johnson, 194 Pa. 61 (1899) ; Amanda G. M. Co. v. Peoples M. Co., 28 Colo. 251 (1901) ; Hull v. Angus. 60 Ore. 95 (1911) ; Stevens v: Los Angeles, 130 Pac. 197 (Colo. 1912) • Hughes v. Hughes, 162 Ky. 505 (1915)- See 1 Sedgwick on Damages (9th Ed.), Sees. 421-424. 1 The arguments of counsel and part of the opinion of the court are omitted. GEORGE KOCH v. HENRY STREUTER 31 reformed as to the kind of abstract, that was to be furnished as to the 2.87 acres lying south of the Illinois River ; and third, that the appellee's land was insufficiently described. First. — The written contract between appellant and appellee contained the following provision: "It is further agreed that, if either party hereto fails to keep or perform the covenants herein- above specified, said party so defaulting shall forfeit to the other the sum of $1000.00, said sum being the agreed liquidated damages.'' The contention of the appellee upon this branch of the case is that, where the contract itself has assessed the damages which the party is to pay upon his doing or omitting to do a particular act, which he has covenanted to abstain from or to perform, equity will not inter- fere either to prevent or to re-enforce the act in question, or to restrain the recovery of damages. In other words, the rule is invoked that, when the parties have agreed upon the compensation of the breach, or, whatsis the same thing in principle, provided the means by which it may be obtained, the necessity of the interference of a court of chancery no longer exists, and the jurisdiction of such court falls to the ground. (Bodine v. Glading, 21 Pa. St. 50.) As a result of this principle, it is said that in this case the appellant has his remedy at law to recover the sum of one thousand dollars, agreed upon as liquidated damages, and that a court of equity will not enter- tain this bill for a specific performance. Whether the rule thus announced applies in the case at bar depends upon the question, whether or not the sum of one thousand dollars, being the agreed liquidated damages, is a penalty to be regarded as a mere security for the performance of the contract. Where a suit at law is brought on such a contract, as is here under consideration, the question often arises whether the sum to be for- feited is a penalty, or liquidated damages, and whether the party, seeking a recovery, is entitled to the actual damages suffered, or to the damages mentioned in the provision. In a court of chancery, however, the question is whether one certain act shall be done, or ' whether one of two things shall be done at the election of the party who is to perform the contract. Pomeroy in his work on Equity Jurisprudence (Vol. 1, Sec. 447) says : "Where, however, the parties to an agreement have added a provision for the payment, in case of a breach, of a certain sum, which is truly liquidated damages, and not a penalty — in other words, where the contract stipulated do for one or two things in the alterna- tive, the doing of certain acts, or the payment of a certain amount of money in lieu thereof — equity will not interfere to decree a specific performance of the first alternative, but will leave the injured party to his remedy of damages at law." In Lyman v. Gedney, 114 III. 388, it was contended for the appellant that a certain clause, written in an instrument whereby each party bound himself to the other in the sum of one thousand dollars liquidated damages, limited the rights of the parties upon a breach of the contract, in equity as well as at law, and that the only 32 PENALTIES AND FORFEITURES remedy was through an action at law for that sum; but this court there said (p. 398) : "The mere fact that a contract stipulates for the payment of liquidated damages, in case of failure to perform, does not prevent a court of equity from decreeing specific perform- ance. (Fry on Specific Performance, Sec. 67, et seq.; Waterman on Specific Performance, Sec. 22; Pomeroy on Contracts, Sec. 50.) It is only where the contract stipulates for one of two things in the alternative — the performance of certain acts, or the payment "of a certain amount of money in lieu thereof — that equity will not decree a specific performance of the first alternative." In Barrett v. Geisinger, lyg 111. 240, it was held that specific performance of a contract to make a will in a particular manner cannot be enforced, where the contract is in the alternative, either to make the will, or pay a sum of money. And this court there quoted from Fry on Specific Performance, and Waterman on Spe- cific Performance, and from the case of Lyman v. Gedney, supra, and said that equity will not interfere to enforce specific perform- ance where the agreement, looked at as a whole, gives to the party the option to do the act or pay a certain sum ; but it was there held that where one certain act is to be done with a sum annexed, whether by way of penalty or damages, to secure the performance of the act, the fact that a penal or other like sum is annexed will not prevent the court from enforcing the performance of the very act, and thus carrying into execution the intention of the parties. In other words, where the sum annexed, whether by way of penalty or damages, is so annexed for the purpose of securing the performance of the con- tract, equity will decree a specified performance; but where the contract stipulates for one of two things in the alternative, that is, where the party has the right either to perform certain acts or to pay a certain amount of money in lieu thereof, then equity will not decree a specific performance of the first alternative. 2 If these principles be applied to the contract in question, we see no reason why a court of equity will not specifically enforce it. There is nothing in the terms of the contract which indicates that either party has the option or election to do the things provided for in the contract, or to pay the sum of one thousand dollars as liquidated damages. The contract provides that the appellee agrees to sell and convey by warranty deed a farm, and the appellant, in consideration thereof, agrees to convey to appellee by warranty deed 341.98 acres. The land to be conveyed by appellant was subject to a mortgage, and there are certain provisions in relation to the assumption of thiaj mortgage, and the execution of another mortgage upon the property. By the terms of the contract each party is to pay the respective taxes 'Articles for the sale of real estate provided that if the vendee refused to comply with the terms of the agreement the sum paid down should be retained as liquidated damages "and all other rights under this agreement shall be at an end." Held: That the parties had mutually waived their right to specific performance. Heckman's Estate, 236 Pa. 193 (1912). Ac- cord: Davis v. Isenstein, 257 111. 260 (1913) ; Clark v. Rosario M. & M. Co., 176 Fed. 180 (1910). UNITED SHOE MACHINERY CO. v. ABBOTT 33 and assessments, which were then liens for the year 1904 upon the farm and the 341.98 acres. By the terms of the agreement each party was to tender to the other an abstract of title and appellant was to have the right to examine the premises and notify appellee whether they were satisfactory or not. It was also agreed that the conveyances should be made at any time not later than March 1, 1905. By the terms of the agreement, also, the deeds were to be deposited in escrow on or before March 1, 1905, in a certain bank in Ottawa, Illinois, and the bank was to deliver the deeds to the grantees upon the performance of the covenants contained in the contract, and appellee was to pay appellant the sum of two hundred and fifty dollars commissions. We have thus referred to the main provisions of the contract for the purpose of showing that the provision in regard to the forfeiture of one thousand d611ars, as agreed liquidated damages, was merely a security for the performance of the contract, and that there is nothing in the terms of the contract to justify the conclusion that either party had a right to perform the contract, or, in lieu thereof, to pay the sum of one thousand dollars. As the con- tract, therefore, is not alternative in its nature, a court of equity is not ousted of its jurisdiction to decree a specific performance by reason of the provision contained in the contract in reference to the forfeiture of one thousand dollars as agreed liquidated damages. 3 Reversed and remanded. UNITED SHOE MACHINERY CO. v. ABBOTT. Circuit Court of Appeals, U. S., Eighth Circuit, 1908. 158 Federal, 762. 1 Sanborn, J. : The appellant, the United Shoe Machinery Com- pany, leased certain patented machines for the lives of the patents to the Tennent Shoe Company, the bankrupt, under a contract 'Accord: Hobson v. Trevor, 2 P. Wms. 181 (1723); Howard v. Hop- kyns, 2 Atk. 371 (1742) ; Chilliner v. Chilliner, 2 Ves. Sr. 528 (I7S4) ; Barret v. Blagrave, 5 Ves. 555 (1800) ; Chamberlain v. Blue, 6 Blackf. (Ind.) 491 (1843); Dike v. Green, 4 R. I. 285 (1856); Hooker v. Pynchon, 74 Mass. 550 (1857) ; Hull v. Sturdivani, 46 Me. 34 (1858) ; Whitney v. Stone, 23 Cal. 275 (1863); Long v. Bowring, 33 Beav. 585 (1864); Ewins v. Gor- don, 49 N. H. 444 (1870) ; Jones v. Heavens, 4 Ch. D. 636 (.1877) ; Henry's Estate, 19 Phila. 468 (1885); Diamond Match Co. v. Roeber, 106 N. Y. 473 (1887), s. c, 1 Ames' Cases on Equity, 123 and note; National P. Bank v. Marshall, 40 Ch. D. 112 (1888); Wilkinson v. Colley, 164 Pa. 35 (1894); Brown v. Norcross, 59 N. J. Eq. 427 ( 1900) ; Augusta S. L. Co. v. Debow, 98 Me. 496 (1904) ; Buckhout v. Witwer, 157 Mich. 406 (1909) ; Hudman v. Henderson, 124 S. W. 186 (Tex. 1909) ; Redwine v. Hudman, 133 S. W. 426 (Tex. 1911) ; Cape May R. E. Co. v. Henderson, 231 Pa. 82 (1911) ; Johnston v. Blanchard, 116 Pac. 973 (Cal. 1911) ; Mikelaicsak v. Kruppa, 254 111. 209 (1912) ; Donahoc v. Franks, 199 Fed. 262 (1912) ; Hedrick v. Firke, 135 N. W. 319 (Mich. 1912) ; Jordan v. Johnson, 98 N. E. 143 (Ind. App. 1912). Contra: Hahn v. Concordia Soc, 42 Md. 460 (1875) ; Martin v. Murphy, I2g Ind. 464 (1891); Rucker v. Campbell, 35 Tex. Civ. App. 178 (1004). 1 Part of the opinion of the court and the dissenting opinion are omitted. 34 PENALTIES AND FORFEITURES* "' whereby the lessee agreed to pay certain rentals at the ends of the months succeeding those in which they were earned, and the lessor agreed that in every case in which the lessee should pay the rentals earned in any month on or before the fifteenth of the succeeding month, or fifteen days before they became due, the lessor would grant a discount of fifty per cent, in consideration of such payment. The rentals for the months of December, 1905; January and Feb- ruary, 1906; amounted to $2247.52, and they have never been paid. The lessor proved this amount as a part of its claim against the estate of the lessee, and the court below reduced it one4ialf, on the ground that the agreed discount for prompt payment was a penalty which could not be recovered. The argument in support of this conclusion is that the actual debt was fifty per cent, of the agreed rentals • that, while the cohtract is not so by its terms, it is in reality an agreement to pay the larger sum, the agreed rentals, in case of default in payment of one-half that sum, and hence the other half, the agreed discount, is a penalty for the failure to pay the first half, and cannot be recovered. Legal interest is th'e measure of damages for the failure to pay debts when they are due, and hence a contract to pay an amount in excess of such interest on account of a default in the payment of money when it is due is an agreement for a penalty which the courts will not enforce. But interest is not the measure of the discount a creditor may lawfully make for the payment of his claim before it is due and this lease is a contract for such a discount, and not for the payment of a larger sum for default in the payment of a debt when due. The practice of merchants to sell their goods at fixed prices on credits of many days and months with agreed discounts far in excess of legal interest, discounts varying from two to sixty per cent, for payment in less time or for cash, is too general and patent for the courts of a commercial people to be oblivious of it. If a pur- chaser of goods at a fixed price on a credit of six months with an agreed discount of fifty per cent, for payment in thirty days should fail to pay at all, it would be a novel defense that he was liable for but half the price, and that the other half was a penalty for his default of payment within the thirty days, and a court would hesitate long to sustain it. Public policy, evidenced by the decisions of the courts and the statutes of the states, prohibits the enforcement of contracts to pay more than lawful interest for the breach of a simple contract to pay a debt at the time agreed, but it does not forbid creditors from mak- ing enforceable agreements to grant their debtors discounts far in ' excess of lawful interest for the payment of their obligations before they are due. It wisely leaves them free to make their own contracts in this regard, because the subject and the consideration of such agreements is the extension of credits, and not the mere delay or forbearance of collection of overdue debts. It is for this reason that such agreements do not fall under and are not governed by the rule applicable to contracts of the latter class. Counsel argue that the actual debt was the agreed rentals less UNITED SHOE MACHINERY CO. v. ABBOTT 35 the discount. But the parties to this agreement were competent to contract and they expressly agreed to the contrary. If agreements for discounts were vulnerable as penalties there could be but one criterion of their validity, and that would be their relation to lawful interest. If the parties were not free to contract for such discounts as they chose, then agreements for them in excess of lawful interest must be void, and those not so in excess alone valid. There could be no other standard by which to try them. And a rule of law to the effect that notwithstanding the express agreement of the parties the actual debt, when an unearned discount is agreed upon, is the agreed debt less the discount, would avoid every contract for a dis- count in excess of lawful interest, and would strike down thousands of commercial contracts that are now valid and enforceable. After the rentals for several months fell due' the lessor accepted payment of them less the discounts, and it is said that this fact evi- dences a constructipn by the parties that the contract was for a pen- alty and a waiver of the right to collect the agreed rentals for subse- quent months. But the acceptance of a part of an overdue claim for the whole is not persuasive evidence that the written contract that the whole was owing, did not mean that which it declared, nor is it a waiver of a right to enforce an agreement for the payment of a subsequent debt not then due. The basis of waiver is estoppel ; where there is no estoppel there is no waiver, and there is no element of estoppel here. Insurance Company v. Wolff, 95 U. S. 326, 32?, 24 L. Ed. 387 ; Assurance Company v. Building Association, 183 U. S. 308, 357, 22 Sup. Ct. 133, 46 L. Ed. 213 ■ Equitable Life Assur. Society v. M'Elroy, 28 C. C. A. 365, 372, 83 Fed. 631, 640. The parties to this transaction deliberately contracted in writing that the rentals here, in question should be due at the ends of the respective months succeeding those in which they were earned, that they should be $2247.52, and that if they were paid respectively fifteen days before they became due the lessor would grant the lessee the discount of fifty per cent. A contract by a debtor to pay an amount in excess 6f lawful interest in the event of his default in the payment when due of a simple contract debt is a contract for a penalty, against public policy and unenforceable. But an agreement in a contract for the sale or lease of property to give to the debtor a discount in excess of lawful interest in the event of his payment of the agreed price or rental before it is due is not obnoxious to public policy, is not a contract for a penalty and is valid and enforceable in the courts. The lease under consideration is of the latter class, and the lessor is entitled to the allowance of its claim for the full amount of the agreed rentals. In the consideration of this case the following authorities which directly or indirectly relate to the ques- tion at issue have been considered: Long-worth v. Askren, 15 Ohio St. 370; May v. Crawford, 142 Mo. 390, 44 S. W. 260; Loudon v. Taxing District, 104 U. S. 771, 26 L. Ed. 923 ; Missouri Edison Electric Company v. Steinberg Hat & Fur Company, 94 Mo. App> 543, 68 S. W. 383; Missouri Edison Electric Company v. Bry, 88 Mo. App. 136; Missouri Electric Light & Power Company v. Car- 36 PENALTIES AND FORFEITURES mody, 72 Mo. App. 534; 19 American & English Encyc. of Law (2d Ed.) 418. The case of Goodyear Shoe Machinery Company v. Selz, Schwab & Company, 157 111. 187, 41 N. E. 625, Id., 51 111. App. 390, upon which counsel for the trustee seem to rely chiefly, has also been carefully examined. So far as it is inconsistent with the views which have been expressed it does not commend itself to our judg- ment. In our opinion, however, the contract in that case provided for a discount of fifty per cent, for the payment of the agreed rents within fifteen days after they fell due, and in that way imposed a penalty of fifty per cent, for a delay of payment more than fifteen, days after the due date, so that the case fell under the first rule. On the other hand, in the case at bar the agreement is to grant the dis- count in case the payments are made more than fifteen days before they become due, so that it falls under the second rule. It is said that this feature of the contract makes it a mere sham and an evasion of the first rule, and that its legal effect is the same as that of the contract in the Goodyear Shoe Machinery Company case. The argument proves too much. By the same mark, every contract for a discount in excess of legal interest would be a sham and an evasion of a contract for a penalty. The truth is that this contract is valid on its face, that the parties to it had the right under the law to make such a contract for a discount, and they made it. It is only by transforming it into what it is not — into an agreement for a pen- alty for a failure to pay a debt when due — it is only by disregarding the agreement the parties actually .made, and making a new agree- ment for them that they did not make, that the contract can be brought under the rule against .penalties. There was no fraud or mistake in the making of this agreement. It. was deliberately exe- cuted by competent parties, and it is not the province of the court to reform it in order to destroy it. 2 Order reversed. Adams, J., dissents. DANIEL A. BALDWIN v. JOHN VAN VORST. Court of Errors and Appeals of New Jersey, 1856. 10 New Jersey Equity, 577. The bill in this cause was exhibited to foreclose a mortgage. The cause was heard in the court of chancery, upon the pleadings and proofs, at the term of February, 1855. 2 Accord : Davis v. Thomas, 1 Russ. & M. 506 ( 1830) ; Jordan v. Lewis, 2 Stew. (Ala.) 426 (1830) ; Carter v. Corley, 23 Ala. 612 (1853) ; Thompson v. Hudson, 4 Eng. & Ir. App. 1 (1869) ; Boland v. McCarroll, 38 U. C. Q. B. 487 (1876) ; Protector Loan Co. v. Grice, 5 Q. B. D. 592 (1880) ; Waggoner v. Cox, 40 Ohio St. 539 ( 1884) ; U. S. Mortgage Co. v. Sperry, 138 U. S. 313 (1890); Wren v. University Land Co., 65 Ore. 432 (1913). Compare: Goodyear Co. v. Selz, S. Co., 157 111. 186" (1895) ; Walsh v. Curtis, 73 Minn 254 (1898). DANIEL A. BALDWIN v. JOHN VAX VORST 37 At the October term of the court, the chancellor delivered his opinion, and on the twenty-first day of November a decree was made in favor of the complainant. From this decree an appeal was taken. 1 The chancellor furnished the court with the following opinion, as containing the reasons for his decree : Williamson, C. : Daniel A. Baldwin, one of the defendants, purchased of the complainant a tract of land lying in Jersey City, in the county of Hudson, for the sum of forty-seven thousand five hun- dred dollars j seven thousand five hundred dollars were paid in cash, and to secure the balance Baldwin gave his bond, with a mortgage on the premises, in the penal sum of eighty thousand dollars, with the condition that if the said Daniel A. Baldwin, his heirs, executors or administrators, should pay to the complainant, his executors, administrators or assigns, the sum of forty thousand dollars in ten years from the date of the said bond, with interest at six per cent., payable half-yearly, then the obligation was to be void. To which condition there was annexed an agreement in the following words : "And it is hereby expressly agreed, that should any default be made in the payment of the said interest, or of any part thereof, on any day whereon the same is made payable, as above expressed, and should the same remain unpaid and in arrear for the space of thirty days, then and from thenceforth, that is to say after the lapse of thirty days, the aforesaid principal sum of forty thousand dollars, with all arrearage of interest thereon, shall, at the option of the said John Van Yorst, his executors, administrators or assigns, become and be due and payable immediately thereafter, although the period above limited for the payment thereof may not then have expired, anything hereinbefore contained to the contrary thereof in anywise notwith- standing." The first payment of interest fell due on the first day of April, 1853, and was unpaid when this bill was filed, on the twelfth day of June following. It appears, by Baldwin's answer and by the proof in the cause, that on the eighth day of July, 1853, Baldwin offered and tendered to the complainant the interest which had become due on the said first day of April, and the interest thereon and the taxable costs then incurred, which tender the complainant refused, but insisted upon the whole "money secured by the bond. The only question presented is, whether the court will relieve the complainant from the payment of the full amount secured by the bond and mortgage, being forty thousand dollars, upon the payment of the decreed interest and costs. The jurisdiction of a court of equity to grant relief in cases of forfeitures and penalties for breaches of covenants and conditions is well established. At the common law there is no remedy, and therefore it is that, in cases of penalties annexed to bonds and other instruments to secure merely the payment of a certain debt, the statute has stepped in, and provided adequate relief against the penalty. 1 Part of the statement of facts is omitted. . r 38 PENALTIES AND FORFEITURES Nor does a court of equity, in affording relief, confine itself to cases of fraud, mistake or accident, however probable it may be that in the origin of this exercise • of its jurisdiction it confined itself within such limits. But it is not imperative in the court to grant relief, although the party in default is willing to render all the compensation in his power to make restoration to the injured party. There is a discretion in the court, regulated, it is true, by well- recognized principles, but exercised in its application of those prin- ciples to each particular case by its peculiar circumstances. In the case of Sanders, v. Pope ( 12 Ves. Jr. 289), Lord Erskine says : "There is no branch of the jurisdiction of this court more delicate than that which goes to restrain the exercise of a legal right. That jurisdiction rests only upon this principle, that one party is taking advantage of a forfeiture, and as a rigid exercise of the legal right would produce a hardship, a great loss and injury, on the one hand, arising from going to the full extent of the right, while on the other, the party may have the full benefit of the contract, as originally framed, the court will interfere where a clear mode of compensation may be discovered." This principle is everywhere recognized, and runs through all the cases. The injured party must be compensated, and must have the full benefit of his contract. If he cannot be adequately redressed for the injury which he has sus- tained, and which has worked the forfeiture, or if, in granting the relief, the court must so alter the contract between the parties as to destroy one of its principal and essential features, and defeat the very object which both parties had in view on annexing a forfeiture or penalty for the breach of its conditions, then the court ought not to interfere between the injured party and his legal remedy ; or, in other words, the court ought not to give relief at the expense and to the injury of the already aggrieved party. What are the legal rights of the complainant against the enforce- ment of which the defendant, Baldwin, asks to be relieved? Baldwin, for a debt of forty thousand, which he owed complain- ant, gave him his. bond in the penal sum of eighty thousand dollars. The condition of the bond was the common one, that if the obligor paid the debt really due of forty thousand dollars in ten years from the date of the bond, and the interest on the debt semi-annually, then the bond was to be void. The penalty was double the amount of the debt due, and the object of the penalty was to secure the due fulfill- ment of the obligation. If this was all the contract, there could be no difficulty as to the legal and equitable rights of the parties. But there was a further condition, in the nature of an agreement, that if the interest money should remain unpaid for thirty days after it was due and payable, then the principal money should be due and pay- able. The object of this was to secure the prompt payment of the interest of the debt. The first interest money that became due was unpaid, and the thirty days were permitted to expire. The com- plainant was compelled to file this bill to enforce the payment of his debt. He is entitled, by the terms of his agreement, to have a decree for the full amount of the debt. He has forfeited the credit of ten DANIEL A. BALDWIN v. JOHN VAN VORST 39 years, which he was to have on condition of prompt payment. ■ If the court relieves the defendant, it destroys the very object of the agreement to secure prompt payment. The parties have made this the essence of their contract ; and when the debt is as large as this one is, prompt payment of the interest is a matter of great conse- quence. It is true, as was argued, the court might in this case give compensation. Perhaps interest upon interest might be a fair com- pensation, as near as- it may be estimated. But this mode of redress deprives the party of the full benefit of his contract. It will not secure prompt payment in future; and if at the end of another six months another default is made, the defendant may have the same relief, and thus obtain a credit from time to time upon terms entirely different from the agreement between the parties. If the court grant this relief, the very object of the agreement will be defeated, and this court virtually declares that parties shall not make an agreement by which the length of credit shall depend upon the prompt payment of the interest, as it becomes due. The agreement is a reasonable one. A says to B, you may have my money for ten years, if you will pay the interest promptly ; if you make default in this respect, you must pay me the principal. It cannot be said to be a rigid exercise of a legal right for A to refuse to extend the credit when he finds he is defeated in his just expecta- tion of receiving his interest money promptly. In 2 Story's Equity it is said: "The true foundation of the relief in equity in all these cases is, that as the penalty is designed as a mere security, if the party obtains his money he gets all that he expected, and all that in justice he is entitled to." In this case the penalty is not designed as a mere security, but its very object is to secure prompt payment. If the party does not get this he does not get what he expects, or all that in justice he is entitled to. If this court could give such relief as would secure the faithful performance of the agreement in future there might be a propriety in its interference. If the court could make a decree that the complainant should be relieved in the present instance upon the terms, that for any future delinquency or for- feiture the further credit should be enforced, this would seem just; and yet, after all, it would be but putting in the shape of a decree of this court the very agreement which the parties have made, and which the defendant now says is a rigid exercise of its legal right to enforce. I think the remarks of the chancellor in Benedict v. Lynch ( 1 Johns. Ch. 376) very applicable to a case like this. The notion that seems too much to prevail (and of which the facts in the present case furnish an example), that a party may be utterly regardless of his stipulated payments, and that a court of chancery will almost at any time relieve him from the penalty of his gross negligence, is very injurious to good morals, to a lively sense of obligation, to the sanctity of contracts and to the character of this court. It would be against all my impressions of the principles of equity to help those who show no equitable title to relief. As a general rule, courts of equity will not regard time in the 40 PENALTIES AND FORFEITURES performance of a contract. But the parties may make time the essence of the contract, so that the court will not interfere to aid the party who is in default,- unless he can offer some good excuse, as mistake or accident, for such default. Benedict v. Lynch ( i Johns. Ch. 370) and cases there referred to ; or where the character of the contract is such that by the payment of money, or otherwise, it has been partly fulfilled, and the default is made under such circum- stances as to render it unconscionable to insist- upon the forfeiture. Wills v. Smith, 7 Paige 22. 2 Edgerton v. Peckham (11 Paige 352) was a case where there was an agreement for the sale of a lot of land for three hundred dollars, one-third to be paid down and the residue in one and two years,, with interest. There was a provision in the agreement that if the purchaser should make default in either of the payments the vendor should be discharged from the agreement and the purchaser forfeit all the previous payments. The first two instalments were paid at the specified time, and the vendee assigned the agreement to the complainant, who made default in the last payment. He was not called upon by the vendor to fulfill the contract, and in a few days after the default he tendered the money and demanded a deed, which the vendor refused to give and insisted upon the forfeiture. But the court relieved against the forfeiture. 3 The propriety of the court's granting relief in a case like that commends itself to our natural sense of what is just and right. To insist upon a forfeiture under such circumstances was an act of great hardship and oppres- sion ; it was against good conscience to enforce the agreement as the parties then stood. There is a large number of cases referred to and commented upon by the vice chancellor in Edgerton v. Peckham, illustrating the principles which govern the court in exercising juris- diction in reference to contracts, where time is any way material to their performance. But I cannot in this case see any ground for equitable relief. The agreement itself is a reasonable one. Time is the essence of the contract, and there was no hardship in making it so. The agreement is altogether executory, and no act has been done, by either party, to change the position of the parties, so as to make it oppressive in the complainant to call for the fulfillment of the agreement. The defendant offers no excuse for his default, not 2 In. Martin v. Melville, 11 N. J. Eq. 222 (1856), relief was given on the ground of excusable mistake on the part of the obligor and conduct on the part of the obligee amounting to a waiver. Accord: Helme v. Phila. L. T. Co., 61 Pa. 107 (i860) ; Willard v. Tayloe, 8 Wall. (U. S.) 557 (1869) ; Wilcox v. Allen, 36 Mich. 160 (1877) ; Adams v. Rutherford, 13 Ore. 78 (1885); Tibbetts v. Cate, 66 N. H. 550 (1891) ; Noyes v. Anderson, 124 N. Y. 17s (1891) ; Hukill v. Myers, 36 W. Va. 639 (1892). Compare: Ferris v. Ferris, 28 Barb. 29 (1858) ; Barrow v. Isaacs (1891), 1 Q. B. 417. 'Chancellor Walworth said: "As a general rule time is not of the essence of a contract for the payment of money, upon an agreement for the sale and conveyance of real estate. And I can see nothing in the cir- cumstances of this case to justify the court in excepting it from the general rule." DANIEL A. BALDWIN v. JOHN VAN VORST 41 even that of negligence, or of his inability to raise the money at the day. From anything appearing to the contrary, the default was wilful and without excuse, and intended to harass and inconvenience the complainant by withholding from him his interest money. The deTendant made no amends for his default until he was compelled to do so by the complainant's exhibiting his bill in. this court. If I relieve the defendant in this case, I must take the ground that a person cannot make a loan upon condition that the credit shall be a long or a short one, depending upon the promptness of the borrower's paying the interest; and that if the agreement is that the borrower shall have ten years' credit if he pays his interest promptly, but a shorter time if he makes default, though he makes default, this court will give him the long credit, in spite of the agreement. See 3 Powell on Mortgages 902; Stanhope v. Manners, 2 Eden 197; Halifax v. Higgins, 2 Ves. 134; Proctor v. Cooper, Vann. 397; Burton v. Slattery, 3 B. C. P. 68; Sparks v. Liverpool Water Works, 13 Ves. 433. There is a class of cases in reference to leases where the court has interposed to prevent a forfeiture where a right of entry is stipu- lated in the lease in case of the nonpayment of the rent at the regular days of payment. But in those cases the court interferes on the ground that the right of entry is intended as a mere security for the payment of rent, and that when the rent is paid the end is obtained. Story's Eq. N. S. 1315; W adman v. Calcraft (10 Ves. Jr. 69); Sanders v. Pope (12 Ves. 284) ; Bracebridge v. Buckley (2 Prior's Ex. R. 216). As I have before remarked in this case, the penalty of eighty thousand dollars was intended to secure the payment of the principal money. But this additional agreement was intended for another purpose, to secure the prompt payment of the interest to grow due on the debt. If it fails to accomplish this, its only aim and object are frustrated ; the intention of the parties is defeated. I can see no principle of equity to justify the court's interfer- ence to give the deTendant relief against the forfeiture. The com- plainant is entitled to a decree for his principal money and interest. 4 'Accord: Gowlett v. Hanforth, 2 Wm. Bl. 958 (I774 - ) ', Steel v. Brad- field, 4 Taunt. 227 (1812) ; James v. Thomas, 5 B. & Ad. 40 (1833) ; People v. Superior Court, 19 Wend. (N. Y.) 104 (1838) ; Berrinkott v. Traphagen, 39 Wis. 219 (1875) ; Bennett v. Stevenson, 53 N. Y. 508 (1873) ; Whitcher v. Webb, 44 Cal. 127 (.1872); Sterne v. Beck, r DeG. J. & Q. 595 (1863); Schooley v. Roman, 31 Md. 457 (1869) ; Spring v. Fisk, 21 N. J. Eq. 175 (1870) ; Mobray v. Leckie, 42 Md. 474 (1875) ; Howell v. Western R. Co., 94 U. S. 463 (1876) ; Ex parte Cochrane, 38 i. T. N. S. 820 (1878) ; Wal- lingford v. Mutual Soc, 5 App. Ca. 685 (1880) ; Moore v. Sargent, 112 Ind. 484 (1887) ; Atkinson v. Walton, 162 Pa. 219 (1894) ; Conn. Mut. L. I. Co. v. Westerhoff, 58 Neb. 379 (1899) ; Hothorn v. Louis, 52 N. Y. App. Div. 218 (1900) ; Curran v. Houston, 201 III. 442 (1003), affirming 101 111. App. 203; Clark v. Paddock, 24 Ida. 142 (1913)- But see Mayo v. Juda, 5 Munf. Va. 495 (1817); Tiernan v. Hinman, 16 111. 400 (1855), Whelan v. Reilly, 61 Mo. 565. 42 PENALTIES AND FORFEITURES The decision of the chancellor was affirmed by the following vote: For affirmance — Chief Justice, Judges Arrowsmith, Haines, Potts, Valentine, Vornelison, Huyler, Risley, Willis, Ogden, Ryerson. For reversal — None. UNITED STATES v. UNITED ENGINEERING AND CON- TRACTING COMPANY. Supreme Court of the United States, 1914. 234 United States, 236. Day, J. : Suit was brought in the court of claims by the United Engineering and Contracting Company to recover of the United States upon a contract, dated the 15th of September, 1900, for the construction within seven calendar months from the date of the con- tract, namely, by April 15, 1901, of a pumping plant for dry dock No. 3 at the New York Navy Yard, the work to be done in accord- ance with certain plans and specifications annexed to and forming a part of the contract. The claimant recovered a judgment (47 Ct. CI. 489) , and the United States brings this appeal. The principal question in the case involves the correctness of that part of the judgment of the court of claims which permitted the claimant to recover six thousand dollars, which the government had deducted as liquidated damages for two hundred and forty days' delay in the completion of the work, at the rate of twenty-five dollars per day. To understand this question the terms of the contract and certain facts found by the court of claims, upon which the case is to be considered here, must be had in view. The claimant commenced the construction of the work in accordance with the contract, and after a portion thereof had been done the Navy Department concluded to connect dry dock No. 2 with dry dock No. 3 and to build a single pumping plant for both docks. To that end, on July 21, 1901, a supplemental contract was entered into with the United States, whereby the claimant agreed, for an additional sum, to furnish all the material and labor necessary to carry out the changes in and additions to the plant originally con- tracted for and to complete the work on or before October 15, 1901, to which date the original contract was extended. [On February 15,. 1903, a second supplemental contract was entered into and on March 7, 1903, a third, which embodied changes in the original plans. Nothing was said in these supplemental con- tracts as to the time of completion or as to delays under prior contracts.] 1 'Abridged from the opinion of the court, part of which is omitted. U. S. v. UNITED ENGINEERING AND CONTRACTING CO. 43 The claimant proceeded under the contracts with reasonable dispatch and without delay on its part until May 1, 1903, -when the work was ready for the installation of the machinery. Up to this date the claimant was delayed by the government in making changes and alterations in the work and in the use of the docks for docking vessels while the work was going forward. No delays were charge- able to the claimant up to October 15, 1901, the time fixed for the completion of the work, nor thereafter to May 1, 1903. During this period, due to the delays of the government, the claimant incurred additional expenses for superintendence and maintenance. During the period from May 1, 1903, to April 21, 1904, the work was delayed by the claimant's subcontractors in not getting the pump castings in place, for which the government was not responsible. The claimant was also delayed for a few days during said period by the govern- ment while using the docks for docking vessels. . . . In February, ,1906, long after the plant had been accepted, the bureau held the claimant responsible for two hundred and forty days' delay, and deducted as liquidated damages for the delay the sum of twenty-five dollars per day, or six thousand dollars, from the balance due under the contract, which the claimant accepted under protest, and it subsequently filed with the bureau a written protest against the deductions for delays and disallowances. The work was completed and accepted finally by the government on April 5, 1905. Notwithstanding the delays of the government, the court of claims found that the claimant with reasonable diligence could have completed the plant for tests during the period by about September 21, 1903, and found that if it was chargeable for the delay accord- ing to the liquidated damage clause of paragraph 12 of the specifi- cations of twenty-five dollars per day, the deduction would be seven hundred and fifty dollars less than the government had deducted. But it found that, if the claimant was only liable for actual damages, and it did so determine, since there was no evidence as to such damages, the claimant was entitled to recover the entire amount deducted. In the original contract the specifications provided, paragraph 12, for liquidated damages for delay, as follows: "12. Damages for Delay. — In case the work is not completed within the time specified in the contract, or the time allowed by the Chief of the Bureau of Yards and Docks under paragraph 1 1 of this specification, it is dis- tinctly understood and agreed that deductions at the rate of twenty- five dollars per day shall be made from the contract price for each and every calendar day after and exclusive of the date within which completion was required up to and including the date of completion and acceptance of the work, said sum being specifically agreed upon as the measure of damage to the United States by reason of delay in the completion of the work; and the contractor shall agree and consent that the contract price, reduced by the aggregate of damages so deducted, shall be accepted in full satisfaction for all work done under the contract." 44 PENALTIES AND FORFEITURES Under the provisions of this paragraph, if there had been nothing subsequently changing the rights of the parties, and the delay had resulted from the failure of the claimant to complete the work within the time specified, the deduction at the rate of twenty- five dollars per day might have been made by the United States as liquidated damages. This was the sum estimated and agreed upon between the parties as the damages which might be regarded as sus- tained by the government in event of the breach of the claimant's obligation to complete the work within the stipulated time. Such contracts for liquidated damages when reasonable in their character are not to be regarded as penalties and may be enforced between the parties. See Sun Printing & Publishing Ass'n v. Moore, 183 U. S. 642, in which the matter is fully discussed. 2 The precise question here is whether, when the work was delayed solely because of the government's fault beyond the time fixed for its completion and afterwards the work was completed without any definite time being fixed in which it was to be done, the claimant can be charged for the subsequent delays for which he was at fault by the rule of the original contract stipulating liquidated damages, or was that stipulation waived by the conduct of the government and was it obligatory upon it in order to recover for the subsequent delays to show the actual damages sustained? We think the better rule is that when the contractor has agreed to do a piece of work within a given time and the parties have stipulated a fixed sum as liquidated damages not wholly disproportionate to the loss for each day's delay, in order to enforce such payment the other party must not prevent the performance of the contract within the stipulated time, and that where such is the case, and thereafter the work is completed, though delayed by the fault of the contractor, the rule of the original contract cannot be insisted upon, and liquidated damages measured thereby are waived. Under the original and first supplemental agreements, the claimant knew definitely that he was required to complete the work by a fixed date. Presumably the claimant had made its arrangements for completion within the time named. Certainly the other contracting party ought not to be per- mitted to insist upon liquidated damages when it is responsible for the failure to complete by the stipulated date; to do this would permit it to recover damages for delay caused by its own conduct. It may be that damages were sustained by the failure to carry out the subsequent agreement. But the government, as well as the claimant, saw fit to go on with the work with no fixed rule for the 2 As to construction contracts, see further ; Ex parte Newitt, 16 • Ch. D. ?22 (1881) ; Monmouth Park Ass'n v. Wallis T. W., 55 X. J. L. 132 (1892) ; Malone v. Philadelphia, 147 Pa. 416 ( 1892) ; Kunkel v. Wherry, 189 Pa. 198 (1899): Phaneuf v. Corey, 190 Mass. 237 (1906) : Boston Store v. Schleuter, 88 Ark. 213 (1908) ; Charleston L. Co. v. Friedman, 64 W. Va. 151 (1908) ; Germain v. Stanton School Dist., 158 Mich. 214 (1909) : Craw- ford v. Heatwole, no Va. 358 (1009). s. c, 34 L. R. A.. N. S„ 587 note; Merritt v. Poli, 236 Pa. 170 (1912) ; Dean v. Connecticut T. Co., 88 Conn. 619 (1914); Parker-Washington Co. v. Chicago, 267 111. 136 (1915). U. S. r. UNITED ENGINEERING AND CONTRACTING CO. 4S time of its completion, so that it be reasonable, and the government required no stipulation in the second and third supplemental con- tracts as to damages in a fixed and definite sum for failure to com- plete the work as required. Under such circumstances we think it must be content to recover such damages as it is able to prove were actually suffered. This conclusion is in accord with the rule of the English cases. In Dodd v. Churton, L. R., i O. B. 1897, 562, 568, Chitty, L. J., said : "The law on the subject is well settled. The case of Holme v. Guppy (3 M. & W. 387) and the subsequent cases in which that decision has been followed are merely examples of the well-known principle stated in Comyns' Digest, Condition L (6), that, where performance of a condition has been rendered impossible by the act of the grantee himself, the grantor is exonerated from performance of it. The law on the subject was very neatly put by Byles, ]., in Russell v. Bandeira (13 C. B. [X. S.J 149). This principle is applicable not to building contracts only, but to all contracts. If a man agrees to do something by a particular day or in default to pay a sum of money as liqui- dated damages, the other party to. the contract must not do anything to prevent him from doing the thing contracted for within the speci- fied time." The same rule was followed with approval by the New York Court of Appeals in a well-considered case, M osier Safe Co. v. Maiden Lane S. D. Co., 199 N. Y. 479, in which it was held that, even where both parties are responsible for the delays beyond the fixed time, the obligation for liquidated damages is annulled, and in the absence of a provision substituting another date it cannot be revived, and the recovery for subsequent delays must be for actual loss proved to have been sustained. This principle is applicable here ; the conduct of the govern- ment's agents had caused the delays up to May 1, 1903, and the subsequent delays, though chargeable to the claimant, would only give rise to a claim for damages measured by the actual loss sus- tained. M osier Safe Co. v. Maiden Lane S. D. Co., supra. We think the application of this rule is not changed by the difficulty suggested that it might be impracticable to prove actual damages. This fact, if such it be, would not permit the government by its own fault to prevent the performance of the contract and to do that which amounts to a waiver of the stipulation and then insist upon it as a rule of damages. We think the court of claims was right upon this principal branch of the case. 3 Affirmed. "Accord: Hamilton v. Moore. 33 U. C. Q. B. 520 (1873); Weeks v. Little. 89 N. Y. 566 (1882): Champlain C. Co. v. O'Brien. 117 Fed. 271 (1902) : Jefferson Hotel Co. v. Brumbaugh. 168 Fed. 867 (1900) ; Vilter M. Co. v. Tyart's I 'alley B. Co., 168 Fed. 1002 (1909) ; M osier S. Co. v. Maiden L S. D. Co., 190 N. Y. 479 (1910) ; Wvant v. United States,, 46 Ct. of CI- 205 (1911) : F. I. Lewis M. Co. v. Cole. 180 111. App. 466 (1013) : Wiley v. Hart 74 Wash. 142 C1913) ; Mitchell v. Davis. 80 S. E. '493 (W. Va. 1913). 46 PENALTIES AND FORFEITURES KLEIN v. INSURANCE COMPANY. Supreme Court of the United States, 1881. 104 United States, 88. Woods, J.: On September 1, 1866, a policy of insurance was issued by the New York Life Insurance Company upon the life of Frederick W. Klein in the sum of five thousand dollars, payable to his wife, Caroline Klein, within sixty days after his death and due notice and proof thereof. The policy is in the usual form. The consideration for its issue was the payment to the company by Caro- line Klein of an annual premium of one hundred and seventy-three dollars, in semi-annual instalments' of eighty-six dollars' and fifty cents each, on the first day of September and the first day of March of every year during the life of Frederick W. Klein. The policy contains the following provision: "And it is also understood and agreed by the within assured to be the true intent and meaning hereof that . . in case the said Caroline Klein shall not pay the said premiums on or before the several days herein mentioned for the payment thereof, with any interest that may be due thereon, then and in every such case the said company shall not be liable for the payment of the sum assured or any part thereof, and this policy shall cease and determine." The premiums were punctually paid until March, 1871, when default was made in the payment of the semi-annual instalment which matured on the first day of that month, and it remained unpaid until the death of Frederick W. Klein, which occurred March 18, 1871. The agent of the company, after proof of the death of Klein, offered to pay Caroline Klein the surrender value of the policy. She declined to accept any sum less than the amount of the insurance, and on the company then insisting upon the abso- lute forfeiture of the policy, according to its terms, she filed this bill. She therein alleges as the ground of relief that the policy was taken out by Frederick W. Klein without her knowledge; that she had received no information of its terms or conditions until after his death ; that about February 1 he was taken down by the illness of which he died; that for about twenty days prior to March 1, and thence up to the time of his death, he was, in consequence of his Contra: Wallis v. Wenham, 204 Mass. 83 (igro) ; Schmulbach v. Caldwell, 196 Fed. 16 (1912) ; Coal & I. Co. v. Reherd, 204 Fed. 859 (1913). The contract may provide for an apportionment of damages. Van Buskirk v. Board of Education, 75 Atl. 009 (N. J. 1910) ; and see Cramp Co. v. Boyertown B. C. Co., 241 Pa. 15 (1913). But liquidated damages cannot be recovered where performance was prevented solely by the acts of the other party. Lilly v. Pearson, 168 Pa. 219 (1895) ; Chamberlin v Booth, 135 Ga. 719 (1911); Wallis v. Wenham, 204 Mass. 83 (1911), and cases cited; Murphy v. United States F. Co., 100 N. Y. App. Div g-? dooO ■ McClintic M. Con. Co. v. Freeholders, 91 Atl. 881 (N. J. Eq. 1914). ' KLEIN v. INSURANCE COMPANY 47 sickness, deranged in mind and incapable of attending to any matter of business whatever, and for that reason, and that alone, failed to pay the premium when it was due, and that she failed to pay it because she was ignorant of the existence of the policy and of its terms. The prayer of the bill is as follows : "That the said New York Life Insurance Company may be prevented from insisting upon and taking advantage of the alleged forfeiture of said policy of insur- ance, and that your oratrix may be relieved from said alleged default upon her part, and the accidental default of the said Frederick W. Klein in the nonpayment of said semi-annual premium maturing March 1, 187 1, and that the said New York Life Insurance Com- pany may be decreed to pay to your oratrix the said sum of $5000,'' etc. The answer of the company denies its liability upon the policy of insurance, and insists that the contract ceased and determined by reason of the nonpayment of the premium due March 1, 1871, and denies the equity of the bill. The bill was dismissed upon final hearing. The cause was then brought to this court for review, by the appeal of the complainant, Conceding, for the sake of argument, that the case made by the bill is sustained by the evidence, the question is presented whether, upon the facts, the appellant was entitled to the relief prayed for. In New York Life Insurance Co. v. Statham (93 U. S. 24) it was held by this court, Mr. Justice Bradley delivering its opinion, that a life insurance policy "is not a contract of insurance for a single year, with the privilege of renewal from year to year by paying the annual premium, but that it is an entire contract for assurance for life, subject to discontinuance and forfeiture for non- payment of any of the stipulated premiums." But, in the same case, the court further said: "In policies of life insurance time is mate- rial and of the essence of the contract, and nonpayment at the day involves absolute forfeiture, if such be the terms of the contract." While conceding this to be the rule which would apply if an action at law were brought upon the policy, the appellant insists that she is entitled to be relieved in equity against a forfeiture, by reason of the excuses for nonpayment of the premium set out in the bill, and this contention raises the sole question in this case. We cannot accede to the view of the appellant. Where a pen- alty or a forfeiture is inserted in a contract merely to secure the per- formance or enjoyment of a collateral object, the latter is consid- ered as the principal intent of the instrument, and the penalty is deemed only as accessory. Sloman v. Walter, 1 Bro. Ch. 418; Sanders v. Pope, 12 Ves. Jr. 282 ; Davis v. West, id. 475 ; Skinner v. Dayton, 2 Johns. (N. Y.) Ch. 526. But in every such case the test by which to ascertain whether relief can or cannot be had in equity is to consider whether compensation can or cannot be made. In Rose v. Rose (Amb. 331, 332), Lord Harwicke laid down the rule thus : "Equity will relieve against all penalties whatsoever ; against nonpayment of money at a day certain ; against forfeitures of copy- holds ; but they are all cases where the court can do it with safety 48 PENALTIES AND FORFEITURES to the other party; for if the court cannot put him in as good con- dition as if the agreement had been performed, the court will not relieve." A life insurance policy usually stipulates, first, for the payment of premiums ; second, for their payment on a day certain ; and third, for the forfeiture of the policy in default of punctual payment. Such are the provisions of the policy which is the basis of this suit. Each of these provisions stands on precisely the same footing. If the payment of the premiums, and their payment on the day they fall due, are of the essence of the contract, so is the stipulation for the release of the company from liability in default of punctual pay- ment. No compensation can be made a life insurance company for the general want of punctuality on the part of its patrons. It was said in New York Life Insurance Co. v. Statham {supra) that "promptness of payment is essential in the business of life insurance. All the calculations of the insurance company are based on the hypothesis of prompt payments. They not only calculate on the receipt of premiums when due, but upon compounding interest upon them. It is on this basis that they are enabled to offer insur- ance at the favorable rates they do. Forfeiture for nonpayment is a necessary means of protecting themselves from embarrassment. Delinquency cannot be tolerated or redeemed except at the option of the company." If the assured can neglect payment at maturity and yet suffer no loss or forfeiture, premiums will not be punctually paid. The companies must have some efficient means of enforcing punctuality. Hence their contracts usually provide for the forfeiture of the policy upon default of prompt payment of the premiums. If they are not allowed to enforce their forfeiture they are deprived of the means which they have reserved by their contract of compelling the parties insured to meet their engagements. The provision, therefore, for the release of the cpmpany from liability on a failure of the insured to pay the premiums when due is of the very essence and substance of the contract of life insurance. To hold the company to its prom- ise to pay fhe insurance, notwithstanding the default of the assured in making punctual payment of the premiums, is to destroy the very substance of the contract. This a court of equity cannot do. Wheeler v. Connecticut Mutual Life Insurance Co., 82 N. Y. 543. See also the opinion of Judge Gholson in Robert v. New England Life Insurance Co., 1 Disney (Ohio) 355. It might as well under- take to release the assured from the payment of premiums altogether as to relieve him from forfeiture of his policy in default of punctual payment. The company is as much entitled to the benefit of one stipulation as the other, because both are necessary to enable it to keep its own obligations. In a contract of life insurance the insurer and assured both take risks. The insurance company is bound to pay the entire insur- ance money, even though the party whose life is insured dies the day after the execution of the policy and after the payment of but a single premium. The assured assumes the risk of paying pre- BELJRY et al. v. FAY et al. 49 '\ miums during the life on which the insurance is taken, even though their aggregate amount should exceed the insurance money. lie also takes the risk of the forfeiture of his policy if the premiums are not paid on the day they fall due. The insurance company has the same claim to be relieved in equity from loss resulting from risks assumed by it as the assured has from loss consequent on the risks assumed by him. Neither has any such right. The bill is, therefore, based on a misconception of the powers of a court of equity in such cases * There is another answer to the case made by the bill. The engagement of the insurance company was with Caroline Klein, and not with Frederick W. Klein. It entered into no contract with the latter. It agreed to pay Caroline Klein the insurance, provided she paid with punctuality the premiums. She was never incapaci- tated from making payment. The alleged fact that she had no knowledge of the existence and terms of the policy does not relieve her default. If the fact be true, her ignorance resulted from the neglect of her husband, who, in respect to this contract of insurance, was her agent, in not informing her about the insurance upon his life and the terms of the policy. The bill is, therefore, an effort by her to obtain relief in equity against the appellee from the conse- quences of the carelessness or neglect of her own agent. We are of opinion that the decree of the Circuit Court is right and should be affirmed. BEURY ET AL. 7-. FAY ET AL. Supreme Court of Appeals of West Virginia, 1914. 73 West J'irginia, 460. Poffenbarger, J. : This appeal is from a decree dismissing a bill filed against the depositaries of a ten thousand dollar fund, under a contract forfeiting it as liquidated damages for nonper- formance of the depositor's covenants or agreements imposed by 1 Accord : New York Life Ins. Co. v. Siatham, 93 U. S. 24 (,1876) ; Knickerbocker L. I. Co. v. Pendleton, 112 U. S. 696 (1884) ; Holly v. Metro- politan L. I. Co., 105 N. Y. 437 (1887) : Fowler v. Metropolitan L. I. Co., 116 N. Y. 389 (1889) ; Seeley v. Union C. L. I. Co., 10 Pa. Super. Ct. 270 (1899) ; Iowa L. I. Co. v. Lewis, 187 U. S. 335 (1902) ; Manhattan L. I. Co. v. Wright, 126 Fed. 82 (1903) ; Ferguson v. Union M. L. I. Co., 187 Mass. 8 (1904) ; Nederland L. I. Co. v. Meinert, 199 U. S. 171 (1905) ; Thompson v. Fidelity M. L. 1. Co., 116 Tenn. 557 (1906) ; Reed v. Bankers R. L. I. Co., 192 Fed. 408 (1911) ; Mutual Fire Co. v. Maple, 60 Ore. 359 (1911)- Com- pare: Dennis v. Mass. B. Ass'n, 120 N. Y. 496 (1890), s. c, 9 L. R. A. 189 and note; Haas v. Mutual L. I. Co., 84 Neb. 682 (1909) ; s. c, 26 L. R. A., N S 747 and note. The forfeiture may be waived. Insurance Co. v. Nor- ton. 96 U. S. 234 (1877), Hipp v. Fidelity M. L. I. Co., r28 Ga. 491 (1907) ; Bank of Brunson v. Aetna Ins. Co., 203 Fed. 810 (1913). So PENALTIES AND FORFEITURES the contract, and the covenantee to whom the fund was paid after such default, to compel an accounting and repayment of the money. 1 The alleged violation of the trust rests upon tfte following claims : ( i ) nonexecution or nondelivery of the contract by the party in whose favor the deposit was made; (2) violation of the trust (assuming the contract to have been executed) in the treat- ment of the fund as liquidated damages and not as a penalty; and (3) invalidity of the deposit provision of the contract for lack of consideration. The agreement was one for exchange of mineral and timber lands, acre for acre, each party covenanting to convey to the other 11,271 acres, part of which, 3565.1 acres, was actually conveyed by each, on the date fixed for delivery of the contract, January 30, 1902. The deposit was made merely as security for performance of the contract as to the residue of the land on the part of Jos. L. Beury, one of the parties, according to the contention of the plain- tiffs, his administrators, and as liquidated damages or compensation for his breach of the contract, according to the contention of the defendants, the firm of Brown, Jackson & Knight, the depositaries, and H. H. Fay, R. H. Crozier and Charles Catlett, trustees of the Gauley Coal Land Association, and their unknown cestuis que trustent, and the Gauley Coal Land Company, successor of the Gauley Coal Land Association. For the fund in question, the depositaries executed the follow- ing receipt, expressing the purpose and terms of the trust: "Received- January 30, 1902, of Jos. L. Beury, of Fayette County, West Vir- ginia, ten thousand dollars in pursuance of and in accordance with the third section of an agreement made between the Gauley Coal Land Association and J. L. Beury dated in the body of said agree- ment on October 31st, 1901, as modified with reference to date by an endorsement on said agreement, and at the close thereof signed by the said parties thereto." The "third section of an agreement" referred to in it reads as follows : "It is of the essence of this con- tract that the exchange above provided for shall be completed within six months from the date hereof; and it is agreed that said Beury is at or before the time of passing papers on said initial exchange of about 3565.1 acres to pay to Brown, Jackson & Knight, of Charleston, West Virginia, the sum of ten thousand dollars, which is to be held by them and is to be forfeited and paid to said associa- tion as liquidated damages if said Beury fails to complete within said six months his agreements herein contained; but if he duly performs his said agreements, said Brown, Jackson & Knight are to repay said ten thousand dollars to him." The contract and receipt of the depositaries both describe the ten thousand dollars as liquidated damages, and the references to it in the correspondence are not inconsistent with this designation. They do not define it at all and the circumstances disclose nothing 1 Part of the opinion is omitted. BEURY et al. v. FAY eial. 51 reflecting intent to treat the fund as anything other than what it is stated to be in the contract. Beury .was exceedingly anxious to make the initial exchange in order to solidify certain territory he was endeavoring to sell, and the association representatives doubted his intention as to the completion of the contract. Some of the land he agreed to convey did not belong to him, but he had options oa it and it lay within the general boundary principally owned by the association. Beury wanted the 3565.1 acres of association land badly and the association greatly desired the exchange of the addi- tional land mentioned in schedules A and B. A claim of actual damage in excess of the sum deposited is founded upon a declara- tion of Beury or his agent as to the relative value of the lands to be exchanged, but this would be slight and perhaps insufficient evidence of the quantum of damages. Whether the association or its suc- cessor ever acquired the lands it expected to obtain through Beury, or what it would eost to obtain them, is not shown. Nor does it appear whether the cost of procuring them was increasing. The designation of the sum to be forfeited as liquidated damages is not conclusive. 19 Am. & Eng. Ency. L. 400. If the actual damages resulting from the breach were readily ascertainable and the. for- feiture flagrantly disproportionate thereto, the latter might well be treated as a penalty although denominated liquidated damages by the contract. Friedman v. Lumber Co., 64 W. Va. 161 ; 19 Am. & Eng. Ehcy. L. 402 to 410. But whether the damages contemplated were at all or readily ascertainable the record fails to disclose. As to that the evidence is very meager. A decisive element appears, however, in the actual deposit of the money under a stipulation for payment of it in case of breach. It is generally regarded as con- clusive. 19 Am. & Eng. Ency. L. 413; 1 Sedg. Dam., Sec. 414. 2 Deposit of the money and the agreement that it be paid over puts the question of intent beyond the shadow of a doubt. A mere agree- ment to forfeit a certain sum as liquidated damages, read in the light of other portions of the contract, its subject matter and the situation and purposes of the parties, may be found, upon analysis, to be an inaccurate expression of their intention. But a deposit of the stipulated sum under an agreement to pay it leaves no room at 'There are at least three different reasons given for the forfeiture of deposits: (1) That the party who has advanced money or done an act in part performance of his agreement, and then refuses to proceed, will not be permitted to recover back what has thus been advanced or done. Haus- borough v. Peck, 5 Wall. (U. S.) 497 (1866); Green v. Green, 9 Cow. (N. Y.) 46 (1828). (2) That money paid as a deposit is not merely a part payment but also an "earnest" to bind the bargain and to be forfeited in case of non-performance. Howe v. Smith, 27 Ch. D. 89 (1884); Thompson v. Kelly, 101 Mass. 291 (1869). (3) The deposit may be treated as liquidated damages. Streeper v. William, 48 Pa. 450 (1865) ; Kaplan v. Gray, 215 Mass. 269 (,1912). See further, Palmer v. Temple, 9 Ad. & El. 508 (1839) ; Ocken- den v. Henly, E. B. & E. 485 (1858) ; Hinton v. Sparks, 3 C. P. 161 (1868) ; Ex parte Barrell, 10 Ch. App. 512 (187s) ; Cotton v. Bennett, 51 L. T., N. S., 70 (1884); Soper v. Arnold, 35 Ch. D. 384 (1887); Donahue v. Parkman, 161 Mass. 412 (1894); Moore v. Durnam, 63 N. J. Eq. 96 (1902). 52 PEXALTIES AND FORFEITURES all for inquiry as to the intention, unless the disproportion between the forfeiture and the actual damage is so great as to make the agreement an unconscionable one. Here the subject matter of the contract was land, consisting of numerous tracts of large aggregate areas and peculiar in their relations to one another and to other property of the parties. Its actual value was no doubt far beyond the one hundred thousand dollar mark and some of the tracts had peculiar or strategic values, due to their relation to other proper- ties. To say, in view of these facts, the actual damages were readily ascertainable, the deposit was disproportionate thereto or the agree- ment as to the damages unconscionable, would express no more than a bare surmise or conjecture. In our opinion, the contract rests upon an adequate considera- tion and was so far executed, 'though informally, as to bind both parties and the sum of money deposited was the amount agreed upon as liquidated damages. Accordingly, we affirm the decree complained of. 3 Affirmed. GRAHAM ET AL. v. CITY OF LEBANON. Supreme Court of Pennsylvania, 1913. 240 Pennsylvania, 337. Assumpsit for moneys deposited by way of security for per- formance of bidders' contract. Before Henry, P. J. The case was submitted to the court under the Act of April 22, 1874. The opinion of the Supreme Court states the facts. Error assigned was in enter- ing judgment for plaintiff. Defendant appealed. 1 Stewart, J. : This appeal is devoid of merit. In the first place, notwithstanding the plaintiffs' sealed proposal for the purchase of the entire issue of the city bonds recited that the accompanying certified check for five thousand five hundred dollars, being the five per cent, of the entire amount bid, was to be retained as and for liquidated damages in case of failure to make payment, it is evident from the whole transaction that all that was intended to be secured / 3 Accord: Wallis v. Smith, 21 Ch. Div. 243 (1882) ; Matthews v. Sharp, 99 Pa. 560 (1882); Sanders v. Carter, 91 Ga. 450 (1893); Woodbury v. Turner, 96 Ky. 459 (1895) ; Moore v. Durnam, 63 N. J. Eq. (1902) ; Garcin v. Penna. F. Co., 186 Mass. 405 (1904) ; Harris v. Snyder, 55 N. Y. Misc. 306 (1907) ; Turner v. Preetnont, 159 Fed. 221 (1908) ; Moyses v. Schendorf, 238 111. 232 (1009) ; Lichetti v. Conway, 44 Pa. Super. Ct. 71 (1910) ; Yoder v. Strong, 227 Pa. 432 (1910) ; Davin v. Syracuse, 69 X. Y. Misc. 285 (1910) ■ Bils v. Powell, 50 Colo. 482 (1911) ; Whitson v. Sheffield F. S. D. Co. 76 N. Y. Misc. 180 (1912) ; Kaplan v. Gray, 215 Mass. 269 (1913) ; Goshorn v Daniel, 169 S. W. 1071 (Tex. 1914). "The arguments of counsel and part of the opinion relating to another question are omitted. SPARKS v. THE COMPANY OF PROPRIETORS OF THE L. W. W. 53 by requiring a deposit of the check with the bid was the fulfillment of the contract on the part of the successful bidder. The amount was so out of proportion to any damages which might reasonably be anticipated as a result of default by the bidder — assuming that the bonds would be marketable — that it agrees with neither reason nor equity to suppose that the parties intended by this provision anything more than compensation or indemnity. "Equity will regard a penalty as intended to secure the fulfillment of a contract and will limit a recovery to the loss actually sustained, notwithstanding the stipulation of the parties, on the principle that one party should not be allowed to profit by the default of another. Compensation, not forfeiture, is the equitable rule; but effect will be given to the intent of the parties as ascertained unless it conflicts with some rule of law or equity": Emery v. Boyle, 200 Pa. 249. Clearly it was not the intention of the city in executing the penalty to make profit. -As to loss in- consequence of plaintiffs' default, it alleges none ; and in point of fact it sustained none, for in less than a month follow- ing upon plaintiffs' default it sold the whole issue of bonds at par. When then it finally appeared that the city had sustained no loss or damage through plaintiffs' default, it was its duty to return to plaintiffs their check. Instead of returning it to the plaintiffs, the city drew the money upon the check, carried it into its own cash balance and refused to account to the plaintiffs for the same. The plaintiffs then brought the present action. On the ground we have indicated, were there nothing more, plaintiffs were entitled to iver. 2 Affirmed. SPARKS v. THE COMPANY OF PROPRIETORS OF THE LIVERPOOL WATER-WORKS. In Chancery, 1807. 13 Ves. Jr., 428. By an Act of Parliament, for better supplying the town and port of Liverpool with water, several persons by name, together with such other persons as should be appointed by them, and their successors, their executors, administrators and assigns, were united 'Accord: Chaude v. Shepard, 122 X. V. 397 (1890); Wilson v. Balti- more, 83 Md. 203 (1896) ; Nichols v. Haines, 98 Fed. 692 (1900) ; Caesar v. Rubinson, 174 N. Y. 492 (1903) ; Hecklau v. Hauser, 71 N. J. L. 478 (1904) ; Stillwell v. Paepcke L. Co., 73 Ark. 432 (1904) ; Hughes v. United States, 45 Ct. of CI. 517 (1910); Evans v. Moseley, 84 Kan. 374 (1911), s. c, 50 L. R. A., N. S., 889; Yuen Suey v. Fleshman, 65 Ore. 606 (1913) ; Benfield v. Croson, 90 Kan. 661 (1913) ; Feisnot v. Burstein, 82 N. Y. Misc. 429 (1913) ; Poppenberg v. Owen, 84 N. Y. Misc. 126 (1914) ; Quigley v. Brackett, 124 Minn. 366 (1914) ; Dubinsky v. Wells, 218 Mass. 232 (1914). Compare: Wheaton B. & L. Co. v. Boston, 204 Mass. 218 (1910) ; Coonan v. Cape Girardeau, 149 Mo. App. 609 (1910)- 54 PENALTIES AXD FORFEITURES into a company and incorporated by the name of "The Company of Proprietors of the Liverpool Water- Works," and it was enacted that the property in and profits of the undertaking were vested in the company in such shares, and subject to such conditions as had been or should be agreed upon. By articles of agreement, dated the 18th of June, 1799, it was declared, that the premises comprised in the undertaking, and all the profits and emoluments, should be divided into four hundred and sixty shares, and each proprietor should have a debenture of each share under the common seal; and it was further declared that the committee for the time being should and they were thereby author- ized and empowered, from time to time, when they shall have occa- sion to call upon the several parties thereto respectively, their sev- eral and respective executors, administrators and assigns, for the several sums to become payable and be paid by them in respect of their shares so held by them in the said undertaking, to order and" 1 give twenty-one days' notice at least for the payment- from them of the same into the hands of the bankers to the said undertaking for the time being, to be placed to the credit and account of the Com- pany of Proprietors. The deed also contained the following proviso : "And in case any or either of .the several persons parties hereto or their respective executors, administrators or assigns, shall neglect or refuse to pay his, her or their respective calls or shares of the said moneys in respect of the shares so by him, her or them respec- tively subscribed agreeable to the true intent and meaning of these presents for or by the space of twenty-one days next after the day or respective days to be appointed for that purpose, then and in such case every such defaulter shall receive notice of such default or neglect by letter from the secretary addressed to the then or last usual place of abode of such member or members; and if the call or calls subscription or subscriptions then in arrear shall not be paid by the person or persons so in arrear before the expiration of ten days next after such letter shall be so sent as aforesaid, then and in every such case the respective share or shares of such defaulter or defaulters shall be absolutely forfeited for the benefit of the several other members of the said corporation according and in pro- portion to their respective shares of and in the said undertaking and their respective executors, administrators and assigns." A debenture, dated the 19th of June, 1799, testified that Thomas Evans had become a joint proprietor and entitled to one four hun- dred and sixtieth share, No. 249, and all profits therefrom, subject to the covenants and agreements in the articles. of the 18th of June, 1799; by one of which it is provided that no share shall be trans- ferred until the whole of the calls, then due by virtue of the said deed, shall have been paid up to the company's bankers ; and that a memorial of ,the transfer shall be entered by. the secretary ; and every such transfer shall contain a covenant from the person to whom the same shall be made to abide by the covenants and agreements in the said deed, as far as respects such share, and all such other regula- tions, by-laws, rules and orders as shall be made by the said com- SPARKS v. THE COMPANY OF PROPRIETORS OF THE L. W. W. 55 pany by virtue thereof; and that no person to whom any transfer shall be made shall be entitled to have or receive any share or benefit from the said undertaking until such memorial shall have been made, and that every such transfer, etc., shall be made in the mode prescribed by the said deed. Evans having also become duly entitled to four other shares, Sir Lionel Darell, being himself a proprietor, on the 23d of June, 1803, purchased on behalf of the plaintiff the shares of Evans, which were duly transferred accordingly. The calls in respect of the shares of Sir Lionel Darell were received from his bankers upon notice, sent to them according to his direction by the officer of the company ; and the plaintiff using the same bankers, the calls in respect of his shares were received in the same manner until the middle of the year 1805, when the shares of Sir Lionel Darell, who died in Octo- ber, 1803, being sold, the company ceased to give notice of calls at the bankers'. On the plaintiff's return to town on the 29th of Octo- ber, 1805, from his house in the country, he found a letter from the secretary of the company, directed to him at his house in town and dated the 2d of October, apprising him that he had neglected to pay his call on his five shares on the day appointed and duly signified to him; and that, unless he should pay the sum of £25, being the amount of the call, before the expiration of ten days from the deliv- ery of that letter, such shares would be absolutely forfeited. The plaintiff answered the letter, explaining the cause of the mistake, and adding that -he would give immediate directions for the pay- ment, which was made accordingly the next day by his bankers to the bankers, of the company. On the 5th of December, when in the country, the plaintiff received another letter, dated the 4th of Decem- ber, from the secretary, stating that on the first meeting of the committee subsequent to his letter of the 29th of October, the com- mittee had directed the receipt of it to be acknowledged, lamenting that his absence from town, or any other cause, should have been the means of his shares being forfeited for nonpayment in due time (viz., on or before the 12th of October last) of the thirty-fifth call, and stating that the committee had ordered the £25 paid to their bankers on the 30th of October to be repaid to the plaintiff's account, which was that day done accordingly, and that unfortunately it does not appear that the secretary had any orders to direct the plaintiff's letters elsewhere than to No. 22 Portland Place, where they had been regularly sent. The plaintiff in his answer to that letter stated the cause of the failure to have been from misconception and not from wilful neglect ; that shortly after the purchase by Sir Lionel Darell on his behalf he left town, being ignorant that he was liable to further claims until two payments had been made of £25 each, whence he con- cluded that his friend had given the necessary directions for pay- ment of the calls, their bankers being the same, and they were paid regularly till the thirty-fifth, the failure of which payment was occasioned by the discontinuance of the notice to .his banker, in consequence of the sale of Sir Lionel Darell's shares, the plaintiff's 56 PENALTIES AND FORFEITURES first knowledge of the mistake being on his coming to town the end of October. The answer to that letter stating that it was not in the power of the committee to give the plaintiff any relief, having acted according to the laws of the company, from which no deviation could be made, the bill was filed, praying relief against the forfeiture and offering to pay the call with interest, and to make good the detriment, if any, by nonpayment in due time, insisting that the nonpayment was solely owing to accident and did not arise from any wilful default or neglect, the plaintiff having always left money at his bankers' to pay the calls. The defendants proved that a letter, dated the 30th of July, 1805, was sent to the plaintiff's house in London by the post, con- taining a copy of a resolution of the company; that an abstract of such part of the deed as relates to the forfeiture of shares shall be printed and the laws put in force against defaulters, and then fol- lowed the clause of forfeiture. That letter gave the plaintiff the first notice to pay the money on or before the 26th of August. The letter of the 2d of October was delivered at the plaintiff's house. Mr. Richards and Mr. Wooddeson, for the plaintiff, contended that, though the property was forfeited at law, relief would be given in equity, and it was necessary to come into equity for the specific relief: First, upon the ground of accident; secondly, that compen- sation may be had and no injury would be sustained by the defend- ants; thirdly, upon the invalidity of the by-law, as unreasonable, exorbitant and uncertain. Upon such occasions the court will con- sider the validity of a by-law: Child v. Hudson's Bay t Company. This by-law, creating a total forfeiture, the thirty-fifth call only being in arrear, exceeds all bounds of moderation. It is also unrea- sonable, that calls being uncertain, not periodical, in fixing the period of ten days from the time of sending the letter ; not requiring personal notice to pay the money; having no consideration of the distance at which the party may live, the expression of that clause being that the party shall "receive," not as in the former clause, that the committee shall "give" notice. Mr. Leach and Mr. Trower, for the defendants, insisted that the plaintiff was without a remedy; that this was merely a case of contract, and that the plaintiff had fallen into this situation from his inattention to the concern in which he had engaged, stating that he supposed there were to be no more calls. The Master of the Rolls (Sir William Grant) : This bill is founded in forfeiture, and upon the ground that the plaintiff did not consider himself as a partner, and offering compensation, and praying to be relieved from the forfeiture. The parties might con- tract upon any terms they thought fit, and might impose terms as arbitrary as they pleased. It is essential to such transactions. This struck me as not like the case of individuals. If this species of equity is open to the parties engaged in these undertakings, they could not be carried on. It is essential that the money should be paid and that they should know what is their situation. Interest is OIL CREEK R. CO. v. THE ATL. AND GREAT W. R. CO. 57 not an adequate compensation, even among individuals ; much less in these undertakings. In particular cases interest might be a compen- sation ; but in the majority of cases it is no compensation, from the uncertainty in which they may be left. The effect is the same, whether money has been paid or not. They know the consequence. The party, making default, is no longer a member; but if a party can in equity enter into a discussion of the circumstances, each may bring his suit. They must remain a considerable time to see whether a suit will be begun, and before the suit can be decided. They do not know when any member will sue. If a bill is to be permitted, there cannot be any certainty that every member- who has made default may not file a bill. Can the court impose a limitation of the period when bills may be filed ? If the court ever began to deal with these cases, the number must be infinite. This is a mode which the party has to withdraw from a losing concern. Why is not this equity open to contractors. for the government loans? Why may not they come here to be relieved when they have failed in making their deposit; and, if they could have that relief, how could government go on ? It would be just as difficult for these undertakings to go on. If compensation cannot be effectually made, it ought not to be attempted. It would be hazardous to entertain such a bill. Acci- dent here is only the want of precaution. The plaintiff did not inform himself of the orders and rules of the company. It was easy for the plaintiff to direct the secretary to send the notices, as he pleased. The court cannot relieve against such accidents. The plaintiff ought to have taken all due pains to inform himself. 1 Dismiss the bill, without costs, as this is a hard case. THE OIL CREEK RAILROAD CO. v. THE ATLANTIC AND GREAT WESTERN RAILROAD CO. Supreme Court of Pennsylvania, 1868. 57 Pennsylvania, 65. Appeal from nisi prius. In equity. This was a proceeding in equity, commenced in the Supreme Court, Eastern District, No. 41, to January Term, 1865, by the Oil 1 Accord: Prendergast v. Turton, 1 Y. & C. Ch. 98 (1841) ; Naylor v South Devon R. Co., t DeG. & S. 32 (1846) : Small v. Herkimer M. Co. 2 N. Y. 330 (1849) ; Sudlow v. Dutch R. Rwy. Co., 21 Beav. 43 (1855) Germantown P. Ry. Co. v. Fitter, 60 Pa. 124 (1869) ; Marshall v. Golden F, M. Co., 16 Nev. 156 (1881) ; Vatable v. New York L. E. & W. R. Co., 96 N. Y. 49 (1884); Burham v. San Francisco F. M. Co., 76 Cal. 26 (1888) Southern B. & L. Ass'n. v. Anniston L. & T. Co., 101 Ala. 582 (1893) Elizabeth City C. M. Co. v. Dunstan, 121 N. Car. 12 (1897) ; Raht v. Min- ing Co., 18 Utah 290 (1898) ;• Ladies D. Ass'n v. Pulbrook (1900), 2 Q. B 376. But the power to forfeit must exist and must be strictly pursued Mitchell v. Vermont C. Co., 67 N. Y. 280 (1876). In re Alma Spinning Co., 16 Ch. D. 681 (1880) ; Watkins v. Workmen's B. & L. Ass'n, 97 Pa. 514 (1881) ; March v. Fairmount C. Co., 32 Pa. Super. Ct. 517 (1907) ; New York & E. Tel. Co. v. Great Eastern T. Co., 74 N. J. Eq. 221 (1908) ; Wood v. Universal A. M. Co., 166 111. App. 346 (1911)- 58 PENALTIES AND FORFEITURES Creek Railroad Company against the Atlantic and Great Western Railroad Company of Pennsylvania. The bill avers: I. The incorporation of the plaintiff under an Act of Assembly of April, i860, with power, amongst others, to build a railroad from a point on the Sunbury and Erie Railroad near Garland Station, Warren County, to Oil City, in Venango County, and thence to Franklin, in the same county. II. The incorporation of the Meadville Railroad Company under an Act of May 20, 1857, and the change of its name by Act of April 15, 1865, to the Atlantic and Great Western Railroad Com- pany of Pennsylvania, ■ the defendants in this case, and the vesting of all rights of the Meadville Railroad Company in the defendants. III. That the plaintiffs and defendants entered into a contract on the 14th of January, 1864, by which the plaintiffs granted to the defendants the right to construct a railroad from Oil City to Frank- lin under the plaintiffs' charter, and use and work it on the follow- ing terms: 1. The defendants to pay all expenses of engineering and dam- ages of every kind, keep up the fences on the line and indemnify the plaintiffs against costs, etc. 2. The defendants, at their own expense, to construct in a work- manlike manner a railroad from Oil City to Franklin, to be com- menced within thirty days and completed on or before January 1, 1865. 3. To aid the raising of money for these purposes, the plaintiffs to issue to the defendants first mortgage bonds secured on their road to the amount of fifteen thousand dollars per mile, the defendants assuming the payment of the principal and interest as they should respectively become due. 4. On the completion and equipment of the road, the plaintiffs to lease it to the defendants at one dollar per annum for ninety-nine years ; the defendants to have the right to fix the charges for travel and freight, but never so low as to enable them to deliver oil at Corry, etc., by other routes at less than the plaintiffs' charge, nor discriminate, by reduced charges from Corry, against oil delivered there for the western market. 5. The defendants to keep an accurate account of receipts, etc., and to pay the state and United States Government taxes on that part of the land. 6. The defendants to indemnify the plaintiffs against claims for damages of every kind arising on that part of the road. 7. "A violation of or failure to perform any of the stipulations of this contract to be performed and kept on the part of the (defend- ants) to operate as a forfeiture of the lease, and the (plaintiffs) might at once take possession of and use and occupy the road, with all its fixtures and appurtenances, as fully and completely as though it had been constructed by itself, and without any liability over to the (defendants)." IV. That defendants, under the contract, commenced and prose- OIL CREEK R. CO. v. THE ATL. AND GREAT W. R. CO. 59 cuted a railroad from Oil City to Franklin, but did not complete it on or before January i, 1865, and have not yet completed it, and therefore the plaintiffs are entitled to put an end to the lease and take possession of the road, fixtures, etc., and use them, etc. V. That the board of directors of the plaintiffs, on the 3d of January, 1865, resolved that the lease should be regarded as for- feited and at an end; that the company (plaintiffs) take possession of the road, fixtures, etc., and occupy and use them as provided in the contract and lease; that the president take measures to carry the resolution into effect and to complete the road, and that he give notice hereof to the defendants. VI. That notice of the resolution was given to the directors and other officers of the defendants, and that the plaintiffs took possession of the unfinished portion of the roadway, are still in possession of it, and are about forthwith to complete and bring it into public use. » VII. That the plaintiffs demanded and attempted to take pos- session of the completed part of road; that the possession was refused, etc. VIII. That the defendants. pretend, notwithstanding the prem- ises, that they are entitled to hold and use the road for ninety-nine years. IX. That by reason of the noncompletion of the road within the time limited, the plaintiffs are entitled to be protected in the possession of that part of the roadway which they have, and to take possession of the remainder, and enjoy the road free from all inter- ests of the defendants, paying them whatever may be equitably due for expenses of construction before January 2, 1865, which the plaintiffs declared themselves ready and willing to pay. X. That damages for the breach of the contract cannot be accu- rately ascertained; that collisions will occur between the persons employed by the parties respectively; litigation will ensue as to the rights of the parties, and the plaintiffs are without remedy, unless from a court of equity. The prayer was for a decree that the plaintiffs had a right to declare the lease at an end, re-enter, etc.; that they are entitled to the aid of the court to protect them in the possession of the portion of the roadway of which they have taken possession, and of the whole ; to quiet their title, and to prevent the defendants from work- ing or using the road ; that an account be taken of the amount expended by the defendants, and that upon the payment of the sum found due, the contract may be delivered up to be canceled; for an injunction restraining defendants from interfering with plaintiffs' possession; from retaining any portion of the roadway; from pre- venting plaintiffs from taking possession of the road, fixtures, etc.; from working or using the same and from claiming any interest therein, etc., and for general relief, etc. The answer admits the allegations in the first and second para- graphs of the bill, and avers that the authority to plaintiffs to con- struct a railroad from Oil City to Franklin was repealed by an act 60 PENALTIES AND FORFEITURES passed January 29, 1862 ; admits the execution of the contract, but denies the commencement of the road under it; avers that it was commenced prior to the contract as an extension of another road authorized by the defendants' act of incorporation; that they have steadily prosecuted the road to completion, but admits that it was not completed on the first day of January, 1865 ; denies that the plaintiffs are therefore entitled to put an end to the lease, etc. It avers that plaintiffs have not built a railroad from Garland Station, etc., to Oil City, or near it ; that although the defendants commenced the road and progressed towards its completion a sufficient time before the 1st of January, 1865, to have finished it, if the plaintiffs had issued their bonds according to the contract, yet the plaintiffs have refused, and still refuse, to issue the bonds; admits the notice of the resolutions of plaintiffs' board of directors; denies that the plaintiffs took or had lawful possession of the road, or are in such possession, unless by artifice or fraud ; avers that defendants retain the possession, have always refused to surrender it to the plaintiffs, and design to retain it and operate the road during the whole term of their lease, and to comply with all its obligations, etc. The plaintiffs filed a general replication, and testimony was taken by examiners. The plaintiffs' witnesses testified that, on the 1st of January, 1865, the track was laid within about two and one-half miles of Oil City; the road was graded to within about three hundred and fifty feet of Oil City ; but there were no ties nor iron on that part of the road, and it was otherwise imperfect. Some of the work had been done when there was much snow on the road. The road in its con- dition on January 1, 1865, could have been finished with diligence in a month — or it might have taken two in that season of the year ; at the rate the defendants had been working on the road previously to that date it would have taken three months. The distance between Franklin and Oil City is seven miles. The road was put into opera- tion early in the spring of 1865, and has been in operation ever since. The defendants' testimony was that the road had been graded to Oil City on January 1, 1865 ; all the masonry done and track laid to a point about two miles below Oil City ; that there was much delay in consequence of interference by the landholders along the route ; that the defendants have kept and operated the road after January 1, 1865 ; twenty men could have finished the road to Oil City in one week after January 1, 1865; the work had progressed up to that time as rapidly as it could from the nature of the work ; the respond- ents had paid large sums of money for right of way ; the plaintiffs had not delivered bonds when demanded by defendants. There was other testimony on Both sides which, in the view taken of the case by the judge at nisi prius, and in the opinion of the Supreme Court, it does not appear important to notice. Agnew, J., dismissed the bill with costs. Plaintiffs appealed. 1 5 The opinion at nisi prius and the arguments of counsel are omitted. OIL CREEK R. CO. v. THE ATL. AND GREAT W. R. CO. 61 Sharswood, J. : A bill for the special enforcement of a contract is an appeal to the conscience of the chancellor. He exercises, upon the question presented, a sound discretion, under all the circum- stances of the case, for the most part untrammeled by rule or prece- dent. If the bargain is a hard or unconscionable one, if the terms are unequal, if the party calling for his aid is seeking an undue advantage, he declines to interfere. Therefore it is that although a court of equity will not in general relieve against a forfeiture, unless it be in the case of nonpayment of rent, where anexact and just compensation can be made by decreeing to the landlord the arrears of his rent with interest and costs, yet they never lend their assist- ance in the enforcement of one, but leave the party to his legal remedies. More especially is this the case where the contract has been substantially carried out, but its literal fulfilment has been pre- vented by uncontrollable circumstances. It is unnecessary to cite authorities in suppert of these positions. They underlie all the cases which abound on the subject, and have been canonized in the stand- ard elementary works: Jeremy's Eq., 425, 471 ; Adams' Eq., 77, note; 2 Story's Eq., Sees. 742, 750, 1319, 1323. They commend themselves to every man's common sense of reason and justice, in view of the special objects which courts of equity have been con- stituted to effectuate. They would otherwise become engines of oppression and injustice. Perhaps there could be no clearer illustration of the value and importance of these principles than in the circumstances of the case now presented for decision. The defendants, the Atlantic and Great Western Railroad Company, on the 14th of January, 1864, entered into a contract with the Oil Creek Railroad Company, by which they agreed, at their own expense, to furnish the iron and all other mate- rials, and grade, construct and complete in a good and workman- like manner, a railroad from Oil City to Franklin, the work to be commenced within thirty days of date, and be completed on or before the first day of January, 1865. As the consideration for this work, the plaintiffs agreed that when the said road from Oil Creek to Franklin should be so constructed, to lease, and thereby did lease the same to the defendants, for the term of ninety-nine years from the date of the covenant at the nominal rent of one dollar per annum, and with certain stipulations as to the tariff of charges for freights and other matters for the advantage of the plaintiffs. The seventh article provides that "a violation of or failure to perform any of the stipulations of this contract to be performed and kept on the part of the party of the second part (the defendants), shall oper- ate as a forfeiture of this lease, and the party of the first part (the plaintiffs) may at once take possession of and use and occupy the road with all its fixtures and appurtenances as fully and completely as though it had been constructed by itself and without any liability over to the party of the second part." It is sometimes a question what is or is not a forfeiture. That question does not arise here, as the parties have explicitly settled it by their own language. The railroad was not completely finished and equipped on the 1st of 62 PENALTIES AND FORFEITURES January, 1865. The defendants had progressed to within two or three miles of Oil City, which seems to be a place of somewhat extensive and unascertained boundaries. The season was a severe one, and the difficulties of the construction much increased in the approach to its terminus. According to the plaintiffs' own testi- mony, it could have been finished within a month. An examination was made of the road by the chief engineer of the plaintiffs on the first day of January, 1865, although the defendants had the whole of that day before a. forfeiture could accrue, and might have made some progress if it had not been, as it appears, Sunday. On the 3d of January, 1865, the plaintiffs, by resolution of their board of directors, declared the road to be forfeited. On the 6th of January formal notice was given to the engineer and foreman of the defend- ants of this action, and possession Was taken of the unfinished part of the road by placing some cars on it. The defendants went on, however, and completed the road by the early part of spring. The plaintiffs pray that the lease may be declared forfeited, that they may be protected in the possession of that part of the roadway of which they have possession, that an account be taken of the cost of the road, and that upon payment thereof the contract may be deliv- ered up to be canceled, and that defendants be enjoined from inter- fering with or preventing the plaintiffs from taking peaceable pos- session of the said road or from claiming or exercising any right as lessees. Thus distinctly is this court asked to enforce what the parties themselves agreed to be and denominated a forfeiture ; to' deprive the defendants of the entire benefit of their contract and lease, and that on the ground that a partial failure of performance has occurred, not productive of serious loss to the plaintiffs, and for which in all probability it would be difficult to persuade any jury to give them more than nominal damages. The judge at nisi prius was clearly right in dismissing the bill with costs, and the decree is affirmed at the costs of the appellants. 2 Decree affirmed with costs. 2 Accord: Wrottesley v. Bendish, 3 P. Wms. 235 (1733); Livingston v. Tompkins, 4 Johns. Ch. (N. Y.) 415 (1820) ; Atlas Bank v. Nahant Bank, 44 Mass. 581 (1842) ; Lefforge v. West, 2 Ind. 514 (1851) ; Rynear v. Neilin, 3 Gr. (la.) 310 (1851); Coe v. Columbus P. & I. R. Co., 10 Ohio St. 732 (1859) ; Warren v. Bennett, 31 Conn. 468 (1863) ; White v. Port Huron & M. R. Co., 13 Mich. 356 (1865) ; United States v. McRae, 4 Eq. Ca. 327 (1867) ; Meig's Appeal, 62 Pa. 28 (1869) ; Marshall v. Vicksburg, 15 Wall. (U. S.) -146 (1872); Keller v. Lewis, 53 Cal. 113 (1878)'; Broadnax v. Baker, 94 N. C. 67s (1886) ; Lincoln v. Quynn, 68 Md. 299 (1887) ; Boston C. Si M. R. v. Boston & L. R., 65 N. H. 393 (1888) ; Worthington v. Moon, S3 N. J. Eq. 46 (1894) ; Kennedy v. Klaw, 6 Pa. D. R. 243 (1897) ; Miss. R. Comm. v. Gulf R. Co., 78 Miss. 750 (1901) ; Michigan P. Co. v. Freemont D: Co., in Fed. 284 (1901), s. c, 8 Amer. & Eng. Dec. Eq. 180 and note; Wallace v. Kelly, 148 Mich. 336 (1907) ; Dresser v. Hartford L. T. Co., 80 Conn. 681 (1908) ; Pyle v. Henderson, 63 S. E..762 (W. Va. 1009) ; Newton v. Kemper, 66 W. Va. 130 (1909) ; John v. McNeal, 132 N. W. 508 (Mich. 191 1 ) ; Tarr v. Shearman, 264 111. no (1914). It is sometimes said that there are no real exceptions to the rule that CLARK v. BARNARD 63 CLARK v. BARNARD. Supreme Court of the United States, 1882. 108 United States, 436. 1 Bill in equity by the assignees in bankruptcy of the Boston, Hartford and Erie Railroad to restrain the treasurer of the State of Rhode Island from receiving one hundred thousand dollars in the possession of the court, the proceeds of a loan certificate of the city of Boston, which was lodged with the state by the bankrupt as security for the performance of its bond for that amount given to the state in pursuance of law to secure the construction of an exten- sion of its road in Rhode Island, the extension never having been made. The act in question contained a provision in the following terms : "This act shall not go into effect unless the said Boston, Hartford and Erie Railroad Company shall, within ninety days from the rising of this general assembly, deposit in the office of the general treasurer their bond, with sureties satisfactory to the governor of this State in the sum of one hundred thousand dollars, that they will complete their said road before the first day of January, A. D. 1872." On final hearing the fund was awarded to the appellees, and from that decree Clark, general treasurer of the State of Rhode Island, and the State of Rhode Island appealed. The state itself is a party to the appeal bond, which recites that the State of Rhode Island was an intervenor and claimant of the fund in court and that a decree was rendered against it as such. The bond executed and delivered by the Boston, Hartford and Erie Railroad Company to the State of Rhode Island is as follows : "Know all men by these presents that the Boston, Hartford and Erie Railroad Company, a corporation created by the general assem- bly of the State of Connecticut, is held and firmly bound to the equity will not enforce a forfeiture; apparent exceptions arising only when the enforcement of a forfeiture is the indirect result of a decree com- pelling performance of a contract. 1 Pomero/s Eq. Jurisp. (3d Ed.), Sec, 460; 8 Amer. & Eng. Dec. Eq. 194. See Leach v. Leach, 4 Ind. 628 (1853) ; Whitney v. Union Ry. Co., 77 Mass. 359 ( 1858) ; Columbia Trustees v. Lynch, 70 N. Y. 440 (1877); McClellan v. Coffin, 93 Ind. 456 (1883); Harper v. Tidholm, 153 111. 370 (189s) ; Telegraphone Co. v. Canadian T. Co., 163 Me. 444 (.1908) ; Farmers P. C. Co. v. Pawnee W. S. Co., 47 Colo 239 (191Q). Elsewhere it is maintained that there is no insuperable objec- tion to the enforcement of a forfeiture when justice requires it. Brewster v Lanyon Zinc Co., 140 Fed. 801 (1905) ; Brown v. Vandergrift, 80 Pa. 142 (1875); United States v. Oregon & C. R. Co., 186 Fed. 861 (1911), at p. 925; Bickell v. Rockwood, 209 Fed. 187 (1913)- It is also maintained that a statutory forfeiture may be enforced. Chapman v. State, 5 Ore. 432 (187s); State v. Hall, 70 Miss. 678 (1893); McCreary v. First N. Bk., 109 Tenn. 128 (1902); State v. Marshall, 56 So. 792 (Miss. 1911). 64 PENALTIES AND FORFEITURES State of Rhode Island and Providence Plantations in the sum of one hundred thousand dollars, to be paid to said State of Rhode Island and Providence Plantations ; to which payment, well and truly to be made, the said corporation doth bind itself and its successors firmly by these presents. "The condition of the aforewritten obligation is such that whereas by an act of the general assembly of said State of Rhode Island, entitled 'An Act in addition to an act entitled An Act to ratify and confirm the sale of the Hartford, Providence and Fishkill Railroad to the Boston, Hartford and Erie Railroad Company,' passed at the January session, 1869, said Boston, Hartford and Erie Railroad Company are authorized and empowered to locate, lay out, and construct a railroad, in extension of their line of railroad purchased of the Hartford, Providence and Fishkill Railroad Com- pany, commencing at a point in their said purchased railroad at or near their freight depot in the city of Providence, thence running westerly and northerly by a line westerly of the State's prison, a little easterly of the Rhode Island Locomotive Works, and thence by nearly a straight line and crossing or running near to Leonard's Pond, and thence passing between the villages of Pawtucket and Lonsdale, and over and above the Providence and Worcester Rail- road, thence continuing to the easterly line of the State, in or near the village of Valley Falls; "Now, therefore, if said Boston, Hartford and Erie Railroad Company shall complete their said railroad before the first day of January, A. D. 1872, then the aforewritten obligation shall be void; otherwise be and remain in full force and effect. "In testimony whereof, said Boston, Hartford and Erie Rail- road Company have caused this instrument to be signed by John S. Eldridge, its president, and its corporate seal to be thereto affixed, this twenty-third day of June, 1869. .(L.S.) "Boston, Hartford and Erie R. R. Co., "By John S. Eldridge, President. "Executed in presence of — "Samuel Currey. "H. S. Barry." The testimony taken in the cause pursuant to the interlocutory decree, it is admitted, failed to prove any damage or loss occasioned to the State of Rhode Island, or to any of its citizens or inhabitants, by reason of the failure of the railroad company to comply with the conditions of this bond. 1 Matthews, ].\ It has been uniformly held, in cases too numer- ous for citation, that courts of equity will not interfere in cases of forfeiture for the breach of covenants and conditions where there, cannot be any just compensation decreed for the breach ; for, as was 'The arguments of counsel are omitted as well as part of the opinion of the court relating to other questions. CLARK v. BARNARD 65 said by Lord Chancellor Macclesfield, in Peachy v. Duke of Somer- set, 1 Strange 447; S. C. Prec. Ch. 568, 2 Eq. Ca. Abr. 227, "it is the recompense that gives this court a handle to grant relief." Accordingly, where any penalty or forfeiture is imposed by stat- ute upon the doing or omission of a certain act, there courts of equity will not interfere to mitigate the penalty or forfeiture, if incurred, for it would be in contravention of the direct expression of the legislative will. Story's Eq. Jur., Sec. 1326. Lord Chan- cellor Macclesfield said in Peachy v. Duke of Somerset, 1 Strange, 447-453 = "Cases of agreements and conditions of the party and of the law are certainly to be distinguished. You can never say the law has determined hardly, but you may that the party has made a hard bargain." In Powell v. Redfield, 4 Blatchf ord 45, an application was made in equity to restrain* suits upon a bond given in pursuance of the revenue laws of the United States, which was denied on the ground that a court of equity had no right to interfere and, by injunction or decree, to virtually repeal the express provisions of a positive statute, or defeat their operation in the particular case. In Benson v. Gibson, 3 Atk. 395, Lord Hardwicke said : "Nor is it like the case of bonds given as a security not to defraud the revenue, because there, where a person is guilty of a breach, it is considered in law as a crime, and this court will not relieve for that reason." The case of Treasurer v. Patten, 1 Root 260, was an action for the penalty of a bond given to oblige the defendant to observe the laws respecting excise, in which there was a verdict for the plaintiff and the £200 penalty. Defendant moved the court, says the report, to chancer said bond : "By The Court : There is no power short of the legislature can do it; for it is the sum prescribed by an act of the legislature." So in Keating v. Sparrow, 1 Ball & Beatty 367-373, the Lord Chancellor Manners said: "It has been argued on the part of the plaintiff that this court leans against forfeiture, if the party can be compensated ; and that he can in this case, where interest and sep- tennial fines may be given to the landlord. That principle is applica- ble to cases of contract between the parties, but not to the pro- visions of an act of Parliament or conditions in law." The fact that the obligation is in the form of a bond to the state does not make its penalty less a statutory forfeiture, and so outside the jurisdiction of a court of equity. In the case of The United States v. Montell, Taney 47, it was held that the sum secured by a bond with sureties, under the Act of Congress of December 31, 1792, Ch. 1, Sec. 7, 1 Stat. 290, conditioned that the registry of a vessel should be used solely for the vessel for which it was granted, and should not be disposed of to any person whatsoever; and if the vessel be lost, or prevented by disaster from returning to the port, and the registry shall be preserved, or if the vessel be sold, that the registry shall be delivered up to the collector, is a penalty or for- feiture inflicted by the sovereign power for a breach of its laws, not 66 PENALTIES AND FORFEITURES a liquidated amount of damages due under a contract, but a fixed and certain punishment for an offense, and not the less so, because security is taken before the offense is committed, in order to secure the payment of the fine if the law should be violated. Chief Justice Taney, in his opinion, said: "Penalties and forfeitures imposed by statute are not usually provided for by bond and security given in advance. The sum recovered from Montell is recovered upon a con- tract; the action was brought upon a contract, and was not and could not have been brought in any of those forms which are usually necessary for the recovery of fines or forfeitures imposed by law. Yet this sum was, in truth, forfeited by Montell by reason of his violation of a duty imposed by the act of Congress ; it was a specific penalty upon the owner and master for the commission of a particu- lar offense against the policy of that law. And although the amount was secured by bond given for the performance of the duty, yet this duty was a part of the same policy with other duties mentioned in the act and for which other penalties are inflicted. ... It cer- tainly is not to be regarded as a bond with a collateral condition, in which the jury are to assess the damages which the United States shall prove that they have sustained ; for according to that construc- tion, the amount of damages would not depend upon the amount of the penalty described in the section, which is graduated according to the size of the vessel, but would depend upon the discretion of different juries, and larger damages might be given where the pen- alty was only four hundred dollars, than in a case where the pen- alty was two thousand dollars. This, obviously, is not the intention of the law, and the United States are entitled to recover the whole sum for which the party is bound, if any one of the conditions are broken. Besides, how could the United States prove any particular amount of damages to have been sustained by them in a suit on this bond ? What do they lose ? It would be difficult, we think, by any course of proof or any process of reasoning, to show that the United States had sustained any particular amount of damages in a case of this description, or to adopt any rule by which the damages could be measured by a jury, or be liquidated by agreement between the parties. The sum for which the parties are to become bound is manifestly a penalty or forfeiture, inflicted by the sovereign power for a breach of its laws. It is not a liquidated amount of damages due upon a contract, but a fixed and certain punishment for an offense. And it is not the less a penalty and a punishment, because security is taken before the offense is committed, in order to secure the payment of the fine if the law should be violated." Recurring now to the particular circumstances of the present case, with a view to the application of these principles and decisions, we are satisfied that the proper solution of the question now under examination is to be found in two principal considerations. The first of these is, that it was not intended by the parties, the State of Rhode Island on the one hand and the Boston, Hartford and Erie Railroad Company on the other, that the obligation given and accepted should be for an indemnity against any loss or damage CLARK v. BARNARD 67 expected to be suffered by the state, in the event that the railroad company should fail to build the railroad as required. It is found as a fact that no such loss or damage has in fact ensued. It is equally plain that none could possibly have arisen. The security is not to be extended to any supposed damage to private interests legally affected by the process of constructing the work. All damage of this kind to private persons was carefully provided for in other parts of the act. As to the state itself, the real party to the arrangement and contract, it could gain nothing in its political and sovereign character by the construction of the road ; it could lose" nothing by the default. If it could be supposed as possible that the state had in view the public interests of commerce and trade in the construction of the proposed railroad, and meant to provide for loss and damage to them by reason of its failure, the obvious answer is that no com- putation and assessment of actual damages on that account would ■ be practicable, leavjpg as the alternative that the state, in fixing the penalty of the bond in the statute, had established its own measure of the public loss. The question of damages and compensation was not, because it could not have been, in contemplation of the parties. There was no room for supposing that there could be any. To assume that the statute required this bond and security in this sense, in full view of the legal conclusion which it is said necessarily flows from its form, and that in the event contemplated, of the failure to build the road, all that remained to be done was that the state should hand back canceled the obligation and security it has been at such pains to exact, is to put upon the transaction an interpretation alto- gether inadmissible. It would have been, upon such an assumption, a vain and senseless thing, and however private persons may be sometimes supposed to act improvidently, we are not to put such constructions, when it is legally possible to avoid them, upon the deliberate and solemn acts and transactions of a sovereign power, acting through the forms of legislation. The conclusion, in our opinion, cannot be resisted that the intention of the parties in the transaction in question was that, if the railroad should not be built within the time limited, the corporation should pay to the state, absolutely and for its own use, the sum named in the bond and secured by the deposited certificate of indebtedness. The supposi- tion is not open that the penalty was prescribed merely in terrorem, to secure punctuality in performance, with the reserved intention of permitting subsequent performance to condone the default, for a distinct section of the statute (Sec. 9) declares that in case of failure to complete the road within the time limited, the act itself should be void and of no effect. In the second place, we think that the sum named in the statute is imposed by it as a statutory penalty for the nonperformance of a statutory duty. The obligation required is that the railroad com- pany shall give a bond, with satisfactory security, that they will obey the law, that they will complete their road as required by it. The language evidently means that, in case they fail to do so, they shall 68 , PENALTIES AND FORFEITURES forfeit and pay the sum named ; and in order to insure its payment, additional parties to the bond, as sureties, are required. It is admitted that if it does not mean this, it does not mean anything, and we have already said that we are not at liberty to adopt that alternative. We must construe it, ut res magis valeat quam pereat; and the rule of strictness, in the construction of penal statutes, does not require an interpretation which defeats the very object of the law. The State of Rhode Island was dealing with one of its own corporations, and it had perfect right to act upon its own policy and prescribe its own terms, as conditions of powers and privileges sought from its authority. For these reasons the decree of the Circuit Court is reversed and the cause is remanded, with instructions to enter a decree in favor of the State of Rhode Island for the sum of one hundred thousand dollars, payable out of the fund in court, with so much interest thereon, if any, as has accrued on that sum since the first day of January, 1872, which is the date when the amount became due. 2 CITY OF SUMMIT v. MORRIS COUNTY TRACTION COMPANY. Court of Errors and Appeals of New Jersey, 1913. 85 New Jersey Law, IQ3. Gum mere, C. J. : The city of Summit, in 1907, on the applica- tion of the defendant company, passed an ordinance granting leave to it to construct and operate a trolley line through the city streets, upon certain conditions specified in the ordinance and agreed to by the company. These conditions were many in number and of vary- ing importance. Some of them related to the construction of the road, others to the operation thereof, and still others to the payment to the city of compensation for the privilege of using the city streets. Most of those relating to construction and operation carried with them a specific penalty for violations thereof by the company. The ordinance also contained a provision that the company should, at the time of its acceptance thereof, give a bond to the city, with suffi- ^ Accord: Treasurer v. Patten, 1 Root (Conn.) 260 (1791) ; Keating v. Sparrow, 1 Ball. & B. 367 (1810) ; United States v. Hatch, 1 Paine (U. S. C. Ct.) 336 (1824); Gorman v. Low, 2 Edw. (N. Y.) 324 (1834); United States v. Montell, Taney (U. S. C. Ct.) 47 (1840) ; Maryland v. Bait. & O- R. Co., 44 U. S. 534 (1845) ; Smith v. Mariner, 5 Wis. 551 (1856) ; Powell v. Redfield, 4 Blatch. (U. S. C. Ct.) 45 (1857) ; Cameron v. Adams, 31 Mich. 426 (1875); State y. McBride, 76 Ala. 51 (1884); The S. Oteri,' 67 Fed. 146 (.1894); United States v. Dickerhoff, 202 U. S. 302.(1905), re- versing 136 Fed. 545; United States v. U. S. Fidelity & G. Co., 151 Fed. 534 (1907). Compare: Cooley -.v. Love-well, 130 S. W. 574 (Ark. 1910) ; Donaldson v. Abraham, 122 Pac. 1003 (Wash. 1912). CITY OF SUMMIT v. MORRIS COUNTY TRACTION CO. 69 cient surety, in the sum of five thousand dollars, with a condition that the company and its successors should fully and faithfully keep, observe and perform all the provisions of the ordinance on its part to be kept, observed and performed. A bond was given in accord- ance with this provision, and the present suit is brought to recover the damages alleged to have been sustained by the city by the failure of the company to perform diverse duties imposed upon it by differ- ent sections of the ordinance. The breaches alleged having been proved at the trial, the court found for the plaintiff ; but, no special damage having been proved to have been sustained by the city, only nominal damages were permitted to be recovered by it, the court holding that the payment called for by the bond was by way of penalty and not as liquidated damages. The plaintiff now seeks to review the ruling of the trial court upon this point. We think the view of the trial court that the bond in suit pro- vided a penalty fo» a breach of any of the conditions thereof, and not for damages liquidated by agreement of the parties for such breach, is the correct one. The rule to be gathered from our decided cases is this : That when damages are to be ascertained for the breach of a single stipulation contained in an agreement, and they are uncertain in amount and not readily susceptible of proof under the rules of evidence, then if the parties have agreed upon a sum as the measure of compensation for the breach, and that sum is not disproportionate to the presumable loss, it may be recovered as liquidated damages {Monmouth Park Association v. Wallis Iron Works, 26 Vroom 132; Robinson v. Centenary Fund, 39 Id. 723) ; but where the agreement contains disconnected stipulations of vari- ous degrees of importance, the sum named therein to be paid in case of a failure of performance will be considered as a penalty, unless the agreement specifies the particular stipulation or stipulations to which the liquidated damages are to be confined. Whitfield v. Levy, 6 Id. 149 ; Hoagland v. Segur, 9 Id. 230. The determination of the trial court was in consonance with this rule of law. It was also in harmony, we think, with the intention of the parties as exhibited by the provision of the ordinance which required the bond to be given, for apparently in every case in which the municipal authorities con- sidered that the breach by the company of any stipulation contained in it should carry an obligation on the part of the company to pay to the city a specific sum, it is so declared, and the sum fixed, by the ordinance itself. We deem it proper to say that we have not reached the con- clusion expressed without a consideration of the cases of Clark v. Barnard, 108 U. S. 436; City of Salem v. Anson, 40 Ore. 339, and City of Indianola v. Gulf, Western, etc., Railroad Co., 56 Tex. 594, felied upon by counsel for plaintiff in error in support of his con- tention. They are each of them cases where the ascertainment of damages for the breach of a single stipulation contained in the agreement was involved, and so come within the first division of the rule which we have said prevails in this state, and are in accord 70 PENALTIES AND FORFEITURES with it. The opinions themselves, as we read them, do not, we think, militate against the conclusion which we have reached. The judgment under review will be affirmed. 1 We are not to be understood, however, by our affirmance of this judgment as approving the form in which it is entered. The consideration est is that the plaintiff do recover against the defend- ants "its said damages by the court, in form aforesaid, found to be the sum of six cents, and by the court now here adjudged to the said plaintiff," etc. The bond in suit, being one for the payment of money, the fifth section of our act concerning obligations (Comp. Stat., p. 3778), required that the judgment should be entered for the penalty of the bond ; the execution thereon issuing only for such damages as were assessed. The wisdom of the statutory provision referred to is peculiarly apparent in a case like the present, where the bond is intended as an indemnity against breaches of various and unrelated conditions; for the judgment is not only in satisfac- tion of the damages resulting to the plaintiff from the breach sued upon, but stands as security for future breaches. Roll v. Maxwell, 2 South. 568. But as the form of the judgment is not attacked by any assignment of error, this defect cannot be made a ground of reversal. Swayze, J. (dissenting) : In this suit upon a bond in the penal sum of five thousand dollars, breaches of condition were proved and a judgment entered for six cents. The. effect is that the bond is merged in the judgment and six cents is all the city can ever recover. The judgment should have been entered for the penalty and execution issued for the proper amount from time to time. This, however, is . a • mere, technical or perhaps clerical error. My real objection to the result is that the opinion of the court precludes any substantial recovery, not only on this bond, but on any bond that may be taken by a municipality to secure the performance of public obligations; for it can rarely happen that the municipality as such is damaged by failure to perform. The damage is to the public, not to the municipality. The reason for the rule on which the opinion rests is the presumption that what the parties meant to secure was the actual damages, rather than the penalty, and this reason must fall where there can be no actual damage to the obligee. In this respect the case is like Clark v. Barnard, 108 U. S. 436. It differs, however, since this bond is conditioned for the performance of all the provisions of the ordinance. Among those provisions are pro- visions for the payment of specific fixed penalties for the violation of certain covenants to be performed by the traction company. Those 'Accord: Wheeling L. & G. R. Co. v. Triadelphia, 58 W. Va. 487 (1005) ; Chicago v. Chicago & W. R. Co., 105 111. 73 (1882) ; North Jersey S. Ry. Co. v. South Orange, 58 N. J. Eq. 83 (1899) ; Pike's P. P. Co. v. Colorado Springs, 105 Fed. 1 (1900). Contra: Indianola v. Gulf, W. T. & P. R., 56 Tex. 594 (1882) ; Nilson v. Jonesboro, 57 Ark. 168 (1893) ; Salem v. Anson, 40 Ore. 339 (1002) ; Brooks v. Wichita, 114 Fed. 297 (1902) ; Springwells Tp. v. Detroit, P. & N Ry.. 140 Mich. 277 (1905) ; Whitcomb v. Houston, 130 S. W. 215 (Tex. 1910). " KETTLEBY v. ATWOOD 71 covenants have been violated and I think the penalties are due. It seems to me a great stretch of the law to hold that specific penalties fixed by a municipal ordinance are in fact meant only to secure actual damages. The penalties are actual damages and the loss of the penalties is the only damage the city as a municipality can suffer. For affirmance — The chancellor, chief justice, Garrison, Trenchard, Parker, Voorhees, Kalisch, Vredenburgh, Congdon, White, Terhune, Heppenheimer, J J. ; twelve. For reversal — Swayze, Minturn, J J. ; two. CHAPTER II. EQUITABLE CONVERSION. KETTLEBY v. ATWOOD. In Chancery Before Lord Keeper North, 1684, and Before Lord Chancellor Jefferies, 1687. 1 Vern., 298, 471. By articles made upon marriage it was agreed that the wife having £1500 portion, the husband should add £500 more to it, and that the same should be deposited in trustee's hands, until a con- venient purchase could be found out for investing the same in land, which land, when purchased, was to be settled to the use of the husband and wife for their lives, remainder to the first and other sons of their two bodies in tail, remainder to their daughters in tail, with a remainder over to the right heirs of the husband. And in the article there was a proviso, that in case the husband died with- out issue, the wife might make her election, whether she would have the land or money, and had six months' time to make her election. The husband died before any purchase was made, leaving the wife enseint of a daughter, born soon after his death, who died at a month old. The wife was administratrix both to her husband and child, and made her election within the six months to have the money, and gave notice thereof to the plaintiff, who was her hus- band's brother and heir. The bill was brought by the plaintiff to have the £2000 invested in lands and settled according to the articles. Lord Keeper: Had a bill been brought to the lifetime of the infant (it being better and safer for the infant to have had land than money) I would have decreed the money to be laid out for the benefit of the infant; but I do not see what equity the heir has against the administratrix. The bill was dismissed, but without costs. On Rehearing. This cause came on to be reheard, and the question now was between the wife and the heir on the part of the husband, who should have the money after the death of the wife ; the wife being 72 EQUITABLE CONVERSION administratrix both to her husband and her child; and the court decreed for the heir, that the money was bound by the articles, and should be for the benefit of the heir, as the land should have gone, in case the money had been laid out according to the articles, 1 and the case of Whittick and Jermin was cited, which had been lately decreed by this chancellor and was a case in point, and the chan- cellor said he remembered the case of Lawrence and Beverley (2 Keeb. 841) upon a special verdict before the Lord Chief Justice Hales, in which himself was of counsel, and was there ruled, that the money was not assets to justify a creditor, but was bound by the articles. In the arguing of this case it was insisted for the defendant that the wife by the articles had an election, in case her husband died without issue, whether she would have the land or the money, and had six months' time to make her election after the death of the husband ; and although the husband had issue at his death, yet "that issue died within the six months, and therefore the wife might electa Sed non allocatur, for the husband having issue at his death, he could not be said to die without issue ; so no election could arise to the wife. And the case of Goodier and Clark was cited in Siderfin, part 1, fol. 102. SCUDAMORE ET AL. v. SCUDAMORE. In Chancery Before Lord Macclesfield, 1720. Precedents in Chancery, 543. The Lady Jane Scudamore, by her will in 1696, gave the sum of £8ooo to her daughter, Mrs. Prince, to be laid out by her in a purchase of lands, to be settled to the use of herself for life, with remainder to John Scudamore and his heirs ; and in case he died in the lifetime of the said Mrs. Prince, to the Lord Scudamore, his heirs, executors and administrators. John Scudamore died in the year 1714, and in the lifetime of Mrs. Prince. The Lord Scuda- * Accord: Knights v. Atkyns, 2 Vern. 20 (1687); Lancy v. Fairechild, 2 Vern. 102 (1689) ; Lingen v. Sowray, 1 P. Wms. 172 (1711), s. c, Gilb. Eq. 91, Pre. Ch. 400, 1 Eq. Ca. Abr. 175, 10 Mod. 528; Disher v. Disher, 1 P. Wms. 204 (1712) ; Chaplin v. Homer, 1 P. Wms. 483 (1718) ; Edwards v\ Countess of Warwick, 2 P. Wms. 171 (1723), s. c, 1 Br. P. C. 207; Lechmere v. Carlisle, 3 P. Wms. 211 (1733) ; Guidot v. Guidot, 3 Atk. 254 (1745); Rashleigh v. Master, 3 Br. Ch. qo O780') : Jn re Greaves (1883), 23 Ch. D. 313; In re Cleveland (1893), 3 Ch. D. 244. Compare: Svtnons v. Rutter, 2 Vern. 227 (1691) ; Abbott v. Lee, 2 Vern. 284 (1692) ; Chichester v. Bickerstaff, 2 Vern. 295 (1693) ; Pultney v. Darlington, I Br. Ch. 223 (1783). Where land is directed to be sold and the proceeds invested in other lands, a double conversion takes place. Pearson v. Lane, 17 Ves. toi (i8to1 : Ford v, Ford, 80 Mich. 42 (1890) ; Lane v. Eaton, 69 Minn. 141 (1897). SCUDAMORE et al. v. SCUDAMORE 73 more likewise died in the lifetime of Mrs. Prince, in the year 1716, having about three months before his death made his will, and the plaintiff his lady executrix ; and having given several legacies to the other plaintiffs, and leaving the defendant, Frances Scudamore, his only daughter and heir at law, an infant; and in the year 1717 Mrs. Prince died, and the money had never been laid out; and now this bill was brought by the plaintiff against the Lady Frances, heir at law, and against the executors of Mrs. Prince to have the money for the benefit of the executors and legatees of the Lord Scuda- more; and that no purchase might be made for the benefit of the defendant, the heir at law of Lord Scudamore. Lord chancellor was clear of opinion, and decreed accordingly, that the money belonged to the defendant, the heir at law, as the lands would have done if a purchase had actually been made, as it ought to have been, by Mrs. Prince, the trustee; and that to decree it otherwise would he to put it into her power and election which of the two should have it; for if the purchase had been made, it must have gone to the heir; but if she by delaying the purchase may alter the right and give it to the executors, this would be to make it her will, and not the will of the first testator, which would be very unreasonable and inconvenient; and therefore, though the trust for laying out the money was personally confined to Mrs. Prince without nominating executors, yet they were implied and included in it r and this case was the stronger, because the heir at law of Lord Scudamore was an infant, and as Mrs. Prince survived my lord two years, the infant heir might have brought her bill against Mrs. Prince herself, the trustee, to have had the purchase made, and her laches in not doing it is not to turn to her prejudice, being an infant; the cases cited were Lingen and Souray in Lord Harcourt's time and a case lately decreed of Jones contra Powell. Note. — In this case it was agreed by my lord chancellor to be a declared rule in this court, that if money be devised to be laid out in the purchase of lands to be settled on one, and his heirs, that the persoti himself, for whose benefit the purchase was to be made, may come into this court, and pray to have the money itself, and that no purchase may be made, because none have an interest in it but himself; but if he dies before the purchase made, or payment of the money, so that the question comes between his heirs and executors, which of them shall have the money, the heir shall be preferred, and it shall for his benefit be considered in a court of equity, as if the purchase had been actualy made in the life of his ancestor, for two reasons. First, because the heir is to be favored in all cases, rather than the executors, who by the old law were to have nothing to their own use. Secondly, if the executor should have, it would be against the words of the will, which gave it to the heirs. 1 'Accord: Johnson v. Arnold, 1 Ves. Sr. 169 07'48) ; Carr v. Ellison, 2 Br. Ch. 56 (1786) ; Rashleigh v. Master, 1 Ves. Jr. 201 (1790) ! Thorn v. Coles, 3 Edw. Ch. (N. Y.) 330 (1839) ; Chase v. Lockerman, 11 G. & J. 74 EQUITABLE CONVERSION JOHN FLUKE v. THE EXECUTORS OF FLUKE AND OTHERS. Court of Chancery of New Jersey, 1864. 16 New Jersey Equity, 478. Green, Chancellor: The bill is filed for the partition of a tract of land in the county of Morris, of which John Fluke, the father of the complainant, died seized. The complainant claims title to one-fifth of the tract, as one of the heirs at law of his father. The father died on the 1st of August, 1862, leaving a last will and testament, duly executed to pass real estate. By his will, bearing date on the fifteenth day of December 1856, and by a codicil thereto, the testator, after certain specific bequests, ordered, and directed that "all the rest and residue of his estate, of what kind soever there might be at the time of his death," should be converted into money by his executors, and one-fifth part thereof paid to each of his four children then living, and the remain- ing one-fifth to the four children of a deceased son of the testator, to be divided between them in unequal shares, viz., one equal half thereof to the grandson, and the other half equally between three granddaughters. 1 The will contains no actual disposition of the lands, but confers Md. 185 (1840) ; Collins v. Champ, 15 B. Mon. 118 (1854) ; Matter of De Lancey (1869), 4 Exch. 345; De Lancey v. Queen (1872), 7 Exch. 140; De Vaughn v. McLeroy, 82 Ga. 687 (1889) ; Becker's Estate, 150 Pa. 524 (1892). "The principle upon which the whole of this doctrine is founded is, that a court of equity, regarding the substance, and not the mere forms and circumstances of agreements and other instruments, considers things directed or agreed to be done, as having been actually performed^ where nothing has intervened which ought to prevent a performance. This quali- fication of the more concise and general rule, that equity considers that to be done which is agreed to be done, will comprehend the cases which come under this head of equity. Thus where the whole beneficial interest in the money in the one case, or in the land in the other, belongs to the person for whose use it is given, a court of equity will not compel the trustee to execute the trust against the wishes of the cestui que trust, but will permit him to take the money or the land, if he elect to do so before conversion has actually been made : and this election he may make as well by acts or declarations, clearly indicating a determination to that effect, as by application to a court of equity. It is this election and not the mere right to make it, which changes the character of the estate so as to make it real or personal, at the will of the party entitled to the beneficial in- terest." Per Washington, J., in Craig v. Leslie, 3 Wheat. U. S. 563 (1818). See also Crabtree v. Bramble, 3 Atk. 681 (1747) ; Bradish v. Gee, Ambl. 229 (i7S4); Cookson v. Cookson, 12 CI. & Fin. 121 (1845); Shallenberger v. Ashworth, 25 Pa. 152 (1855); Prentice v. Janssen, 79 N. Y. 478 (1880); Walker v. Lever (1903), 1 Ch. D. 565. 1 A portion of the opinion on another point is omitted. JOHN FLUKE v. THE EXECUTORS OF FLUKE AND OTHERS 75 upon the executors a naked power of sale. Until the sale be made, the legal title descends to and vests in the heirs at law of the testator. The complainant is, therefore, seized in fee, as tenant in common with the other heirs of his father, of the one equal fifth part of the land in question. Herbert v. Executor of Tuthill, Saxton 141 ; Bergen v. Bennett, 1 Caines' Cases in Error 16; Gest v. Flock, 1 Green's Ch. R. 108, 113. But the heir at law takes the legal title charged with the trusts created by the will. The land is directed to be converted into money by the executors, and the proceeds to be distributed in the mode designated by the testator. Equity will not interfere with the execu- tion of the trusts by the executors. It regards as actually per- formed that which is directed to be done. Lands directed by the testator to be sold and converted into money, and the proceeds distributed either among the heirs or other legatees, is regarded as a gift of money. 2 Fletcher v. Ashburner, 1 Bro. Ch. Cases, 497; Craig v. Leslie, 3 Wheaton 563. It is true that where the whole beneficial interest in the land thus directed to be converted belongs to the person or persons for whose use it is given, equity will not compel the trustee to execute the trust against the wishes of the cestui que trust, but will permit him to take the land, if he elect to do so before the conversion has actually been made. Gest v. Flock, 1 Green's Ch. R. 115; Craig v. Leslie, 3 Wheaton 563; Osgood v. Franklin, 2 Johns. Ch. R. 21: Story's Eq. Jur., Sec. 793. But the whole beneficial interest in the land sought to be sold is not in the complainant. The other cestui que trusts are interested in the due execution of the trusts created by the will. They have not joined in the prayer for partition. The devisees of one share are infants. They take, moreover, as legatees, different interests under the will from what they do as heirs at law. It is not a case, therefore, for the application of the doctrine of election; nor does the complainant rest his case upon this ground. As the facts are all admitted urJon the face of the bill and answer, no benefit can result from a reference to a master. The bill must be dismissed. '* Accord: Yates v. Compton, 2 P. Wms. 308 (1725) I Doughty v. Bull, 2 P. Wms. 320 (1725) ; Wheldale v. Partridge, 5 Ves. 388 (1800), affirmed, 8 Ves. 227; Allison v. Wilson, 13 S. & R. 330 (1825) ; Berrien v. Berrien, 4 N. J. Eq. zl (1837) ; Kane v. Gott, 24 Wend. N. Y. 641 (1840) ; Elliott v. Fisher, 12 Sim. 505 (,1842) ; Bogert v. Hertell, 4 Hill, N. Y. 492 (1842); McClure's Appeal, 72 Pa. 417 (1872) ; Greenwood v. Greenwood, 178 111. 387 (1899) ; Walker v. Killian, 62 S. Car. 482 (1901) ; Collins v. Coombs, 160 Ky. 325 (1914) ; Clifton v. Owens, 170 N. Car. 607 (191S) I Meekins v. . Branning Co., 224 Fed. 202 (191 5) ; Dunham v. Slaughter, 268 111. 625 (I9IS). 76 EQUITABLE CONVERSION JOHNSON v. ARNOLD. In Chancery Before Lord Hardwicke, 1748. 1 Ves. Sr., 169. . Henry Seer by his will directs that £4000 in money should be taken out of his estate to be raised by instalments of £500 per annum, to be laid out in government securities in the joint names of his executor and George Johnson, subject to the payment of two annuities and a debt, and when the whole is so raised and fully paid, if George Johnson should be willing and desirous to have it laid out in lands, then he shall and may purchase therewith in the name of the executor and himself ; the produce and profits of the said lands and tenements to go to George Johnson for life, and afterwards to his wife for life ; and after their decease, to the eldest son of George Johnson, to be begotten upon her, that shall be then living; and if the said George Johnson should die without such issue male, then the profits of the said lands to be equally divided among the daugh- ters ; and if the wife should die without leaving any issue by George Johnson, or any future husband, then £1000 and other legacies out of it to the present defendants ; the remainder to be divided -among such as are his nearest relations. But if they should not purchase lands, it should remain in government securities, and be and enure to such purposes as if lands had been purchased. Upon a bill brought by George Johnson it was contended that it should be considered as money, and the remainder too remote; that it was dependent upon his election whether it should be laid out in land or not, and that he had determined to have it in money, by a former bill brought by him (and an infant daughter, who after- wards died, for an execution of the trusts, Supplement, p. 97) two years after the testator's death, to have the £4000 raised, etc., upon which a decree was made; that it was not unreasonable , to give a further power to exercise his discretion for himself and his family ; and if it was only a power as to the time, it would have been given to the executors as well as him. For defendant, it was said that in all events it should be laid out in lands, but left to the election of the plaintiff to postpone or accelerate the purchase only, and that it was not material, that the words were not imperative on him to purchase ; for in a will desir- ing an executor to pay it is looked on as a gift. Lord Chancellor: This will is penned in an obscure and blundering manner, and there is some difficulty in the construction of it. But something in respect of the intention is very plain. First, that let the construction of the limitations be what they will, these charges should take place on failure of George Johnson and his family. Next that, though not laid out in lands, the same person should have it. Then I am of opinion, that the construction for the defendant will best answer the intention, and consistent enough with LUCAS v. BRANDETH (No. i) 77 the words, though they are not absolutely clear. The construction for the plaintiff would be absurd; putting' it in his power to vary the rights of the parties, and to determine whether these limitations should take effect to the prejudice of his family or not ; and he might eventually by that means give all to himself. For if it was money, and he had a daughter, who died (as in fact it happened), it would all go to him. Supposing he had an election, the bringing that bill would not determine it ; f o.r it was before the payment of the whole was completed ; before which time it was not to be laid out in lands ; and part of the relief then prayed shows it was not then raised ( 1 Ves. Sen. 42) . Devise of the profits of lands is a devise of the lands themselves, and it was meant that the eldest son should have the inheritance. But if by accident these were all but estates for life, it is no objection against the charges claimed by the defendants, which would equally arise ; and are charges on the reversion in fee. It is truly said for the plaintiff that it is out of the testator's power to make money go as land, unless the court can consider it as land ; and to comply with the intention of the testator it is reasonable to expound this clause so, that he meant it as land, and it must be taken so throughout. 1 LUCAS v. BRANDETH (NO. 1). In Chancery Before Sir John Romilly, i860. 28 Beav., 273. Thomas Beesley, by his will dated in 181 1, devised and bequeathed unto his sister, Elizabeth Beesley, and William Lawson all his estate and effects, real, personal and copyhold, to hold to them, their heirs, executors, administrators and assigns, absolutely and forever, upon trust, to divide and distribute the same unto and equally between his sisters, Elizabeth Beesley, Ann Maria Beesley and Sarah Lucas, and their respective heirs, executors, administrators and assigns, share and share alike. And the testator authorized his trustees and executors to sell and dispose of all or any part of his property in such way as they should think best, for the purpose of dividing the same ; and he declared that no purchaser should be bound to see to the application of the purchase money. He appointed Elizabeth 1 Accord: Earlom v. Saunders, Amb. 241 (1754); Cowley v. Hartstonge, 1 Dow. 361 (1813) ; Cookson v. Reay, 5 Beav. 22 (1842), affirmed, 12 CI. & Fin. 121; Hereford v. Ravenhill, 5 Beav. 51 (1842); Simpson v. Ashworth, 6 Beav. 412 (1843). See 1 Jarman on Wills (6th Ed.), 746. In Hovey v. Dory, 154 Mass. 7 (,1891), testatrix authorized and em- powered her executors to sell hej- real estate, the proceeds to be held and accounted for "in lieu and instead of such real estate." Held: That the testatrix intended to "guard against any inference that by the change into •personalty the property sold is to lose the character of realty, or that its descent or disposition is to be in any way altered." 78 EQUITABLE CONVERSION Beesley and William Lawson his executrix and executor. The tes-. tator died in 1814. Elizabeth died in 1842, Ann Maria in 1843 and Sarah in 1849. A question afterwards arose between parties claim- ing under the sisters, whether such part of the real estate of the testator as remained unsold was to be considered as realty or per- sonalty; that is, whether the direction to divide and distribute, coupled with the authority to sell, effected a conversion of the real into personal estate. Mr. Selwyn and Mr. Jessel for the plaintiff. Mr. Follett, Mr. North, Mr. Nalder and Mr. C. Hall for the defendants. ' Lantsbery v. Collier (2 Kay & J. 709), was cited as to the validity of the unlimited power of sale. The Master of the Rolls: One of the questions raised in this case was whether the will of Thomas Beesley was a conversion of his real estate into personalty. I disposed of this point at the hearing of the cause, it being clear. The will merely contains an authority to sell, but nothing like an absolute direction, which, in the absence of the exercise of the power, could be treated as having converted the property into personalty. 1 HUNT'S AND LEHMAN'S APPEALS. Supreme Court of Pennsylvania, 1884. 105 Pennsylvania, 128. These five separate appeals were argued together and involved the same facts. John H. Jones died September 21, 1874, having appointed Benaiah S. Hunt and George N. Watson executors of his will, in which he .gave them the following power of sale : "First. — To sell all or any part of the real estate, without liabil- ity on the part of the purchaser to see to the application of the purchase money, and the proceeds of sale to reinvest from time to time, if practicable, in irredeemable ground rents, upon the same trusts. . . . And thereby authorize and empower them, and the survivor of them, to sell and dispose of all or any part of my estate, 'Accord: Stamper v. Miller, 3 Atk. 212 (1744); Bourne v. Bourne, 2 Hare 35 (1842) ; Buchanan v. Angus, 4 Macq. H. L. Ca. 374 (1862) ; Glove.r v. Heelis, 32 L. T., N. S., 534 (1875) ; In re Bird (1892), 1 Ch. 279; In re Walker (1908), 2 Ch. D. 705; Re Newbould, no L. T. 6 (1913) ; Cook v. Cook, 20 N. J. Eq. 375 (1869) ; White v. Howard, 46 N. Y. 144 (1871) ; Janes v. Throckmorton, 57 Cal. 368 (1881) ; King v. King, 13 R. I. 501 (1882) ; Hobson v. Hale, 95 N. Y. 588 (1884) ; Scholle v. Scholle, 113 N. Y. 261 (1889); Penfield v. Tower, 1 N. Dak. 216 (1800); Darlington v. Dar- lington, 160 Pa. 65 (1894); Gray v. Whittemore, 102 Mass. 367 (1906); Marr's Estate, 240 Pa. 38 (1913) ; Windsor Tr. Co. v. Waterbury, 160 N. Y. App. Div. 571 (1914) ; Whitman v. Huefner, 22.1 Mass. 265 (1915) ; Sheffield v. Cooke, 98 Atl. 161 (R. I. 1916). HUNT'S AND LEHMAN'S APPEALS 79 real or personal, for the payment of my debts and the legacies which I have given, without liability on the part of the purchaser to see to the application of the purchase money." The decedent, at the time of his death, was seised and pos- sessed of real and personal estate of large value, and was heavily indebted. His executors filed an account in 1878, which was referred to E. Coppee Mitchell, Esq., as auditor, who filed three reports upon it. Subsequently, the executors sold some of the dece- dent's real estate for the payment of debts, and the same auditor was, appointed to distribute the fund. Certain claims were pre- sented at the audit which the auditor held had lost their lien on the land of the decedent through failure to comply with the statutory requirement that a written statement of the demand should be filed in the office of the prothonotary of the county where the real estate to be charged is situate. Exceptions to the auditor's report were dismissed by the Orphans' Court of Philadelphia. 1 Paxson, J.: It was urged, however, on behalf of some of the appellants that the will of the testator worked a conversion of the real estate. The learned auditor has found that the fund in court is the proceeds of real estate, and has distributed it as such. If this [the appellants'] contention be correct, the fund must be regarded as personalty, and as such distributed. We are unable to see anything in the will of the testator from which an intent to convert can fairly be drawn. After giving a number of legacies to different persons and institutions, he devises and bequeaths all the residue of his estate to trustees in trust, "to let and demise the real estate, and invest and keep invested the per- sonal estate" for the purposes of the trust, and then follows a power of sale in these words: "To sell all or any part of the real estate, without liability on the part of the purchaser to see to the applica- tion of the purchase money, and the proceeds of sale to reinvest from time to time, if practicable, in irredeemable ground rents upon the same trusfs." There is no direction here to sell; only a power. It ought to be settled by this time that, in order to work a conversion, there must be either, first, a positive direction to sell ; or second, an abso- lute necessity to sell in order to execute the will; or third, such a blending of real and personal estate by the testator in his will as to clearly show that he intended to create a fund out of both real and personal estate, and to bequeath the said fund as money. 2 In each of the two latter cases an intent to convert will be implied. 1 The statement of facts is abridged and only so much of the opinion as relates to conversion printed. 2 See also Darlington v. Darlington, 160 Pa. 957 (1894); Irwin v. Patchen, 164 Pa. sr (1894) ; Keim's Estate, 201 Pa. 609 (1902) ; Sauerbier's Estate, 202 Pa. 187 (1902) ; Cooper's Estate, 206 Pa. 628 (,1903) J Vanuxcm's Estate, 212 Pa. 315 (1905) ; Martin v. Provident L. & T. Co., 235 Pa. 281 (1912). • 80 EQUITABLE CONVERSION These propositions are settled by a line of authority. It is sufficient to refer to the late cases of Jones v. Caldwell, I Out. 42 ; Roland v. Miller, 4 Out. 47 ; Lindley's Appeal, 6 Out. 235. We have neither of these requirements in the will of this tes- tator. The most that can be said is that he made a mistake as to the extent of his estate, and a sale of his real estate became necessary in order to pay his debts. But this is not to the purpose. The scheme of his will did not contemplate this, and if by reason of the depreciation of his property or for other cause a necessity to sell the real estate arose which was not foreseen by the testator, it will not work a conversion, for the obvious reason that a conversion is always a question of intent. We are of opinion that all of the questions arising in this estate were correctly disposed of by the court below. The decree is,- affirmed. JESSE E. GREENMAN v. WILLIAM McVEY. Supreme Court of Minnesota, 1914. 126 Minnesota, 2.1. Bunn, J. : February 12, 1901, Hugh Vallely, a resident of Goodhue County, made his will. After directing the payment of his debts and funeral expenses, the testator gave, devised and bequeathed to his wife during her natural life his real estate, con- sisting of a tract of one hundred and sixty acres and another ten-acre tract, and his personal property. Then follows this language : "And after her death and within two years thereafter, I give and bequeath to the oldest son, Thomas M. Vallely, $100; to John O. Vallely, the second son, $100; to Peter J. Vallely, third son, $600; to Mary A. Vallely, $900 ; to Kate A. Vallely, $960; to Charles E. Vallely, fourth son, $600; to James H. Vallely, fifth son, $600; Ann M. Vallely, $1,200; to Frances D. Vallely, $200." The will contained no devise or bequest in terms of the remainder after the life estate of the wife. Hugh Vallely died in June, 1905, seized of the one-hundred-and- sixty-acre tract before mentioned. The will was admitted to pro- bate September 25, 1905, and William McVey appointed adminis- trator, with the will annexed. Plaintiff was a creditor of James H. Vallely, the fifth son of the testator, to whom, after the death of his wife, he gave and bequeathed $600. September 13, 1905, plaintiff commenced an action against James H. Vallely to recover his claim. In this action a writ of attachment was issued and levied upon "all the right, title and interest in reversion or otherwise of the said James H. Vallely" to the one hundred and sixty acres of land described in and devised by the will of Hugh. In May, 1906, judgment was entered in the action, execution was issued on the judgment, and a levy made upon JESSE E. GREENMAN v. WILLIAM McVEY 81 the interest of the judgment debtor in the real estate. This interest, if the debtor had any interest, was thereafter sold to plaintiff at the execution sale, and a certificate of sale executed and recorded in June, 1907. No redemption was made from this sale. Margaret Vallely, the widow of the testator, died March 10, 1910. March 31, 1910, the administrator applied to the probate court for license to sell the real estate of deceased, being the one hundred and sixty acres before mentioned, for the purpose of pay- ing the debts of deceased and the bequests and legacies given by the will, as hereinbefore set out. After .due notice and hearing, the court licensed and directed the administrator to sell the one hundred and sixty acres at private sale for the purpose of paying the debts and legacies of deceased, and thereafter the real estate was, pur- suant to the license, sold for eight thousand dollars. The sale was confirmed by the court. In December, 1911, the administrator filed his final account and petition for the settlement thereof, representing that he had paid the debts of deceased, including a one thousand five hundred dollar mortgage on the real estate, and had in his hands for distribution under the terms of the will six thousand three hun- dred and seventy-eight dollars and sixty-two cents, being' part of the proceeds of ,the sale of said real estate. The court distributed and assigned the sum of three thousand five hundred and seventy dollars and nineteen cents, the residue, to the legatees named in the will. The share of James H. Vallely was the sum of four hundred and twenty-three dollars and forty-nine cents. Plaintiff demanded of the administrator the sum so assigned to James H. Vallely. The administrator refused to pay the same to plaintiff, and this action was brought to recover it. The case was tried to the court without a jury, and the decision was that plaintiff take nothing by the action. . . . Plaintiff appealed from the order. The findings of fact are not challenged. In addition to the facts stated above, the court found that at the time the will was made the real estate was worth thirty-five dollars per acre, subject to a one thousand five hundred dollar mortgage, and that the personal property then owned by the testator was worth eight hundred dollars. At the time of the testator's death, the one hundred and sixty acres he then owned was worth thirty-five dollars per acre, or five thousand six hundred dollars, still subject to the mortgage, and his personal property was worth three hundred dollars. The aggre- gate amount of the bequests to his children was five thousand, two hundred dollars. These figures have a bearing upon the question of the intent of the testator in making his rather peculiar and unusual will. It is noteworthy that the amount of his bequests is far in excess of the value of his personal property at the time the will was made, as found by the trial court, and is only slightly under the total net value of all the real and personal property then owned by the testator. 82 EQUITABLE CONVERSION Plaintiff's claim that he is entitled to recover of the adminis- trator the amount of the bequest to James H. Vallely is based first upon the contention that under the will, or under the statute, James H. acquired a reversionary interest in his father's real estate that could be seized and sold on execution. The will contains no residu- ary clause, and no express direction or power to sell the remainder after the termination of the life estate. If the testator died intestate as to this remainder, the land on the death of the life tenant would go in equal shares to his children, and James H. Vallely would have an interest in the real estate that might be seized and sold on execu- tion against him. And if plaintiff acquired such interest by pur- chasing at the execution sale, he would be entitled to James H. Vallely's share in the proceeds of the sale by the administrator. Ness v. Davidson, 49 Minn. 469, 52 N. W. 46; Kolars v. Brown, 108 Minn. 60, 121 N. W. 229, 133 Am. Rep. 410. But if there was an equitable conversion by the testator of the real estate into personalty so that the remainder must be regarded as personalty at the date of the testator's death, James H. Vallely never had an interest in the real estate described in the will, and the levy and attempted sale amounted to nothing. The case hinges therefore on the question whether there was an equitable conversion of the real estate into personal property at the date of the death of the testator. The doctrine of equitable conversion has been applied in a multitude of cases, but not frequently .in Minnesota. There is no doubt that an express direction by the testator to sell real estate and devote the proceeds to the payment of bequests or to other purposes amounts to an equitable conversion of the real estate into person- alty. And where the time at which the land is directed to be sold is indefinite, it is universally held that the conversion takes place, not when the sale actually takes place, but when the will goes into effect, on the death of the testator. The decisive questions in the case at bar are these : ( 1 ) In the absence of any express direction to sell the real estate to pay the bequests, does it clearly appear that it must have been the intention of the testator that his real estate be sold, and is this equivalent to an express direction? (2) In view of the fact that the sale could only take place after the termination of the widow's life estate, is the remainder converted into personal property as of the date of the testator's death ? 1. The will contains no direction to the executor to sell the real estate and no express power to do so. It gives a life estate to the testator's wife, "and after her death and within two years there- after," gives to each of the testator's children a specific sum of money. These bequests aggregate five thousand two hundred dollars, a sum approximately equal to the value of the testator's entire estate, real and personal. His personal property was worth eight hundred dollars at the time the will was made, and three hun- dred dollars at the time of his death. He had debts greatly in excess of the entire value of -his personal property, and he gave this per- sonalty to his wife. It is plainly certain that the testator must have JESSE E. GREENMAN v. WILLIAM McVEY 83 intended that the bequests be paid out of the proceeds of a sale of the real estate, for they could be paid in no other way. It would seem clear that the intent of Hugh Vallely was that his executor should sell the real estate after the death of his widow, "and within two years thereafter," and distribute the proceeds of sale as directed. We thus have a direction to sell, not express, but implied. Is such- an implied direction equivalent to an express direction in that it works an equitable conversion ? The general rule is that : "In order to work a, conversion while the property remains unchanged in form, there must be a clear and imperative direction to convert it. There must be an expression in some form of an, absolute intention that the land shall be sold and turned into money." 9 Cyc. 831, and cases cited in note 31. -This idea is expressed strongly in Anewalt's Appeal, 42 Pa. St. 414, where the court said : "To establish a conversion, the will must direct it absolutely or out and out, irrespective of all contingencies. The direction to convert must be positive and explicit, and the will, if it be by will, or the deed, if it be by contract, must decisively fix upon the land the quality of money. It must be an imperative direction to sell." But the inquiry is always as to the intention of the testator. It is not- so much the words that he employs as it is his intention as derived ■from the entire instrument. The whole theory of conversion rests upon the intention of the testator. That is the greatest guide in determining whether there has been an equitable conversion of realty into personalty. Orrick v. Boehm, 49 Md. 72. There have been many cases where there was no express direction to sell, but where it was apparent from the general provisions of the will that the testator intended the real estate to be sold. In these cases it has been universally held that a direction would be implied and an equitable conversion worked. 9 Cyc. 832 and cases cited. In the opinion of Chief Justice Ryan in the celebrated case of Dodge v. Williams, 46 Wis. 70, 1 N. W. 92, 50 N. W. 1103, the great jurist stated the rule thus: "When a will contains a power of sale, not mandatory in terms, but it is apparent from the general scope and tenor of the will, that the testator intended all his realty to be sold, the power of sale will be held imperative, and the doctrine of equita- ble conversion applied." In Harrington v. Pier, 105 Wis. 485, 82 N. W. 345, 50 L. R. A. 307, 76 Am. Rep. 924, and in Becker v. Chester, 115 Wis. 90, 91 N. W. 87, 650,, the rule stated in Dodge v. Williams is added to in the way of indicating the necessary degree of certainty with which the intention of the testator should be mani- fested in his will, in order to make an implied direction to convert. In the Harrington case, it was said that when the provisions of the will cannot be carried out without converting the realty into per- sonalty, and the conditions are such that the testator must have con- templated that such conversion would take place to that end, a direc- tion would be implied. In Becker v. Chester, the court reviews its former decisions and deduces the following rule : "When the execution of the scheme of the testator would be impossible or attended with such difficulties that it would be unrea- 84 EQUITABLE CONVERSION sonable to suppose that its execution would be contemplated by him, without the conversion of his real estate into personal property, a direction of such conversion will be deemed imperatively expressed in the will by necessary implication, to the same effect as if expressed in words." In each of the three Wisconsin cases the will contained a power of sale, though not an express direction. This was the situation in most of the cases cited in the note referred to. But the direction to sell is not implied from the power, but rather from the fact that the execution of the scheme of the testator is impossible without a conversion. Giving a power of sale does not amount to a direction that there be a sale, nor does it have any bearing on the question of the testator's intention to direct by implication a conversion of real estate into personalty. It would seem, therefore, that the absence of an express power of sale is immaterial, providing there is a clear necessity of a conversion of the realty into personalty in order to accomplish the purposes expressed in the will. And the authorities amply support this statement. 9 Cyc. 833 and cases cited in note. In many of these cases there was no express power of sale, as well as no direction in words, but in each the doctrine so well stated in the Wisconsin cases above referred to was applied, though expressed in different words. Clarke v. Clarke, 46 S. C. 230, 24 S. E. 202, 57 Am. St. 675 ; Chick v. Ives, 2 Neb. (Unoff.) 879, 90 X. W. 751, and Davenport v. Kirkland, 156 111. 169, 40 X. E. 304, are cases in which the will gave no power of sale, and others are cited in the note referred to. We have been able to discover no case in which the doctrine of equitable conversion has not been applied, where it clearly appeared from the will that the bequests of the testator would fail unless the real estate was sold. It appears beyond doubt in the case at bar that the bequests of the testator to his children could not be carried out, unless his real estate was sold to create a fund from which. to pay them. Indeed, if we hold there was no implied direc- tion to sell his real estate after the death of his wife, the testator died intestate as to such real estate, except as to the life estate devised to the widow. Plainly it was not the intention of Hugh Vallely to die intestate as to any part of his property, and a decision that he did would be to defeat his plan of distributing his estate. Such a decision is to be avoided, unless it is impossible to carry out the intention of the testator by any reasonable construction of the provisions of the will. The doctrine of equitable conversion makes it easy to distribute the property according to the testator's scheme, while without that doctrine it is impossible to do so. The will, con- strued as a whole, unmistakably shows the intent of the testator that his executor should, after his wife's death, sell the real estate and pay the bequests out of the proceeds of such sale. There was therefore an equitable conversion of the realty into personalty. 1 "Accord: Grievson v. Kirsopp, 2 Keen 653 (1838) ; Hammond v. Putnam, no Mass. 232 (1872) ; Ropp v. Minor, 33 Gratt. 07 (1880) ; Church Exten- sion, etc., v. Smith, 56 Md. 362 (1881) ; Powers v. Cassidy, 79 N. Y. 602 JESSE E. GREENMAN v. WILLIAM McVEY 85 2. Did this conversion take place on the death of the testator, so that at the time of plaintiff's attempted levy and sale James H. Vallely had no interest in land, but only a right to receive the bequest given him by will ? There is no doubt that an equitable conversion worked by a will takes place on the death of the testator, unless the conversion is expressly directed to be made at a specified time in the future, or upon the happening of a particular event. 9 Cyc. 837 and cases cited. By the great weight of authority, it is no exception to the rule that land directed to be sold and turned into money is considered as money from the death of the testator, because the period of sale is remote and the actual conversion cannot be made until the time arrives. Where the sale is directed to be made at some future time or upon the happening of a future event which is certain to happen, the general rule is still that the conversion is deemed to take place as of the date of -the testator's death. Underwood v. Curtiss, 127 N. Y. 523, 28 N. E. 585 ; 3 Pomeroy; Equity Jurisprudence, Sec. 1 162. There are authorities, however, holding that in such case the change does not take place until the time arrives or the event occurs. 9 Cyc. 838. Note to Beaver v. Ross, 17 Ann. Cas. 640 (140 Iowa 154, 118 X. W. 287, 20 L. R. A. [N. S.] 65). In this note it is stated that the great weight of authority supports the rule that where land is directed by a testator to be sold at, within or after a definite future time, it is to be regarded as converted into person- alty as of the time of the testator's death, and that all property rights must be determined as if actual conversion had taken place at that time. The mass of authorities cited to the proposition amply sup- port the statement of the author. Beaver v. Ross is a fair example of the doctrine, and in its facts is very like the case at bar. The testator devised to his wife a life estate in his real property, and directed that after her death it and the personal property remaining be sold, the proceeds to be divided among his heirs. Before the sale took place- a judgment creditor of one of the heirs levied upon the debtor's interest in the land. It was held that there was an equitable conversion of the realty into personalty as of the date of the testator's death, and that the heir had no estate or interest' in the land that was subject to the lien of the judgment. The case is well considered and the leading authorities are cited. It is also reported in 20 L. R. A. 65, with an elaborate note in which the authorities are discussed. There is no doubt that the ruling of the case is supported by the decisions in the federal court, and in most of the states, and we think it is the correct rule. We have not overlooked the authorities that hold to the contrary. Some take the (i88p) ; Lent v. Howard, 89 N. Y. 169 (1882) ; Ramsey v. Hanlon, 33 Fed. 425 (1887) ; Perkins v. Coughlan, 148 Mass. 30 (1888) ; Roy v. Munroe, 47 N. J. Eq. 356 (1890); Merritt \. Merritt, 32 N. Y. App. Div. 442 C1898) ; Mustin's Estate, 194 Pa. 437 (1900) ; Severn's Estate (No. /), 211 Pa. 65 (1905) ; Griffith v. Witten, 252 Mo. 627 (1913) : Brown v. Miner, 261 111. 543 (1914). 86 EQUITABLE CONVERSION broad ground that conversion takes place for no purpose until the time arrives at which the sale is directed, while others decline to apply the doctrine or "fiction" of equitable conversion where the rights of intervening creditors are involved. Wilson's Ex'r v. Rudd, 19 Ind. 101 ; Simonds v. Harris, 92 Ind. 505 ; Comer v. Light, 175 Ind. 367, 93 N. E. 660, 94 N. E. 325 ; Smith v. Hensen, 89 Kan. 792, 132 Pac. 997; Eneberg v. Carter, 98 Mo. 647, 12 S. W. 522, 14 Am. St. 664; Williams v. Lobban, 206 Mo. 339, 104 S. W. 58; Estate of Walkerly, 108 Cal. 652, 41 Pac. 992, 49 Am. St. 97 ; Bank of Ukiah v. Rice, 143 Cal. 265, 76 Pac. 1020, 101 Am. St. 118. These are eminently respectable authorities and support plaintiff's right to recover in the case at bar. But, as we have stated, the great weight of authority is to the effect that, when there is no discretion left in the executor as to whether a sale shall be made, and the time in the future when it is to be made is definitely fixed, or the event is certain to happen, the conversion takes place as of the date of the testator's death, and that this determines not only the rights of the legatees, but those of assignees or creditors of a legatee. There is nothing in Ness v. Davidson, 49 Minn. 469, 52 N. W. 46, or in Kolars v. Brown, 108 Minn. 60, 121 N. W. 229, 133 Am. Stat. 410, that is at all in conflict with this. We hold, therefore, that the conversion took place at the date of Hugh Vallely's death, and that thereafter the real estate formerly owned by him, excepting the life estate of the widow, was personal property. 2 It follows that plaintiff's judg- ment was not a lien on the land, because the judgment debtor had no interest therein, and that the levy and sale on execution amounted to nothing. Plaintiff might have reached his debtor's share of the proceeds of the sale by garnishment, attachment or execution properly levied, but he did not avail himself of these remedies. Clearly he is not entitled to maintain this action against the administrator without showing that he is the owner of the fund, or that he possesses a right to it superior to the right of defendant. Order affirmed. DOUGHTY v. BULL. In Chancery Before Lord King, 1725. 2 P Wms., 320. Robert Doughty, the plaintiff's father, being seised in fee of lands in Lincolnshire, devised the same to trustees (his wife and son-in-law) and their heirs in trust to apply the rents and profits 2 Accord: Elliott v. Fisher, 12 Sim. 505 (1842); Parkinson's Appeal, 32 Pa. 455 (1859); Stevenson's Estate, 2 Del. Ch. 197 (1859); Collier v. Grimesey, 36 Ohio St. 17 (188a) ; Effinger v. Hall, 81 Va. 94 (1885) ; Under- wood v. Curtis, 127 N. Y. 523 (1891) ; Allen v. Watts, 98 Ala. 384 (1892) ; DOUGHTY v. BULL 87 thereof until sale, for the benefit of all his children, A, B, C and D, and the survivors and survivor of' them equally part and share alike, and on further trust, that as soon as the trustees should see necessary for the benefit of the children, they should sell the prem- ises and apply the moneys for the benefit of his children part and part alike, the shares of the sons to be paid at twenty-one and those of the daughters at twenty-one or marriage. A, the eldest son, attained his age of twenty-one and died without issue and intestate, leaving a wife, upon which the plaintiff B as heir brought a bill against the trustees, praying that they might convey to the plaintiff the deceased brother's share of the fee simple and inheritance of these lands, and likewise for a share of the rents and profits of the premises that had been received, by the trustees. The master of the rolls decreed that the lands being devised to be sold were thereby rendered personal estate, and that all the children were tenants- in common, as 'Well as of the rents and profits accrued before the sale, as of the money arising by the sale, and that the wife of the deceased son should have a moiety of the said deceased son's share as well as of the rents received in her said husband's lifetime as of his share of the moneys which were to arise by the sale. Upon which an appeal was brought before Lord Chan- cellor King. 1 It was objected that this question was now purely between the heir and administrator, whether upon the words of the will this land was turned into personal estate or not. That the eldest son who was dead had left no creditor, and that the land was not abso- lutely and indefinitely directed to be sold, but as soon as the trustees should see it necessary for the benefit of the children ; and the trustees being made defendants did by their answer upon their oaths say that they thought it was not for the benefit of the children that the land should be sold; that the rest of the children were infants and could not judge one way or other, and in point of reason it. seemed not to be for the benefit of the children (at least as yet) to have a sale ; for at present the children's provision was safer, while secured by terra firma, than when turned into money, which might lie dead and yield no profit ; and if put out, might be lost upon an ill security ; whereas, while it continued upon land it could not be lost ; and though it was true that (regularly speaking) lands devised to be sold are thereby turned into money and construed in equity as personal estate, yet that was not so in all cases; as suppose lands were devised to be sold for payment of debts, and on the testator's death it should appear that the debts might be paid in a reasonable Handley v. Farmer, 103 Fed. 39 (1900) ; Lynch v. Spicer, 53 W. Va. 426 (1903) ; Thissell v. Schulinger, 186 Mass. 180 (1904) ; Emery v. Cooley, 83 Conn. 235 (1910). Contra: Brothers v. Cartwright, 55 N. Car. 113 (t8ss) ; Moncrief v. Ross, So N. Y. 43T (1872), and cases cited in principal case. See also Ann. Cas. (l°i5), D. 430. 'Part of the case, upon another point, is omitted. 88 EQUITABLE CONVERSION time out of the profits, or by a sale of a small part only of the estate; in the one case no part of the land and in the other but a sufficient part thereof should be sold (vide Cruse v. Barley, 3 P. Wms. 19), and this in favour of the heir; so in the principal case, in favour of the heir and against the administrator ; the land not being as yet sold, nor thought proper to be sold by the trustees, nor decreed to be sold by the court in the life of the eldest son, it ought as to the eldest son at least to be esteemed, as in fact and truth it was, a real estate. Lord Chancellor: The rule being that lands devised to be sold are thereby made personal estate, this case is within such rule ; the lands are here devised to be sold, and only the time of the sale left to the discretion of the trustees ; wherefore this case being within the general rule, must be determined accordingly. 2 Affirm' the decree. DAVIES v. GOODHEW. In Chancery Before Sir Lancelot Shadwell, 1834. 6 Sim., 585. By the settlement made on the marriage of the Rev. Edward Davies with Katharine Farr, the grandfather and grandmother of the plaintiff, dated the 2d of December, 1788, Edward Davies cove- nanted that, immediately on the solemnization of the marriage, ne would pay to trustees £1200, upon trust, so soon as conveniently might be, with the joint approbation and consent of himself and Katharine Farr, and not without, to lay out the same in the purchase of lands, tenements or hereditaments in fee simple, or for some long term or terms of years, absolute or determinable on lives, or of copy- hold or customary lands of inheritance in possession in Great Britain, and to settle the same in such manner as to enure to the use of or in trust for himself and his assigns, during his life, without impeach- ment of waste, and after his death to the use of or in trust for Katherine Farr and her assigns, during her life, for her jointure and in bar of dower, and from and after their several deceases, then to the use of or in trust for such one or more of the children or issue of the marriage, for such estate and in such manner as Edward Davies and Katherine Farr, during their joint lives, and after the decease of either of them, as the survivor should, in manner therein 2 Accord: Tazewell v. Smith, 1 Rand. Va. 313 (1823) ; Arnold v. Gilbert, 5 Barb. N. Y. 190 (1849); Tily v. Smith, 1 Coll. 434 (1844); Pearce v. Gardner, 10 Hare, 287 (1852) : Robinson v. Robinson. 10 Beav. 494 (1854) ; Fisher v. Banta, 66 N. Y. 468 (1876) ; Morris v. Griffiths, 26 On. D. 601 (1884); Crane v. Bolles, 49 N. J. Eq. 373 (1892"); Bates v. Spooner. 75 Conn. 501 (1903): Boyce v. Kelso Home, 107 Md. 190 (1908). Contra: Christler v. Meddis, 6 B. Mon, (Ky.) 35 (1845); Compton v. McMahan, 19 Mo. App. 494 (1885). DAVIS v. GOODHEW 89 mentioned, appoint, and, in default of such appointment, to the use of or in trust for all and every the child and children of the said Edward Davies and Katherine Farr to be begotten, share and share alike, as tenants in common, and of the several and respective heirs of the body and bodies of all and every such children, and, in default of such issue, as to one moiety, to the use of Edward Davies, his heirs, executors or administrators, and as to the other moiety, to the use of Katherine Farr, her heirs, executors or administrators. And it was provided that, until the £1200 should be paid out in the purchase of such lands, tenements and hereditaments as aforesaid, it should be lawful for the trustees to lay out the same, or such part thereof as should be undisposed of, in their names, in some one or more of the public stocks or funds, or to lend or place out the same at interest, on such security, either real or personal, as they, with the consent of Edward Davies and Katherine Farr, should approve of, with power to, vary such investment ; and it was declared that the yearly dividends, interest, produce of the securities, should be paid to and received by such persons as and to whom the rents and profits of the premises so to be purchased as aforesaid should belong by virtue of the limitations aforesaid. The £1200 was paid to the trustees, and was invested by them in the purchase of £1250 four per cents. Edward Davies, the plain- tiff's father, was the only issue of the marriage. Edward Davies, the grandfather, died in 1812, leaving his wife, Katherine Davies, and the plaintiff's father him surviving, but without having con- curred with his wife in making any appointment of the trust fund. One of the trustees having died, the fund was transferred into the names of the surviving trustee and of Katherine Davies and the plaintiff's father. The plaintiff's father died in 1831, intestate, leaving the plaintiff and his sister, both of whom were infants, his only next of kin. Katherine Davies died in August, 1832, without having made any appointment of the fund. The surviving trustee having died in the lifetime of Katherine Davies, the fund was, after her death, transferred into the names of her executors. The bill was filed against the widow and administratrix of the plaintiff's father, the executors of Katherine Davies and the plain- tiff's sister submitting that the fund ought, under the trusts of the settlement, to be considered as real estate, and that the plaintiff was entitled thereto as the heir of the body of his father; and praying that the plaintiff might be declared entitled thereto, or to the lands to be purchased with the produce thereof, as tenant in tail, in case the court should think proper to direct such purchase to be made; or, if the court should be of opinion that the fund ought not to be considered as real estate under the trusts of the settlement, then that the rights of the parties interested therein might be declared, and that the executors of Katherine Davies might be decreed to transfer the same" accordingly, and that the plaintiff's share might be secured for his benefit. 1 1 The arguments of counsel are omitted. go EQUITABLE CONVERSION The Vice Chancellor, after stating the trusts and provisions of the settlement, said: The husband and wife never having con- sented to the fund being laid out in the purchase of lands, the ques- tion is whether it is to be considered as personal estate, or as being impressed with the character of 'real estate. When the cause was heard several cases were cited and others exist; but it would be useless to state them at length, as they all admit that whatever a fund naturally is, it must so remain, unless the persons who have dominion over it impress upon it a different character. In Johnson v. Arnold (2 Ves. 169), Lord Hardwicke thought that it was the intention of the testator that the quality of real estate should be impressed on the money, and therefore he decided that it must be taken as real estate. In Cowley v. Harts- tonge (4 Dow 361) the House of Lords decided that the money was to be considered as real estate, because it was evident that the testa- tor intended that, at some time or other, it should be invested in land; and that the discretion given to the trustees to lay it out at interest was intended merely to enable them to lay it out, until it could be conveniently invested in land. And in every other case in which the question has been whether the property, which was the subject of the suit, ought to be considered as real or as personal estate, the court has ascertained the intention of the parties on that point, and has decided accordingly. This case is free from all doubt, because the parties to the settle- ment have declared that the ii200 should be laid out, with the joint approbation and consent of the husband and wife, and not without, in the purchase of lands in fee simple, or for some long term or terms of years absolute or determinable on lives, or of copyhold or customary lands of inheritance. Therefore, if the fund had ceased to be money, the court could not know whether it ought to be taken as land of inheritance or as leasehold, or, if taken as land of inher- itance, whether it ought to go in one mode of descent or another. I am of opinion, in this case, there was no conversion. 2 2 "There must, however, be an imperative and unequivocal direction to sell the real estate, and when the power to sell requires the consent of the parties interested, there is no conversion until such consent is given. And when the sale is dependent upon a contingency, there is no transmuta- tion until the contingency has happened." Per Yellott, J., in Keller v. Harper, 64 Md. 74 (1885). Accord: Henry v. McCloskey, 9 Watts 145 (1839) ; Ward v. Arch, 15 Sim. 389 (1846) ; Nagle's Appeal, 13 Pa. 260 (1850) ; Ex parte Hardy, 30 Beav. 206 (1861) ; Sykes v. Sheard, 33 Beav. 114 (1863), affirmed, 2 DeG. J. & S. 6; Massey v. Modawell, 73 Ala. 421 (1882) ; Kouvalinka v. Geibel, 40 N. J. Eq. 443 (1885) ; Pyott's Estate, 160 Pa. 441 (1804) ; Wheless v. Wheless, 92 Tenn. 293 (1892) ; Meade v. Camp- bell, 34 S. E. 30 (Va. 1899) ; Cooper's Estate, 206 Pa. 628 (1903) ; Bank of Ukiah v. Rice, 143 Cal. 265 (1904) ; Rockland Co. v. Leary, 203 N. Y. 469 (1911); Elliott v. Loftin, 160 N. Car. 361 (1912) ; In re GoswelFs Trusts (1915), 2 Ch. D. 106. Compare: Attorney Gen. v. Dodd (1894), 2 Q. B. 150; Thornton v. Hawley, 10 Ves. 129 (1804). GRIFFITHS v. RICKETTS 91 GRIFFITHS v. RICKETTS. In Chancery Before Sir James Wigram, 1849. 7 Hare, 299. 1 The Vice Chancellor : The plaintiff in this case claims under the will of Edmund Griffith, the younger, who was the heir at law of Edmund Griffith, to be entitled to the equity of redemption of freehold lands of inheritance comprised in a mortgage alleged to have been made of the same lands by Edmund Griffith to Richard Ricketts in the month of December, 1800. The defendants in the cause, between whom and the plaintiff the contest in the cause has arisen, claim under Ricketts, the mortgagee ; amongst other defenses they have insisted that the plaintiff is not entitled to the equity of redemption of the mortgage in question. They insist that the equity of redemption was so dealt with by Edmund Griffith that at his death his personal representative, and not his heir at law, was the party entitled to the equity of redemption. The mortgage, as already observed, was made in the month of December, 1800. In 1805 or 1810 (but I think I must say in 1805) the mortgagee entered into possession, and the possession has ever since been, and now is, in the mortgagee or persons claiming under him. The mortgagor has been out of possession ever since posses- sion was taken by the mortgagee. In 1 8 10 Edmund Griffith executed a deed, by which the equity of redemption, arid other property real and personal, was trans- ferred to trustees, upon trust, to pay the debts of Edmund Griffith, . . . and, in case there should be any surplus of the trust moneys, in trust to pay the same unto Edmund Griffith, his executors, admin- istrators and assigns, to and for his and their own absolute use and benefit. Two questions then present themselves for consideration : First, what is the effect of the deed as between the real and personal repre- sentatives of Edmund Griffith? and, secondly, is the' effect of the deed altered by anything which has since taken place ? In considering the former of these questions I shall assume that the latter is to be answered in the negative, and shall also suppose Edmund Griffith to have died not later than the year 1820, that being (as I understand) a period down to which the trustees under the deed of 1810 certainly continued to act in execution of the trusts. The question to be answered, it must always be remembered, is not whether the surplus proceeds of the trust estates are real or personal estate, but to which of the testator's representatives those proceeds, whether real or personal estate, belong. If the question arose under the will of Edmund Griffith and not under his deed, I should perhaps have little difficulty in answer- l A part only of the judgment is printed. 92 EQUITABLE CONVERSION ing the question ; I should follow my own decision in Fit ch v. Weber (6 Hare 145), which was founded upon the authority of a case before Lord Thurlow {Robinson v. Taylor, 2 Bro. C. C. 589). The will speaks from the death of the testator, and whatever is deemed real estate at the time of his death prima facie belongs to his heir. A contemporaneous declaration that his real estate shall be turned into personalty may alter the character of the property which the heir at law iakes, but unless it be given away from the heir there is no reason why he should take it, although the trusts of the will may oblige him to take it as personal estate and not as real estate. If the question in this cause had arisen under the will of Edmund Griffith, the question would be whether the limitation of the surplus to the executors of Edmund Griffith (who could not take beneficially) was a gift of the surplus to the next of kin, and the decision between the two classes of representatives would be gov- erned by the answer to that question. But a deed differs from a will in this material respect. The will speaks from the death, the deed from delivery. If, then, the author of the deed impresses upon his real estate the character of personalty, that, as between his real and personal representatives, makes it personal and not real estate from the delivery of the deed, and consequently at the time of his death. The deed thus altering the actual character of the property is, so to speak, equivalent to a gift of the expectancy of the heir at law to the personal estate of the author of the deed. The principle is the same in the case of a deed as in the case of a will; but the application is different, by reason that the deed converts the property in the lifetime of the author of the deed, whereas, in the case of a will, the conversion does not take place until the death of the testator, and there is no principle on which the court, as between the' real and personal repre- sentatives (between whom there is confessedly no equity), should not be governed by the simple effect of the deed in deciding to which of the two claimants the surplus belongs. It was in this view of the case that I observed during the argument that the status in which the property was found could not, as it appeared to me, affect the question to whom it belongs. In this view of the question I find myself confirmed by the language of Sir W. Grant in Thornton v. Hawley (10 Ves. 129). In that case the question was whether money, the subject of a marriage settlement, was absolutely required to be laid out in land or conditionally only. Sir W. Grant decided that the requisition was absolute, and said : "There is no weight in the circumstance that the property is found in the shape of money or land, for the character is to be found in the deed ; and in Wheldale v. Partridge the lord chancellor lays down, in which I perfectly concur, that it is a circumstance that goes no way, except when the fund gets into the possession of a party who would have it in either way." Then, after observing that the money in that case never came into the hands of any one who could determine whether it should be money or land, he adds : "We must go back to the deed> upon which the true construction is that it must be considered land." GRIFFITHS v. RICKETTS 93 There can be no doubt as to the mere construction of .the deed in the present case ; the deed gives the surplus to Edmund Griffith, his executors, administrators and assigns. I need not inquire how the case would be if Edmund Griffith had received the money and dealt with it as his own estate. The first question is, how the case would be if the trustees had sold the land in the lifetime of Edmund Griffith and had the money in their hands. In that case it would, 1 apprehend, clearly belong to the personal representative of Edmund Griffith. The words of the deed require this, and the case of Van v. Barnett (19 Ves. 102), as' explained by the plaintiff's counsel, supports the conclusion; some of the observations of Lord Thurlow, in the case of Robinson v. Taylor (2 Bro. C. C. 589), above referred to, throw light upon this subject. The question, however, remains as to the surplus property sold after the death of Edmund Griffith, or riot required to be sold to pay his debts ; the answer to this question must be found in the deed. I can understand the argument which alters the nature of the prop- erty, according as it is usually sold or not sold ; but I cannot under- stand the reasoning which, in the case of a deed, would give the surplus to a different person, according only to the time when the trustees may happen to execute the trust for sale. In the absence of authority, therefore, I should conclude that the personal repre- sentative of Edmund Griffith and not his heir is the party entitled to the surplus of the property comprised in the deed of 1810. With respect to authority, the late case of Biggs v. Andrews (5 Sim. 424) is a direct authority in point. It is true, indeed, that the language of the deed in that case does in a popular sense express more clearly than the language in the present case the intention of the author of the deed that the surplus property should become personal estate • but the limitation of the surplus to Edmund Griffith, his executors, administrators and assigns, expresses in technical language all that is expressed in popular language in the case of Biggs v. Andrews, and I am not at liberty to suppose that Edmund Griffith, using technical language, did not understand its effect. The case of Van v. Barnett appears to me to be an authority in support of the same proposition. In that case, Van conveyed his property to trustees upon trust to sell and pay his debts, and to pay the ultimate surplus to Van, his executors, administrators and assigns. It appears by searching the registrar's book that Van filed his bill, complaining of the conduct of his trustees. He did not, however, seek to revoke the deed, but prayed in effect that the trusts of it might be executed by the court. In the suit, as I understand it, real estate was sold in the lifetime of Van, and the proceeds came to be administered by the court according to the trusts of the deed. Van died, and the question arose between his real and personal representative as to the surplus proceeds not required to pay Van's debts. Lord Eldon decided in favour of, the personal representative, but gave no opinion as to the real property, if any, remaining unsold. Whether there were any such does not, I think, appear. That case decides that the trust of the deed deprived the heir at law of his 94 EQUITABLE CONVERSION expectancy, so far at least as related to real estate converted before the death of Van. But if it be once admitted that that is the effect of the deed as to part of the property, I cannot follow the reason- ing which would ascribe any other effect to the deed in its applica- tion to other parts of the property. The sale or nonsale of the trust property may effect the character in which any surplus may go to the party to whom the deed gives it, but cannot determine -or assist in determining the person to whom it is given. ' Such an intention cannot be ascribed to Edmund Griffith without express words on the clearest implication, of which I find none in the present case. I think, therefore, both upon principle and authority, the personal representative of Edmund Griffith and not his heir at law is the party entitled to the surplus of the property comprised in the deed of 1810. 2 HAMMOND v. PUTNAM. Supreme Judicial Court of Massachusetts, 1872. no Massachusetts, 232. 1 Morton, J. : This is a bill in the nature of a bill of inter- pleader, brought to obtain the directions of the court as to the dis- tribution of the residue in the hands of the plaintiffs as the execu- tors of the will of Levi Hammond. The clause of the will disposing of this residue is as follows : "And the remainder of my estate, after the payment of my just debts and funeral charges, and for a suitable and proper monument at my grave, I give and bequeath to my children, Gilbert Hammond, Levi L. Hammond, George Hammond, Aaron Hammond,' Hannah D. Aldrich, wife of Dwight M. Aldrich, and Mary Jane Putnam, wife of Leonard Putnam, to be equally divided between them." The five children first named are alive, and no question arises as to the shares which belong to them respec- tively. But Mary. Jane Putnam died soon after the testator, and the only question in the case is as to the disposition of her share. It is claimed by her husband and by her only surviving child. If it passed to her under her father's will as a bequest of personal prop- erty, then her husband, who is also her administrator, is entitled to it subject to the payment of her debts. Gen. Sts., Chap. 94, Sec. 16, cl. 4. On the other hand, if it is to be regarded and treated as real estate devised to her, it descended to her two children, and her surviving son Arthur is entitled to it, subject to her husband's right as tenant by the curtesy. Gen. Sts., Chap. 91, Sec. 1, cl. 6, and Sec. 11. 'Accord: Loughborough v. Loughborough, 14 B. Mon. (Ky.) 549 (1854)'. Compare: In re Lord Grimthorpe (1008), 2 Ch. D. 675. See also Miller v. Miller, 25 N. J. Eq. 354 (1874) ; Frewen v. Frewen (1875), 10 Ch. App. 610: Keep v. Miller, 42 N. J. Eq. 100 (1886). 1 The statement of facts and part of the opinion of the court are omitted. HAMMOND v. PUTNAM 95 At the death of the testator, the property of which the fund in controversy is the proceeds was real estate. The question is whether, by the rules of law, it is to be' regarded as constructively converted into personal property at the time of his death, so that the will operated upon it as personalty. The cases upon this subject in the English and American courts are very numerous. But the general rule is recognized in all of them, that where it unequivocally appears from the will that the intention of the testator was to convert real estate into personal estate, the law will consider the conversion as acually made at the death of the testator, and treat the estate as personal for all purposes to which the intention of the testator clearly extends, i Jarm. Wills (3d Ed.), 549 et seq.. The direction to the executors to sell the real estate is absolute and imperative. In the third clause he says : "I authorize and direct my executors to sell to my son George Hammond my old farm at the Northside, so,, called," and also in the same clause, "and any other real estate I may own at the time of my decease I order my said executors to sell and convey as aforesaid, excepting the place the use of which is herein secured to my said wife." The gift to the residuary legatee is not a devise of land, but a bequest of money "to be equally divided between them." It is only after the sale that' it is to be divided, or that it could be received by the legatees. The whole tenor of the will shows that it was the undertaking and inten- tion of the testator that his personal property, and the proceeds of the real estate directed to be sold, should form a common fund, out of which his debts and specific legacies were to be paid, and the trust fund for the support of his widow taken, and the balance to be equally divided among his children. He gave the quality of per- sonalty to the proceeds of the real estate, and the law will deal with it as having at the time of his death the character which he impressed upon it, of personal property. Martin v. Sherman, 2 Sandf . Ch. 341 ; Craig v. Leslie, 3 Wheat. 563. The provisions of the General Stat- utes, Chap. 102, Sec. 44, apply only to sales by executors or guardians made under that chapter, but have no application to this case. It follows from these considerations that the only interest which Mary Jane Putnam took under her father's will was a bequest of personal property. It vested in her at the death of the testator. Her death before it was reduced to possession could not reconvert it into real estate or change its character. Having been bequeathed to her as personal property, it had all the incidents of property of that char- acter, and upon her death is to be distributed as her personal estate. Her husband, as her administrator, is entitled to receive it of the plaintiffs. 2 Decree accordingly. "Accord: Bartholemew v. Meredith, 1 Vern. 276 (1684); Smith v. McCrary, 38 N. Car. 204 (1844); Gover v. Davis, 29 Beav. 222 (i860); Scudder v. Vanarsdale, 13 N. J. Eq. 109 ( i860) ; Freeman v. Smith, 60 How. Pr. 311 (1881); Bender v. Luckenbach, 162 Pa. 18 (1894). If the distributee is a feme covert her husband takes, according to his 96 EQUITABLE CONVERSION OSCAR KEEN, TRUSTEE, v. A. GIFFORD PLUME ET AL. Court of Chancery of New Jersey, 1913. 82 New Jersey Equity, 526. 1 Howell, V. C. : When the memorandum was filed in this case on July 11, 1912, no mention was made of the question whether there had been an equitable conversion of the estate of Mrs. Plume from realty into personalty. In fact, it seems to have been assumed that the conversion had taken place and that the whole estate now in the- hands of the trustee should be regarded as personal property. Since then a very full and complete argument has been had on that point, and I have reached the conclusion that the conversion has taken place and that the whole estate now in the hands of the trustee should be considered and treated as personalty. The only question now is when did the conversion take place. It might well be asserted that the conversion took place at the death of the testatrix, for the obvious reason that she treated all her property as a single f ufid to be converted into cash and invested as a single fund for the benefit of certain legatees with a devise over of the proceeds of the sale if the same should have been made, thus raising a case which would compel the court to hold that the conversion took place upon her death for the purposes of the will and for the purposes of distribution ; 2 but it is not necessary to decide the case on that point. There is another plain reason why the property must now be held to be personalty. Treating the power of sale as a mere authorization and power to the trustees to make sale of the premises in their discretion, it must be held that whatever right the devisees took irf the estate was subject to the power of sale. Wurts v. Page, 19 N. J. Eq. 365 ; Condict v. Condict, 73 N. J. Eq. 301. There "Has been no attempt right in her personalty, jure mariti. Proctor v. Ferebee, 36 N. Car. 143 (1840); Siter'v. M'Clanachan, 2 Gratt. Va. 280 (1845); Hocker v. Gentry, 3 Mete. Ky. 463 (1861) ; Jones v. Plummer, 20 Md. 416 (1863) ; Wayne v. Fonts, 108 Tenn. 145 (1901). The widow of a distributee is not entitled to dower in land converted into money, Willing v. Peters, 7 Pa. 287 (1847). A husband is entitled to curtesy in money directed to be converted into land. Sweetapple v. Bindon, 2 Vern. 536 (1705). But, inconsistently, it was held that the wife was not entitled to dower. Cunningham v. Moody, 1 Ves. Sr. 174 (1748). Contra: Haggard v. Rout, 6 B. Mon. Ky. 247' (184s), and see Dower Act of 1833 (3 & 4 Wm. IV, c. 105) ; 3 Pomeroy's Equity, Sec. 990. A gift of the proceeds of land may be in lieu of dower and put the widow to an election. See In re Thomas, 34 Ch. D. 166 (1886) ; Kovalinka v. Schlegel, 104 N. Y. 125 (1887) ; Cunningham's Estate, 137 Pa'. 621 (1890), and compare Jennings v. Smith, 29 111. 116 (1862); Brown v Pitney, 39 111. 468 (1866). 1 Only so much of the case as relates to conversion is given. 1 Welsh v. Crater, 32 N. J. Eq. 177 (1880) ; Hutchings v. Davis, 68 Ohio St. 160 (1903) ; Ramsey v. Ramsey (No. 1), 226 Pa. 249 C1910). MARTIN E. BARKER v. MAHALA COPENBARGER et al. 97 on the part of any of the devisees or legatees to defeat the power of sale by an election to take the land instead of the money, and hence the power of sale continued as a valid power which might be exercised and which was exercised by the trustees in their discre- tion. The cogent fact is that a conversion has actually been made and the property actually transmuted from realty to personalty without objection; the change took place with regard to each sepa- rate parcel of land at the time when the power to sell was exercised and the actual transmutation of the property took place. This rule is found in our own state in Wurts v. Page, supra; in Cook v. Cook, 20 N. J. Eq. 375; Kouvalinka v. Geibel, 40 N. J. Eq. 443, and McKiernan v. McKiernan, 74 Atl. Rep. 289. The English rule is the same. I quote from Mr. Justice Farwell's work on Powers (at p. 548) : "A power of sale as distinguished from a trust for sale does not operate as a conversion of property. The direction to sell must be imperative in 1 order to operate as a conversion (Fletcher v. Ashburner, 1 Bro. Ch. C. 497), but if it be exercised, the property will be converted according to law unless there be a trust declared of the proceeds sufficient to reconvert it. Walter v. Maunde, 19 Ves. 424; De Beauvoir v. De Beauvoir, 3 H. L. G. 525; Greenway v. Greenway, 29 L. J. Ch. 601 ; 2 De G. F. & J. 128; Sugd. Pow. 856." It is the physical change of land to money, effected by a valid testamentary power to perform an act which was evidently in the contemplation of the testatrix, which establishes the rule upon the foundation of reason. The estate will therefore devolve under the provisions of the will as personalty. 3 MARTIN E. BARKER v. MAHALA COPENBARGER ET AL. Supreme Court of Illinois, 1853. 15 Illinois, 103. Caton, J. : By his last will and testament, James Newell devised the premises in question to his wife for life ; then the will proceeds : "And that at the death of my said wife, all the property hereby devised or bequeathed to her as aforesaid, or so much thereof as 'Accord: Brown v. Bigg, 7 Ves. 269 (1801) ; Polley v. Seymour, 2 Y. & C. Exch. 708 (1837); Haggard v. Rout, 6 B. Mon. Ky. 247 (1845); Graham v. DelVitt, 3 Brad. (N. Y.) 186 (1855) ; Smith v. Anderson, 31 Ohio St. 144 (1876) ; Cronise v. Hardt, 47 Md. 433 (1877) ; Peterson's Appeal, 88 Pa. 397 (1879) ; Ness v. Davidson, 49 Minn. 469 (1892). "Where there' is a mere discretionary power to convert real property into personalty, and to distribute it amongst certain persons, such persons must take the property in the actual condition in which they find it." 1 W. & T. L. Ca. Eq. (8th Ed.), 368; Walter v. Maunde, 18 Ves. 424 (1815) ; Edwards v. Tuck, 23 Beav. 268 ( 1856) ; Rich v. Whitfield, L. R. 2 Eq. 583 (1866) ; In re Ibbitson's Estate, L. R. 7 Eq. 226 (1869) ; Gray v. Whitte- more, 192 Mass. 367 (1906) ; Henszey's Estate, 220 Pa. 212 (1908) ; In re Dyson (1910), 1 Ch. D. 750. 98 EQUITABLE CONVERSION may remain unexpended, be sold, and equally divided among my children, Martha Copenbarger,'' and four others, naming them. Conveyances were made by several of the devisees to William D. Newell, one of the devisees, of their interest in the premises, to which objections were made, but which, with the view we take of this case, it is unnecessary to examine. 1 The question, however, will still arise, whether the purchaser at the sheriff's sale will be entitled to receive that portion of the rnoney which by the will is devised to William Newell. This depends entirely upon the question whether he had any interest in the land which was subject to be levied upon under the execution. If the plaintiff in the execution had a right to levy upon the land, he had a right to sell it, and to convey a good title in spite of the other devisees. This we have already seen he could not do. The reason of this is obvious. A portion of the legal title had descended to and vested in him, not as owner, but as trustee, to be sold and the pro- ceeds distributed according to the directions of the will, and that title was held as strictly in trust as if he was to have no interest in the proceeds. The land was not devised to him, but the money was. His only claim of interest was in that money, and even in that he had no certain interest till after the death of his mother, who, by the will, was authorized to sell it. The naked legal title, then, which he thus held in trust, certainly could not be sold on execution at law. Could his equitable title? That was derived solely from the will. By the will he derived no title to the land, either legal or equitable. The devise, as before suggested, was not of the land, but of money. The bequest was of money, not presently, but in expect- ancy, and even then not certain, but contingent upon his mother dying without disposing of' the land. Till that event happened, he had no certain interest either in the lands or its proceeds. After that event," he had an expectancy of money, but nothing more. There was even yet no money due him under the will, nor could it become due till it had been produced by a sale of the land. Till then he could have no right to demand it of any one. The question then simply is, Can an execution be levied, not upon money present, nor even upon a claim for money presently due and payable, but upon a hope or probability that money may, upon the happening of some future event, become due and payable to the defendant in the execution? The very statement of the proposition conveys to every legal mind the most conclusive answer. We are of opinion that the sale under the execution conveyed no title whatever, either in the land or its proceeds, as to any of the devisees, and the decree of the circuit court must be affirmed. 2 Decree affirmed. 1 Part of the opinion is omitted. 2 Accord : Morrow v. Brenizer, 2 Rawle 185 ( 1828) ; Turner v. Davis, 41 Ark. 270 (1883) ; Sayles v. Best, 20 N. Y. Supp. 951 (1892) ; Snover v. Squire, 24 Atl. 365 (N. J. 1892) ; Hunter v. Anderson, 152 Pa. 386 (1893) ; Paisley v. Holzshu, 83 Md. 325 (1896) ; Beaver v. Ross, 140 la. 154 (1908) ; EAGAN v. MAHONEY 99 EAGAN v. MAHONEY. Court of Appeals of Colorado, 1913. 24 Colo. App., 285. July 20, 1892, Michael Mahoney conveyed to his brother John, one of the defendants in this case, the legal title to lots 39 and 40, block 22, Colfax Avenue Park subdivision of the city of Denver, in trust. The conditions of the trust were expressed in a writing of even date with the deed, and provided that said John Mahoney should dispose of the lots to the best advantage, and, out of the proceeds, retain one-fifth thereof for his own use and pay one-fifth thereof to each the father, mother, sister and another brother of the said donor, and trustee. The trust was never executed. November 19, 1903, a treasurer's tax deed was executed and delivered, by which said lots (with others) were conveyed to W. C. Mitchell, pursuant to a tax sale made November 13, 1900, for the unpaid taxes of 1899. This treasurer's deed was recorded December 28, 1903. Thereafter such title as Mitchell received by said deed vested by mesne convey- ances in Eagan, one of the defendants, appellant herein. March 27, 1909, the cestuis que trust above named, except said John Maho- ney, commenced this action against the trustee, alleging the failure and refusal of the trustee, after repeated requests, to execute the trust; that plaintiffs were entitled to have the property partitioned among themselves, or disposed of as provided in the trust agree- ment, and the proceeds thereof divided; that the property was so situated that it could not be conveniently partitioned among the five persons interested; and prayed that the trust be executed, either by partition of the property, or a sale thereof, and division of the pro- ceeds. Plaintiffs also alleged that the defendant, Eagan, claimed some interest or estate in said real property adverse to plaintiffs, which was a cloud upon plaintiff's title and interest, and asked that said cloud be removed and the title quieted. To this complaint Eagan made answer, admitting his claim, and alleging that he was the owner of said property in fee simple under and by virtue of the treasurer's tax deed hereinbefore mentioned, and in aid thereof invoked the bar of the five-year statute of limitations, namely, Sec. 3904, Mills' Ann. Stats. To this answer plaintiffs replied, admitting the execution and record of the treasurer's tax deed, but alleged that it was void for reasons appearing on its face, and aliunde. Pasquay v. Pasquay, 235 111. 48 (1908) ; Clifton v. Owens, 87 S. E. 502 (N. Car. 1916). See also Trelawney v. Booth, 2 Atk. 307 (l74S)- The interest of a distributee in land directed to be sold cannot be conveyed or mortgaged as land. Gray v. Smith, 3 Watts 289 (1834) ; Early v. Dorsett, 45 Md. 462 (1876). But may be assigned as personalty, Matter of Ledrich, 68 Hun, N. Y. 396 (1893) ; and a mortgage may operate as an equitable assignment of the distributee's interest, Horst v. Dague, 34 Ohio St. 371 (1878); McClellan's Estate, 158 Pa. 639 (1893) ; Walker v. Killian, 62 S. Car. 482 (1901). ioo EQUITABLE CONVERSION Judgment was rendered in favor of the plaintiffs and Eagan appealed. 1 King, J. : The first question raised by appellant is that plain- tiffs had no interest in the real estate which constituted the trust fund, upon which a suit to quiet title, or remove a cloud could be predicated. This claim is based on the terms of the trust in conse- quence of which it is asserted that the real estate, by the operation of the doctrine of equitable conversion, was immediately transmuted into personalty, and therefore plaintiffs, as beneficiaries of the trust, had no estate, legal or equitable, in the lots as realty, but in the proceeds only; and that a suit to quiet title, brought under section 255 of the civil code, does not lie to that class of property. As presented upon the facts of this case, the question seems to be a novel one in this state, and we know of no decided case squarely in point. But we think the contention should not be sustained. In the first place, the action is not brought under section 255 of the code, which applies only to a plaintiff in possession of realty, nor under any other provision of the code, as it was alleged that at and prior to the suit the lots were vacant and unoccupied. It has always been the law of this state, without the aid of statute, that a person claiming title to vacant and unoccupied lands may maintain an action to quiet the title or remove a cloud therefrom. Lambert v. Murray, 52 Colo. 156, 120 Pac. 415. Again, if it be conceded that plaintiffs had no estate, legal or equitable, in the lots as realty, using the term "estate," as sometimes limited, to mean real ownership, nevertheless we think they had such interest in the trust fund, although realty, the legal title to which was in the trustee, as to make them proper parties plaintiff in a suit to remove a cloud that would embarrass if not make impossible the execution of the trust by sale of the property for a fair value, or if permitted to remain might, through operation of the statutes of limitation, extinguish the fund itself ; and particularly when, as in this case, the trustee has failed and refused to act and a suit has become necessary to enforce the trust. But, even if the equitable interest of the cestuis que trust is in personal property, a suit te remove a cloud from their title to such personalty may be maintained. Although authority to the contrary is found, it is so held by other and we think better authority. Pomeroy's Code Remedies (4th Ed.), Sec. 266; Earle v. Maxwell et al., 86 S. C. 1, 67 S. E. 962; Magnuson v. Clithero, 101 Wis. 551, 77 N. W. 882; Sherman v. Fitch, 98 Mass. 59; New York & New Haven R. R. Co. v. Schuyler and Others, 17 N. Y. 592. It must be evident that, in this case, any distinction between real and personal property is purely artificial, and to make it would tend to hinder the practical administration of justice. Moreover, the doc- trine of conversion is a creation or invention of equity jurisprudence applied for the purpose of effectuating the intention of the donor of a trust, not to defeat it ; and its effects extend only to those persons J The statement of facts is from the opinion of the court, part of which is omitted. ACKROYD v. SMITHSON et al. ' iot who claim property through the same source of title as the trustee or beneficiary, or through the same instrument, or directly from or under the author of the instrument. It cannot be. invoked by the appellant here, who claims paramount title from another source, which, if good, extinguishes the trust estate. Pomeroy's Equity Jurisprudence (3d Ed.), Sec. 1166, and cases cited. 2 Affirmed. ACKROYD v. SMITHSON AND OTHERS. In v Chancery Before Lord Thurlow, 1780. 1 Brown's, Chancery Rep. 503. Christopher Holdsworth, by his will, gave {int. al.) to the defendants, Smithson and Ibetson, their executors and administra- tors, £200 in trust, to put the same out at interest and to apply the interest in bringing up the defendant, Mary Bracklebank, then an infant, till twenty-one, the principal to be paid to her at twenty- one, and if she died before twenty-one, then to be paid to her repre- sentatives; and bequeathed to the Rev. Thomas Whitaker £100; to James Roberts and William Roberts, £100 each ; to Grace Ogle, £200; to George, Ann and Phoebe Ogle, her children, £100 each; to. Joseph Scurr, £200; to Benjamin Wright, £200; to Mrs. Moly- neaux, £400; to Hannah Close, £150; to William Hawkeswell, £100; to Mary Ross, £200; to Joseph Marshall, £200, all which legacies, together with other legacies given by his will, he directed to be paid at the end of six months after his decease ; and the said testator thereby gave all his messuages, cottages, lands, tenements and herid- itaments, situate at the Bank, in the township of Leeds, with their appurtenances, and all his real estate not therein before devised, and all his household goods and furniture, plate, linen, stock in trade and all his personal estate whatsoever, unto the defendants, Smith- son and Ibetson, their heirs, executors, administrators and assigns, to hold the same to them, their heirs, executors, administrators, and assigns, forever, in trust, that they should as soon as convenient after his decease, sell all his said messuages, etc., for such price or prices as could be got for the same, and thereby to convert such real and personal estate so to them devfsed, and every part thereof, into 'Accord: Shaw v. Chambers, 48 Mich. 355 (1882); Wilder v. Ranney, 95 N. Y. 7 (1884); Morris v. knight, 14 Pa. Super. Ct. 324 (1900) ; - McElroy v. McElroy, no Tenn. 137 (1002) ; Baptist Univ. v. Borden, 132 N. Car. 476 (1003); O'Bannon's Estate, 142 Mo. App. 268 (1910). Com- pare Ramsey v. Ramsey (No. 2), 226 Pa. 252 (1910). As to inheritance taxes, compare Custace v. Bradshaw, 4 Hare 315 (1845) ; Swift's Estate, 137 N. Y. 77 (1893) ; Connell v. Crosby, 210 111. 380 (1904); McCurdy' v. McCurdy, 197 Mass. 248 (1908), with In re Gunn, L. R. 9 P. D. 242 (1884); Attorney General v. Dodd (1894), 2 Q. B. 150; Hundley's Estate, 181 Pa. 339 (1897) ; Attorney General v. Johnson (1907). 2KB. 885. And see Crozer's Estate, 253 Pa. 15 (1916) ; 19 L. R. A., N. S., 290. 102 ' EQUITABLE CONVERSION ready money, and by and out of the money arising by such sale, to pay all his debts, legacies and funeral expenses and charges of proving his will, and after payment thereof and retaining to them- selves £50 each, where he thereby gave them for their trouble, in trust out of such moneys to arise as aforesaid, to pay all lega- cies and annuities thereby bequeathed, at the time and in the manner thereby directed; and if, after all such payments made, and putting out of the funds as thereby directed, for raising the annuities thereby given, and indemnifying his trustees from all charges, expenses and loss which might attend the carrying the trusts of his will into execution, there should remain an overplus in the hands of the trustees, which he apprehended there would be to a considerable amount, he directed that they, and the survivors of them, should, within six months after the same be ascertained, pay the same unto his said legatees, Thomas Whitaker, James Rob- erts, William Roberts, Grace Ogle, George Ogle, Ann and Phoebe Ogle, Joseph Scurr, Benjamin Wright, Mrs. Molyneaux, H. Close, William Hawkeswell, Mary Bracklebank, Mary Ross and Joseph Marshall, in proportion to their several and respective legacies therein to them bequeathed; and the testator thereby willed and devised that two several sums of £250 each, which he had therein directed to be put out on securities in the names of his trustees, and the interest arising therefrom to be respectively paid to M. Thack- eray and R. Gaunt during their respective lives, should upon .the several deaths of them, the said M. Thackeray and R. Gaunt, be paid in the like proportions unto them his said several and respective legatees. Benjamin Wright and Mrs. Molyneaux died in the lifetime of the testator. The bill was filed by the next of kin of the testator against the surviving legatees and the heir at law; claiming the legacies given to the deceased legatees, their shares in the overplus, and in the two sums of £250 as lapsed, and become part of the personal estate of the testator. The cause came on at the Rolls, 10th July, 1778, when, his honor (Sir James Seidell) being of opinion that the surviving legatees took the whole residue, in proportion to their several lega- cies, dismissed the bill without costs. From this decree the plaintiffs appealed to Lord Chancellor; and the cause coming on to be heard before his lordship — Mr. Kenyon attempted to support the decree ; But Lord Chancellor, being clear, without hearing much argu- ment, that this was a tenancy in common in the residue, and that therefore the shares of the legatees who died in the testator's life- time were undisposed of, said the only question was whether such shares belonged wholly to the next of kin or to the heir at law. The Attorney General (W edderburn) , Mr. Maddocks and Mr. Selwyn (for the plaintiffs, the next of kin) contended that the testator had converted his real estate into money, out and out ; that he had mixed two funds and made all personal real estate (see ACKROYD v. SMITHSON et al. 103 Fletcher v. Ashburner, 1 Bro. C. C. 497) ; that the cases therefore of Mallabar v. Mallabar (Temp. Talbot 78) and Durour v. Mot- teux ( 1 Ves. 320) must govern the decision here, and that the blend- ing the funds distinguished this case from that of Digby v. Legard (3 P. Wms. 22 note). Mr. Selwyn mentioned the cases of Flanagan V. Flanagan (cited 1 Br. Ch., p. 500), Fletcher v. Ashburner (1 Br. Ch. 497) and Ogle v. Cook (cited 1 Br. Ch. 501). Lord Chancellor thought the two former cases did not apply; but being, in general, of opinion with the counsel for the next of kin, asked the counsel for the heir at law upon what grounds they could support his claim. Mr. Scott, 1 for the heir at law, said they claimed on his behalf such interest in the moneys produced by the sale of the testator's real estates as the deceased residuary legatees would have been entitled to if they had survived the testator, o*r so much of their shares of the overplus, now in the events which have happened, undis- posed of, as is constituted by the . produce of the testator's real estate. That the heir at law is entitled to every interest in land, not disposed of by his ancestor, is so much of a truism that it calls for no reasoning to support it. It is not necessary for the heir at law to deny that the intention of the testator has designed him nothing; his intention has certainly been equally unpropitious to his next of kin ; but it is not enough that the testator did not intend that his heir should take, he must make a disposition in favour of another; if he has not actually disposed of all his real estate, if he has not made an universal heir, the law will give such part of his real estate as he has not actually and eventually disposed of, even against his intention, and a fortiori in a case where he has expressed no intention, to the haeres natus. If the interest of the deceased legatees had been an interest in the produce of mere real estate, not blended with the produce of personal estate, it has been admitted, upon both hearings, that the benefit of the lapsed devises would, according to the case of Digby and Legard (3 P Wms. 22, note) and the principle of the case of Emblyn and Freeman, Pre. Chan. 541, and of many others, have accrued to the heir at law. It is admitted, and cannot be denied, that where a testator directs real estate to be sold for special purposes, if any of those purposes become incapable of taking effect, the heir at law shall take ; because there is an end of the disposition, when there is an end of the pur- poses for which it was made ; but it is contended here the testator had not a special intention, but that he meant the produce of his real estate should be considered as personal estate ; that he intended to convert it out and out; that he had not kept the funds distinct, but that he has blended them so as to be incapable of being distin- guished, and that the cases therefore of Durour v. Motteux and Mallabar v. Mallabar are authorities in point, that the whole, fund is personal. We admit that a person may decide what shall be the 1 Afterwards Lord Eldon. The greater part of the argument is omit- ted. 104 EQUITABLE CONVERSION nature of his property after his death, so as to preclude all question between real and personal representatives. (See in Fletcher v. Ashburner, i Bro. C. C. 499.) But we insist that if he has not actually and eventually so decided, they upon whom the law "casts the title to personal- estate can no more claim in a court of equity, money arising from the sale of land, than the heir can claim prop- erty admitted to be of a personal nature. The Chancellor reversed the decree and directed an account to be taken of the personal estate, and the money arising from the sale of the real estate, and that the share of the deceased legatees in the overplus should be divided between the next of kin and the heir; that is, so much of those shares as was constituted of the personal estate, to the next of kin, and so much as was made up of the produce of the real estate, to the heir. He said that he fully approved the determination in Digby V. Legard. That he used to think, .when it was necessary, for any purposes of the testator's dis- position, to convert the land into money, that the undisposed money would be personalty; but the cases fully proved the contrary. It would be too much to say that, if all the legatees had died, the heir could, as he certainly might, he said, prevent a sale ; and yet to say that, because a sale was necessary, the heir should not take the undis- posed part of the produce. The heir must stand in the place of the residuary legatees who died, as to the produce of the real estate. He said he approved the distinctions made in behalf of the heir, and decreed as before. 2 BAGSTER v. FACKERELL. In Chancery Before Sir John Romilly, 1859. 26 Beavan, 469. The testator, Edward Fackerell, by his will, dated in 1780 (among other things), bequeathing to his cousin, James Fackerell, the elder, the sum of 4s. per week, to be paid to him weekly during his lifp, and he devised all his estate to trustees, on trust to sell the same, and invest the moneys arising from such sale, together with all sums of money arising from the sale of his personal estate (which by his said will he directed to be sold), and then to be placed, in the joint names of the trustees for the time being, in the purchase of a Accord: Roberts v. Walker, 1 R. & M. 7^2 (1830) ; Jessop v. Watson, 1 Wy. & K. 665 (1833) I Eyre v. Marsden, 2 Keen 564 (1838) ; Edwards v. Tuck, 23 Beav. 268 (1856) ; Thorn v. Coles, 3 Edw. Ch. N. Y. 330 (1839) ; Gourley v. Campbell, 66 N. Y. 169 (1876) ; Giraud v. Giraud, 58 How. Pr. N. Y. 175 (1879); Riser v. Perry, 58 Md. 112 (1881) ; Roy v. Monroe, 47 N. J. Eq. 356 (1890) ; Read v. Williams, 125 N. Y. 560 (1891) ; Canfield v. Canfield, 62 N. J. Eq. 578 (1901) ; Painter v. Painter, 220 Pa. 82 (1908) : In re Perkins, 101 L. T. 345 (1909) ; Muderspaugh's Estate, 231 Pa. 376 (1911); Reed's Estate, 237 Pa. 125 (1912). See Langdell's Equity Jurisdic- tion 335. BAGSTER v. FACKERELL 105 .three per cent. Consolidated Bank annuities, in trust to apply the dividends thereof in payment of the annuities and weekly sums by his said will directed to be paid, and then to apply the residue of the dividends of the said trust stock according to the following directions in his will (that is to say) : "I do hereby direct that as soon as conveniently may be after my decease, a proper and com- modious house in the town of Bridgewater shall be taken by my trustees, on lease or otherwise, at such yearly rent as shall be agreed upon, and fitted up for a school for the reception and education of the children and grandchildren of my relations, William Fackerell, James Fackerell, junior, Robert Greenfield and Catherine, his wife; John Tucker and Anne, his wife, and the two boys of Sarah Law- rence, widow, which said children and grandchildren, as they respec- tively attain their age of seven years, I will and direct that my said trustees shall place and clothe in the said school, at the expense of my estate, in such manner as they shall think proper, until each of them shall attain their respective ages of fourteen years, and then to put or place them out apprentices, to such trade or business as they my said executors and trustees for the time being, er the sur- vivors or survivor of them, shall think fit and most • conducive to their benefit. And that they my said trustees shall also admit and take into the said school such number of other boys and girls, the boys being two to one in proportion to the girls, as the yearly income or produce of my trust stock, from time to time, will be sufficient to educate, after paying the rent and taxes and other expenses attending the school, the salary of the master and mistress, and answering the other purposes hereinafter mentioned." The testator died shortly afterwards. A suit of Blandford v. Fackerell being instituted for the execution of the trusts of the will, the lord chancellor, at the hearing in 1796 (2 Ves. 238) (a), declared that the devise and bequest in the testator's will, as a devise for the general purposes of establishing a charity, was void, as being within the Act of Parliament of the ninth year of the reign of his late majesty King George the Second, entitled "An Act to restrain the Disposition of Lands whereby the same become unalien- able." But he declared that the children and grandchildren of the several persons named in the testator's will were entitled to the dispositions made in their favor by the will, so far as the objects thereof were not too remote. And his lordship declared that the devises and dispositions contained in the testator's will (except as aforesaid) were to be considered as a trust for the testator's heir and next of kin. The trustees were to lay before the master, a plan for educating these objects of the testator's bounty, and for placing such persons out apprentices. The master made his report in December, 1857, approving of a plan which was confirmed by the court. There was, at present, only one person entitled to the benefit of the above devise and bequest, and the fund (after setting apart £500) had, there- fore, become distributable. The only question was, whether James Fackerell (deceased), 106 EQUITABLE CONVERSION the heir of the testator, took his real estate as realty or personalty^ as on that depended the question who were now entitled to the , existing fund. Mr. C. C. Barber for the plaintiff. Mr. J. H. Palmer insisted that the testator's object for con- version having now failed, the conversion was to be regarded as only having taken effect to the extent of the object for which the conversion was directed, and that the heir took as realty, and that such must have been his intention. Mr. Follett and Mr. R. Moore, contra, were not heard. Mr. Surrage, Mr. Baggallay and Mr. Horsey for other parties. The Master of the Rolls : The court will not inquire whether the intention would best be carried into effect by disposing of this as real or personal 1 estate. The testator has plainly directed the absolute conversion of his real into personal estate, of the expediency of which he is the sole judge ; and as he has given a clear direction that it should be sold, and the produce invested, no doubt he must have intended a conversion. This - distinction then arises, if the object of the conversion wholly fails, it is considered that the testator only intended the con- version for that purpose, which, as it wholly fails, the intention also fails, and the heir at law takes the property as real estate. But if a part of the object does not fail, as it is impossible for the court to determine how far the testator intended the conversion to go, the heir at law takes the residue of the property, but takes it as personal estate. In other words, if the object totally fails, the property remains real estate, and as such descends to the heir; but if there be only a partial failure, the heir takes the surplus as personalty. 1 CURTEIS v. WORMALD. Court of Appeals, 1878. 10 Ch. D., 172. The testator, George Gent, died in 1818, having by his will devised his real estate in settlement, limiting life estates to several persons, with remainders to their sons successively in tail male, and the ultimate reversion in fee to a relation who died in the testator's lifetime. By a codicil he, on the death of the devisee of the reversion, substituted another devisee; but by a seventh codicil revoked this substituted devise, and by an eleventh codicil directed that "the Accord: Wright v. Wright, 16 Ves. 188 (1809); Smith v. Claxton 4 Mad. 484 (1820) ; Wilson v. Coles, 28 Beav. 215 (i860) ; In re Newberry's Trusts, L, R. 5 Ch. D. 746 (1877) ; In re Richerson (1892), 1 Ch. D. 379. For cases of total failure, see Chitty v. Parker, 2 Ves. 271 (1793) ; Daven- port v. Coltman, 12 Sim. 588 (1842) ; Luffberry's Appeal, 125 Pa. 513 (1889) CURTE1S v. WORMALD 107 remainder of the fee simple of all my landed estates shall go in such way as the law may direct.'' He directed his trustees, whom he also appointed his executors, to lay out his residuary personal estate in the purchase of freehold and copyhold estates to be settled to the same uses. All the tenants for life survived the testator and died without issue, and on the death of the survivor of them in 1870, all the dis- positions of the real estate came to an end. The next of kin of the testator at his death "were Edward Walker and Benjamin Walker. Edward Walker died in 1820 and Benjamin Walker in 1827. The testator's debts and funeral expenses and legacies were all paid, and at various times, beginning in 1821 and ending in 1870, considerable sums forming part of the testator's residuary estate were invested in the purchase of freehold and copy- hold estates. The freeholds so purchased were for the most part, if not entirely, conveyed to the uses declared by the will and codicils concerning the devised estates. The copyholds were surrenderd to the trustees on corresponding trusts. The last of these purchases was completed after the death of the last tenant for life, but the contract had been entered into before his death. Edward Walker devised his real estate to his son, George Walker, absolutely. Benjamin Walker died intestate as to his residuary real estate, leaving George Walker his heir at law. George* Walker devised all his real estate to the plaintiff, E. Walker, and the defendant, Robert Walker, upon trusts. The plaintiff, E. Walker, and the defendant, Robert Walker, were thus the real repre- sentatives both of Edward Walker and of Benjamin Walker, and they were also the personal representatives of Edward Walker. The personal representative of Benjamin Walker was Jeremiah Curteis, the other plaintiff. The plaintiff, E. Walker, was the heir at law of both Edward Walker and Benjamin Walker. By an order made on the 13th of November, 1876, it was declared that, according to the true construction of the will and codicils of the testator and in the events which had happened, he had died intestate as to the corpus of his residuary personal estate, and that his next of kin, according to the Statutes of Distribution, living at his death, were entitled to such corpus. A summons was now taken out by the plaintiff, E. Walker, asking for a declaration that the corpus of the residuary personal estate, to which the next of kin were declared by the order of the 13th of November, 1876, to be entitled, devolved as real estate. The summons was heard before the master of the rolls on the 3rd of March, 1878. 1 Jessel, M. R. : The point which I have to consider and to decide is this: A testator directed his trustees — for, although the same persons may have been appointed executors, they are for this purpose trustees, and trustees only — to lay out his residuary per- 1 The arguments of counsel in both courts are omitted. 108 EQUITABLE CONVERSION sonal estate in the purchase of real estate, freeholds and copyholds, to be settled to certain uses, comprising a long series of limitations. The residue was ascertained; that is, the testator's debts and lega- cies and funeral and testamentary expenses were" all paid, and then the residue was at different times laid out by the trustees, pur- suant to the will, in the purchase, of freehold and copyhold estates, which were conveyed so as to vest the legal estate in the trustees. That being so, the limitations took effect to a certain extent, and then, by reason of failure of issue of the tenants for life, the ultimate limitations failed, and there became a trust for somebody. Now, for whom? According to the doctrine of the court of equity, settled, if I may say so, by the well-known case of Ackroyd v. Smithson, i Bro. C. C. 503 — for it has always been the law of this court since — this kind of conversion is a conversion for the purposes of the will, and does not affect the rights of the persons who take by law independ- ent of the will. If, therefore, there is a trust to sell real estate for the purposes of the will, and the trust takes effect, and there is an ultimate beneficial interest undisposed of, that undisposed of interest goes to the heir. If, on the other hand, it is a conversion of personal estate into real estate, and there is an ultimate limitation which fails, of taking effect, the interest which fails results for the benefit of the persons entitled to the personal estate, that is, the persons who take under the Statutes of Distribution as next of kin. Their right to the residue of the personal estate is a statutory right independent of the will. The result is that in the case I put there is a trust for the next of kin. How any one could imagine it was a trust for anybody else it is difficult to understand; and had I not been referred to the judgment of a very eminent judge on this subject I should have said it was impossible to understand it. There certainly is authority for saying — a single authority, and an authority standing alone — that the ultimate trust is not for the next of kin, but for the executors. Why? The executors have ceased to have anything whatever to do with the matter. They have paid over the legacy to the legatee, who happens to be a legatee- trustee, and who holds it by law, under the Statutes of Distribution, as trustee for the next of kin, and no one else. By what process of reasoning any other result can be arrived at I have been unable to discover. The decision to which I have referred is one which, to my mind, is utterly opposed to the whole law upon the subject. Then the next question which arises is, how does the heir at law in the first case, or the next of kin in the second, take the undis- posed of interest? The answer is, he takes it as he finds it. If the heir at law becomes entitled to it in the shape of personal estate, and dies, there is no equitable reconversion as between his real and personal representative, and consequently his executor takes it as part of his personal estate. On the other hand, if the next of kin, having become entitled to a freehold estate, dies, there is no equity to change the freehold CURTEIS v. WORMALD iog estate into anything else on his death; it will go to the devisee of real estate, or to his heir at law if he has not devised it, and will pass as real estate. As to that, there is no question, no doubt, no difficulty. No one has suggested any other principle, and even in the case cited — Reynolds v. Godlee, John. 536, 582 — it was admitted that that was the principle, and the only point of difference or dis- tinction suggested was that which appears to me to be opposed to the whole law on this subject, namely, that there was an ultimate trust for the executors, and not for the next of kin. As that does not seem to me to have any foundation, and as it appears to me* to be opposed to both principle and authority, I do not consider myself bound to follow that decision, and I may say that I am very glad to find I can invoke the very same judgment of the very same judge for the purpose of "showing that I am not bound to follow it ; for, being referred to a decision of another judge — the master of the rolls-*-given several years before, he said that this decision was not obligatory upon him; but that as he thought it consonant with sense and reason, and sound law, he chose to follow it. Unfortunately I do not entertain the same view as regards this authority, and therefore I am unable to follow it. A declaration was accordingly made "that all the real estate bought or contracted to be bought before the death of the last tenant for life passed to Edward Walker and Benjamin Walker, the next of kin bf the said testator, as real estate in equal moieties, and that George Walker became entitled to one of such moieties as the devisee of the said Edward Walker, and to the other moiety as the heir at law of the said Benjamin Walker at his (Benjamin Walker's) death, and that both of such moieties passed to the devisees of the real estate under the will of the said George Walker." The legal personal representative of Benjamin Walker appealed. James, L. J. : I have no doubt as to the proper decision to be arrived at in this case. With all deference to the judgment of Lord Hatherley, it is impossible, I think, to arrive at any other conclusion than that at which the master of the rolls has arrived. It was settled by Cogan v. Stephens that what was the right rule as between the real and personal estate where land was directed to be sold, was also the right rule as between the two estates in the case where money was directed to be laid out in the purchase of land, that is to say, if the purpose for which that land was required failed, the undisposed of interest went back to the persons entitled to the per- sonal estate. It has been urged that this means that it goes back to the executors to be dealt with as personal estate. But where there is no trust remaining to be performed, and the executors have entirely discharged themselves from every executorial duty, it is absurd to say that the undisposed of interest in the personal estate is to go back to them upon trust for the persons entitled to the personal estate ; it goes directly to the persons beneficially entitled, that is to say, to the next of kin, just as the undisposed of proceeds of the sale of real estate go to the heir at law. And therefore the same principle applies in both cases, which is this, that where you trace no EQUITABLE CONVERSION property into a man there is no equity between his different classes of representatives as to altering the position in which that property is. If it is money arising from the sale of land it remains money, that is to say, the heir at law of the person who has become bene- ficially entitled to it as heir at law has no right to have it reconverted into land. If it is land purchased under a direction to invest in land, the persons interested in the personal estate of the persons who have become entitled to it as next of kin have no right to have it recon- verted into money. This property came to the next of kin in the shape of real estate, and their personal representatives have no equity to have it converted, but it must go to the heirs or devisees of the next of kin according as they died intestate or testate. The decision of the master of the rolls must be affirmed. 2 Baggallay, L. J. : I entirely assent, and for the same reasons. Thesiger, L. J. : I am of the same opinion. CLARKE v. FRANKLIN, In Chancery Before Sir W. Page Wood. 4 K. & J., 257. By an indenture, dated 1852, John Clarke appointed and con- veyed an estate at Crick, in the county of Northampton, to trustees-, to the use of himself for life, with remainder to such uses as he should by deed or will appoint, with remainders over. And by the same indenture he granted and conveyed certain real estate in Clar- endon Square, Leamington Priors, of which he was seised in fee, and assigned two sums of £1000 each secured on mortgage, and certain personal chattels therein mentioned, to trustees. Habendum, after and subject to the same estate for life of the said John Clarke, and such power of appointment and revocation therein as was there- inbefore provided and limited respecting the estate and premises at Crick aforesaid, unto and to the use of the said trustees, their heirs, executors, administrators and assigns, according to the tenure, nature and quality thereof respectively, upon trust to sell and dis- pose of the said real estate and personal chattels, and receive the purchase money and the said moneys respectively; and after pay- ment of the costs, charges and expenses incident to and attending such sale, and collecting and calling in the said moneys, to pay six sums of £50 each and one sum of £20 to certain persons named in the indenture, or to such of them as might be living at the death of the said John Clarke ; and upon trust to pay the residue to the min- 2 See criticism of principal case in Langdell's Equity Jurisdiction 275. See also, Cogan v. Stephens, 5 L. J. Ch. vf (1835) ; Hereford v. Raven- hill, 1 Beav. 481 (1839) ; In re Skerrett's Trusts, L. R. 15 Ir. 1 (1884). Compare: Head v. Godlee; Reynolds v. Godlee, Johns. 536 (1859), s. c., 29 L. J. Ch. 633, overruled in principal case. CLARKE v. FRANKLIN ill ister, church wardens and overseers of the parish of Crick, to be by them applied for the charitable purposes in the indenture mentioned. The indenture was not enrolled pursuant to the provisions of the Mortmain Act, 9 Geo. 2, Ch. 36. Qn the same day John Oarke made his will, by which he ratified and confirmed the indenture, and, after making certain pecuniary bequests, he bequeathed all the rest and residue of his personal estate not affected by or included in the indenture, upon trust, after paying thereout all his just debts, funeral and testamentary expenses, to pay the residue to trustees, to be applied and disposed of by. them upon such and the like trusts as were mentioned and set forth in the indenture as to and concerning the residue of his real and per- sonal estate therein mentioned. The testator died in 1855 without issue, and without having exercised the power of revocation and appointment contained in the indenture of 1852. . The bill was filed by his widow, and it prayed to have his real and personal estate administered under the direction of the court, and that the rights and interests of all parties in relation to the real and personal estate comprised in the indenture of 1852 might be ascertained and declared, and the trusts thereof, so far as they were valid, administered under the direction of the court. By the decree made on the hearing of the cause, it was declared that the charitable trusts under the indenture of 1852 were void, so far as regarded the real estate and the personal estate savouring of realty. The cause now came on for further consideration. 1 Mr. Rolt, Q. C, and Mr. Lewin for the plaintiff, the widow. Mr. Pemberton for next of kin. Mr. Evans, in the absence of the solicitor general, for the heir at law of the grantor. Mr. Willock, Q. C, and Mr. Erskine for the trustees, and Mr. Wickens for the crown. The Vice Chancellor: It appears to me that this point is governed by authority. The case of Griffith v. Ricketts (7 Hare 299) is quite in accord- ance with the previous authorities. What the vice chancellor there says is this: "A deed differs from a will in this material respect. The will speaks from the death, the deed from delivery. If, then, the author of the deed impresses upon his real estate the character of personalty, that, as between his real and personal representatives, makes it personal and not real estate from the delivery of the deed, and, consequently, at the time of his death. The deed thus altering the actual character of the property is, so to speak, equivalent to a gift of the expectancy of the heir at law to the personal estate of the author of the deed. The principle is the same in the case of a deed as in the case of a will; but the application is different, by reason that the deed converts the property in the lifetime of the author of the deed, whereas, in the case of a will, the conversion 1 The arguments of counsel are omitted. H2 EQUITABLE CONVERSION does not take place until the death of the testator." (/d. 311, 312.) It is not a question of actual physical conversion of the property from real estate into personal property, but, whatever be the time at which that conversion is directed to take place, whether in the grantor's lifetime or after his death, the grantor, by executing a deed of this description, says, in effect: "From the time I put my hand to this deed, I limit so much of this property to myself as per- sonal property." That is the actual decision in the case of Hewitt v. Wright {1 Bro. C. C. 86). There real estate was limited to the use of the settlor for life, with remainder to trustees, in trust to sell and pay debts and a sum of £2100, and after payment' of their expenses, to pay and apply the residue as follows: To raise ii5co and pay the interest to Dorothy Wright, the daughter of the settlor, till she married, and to pay the principal to Dorothy within twelve months after her marriage ; and there was a power of revocation. The set- tlor died without having exercised that power. Then Dorothy died without ever having been married, and the trust as to the principal sum of ii5 never having taken effect, the question was whether that sum was personal estate in the grantor, and passed by his will. The lord chancellor held that it did. "If," he said, "it goes in a case of a will to the heir, in the case of a deed it must result to the grantor; and though, in the case of the will, it cannot go to the executor as money, not having been converted, but must descend to the heir ; yet he should think that it was personal estate of the heir, and, if he were dead, would go to his executor" (that has since been decided to be the case) ; "and if so, where it resulted to the grantor, it would be personalty in his hands, and would pass as such." That, therefore, is an express decision that, notwithstanding the trust for conversion of real estate into personal, is not to arise until after the death of the settlor, the property is impressed with the character of personalty immediately upon the execution of the deed, and so much as is undisposed of results to the grantor as personalty. The doctrine of the converse case of personalty directed by deed or will to be converted into land is fully discussed by Lord Eldon in Wheldale v. Partridge (8 Ves. 227), where, upon the special terms of the instrument, it was held not to be one which upon its execution clothed the property with real uses; but Lord Eldon said that, but for those special provisions, and if there had been nothing more in the deed, "the property would, immediately upon the execution of the deed, have been impressed with real quali- ties, and clothed with real uses, and the money would have been land," clearly recognizing the rutathat conversion takes effect from the moment of the execution- of the deed ; and the rights of the parties, and the character in which the property is taken by them, are to be determined according to that conversion. The principle of these authorities is therefore clearly settled; and where, as here, real estate is settled by deed upon trust to sell for certain specified purposes, and one of those purposes fails, there, GIVEN v. HILTON 113 whether the trust for sale is to arise in the lifetime of the settlor or not until after his decease, the property to that extent results to the settlor as personalty from the moment the deed is executed. The only exception is where the whole of the purposes for which conversion is directed fail from the moment of the delivery of the deed. In Ripley v. Water-worth (7 Ves. 435), Lord Eldon admits that, where conversion is directed for a particular and special pur- pose, or out and out, but the produce to be applied to a particular purpose, and the purpose fails, the intention fails, and this court regards the grantor as not having directed the conversion. So here, if at the moment when the grantor puts his hand to this deed the purpose 'for which conversion was directed had failed — for instance, if he had given all the proceeds instead of a part to charitable pur- poses, so that the property would have been at home in his lifetime, the court would have regarded it as if no conversion had been directed, and the property would have resulted to the grantor as real estate. And so in Hewitt v. Wright, if the only purpose of con- version had been the gift to Dorothy on her marriage, and she had been already dead at the date of the deed without having been married, there again the court would have regarded the grantor as not having directed a conversion. But here that consideration does not arise. Here some of the purposes for which conversion was directed had not failed, when the deed was executed. It appears to me, therefore, that the property in question resulted to the grantor as personalty. 2 Declare that, by the indenture of 1852, the Clarendon Square estate, therein comprised, was bound by a trust for sale; and that the proceeds, so far as they were directed to be applied to charitable purposes, resulted to John Clarke, the settlor, as personal estate, and are applicable and distributable in like manner as the other personal estate undisposed of by his will. GIVEN v. HILTON. Supreme Court of the United States, 1877. 95 United States, 591- Appeal from the Supreme Court of the District of Columbia. The bill in this case was filed by John Emory Hilton and certain other heirs at law and next of kin of John P. Hilton against John T. Given and Carberry S. Hilton, his executors, and others, to obtain judicial construction of his last will and testament. It prayed for an injunction restraining the executors from selling any portion of "Accord: Hewitt v. Wright, 1 Br. Ch. 86 (1780); Biggs v. Andrews, 5 Sim. 424 (1832). Compare In re Lord Grimthorpe (1908), 2 Ch. D. 675, where all the purposes for which a conversion had been directed had failed. ii4 EQUITABLE COX VERSION the real estate until they should first have applied the personal estate to the payment of debts and the legacies specified in the will, and, in the event of any deficiency, then to sell no greater portion of such real estate than would be sufficient to discharge such debts and legacies. The court decreed that the debts due by the deceased were to be first paid, then the legacies, and both from the personal estate, if that be sufficient; but if not, then that the real estate be resorted to, but only to discharge any deficiency, and that the residue of said real estate be equally divided among the heirs. From this construction of the will the defendants appealed to this court. This will, which was duly attested and admitted to probate [con- tained these clauses] : x "Item. As soon after my decease as possible, I direct that my debts and funeral expenses be paid out of any portion of my estate which may first come into the hands of my executors hereinafter named. "Item. Secondly, I direct that all of my estate, except such as is hereinafter otherwise devised and bequeathed, be sold by my exec- utors at as early a day as practicable, upon such terms and conditions as may seem best in their, judgment for the best interest of all herein concerned, and that the proceeds arising therefrom shall be divided in the following manner and proportions as they are first herein named, written, and stated, as far as the amount realized from the sale of my said estate will allow, viz.: "Item. I give and devise unto my kind and obedient son, Car- berry S. Hilton, and my grandchildren, John Perry Hilton and Harry Sheer, sons of Carberry S. Hilton, all that part of lot eight (8) of Davidson subdivision of square two hundred and fifteen (215), fronting on 14th Street west, between L and M Streets. north, with the improvements; that is to say, one-half of the said lot and improvements* to the said Carberry S. Hilton, in fee simple, and the remaining half as he may choose, to him the said Carberry S. Hilton, in trust for the sole use and benefit of his said children, John Perry Hilton and Harry Sheer Hilton, in fee simple, to be equally divided between them." [Here follows a number of pecuniary legacies.] "Item. I give and bequeath unto my kind, affectionate son, Carberry S. Hilton, all the rest and residue of my estate of which I may die seised or possessed, which is not herein otherwise devised and bequeathed, such as moneys, bonds, stocks, judgments, notes, household furniture, and all personal effects of every description, and not herein otherwise disposed of, for his sole use and benefit and that of his children." Strong, J.: The ultimate question in this case is what passed under the residuary clause of the testator's will. It can be answered 1 Part of the will is omitted. GIVEN v. HILTON 115 intelligently only after a careful examination of all the provisions of the instrument and an ascertainment therefrom of the testator's general scheme. 2 The testator in this case ordered that all his estate, except a single lot, and confounding realty and personalty, should be sold by his executors as soon as practicable. This sale he directed to be made upon such terms and conditions as might seem best in their judgment for the interests of all concerned in the will; and he directed the proceeds arising therefrom to be divided in the manner and proportions, "as first written, named, and stated" in, the will, as far as trie amount realized from the sale would allow. Then fol- lowed a devise of the excepted lot, and various pecuniary bequests, succeeded by a residuary legacy to his son, given in the following words: "I -give and bequeath unto my kind and affectionate son, Carberry S. Hilton, all the rest and residue of my estate, of which I may die seised or possessed, which is not herein otherwise devised and bequeathed, such as moneys, bonds, stocks, judgments, notes, household furniture, and all personal effects of every description, and not herein otherwise disposed of, for his sole use and benefit and that of his children." If by this residuary clause the testator intended to give only the residue of that which was personalty immediately preceding his death, then he died intestate as to all his real estate not needed for the payment of his debts and other legacies, and as to the surplus of the proceeds of its sale not necessary for those payments. Then there is a resulting interest in all his children as collectively heirs at law ; and, as that which was personalty at his death is, by admis- sion, largely insufficient for the payment of those debts and legacies, the residuary legatee takes nothing under the bequest to him, for the personal property is first to be applied to discharge the debts and legacies. But, on the other hand, if t by the direction to sell all his estate the testator intended its conversion into personalty out and out, or for all intents, and not merely for the payment of the legacies prior to the residuary gift, the residuary clause carried all that may remain after those legacies shall be paid. It is a fundamental question, therefore, whether the testator's direction to his executors to sell "all his estate" worked an absolute conversion of his realty into personalty. It is undoubtedly estab- lished doctrine that when a will directs conversion of realty only for certain purposes, which are limited, for example, for the payment of particular legacies, and follows the direction by a bequest of the residue of personal estate, the conversion takes place only so far as the proceeds of the sale are needed to pay the legacies prior to the residuary one, and the gift of the personalty will not carry the produce of the sale of the lands in the absence of a contrary intent plainly manifested. The surplus or excess retains the quality of 'A preliminary part of the opinion is omitted. n6 EQUITABLE CONVERSION realty, and is transmitted either by a devise of the realty, if there be one, or descends under the intestate laws. 3 Hence it is often a question, and frequently a difficult one, whether the direction to sell was for a limited purpose, or for all purposes, and, consequently, whether the testator's intent was to impress upon all the proceeds of the sale the quality of personalty. There are certain things which are considered indicative of an intent to cause a complete conversion. It has been held that a general direction to sell and apply the pro- ceeds indiscriminately to the payment of debts and legacies operates as a conversion out and out. Roper on Legacies, 341, 342, et seq.; King v. Woodhull, 3 Edw. (N. Y.) 82; Durour v. Motteux, 1 Ves. 320. Blending the proceeds of realty and personalty in one fund for the payment of debts and legacies is generally regarded- evidence of an intention to give to the proceeds of a sale ordered the character of personalty throughout, though not a conclusive indication in all cases. These indications exist in the will before us, and, were it necessary, they might be called in aid of its construction ; but, after all, little assistance is derived from general rules in the construction of a will. The intent of a testator is to be sought in the instrument itself. In making it he does not often have in mind any particular rules of construction applied to other wills. He uses those expres- sions which he supposes convey his own thoughts and wishes. Turning, then, to the will before us, the first thing noticeable is that the direction to sell was positive, and that it comprehended all the estate. The testator must have known that his personal prop- erty was largely insufficient to pay his debts, funeral expenses and the pecuniary legacies he proposed to give. Yet his order was, not to sell so much of his real estate as might be necessary for satisfying debts and certain legacies, not that what should prove lacking of personalty should be supplied from sales of realty, but all was directed to be sold, whether necessary for the payment of legacies or not ; and in the direction he recognized the interest of the residu- ary legatee as fully as he did the interests of any other legatee therein. The executors were required to sell on such terms and conditions as, in their judgment, might seem best for the interests of all concerned in the will. The residuary legatee was one of those concerned. Why consult his interest, if, as a beneficiary under the will, he had no concern in the sale, if by virtue of the legacy to hirn he was to have no portion of the proceeds of the sale, and if what remained after payment of the legacies prior to his was intended to continue realty, and descend under the intestate laws ? The will further directed that the proceeds of the sale, ». e., the whole proceeds, should be divided in the manner and proportions '•See Berry v. Usher, 11 Ves. 87 (.1805); Kellet v. Kellei, 1 Ball & B. 533 (1811) ; Mangham v. Mason, 1 V. & B. 410 (1813) ; Cooke v. Stationer's Co., 3 My. & K. 262 (1831) ; Collins v. Robins, 1 DeG. & Sm. 131 (1847). GIVEN v. HILTON 117 first in the will named, written and stated, as far as the amount realized would allow. It is not quite clear what was meant by this direction; but it rather seems the intent was that, if the sum for which the property might be sold should prove insufficient to pay all the legacies in full, they should be paid in the order named; ,that is, that the legatee first named should be first paid, and so on, in the order in which the different beneficiaries were mentioned, down to the residuary legatee. If this is not so, the word "first" can have no significance; and then the testator intended that legacies to his children and grandchildren should abate ratably with his gifts to strangers; but, however this may be, it was a fund arising from the sale of the testator's whole estate that was to be divided among legatees; and the residuary bequest to the son, Carberry S. Hilton, was as truly a legacy as any one of the gifts that preceded it. We can discover nothing, therefore, in this clause of the will that indi- cates an intent to effect only a partial conversion, or merely a con- version for the payment of those legacies which preceded the residu- ary bequest. On the contrary, the more reasonable and the true interpretation, we think, is that the testator meant to direct a com- plete conversion, to all intents, of his entire property into personal estate. If so, the residuary bequest, even if it was only a legacy of his personal estate, carried to the legatee not only that which was personalty at his death, but that which by the conversion he ordered became personalty. 4 We conclude, therefore, that the Supreme Court of the district erred in its construction of the will and in the decree made, so far as it was ordered that any portion of the residue of the testator's estate, after the payment of his debts and of the legacies prior to that given to the residuary legatee, should be equally divided among the heirs, and in not decreeing that the whole of the estate, except the lot devised, both real and personal, after the payment of those debts and legacies, passed, under the residuary clause, to Carberry S. Hilton." Decree reversed. * The court then proceeds to discuss the question as to whether, in view of the whole will, the residuary clause should not be considered as including realty. This part of the opinion is omitted. "Accord: Singleton v. Tomlinson, L. R. 3 App. Ca. 404 (1878), criti- cized Langdell's Equity Jurisdiction 298. See i Jarman on Wills (6th Ed.), 767; 3 Pomeroy's Equity Jurisdiction (3d Ed.), p. 2326 note. See also, Mallabar v. Mallabar, Temp. Talbot 78 (1735) ; Durour v. Motteux, 1 Ves. Sr. 320 (1749) ; Craig v. Leslie, 3 Wheat. U. S. 563 (1818) ; Burr v. Simm, 1 Whart. 252 (1835) ; Proctor v. Ferebee, 36 N. Car. 143 (1840) ; Flint v. Warren, 14 Sim. 554 (1845) ; Wall v. Colshead, 2 DeG. & J. 683 (1858) ; Evans" Appeal, 63 Pa. 183 (1869); Spencer v. Wilson, L. R. 16 Eq. 501 (1873) ; Cour v. Buckland, L. R. 1 Ch. D. 60s (1876) ; Smith v. First P. Church, 26 N. J. Eq. 132 (1875) ; Hand v. Marcy, 28 N. J. Eq. 59 (1877) ; Kearney v. Missionary Society, 10 Abb. N. Ca. (N. Y.) 274 (1879);- Harrington v. Pier, 105 Wis. 485 (1900) ; Hutchings v. Davis, 68 Ohio 160 (1903); Boyce v. Kelso Home, 107' Md. 190 (1908). n8 EQUITABLE CONVERSION SEELEY v. JAGO. In Chancery Before Lord Cowper. i P. Wms., 389. One devised that £1000 should be laid out in a purchase of lands in fee, to be settled upon A, B and C and their heirs, equally to be divided; A dies, leaving an infant heir, and B and C, together with the infant heir, bring a bill for this iiooo. Lord Chancellor: The money being directed to be laid out in lands for A, B and C equally (which makes them tenants in common), and B and C electing to have their two thirds in money, let it be paid to them ; for it is in vain to lay out this money in land for B and C when the next moment they may turn into money ; and equity, like nature, will do nothing in vain. 1 But as to the share of the infant, that must be brought before the master, and put out for the benefit of the infant, who, by reason of his infancy, is incapable of making an election. 2 Besides that, such election might, were he to die during his infancy, be prejudicial to his heir. 1 ann Mcdonald v. bryan chara, executor. Court of Appeals of New York, 1895. 144 New York, 566. Appeal firom order of the General Term of the Superior Court of the city of New York, made October 15, 1894, which affirmed an order of special term, which denied a motion by plaintiff to con- tinue a temporary injunction restraining defendant from executing the power of sale contained in the will of John T. McDonald, deceased. 1 "Accord: Benson v. Benson, 1 P. Wms. 130 (1710) ; Short v. Wood, 1 P. Wms. 470 (1718) ; Ford v. Batlcy, 17 Beav. 303 (1853). See, generally, Reed v. Van Wart, 12 Barb. X. Y. 113 (1851) ; Trask v. Sturges, 170 N. Y. 482 (1902); Williams v. Lobban, 206 Mo. 399 (1907). Compare Handley's Estate, 253 Pa. 119 (1916). . 'Accord: Turner v. Street, 2 Rand. Va. 404 (1824); Swan v. Garrett, 71 Ga. 566 (1883) ; Carr v. Branch, 85 Va. 597 (1889) ; Duckworth v. Jordan, 138 N. Car. 520 (1905) ; Beeler v. Barringer, 252 111. 288 (1911) ; Griffith v. Witten, 252 Mo. 627 (1913). So also as to lunatics: In re Wharton, 18 Jurist 299 (1854) ; In re Douglas (1902), 2 Ch. D. 296; In re Jump (1903), 1 Ch. D. 129. As to married women, see Oldham v. Hughes, 2 Atk. 452 ( 1742) ; Shallenberger v. Ashworth, 25 Pa. 152 (1855); Standering v. Hall, 11 Ch. D. 652 (1879). Compare: In re Davidson, 11 Ch. D. 341 (1879) ; Lincoln v. Wakefield, 237 Pa. 97 (1912). 'The arjjuments of counsel are omitted. ANN McDONALD V. B. O'HARA, Exctr. 119 Haight, J.: It appears that John T. McDonald, late of the city of New York, died in the month of May, 1891, leaving him surviving six sisters, of which the plaintiff was one, together with Thomas F. McDonald, John P. McDonald and James A. McDonald, children of a deceased brother, Patrick McDonald; that he left a last will and testament which had been duly proved and admitte'd to probate, in which it was provided in the fourth item thereof that, "All the rest, residue and remainder of my estate, real and personal, I hereby direct and empower my said executors, or the survivor of them, as soon as practicable, to sell and divide into equal parts, and • pay and distribute the said residue and remainder among my sisters, Mary Conlon, Ann McDonald, Bridget McDonald, Kate McDonald, Margaret Kilduff, Ellen McDonald, and the children of my brother, Patrick McDonald, share and share alike ; and in case of the death of either of them, then such residue to be divided among the sur- vivors of them in equal parts, share and share alike; the said children of my brother Patrick taking the share to which they would be entitled in one of said equal parts." At the time of his decease he was the owner of real estate situated on the southeasterly corner of Eighty-fifth Street and Madison Avenue, in the city of New York, consisting of three five-story apartment houses. These houses were occupied throughout by tenants, producing a fair income. In the month of June, 1894, the defendant O'Hara, as sole surviving exec- utor, advertised the real estate in question for sale at public auction at the' New York Real Estate Sales Rooms, 1 1 1 Broadway, upon liberaj terms. As soon as this notice was discovered by the plaintiff • she objected to the sale, insisting that the market was dull and money for real estate investments scarce, and that irreparable injury would result from a forced sale at that time. Four of her sisters and her nephews, Thomas F. and John P. McDonald, joined with her in the request that the premises be not then sold, and that the injunction prayed for issue restraining the sale. The plaintiff's sister, Mary Conlon, and her nephew, James A. McDonald, were made parties defendant; but they do not appear to have joined in the request. James A. McDonald is an infant thirteen years of age. We are inclined to the view that there is no escape from the conclusion that the direction to sell embraced in the will is impera- tive, and that it operates to convert the realty into personalty. (Delafield v. Barlow, 107 N.'Y. 535). It is, however, well settled that the persons who are exclusively entitled to the fund arising from the sale may, if they so elect prior to the actual sale, take the real estate in its unconverted form. (Story's Eq., Sec. 793; Hetzel v. Barber, 69 N. Y. 1-11; Prentice v. Janssen, 79 N. Y. 478-485; Mellen v. Mellen, 139 N. Y. 210220.) There must, however, be a concurrence on the part of all the beneficiaries in an election to take the land in order to take it out of the operation of the power of sale given by the will. This has not been done. Should we assume that the request signed by Kate McDonald and others, that the sale adver- tised by the executor be enjoined, amounts to an election, a question which we do not now determine, the election is still incomplete, 120 EQUITABLE CONVERSION 1 because only made by a' part of those entitled to the proceeds of the sale. It is contended that James A. McDonald, being a minor, is incapable of making an election. True, he has himself no such power. Whether hTs guardian, by the consent of the court, might eject for him it is not necessary now to determine, for no election by guardian has been made, or consent of the court asked. 2 Mary' Conlon was of full age, capable of making an election, and yet no act on her part is disclosed from which she can be said to have consented to accept the real estate. The order appealed from should, therefore, be affirmed, with costs. 3 All concur. ' Order affirmed. AUGUSTUS PRENTICE ET AL. v. MARY ANN JANSSEN ET AL. Court of Appeals of New York, 1880. 79 New York, 478. Appeal from judgment of the General Term of the Supreme Court, in the Second Judicial Department, affirming a judgment, entered on the report of a referee. (Reported below, 14 Huh 548.) 1 Miller, J. : The complaint in this action demands an equitable partition or sale of several pieces of land therein described, upon a portion of which was ■erected a hotel, called the Pavilion Hotel, together with the personal property, consisting of furniture in said hotel, and that an account be taken of the disbursements and expendi- tures made by the plaintiff, Augustus Prentice, for the benefit of and as additions to said property, and that the share of the defend- ant, Mary Ann Janssen, be charged upon the same and deducted from her portion of the proceeds of the sale of the property. The land belonged to Francis Blancard at the time of his decease in 1868, and the title is derived under the provisions of his last will and testa- 2 Subsequently, all parties having elected to take the land as such, and the infant by its guardian with the sanction of the court having joined in the election, the reconversion was held complete. McDonald v. O'Hara, 13 N. Y. Misc. R. 527 (189s). 8 Accord: Fletcher v. Ashburner, 1 Br. Ch. 497 (1779) ; Beatty v. Byers, 18 Pa. 105 (1851) ; Holloway v. Radcliffc, 23 Beav. 163 (1856) ; Ridgeway v. Underwood, 67 111. 419 (1873); Biggs v. Peacock, 22 Ch. D. 284 d882) ; De Vaughp v. McLeroy, 82 Ga. 687 (1889) ; Brown v. Miller, 45 W. Va. 211 (1898) ; Wayne v. Fonts, 108 Tenn. 145 (1901") ; Scott v. Douglas, 39 N. Y. Misc. R. SSS (1903) ; McWilliams v. Gough, 116 Wis. 576 (1903) ; Jackson v. Gunton, 26 Pa. Super. Ct. 203 (1904) ; Bank of Ukiah v. Rice, 143 Cal. 265 (1904) ; Starr v. Willoughby, 218 111. 485 (1905) ; Mattison v. Stone, 90 S. Car. 146 (1911). 1 The arguments of counsel are omitted and only so much of the opin- ion given as relates to reconversion. AUGUSTUS PRENTICE et al. v. M. A. JANSSEN et al. 121 ment. The plaintiff, Augustus Prentice, holds three-fourths, by conveyance from the residuary legatees or their representatives, and the defendant, Mary Ann Janssen, the remaining one-fourth. The defendant last named has joined with the plaintiff in making leases of the property since 1873 ; large sums have been expended in mak- ing improvements by the owners, and the rents have been received and applied in part, if not entirely, for that purpose. The residuary clause in the will of Francis Blancard devised and bequeathed his property to five of his children, among whom were Francis H. Blancard and the defendant, Mary Ann Janssen. It also authorized Francis H. Blancard to carry on the hotel busi- ness in the Pavilion Hotel for the term of five years, if he so desired, and the executors were empowered and directed, after the testa- tor's death, to sell and convert into money all the real and personal property of which he should be seized or possessed, including the hotel property, afteY the right of occupancy of his son had ceased, as they should deem advisable, and divide the proceeds equally among the residuary legatees. The son, Francis H., died before the testator, and no action was ever taken by the executors to sell the property, and it remained undisposed of, and was used and regarded by the owners as real estate to which they had title. Only one of the executors, the defendant, Gerhard Janssen, was living at the time of the commencement of this action, and he is made a party, as the husband of the defendant, Mary Ann Janssen, and does not by his answer claim any rights as executor or that he is a proper party as such. The answers admitted that plaintiff and the defend- ant, Mrs. Janssen, owned the property as tenants in common. We think that under the provision cited from the testator's will, the executors who were donees of a power took no estate in the lands as trustees, but merely a power in trust to be executed for the pur- pose of distribution, according to the will, which was liable to be defeated by a reconversion of the property, which was made per- sonal by the will, into real estate. The testator, by the authority and direction to his executors to sell the real estate, constructively converted the same into personal estate, and, being thus converted, the residuary legatees were entitled to take the same as such and had a right at their election to recon- vert into real estate. No distinct and positive act is required for such a purpose, and the rule applicable to such a case is that, "In the reconversion of real estate, a slight expression of intention will likewise be considered sufficient to demonstrate an election on the part of those absolutely entitled." (Leigh & Dalzell on Eq. Con- version [5th Vol. of Law Library], m. p. 168 ■ Mutlow v. Bigg, L. R. 1 Chan. Div. 385; 1 Jarman on Wills, 523 et seq.) 2 The real 'Pulteney v< Darlington, 1 Br. Ch. 223 (1783), at p. 238; Dixon v. Gayfere, 17 Beav. 433 (1853). See Triquet v. Thornton, 13 Ves. 345 (1807). In Harcourt v. Seymour, 2 Sim. N. S. 12 (1851), it is said by Lord Cran- worth, V. C. : "It was argued by Mr. Rolt that there must be an intention strictly to convert; that is to say, that, knowing the money was impressed 122 EQUITABLE CONVERSION estate was not disposed of by the executors under the provisions contained in the will, and as there was no lawful purpose for which a sale as absolutely required, there was no obstacle to prevent a reconversion of the same by the parties in interest from personal into real estate. This they elected to do by positive and unequivocal acts. Three of the four residuary interests were conveyed to the plaintiff, Augustus Prentice, and the defendant, Mary Ann Janssen, retained the other one-fourth. The whole has since been enjoyed, possessed and treated the same as real estate. This was done by the acquiescence of the executors and all the parties in interest, not only by possession, but by acts showing their intention beyond any question. In Story's Equity Jurisprudence (Sec. 793), it is said that if land is directed to be converted into money merely, the party entitled to the beneficial interest may, if he elects so to do, prevent any conversion of the property and hold it as it is. This has been done by the residuary legatees here ; and as the lands were not sold and disposed of by the executors, and no diversion made, the rule applies that the person entitled to the money, being of lawful age, can elect to take the land, if the rights of others will not be affected by such election. {Hetzel v. Barber, 69 N. Y. 1, 11.) No rights of other parties were injured by the election to reconvert; and as three-fourths of the residuary interests had been sold and conveyed to the plaintiff by those who were entitled to the proceeds of a sale, if one had been made under the power and the owner of the remain- ing one-fourth had assented to the reconversion, by exercising acts of ownership, and the purpose of the power had become unattain- able, the power to sell became extinguished, and the plaintiff and defendant already named became owners as tenants in common. {Hetzel v. Barber, supra; Garvey v. McDevitt, 72 N. Y. 563.) Neither the will itself nor the surrounding circumstances evince in any way that the testator intended not only to confer a power of sale, but that the exercise of such power would become absolutely necessary to enable the executors to make the distribution required to the residuary legatees, within the principle laid down in Crittenden v. Fair child (41 N. Y. 289, 292), which is relied upon by the defend- ant's counsel. The facts here are far different from the case cited. The distribution was actually made and the purpose of the will fully accomplished by the reconversion of the personal estate into real estate by the parties in interest, as is quite obvious, and each of the legatees had received their full share as directed; thus rendering with the character of land, the party must say : 'I mean that it shall no longer be land, but it shall be in its actual form of money.' I do not, however, think that that is the correct view df the law. It is quite suffi- cient if the court sees that the party means it to be taken in the state in which it actually is. Whether he did or did not know that, but for some election by him, it would be turned into land is quite immaterial. If, being money, the party absolutely entitled indicated that he wished to deal with it as money, and that it should be considered as money, whether he knew or did not know that, but for that wish, it would have gone as land, appears to me to be wholly immaterial." ESTATE OF JAMES D. SCOTT, Deceased 123 the exercise of the power of no avail. It follows that the executors having only a power to sell for the purpose of distribution — which power never was exercised, and which became of no use, by reason of the reconversion of the land into realty — Gerhard Janssen, the surviving executor, had no right, title, interest or lien upon the prop- erty, which rendered him a necessary party to the action as such executor. The provision of Section 107 (1 R. S. 735), which makes a power of sale a lien or charge upon the land, has no application when it had ceased to operate, and was of no practical use. As by the reconversion no interest remained in the executors, there could be no lien or charge upon the land. Equity would not interfere to compel the execution of the power under 1 Revised Statutes, page 734, Section 96, because the purpose had been accomplished without its exercise. 8 Affirmed. ESTATE OF JAMES D. SCOTT, DECEASED. Supreme Court of Pennsylvania, 1890. 137 Pennsylvania, 454. On March 26, 1889, William H. Scott and William M. Kaufman filed the account of their settlement of the estate of James D. Scott, deceased, which account after confirmation was referred to Mr. Walter K. Sharpe as auditor to report a distribution. The auditor subsequently reported, finding as facts that James D. Scott died resident at Chamber sburg on January 18, 1887, intes- tate, leaving to survive him a widow and four children, to wit, William H., George W., Mary C, intermarried with William M. Kaufman, and Clara Scott. Letters of administration upon his estate were granted to the accountants on January 27, 1887. On May 10, 1887, upon the petition of the heirs, proceedings in partition of the real estate of the deceased were begun in the Orphans' Court, and so proceeded in that sales thereof were made by the adminis- * Accord, holding there was a reconversion: Bradish v. Gee, Amb. 229 (1754); Griesbach v. Freemantle, 17 Beav. 314 (1853): Condit v. Bigalow, 64 N. J. Eq. 504 (1903); Brandon v. McKinney, 233 Pa. 481 (1912) ; Mc- Claren's Estate, 238 Pa. 220 (1913). Compare, no reconversion: Dixon v. Gayfere, 17 Beav. 433 (1853) ; In re Pedder's Settlement, 5 DeG. M. & G. 890 (1854) ; Harcum v. Hudnall, 14 Gratt. 369 (1858) ; In re Douglas (1902), 2 Ch. D. 296; Ranch's Estate, 21 Pa. Super. Ct. 60 (1902) ; Meekms v. Branning M. Co., 224 Fed. 202 (1915), Lapse of time may be an element in reaching a decision. Compare Swan v. Goodwin, 2 Duv. Ky. 298 (1865) ; Mutlow v. Bigg, 1 Ch. D. 385 (1873), with Kirkman v. Miles, 13 Ves. 338 (1807) ; In re Tweedie, 27 Ch. D. 315 (1884) ; Mellen v. Mellen, 139 N. Y. 210 (1893). , The effect of reconversion is to give the property its actual character. In the case of land, a judgment obtained against one of the beneficiaries after election will bind his interest. Stuck v. Mackey, 4 W. & S. Pa. 196 ( 1842) ; Brandon v. McKinney, supra. i2 4 EQUITABLE CONVERSION trators, as trustees, which sales were all confirmed on October 25, 1887, and the administrators directed to make deeds to the pur- chasers. On November 3, 1887, Clara Scott was married to Alex- ander Linn, and on various dates between November 4, 1887, and April 2, 1888, the deeds for the real estate sold were all delivered by the administrators to the purchasers, each deed containing a charge protective of the statutory interest of the widow, who at the date of the distribution by the auditor was still living. TVlrs. Clara Scott Linn died on April 3, 1888, intestate and without issue, and letters of administration upon her estate were granted to Alex- ander Linn, her husband. The account adjudicated embraced both the personal and the proceeds of the real estate of the decedent, but the personal estate was exhausted by the payment of the debts and the expenses of settlement of the -estate. No claim was made that there were debts held against the estate of Mrs. Linn. Upon the foregoing facts, considering Sec. 48, Act of March 29, 1832, P. L. 205 j 1 Sec. 9, Act of April 11, 1848, P. L. 537; Kann's Est., 69 Pa. 224; Bigg erf s Est., 20 Pa. 17; Nissley v. Heisey,.?8 Pa. 418; Wentz's App., 126 Pa. 541 ; Hay's App., 52 Pa. 450, the auditor concluded as matter of law : That one-fourth of the net balance for distribution was dis- tributable to Alexander Linn, administrator of Clara Scott Linn. That Alexander Linn, the husband and administrator of Clara Scott Linn, was entitled to the whole of her share, not only as her administrator, but absolutely in his own right as her husband, it descending to him under Sec. 9, Act of April n, 1848, P. L. 537. The auditor thereupon reported a distribution accordingly. To the report the other distributees filed exceptions, which were dismissed by the court. Whereupon the exceptants appealed. 2 Pee Curiam : When Clara Scott Lynn died, . the real estate which she inherited from her father had been sold under proceed- ings in partition, the deeds had been made to the respective pur- chasers thereof, and the contention now is whether the purchase money for said real estate shall be paid to her administrator, who is her husband, or to her heirs at law. The auditor and the court below awarded it to her administrator, upon the ground that it was personalty; the appellants contend that it should have been dis- tributed to them as the heirs at law of Clara, because it was real estate. I presume no one will contend that if Clara had sold her undi- vided interest in her father's real estate at private sale, and taken a bond and mortgage for the purchase money, the bond and mortgage thus taken would have been real estate. Does it make any differ- ence that her interest was sold under proceedings in partition? Granted that, as to the proceeds of the sale under the partition, they 1 Requiring „a husband to enter security on receiving money awarded by the court to his wife. 3 P. & L. Dig. (2d Ed.), 5504. 2 Part of the statement of facts and the arguments of counsel are omitted. A. D. McLEAN v. J. A. LEITCH 125 descended or were distributed as realty; that Clara took or was entitled to take the same as realty ; yet, in her hands, the same became personal estate, and those who take by descent from her take it as money. It was said by our Brother Mitchell, in Wcntz's App., 126 Pa. 541 : "It is not uncommon to say that the proceeds of real estate remain realty, but the expression is not accurate. The money never is real estate, in law any more than fact, but for certain purposes, and within certain limits, it is treated as if it was real estate. The purpose is to preserve the inheritable quality of the estate, so that the title may not be diverted from the previous owner, and the limit is the first devolution." This is settled law. The first devolution here was to Clara Linn. In the distribu- tion of the estate of her father, James D. Scott, the money derived from the sale of his real estate must be distributed to his children as real estate, not as money ; that is to say, they take the money as they would take the land' This was the first devolution. But in the hands of Clara, it was as clearly money as if it had been sold by her at private sale, and her administrator is entitled to the money. 3 The Act of March 29, 1832, has no application. The decree is affirmed. A. D. McLEAN v. J. A. LEITCH. Supreme Court .of North Carolina, 1910. 152 North Carolina, 266. This was a motion in a special proceeding. Pending the pro- ceeding and after order of sale, certain of the cotenants conveyed for value their several interests to A. D. McLean. He did not have his deeds recorded nor did he then become a party to the proceed- ings. The proceeding pended for several years thereafter, the order 3 See generally: Emerson v. Cutler, 14 Pick. Mass. 108 (1833); Dyer v. Cornell, 4 Pa. 359 (1846) ; Ex parte Hawkins, 13 Sim. 569 (1843) ; Richards v. Attorney General, 13 Jurist 197 (1848) ; Cadman v. Cadman, L. R. 13 Eq. 470 (1872); Ballon v. Ballon, 78 N. Y. 325 (1879). In partition, see Mordaunt v. Benwell, L. R. 19 Ch. D. 302 (1881) : Jacobus v. Jacobus, 36 X. J. Eq. 248 (1882) ; Findley v. Findlcv, 42 W. Va. 372 (i8g6) ; Dolan's Estate, 231 Pa. 180 (rgn). Compare, as to estates held in trust. In re Bagofs Settlement, 31 L. J. Ch. 772 (1862) ; Simonds v. Simonds, 112 Mass. 156 (1873); In re Chapin, 148 Mass. 588 (1889); Tatham's Estate, 250 Pa. 269 (1915). . For the distinction between conversion by will or deed and conversion de facto by paramount authority, see 3 Pomeroy's Equity Jurip. (3d Ed.), Sec. 1167'. As to the interests of married women, compare Cowden v. Pitts, 2 Baxt Tenn. 50 (1872): Denham \. Cornell, 7 Hun, N. V. 662 (1876); Wenta's Appeal, 126 Pa. 541 (1889) ; Hottal v. Ekart, 86 S. Car. 341 (1910), with Wallace v. Greenwood, L. R. 16 Ch. D. 362 (1880) ; Turner v. Dawson, 80 Va 841 (188O : Hackett v. Moxlev. 68 Vt. 210 (1895) ; Herbert v. Her- bert (1912), 2 Ch. D. 268: Oestcrlc's Estate, 25 Pa. D. R. s88 (1916). 126 EQUITABLE CONVERSION of sale was attempted to be executed, but no order of confirmation was made. Subsequently, some of the parties who had conveyed their interests to A. D. McLean conveyed the same interests for value to I. P. and J. L. McLean, who had their deeds recorded. Both purchasers were made parties to the proceedings, a resale was ordered and was executed, the report was confirmed, the purchase money was paid and deed made; and the contest is now over the fund to be distributed to the interests claimed by>A. D. McLean and I. P. and J. L. McLean. His honor, on appeal, held that A. D. McLean was entitled to the fund, and gave judgment accordingly. I. P. and J. L. McLean excepted and appealed to this court. Manning, J. : The sole question presented by this appeal is whether realty, petitioned to be sold for partition by tenants in common, is converted into money when the order of sale is made, and passes as personalty, or whether it retains its character as realty until sale is actually made and the proceeds received. Sec. 2516, Rev., clearly provides that as to infants, married women and the classes therein mentioned, the money is realty and goes to the real representatives, and it has been so construed by this court. Hall v. Short, 81 N. C. 273 ; Dudley v. Winfield, 45 N. C. 91 ; Bateman v. Latham, 56 N. C. 35 ; Allison v. Robinson, 78 N. C. 222. This rule rests upon the principle that during disability neither the married woman, nor infant, nor lunatic, can exercise the right of election to take their respective interests as money, and therefore the pro- ceeds will be held in their unconverted character as realty until such election can be legally made. 1 In determining the time when the interests of adults, not under any disability, are converted from realty to personalty, we have no statutory declaration or express decision -of this court. We think, however, as to them, the conversion takes place only when the land is sold and the sale confirmed by the court, and not when the decree of sale is made. Up to the time of confirmation of the sale, the land remains realty and the several tenants in common must convey their interests as land with the formalities of conveyances of real estate, that they may be binding and effective. Such conveyances, as all other con- veyances of land, must be registered, and will be valid to pass title against subsequent purchasers for value only from the registration 1 Accord: Wood v. Reeves, 58 N. Car. 271 (1859) ; Lerch v. Oberh, 18 N. J. Eq. S7S (1867) ; Horton y. McCoy, 47 N. Y. 21 (1871) ; Wetherill v. Hough, 52 N. J. Eq. 683 ( 1894) ; Merriam v. Dunham, 62 N. J. Eq. 567 (iqoi) ; Matter of McMillan, 126 N. Y. App. Div. 155 (1008). Contra: Emerson v. Cutler, 14 Pick. Mass. 108 (1833I ; Armstrong v. Nuller, 6 Ohio 118 (1833) ; Kanri's Estate, 6q Pa. 210' (1871) : United States v. Baker, 183 Fed. 280 (igio); Hottal v. Ekart, 86 S. Car. 341 (1910). The de- cisions frequently rest on the terms of the statutes authorizing the pro- ceedings. Hough's Estate, 3 Pa. D. R. 187 (1893) ; Murray's Estate, 234 Pa. 520 (1912) ; Buck's Estate, 25 Pa. D. R. 367 (1916) ; Kelland v. Fulford, L. R. 6 Ch. D. 491 (i877) : In re Norton (iooo), 1 Ch. D. 101 : In re Morgan (1900), 2 Ch. D. 474; Hopkinson v. Richardson (1913), 1 Ch. D. 284. D. A. McLEAN v. J. A. LEITCH 12; thereof. Sec. 980, Rev. In 9 Cyc, 845, it is said : '" No conversion takes place by virtue of proceedings in partition before sale or allot- ment and acceptance of the purparts. Until then, the interests of the several owners retain all the qualities of real estate." In Smith v. Smith. 174 111. 52, the court says: "When partition is among the heirs of a deceased ancestor, the purpose of the sale is the distribu- tion of the proceeds among the owners of the undivided interest in the land. Such proceeds, therefore, remain impressed with the character of real estate for the purpose of distribution." To the same effect is Jenkins v. Simms, 45 Md. 532. In Wentz Appeal, 126 Pa. St. 541, that court held: "The money derived from a sale of land in partition proceedings is never real estate, any more in law than in fact, but for a certain purpose and within a certain limit it is to be treated as real estate ; that purpose is to preserve the quality of the estate, so that it will vest in the persons who would have been entitled to it, had it remained unconverted, and the limit is the first transmission." In Freeman on Cotenancy and Partition, Sec. 464, the author says : "If pending a partition suit between cotenants, who do not hold with benefit of survivorship, one of them die, the action thereby becomes defective, and cannot properly proceed until the successors in interest of the deceased are brought, before the court. By his death his heirs have become cotenants in his stead, and their rights as such cannot be litigated in their absence." In 7 Am. and Eng. Enc. (2d Ed.), p. 473, the writer says the decisions are conflicting as to the time of conversion, "some holding that the conversion dates from the order of sale, though there has been no sale; whereas other courts hold that there is no conversion before actual sale and compliance by the purchasers with the terms of"sale." As under the decisions of this court (Joyner v. Futrell, 136 X. C. 301, where many cases are cited), the contract between the purchaser and the court, through its commissioner to sell, becomes a completed contract upon confirmation of .the sale — which is the act of acceptance — we hold that the conversion as to parties sui juris then takes place and is complete, and the proceeds of the sale become, at that time, impressed as personalty, with the qualities of per- sonalty. 2 Applying the conclusion we have reached to the present case, we think his honor's ruling erroneous. The deeds to A. D. McLean "Accord: State v. Hirons, 1 Houst. Del. 252 (1856); Ex parte Moore. 3 Head. Tenn. 171 (1859); Early v. Dorsctt, 45 Md: 462 (1876). See Ballon v. Ballon, 78 N. Y. 325 (1879). In Pennsylvaina there is no con- version until the delivery of the deed. Schmid's Estate, 182 Pa. 267 (1897) ; Simpson's Estate, 39 Pa. Super. Ct. 382 (1909), and semblc, Shaffer v. Briggs, 36 Ind. 55 (1871). . , In England an absolute order of sale operates as a conversion from the date of the order. Hyett v. Mekin, L. R. 25 Ch. D. 735 (1884) ; In re Dodson (1908), 2 Ch. D. 638; Burgess v. Booth (1908), 2 Ch. D. 648; Fauntleroy v. Beebe (1911), 2 Ch. D. 257; Herbert v. Herbert (1912), 2 Ch. D. 268. 128 EQUITABLE CONVERSION not being registered before the deeds to I. P. and J. L. McLean were registered, they were not valid to pass the title as against these subsequent purchasers for value, and these conveyances having been made before conversion had taken place, the interests of the coten- ants could pass only by conveyances executed as deeds of real estate and for the vendee, as a protection of his title under the statute, reg- istration is necessary. His honor should have held, therefore, that the appellants were entitled to the shares of the tenants in common, whose interests had been conveyed to them in preference to the appellee, A. D. McLean. The judgment is reversed. CHARLES C. KOLARS v. WILLIAM W. BROWN. Supreme Court of Minnesota, 1909. \c& Minnesota, 60. Elliott, J.: On September 22, 1901, Minerva Brown died intestate, leaving certain real estate in the county of Le Sueur, Minnesota. An administrator was not appointed until April 10, 1906. On December 7, 1903, B. C. Hughes recovered a judgment in the district court of Le Sueur County against William W. Brown, who was the son and one of the heirs of Minerva Brown. It becanie necessary to sell the real estate for the purpose of payijg the debts of the decedent and the expenses of administration. After these claims were paid, there remained of the proceeds of the sale the sum of one thousand five hundred and twenty-seven dollars and ninety-five cents, of which one hundred and thirty-eight dollars and ninety cents was assigned as the share of William W- Brown. C. C. Kolars, who had a claim against William W. Brown, brought suit against him, and on December 19, 1907, served garnishment papers upon the administrator for the purpose of reaching Brown's share of the estate. The trial court held that the judgment creditor was entitled to the money. Upon the death of Minerva Brown the title to the real estate vested in the heirs, subject to the condition that it might be sold, if necessary, to pay the debts of the. deceased and expenses of admin- istration. State v. Probate Court of Ramsey County, 25 Minn. 22 ; Noon v. Finnegan, 29 Minn. 418, 13 N. W. 197; Hill v. Townley, 45 Minn. 167, 47 N. W. 653; Hanson v. Nygaard, 105 Minn. 30, 117 N. W. 235. The lien of the judgment attached to the judgment debtor's interest in the real estate, subject to the same conditions. A sale of real property under proceedings in the probate court changes the character of the property only so far as is necessary to effect the purpose for which the sale was made, and any surplus made after the purpose of the sale has been effected should be treated as real estate. As said by Judge Woerner : "The conversion is com- plete and effectual only to the extent and for the purpose for which the sale was authorized, whether by the will, or by the order of the IN THE MATTER OF THE ESTATE OF STINSON et al. 129 court. So far as these purposes do not extend, and in so far as any of them do not take effect in fact or in law, the property retains its former character in respect of the rights of its owner, ana passes accordingly. The surplus of the proceeds of a sale ordered for the payment of debts remaining after the debts and expenses of admin- istration have been discharged retains the character of real estate for the purpose of determining who is entitled to. receive it, and goes to the persons to whom the real estate would have gone but for the conversion." 2 Woerner, American Law of Administration, Sec. 481. As sustaining this rule, see Hovey v. Dary, 154 Mass. 7, 27 N. E. 659; Allen v. Trustees, 102 Mass. 262; Griswold v. FrinR, 22 Oh. St. 79; Garner v. Wood, 71 Md. 37, 17 Atl. 1031 ; Cronise v. Hardt, 47 Md. 433 ; Williamson v. Mason, 23 Ala. 488, 499 ; Read v. Bostick, 6 Humph. (Tenn.) 321; Sears v. Mack, 2 Bradf. Sur. (N. Y.) 394; Pennell's Appeal, 20 Pa. St. 515 ; Ackerman v. Gorton-, 67 N. Y. 63; Dentov, v. Tyson, 118 N. C. 542, 24 S. E. 116; Ball v. Green, 90 Ind. 75; Coombs v. Jordan, 3 Bland (Md.) 284, 22 Am. Dec. 236; Erb v. Erb, 9 Watts & S. (Pa.) 147. It has been held that, although the fund goes to the person who would have taken it as real estate, he takes it as money, and not as real estate, which means no more than that, after the death of the heir, the money thus received goes to his personal representative as personal property. The rule to which we have referred is supported by Ness v. Davidson, 49 Minn. 469, 52 N. W. 46, although the facts of that case are not exactly the same as those we are now considering. It follows that, as the real estate would have gone to Brown and been subject to the lien of the judgment against him, the proceeds of the sale of the land must follow the same course, The judgment cred- itor's rights had attached evert before the appellant's action was commenced, and neither justice nor reason requires that the change of form resulting from the necessities of administration should be allowed to prejudice his rights. This fund was the proceeds of the sale of the real estate upon which Hughes had a lien, and should go to those who were beneficially interested in the real estate. See Citlbertson v. Cox, 29 Minn. 309, 13 N. W. 177, 43 Am. 204. 1 Judgment affirmed. IN THE MATTER OF THE ESTATE OF JOHN STINSON AND THOMAS STINSON. Court of Appeal of Ireland, 1909. (1910.) 1 I. R., 13. Incumbrancer's petition for sale. The owner, at the time of the filing of the petition, was entitled to an estate in feeisimple in the lands, the subject of the petition. 'See also Cooke v. Dealey, 22 Beav. 196 (1855); Lloyd v. Hart, 2 Pa. 130 EQUITABLE CONVERSION The absolute order for sale was made in the year 1893. The owner, Thomas Stinson, died intestate on the 30th June, 1908. The sale was completed in July, 1908, when the purchase money was lodged in court. The heir at law of Thomas Stinson claimed the surplus proceeds, amounting to ^105, as realty. An application was made on his behalf, ex parte, to Ross, J., for payment to him of the said proceeds. The application was adjourned by the learned judge, who required the next of kin of Thomas Stinson to be represented on the hearing of the adjourned application, no personal representative to Thomas Stinson having then been raised. 1 Ross, J. : In this case the owner, at the time of the filing of the incumbrancer's petition, was entitled to an estate in fee simple. The lands have been sold, the incumbrances paid off, and a sum remains in court to the credit of the matter representing the surplus of the proceeds of the sale. The owner died intestate. His heir at law claims this money as representing realty. His next of kin claim it as personalty. On this elementary question of law there is a difference of opinion between the courts in England and Ireland. It is essential that the point should be considered by the court of appeal and settled. In Richardson V. Nixon, 2 Jo. & Lat. 250, Lord St. Leonards stated his view that if more of the purchase estate was sold than was sufficient to pay off the mortgage upon it, the residue of the purchase money would remain real estate. In Steel V. Preece, L. R. 18 Eq. 192, Sir George Jessel laid down the very reverse, holding that if conversion is rightfully made, all consequences of conversion must follow, and that there is no equity of reconversion in favour of the heir. Both these statements must be taken as obiter dicta only. Now, if the owner had lived, he would have received this money, because he combined in himself the two rights which on his death passed to his heir and personal respectively. He has not indi- cated any intention in the matter — there are no special circum- stances in the case — the court has now the money in its control, and in disposing of it must decide the pure question of law. In Scott v. Scott, 9 L. R. Ir. 367, Vice Chancellor Chatterton decided the question in favour of the contention of the heir at law. The same view is taken by Mr. Justice Monroe in Hall's Estate, 31 L. R. Ir. 416. He says there is a conversion only of so much of the estate as may be necessary for the payment of incum- brances ; the surplus will go to the heir at law. I have myself acted on this view up to the present. I find that the very contrary had been decided by Kay, J., in Heyett v. Mekin, 25 Ch. D. 735 ; by Cozens-Hardy, M. R., in Hart- ley v. Pendarves (1901), 2 Ch. 498; by Parker, J., in Chadwick v. 473 (1846); Fidler v. Higgins, 21 N. J. Eq. 138 (1870) ; McCarthy's Estate, 11 Phila. 85 (1875) ; Pickens v. Kniseley, 36 W. Va. 794 (1892) ; Matter of Knapp, 25 N. Y. Misc. 133 (1898) ; Adams v. Jones, 176 Mass. 185 (igoo). 1 Counsels' arguments are omitted. IN THE MATTER OF THE ESTATE OF STINSON et al. 131 Grange (1907), 1 Ch. 313; (1907) 2 Ch. 20, which decision was approved by the court of appeal in England. Notwithstanding these decisions, Eve, J., in Burgess v. Booth (1908), 1 Ch. 880, has fol- lowed the Irish vice chancellor's decision in Scott v. Scott. His decision has been reversed by the English court of appeal which expressed opinions entirely at variance with Scott v.' Scott (1908), 2 Ch. 648. The matter cannot be allowed to rest in this unsatisfactory state. The point is occurring every day, and considerable sums of money may be paid out to the wrong parties. In this conflict of authority, and inasmuch as the case must go to our own court of appeal, 1 am free to express my own view. Although more land was sold than was absolutely necessary, the surplus being in fact cash must be treated as cash unless there is an equity for reconversion. The order of the court for sale was a rightful order. It resulted in a cash surplus. There is no equity for reconversion as between the heir and the next of kin ; both are volunteers. They must take it as they find it, and being personally unaffected by any trust, it must go to the next of kin. What I have stated is the argument that forms the basis of the English decision, and I see no answer to that argument. I accordingly declare that the next of kin are entitled. The heir at law appealed. Hewitt, R. Poole, for the appellant Chadwick for the next of kin and Carson for the personal representative of Thomas Stinson, were not called upon. The Lord Chancellor (Sir Samuel Walker) : We do not require to hear this case further argued. Our decision is founded upon this : We now find the very point involved in the appeal decided, if not by Sir G. Jessel in Steed v. Preece, L. R. 18 Eq. 192; by Kay, J., in Hyett v. Mekin, 25 Ch. D. 735, and by the full- court of appeal in England — Cozens-Hardy, M. R, Fletcher Moul- ton, L. J., and Farwell, L. J., all eminent judges, in Burgess v. Booth (1908), 2 Ch. 648. On what principle could we, with any convenience, overrule the decision of the English court of appeal in that case? The question at issue might well have been decided originally the other way. I express no opinion at all as to that ; we are guided in our present judgment by authority, and authority alone. The Irish decisions to which we have been referred are all based upon the judgment of Chatterton, V. C, in Scott v. Scott, 9 L. R. Ir. 367, but that case has been expressly dissented from in England, and we cannot now follow it. The appeal must accord- ingly be dismissed. Palles, C. B. : I base my decision, as the lord chancellor has based his, on the ground of convenience. I state no general propo- sition upon the question involved in this case, but I consider that it would be a most inconvenient thing if, by now reversing the decision of Ross, J., we were to hold that different rules of law should apply in England and in Ireland, with regard to the devolution of prop- 132 MERGER erty in such a case as the present. The law upon the present ques- tion appears to have been determined in this country by the decision of Chatterton, V. C, in Scott v. Scott, 9 L. R. Jr. 367. Prior to that time, a contrary principle had been laid down in Steed V. Preece, L. R. 18 Eq. 192, by that great master of real property law, Sir G. Jessel. It has often been said that the decision of Sir G. Jessel was a dictum merely; but that is not admitted by the judges of the court of appeal in Burgess v. Booth (1908), 2 Ch. 648. If the matter were now res nova I think a good deal could be said in favour of Mr. Poole's contention ; but I am clearly of opinion that it would be most inconvenient for us now to differ from the established English practice, and I agree that this appeal should be dismissed. Holmes, L. J. : I agree. I offer no suggestion as to how I should have decided the case, were it not for the decisions in England, which have been referred to, and with which the decision of Ross, J., is admittedly in accordance. 2 CHAPTER III. MERGER. WILDER v. HOLLAND. Supreme Court of Georgia, 1897. 102 Georgia, 44. Cobb, J.: Wilder, as administrator with the will annexed of John M. Weaver, filed suit against Rebecca H. Holland and others, praying for the cancellation of a certain deed, which he alleged was a cloud upon the title to property alleged to belong to the estate of his testator. On demurrer the petition was dismissed, and the plaintiff excepted. The will of John M. Weaver contained the following item : "I devise and bequeath my entire real estate to my beloved wife Elizabeth Weaver, to have to and to hold the same during her natural life; and at her death to be had, held, and used by my beloved daughter Rebecca H. Renard, during her natural life, with power to devise and bequeath the said real estate by will at her death to whomsoever she may desire." Elizabeth Weaver and Rebecca H. Renard, who has since intermarried with Holland, were the only heirs of the testator. Elizabeth Weaver died in November, 1886, leaving Mrs. Holland as her sole heir. Mrs. Holland on July 30, 1890, executed a warranty deed in fee simple to certain lands which belonged to John M. Weaver at the time of his death. This is the deed alleged to be a cloud upon the title of th*e estate of the plaintiff's testator, and which it is prayed may be ' See also Graham v. Dickinson, 3 Barb. Ch. 169 ( 1848) ; Squire's Ap- peal, 10 W. N. C. Pa. 118 (1881); Fauntleroy v. Beebc (1911), 2 Ch D. 257- WILDER v. HOLLAND 133 vanned. It is contended that as the will gave Mrs. Holland a life estate with power to dispose of the property by will, the making of the deed was not a good execution of the power, and therefore, being void, is a cloud upon the reversionary interest which it is alleged will come back to the estate of John M. Weaver, after the death of Mrs. Holland. If the title of Mrs. Holland depended upon the will alone, and the only interest which she had in the property were derived there- from, her interest would be a life estate with power to dispose of the property by will at her death. The mere fact that she has the power given to dispose of this property does not increase into a fee the estate which she takes, and upon her failure to exercise the power at her death, the property would revert to the estate of John M. Weaver, to go to whomsoever his will directed in such con- tingency, or upon failure of such direction, to his heirs at law. Edmondson v. Dyson, 2 Kelly 307; Haralson v. Redd, 15 Ga. 148. The power conferred being to dispose of the property by will, the deed disposing of the property would not be a good execution of the power, and would not prevent the property from reverting to the estate of the testator. Porter v. Thomas, 23 Ga. 468. But Mrs. Holland has an interest in the property which she derived from another source. The will provided for no limitation over, in the event that she failed to exercise the power conferred upon her; and as she and her mother were the only heirs of John M. Weaver, upon his death the reversion vested in her mother and herself as heirs at law. There being nothing in the will expressly directing the reversion to vest in any other person, it necessarily vested in the heirs at law ; and this would be true, even if the inten- tion to disinherit the heirs were ever so manifest. The heir cannot be disinherited, unless the property be expressly devised to some other person. Wright v. Hicks, 12 Ga. 155; Miller v. Speight, 61 Ga. 460. Upon the death of Mrs. Weaver, Mrs. Holland, as her sole heir, became vested with the remaining one-half interest in the reversion belonging to the estate of John M. Weaver. We find, therefore, that at the date of the deed which is attacked in this case, Mrs. Holland had vested in her a life estate annexed to which was a power of disposition by will, which was derived from the will of her grandfather ; that she had also vested in her the reversion which was undisposed of by her grandfather's will ; and upon the well- settled doctrine of merger of estates, the less estate, that is, the life estate, coupled with the power, became merged into the greater estate, that is, the fee represented by the reversion, and Mrs. Holland became the fee simple owner of the property. The two estates being in the same property, and being united in the same person in her individual capacity, the less estate is merged into the greater. Civil Code, Sec. 3106. It is true that merger does not, in general, take place when the person in whom the two estates meet intends that it shall not take place. Knowles v. Lawton, 18 Ga. 476. Still, where it is manifest that the person in whom the two estates meet intends that the merger shall take place,- it cannot be defeated by 134 MERGER other parties. Therefore it was in the power of Airs. Holland to so deal with her property as to preserve for the purposes of dispo- sition by her the two estates which came to herj or she could deal with it so as to manifest an intention that the less estate should merge into the greater. The effect of the merger being to vest in her a fee simple estate, the fact that she made a deed conveying it in fee is conclusive evidence of her intention that the merger should take place. Under the operation of the merger, she was the owner in fee simple of the property at the time that she made the convey- ance, and it was no concern of the administrator of her grand- father's estate that she so dealt with it. The administrator in his application does not show that there were any creditors of the estate ; and even if it were necessary for the benefit of creditors that the administrator should institute such proceedings, nothing appears in the petition to authorize it in their behalf. Mrs. Holland being the owner of the property, her conveyance in fee simple could not be a cloud upon any title of the estate of John M. Weaver, and the court was right in dismissing the case. 1 McCREARY v. COGGESHALL. Supreme Court of South Carolina, 1906. 74 South Carolina, 42. 1 Woods, J. : A judgment was recovered by the plaintiffs for the possession of a tract of land containing six hundred and thirty acres, and defendants appeal. As it is necessary at every point of the dis- cussion to have in view the precise terms of certain portions of the will of Thomas Hunter, under which both parties claim title, they are here set out in full : "Item. / lend to my granddaughter, Mary Ann Coleman, for and during the term of her natural life and no longer, all my lands situate, lying and being on Belly Ache, includ? ing George King's old place, and also Harry King's supposed to 'See 2 Pomeroy's Equity Jurisp. (3d Ed.), Sec. 786; 4 Kent's Comm. 102; 16 Cyc. 665; 20 Amer. & Eng. Enc. of L. (2d Ed.), Sec. 587'; note to Forthman v. Deters (206 111. 159), in 99 Amer. St. Rep. 152. See also, Fox v. Long, 8 Bush. Ky. 551 (1871) ; Cary v. Warner, 63 Me. 571 (1874) ; Allen v. Anderson, 44 Ind. 395 (1873); Magnum v. Piester, 16 S. Car. 316 (1881) ; Little v. Bowen, 76 Va.- 724 (1882) ; Boykin v. Ancrum, 28 S. Car. 486 (1887) ; Harrison v. Moore, 64 Conn. 344 (1894) ; Muscogee M. Co. v. Eagle Mills, 126 Ga. 210 (1900); Starr v. Methodist Church. 112 Md. 171 (1910); Gaddes v. Pawtucket Inst., 80 Atl. 4:5 (R. I. 1911) ; Bowen v. Driggers, 138 Ga. 398 (1912) ; Hopping v. Grey, 89 Atl. 2*7 (N. J. Eq. 1913) ; Erving v. /. H. Goodman & Co. Bank, 153 Pac. 945 (Cal. 1915). "In order to constitute a merger of two distinct estates, these estates must meet in one and the same person at the same time and in the same right." McGuire v. Cook, 135 S. W. 840 (Ark. 191 1) ; Cheda v. Bodkin, 158 Pac. 1025 (Cal. 1916). 1 The arguments of counsel and part of the opinion are omitted. Mccreary v. coggeshall 13s contain nine hundred acres, and also four negroes, Carolina, Sarah and her two children, and the future issue and increase of the females. It is my will and desire that my executors remain and manage the said land and negroes for the benefit of my grand- daughter until she arrives to the age of twenty-one or marriage, and then to be delivered over to her; and in case my said grand- daughter, Mary Ann Coleman, should die leaving issue of -her body then living, then to him or her, or them so living, and to their heirs and assigns forever; but in case the said Mary Ann Coleman should die leaving no issue of her body living at the time of her death, then I give, devise and bequeath all the aforesaid land and negroes to my son, Morris W. Hunter, his heirs and assigns forever. ''Item. / give, devise and bequeath unto my son, Morris. W. Hunter, his heirs and assigns forever, all the rest and residue of my real and personal estate of what kind or nature soever, and wheresoever situate or being, and also, after the death of my wife, Margaret Hunter, I give, devise and bequeath all the real and per- sonal estate hereinbefore loaned to her, to him the said M. W. Hunter, his heirs and assigns forever. "Lastly. I do hereby nominate my son, Morris W. Hunter, and my friends, Samuel Bacot and James R. Ervin, executors of this my last will and testament." We have italicized the portions requiring special attention. Thomas Hunter died about 1831, leaving surviving him his children, William, Morris and Rachel, and his grandchild, Mary Ann Cole- man. Mary Ann Coleman married Samuel McCreary, and died in 1902, at the age of ninety years, leaving surviving her children, the plaintiffs, J. H. McCreary, J. A. McCreary, Susan Hawthorne, Mary McClelland and Mattie Massey, who now claim the land in dispute as issue of her body living at the time of her death, under the second item of the will. We first consider the case on the assumption that there was evidence to the effect that Morris W. Hunter, one of the heirs and the residuary devisee of Thomas Hunter, acquired title to the life estate of Mary Ann McCreary, nee Coleman, and that the defendants, or at least one of them, derived title to the land and possession of it through him. The defendants taking the position that the plaintiffs took under the will a remainder contingent on surviving their mother, the life tenant, the fee being in Morris W. Hunter, the residuary devisee, pending the contingency upon which plaintiffs should take, contended if Morris W. Hunter, owner of the fee, did acquire the life estate of Mary Ann Coleman, it became immediately merged in the fee, which he already held, and the con- tingent remainder being thus left without any particular estate to support it, would be defeated. The circuit judge refused to so charge, but on the contrary instructed the jury the contingent remainder intervening between the life estate and the fee pre- vented a merger. There can be no doubt that the limitation to the issue of Mary Ann Coleman, and, in default of such issue, to Morris W. Hunter, 13& MERGER created a contingent remainder with a double aspect, and not an executory devise. The residuary devise to Morris W. Hunter vested in him the fee after the life estatej with the contingent remainders limited thereon. Hopkins v. Mazyck, Rich. Eq. Cases 263; Williams v. Kibler, 10 S. C. 414. The general rule that a life estate is drowned or merged in the fee when acquired by the owner of the fee to the destruction of an intervening contingent remainder is too deeply imbedded in the common law to be now judicially questioned. Whenever this appli- cation of the doctrine of merger has been under discussion by writers on the common law, the leading case of Purefoy v. Rogers, decided in 1672 and reported in 2 Saunders 380, in which the doc- trine is laid down, has been followed. The rule is thus compre- hensively stated in 2 Wash, on Real Prop. 638: "At common law, there were various ways in which a contingent remainder might be defeated, by destroying the particular estate on which the remainder depended before it vested. It might be done by a feoffment or for- feiture, or by the inheritance descending upon the tenant and merging his particular estate in itself, or by the particular estate and the inheritance becoming united by conveyance or act of the parties, since the. outstanding of a contingent remainder would not prevent the merging of the two, it not being an intervening estate." It is remarkable that a somewhat careful search has disclosed very few cases in American courts in which the precise point was involved. In a text book of high rank our own case of Mangum v. Piester, 16 S. C. 316, is cited as authority for the proposition that "where the particular estate merges in inheritance either by the*act of the particular tenant or by the descent to him of the inheritance after the particular estate has taken effect, intermediate contingent remain- ders are destroyed/' It is true, the court held in that case a life estate became merged in the remainder when it was purchased by the remainderman, but the remainder there under discussion was held to be vested and the limitation over an executory devise, and not a contingent remainder. The subject of the barring -of intervening contingent remainders by merger could not therefore arise, and was neither discussed nor decided. Nor was the precise point here under consideration neces- sarily involved in Bouknight v. Brown, 16 S.' C. 155, 170, as will be found on examination of the facts of the case, but in the course of the discussion the court uses this language: "A contingent remainder may be destroyed at common law by fine or recovery, by merger of the particular estate, or by any displacement thereof, and this is the great and essential difference between a contingent remainder and executory devise." Redfern v. Middleton, Rice 459, decided that alienation by the life tenant by deed of feoffment with livery of seizin operated as a forfeiture of the life estate, resulting in the destruction of the contingent remainder depending upon the life estate as the particular estate supporting it. To the same effect are Faber v. Police, 10 S. C. 376; McElwee v. Wheeler, 10 S. C. McCREARY v. COGGESHALL 137 392, and Snelling v. Lamar, 32 S. C. 72, 10 S. E. 825. While the possibility of destroying contingent remainders by merger was not involved in those cases, yet forfeiture, by deed of feoffment, with the livery of seizin, and merger, have equal common law sanction as methods of barring contingent remainders, and the remarks of Chief Justice Mdver, in Bank v. Garlington, 54 S. C. 413, 426, 32 S. E. 513, as to the former, apply also to the latter: "There is no doubt that under the common law of England a tenant for life could bar contingent remainders by executing a deed of feoffment, with livery of seizin, and there is as little doubt that this portion of the common law became a part of the law of this state by virtue of the Act of 1712, incorporated in the Gen. Stat, of 1882 as Sec. 2738." The Act of 1883 (18 Stat: 430, Civil Code, Sec. 2465) pro- vides that "no estate in remainder, whether vested or contingent, shall be defeated by any deed of feoffment with livery of seizin." However unfortunate it may be regarded that our statute was not modeled after the English statute, 8 and 9 Vict., c. 106, and thus made comprehensive enough to prevent the unjust destruction of the rights of contingent remaindermen by merger and other artificial means, the court cannot extend the statute beyond its plain meaning. 2 But even if the statute had expressly provided against the destruc- tion of contingent remainders by merger, it could have no effect to defeat a right acquired by merger before the enactment of the statute. Here, if Morris W. Hunter acquired the preceding life estate, and thus defeated the contingent remainder, this was accom- plished and his rights and the rights of those claiming under him were vested long before the act was passed. The possibility of defeating it might have been taken away by statute, but after it had been actually destroyed and the entire unlimited title acquired by Hunter, his title could not be altered by statute. Bank v. Garlington, 54 S. C. 429, 32 S. E. 513. The circuit judge was, therefore, in error in saying to the jury that the life estate could not merge in the fee because of the intervening contingent remainder; but the unsoundness of the reason given manifestly could not avail appel- lants if merger was prevented by any other circumstance appearing from the undisputed evidence. This brings us to the difficult inquiry as to the effect of the intention of the parties. Inasmuch as there seems to be considerable doubt as to the state of the law on this subject in South Carolina, a statement of the rule obtaining elsewhere and a brief review of our decisions seem desirable. The view generally held is that merger is not favored in the 2 In many states statutes provide that contingent remainders shall not be defeated by the destruction of the precedent estate. 1 Stimson's Amer. Stat. Law, Sec. 1403; 1 Tiffany on Real Property, 207. For the common law, see Crump v. Norwood, 7 Taunt. 362 (1815) ; Jordan v. McClure, 85 Pa. 495 (1877) ; Craig v. Warner, 5 Mackey, D. C. 460 (1887) ; Stewart v. Xecley. 139 Pa. 309; Archer v. Jacobs, 125 la. 467 (1904); Diamond v. Rotatt 1" 124 S. W. to6 (Tex. !9To). Compare Harris v. McElroy. 45 Pa. 216 (1863). 138 MERGER courts of law or equity ; and in equity at least it will not take place if opposed to the intention of the parties either actually proved or implied from the fact that merger would be against the interest of the party in whom the several estates or interests have united. This doctrine is sustained by an unbroken current of authority in the other states of the Union and in England. 3 It is argued, however, that the rule is different in this state. . . .* From this review we think it clear the later cases in this state establish the proposition, which as we have seen is in accord with the doctrine universally recognized in other jurisdictions, that in equity at least merger will not take place if opposed to the intention of the parties, affirmatively proved or to be implied from the fact that merger would be opposed to the interest of the person in whom the different estates or interests became united. It is argued, however, that though in equity an intention thai! it shall not take place may prevent merger, at law whenever the greater and lesser estate coincide in the same person without any intermediate estate the rule that merger takes place is inflexible, and entirely unaffected by the intention. That is to say, if in this case Mrs. McCreary had made and Hunter had accepted a deed to the life estate, accompanying the execution with the most explicit expression of an intention on the part of both of them that merger should not result to the destruction of the contingent remainder, the life estate nevertheless would have been merged and the con- tingent remainder destroyed. It will hardly be thought that any such difference "at law" and "in equity" can be rested on a differ- ence between the jurisdiction and practice of courts of law and courts of equity. If this supposed distinction ever had such a foundation, it has been taken away by the adoption of the reformed procedure. Pomeroy's Code Remedies, Sees. 94 to 103. The court on its law side will recognize and enforce equitable rights wherever they are necessarily involved in the decision of a legal issue. For example, if A in a suit against B to recover possession of land, proves .his own title, and B shows a deed from A for the land in dispute, this would be a complete bar to A's" recovery • but if A then 3 The court cites Forbes v. Moffat, 18 Ves. 384 O811') ; Factors Ins. Co. y. Murphy, in U. S. 738 (1884) : Welch v. Phillips, 54. Ala. 309 (1875) ; Jackson v. Reif, 26 Fla. 465 ( 1800) : Knowles v. Lawton, 18 Ga. 476 (1855) ; Westheimer v. Thompson, 3 Ida. 560 (1893I ; Shippen v. Whittier, 117 111. 282 (1886) ; Thomas v. Simmon's, 103 Ind. 538 (1885) : Shiner v. Hammond. 51 la. 401 (1879) ; Ann Arbor S. Bank v. Webb. <;6 Mich. 377 (1885) ; Hor- ton v. Maffltt, 14 Minn. 289 (1869) ; Basset v. O'Brien, 149 Mo. 381 (1898) ; Mathews v. Jones, 47 Neb. 616 (1896) ;, Salvage v. Haydock, 68 N. H. 484 (1896) ; Gore v. Brian, 35 Atl. 897 (N. J. Eq. 1896) ; Gardner v. A star, 3 Johns Ch. S3 (1817) : Watson v. Dundee Mtg. Co., 12 Ore. 474 ("1885) ; Bryan's Appeal, in Pa. 81 (1885) : Dodge v. Hogan. 19 R. T. 4 (1894) ; C. M. Hapgood Shoe Co. v. Bank, 23 Tex. Civ. App. 506 (1900) ; Carpenter v. Gleason, 58 Vt. 244 (1885) ; Rorer v. Ferguson. 96 Va. 411 (1898) ; Stewart v. Eaton, 20 Wash. 378 (1898). 'The court discusses Agnew v. Charlotte Railroad Co., 24 S. Car. 18 McCREARY v. COGGESHALL * 139 proves the deed to B was intended as a mortgage and the debt had been paid, he would still have the right to recover possession, and it makes no difference whatever whether we call his right legal or equitable. So if in an action to recover possession of land the title of the plaintiff depends upon an alleged merger, if the merger would be held by a court of equity not to have taken place because con- trary to the intention, the plaintiff could not recover. If it is contended the supposed distinction is founded on the difference between equitable and legal estates and interests, we can find no authority which compels us to recognize it. Indeed, the doctrine that merger at law will take place without respect to the intention seems rather to have been taken for granted by the courts of equity than established by the decisions of the courts of law. The statement that at law the intention of the parties can have no effect seems to be founded on Compton v. Oxenden, 2 Vesey, Jr., 261, and Forbes V. 'Moffatt, 18 Vesey 384, the lord chancellor in the former case using this language: "It is a clear principle, both at law and in equity, that where there is a confusion of rights, where debtor and creditor become the same person, there can be no right put into execution ; but there is an immediate merger. But it is true in equity, though there may be that which, if all was reduced to a legal right, would of necessity operate as a merger, this court, acting upon the trust, will, on the intent, express or implied, preserve them distinct, and that confusion of rights will not take place." Similar expressions will be found in Smith v. Roberts, 91 N. Y. 470; Bassett v. O'Brien, 51 S. W. 107 (Mo.), and our own cases of Agnew v. R. R. Co., Michaelson v. Myrick and Lipscomb v. Goode, and other modern cases. But these expressions have the weight of dicta and nothing more, for in all the cases in which they are found the rule of equity and not the rule of law was involved and under discus- sion; and we have been able to find no law case in which it was adjudged that merger had taken place or would take place at law though opposed to the intention of the parties as established by the evidence. There is high authority against the existence of such rigidity in the rule of merger at law as is stated in the equity cases to which we have referred. "The intention is considered in merger at law, but it is not the governing principle of the rule, as it is in equity; and the rule sometimes takes place without regard to the intention, as in the instance mentioned by Lord Coke." 4 Kent's Com., *io2. So far as we can discover, there is no reference in Coke on Littleton, where the general doctrine of merger is laid down, as to the effect of intention. In Appeal of Fink, 18 Atl. 621 (Pa.), it was held where a widow holds dower, which is a legal (1825) ; Navassa Guano Co. v. Richardson, 26 S. Car. 401 (1886) ; Bleckcley v. Branyan, 26 S. Car. 424 (1886) ; Agnew v. Renwick, 27 S. Car. 562 (1887) ; Parker v. Parker, 52 S. Car. 382 (1897); Michalson v. Myrick, 47 S. Car. 297 (1896) ; Lipscomb v. Goode, 57 S. Car. 182 (1899) ; Powell v. Patrick, 64 S. Car. 190 (1902) ; Glenn v. Rudd, 68 S. Car. 102 (1903). This part of the opinion is omitted. i 4 o MERGER interest in lands, the fee to which descend to her by the death of her son, merger of the two estates becomes a question of intent, and cannot take place against the wishes of the widow, and will not be presumed against her interest. To the same effect is McLeery v. McLeery, 20 Am. Rep. 683 (Me.), where it is said the tendency in the courts has been to admit and apply the same principle in law and in equity. It is true, in Youmans V. Wagener & Co., 30 S. C. 302, 9 S. E. 106, it was held that the widow's dower was merged when she acquired the fee, but there was no proof of a contrary intention, and no reference to the effect of intention. In Flanigan v. Sable, 46 N. W. 854 (Minn.), the action was on promissory notes, and on the question of merger the court says : "The distinction in practice between law and equity having been abolished, and both legal and equitable remedies being now admin- istered by the same court, and in the same action, there is no reason why the rule at law, which was merely technical, should obtain in any case; but the equity rule should always be applied, regardless of the form of action." It is said in 20 Am. & En. Ency. 590: "This distinction appears to be of waning importance, as now in the main the equitable doctrines of merger have superseded the legal doctrines even in courts of law." lb. 591 and 595; note to James v. Morey, 3 Lead. Cases Amer. Law Real Property 236. From the inception of the rule that merger would take place and .the contingent remainder thereby defeated when the owner of the fee acquired the preceding particular estate, an exception was allowed when the will itself gave the particular estate and the fee to the same person, for the reason that to apply the rule in that case would defeat the intention of the testator. Fearne on Remainders, 340-344; 2 Wash, on Real Prop., 638-039. 5 The same exception was applied to a deed to avoid defeating the intention of the grantor in Burton v. Barclay, 7 Bing. 745, 20 E. C. L. 315. Since the law holds it to be practically possible for one person to be the owner of a separate life estate and of the fee at the same time, though this is technically impossible, in order to save the contingent remainder and thus give effect to the intention of the testator or grantor, as expressed in the will or the deed, it would be difficult to find any sound reason against giving a like effect to the common intention of the separate owners of the life estate and of the fee simple, when the owner of the fee acquires the life estate. The whole doctrine of merger is founded on the reasoning that it is technically impossi- ble for a man to hold a valid charge on property which he himself owns, or a life estate in lands to which he has a fee simple; title. If the technical argument may be overcome for the sake of the inten- tion in one case, it would be difficult to find just reason to disregard the intention in the other. To do so without reason would be a reproach to the administration of justice. 'Accord: Crisfield v. Storr, 36 Md. 129 (1872). McCREARY v. COGGESHALL 141 Obviously nothing but precedent from which there is no escape would justify the establishment of one rule as to merger as equita- ble and another as legal. The tendency of the law is to conform to equity. "Since the doctrines of equity began to react upon the law, and especially since the impulse given by the brilliant career ol Lord Mansfield, the common law courts have consciously adopted and applied, as far as possible, purely equitable notions — not so much the technical equity of the court of chancery, but the princi- ples of natural justice — in their decision of new cases, and in the development of the law, until a large part of its rules are as truly equitable and righteous in their nature as those administered by the chancellor." 1 Pomeroy's Eq. Jurisp., Sec. 69. We conclude there is no controlling authority that the inten- tion is not to be regarded in an issue of law or as to legal estates, but on the contrary the tendency of modern authority is to regard the intention controlling at law as well as in equity. There is cer- tainly no reason to be found for any distinction. It is not necessary in this case to decide whether "in law" the intention against merger is to be implied from the fact that it would be contrary to the interest of the party in whom two estates are united for one to be merged in the other, for assuming that the burden is on the plaintiffs to affirmatively prove the intention against it, we think such intention is clearly established by the evidence, and nothing was offered to disprove it. No deed from Mrs. McCreary to Morris Hunter was offered in evidence, defendant's claim that he acquired the life estate of Mrs. McCreary being based entirely on proof of possession. Mr. Peter A. Brunson, a witness of the highest respectability, testified that Morris Hunter was in possession of the land in 1835, claiming it as his own. It is impossible, however, that he was making any such claim against Mrs. McCreary at that time, for he writes to her on February 20, 1836, about the land, referring to it as "your land.'' In addition to this, the will directed him and the other executors to "retain and manage" the land for Mrs. McCreary, then Miss Cole- man, until "she arrives at the age of twenty-one years or marriage," and there was no proof of any notice to her of adverse holding. Foyd v. Minstey, 7 Rich. 181. When Hunter went into possession, therefore, in 1835, he held it for Mrs. McCreary, and his subsequent holding would be regarded permissive without proof to the con- trary. The witnesses, James G. Hutchinson and Albert Sawyer, say they knew of his possession, but testify nothing of the claim under which he held. The defendants' claim of adverse possession by Morris Hunter against Mrs. McCreary, therefore, rests on the evidence of Henry Perkins and H. L. Poston, and they cannot take the benefit of this evidence without its qualification. Both these witnesses say Hunter was in possession claiming only the life interest of Mrs. McCreary, saying the "heirs were out west," clearly referring to the children of Mrs. McCreary, plaintiffs in this action. The proof was plenary and undisputed of declarations to the same effect made by Thomas P. Lide, who was afterwards in possession under a 142 MERGER sheriff's deed purporting to- convey the interest of Hunter ; and as late as 1885 the defendant, A. C. Coggeshall, wrote Mrs. McCreary, saying: "1 own a part of your lifetime interest in a tract of land in this county, which was sold to Mr. Thomas P. Lide in 1858 by the sheriff to satisfy a claim of Mr: Hopkins P. Charles against Maurice W. Hunter, Esq. I would like to either buy the interest of your heirs or sell them mine. ... I would like for them to make me an offer to either buy or sell." Even .if there had been testimony which left something to go to the jury as to the intention of Morris Hunter, this could not help defendants, because the claim of title in him acquired by possession adverse to Mrs. McCreary is without support, and therefore the life estate did not merge in the fee while he held the fee. His possession could not have begun to be adverse until after his letter to Mrs. McCreary, dated Febru- ary 20, 1836, in which he acknowledged her title and right. Before this date, on December 30, 1835, Mrs. McCreary, nee Coleman, was married and remained under the disability of coverture until 1861, four years after the death of Morris Hunter. The law will not presume a deed from her while under this disability. , 2 Wash. 316. Nor could title be acquired against her by adverse possession. Jones v. Reeves, 6 Rich. 132. If Thomas P. Lide acquired the fee by his purchase of Morris Hunter's interest at sheriff's sale and he and his successors in pos- session acquired the life estate of Mrs. McCreary by adverse posses- sion or presumption of a deed from her, this possession was accom- panied, and qualified by the statement that the contingent remainder of the plaintiffs was unclaimed and unaffected. If Hunter or any of his successors who had acquired his fee in the land and claimed under a deed from Mrs. McCreary, expressly stipulating the contingent remainder should not be destroyed by its execution, this beyond doubt would be an expression of intention against merger, because by merger the remainder would necessarily have been destroyed ; and when the claim to the life estate is based on adverse possession accompanied by a declaration that the con- tingent remainder was unaffected, the result cannot be different. The charge that merger did not take place and the contingent remainder was not defeated, was right, not for the reason stated by the circuit judge, but because it was the understanding and inten- tion of all parties concerned that there was no merger, and that the contingent remaindermen should have the land upon the death of the life tenant. Before ending the discussion of this point it may be well to say that if any of the grantees claiming undei Morris W. Hunter had acquired the land without knowledge of the intention that there should be no merger, and relying upon the rule that ordinarily in such conditions the life estate is merged and the contingent remain- der destroyed, a very different question would have been presented. Affirmed. 6 "See also, Sweet v. Henry, 175 N. Y. 268 (1903); Penna. Co. v. Sing- heiser, 235 Pa. 241 (1912). SNOW v. BOYCOTT 14.? SNOW v. BOYCOTT. In the Chancery Division, 1902. (1902) 3 Ch., no. Under the will of Thomas Boycott, who died on the 24th of April, 1856, the Rudge Hall estate stood on and previously to the 28th of July, 1885, limited (subject as to the larger part thereof to legal mortgages in fee simple, and as to the whole to a mortgage for a term of one thousand years) to the use of Emma Boycott, spinster, and her assigns during her life, with remainder to the use of her sons successively in tail male, with remainder to the use of Cathcart Boycott Wight and his assigns during his life without impeachment of waste, with remainder to the use of his eldest son in tail male, with remainders over. In 1885 difficulties had arisen in the management of the estate by Emma Boycott, who was of advanced years. In order to free her from embarrassments connected with the management and otherwise, and to ensure her a fixed income, and also for the pur- pose of bringing the estates under proper management, it was agreed between her and C. B. Wight that she should sell to him the furni- ture and effects (except heirlooms) about Rudge Hall, and all debts due to her, and a bill of sale was executed carrying such agreement into effect. It was also agreed that she should give over her life estate in the real estate devised by the will and in certain heirlooms to C. B. Wight, an annuity of £400 being secured to her for her maintenance. Accordingly, by an indenture dated the 28th of July, 1885, Emma Boycott conveyed unto C. B. Wight "all the real estate devised by the said will, together with all heirlooms (except jewels) thereby bequeathed as aforesaid, to hold the same as to the said heirlooms unto the said C. B. Wight, his heirs and assigns, during all the remainder of the life of the said Emma Boycott, and as to the said real estate, subject to the tenancies now affecting the same, but with the benefit of the rents reserved and arrears of rent due in respect thereof, unto the said C. B. Wight and his heirs, to the use that the said Emma Boycott may henceforth during the remainder of her life receive an annual sum of £400 (without deduction) to be issuing out of the rents and profits of the said real estate, and to be paid by two equal half-yearly payments on the 1st day of January and the 1st day of July in each year, the first payment to be made on the ,1st day of January next, and.subject to and charged as to, the rents and profits thereof with the said annual sum, to the use of the said C. B. Wight, his heirs and assigns, during all the remainder of the life of the said Emma Boycott." The deed contained a pro- viso that so long as Emma Boycott resided with C. B. Wight, and was provided with certain conveniences, C. B. Wight should be entitled to receive out of the annual sum of £400 the annual sum 144 MERGER of £245; and C. B. Wight thereby covenanted .to pay to Emma Boycott the said annual sum of £400, subject to deduction of the said £245 as aforesaid. C. B. Wight- (then C. B. Wight Boycott) died on the 6th of August, 1891, having by his will given all his real and personal estate to the plaintiffs,- the trustees and executors therein named, upon certain trusts, and leaving his eldest son, Thomas A. Wight Boycott, surviving. Thomas A. Wight Boycott being an infant, the question was raised on his behalf whether the deed of 1885 operated to merge the life estate of Emma Boycott, so as to entitle him to the real estate as tenant in tail in possession; and this action was brought by the plaintiffs against Thomas A. Wight Boycott and Emma Boycott claiming a declaration that the deed of 1885 did not operate so as to cause a merger of the life estate of Emma Boycott, and a declaration that in any case the rent charge of £400 was, during the life of Emma Boycott, a charge upon the rents and profits of the hereditaments devised by the will of Thomas Boycott. 1 Kekewich, J. : At the date of the deed of the 28th of July, 1885, the estates in question stood limited, in the events which had happened, to the use of Emma Boycott for life, with remainder to the use of her sons successively in tail, with remainder to the use of Cathcart B. Wight for life, with remainders over, under which the infant now claims. I am not considering the effect of the remain- ders to the sons of Emma Boycott, which has been so much dis- cussed with reference to the other point. For the present purpose the case may be considered as if those remainders were omitted, and as if C. B. Wight was tenant for life in remainder, immediately expectant on the decease of Emma Boycott. The, effect of the deed of 1885 is to convey the estate of Emma Boycott to C. B. Wight. There is not — according to the statement contained in the statement of claim, which I am told is sufficient and full — any indication there that the one estate should, in a popular sense, merge- in the other. There is nothing to show that the two estates were not intended to coexist. By the deed Emma Boycott, the grantor, conveys — she does not purport to surrender or otherwise release, but she conveys — the estate to C. B. Wight, the grantee. That is in itself an indica- tion of what the parties intended. The life estate of Emma Boycott — that is to say, the estate during her life — is conveyed to C. B. Wight, and he is to hold it during the life of Emma Boycott, so that her life estate is changed by the conveyance from an estate for her life existing in her to an estate for her life existing in C. B. Wight. It is admitted that for the purposes of merger an estate pur autre vie is less than an estate for the life of the tenant for life, and that if the doctrine of merger applies, the less estate would be merged in the greater, according to that doctrine. But that any person, professional or lay, should deliberately create an estate pur Arguments of counsel are omitted. SNOW v. BOYCOTT H5 autre vie by the conversion I have mentioned, in order that it should immediately sink into a life estate and be lost, is to my mind, incred- ible. I will go further and say that I think the parties must have intended to keep the two estates separate. That is the only infer- ence I can draw from the language of the deed, and it is to be observed that it is the language of the deed alone on which I rely, the facts set out in the statement of claim not being regarded by me as bearing on the point the one way or the other. I take the deed itself. Then omitting from consideration, as I think I ought to do, the limitation in the will to the sons of Emma Boycott, and the reference in the deed of 1.885 to tne heirs and assigns of C. B. Wight, I find the creation of a legal rent charge during the whole of the life of Emma Boycott ; and yet, if it was not their intention that; that should exist during the whole of her life, but that it should cease when C. B. Wight died, then the parties intended that some- thing should be done other than that which they have clearly expressed. To say that the deed ought to be read as intending that Emma Boycott should receive an annuity of £400 a year during so much of the remainder of her life as should be concurrent with the life of C. B. Wight, is to stultify the deed, and to say in reality that the framers of it, or parties to it, set themselves to create a legal puzzle instead of carrying out a very simple arrangement that for the rest of her life she should take £400 yearly, instead of the rents and profits of the estate. If I am allowed to decide the case accord- ing to the intention, there does not seem to be much room for doubt, and the fourth subsection of Section 25 of the Judicature Act, 1873, leaves it to me to decide it in that way. Mr. Wace says that this would not be a merger by operation of law only within the words used in the subsection. I think that what is meant there is that, where there would not be a merger both at law and in equity, then the merger shall not follow, shall not be concluded, because it would operate at law ; but that where there would be a merger both at law and in equity, then the merger is to exist notwithstanding the pro- visions of the act. That being my view of the intention and of the law, I need not consider the other nice point, which otherwise might exercise me for some time and take me into a great many books which nowadays are not so much consulted as of old. There must be a declaration that the deed of 1885 did not operate so as to create any merger. 2 a In Capital & C. Bank v. Rhodes (1903), 1 Ch. 631, it is said, per Cozens-Hardy, L, J., at p. 652 : "Now there was prior to the Judicature Act, 1873, a great difference between courts of law and courts of equity on the subject of merger. The rule of the" former was rigid, that whenever a term of years and a freehold estate, whether for life or in fee, immedi- ately expectant upon a term, vested in the same person in his own right, the term was merged in the freeheld, whatever may have been the inten- tion of the parties to the transaction which resulted in the union. The courts of equity, on the other hand," in many cases treated the interest which merged at law as being still subsisting in equity. They had regard to the intention of the parties, and, in the absence of any direct evidence of intention, they presumed that merger was not intended, if it was to the 146 MERGER INGLE v. VAUGHAN JENKINS. In the Chancery Division, 1900. (igoo) 3 Ch., 368. This was an action for specific performance of an agreement to grant a lease. The first tenant for life under a strict settlement, having a power to grant a ninety-nine years' lease of any part of the settled estates to any person who built a house thereon, executed an informal instrument, which the court held to amount to a valid agreement to grant a lease of three acres under the power, to the second tenant for life at a rent of £9 per annum, on his erecting a proposed house, which he shortly after erected at a cost of £1500. The first tenant for life died after the house was erected,- and the second tenant for life became legal tenant for life in possession of the settled estates. The lease was never granted. interest of the party, or only consistent with the duty of the party, that merger should not take place. Perhaps the commonest application of these principles was when a tenant for life paid off a charge upon the inheri- tance. The charge was considered to be still kept alive for his benefit, or for the benefit of his executors, although, if an owner in fee had paid off the charge, no such consequence would have followed. These prin- ciples were applicable equally to the merger of estates in land as to merger of charges on land. It was well established that, according to the strict rules of the common law, there would be merger, notwithstanding that one of the two estates might be held in trust, and the other beneficially, by the same person, or one might be held on one set of trusts and the other on another set of trusts. But it was equally well established that equity would interfere, and would, if necessary, decree the execution of such deeds as would replace the parties in their proper position : see Saun- ders v. Boumford, Finch 424, where Lord Nottingham. L. C. decreed that, notwithstanding the merger of a term, the plaintiff should hold possession of the premises during the remainder of the term, and that the defendant should make a further assurance of the remainder of the term. The merger was treated as an accident prejudicial to the real beneficial interests of the parties: see also Attorney-General v. Kerr. 2 Reav. 420. a remarkable in- stance of the application of the equitable doctrine. I think the decision of Farwell, J., or rather his dictum to this effect, in Ingle v. Vaughan Jenkins (1900), 2 Ch. 368. is consistent with principle and is supported by authority. A court of equity had regard to the intention of the parties, to the duty of the parties, and to the contract of the parties, in determining whether a term was to" be treated as merged in the freehold. "This being the state of the law prior to the Judicature Act, 1873, it was enacted by s. 25, sub-s. 4, of that act that 'there shall not. after the commencement of this act, be anv merger bv operation of law onlv of any estate, the beneficial interest in which would not be deemed to be merged or extinguished in equity.' "The result seems to be that, if the circumstances are such that a court of equity would have held that there was no merger in equity, there is now no merger at law, and the rights of the parties must be dealt with on that footing." INGLE v. VAUGHAN JENKINS 147 On the death of the second tenant for life the remainderman declined to recognize his executor's right to a lease under the agree- ment, on the ground {inter alia) that the benefit of the agreement or the equitable term thereby created had become merged or extin- guished in the legal life estate of the termor. The executor claimed specific performance against the remainderman. 1 Farwell, J.: In this case I hold that the equitable leasehold interest was not merged or extinguished in the legal estate of the second tenant for life. In the first place, there was merely an agree- ment to grant a lease, and I know of no case in which such an agree- ment, which is especially enforceable in equity, has been held to be merged or extinguished because the person entitled to the lease sub- sequently happened to fill the position of lessor. For example, if a testator having agreed to grant a lease to J. S., devises the property to J. S. on certain trusts. J. S. is entitled to enforce the agreement against himself as trustee. In that case there is no merger. 2 Simi- larly, if the testator devises the property to J. S. for life, with remainders over, J. S. can still enforce /the agreement against the estate, although if he is the person in whom the power of leasing is vested he would have to grant the lease to himself. In that case, also, there is no reason why the agreement should be merged or' extinguished. Whatever might have been the case at common law, as to which it is unnecessary that I should express an opinion, it is, in my opinion, clear that it was not merged or extinguished in equity. I think the proposition in Lewin on Trusts, 10th Ed., p. 889, is correct — namely, that "The principle by which the court is guided is the intention; and in the absence of express intention, either in the instrument or by parol, the court looks to the benefit of the person in whom the two estates become vested." The author goes on to poirtf out that the chief importance of the doctrine of merger is with reference to charges, and the cases he cites are confined to charges. The defendant contended that a different principle applied in the case of a lease, but I am unable to follow that distinction. The principle being that the court looks to the benefit of the person in whom the interests coalesce, I cannot see why there should be any distinction in this respect between a beneficial lease and a term to secure a charge. In either case the term is taken as an equivalent for money expended. Nor do I think it makes any difference whether the coalescence of the interests is brought about by opera- tion of law or the acts of the parties. The principle of Grice v. Shaw, 10 Hare 76, is applicable to the present case. The head-note is as follows : "Where the tenant in fee or in tail of an estate becomes entitled to a charge upon the same estate, the general rule 1 The arguments of counsel are omitted. 2 Chambers v. Kingham (1878), 10 Ch. 743; In re Radcliffe (1892), 1 Ch. 227; Carrv v. Lai on, 133 Mo. App. 163 (igo8). 148 MERGER is, that the charge merges, unless it be kept alive by the party entitled to it; and where the merger of the charge would have let in other charges in priority, thereby rendering it the interest of the owner of the estate to keep alive his charge, the court presumed that such was his intention, notwithstanding the absence of any other indica- tion of such intention." That was a much stronger case than the present, as there the owner of the charge was tenant in tail, and yet the charge was held to be kept alive because it was for his benefit. The principle applies a fortiori to the case of a tenant for life, as it is well settled that when a tenant for life pays off a charge, it is kept alive for his benefit unless there is clear evidence of intention to the contrary. In the present case the equitable termor, before coming into possession as legal tenant for life, expended .£1500 in building a house on the property in consideration of an agreement to grant him a ninety-nine years' lease. ^Knowing that he might become tenant for life in possession, he expended that amount with- out expressing any intention as to what should happen to his lease- hold interest when he came into possession. It was, however, clearly for his benefit that the interest should not merge. I therefore hold that, even if the lease had been granted, there would .have been no merger in equity, on the ground that it would have been against the interest of the lessee tenant for life. In Grice v. Shaw, 10 Hare 76, Turner, V. C, says, 10 Hare 79 : "The general rule indeed is clear, that,' where a party has an estate in fee or in tail, and at the same time a charge upon the estate, the charge will merge. . . . But the law does not, of course, prevent fhe party entitled to both the estate and the charge from keeping alive the charge; and the rule, therefore, yields to the intention, whether it is expressed or to be presumed. In the present case, there is certainly no express intention to keep alive the charge. There is nothing before the court which can indicate any intention on the subject, except the will of George Grice; and, so far from any intention to keep alive the charge being indicated by the will, I have doubted whether it does not indicate an intention to merge it." Then he goes on to give reasons against merger: "The ques- tion then is, What is the intention to be presumed with reference to this charge ? Now, it is clear, that, if the testator merged this charge of £200, the other two charges of sums of £200 in favour of the granddaughters would take, to that extent, priority over the estate of George; and it follows, therefore, that it was the interest of George to keep alive the charge of £200 to which he was entitled." The present case is a fortiori, as the lessee was only a tenant for life, and it was clearly his interest to keep the term alive. I there- fore hold that there was no merger. 3 3 See also, Thellusson v. Liddard (1900), 2 Ch. 635; Lea v. Thursby (1904), 2 Ch. ,57. IN RE SELOUS i 4y IN RE SELOUS. In the Chancery Division, 1901. (1901) i Ch., 921. Originating summons. A testator who died on September 24, 1890, bequeathed a leasehold messuage to a trustee in trust for two of his daughters in equal shares as tenants in common. By an indenture dated June 24, 1895, and made between the trustee of the one part and the daughters of the other part, after reciting the above bequest and reciting that the daughters had requested the trustee to execute such assignment to them of the said messuage as was thereinafter expressed, it was witnessed that the trustee, at the request and by the direction of the daughters, assigned the messuage to the daugh- ters to hold the same unto the daughters as joint tenants for the residue of the lease, the daughters entering into a joint covenant with the trustee to pay the rent and perform the covenants of the lease, and to indemnify the trustee against all claims on account of the same. One of the daughters having died on September 15, 1900, this summons was issued to determine (inter alia) whether an equitable moiety of the leasehold messuage belonged to her estate, or whether the entirety belonged to the surviving daughter. Jason Smith, for the deceased daughter's executors. The assign- ment of June 24, 1895, only created a joint tenancy of the legal estate, the daughters holding that estate in trust for themselves as tenants in common. The equitable estate did not merge in the legal estate, as these estates were not coextensive, or commensurate, or of the same quality. It is a common practice to convey freeholds and leaseholds to partners as joint tenants in trust for themselves as part of their copartnership estate. 1 Key and Elphinstone's Conveyancing, 6th Ed., 405; and it has never been suggested that they become joint tenants in equity. We are therefore entitled to the equitable interest in one moiety of the messuage. T. T. Methold, for the surviving daughter. Where equitable and legal estates, equal and coextensive, unite in the same person, the former merges. Selby v. Alston, 3 Ves. 339, 4 R. R. 10; Lee v. Lee (1876), 4 Ch. D. 175; In re Douglas (1884), 28 Ch. D. 327. The same rule must apply where they unite in two persons, and for the purpose of merger a tenancy in common must be treated as equal and coextensive with a joint tenancy. The surviving daughter is, therefore, entitled to the entirety. Rayner Goddard and BovUl, for other parties to the summons. Farwell, J. : In my opinion the assignment of June 24, 1895, created a joint tenancy in law and equity. It has been contended that it only created a joint tenancy of the legal estate, and that the ISO MERGER equitable tenancy in common remained unaffected, the daughters merely holding the legal estate as joint tenants in trust for them- selves as tenants in common. But I do not think that is the true view. The rule in Selby v. Alston, 3 Ves. 339, 4 R. R. 10, namely, that where equitable and legal estates, equal and coextensive, unite in the same person, the former merges, or, in other words, that a person cannot be trustee for himself, applies to a case where such estates unite in two or more persons. The" only doubt I felt was whether the advantage of a tenancy in common over a joint tenancy raised any presumption against merger. But the difference in inter- est between these two estates is so small and shadowy that I do not think it would be sufficient to raise that presumption. I hold that two or more persons cannot be trustees for themselves for an estate coextensive with their legal estate. 1 JULIUS T. ASCHE ET AL. v. ESTELLE ASCHE ET AL. Court of Appeals of New York, 1889. 113 New York, 232.' Ruger, C. J. : This is an action between the several executors of the will of Jacob Asche and his widow and legatees to obtain a construction thereof by the court. The will, in substance, devised and bequeathe"d all of his real and personal property, after the pay- ment of debts and funeral expenses, to his executors in trust to invest and keep invested the proceeds thereof in United States bonds or in bonds of the state or city of New York, or in bonds secured by first mortgage on real estate in the city of New York, and to pay the interest or income of a certain small part thereof, determinable by the gross value of his estate, to his mother during her life, and to pay to his widow during her life the interest and income upon all the rest, residue and remainder of his estate, includ- ing that bequeathed to his mother, upon her death, and after the death of his wife remainder over -to his surviving children, share and share alike. At the testator's death his wife and two children 'Accord: Goodright v. Wells. Dougl. 771 (1781): Wade v. Paget, I Br. C. .C. 363 (1784); Bridges v. Bridges, 3 Ves. 120 (17Q6) ; Selby \. Alston, 3 Ves. 330 (1707); Nicholson v. Halsey, 1 Johns. Ch. 417 (1815); Robinson v. Codman, 1 Sumn., C. C. U. S. 121 (1831) ; Wills v. Cooper, 25 N. J. L. 137 (1855") : Hopkinson v. Dumas. 42 N. H. 206 (1861) : Pelerin v. Queripel, 4 W. N. Ca. 330 (1877). Compare: Donalds v. Plumb, 8 Conn. 447 (1831): Earle v. Washburn, 80 Mass. qs (1863). A legal estate does not merge in an eauitable one. Little v. Ott, 3 Cranch, C. C. U. S. 416 (1828) ; Pennington v. Coats, 6 Whart. 277 (1840). "It is said that mergers are odious to the court. I do not understand that. The saying only means that mergers are odious if misapplied so as to do injustice; but there is nothing odious in a merger if there is no injustice done." Per Liridley. L. J., in In re Radcliffe (1892), 1 Ch. 227. 'The arguments of counsel and part of the opinion of the court are omitted. JULIUS ASCHE et al. v. ESTELLE ASCHE et al. 151 survived him. One of the children died after the testator and before the commencement of this action. The widow now claims the benefit of the provision made for her by the will and also dower in the real estate owned by the testator at his death. She contends that upon the death of her daughter she became entitled, as next of kin, to one-half of the remainder provided for such child, and to an absolute interest in possession of one-quarter of the estate by reason of an alleged merger of her legal and equitable interest therein. These questions are to be determined by the intentions of the testator as indicated by the language of the will and the circum- stances surrounding its execution. The general scheme of the will seems to be antagonistic to the claims of the widow. The creation of a trust estate mainly for the benefit of his wife, which was to endure so long as she lived, is inconsistent with an implied right on her part to manage and control any part of the property devised. It is also quite clear that the widow's interest in the trust estate did not merge in the legal estate which she acquired by the death of her daughter. Iii equity the union of legal and equitable estates in the same person does not effect a merger unless such was the intention of the parties, and justice and equity require it. (Smith v. Roberts, 91 N. Y. 470; Champney v. Coope, 32 id. 543.) Merger is accomplished in law when two or more estates in the same prop- erty unite in the same person, and when such estates comprise the whole legal and equitable interest in such property, the person holding them becomes the absolute owner. (Mickles v. Townsend, 18 N. Y. 575; Bouv. Institutes, Sees. 1993-1995.) Merger requires the existence of two estates, a greater and lesser, and, upon merger taking place, the lesser estate is said to be extinguished and absorbed in the greater ; but this cannot take place where there is an interme- diate estate. Merger takes place by virtue of unity of seizin. (Mickles v. Townsend, supra.) There could, therefore, be no merger here because of the existence of a valid trust with the right in the trustees to the possession of the trust fund for the purposes of management and control during the life of its beneficiary. The trust must exist so long as the widow lives, and during her life there could be no merger. She has no estate in the subject of the trust. She had an interest in it as beneficiary, but it was essential to the existence of that interest that the trust estate should be main- tained. The destruction of the trust would necessarily terminate her interest therein, and there would then be nothing to merge. As was held in Pauling v. Hardy (Skinner 62) : "Where an estate and a mere right in the land, not an estate, meet in the same person, the merger will not take place, because such an interest is not an estate." A merger cannot take place except by the extinguishment of the lesser estate, and in this case to extinguish the lesser interest would leave the widow with a remainder alone which could take effect in possession only upon her death. (Bouvier's Institute, 1995.) The provisions of the Revised Statutes indicating the cir- 152 MERGER cumstances under which the union of legal and equitable estates extinguishes the latter, are, in principle, equally applicable to trusts of personal property. Section 47 of the chapter on Uses and Trusts, as was said by the chancellor in the Matter of De Kay (4 Paige 403), provides that every person who is entitled to the actual pos- session of lands and to the receipt of the rents and profits thereof in law or in equity, is deemed to have a legal estate therein, com- mensurate with his beneficial interest in the premises, except in those cases where the estate of the trustee is connected with some power of actual disposition or management. Here the widow is not only not entitled to the posession of the trust fund, but there is also a valid trust imposing upon its trustees the duties of actual disposition and management which will continue as long as the fund exists and the widow lives. It is argued by the appellant that upon the death of both children the widow would become, as heir to her children, and the sole bene- ficiary in the trust, entitled to the immediate possession and control of the trust fund. We do not think so. The object of the creation of the trust estate would not then have been accomplished. The intention of the testator to put the corpus of the fund beyond the hazard of impairment and waste during the life of his wife cannot be defeated or affected by the acquisition by her of the estates in remainder created by the will. The necessity for the maintenance of the trust would remain in full force notwithstanding the widow's succession to the rights of her children. By such acquisition she would acquire a future estate, dependent upon the precedent estate of the trustees, but which she cannot enjoy in possession. She might devise it, but cannot possess an estate conditioned upon her own death. In view of the full and satisfactory opinions of the courts below, we have already extended our discussion of the case beyond the limits which necessity required and those which we intended. The judgment appealed from should be affirmed, with costs of all parties to be paid from the estate. 2 FORBES v. MOFFATT. In Chancery Before Sir William Grant. 18 Ves., 384. By indentures of lease and release, dated the 7th and 8th of April, 1785, reciting the will of Andrew Moffatt, that the sum of £27,000 was due to his estate from Aaron Moffatt ; and that James 'Accord: Saunders v. Bournford, Finch 424 (1679); Powell v. Morgan, 2 Vern. 90 (1688); Thomas v. Kemeys, 2 Vern. 348 (1696); Hildreth v. Eliot, 25 Mass. 293 (1829); Dougherty v. Jack, 5 Watts, Pa. 456 (1836); FORBES v. MOFFATT 15^ Moffatt and Hindman, the executors of Andrew, had agreed to lend the further sum of £ 12,006 upon a mortgage of all the estates of Aaron Moffatt in Jamaica: to secure both the said sums (John Moffatt, the brother of Aaron, being a party, and agreeing to post- pone a debt of £13,000, due to him by Aaron, to the said intended advance of £12,000), in consideration of the said sum of £12,000 and to enable the executors of Andrew Moffatt to obtain an imme- diate security for the said debt of £27,000, Aaron Moffatt, with the consent of John Moffatt, conveyed to James Moffatt and Hindman, and their heirs, the plantation of Blenheim, etc., and all other the estates of Aaron Moffatt in Jamaica, subject to the payment of the sum of £12,000; and the same estates were conveyed to James Moffatt, Hindman, and John Moffatt, and their heirs, subject to the said mortgage for £12,000, and to a proviso for redemption on payment to James Moffatt and Hindman of £27,000, and to John Moffatt of £13,000. - Aaron Moffatt died in 1797; having by his will, dated in 1795, given all his property, real and personal, to his brother, John Moffatt, and appointed him sole executor. John Moffatt died in 1807, intes- tate and without issue. The bill in the first cause was filed by Forbes and Elizabeth Moffatt, executors of James Moffatt, the surviving executor of Andrew; praying an account as to the mortgage for £27,000, and a foreclosure; charging that John Moffatt, taking possession under the will of Aaron, became the absolute owner of the premises ; that his mortgage was thereby extinguished; and, the charge of £12,000 being paid, the £27,000 was the only subsisting mortgage. The defendant, Sarah Moffatt, the widow of John, by her answer insisted upon the mortgage for £13,000, as still subsisting; and prayed a sale, and an application of the produce to the two mortgages pari passu. The bill in the other cause was filed by Sarah, the widow of Tohn Moffatt, and by his next of kin, against the plaintiffs in the first cause, and against Elizabeth Hammond and Martha Bayard, the next of kin of John Moffatt, and his coheiresses at law, in whom the legal estate was vested under the first mortgage ; praying an account with reference to the sum of £13,000 and a foreclosure. The acts of John Moffatt, from which his intention not to con- sider himself a mortgagee was collected, were possession taken upon the death of Aaron; considerable expenditure upon the estate, and the sale of some parts ; the payment as executor of his brother of £5000 on the mortgage account, generally, without distinction of the two mortgages ; that sum exceeding by about £500 the balance in his hands from the produce of the real estate ; on the other hand, the registry of the mortgage deed in Jamaica, after the death of Aaron, was relied on by the personal representatives ; and accounts Fricke C. Co. v. Longhead, 203 Pa. 168 0902) ; Mather's Estate, 17 Pa. D R. 127 (1908); Washburn's Estate, ti Cal. App. 735 (1909): Wilson v. Under, 21 Ida. 576 (1912) ; Bullock v. Wiltbergcr, 92 Kan. 900 (19x4). 154 MERGER kept of the annual supplies and produce of the estate, entitled "the estate of Aaron Moffatt, deceased, in account current with John Moffatt." The bill in the second cause alleged, that the mortgage deed was not recorded in the island of Jamaica until after the death of Aaron Moffatt at his request ; that the estates, sold by John Moffatt, were not named or considered by him as part of the security; and that the sum of £5000 was paid only in part of the arrears due. The answer relied on the general words, as comprising all the estates in the security, 1 The Master of the Rolls: Under the circumstances of this case the question arises between the real and personal representa- tives of John Moffatt ; whether the mortgage for the sum of money, due to him, is to be considered as still 7 subsisting ; in which case his personal representatives are entitled to it; or is extinguished by the union of the characters of owner and mortgagee in John Moffatt; or by any acts done by him after he became owner. It is very clear, that a person, becoming entitled to an estate, subject to a charge for his own benefit, may, if he chooses, at once take the estate, and keep up the charge. Upon this subject a court of equity is not guided by the rules of law. It will sometimes hold a charge extinguished, where it would subsist at law; and some- times preserve it, where at law it would be merged. The question is upon the intention, actual or presumed, of the person, in whom the interests are united. In most instances it is, with reference to the party himself, of no sort of use to have a charge of his own estate ; and, where that is the case, it will be held to sink, unless something shall have been done by him to keep it on foot. The first consideration therefore is, whether John Moffatt has done anything to determine that election which he undoubtedly had ; if not, the question will be upon the presumption of law under the circumstances of the case. It is disputed between the real and the personal representatives, whether John Moffatt took possession in his character of owner or of mortgagee. It must, I think, be taken that he entered as devisee. There is no trace of any of the steps that a mortgagee takes to get in possession. He sold parts of the estates, which, though not specifically named in the mortgage, were included in it by general words; and as to his, keeping an account with Aaron Moffatt's estate, arid therein crediting the produce of the devised estates, he could not with propriety do otherwise; for as they were subject to Aaron Moffatt's debts, the accounts must have been kept, until the debts were paid. But this, I apprehend, goes no way towards the decision of the question. The owner of a charge is not, as a condition of keeping it up, called upon to repudiate the estate. The election he has to make is not, whether he will take the estate or the charge; but whether, taking the estate, he means the charge to sink into it ; or to continue distinct from it. The circumstance that John Moffatt caused the 1 The arguments of counsel are omitted. FORBES v. MOFFATT 155 mortgage deed to be registered in Jamaica was relied on by the personal representatives, as showing an intention to keep the charge on foot; but the coheirs say, that as the mortgage to Andrew Moffatt's estate was included in the same deed, it was the duty of John, as surviving trustee, to register it for the benefit of the cestuis que trusts. It is impossible to determine upon which motive he acted; but I think this weighs something in favor of the personal representa- tives; for, though the deed, containing both mortgages, must have been registered, as it stood, yet, if acting merely for the benefit of the owners of the £27,000 mortgage, he might have entered some memorandum on the record, signifying that the other mortgage no longer subsisted. It is hardly to be supposed he could wish publicly to represent his estate as more heavily burthened than he really meant it to be. The real representatives rely on the payment of £5000 gener- ally, without any apportionment of that sum between the two mort- gages. This appears to have been within about £500, the whole balance at that time in his hands from the produce of the real estate, and the argument is that, as he did not apportion that sum between the two mortgages, he must have considered his own mortgage as no longer subsisting. That, however, is far from being a necessary conclusion. He paid the sum, and took the receipt, as executor of his brother. The whole estate, real and personal, being in his own hands, it would not occur to him formally to set apart the same proportion of his own debt, that he paid to others. From his paying the interest of another mortgage it cannot be inferred that he meant to abandon his own. John Moffatt's acts therefore furnish no con- clusive evidence of actual intention on the subject of this mortgage. With regard to presumptive intention, it was evidently most advantageous to John Moffatt, that this mortgage should be kept on foot ; for otherwise he would have given priority to the other mort- gage and all the debts of his brother. The reasonable presumption therefore is, that he would choose to keep the mortgage on foot. Where no intention is expressed, or the party is incapable of express- ing any, I apprehend the court considers what is most advantageous to him. Upon that principle it was held in Thomas v. Kemish, 2 Vern. 348, that the charges should not sink; as that was for the advantage of the infant; who, having attained the age of nineteen, had made a nuncupative will, devising all, that was in her power to devise, to her mother. This could be of no avail, as an election by 1 the infant ; for she could make none. Her interest must have been been the ground of the decision. In. the case of Lord Compton v. Oxenden, 2 Ves. 261, Lord Rosslyn says : "The cases of infants turn upon a supposed intent. The court saw in Thomas v. Kemish, that it was much more benefi- cial to the infant that it should continue personal property ; because an infant has the use and disposition of that before twenty-one; but he could have no disposable interest in a real estate till that age." 156 MERGER In the case of Lord Compton v. Oxenden, 2 Ves. 261, Lord Rosslyn says, "The cases of infants turn upon a supposed intent. The court saw in Thomas v. Kemish, that it was much more bene- ficial to the infant that it should continue personal property ; because an infant has the use and disposition of that before twenty-one ; but he could have no disposable interest in a real estate till that age." In Wyndham v. The Earl .of Egremont, Amb. 753, the limita- tion was to Lord Thomond for life, with remainder to trustees to preserve contingent remainders, to his first and other sons in tail male, and to his right heirs. Yet it was determined, that the charge should be raised for the benefit of his personal representatives. What the counsel for the personal representatives contended was, that the charge should not merge; unless at some period in Lord Thomond's life it was indifferent to him, whether the term should be kept on foot or not. Upon looking into all the cases, in which charges have been held to merge, I find nothing which shows that it was not perfectly indifferent to the party in whom the interests had united, whether the charge should, or should not, subsist; and in that case I have already said it sinks. There is a case of Gwillim v. Holland, referred to in Lord Compton v. Oxenden, which I believe is not reported anywhere, but which from the statement given of it by the counsel who cite it and by Lord Rosslyin [Loughborough] seems to be in point to the present. Mrs. Holland had a charge upon an estate, which she took by devise from her bother. He had made a mortgage on it. The counsel say, Lord Harwicke thought, that "was no merger; because it was more beneficial for her to take it as a charge." Lord Rosslyn says, the intervening incumbrance prevented the merger; and it was more beneficial for the person entitled to the charge to let the estate stand with the incumbrance upon it, than to take it discharged of the incumbrance, and give a priority to the second incumbrancer. Now it was certainly more beneficial for John Moffatt to let the estate stand with the incumbrance upon it than to give a priority to the other mortgage, and to all the debts of his brother Aaron. On the whole, therefore, I think, that the mortgage for £13,000 must be considered as still subsisting for the benefit of John Moffatt's personal representatives. 2 CARLOS WILCOX AND DANIEL R. BARBER v. F. A. W. DAVIS. Supreme Court of Minnesota, i860. 4 Minnesota, 197. The respondent, Davis, having the title to fee in certain lands, under warranty deeds, and which lands wtere subject to two out- 'See Watts v. Symes, 1 D. M. & G. 240 (1851) ; Bell v. Woodward, 34 N. H. 90 (1856) : Factors Ins. Co. v. Murphy, in U. S. 738 (1884) ; White- ley v. DeLaney (1914), A. C. 132. See also note to Pugh v. Sample, 123 La. 791 (1909), in 39 L. R. A., N. S., 834. C. WILCOX AND D. R. BARBER v. F. A. W. DAVIS 157 standing mortgages given by the respondent's grantor, purchased and took an assignment of the senior mortgage, "with intent" (as he alleges in the complaint for the foreclosure thereof) "to hold the same as the first lien and charge upon the land." The answer, without denying this intent, admits the purchase, etc., but sets up certain facts attending the same, which, it is claimed, show an intent to simply pay off tne mortgage, and that thereby the title under the assignment of the mortgage became merged in the fee, and that the defendants (owners of the junior mortgage) held the first lien upon the property. A demurrer to this portion of the answer was sus- tained by the district court, and the defendant appealed. 1 Flandrau, J. : The allegation of intent is well pleaded in the complaint, and not being denied by the answer, stands admitted. The second defense set up in the answer consists of a series of facts and circumstances which are designed to show that the plaintiff's mortgage* merged in the fee when he purchased it. It seeks to show a condition of things incompatible with an intention in the plaintiff to keep alive the lien of the mortgage, and would perhaps be available for that purpose if accompanied by a denial of such intention as alleged in the complaint ; but as it leaves the fact admitted that the mortgage was purchased by the plaintiff with intent to keep up the lien, it may all be true and yet not make out a defense, as the whole doctrine of merger in equity hinges upon the intention with which the estates are united. In 1 Maddock's Chancery, at page 540, the rule in equity is laid down as follows : "On this subject the general rule appears to be, that a person becoming entitled to an estate liable to a charge (a mortgage, for instance) for his own benefit, may if he chooses at once take the estate and keep up the charge. Upon this subject a court of equity is not guided by the rules of law. It sometimes holds a charge extinguished were it would subsist at law; and some- times preserves it where at law it would be merged. The question is upon the intention, actual or presumed, of the person in whom the interests are united. In most instances it is, with reference to the party himself, of no sort of use to have a charge upon his own estate, and where that is the case it will be held to sink, unless some- thing shall have been done by him to keep it on foot." This is the language of Sir William Grant, master of the rolls, in the case of Forbes v. Moffatt, 18 Ves. Jun. 393. It is cited as the law of merger by Justice Sutherland in James v. Morey, 2 Cow. 303. Chief Justice Savage in the case last cited, at page 313, gives the law of merger as follows : "The doctrine of merger as derived from the decisions of Great Britain and this state seems to be this, that when the legal and equitable estates become united in the same person, the equitable is 'The arguments of counsel and the opinion of the court on another point are omitted. 158 MERGER merged in the legal estate unless, first, the party in whom they unite manifests an intention to keep them separate ; or, second, it is mani- festly his interest to keep them so ; but when it is indifferent whether they unite or not, or when an intention to unite them is shown, then they shall be united." In the same case, on page 318, Air. Senator Cramer states it to be as follows : "From all the authorities which I have been able to examine, I consider the rule well settled, and I think it a rule founded upon good sense and justice that when the legal and equitable claims are united in the same person the equitable title is merged, and no longer exists except in special cases.'' He cites as "explicit and decisive'" of this point 3 John. Ch. Rep. 53; 5 Johns. Ch. 214; 6 Johns. Ch. 309; 2 Ves. Jun. 361. He then proceeds: "The only exceptions to this rule are, first, when there is a declared intention on the part of the mortgagee, that the equitable and legal titles shall continue distinct; secondly, where an intention to continue the mortgage may be fairly presumed from the acts of the mortgagee; and thirdly, where the law will presume such inten- tion from the circumstances of the case without regard to the acts of the mortgagee, which it will do in two cases. First, when for the interest of the party the mortgage should continue; and sec- ondly, when from the situation of the parties (as in the case of an infant) he cannot make his election. These are all the cases to be found in which the mortgage will be deemed a subsisting incum- brance, when the mortgagee has the legal and equitable estates united in himself. But when it is indifferent to the party whether the charge should or should not subsist, it always merges." The doctrine of merger is clearly and correctly expressed in the above quotations, as it is understood and administered by courts of equity. The difference between the doctrine at law and iniquity being that at law when the superior and inferior estates meet in the same person they always merge, and in equity the merger will be controlled by the intention of the party in whom the estates meet in uniting the same ; or where there is a union of the estates with- out the act of the party, as by inheritance, the merger will be governed by the circumstances of the case, and the interest of the party under the rules above mentioned. The complaint shows that there was no merger. The answer does not deny the fact in the complaint which saves the mortgage, and in this respect fails to make out the second defense. The court therefore did right to sustain the demurrer. 2 The judgment is affirmed and the case remanded. 'Thome v. Cann (1895), A. C. 11; Vaughn v. Consolidated M. Co., 21 Colo. 54 (1895) ; Clark v. Gloss, 180 111. 556 (1899) ; Ames v. Miller, 65 Neb. 204 (1902) ; Townsend v. Provident R. Co., no N. Y. App. Div. 226 (1905); Pease v. Doane, 33 Pa. Super. Ct. 6 (1907); Nagle v. Conard, 79 N. J. Eq. 124 (1911), affirmed, 80 N. J. Eq. 252. SELLERS, EXEGUTOR, v. MONTGOMERY i 5 g SELLERS, EXECUTOR, v. MOXTGOMERY. Court of Common Pleas Xo. 4, Philadelphia, 1893. 2 Pennsylvania District Reports, 551. Scire facias snr mortgage. Rule for judgment for want of a sufficient affidavit of defense. Arnold, J.: When Anna B. Montgomery died on Xovember 26, 1880, the real estate bound by the mortgage in suit passed by her will to her two children, Octavia Claytor Montgomery and James Claytor Montgomery. The mortgage was at that time held by the executors of the will of John Phillips Montgomery, who was the husband of Anna and father of Octavia and James. His children were the only persons interested in his estate, James having an absolute fee simple estate, and Octavia an estate held in trust for her. As to the share of James in the mortgage, there was a union of the two interests ; that is, his shares of both the real estate and the mortgage were then united in him, and consequently his share of the mortgage was merged in his share of the real estate, unless he did something showing an intention that a merger should not take place; and that he did nothing to keep the two estates apart is inferentially shown by the affidavit of defense. As to Octavia's share of the mortgage, there was a trust, an active one it is true, but it was principally intended to protect her from any husband she might, take, and as she was not engaged at the time the trust was created (and subsequently died without having been married), the trust estate, under those circumstances, was not a barrier to a merger, it being her interest as well as her right to claim that there was a merger, so that she would be saved the troublesome, superfluous and perhaps expensive act of paying inter- est to her trustees only to have it paid pack to her. Merger is a question of interest and intention. When two estates unite in one and the same person, it is generally his interest that a merger shall take place, and it will be presumed that he so intended it, unless he does some act to show a contrary intention. When, besides this, one of the estates is held by trustees, who might have called for interest or principal and did not, as is averred in this case, we have strong presumptive proof that a merger not only took place, but that it was favored and acquiesced in by the trustees. And when, besides this, several accounts have been filed by execu- tors, who might and should have accounted for this share of the mortgage, if it was alive, and did not, we may safely conclude that besides being the interest and intention of the two most interested parties that the mortgage should be merged, it was also the tacit agreement and understanding of all that it should. Under the facts stated in the affidavit of defense, we are of the opinion that the plaintiffs are not entitled to judgment, and therefore discharge the rule. 1 'See also, Grice v. Shaw, 10 Hare 76 (1852) ; Tyrwhitt v. Tyrwhitt, 32 Beav. 244 (1863). 160 MERGER ALVAH C. MOFFET v. JOHN V. FARWELL, Jr. Supreme Court of Illinois, 1906. 222 Illinois, 543. 1 Farmer, J. : On the eighteenth day of March, 1891, John A. Crain and wife executed a mortgage to Charles B. Farwell on certain lots in Waverly, Morgan County, Illinois, to secure a note for five thousand dollars, bearing interest at eight per cent, and due one year after date. The title to the lots was in Mrs. Crain. She died some year and a half later, leaving a will, in and by which she devised the said lots to her husband, John A. Crain. In January, 1899, the Drovers' National Bank obtained a judgment against Crain in the county court of Morgan County for five hundred and sixty-four dollars and eleven cents, and caused execution to issue thereon within a year from the date of the judgment, which was returned not satisfied. Subsequently seventy-three dollars was paid on the judgment, and on March 4, 1902, the judgment was assigned by the bank to Thomas Crain, who on October 14, 1902, assigned it to plaintiff in error. February 17; 1902, John A. Crain executed a deed for said lots to Charles B. Farwell. The deed recited that John A. Crain, "in consideration of the canceling of a certain prom- issory note and mortgage in favor of the grantee herein and one dollar in hand paid, conveys and quit-claims to Charles B. Farwell lots 1 and 2," etc. The deed also contained covenants that the grantor warranted and would defend "against any estate, interest or claim of heirs, claimants, administrators and executors of him- self or his late wife." On April 22, 1903, Charles B. Farwell and wife conveyed the premises by quit-claim deed to defendant in error, John V. Farwell, Jr. The amended bill filed by defendant in error, after setting up the facts as hereinabove related, averred that the defendant was threatening to have an execution issued on his judgment and levy the same on the lots in controversy. The bill then alleged that the deed from Crain to Charles B. Farwell was in lieu of the mortgage security and made to avoid the expense and delay incident to fore- closure proceedings, and prayed that the judgment held by plaintiff in error, as assignee, be declared a junior lien and subject to the deed from Crain to Farwell, and that the plaintiff in error be required to redeem as a judgment creditor within such, time as the court' might fix, by paying such sum as the court should find the premises to be worth, and that upon his failure to redeem he be forever barred and enjoined from asserting any lien or claim on said premises by reason of said judgment. The answer denies the allegations of the bill as to the purpose and effect of the deed from Crain to Charles B. Farwell, and avers it was said Farwell's intention in receiving the conveyance to cancel, 1 Counsel's arguments are omitted. ALVAH C. MOFFET v. JOHN V. FARWELL, Jr. 161 discharge and satisfy the mortgage debt, whereby the judgment of plaintiff in error became a prior lien upon the premises in question, and admitted that defendant was threatening and endeavoring to have the same satisfied out of a sale of the lots under execution on said judgment. The cause was heard in the circuit court upon a stipulation of facts, wherein, among other things, it was agreed that upon the delivery of the deed from Crain to Charles B. Farwell the note and mortgage mentioned were canceled and delivered to Crain, but no release or satisfaction was made of record unless it was contained in the deed. It was also agreed that at the time of the delivery of the deed to Farwell, and at the time of the trial, the lots were not worth more than two thousand dollars; that Crain was insolvent, and was so known to be to the grantee when he made the deed, and that the amount due on the note and mortgage above the value of the property was about four thousand dollars ; that plaintiff in error purchased the judgment after the deed from Crain to Farwell was recorded and with actual knowledge of its contents. It is also stipu- lated that "the deed given by Crain and received by Charles B. Farwell was in satisfaction of the indebtedness represented by said note and mortgage and given in lieu of the mortgage security, and to avoid the expense and delay incident to foreclosure proceedings on said mortgage," and that Charles B. Farwell and wife conveyed the premises by quit-claim deed to defendant in error. The circuit court found and decreed that there was due on the mortgage indebtedness to Farwell about six thousand dollars, and that Crain executed the deed to him in lieu of the mortgage security and to avoid the cost and delay incident to foreclosure proceedings ; that Crain was insolvent, and that at the time he made the deed to Farwell, and at the time of the trial of the cause, the property described in the mortgage and deed was worth two thousand dollars. The court further found that there was no merger ; that the lien of plaintiff in error by virtue of the judgment was subject to the rights of defendant in error, and decreed that plaintiff in error might redeem the premises by paying • defendant in error, within three months from the date of filing the decree, two thousand dollars, with interest thereon at five per cent., and upon his failure to do so, he and all persons claiming by, through or under him, be forever barred, foreclosed and perpetually enjoined from asserting said claim in any manner or form against the said premises. On appeal to the appellate court, the decree of the circuit court was affirmed, and the case is brought here by writ of error. The principal question in this record is, whether, by the accept- ance by Charles B. Farwell of a deed from Crain, the mortgage became merged in the fee and ceased to be a prior lien on the prem- ises as against the judgment held by plaintiff in error. Whether a merger results from a greater and less estate uniting in the same person depends upon what will best subserve the purposes of justice and the intention of the parties. This court has held the question always to be one of intention, and that the interests of the parties 162 MERGER and their intentions are controlling considerations. , (Richardson v. Hockenhull, 85 111. 124.) "The' intention is the controlling consid- eration, where it has been made known or can be inferred from the acts and conduct of the party, and the court will look into all of the circumstances of the case to ascertain his real intention. If it appears that he intended to discharge the incumbrance and rely exclusively upon his newly acquired title, the incumbrance is regarded as extinguished arid cannot afterward be set up to strengthen and support that title. If no intention has been mani- fested, equity will consider the incumbrance as subsisting or extin- guished, as may be most conducive to the interests of the party." (Campbell v. Carter, 14 111. 286.) In Edgerton v. Young, 43 111. 464, it was held that whether a merger resulted from a greater and less estate meeting in the same person depends upon the intent and interest of the parties, and that a court of equity will keep alive both estates if it appears necessary to the ends of justice to do so. It was said in Shippen v. Whittier, 117 111. 282: "The conveyance of the mortgagor's estate to the mortgagee does not operate as a merger, in equity, unless it was intended to have that effect." These prin- ciples are sustained by Lowman v. Lowman, 118 111. 582; Shaver v. Williams, 87 id. 469, and Farrand v. Long, 184 id. 100. Three things are relied upon by plaintiff in error as establish- ing the intention of Charles B. Farwell, at the time of taking the deed, to be to relinquish all right and interest under the mortgage and rely solely upon the deed, namely, the acceptance of the special warranty deed; the cancelation and delivery to Crain of the note and mortgage, and the paragraph in the stipulation of facts that the deed was received in satisfaction of the indebtedness represented by the note and mortgage and in lieu of the mortgage security, and to avoid the expense and delay of foreclosure. We are of opinion the evidence in this record does not show Farwell's intention to ha.ve been to release all claim and right under the mortgage and rely solely upon the deed. There is nothing in the deed from Crain to him from which such intention is necessarily to be inferred, nor does the delivery to Crain of the Canceled note and mortgage prove that such was his intention and purpose. The court held in Rich- ardson v. Hockenhull, supra, that such an intention was not proven by the surrender of the note and the release of the mortgage upon the record by the mortgagee upon the receipt of a deed to the mort- gaged premises. (See, also, Farrand v. Long, supra.) We have already seen that the law presumes a mortgagee to have intended to keep the mortgage alive. In 1 Jones on Mortgages (3d Ed.), Sec. 873, it is said: "It is presumed as a matter of law, that the party must have intended to keep on foot his mortgage title when it was essential to his security against an intervening title or for other purposes of security; and this presumption applies although the parties, through ignorance of such intervening title or through inadvertence, have actually discharged the mortgage and canceled the notes." Of course, such presumption of the law could not prevail if a contrary intention appeared from the evidence. No J. FRAZEE v. C. T. INSLEE and WIFE et al. 163 .such contrary intention appearing from the evidence in this case, the judgment of the appellate court is affirmed. 2 The time for redemption allowed plaintiff in error by the decree of the circuit court will be extended to three months from the date of filing this opinion. Judgment affirmed. JOHN FRAZEE v. CHARLES T. INSLEE AND WIFE AND SAMUEL CAMPBELL. Court of Chancery of New Jersey, 1839. 2 New Jersey Equity, 239. Bill for foreclosure of a mortgage given by Inslee and wife to complainant, dated September 8, 1836, and recorded April 21, 1837. The defendant, Campbell, was the holder of a mortgage given by Inslee and wife on November 25, 1836, and recorded December 3, 1836. On April 21, 1837, Inslee applied to Campbell and urged him to pay one hundred dollars, take a deed for the premises and cancel his bond and mortgage. Campbell agreed, a conveyance was made and recorded the following day, and Campbell's bond and mortgage were canceled. Campbell in his answer averred that he was fraudulently induced to cancel his mortgage and claimed that he was entitled either to hold the premises clear of complainant's mortgage or that his mortgage should be revived and paid first. 1 Pennington, C. : The complainant's mortgage bears the earliest date of any of the present incumbrances on the property which it covers. It is said to be antedated, but it is not so proved, and if it might be surmised from the attendant circumstances that it does not carry its true date, yet it does not appear when it was in fact executed. The money for which this mortgage was given was applied to pay off a previous mortgage held by Samuel Oliver on the property, and the complainant might by assignment of such mortgage have been placed as the first incumbrancer. I suppose the complainant's was in fact, therefore, the first lien, and was so intended to be. By the neglect of Mr. Stansbury, the complainant's agent, as he swears, the mortgage was not placed on record until ' Accord : Stantons v. Thompson, 49 N. H. 272 ( 1870) ; Adams v. Angell, S Ch. D. 634 (1877) ; Andrus v. Vreeland, 29 N. J. Eq. 394 (1878) ; Silliman v. Gammage, 55 Tex. 364 (1881) ; Belknap v. Dennison, 61 Vt. 520 (1889) ; Siberling v. Tipton, 113 Mo. 373 (1892) ; Keith v. Wheeler, 159 Mass. 161 (1893) ; Woodhurst v. Cramer, 29 Wash. 40 (1902); Citizens' P. & L. AsJn v. Rampe, 116 N. Y. S. 597' (1909) ; Sullivan v. Saunders, 66 W. Va. 350 (1909) ; Dennis v. McEntyre M. Co., 65 So. 774 (Ala. 1914) ; Cowling v. Britt, 169 S. W. 783 (Ark. 1914) ; Dubbels v. Thompson, 143 Pac. 986 (1914) ; Tankersley v. Jackson, 187 S. W. 985 (Tex. 1916). 'The statement of facts is considerably abridged. 164 MERGER after Samuel Campbell's mortgage for seven hundred dollars, which, bears a later date. After the complainant placed his mortgage on record, Samuel Campbell canceled his mortgage of record, and took a deed from Inslee and wife for the property. This places the parties again as they originally stood: the complainant's mortgage first, and Mr. Campbell's second. It seems that the complainant's mortgage was received in the office to be registered on the 21st of April, 1837, at half-past ten in the morning, and the mortgage of Campbell was canceled and his deed recorded on the next day. The defendant alleges that his mortgage was canceled and his deed taken by the fraudulent management and misrepresentation of Elias Stansbury, the complainant's agent. Had this been made out in the proof, I should readily have protected the defendant; but there is, in my opinion, a failure to sustain by evidence this part of the case. There is, it is true, an appearance of a studied silence on the part of Stansbury respecting the complainant's mortgage, and a promptness in putting it on record at the time when he knew the parties' were negotiating to sell the land to Campbell ; and I have no doubt he intended, if they did' sell, that the complainant's mortgage should stand as a lien on the property. But was all this in any way fraudulent? He was not bound to give information, unless he pleased, that he held in his hands a mortgage ; but he takes it to the public office, and there places it on record, to be seen by everybody. The only act that I perceive Stansbury charged with by the evidence is, that he recommended to Campbell to take a deed. There is no doubt that the mortgage of complainant was at the clerk's office the day before the defendant canceled his mortgage or took his deed. He examined the records, and it seems the clerk gave him wrong information. He did not, when inquired of, inform him that this mortgage of complainant was left there for record. That it was there, however, at the time, I see nothing from the evidence to make me doubt. The clerk's certificate on the back of it says it was recorded on the 21st of April. In the absence of any proof of fraud by the complainant, or his agent, when the mortgage was canceled intentionally and understandingly by the defendant, and a deed taken for the same property, I cannot upon any safe principle revive the mortgage, or prevent the complainant from reaping the benefit of his rights as a first mortgagee. This would be giving encour- agement to negligence, and destroy the value of a public record. It is to be observed that the defendant has no certificate from the clerk of any search, but the evidence is, that the clerk's deputy told him, upon inquiry, that there were only certain incumbrances on the property, omitting that of the complainant. It further appears, from the testimony of Jeremiah Crocheron, that before taking the deed he mentioned to the defendant, Campbell, the existence of this mort- gage that he got his information from Inslee; to which Campbell said, he would run the risk of that, for he had searched. This infor- mation, coming directly from Inslee, should, at any rate, have put him on inquiry and. more diligent investigation. This inquiry of the clerk was made the day before the mortgage was canceled, and ANN ARBOR SAVIXGS BANK v. SOPHIA WEBB et al. 165 the mortgage and deed were brought to the office by Campbell him- self. He then had a further opportunity to examine the records, had he been disposed so to do. The whole evidence is obscure and uncertain. It is not quite clear from Bigbie's evidence what part of the day it was on the 21st — whether before or after dinner — that he saw Mr. Campbell. It might have been before the complainant's mortgage was brought to the office on that day, though I should infer the contrary. As the defendant has failed to sustain his case by sufficient ■ evidence, the complainant is entitled to the ordinary decree on his mortgage. Decree accordingly. ANN ARBOR SAVINGS BANK v. SOPHIA WEBB ET AL. Supreme Court of Michigan, 1885. 56 Michigan, 377'. Sophia Webb held a mortgage on certain real estate of her daughter, Nancy M. Beebe, conditioned to pay the mortgagee two hundred and fifty dollars semi-annually for life, recorded April 2, 1878. In 1 881 Mrs. Beebe, being indebted to the Ann Arbor Savings Bank in the sum of eight thousand dollars, transferred her real estate by deed to C E. Hiscock, the cashier of the bank, who gave her a deed of defeasance not recorded. On February 18, 1882, Mrs. Beebe and C. E. Hiscock executed deeds for said lands to Mrs. Webb, who on the same day executed a note and mortgage to secure the debt due the bank, for the foreclosure of which this suit was brought. Mrs. Webb filed an answer alleging the transaction was a fraud upon her rights and also filed a cross-bill praying for a decree declaring the mortgage of complainant subsequent to her mortgage. The decree below was in accordance with the relief prayed for in the cross-bill and the bank appeals. 1 Champlin, J. : The main question in controversy is whether, by virtue of the deeds executed by Mrs. Beebe and by Mr. Hiscock to Mrs. Webb, her mortgage became merged in the legal title, and in consequence the mortgage given by her to complainant in the original bill became the first lien upon the premises covered by the mortgage. It did not merge (1) if she was induced to accept the legal title and execute a mortgage by any false representation, fraud or deceit practiced upon her to obtain her signature to the mortgage ; 2 Accord: Weidner v. Thompson, 69 la. 36 (1886); Bleckeley v. Bran- yan, 26 S. Car. 424 (1886) ; Beacham v. Gurney, 91 la. 621 (.1894) ; Woodside v. Lippold, 113 Ga. 877 (1901); Errett v. Wheeler, 109 Minn. 157 (1909); Senter v. Senter, 87 Ohio 377 (1913)- "The statement of facts is abridged from the opinion of the court, part of which is omitted. 166 MERGER or (2) if it was not her intention that her mortgage should become merged in the legal title. In either case the question depends upon her intention, actual or presumed. It is a question of fact, and must be determined by the evidence in the case. It is a general rule that when the legal and equitable titles become united, so that the owner has the whole title, the mortgage is merged by the unity of possession. But if the owner has an interest in keeping the titles distinct, there is no merger. The testimony shows that on the eighteenth day of February, 1882, Mrs. Beebe had a conference with the bank officials and its attorney at the bank, in the city of Ann Arbor. At that time the situation of affairs was this : Mrs. Beebe owed the bank about eight thousand dollars. As security for this indebtedness Mr. C. E, His- cock held a deed, absolute in form, executed by Mrs. Beebe, by which she conveyed to him all her real estate, amounting to two hundred acres of land, eighty acres of which was subject to the mortgage of Mrs. Webb. The bank officials desired to obtain the first lien upon this eighty acres ; in short, to get rid of the mort- gage to Mrs. Webb. To accomplish this they proposed that Mrs. Beebe should give a warranty deed to Mrs. Webb, and also Mr. Hiscock should give to her a warranty deed; Mrs. Webb should then make her note to the bank, indorsed by Mrs. Beebe, and should secure the payment of the note by a mortgage to the bank upon .the two hundred acres of land, payable in a year. To this proposition Mrs. Beebe assented, although she swears that she did not under- stand that the arrangement was to affect her mother's mortgage. The papers were prepared by the officers of the bank and its attor j ney. Mrs. Beebe executed the deed to her mother, and left it with Mr. Hiscock. Mr. Hiscock signed, but did not acknowledge, the deed to Mrs. Webb that day, and it was not acknowledged until after he received the note and mortgage executed by Mrs. Webb. The note and mortgage for Mrs. Webb to execute were also prepared. It is proper here to pause and consider who were the parties to this proposition. On the one side were the bank and its debtor, Airs. Beebe ; and on the other was Mrs. Webb ; the object being to get rid of Mrs.' Webb's mortgage, so as to give the bank a prior lien. The object sought to be accomplished and the interests to be affected thereby, by the bank and Mrs. Beebe, were identical. But Mrs. Webb, the other party to be affected, was not present. She knew nothing of what it was proposed to do. The officers of the bank testify that Mrs. Beebe promised and undertook to obtain the note and mortgage from her mother. There was an attorney by the name of J. H. Morris, who was out and in the bank during the inter- view, who had previously acted as the attorney of Mrs. Beebe in some of her matters, but he had never acted as attorney for Mrs. Webb. The nbte and mortgage prepared for Mrs. Webb to execute were placed in his possession. He took them and went with Mrs. Beebe to Pinckney, where she resided, on the evening of February 1 8th. The next day was Sunday. On that day he and Mrs. Beebe ANN ARBOR SAVINGS BANK v. SOPHIA WEBB et al. 167 went to the residence occupied by Mrs. Webb, which was on the premises covered by her mortgage, a distance of about two and a half miles from Pinckney. There Airs. Beebe told her mother, or asked her, rather, if she was willing that the farm should be deeded to her, and she give a mortgage to the bank, and she replied that she was willing, and she was requested to come to Pinckney the next morning to execute the papers. Nothing was said about her mort- gage, or the effect it would have upon her mortgage security. She went to Pinckney the next morning and found Mr.- Morris waiting and in haste to be taken to Dexter to catch the train for Ann Arbor. The note and mortgage were laid upon the table before Mrs. Webb without being read. Mr. Morris told her where to sign. When she took the pen she inquired whether that would affect her rights — ■ her mortgage; and she testifies that Mr. Morris answered, "No," and she says she signed it in view of this statement, that it would not affect her mortgage, and that she did not suppose that it would. Mr. Morris says such inquiry was made by Mrs. Webb at the time of signing the mortgage, but he doesn't remember that he made any reply, but that Mrs. Beebe answered that it would not affect her mortgage. The mortgage and note thus executed was by Mr. Morris .then taken to Ann Arbor and delivered to Mr. Hiscock and then he acknowledged the execution of the deed to Mfs. Webb, and placed the deeds and mortgage upon record. If Mrs. Beebe and Mr. Morris know the purpose of making the deeds and mortgage was to obtain for the bank priority over Mrs. Webb's mortgage — and it is plain that the transaction had no other signification — and if it is allowed to stand, then they perpetrated a fraud upon Mrs. Webb, who was there without a legal adviser, in obtaining her signature to the mortgage in the manner they did. Grant that Mrs. Beebe was ignorant of the effect upon her mother's mortgage interest by the conveyances to Mrs. Webb, yet Mr. Morris must certainly have been aware of the law in that respect, and should have advised her correctely relative to her rights in the premises. But the complainants in the original bill say the bank is not responsible for the statements of Mrs. Beebe or of Mr. Morris ; that they were not their agents. But it is evident that they acted for somebody in getting Mrs. Webb's signature, and it is certain they did not act for Mrs. Webb, nor in her interest. Under all the cir- cumstances, the bank must be held responsible for any misrepre- sentations which were made to Mrs. Webb in procuring her signa- ture to the mortgage. The indirect manner in which it was proposed by the bank officials to obtain this priority, raises a strong presump- tion that they did not expect that Mrs. Webb would be willing to discharge her mortgage, or make it subject to the indebtedness of her daughter to the bank, if informed of that proposition in direct terms. Few persons unlearned in the law are acquainted with the doctrine or effect of merger. The course pursued to obtain priority was well calculated, if it was not designed, to entrap a person in the situation in which Airs. Webb was placed. But aside from these 168 MERGER considerations, the testimony is positive and convincing that there was no intention on the part of Mrs. Webb that there should be a merger of her mortgage interest with the legal title. It was not for her interest that it should be merged; and in such case, upon well- recognized principles, equity will preserve the lesser estate by pre- venting a merger. If it was the design of the bank that the mort- gage of Mrs. Webb should become swallowed up and lost in the legal title, they should have required her note and mortgage, with a proper discharge thereof, to accompany the mortgage to them, and thus save all question. The complainants in the original bill have shown no equities superior to those of Mrs. Webb. The decrees of the court below are in accord with the views herein expressed. 2 Affirmed. ELLEN McCABE v. ISABELLA SWAP. Supreme Judicial Court of Massachusetts, 1867. 96 Massachusetts, 188. The first of these causes was a writ of dower, to which the tenant pleaded that the demandant had released and conveyed away her dower, and that there was an outstanding mortgage upon the demanded premises which the demandant must redeem before dower could be decreed. At the trial, before Bigelow, C. J-,. the title appeared to be as follows : 1. A mortgage of the premises by Michael McCabe, the demand- ant's husband, to Stephen S. Seavy, dated September 16, 1846, to secure a promissory note. The demandant joined in this mortgage, to release dower. 2. Deed of quit-claim from Michael McCabe to Samuel M. Bellows, dated June. 27, 1851, containing the following provisions : "Said premises are subject to a mortgage given by said McCabe to Stephen S. Seavy, bearing date September 15th, 1846, on which there is now due about the sum of four hundred and thirty dollars, which mortgage said Bellows assumes and agrees to pay as a part of the consideration of this deed ; and said Bellows agrees to pay the amount now due on said mortgage, and save said McCabe harmless by reason of the same." The demandant did not sign this deed. 3. Deed of quit-claim from said Bellows to Isabella Swap, the tenant, dated October 4, 1851. 4. Assignment of the above named mortgage by said Seavy to said Bellows, dated October 11, 1851. ' Accord : Vannice v. Bergen, 16 la. 55 ( 1864) ; Young v. Hill, 31 N. J. Eq. 429 (1879) ; Cook v. Foster, 96 Mich. 610 (1893) ; Miller v. Whelan, 158 111. 544 (1895); Hines v. Ward, 121 Cal. 115 (1898); Howard v. Clark, 71 Vt. 424 (1899). So conversely, equity will not prevent a merger if this would work a fraud or prejudice the rights of third persons. McGiven v. Wheelock, 7 Barb. N. Y. 22 (1849) ; Weis v. Levy, 106 N. Y. App. Div. 496 (1905). ELLEN McCABE v. ISABELLA SWAP 169 The demandant contended that the mortgage was extinguished; and, to meet this claim, the tenant offered certain testimony, which is sufficiently stated in the opinion, for the purpose of showing that the intention of Bellows and Michael McCabe was to keep the mort- gage alive. The evidence was admitted de bene. The second cause was a bill in equity to redeem the same prem- ises from the mortgage, and is the same cause in which, at former stages thereof, decisions of this court are reported in 7 Gray 148 and 1 Allen, 269. These causes were reserved for the determination of the whole court, with the agreement that if the defendant should be found entitled to recover in her writ of dower, judgment should be entered therefor, and for damages to be determined by an assessor ; and the bill in equity should be dismissed ; otherwise, judgment for the tenant in the writ of dower, and such decree in the bill in equity as justice might require. 1 . Wells, J. : • The tenant resists the claim of dower by setting up a mortgage, in which the demandant released dower, and which was assigned to Bellows a few days after his deed to the tenant. Assuming that the tenant, under her deed of quit-claiin, and release from Bellows, is entitled to avail herself of all his rights, although after acquired, the questions arise, first, whether the writ of dower is barred by this mortgage title; if not, then, secondly, whether the demandant is to have dower in the equity only, or in the whole estate. The decisions since the adoption, in the Revised Statutes, of the provisions contained in the General Statutes, Chap. 90, Sec. 2, establish these propositions : First. — When a purchaser pays off a mortgage, to which the right of dower would be subject, merely to clear the estate of the incumbrance, and not by virtue of any obligation to pay the mort- gage debt, and takes an assignment, or a conveyance of his interests from the mortgagee, he may stand on the mortgage title, if he please, and then no dower can be assigned without payment of the whole mortgage debt by the demandant. Strong v. Converse, 8 Allen 557 ; McCabe v. Bellows, 7 Gray 148. Second. — If, in such case, the mortgage be discharged, then he will be held to have redeemed, and the widow will take her dower in the equity, or by contribution, aS she may elect, under General Statutes, Chap. 90, Sec. 2. Newton v. Cook, 4 Gray 46. Third. — But if the mortgage debt be paid by the debtor, or from his property, or in his behalf, then the payment will be treated as a satisfaction and discharge of the mortgage, and the widow will be remitted to her full right of dower. Wedge v. Moore, 6 Cush. 8. * Fourth. — The payment will be held to be made in behalf of the debtor, when there is an obligation imposed by the grantor upon the purchaser to assume and pay the debt as his own ; or when the 'Counsel's arguments are omitted. 170 MERGER grantor furnishes the means for the payment; as where, by the terms of the conveyance, the entire estate is sold, and the seller leaves a sufficient part of the purchase money in the hands of the grantee for the purpose. Brown v. Lapham, 3 Cush. 551. In such cases, if the purchaser takes an assignment of the mortgage to him- self, he will not be allowed to set it up, but the legal title thus acquired will be held to merge in the equity. Bolton v. Ballard, 13 Mass. 227; Snow v. Stevens, 15 Mass. 278. It is said that "mergers are odious in equity." Gibson v. Cr chore, 3 Pick. 475-482. It is undoubtedly so whenever injustice will be worked thereby. But when a party, for the purpose- of defeating a meritorious right in another, sets up, as a subsisting title, a mortgage which it was his duty to pay, equity is equally ready to manifest its aversion to such an attempt; and we think that both law and equity coincide in declaring against it. This we under- stand to be the real doctrine of the proposition in Gibson v. Crehore, which has since been repeatedly quoted and approved, viz., that an assignment "shall or shall not operate as an extinguishment of the mortgage, according as the interest of the party taking this assign- men^, may be, and according to the real intent of the parties." It "does not so much depend upon the form of words used, as upon the relations subsisting between the parties." Brown v. Lapham, 3 Cush. 554. Accordingly an assignment in form is held to be an- extinguishment, when the justice of the case requires it. Wade v. Howard, 6 Pick. 492. In this case, the deed from McCabe to Bellows expressly stipu- lates that Bellows "assumes and agreed to pay" the mortgage "as a part of the consideration of this deed; and said Bellows agrees to pay the amount now due on said mortgage, and save said McCabe' harmless by reason of the same." The acceptance of this deed made the amount due on the mortgage the debt of Bellows, which McCabe and his representatives could have compelled him to pay. Pike v. Brown, 7 Cush. 133; Braman v. Dowse, 12 Cush. 227. Bellows, by paying the mortgage debt according to his obligation, could have no interest nor intent, which the law would favor or recognize, to set it up against his grantor or any one standing upon his right. The testimony of Hildreth, admitted de bene, shows an agreement between himself and Bellows, by which he was to advance the money to enable Bellows to procure an assignment of the mortgage to Hildreth, "to cut off this claim of dower." So far as this testimony was offered to prove an intent to preserve the mortgage title out- standing against the demandant, it is incompetent, because, as already shown, the law will not permit Bellows to carry such an intent into effect. It cannot be allowed to contradict the writing, which shows an assignment to Bellows. And although it might establish a trust in Bellows, if he could hold the assignment as a valid title, it cannot do so against the countervailing equities which require that it should be extinguished. The testimony of Bellows is in some respects contradictory to that of Hildreth, in relation to the transaction of the purchase of the TN RE HARVEY 171 mortgage from Seavy ; it is contradictory to his deed from McCabe in respect to the mortgage debt forming part of the consideration given for the land; and contradictory, one part with another, in itself ; so that it is difficult to say what it does tend to prove. But it does not seem to raise any questions other than those already dis- posed of. It does tend to show, however, apparently, that in .his purchase from McCabe, the incumbrance of the right of dower was allowed for in the consideration; so that it strengthens the equity of the conclusion to which we arrive, which is, that the demandant is entitled to recover her full dower in the premises. The case must accordingly be sent to an assessor to ascertain and report the amount to which she is entitled as damages for the detention thereof. 2 As a result of this conclusion the suit in equity, argued with this, McCabe v. Bellows, must be dismissed, as the plaintiff has her remedy at law. IN RE HARVEY. Court of Appeal, 1895. (1906) 1 Ch., 137. Appeal by the plaintiff against the refusal of Kekewich, J., to vary the chief clerk's certificate. On November 15, 1894, a summons was taken out by the plain- tiff, who was the executor of Charlotte Emily Harvey, the widow of Charles Bloomfield Harvey, who died on October 7, 1868, to deter- mine whether the plaintiff, as executor of Mrs. Harvey, who was tenant for life under her husband's will, was entitled to be paid by the trustees of his will out of the corpus of his estate an amount which had been applied by the trustees, out of her income as tenant for life, in paying off a mortgage upon the inheritance. The defendants to the summons were the trustees of the testa- tor's will and one of the residuary legatees. C. B. Harvey, by his will, dated October 3, 1868, after directing payment of his debts and funeral and testamentary expenses, and making a bequest to his wife, gave, devised and bequeathed to his executors all other property of which he might die possessed, real and personal, upon trust to be disposed of by them in the best and most profitable manner, and at a time most suitable (except the pair of houses in Western Road, Romford, which should not be sold during the widowhood of his wife or until her second marriage), the proceeds of such sale to be applied in paying off his existing •Accord: Johnson v. Webster, 4 DeG. M. & G. 474 (1854); Otter v. Lord Vaux, 2 K. & J. 650 (1856) ; Shepherd v. McClain, 18 N. J. Eq. 128 (1866); Wodsworth v. Williams, 100 Mass. 126 (1868); Carlton v. Jackson, i->i Mass.' 592 (1877) : Burnham v. Dorr. 72 Me. 108 (1881) ; Kneedland v. ftoorc 138 Mass. 198 (1884) : Birke v. Abbott, 103 Ind. 1 (1885) ; Loverin v. Humboldt S. Co., 113 Pa. 6 (1886) ; Clark v. Glos, 180 111. 556 (1899) ; Forthman v. Deters, 206 111. 159 (1903) ; Barnett v. McMillan, 58 So. 400 (Ala. 1912)- V/2 , MERGER mortgage, with interest thereon, and the remainder (if any) to 'be invested in the names of his executors upon trust that the interest arising therefrom, together with the rents or profits arising from the aforesaid houses, should as they became due be paid unto his said wife during her life or widowhood; and after her decease or second marriage, whichever should first happen, he requested that his executors would divide his property as equally as possible among his children by his said wife, or such of them as might be then surviving. The testator left his wife and five children surviving him. The two houses mentioned in his will were at the time of his death sub- ject to a mortgage to a building society, the sum secured by which was under the rules of the society to be repaid in monthly instal- ments consisting of principal and interest. The trustees applied the rents of one of the houses in making the monthly payments to the building society, and by means of those rents, and of a further sum provided out of the testator's estate, the mortgage debt was finally paid off by June, 1882. The widow did not marry again, and she died on March 18, 1891. In May, 1893, the two houses were sold for £1225, and out of this amount the plaintiff claimed to be paid so much of the amount of the rents which had been paid to the building society as repre- sented capital. An inquiry was directed what (if anything) was due to the plaintiff as executor of the widow in respect of money expended out of the widow's income as tenant for life under the will in paying off incumbrances on the houses. The chief clerk by his certificate found that nothing was due to the plaintiff; and Keke- wich, J., refused the plaintiff's application to vary the certificate. The plaintiff appealed. 1 Lindley, L. J. : I think it is established by the evidence that as a matter of fact (whatever the explanation of it may be) the rents of one of the two mortgaged houses were applied by the trustees of the will in paying the instalments which became due under the mort- gage to the building society. Then, as regards the law, the ordinary legal presumption is that a tenant for life who pays off an incumbrance upon the inher- itance does so for his own benefit, and I think Mr. Warrington is right in saying that the onus is upon the defendants to prove that it does not apply. The fact that the tenant for life and the remainder- men stood in the relation of parent and child is no doubt a material circumstance ; and if there were anything else to rebut the presump- tion that fact would be of importance. 2 But I do not think any of the authorities goes the length of saying that the existence of that relationship standing alone is sufficient. We must therefore look at all the facts and circumstances, and see what else there is to rebut the presumption. (His lordship • referred to the evidence.) The tenant for life had no option about paying off the mortgage debt; 'The arguments of counsel are omitted. 2 Compare: Toplis v. Vender Heyde, 4 Y. & C. 173 (1840): Wanders Estate, 16 Phila. 330 (1883) ; Kinkead v. Ryan, 65 N. J. Eq. 726 (1903). IN RE HARVEY 173 indeed, it was rather to her interest that "it should be paid off. And it is an important fact that no other property but these two houses was subject to the mortgage. The fact that some arrangement was made that the rents of one of the houses should be applied in paying off the mortgage debt does not throw any light upon the question whether the tenant for life intended that it should be paid off for the benefit of her children. Taking all the facts together, the case comes to this : on the one side of the legal presumption which I have mentioned, and on the other side there is nothing to rebut it but the relationship between the parties; and that, as I have already said, is not, in my opinion, sufficient to rebut the presumption. In my opinion, the appeal must be allowed. A. L. Smith, L. J. : I am satisfied by the evidence that the rents of the one house were applied in paying off the building society's mortgage. What, then, is the presumption of law when such a pay- ment is made by a tenant for life? I cannot do better than read what was said by Lord Langdale in Burrell v. Earl of Egremont, 7 Beav. 232: "A simple payment of the charge, without more, is sufficient to establish the right of the tenant for life to have the charge raised out of the estate. He has no obligation or duty to make a declaration, or to do any act demonstrating his intention. The burden of proof is upon those who allege that, in paying off the charge, he intended to exonerate the estate." The burden of proof, therefore, is upon the respondents. Have they discharged it? It is said on their behalf that the tenant for life is a mother and the remaindermen are her children. It seems to me that, according to the authorities which have been cited, that of itself is not sufficient to rebut the presumption, and there is nothing else to rebut it. In my opinion, therefore, the presumption has not been rebutted, and the decision of my brother Kekewich was erroneous. Rigby, L. J. : I have arrived at the same conclusion. The case is in some respects one of importance. Probably it was never explained to the tenant for life that, if she paid off the mortgage debt, she would be entitled to a charge upon the inheritance to the extent of the principal. Her voluntary giving up of that which the law allowed her to receive is- not so strong an indication of intention as the payment of a lump sum would .have been. And, if in the ordinary case of payment of a mortgage debt by a tenant for life the legal presumption arises, I think that when the debt was payable by instalments, each consisting of principal and interest, and prob- ably all that the tenant for life knew was that, if the instalments were not punctually paid, the building society would come down on the property, it would require more than a mere suggestion of some arrangement that she should pay off the mortgage debt for the benefit of her children, to rebut the presumption that she did not intend to relinquish her right to a charge upon the property. The appeal must be allowed. 3 'Accord: Jones v. Morgan, 1 Br. Ch. 206 (1783) ; Shrewsbury v. Shrews- bury, 1 Ves. Jr. 227 (1790) ; Burrell v. Earl of Egremont, 7 Beav. 205 (1843) ; 174 MERGER ANNE i\I. BARKER v. JOHN FLOOD. Suprkme Judicial Court of Massachusetts, 1870. 103 Massachusetts, 474. Writ of entry to recover a parcel of land in Lowell. At the trial in the superior cour., before Rockwell, Jr., it appeared that Patrick Flood, being seised in fee of the demanded premises, moit-* gaged them in 1854 to Joshua Bennett, and in 1859 died intestate; that his sons, John Flood (the tenant) and Peter Flood, were his heirs; and that Peter Flood paid Bennett the amount due on the mortgage, took an assignment thereof to himself in i860, made an entry to foreclose in 1861, a certificate of which was duly recorded, and in 1868 conveyed the premises to the demandant by a warranty deed. The judge ruled that on these facts the action could not be maintained, and by consent of the parties reported the case to this court; if the ruling was correct, judgment to be ordered for the tenant ; otherwise the case to stand for trial. Chapman, C. J.: The debt which the mortgage was given to secure was due from Patrick Flood, the mortgagor, and not from his heirs.. By his death, his heirs became tenants in common, not of the legal estate, but of the equity of redemption. Neither of them was under any personal obligation to pay the debt ; but each of them had an interest in acquiring the legal title, in order to prevent his interest in the equity from being lost by foreclosure of the mortgage. If Peter purchased the mortgage and took an assignment of it to himself, it would be for his interest that it should remain in force, as a security for the payment of the proportion due on it from his cotenant. And as he was under no obligation to his cotenant, who had paid nothing, the assignment would take effect according to his interest, and could not be regarded as a discharge for the benefit of John Flood. Strong v. Converse, 8 Allen 557, and cases cited. If he held the legal title in mortgage, there is no reason why he should not be permitted to exercise his rights as assignee of the mortgage Morley v. Morley, 5 DeG. M. & G. 610 ^( 1855); Pitt v. Pitt, 22 Beav. 294 (1856) ; Crawford v. Carver, 16 Phila. 53 (1883) ; Lord Gifford v. Lord Fitzhardinge (1899), 2 Ch. 32; Tindall v. Peterson^ 71 Neb. 160 (1904); Williams v. Williams-Wynn, 84 L. J. Ch. 801 (1915). "But his right to preserve and enforce the lien exists for the purpose of reimbursement or contribution only. He cannot in the absence of special circumstances requiring that the lien be kept in force, assert it gen- erally as a charge upon the whole estate, including his estate for life, especially where the result would be unjust or inequitable. In such cases, he has no legitimate interest in keeping it alive." Per Pound, Commr., in Downing v. Hartshorn, 69 Neb. 364 (1903). Accord: Knolls v. Barnhart, 71 N. Y. 474 (1877) ; Upton v. Merriman, 133 N. W. 977 (Minn. 1911) ; Stroh v. O'Hearn, 142 N. W. 865 (Mich. 1913). See also, Stark v. Byers, 213 Pa. 101 (1905). MELVIN J. COLE v. THOMAS BEALE 175 by foreclosure. He might take possession as mortgagee. His own interest in the equity of redemption would not prevent his holding under the higher title. His brother John could not be prejudiced; for he might redeem by payment of half the mortgage debt, and would thereupon hold his moiety of the land free from the incum- brance. 1 Case to stand for trial. MELVIN J. COLE v. THOMAS BEALE. Appellate Court of Illinois, 1900. 80 III App., 426. 1 Higbee, J. : On July 27, 1893, Orange R. Gorham and wife mortgaged certain "premises in Boone County, Illinois, to Ralph J. Sensor to secure, as stated in the mortgage, the sum of five thousand six hundred dollars, according to the tenor and effect of five certain promissory notes of even date therewith, one for the sum of one thousand six hundred dollars and four for the sum of one thousand dollars each, and also certain notes attached to said principal notes representing the interest therepn. This mortgage has never been released of record. The mortgage was duly acknowledged on the day of its date and afterward recorded in the proper county on August 1, 1893. On the day the notes and mortgage were executed the note for one thousand six hundred dollars and the interest notes attached were assigned and transferred to Isaac Toms, one of the appellees. On December 20, 1893, said Orange R. Gorham and his wife conveyed said premises to Henry N. Baker and Ralph J. Sensor by warranty deed subject to a certain mortgage for five thousand six hundred dollars to Ralph J. Sensor, which said parties of the second part assumed and agreed to pay as part of the purchase price of said premises. This deed was duly acknowledged on the day of its date and afterward on December 23, 1893, recorded in the office of the recorder of Boone County. On August 23, 1895, two of said notes for one thousand dollars each were duly assigned and trans- ferred by Sensor to appellee, Thomas Beale. On September 6, 1895, another one of said notes for one thousand dollars was assigned and transferred by Sensor to appellee, Thomas Beale. On September 6, 1895, another one of said notes for one thousand dollars was assigned and transferred by Sensor to J. S. Wilmarth, Wilmarth afterward 'See also, Casey v. Buttolph, 12 Barb. N. Y. 637 (1851); Titsworth v. Stout, 49 111. 78 (1868) ; In re Pride (1891), 1 Ch. 135; McQueen v. Whet- stone, 127 Ala. 417 (1900) ; Singleton v. Singleton, 60 S. Car. 216 (1900") ; Saint v. Cornwall, 207 Pa. 270 (1903). Where the owner of the equity of redemption acquired by will an undivided interest in the mortgage debt in common with others, it was held that no merger took place. Clark v. Clark, 56 N. H. 105 (1875). 'The arguments of counsel and part of the opinion of the court are omitted. 176 MERGER died testate; Alonzo B. Wilmarth was appointed his executor and is one of the appellees herein. On January 27, 1896, the last one of the one thousand dollar notes was assigned and- transferred by Sensor to appellee, J. R. Moxley. Sensor paid the interest upon these notes for several years. On September io, 1896, Henry N. Baker and Ralph J. Sensor made their note for five thousand dollars, due five years after date, with interest payable annually at the rate of six per. Cent, per annum from date, to appellant, Melvin J. Cole. Some time after the giving of the note Baker and Sensor made a mortgage to Cole on the premises in question to secure said note for five thousand dollars. The mortgage was dated back to September 10, 1896, but was acknowledged December 31, 1896, and recorded March 11, 1897. After the description of the property in the mort- gage were inserted the words, "subject to prior incumbrance," and after the covenants that the premises were clear from all liens, etc., occurred the words, ''except one mortgage," and these words appear in the mortgage as first recorded. In the mortgage as first recorded, Mrs. Baker and Mrs. Sensor did not join, but afterward at the request of Cole on the twenty-eighth day of December, 1897, they executed the same mortgage and all the parties acknowledged it. It was again recorded on January 4, 1898. In the second record of the mortgage, nothing appears to indicate a prior incumbrance on said premises, the words above referred to in reference to the same having been erased. At the January Term, 1899, of the circuit court of Boone County, appellees, who are the holders of the Gorham notes to Sensor, as above set forth, filed their bill in chancery to foreclose the mortgage given by Gorham and wife to secure the same, making Baker, Sensor and their wives, appellant, M. J. Cole, and Albert J. McGee, defendants, the latter being a tenant holding the premises under Baker and Sensor. , All of the defendants were defaulted except Cole, who answered and then filed his cross-bill, alleging that the conveyance above referred to, made by Gorham and his wife to Baker and Sensor, operated as a merger of the fee to said premises and extinguished any prior incumbrances on the same running to Sensor, and that by reason thereof the mortgage made to him by Baker and Sensor was a first lien upon said premises. The cross- bill also sought the foreclosure of the mortgage made to appellant by Sensor and Baker. The court below entered a decree in favor of appellees foreclosing the Gorham mortgage, but giving no relief to appellant Cole under his cross-bill. The principal question presented to the court in this case is whether or not the conveyance from Gorham and wife to Baker and Sensor merged the prior mortgage from the same parties to Sensor in the fee, thereby extinguishing the lien. We are of opinion that there was no merger for the following reasons : ( 1 ) The deed is made expressly subject to the mortgage, which Baker and Sensor assumed and agreed to pay as part of the pur- chase, price of the premises. The deed being recorded was ample notice to all persons who might thereafter become interested in these premises, of the existence of the mortgage. MELVIN J. COLE v. THOMAS BEALE 177 (2) The deed was made not to the mortgagee, Sensor, alone, but to Baker and Sensor. While it is true, as urged by appellant, that where the ownership of the mortgage debt and the title of the land becomes vested in the same person the mortgage is ordinarily thereby merged and extinguished, yet there are many exceptions to this rule. There is no merger where the conveyance is made to the mortgagee and one or more other persons, he becoming the owner of only an undivided part of the fee. "To effect a merger at law the right previously held and the rights subsequently acquired must coalesce in the same person and in the same- right without any other right intervening." 1 Jones on Mortgages, Sec. 848. i "There is no merger when a mortgagee of the entire premises becomes a devisee of an undivided part of the equity of redemption. He is entitled to be protected by holding his entire mortgage against the entire premises." 1 Jones on Mortgages, Sec. 849; Sahler v. Signer, 44 Barb. (N. Y.) 606. (3) The note for one thousand six hundred dollars and the interest notes therewith were assigned by Sensor and transferred to the appellee, Toms, before the conveyance was made by Gorham and wife to Baker and Sensor. The conveyance of a mortgagor's equity of redemption to the mortgagee, after the latter has parted with the mortgage and notes thereby secured to a bona fide pur- chaser, cannot in equity be treated as a merger of the mortgaged estate in the fee. 3 International Bank of Chicago v. Wilshire, 108 111. 143. The transfer of a part of the mortgage debt would have the same effect in preventing a merger as the transfer of the whole, as there could not in that event be a merger of all the interests in one person at the same time. 4 (4) All the actions of Sensor show there was no intention on his part that there should be a merger. 5 Decree affirmed, but modified so as to provide for the payment of the Cole mortgage after payment of the first mortgage. a Accord: Klock v. Cronkhite, 1 Hill N. Y. 107 (1841) ; Stover v. Her- rington, 7 Ala. 142 (1844) ; Wilhelmi v. Leonard, 13 la. 330 (1862) ; Trim- mier v. Vise, 17 S. Car. 499 ( 1882) ; Thebaud v. Hollister, 37 N. J. Eq. 402 (1883); Carpenter v. Gleason, 58 Vt. 244* (1885) ; Chase v. VanMeter, 140 Ind. 321 (1894) ; Souther v. Pearson, 28 Atl. 450 (1894). 3 Accord : Pratt v. Bank of Bennington, 10 Vt. 293 ( 1838) ; Purdy v. Huntingdon, 42 N. Y. 334 (1870); Bank v. Mowry, 66 N. H. 598 (1891) ; Curtis v. Moore, 152 N. Y. 159 (1897). 'Accord: Stewart v. Eaton, 20 Wash. 378 (1898); Wallace v. Blair, I Grant, Pa. 95 (1854). In Ehrman v. Alabama M. L. Co., 109 Ala. 479 (1895), one purchased an undivided one-half interest in a mortgage and then purchased the mortgaged land from the mortgagor, assuming the amount due on the notes secured by the mortgage as part of the purchase money. Held: His interest in the mortgage merged and he became principal debtor for the amount due the holder of the remaining one-half interest in the mortgage. "In Smith v. Roberts, 91 N. Y. 470 (1883), B sold to A an undivided one-fourth interest in land and mortgaged the remaining undivided, three- 178 MERGER LEVI GOODWIN v. HENRY KENEY AND ANOTHER. Supreme Court of Errors of Connecticut, 1880. 47 Connecticut, 486. Bill for the foreclosure of a mortgage and for possession of the mortgaged premises; brought to the superior court in Hartford County. The petition alleged that on the 5th of November, 1846, John K. Goodman, of the city of New York, made, a mortgage to Abigail Goodman, of Hartford, to secure a note of three hundred and sev- enty-five dollars, of certain real estate situated in the city of Hart- ford, and which was described in the mortgage as "all the right, title and interest (being one undivided fifth part) of the said John K. Goodman in and to a certain piece of land lying in said city of Hart- ford, and bounded," etc. (giving the boundaries). That the said Abigail Goodman, who then owned and till her death continued to own three-fifths of the same property, immediately upon the execu- tion of the mortgage entered into the possession of the mortgaged premises, and continued in possession until her death in 1866; and her devisees, hereinafter named, and those claiming title under her, have been in possession thereof from her death until the present time. That on the third day of June, 1863, the said Abigail, for a good and valuable consideration, sold, assigned and transferred to the petitioner the aforesaid mortgage, and the debt secured thereby, and endorsed and delivered the mortgage note to the petitioner, who is now the lawful owner and holder of the same. That the said Abigail having theretofore acquired from the said John K. Goodman the full legal title to the mortgaged premises, in November, 1862, by her last will and testament of that date devised the same to Henry Keney, of said Hartford, in trust for Albert W. Goodwin during the life of the said Albert, who now holds the same, subject to said mortgage; and that the remainder of said estate, after the death of said Albert, was by said will devised to Elizabeth G. Kingsbury, now of the city of Paris, in France, and to her heirs and assigns forever. And that said mortgage note has never been paid, but is still due, with the interest thereon; and that the petitioner is entitled to the possession of said mortgaged premises, and is without adequate remedy at law. The petition then prayed for a foreclosure. The respondents demurred to the petition, and the court fourths to A. Subsequently A purchased for value an undivided one-half interest in the tract. Held: There was no extinguishment even pro tanto of the mortgage debt, but it rested on the unconveyed one-quarter. In Sanford v. Van Arsdall, 53 Hun 70 (1889), A held a mortgage on land of B. An undivided one-half of the mortgaged premises was con- veyed by B to C, who agreed to pay one-half of the mortgage. C then conveyed his undivided half to A. Held: That A was not entitled to collect the whole mortgage from the one-half of the premises still held by B. LEVI GOODWIN v. HENRY KENEY AND ANOTHER i?y (Beardsley, J.) held it insufficient and dismissed it. The petitioner thereupon filed a .motion in error and brought the record before this court. 1 Loomis, J. : The next question is, where there was a merger of the legal and equitable titles in Abigail Goodman which extinguished the mortgage. It appears that both titles yested.in Abigail, the mortgagee, and if nothing more was shown we should presume a merger. But courts of equity will always keep the estates separate and uphold the mortgage, when it is required by the justice of trie case or the intent of the parties. Stanton v. Thompson, 49 N. Hamp. 272 ; Bell v. Woodward, 34 N. Hamp. 90; Lock-wood v. Sturdevant, 6 Conn. 373; Donalds v. Plumb, 8 Conn. 447; Bassett v. Mason, 18 Conn. 131; Mallory v. Hitchcock, 29 Conn. 250; Delaware & Hudson Canal Co. v. Bonnell, 46 Conn. 10. In the case at bar a merger should be prevented because both the justice of the case and the intention of the mortgagee alike require it. The petitioner purchased the mortgage for a valuable consideration from the mortgagee herself, while the respondents are merely recipients of her bounty, taking the remainder of the estate by her will, and holding it, as the petition avers, "subject to the mortgage." Their position in equity can be no better than that of their devisor, and it must be inferior to that of the petitioner. In addition to the justice of the case the facts alleged in the petition furnish the most cogent evidence that the mortgagee's inten- tion was to keep the estates separate. She not only severed the two titles, but put them as wide asunder as possible; devising the fee to the respondents, and selling and conveying the mortgage to the petitioner. But the respondents insist that the merger was complete the instant the two estates vested in Abigail, and that evidence of her intention to prevent a merger, to be effectual, must be contempora- neous with the union of the two estates. This proposition is neither supported by good reason nor by good authorities. In James v. Morey, 2 Cowen 248, the fee and the mortgage interest united in one Wattles, a mortgagee, who soon after verbally declared himself to be the absolute owner, and then after the lapse of several months sold his interest in the mortgage, and' yet the last-mentioned act as evidencing his intention prevailed to prevent a merger. Woodworth, J., in giving the opinion, said: "Until he made a disposition of the property and until some person acquired an interest, he was at perfect liberty to consider the mortgage merged or not as might be most beneficial. If the question is to be decided "by intent, express or implied, when does it become fixed and unchangeable? Certainly not until some one acquires an inter- est, and thereby obtains a right to draw it in question. It would be novel in principle, and I apprehend without precedent in any 'Only so much of the case as relates to merger is printed. The judg- ment below was reversed on other grounds. 180 MERGER book of authority, that a stranger should urge. You once declared the mortgage was merged, and although at the time it was indiffer- ent to all the world in what manner you treated it, you are bound by that election." In Forbes v. Moffatt, 18 Ves. Jun. 389, the acts of the party were considered and examined for a series of years, and up to the time of his death, a period of ten years, for some conclusive evidence of intention, but not finding these acts and declarations decisive, the case finally turned on the legal presumption of his intention that the charge should not merge because it was for his interest that it should not. The only authority that we can find which seems at all to support the claim of the respondents is a passing remark of the chancellor in giving the opinion in Starr v. Ellis, 6 John. Ch. 393, that "unless some beneficial interest be shown to require the charge to be kept up, or the intention to keep up the charge be immedi- ately and duly declared, it shall merge." But in James v. Morey, supra, in a very able and exhaustive review of the authorities, this is showp not to be good law. The question of merger was not care- fully considered, as it was not necessary. The. case turned on the fact that it was a fraudulent assignment from a father to his son. Sutherland, J., on pages 306-7, says : "To establish the rule that the intention of the party shall be immediately declared or the law shall declare it for him, would be virtually to take from him the privilege of election. How is he to make his intention known except by his acts in rfelation to the property which is the subject of the charge? Is not a reasonable time then to be allowed him? Is he to be com- pelled immediately to assign the charge if he intends to keep it distinct? or to sell the fee if he intends the charge shall merge? If the law gives him the privilege of election, it will give him a reason- able time within which to make it. This appears to me to be the good sense of the rule, and it is clearly sanctioned by the authorities to which I have adverted, particularly by the case of Forbes v Moffatt." 2 It being clear that there was no merger, it becomes unneces- sary to consider the question of estoppel, which was discussed by counsel in this connection. IN THE MATTER OF THE ESTATE OF CECELIA GODLEY, OWNER, EXECUTRIX OF WILLIAM GODLEY, PETI- TIONER. Chancery Division of High Court, Ireland, 1895. (1896) 1 I. R., 45. Motion to make absolute the conditional order for sale not- withstanding cause shown by the owner. The petitioner was execu- 1 Accord: Hatch v. Kimball, 16 Me. 146 (1839); Rankin v. IVilsey, 17 la. 463 (1864), semble. Compare Gardner v. Gardner, 3 Johns. Ch. 53 IN THE MATTER OF ESTATE OF CECELIA GODLEY 181 trix of William Godley, deceased, who died on the 30th January, 1894. His estate, which was an insolvent one, had been adminis- tered in the chancery division, where the executrix was directed by the judgment on further consideration to call in a mortgage for £500 on the lands in this matter, of which William Godley had been tenant for life. The owner alleged that this mortgage had been merged by express declaration of intention by William Godley in his lifetime. The petitioner not only disputed the evidence on this point, but contended that a merger would have been void as a fraud upon the creditors of William Godley. The material facts and the inferences which the court drew from the evidence are fully stated in the judgment. 1 Madden, J.: The petition in this case had been presented on foot of a mortgage executed on the 27th July, 1878, to J. H. Jessop for the sum of £500. This mortgage originally affected a base fee in a perpetual yearly rent charge of £300, issuing out of the lands comprised in the petition. But by virtue of an indenture of family settlement, dated the 18th December, 1882, it is now secured by a term of one thousand years, carved out of the fee simple of these lands. J. H. Jessop, the mortgagee, left his property, including this mortgage, to his sister, Catherine Jessop, who, in turn, left the mortgage to her cousin, William Godley. She died on the 3d Novem- ber, 1890, and William Godley died on the 30th January, 1894, having appointed the petitioner executrix of his will, by whom it was duly proved. So far the title of the petitioner is complete. But William Godley, to whom this mortgage was left by Catherine Jessop, was then tenant for life of the mortgaged lands; and the ow.ner, who claims under the remainderman, shows cause against the conditional order for sale, upon the ground that the mortgage has merged in the fee simple and inheritance of the land by virtue of an intention to that effect expressed by William Godley, the tenant for life of the lands, after he became, upon the death of Catherine Jessop in 1890, absolute owner of the mortgage. That this was the intention of William Godley at the time of his death cannot be disputed, in the face of a -letter written by his direction on the 14th January, 1894, in which he gives instructions for the preparation of a formal deed of release. I am satisfied upon the evidence that in so doing he was only carrying out the intention which he had constantly in his mind from the time of his acquisition of the mortgage. The owner, Mrs. Cecelia Godley, in her affidavit, filed the 31st October, 1895, deposes to statements made by William Godley to this effect, going back to within six months after the death of Catherine Jessop. She has not been cross-examined, and I have no hesitation in acting upon her statements, which are in entire (1817) ; Koons v. Hartman, 7 Watts, Pa. 20 (1838) ; Given v. Marr, 27 Me. 212 (1847). 1 Counsel's arguments are omitted. 182 ■ MERGER accordance with the indisputable intention of William Godley in the year 1894, and with the probabilities of the case. I am satisfied that he always intended that the Jessop mortgage should merge in. the inheritance, and that it should not be raised by his personal representatives. But the petitioner contends that even if this were his intention, William Godley was never in a position to carry it into effect, inas- much as "his circumstances were such as to render a voluntary dispo- sition or gift of this mortgage a fraud upon his creditors within the provisions of the Irish Act 10 Car. 1, Sess. 2, c. 3, corresponding to 13 Eliz., c. 5. Now under ordinary circumstances the petitioner, as personal representative of William Godley, could not be heard making such a case. She would be bound by the act of her testator. But it is contended that inasmuch as the assets of William Godley have been administered in the chancery division in the action of Wiseman v. Godley, and have been there found deficient, and inas- much as the petitioner is proceeding in this court to collect outstand- ing assets for the purpose of paying creditors, she may be considered as representing creditors in this matter, and . is entitled to make whatever case a creditor could have established against a voluntary disposition of the mortgage in question. I will assume that this is so, without entering into some nice questions of general law, and of the procedure of this court, which would arise for considera- tion if it were necessary to decide the point. William Godley was clearly insolvent at the time of his death in 1894. If the merger of the charge in the estates is referable to that date, I am disposed to think that it would be void under the statute, as a disposition by way of gift withdrawing property from his creditors, and that the mortgage could be raised notwithstand- ing his clearly expressed intentions to the contrary. The point does not appear to have been decided. But the merger of a charge by a tenant for life, whether by deed of release or by expressed inten- tion, seems to me to be a disposition, withdrawing from his cred- itors property under his control. It could I think be set aside, and the charge raised — at all events, in a properly constituted action, In which a creditor should be plaintiff and the owner of the estate and the personal representative of the tenant for life defendants — upon proof that fraud upon creditors was either the motive or the result of the transaction. The owner, however, contends that the merger must be taken as effected, not at the death of the tenant for life, but at the date of his acquisition of the mortgage, inasmuch as thenceforth and up to the time of his death he consistently intended that it should merge. He further contends that William Godley, though insolvent in 1894, was solvent when he became entitled to the mortgage in November, 1890, and capable of disposing of it for the benefit of the inheritance. In determining the former of the questions thus raised I have not the guidance of any decided case, and it therefore becomes neces- sary to consider certain general principles. The law of merger of IN THE MATTER OF ESTATE OF CECELIA GODLEY 183 charges, unlike the legal doctrine of merger of estates, is founded, not upon feudal principles, but upon certain clear and well-defined doctrines of equity, engrafted upon a principle borrowed from the civil law. According to the civil law the confusio caused by the union in the same individual of the characters of debtor and cred- itor, extinguished the debt. By analogy, it was held that the union in the same person of an estate in lands and a charge affecting the same estate, operated to merge the charge. But equity intervened to give effect to intention expressed or implied. In the words of Lord Macnaghten (Thorn v. Cann [1895], A. C. 18) : "Nothing I think is better settled than this, that when the owner of an estate pays charges on the estate which he is not personally liable to pay, the question whether those charges are to be considered as extin- guished, or kept alive for his benefit, is simply a question of inten- tion. You may find the intention in the deed, or you may find it in the circumstances attending the transaction, or you may presume an intention from considering whether it is or is not for his benefit that the charge should be kept on foot.*' In accordance with these principles, when a tenant in fee becomes owner of a charge, the latter is prima facie merged, in the absence of expressed intention to the contrary on the part of the owner of the estate ; unless by reason of intervening incumbrances or otherwise he has an interest in keeping it alive, in which event an intention is implied in accordance with his interest. But when, as in the present case, the owner of the charge is tenant for life of the estate, no principle analogous to confusio applies. The charge is accordingly prima facie unmerged, and capable of being raised by the personal representative of the tenant for life. But in this case also the presumption is capable of being rebutted by evidence of intention on the part of the tenant for life, that the charge should merge in the inheritance. The question arises, at what point of time does this merger take place: at the date of the union of estate and charge, at the death of the person whose intention is in question, or at some inter- vening date? It was laid down in Swinfen v. Swinfen, 29 Beav. 199, that where a tenant in fee becomes entitled to a charge, the presumption of merger arises on his death. This is indeed obvious in the case of absolute ownership of both estate and charge; for merger is presumed as the result of silence on the' part of the owner of the estate, and this silence may be broken, and the presumption rebutted, so long as he is alive. It is premature finally to conclude that a charge is merged, or a man happy, until all possibility of an opposite condition has been removed by death. The question is a different and a more difficult one where merger is the result, not of mere abstention from action, but of certain words or deeds on the part of the owner of the estate, evidencing an intention contrary to that which would be presumed in the absence of evidence. It seems to be now clearly settled that the tenant for life has the whole of his life during which he may negative this presumption by expressed intention, and that in this sense, in the words attributed i«4 MERGER to Brady, C, in Lysaght v. Lysaght, 4 Ir. Jur. at p. 112, "the inten- tion is ambulatory, as it were, until the death of the tenant for life." It has, indeed, been questioned whether the intention in such cases is ambulatory in the testamentary sense of the term; that is to say, whether a tenant for life who has once expressed an intention to merge a charge, can afterwards give effect to a contrary intention. If he had actually released the estate, even by a voluntary deed, without reserving a power of revocation, he could not afterwards revive 'the charge. And Lord Cranworth plainly considered that the payment off of a charge might, under certain circumstances, have the same effect. In Morley v. Morley, 5 De G. M & G. 626, he is reported to have said: "It is necessary to show that He did at the time intend to keep it alive, for I take it to be clear that if a tenant for life pays off an incumbrance intending to discharge the inheritance, he cannot afterwards say, 'I have altered my mind and will now revive it.' " The words in this passage which I have itali- cised were commented on by Sir E. Sullivan, M. R., in Lindsay v. Earl of Wicklow, Ir. R. 7 Eq. 192. In that case the presumed inten- tion of a tenant for life to keep a charge alive was sought to be rebutted by certain recitals in a deed, which taken by themselves and unexplained, afforded evidence of intention to merge. The master of the rolls treated this deed as evidence merely, capable of being encountered and overcome by a long series of acts on the part of the tenant for life consistent only with an intention to keep the charge alive. Of the words in italics he says, at page 205, thai they "so far as they are conversant with the position that it is necessary to prove an intention on the part of a tenant for life to keep the charge alive, must be inaccurate; I doubt if they were delivered by him as they stand." But as regards the remaining portion of the passage quoted, he adds (at p. 209) : "I do not mean to invade in the smallest degree the position which has the high authority of Lord Cranworth's dictum, in Morley v. Morley, 5 De G M. & G. 510, that if a tenant for life, when he pays off the charge, at that moment declares an intention to release the estate from the charge, he can never afterwards revive it; although I may say that there are some observations of Lord Chancellor Brady, in Lysaght v. Lysaght, 4 Ir. Jur. no, which would tend to show that in his opinion the intention of the tenant for life ought to be regarded as ambulatory until his death. However, I say nothing about that — I have no such case before me." Although Lord Cranworth's opinion, assuming it to be correctly expressed and reported, is not directly in point in the present case, the principle which underlies his judgment affords some degree of guidance. It is plain that he regarded merger, when effected by virtue of intention on the part of a tenant for life, as a disposition for the benefit of the inheritance, taking effect simultaneously with the intention of which it is the result. So clearly was this principle present to his mind, that he was prepared to hind a tenant for life (under certain circumstances at all events) by his intention once expressed. His observations were directed to the case of a tenant IN THE MATTER OF ESTATE OF CECELIA GODLEY 185 for life actively intervening to pay off a charge with the intention of extinguishing it; and he appears to have thought that such a transaction would have the same effect as a release by deed, which in the absence of a power of revocation, would have conclusively bound him. No doubt the case before me is a different one. Here the union of the life estate and the charge is not the result of any act on the part of the tenant for life, prompted by some definite intention, whether of relieving the inheritance or of acquiring the charge. In a case like the present you would naturally seek for intention, not necessarily at the precise moment of union of estate and charge, but throughout the lifetime of the tenant for life. The charge is presumed to remain his proper 'money unless evidence be forthcoming of intention to the contrary; and (applying the prin- ciple of Swinfcn v. Swinfen, 29 Beav. 199), he has the whole of his lifetime to express such an intention. But it does not follow from this proposition, that the precise time of merger must be taken to be the da{e' of his death. The date to which the intention, and the consequent merger of the charge are referable is, in my opinion, a matter of evidence in each individual case, in the same manner as the fact of the existence of an intention to merge. Some analogy is afforded by the law, as it is now settled, with regard to presump- tion of death after seven years. A man who has not been heard of for seven years is, when that period has expired, presumed to be dead. But the precise time at which death occurred is a matter of evidence in each case. In the case before me I conclude from the evidence that William Godley intended the charge to merge from the date of his acquisition of it. Why should I disassociate the merger from the intention, of which it is the result, and post-date the former ? Even if it should be ultimately held that where the matter rests in intention only, the ultimate intention prevails, I see no reason why the disposition thus effected should be post-dated, and referred to the death of the tenant for life. The difficulty is caused by the use of the word ambulatory, and by the supposed analogy of a testa- mentary disposition. But merger, in a case like the present, is a disposition inter vivos, the creation of equity in order to effectuate intention. Prima facie, I should think the date of the disposition ought to coincide with the date of the intention. It is unnecessary for me to consider whether intention once expressed is ambulatory, in the sense of revocable, inasmuch as in the case with which I have to deal the intention to merge was constant throughout. In such a state of facts, I am of opinion that merger takes place at the earliest point of time to which, upon the evidence, the intention to merge is referable. In the present case there never was a time at which, if the tenant for life had then died, his personal representative could have maintained that the charge was raisable against the estate. Various circumstances haye been relied on by the owner, con- nected with the origin of this mortgage, and with the manner in which it was subsequently dealt with; and the will of Catherine Jessop has been referred to. These circumstances would not, in my opinion, be sufficient to rebut the presumption, in the absence of- 186 SATISFACTION AND PERFORMANCE evidence of intention, and I do not deem it necessary to consider them in detail. The question remains, did the circumstances of William Godley at the death of Catherine Jessop on the 3d November, 1890, render the merger of the charge a fraud on his creditors ? The burden of proof rests on the petitioner, assuming her to be legally entitled to raise this question. She has made an affidavit in Wiseman v. Godley upon an application to set aside as a fraud upon his creditors, a voluntary assignment in her favour of a policy of assurance executed by William Godley on the 12th February, 1889. The assignment was upheld by the vice chancellor. It is evident from this affidavit that the ground of his decision was not (as suggested in argument) the trifling amount of property withdrawn from creditors by this deed, but the solvency of William Godley. The petitioner swore (in the fourth paragraph of her affidavit, filed on the 3rd July, 1894) that Catherine Jessop "left him (William Godley) £2000 in money, released a mortgage upon his estate for £500, with any interest due thereon, also released from a simple contract debt of £85." I have not decided this case upon her representation with regard to the merger of the charge' of £500; but I accept her statement that William Godley was perfectly solvent in February, 1889, and that his subsequent insolvency was largely due to the debts of his son, John Godley, for which he made himself responsible. Indeed, I am bound to do so, having regard to the vice chancellor's order. It was not until December, 1890, that John Godley compounded with his creditors, and I am of opinion that the petitioner has failed to prove that his circumstances were in the month of November such as to render a release or merger of the charge a fraud upon his creditors. I therefore allow the cause shown with costs. CHAPTER IV. SATISFACTION AND PERFORMANCE. SIR JOHN TALBOTT v. DUKE OF SHREWSBURY. In Chancery Before Sir John Trevor, M. R., 1714. Pr.'Ch., 3Q4. 1 In this case it was s,aid by Mr. Vernon, and agreed to by the master of the rolls, that if one, being indebted to another in a sum of money, does by his will give him as great, or greater sum of money than the debt amounts to, without taking any notice at all of the debt, that this shall nevertheless be in satisfaction of the debt, so as that he shall not have both the debt and legacy; but if such a legacy 2 were given upon a contingency, which if it should *A second point is omitted. See notes to this case in the various edi- tions of White and Tudor's Leading Cases in Equity. "Debt in report. MARY STRONG v. JOHN C. WILLIAMS, Executor 187 not happen, the legacy would not take place, in that case, though the contingency does actually happen, and the legacy thereby became due, yet it shall not go in satisfaction of the debt, because a debt, which is certain, shall not be merged or lost by an uncertain and contingent recompense ; for whatever is to be a satisfaction of a debt, ought to be so in its creation, and at the very time it is given, which such contingent provision is not; and cited the case of one Pollexfcn to be so adjudged by the Lord Harcourt, and affirmed on an appeal in the House of Lords ; and as it is in the case of a will, so it will be likewise if the provision were by a deed; if the provision be absolute and certain, it shall go in satisfaction of the debt; but if it be uncertain and contingent, it can be no satisfaction, because it could not be so in its creation, and the happening of the contin- gency afterwards will not alter the nature of it. 3 MARY STRONG v. JOHN C. WILLIAMS, EXECUTOR. Supreme Judicial Court of Massachusetts, 181 5. 12 Massachusetts, 390. The plaintiff declared in debt upon a bond made to her by Woodbridge Little, Esq., the defendant's testator, dated the 18th of August, 1800, conditioned to pay her two hundred dollars within one month after her marriage, if such event should take place in the lifetime of the obligor, or that his heirs, executors or adminis- trators should pay her three hundred and thirty-three dollars and thirty-three cents within six months after his decease. The action was referred to the decision of the court upon an agreed statement of facts in the following effect: On the day of making the bond declared on, the testator made a written promise to the plaintiff, then resident in his family, to pay her twenty dollars annually, so long, as she could continue in his family, and to provide for her, during the same time, all kinds of clothing, and all articles which she might need, both in health and sickness; the plaintiff at that time living in the testator's family, as a maid and housekeeper. Payment of the said annuity was regularly indorsed on said promise until the year 1806, and the plaintiff duly received the other articles therein stipulated, and continued to live in the testator's family until his decease. On the 20th of March, 1813, the said testator made his last will, 3 See, Atkinson v. Webb, Pr. Ch. 236 (1704), s. c. 2 Vern. 478; Cutfi- bert v. Peacock, 1 Salk. 155 (1707) ; Crarnner's Case, 2 Salk. 508; Chanccys Case, 1 P. Wms. 408 (1717) ; Nicholls v. Judson, 2 Atk. 300 (1742) ; Clark v. Sewell, 3 Atk. 96 (1744) ; Mathews v. Mathews, 2 Ves. Sr. 635 (i7'5S) • Adams v. Lavender, 1 McCl. & Y. 41 (1824) ; In re Horlock (1895), 1 Ch. 516. See also Bispham's Equity (9th Ed.), Sec. 538; 2 Spence's Equity, 60s; 2 Pomeroy's Eq. Jurisp. (3d Ed.), Sec. 527; Snell's Equity, Chaps. 13 and 14. i88 • SATISFACTION AND PERFORMANCE which was approved after his decease, and of which the defendant is executor; and, on the 21st of June following, the testator . died, leaving neither wife nor issue. In the said will, the said testator, in consideration of the long, faithful, friendly and meritorious services of the plaintiff, both to himself and his then late beloved wife, bequeathed to her his household furniture, with sundry other valua- ble chattels, three hundred dollars in cash, and also the use of his homestead for six months, or half the rents thereof for the first twelve months after his decease, at her election. The specific articles so bequeathed were of the value of seven hundred and forty-five dollars and eighty-four cents, and the rent of the said homestead for six months was equal to fifty dollars ; all of which the plaintiff had received, together with the said cash legacy. The amount of the testator's estate and credits was three thousand three hundred and forty-six dollars and sixty-six cents, and of the legacies, payable in money, two thousand two hundred dollars. All the residue of his estate, after payments of debts (which were of trifling amount) and legacies, he devised to the corporation of Williams College, under whose direction the defendant contended that the bond had been satisfied by the payment of the said legacies to the plaintiff. If, in the opinion of the court, the plaintiff was entitled to recover the sum due by the bond, in addition to the said legacies, judg- ment was to be rendered in her favor upon the default of the defend- ant; otherwise, the plaintiff was to become nonsuit. Putnam, J. : The general rule anciently established in chancery was, that, when a testator, being indebted, gave to his creditor a legacy equal to, or exceeding, the amount of his debt, the legacy should be considered as a satisfaction for the debt. The rule has been acknowledged in later cases, but with marks of disapprobation, and a disposition to restrain its operation in all cases where, from circumstances to be collected from the will, it might be inferred that the testator had a different intention. Haynes v. Mico, i Bro. Cha. Ca. 131. Thus, where a testator left a sufficient estate, it was deter- mined that he was to be presumed to have been kind as well as just. So, if the legacy was of a less sum than the debt, or of a different nature, or upon conditions, or not equally beneficial in some one particular, although more so in another. All the cases agree that the intention of the testator ought to prevail; and that, prima facie At least, whatever is given in a will is to be intended as a bounty. But, by later cases, the courts have not been disposed to understand the testator as meaning to pay a debt, when he declares that he makes a gift ; unless the circum- stances of the case should lead to a different conclusion. Thus, in the case cited for the plaintiff, Brown v. Dawson, 2 Vern. 498, where the wife joined in the sale of her jointure, and the husband gave her a note of £7 10s. per annum for her life ; and afterwards, upon another such sale, he gave her a bond for £6 10s. per annum for her life ; and he afterwards made his will, and gave her £14 per annum for life; the legacy was adjudged to be a satis- MARY STRONG v. JOHN C. WILLIAMS, Executor 180 faction for the note and bond. Here it will be perceived, that the annuity given in the will amounted exactly to the sums secured by the bond and note; and the presumption of satisfaction proceeded upon the similitude of the legacy to the debt. 2 Fonbl. 330, in notis. So, in the case of Fowler v. Fowler,^ P- Will. 353, the general rule was applied. There the husband, being indebted to the wife for arrears due by the marriage settlement, gave her a larger legacy by the will ; and it was held a satisfaction of the debt. But it is to be observed, that Lord Chancellor Talbot expressed great dissatisfac- tion with the rule; and it does not appear that any circumstances could be found to take the case out of its general application. In that case the court refused parol evidence, to prove that the testator intended both should be paid. But cases of this nature must depend upon the circumstances ; and v there must be a strong presumption, to induce a belief that the testator intended the legacy as a payment, and not as a bounty. 2 Fonbl. 332. Thus, where the tesfetrix had given her servant a bond for £20 free of taxes for her life, and afterwards made her will and gave the servant £20 per annum, payable half yearly, but said nothing about the taxes, the court held that both should be paid: Atkinson v. Webb, 2 Vern. 478. Here the legacy, being not quite so beneficial as the debt, did not raise a presumption that it was intended as a payment. « So, where the testator, having sufficient assets, and having manifested great kindness for the legatee, gave a legacy of a greater amount than he owed, it was holden by Lord Chancellor Cowper, that the testator might be presumed to be kind as well as just ; and he decreed the payment of the legacy as well as the debt. Cuthbert v. Peacock, 1 Salk. 155. It has been holden, that a legacy for a less sum than the debt shall never be taken as satisfaction, 1 Salk. 508; and that specific things devised are never to be considered as satis- faction of a debt, unless so expressed. 2 Eq. C. Abr., title, Devises, pi. 21, cited Bac. Abr., Legacies, D. 1 So the circumstance, where the testator had devised "that all his debts and legacies should be paid," was holden sufficient to take the case out of the general rule ; as, where the testator, indebted to his maidservant £100 by bond for wages, afterwards gave her £500, Lord Chancellor King decreed that both should be paid, and as the testator had made provision for the payment of his debts. 1 P. Will. 408, 409, vide note. So where it appeared that the legatee had lived with the testa- trix as a servant for twenty or thirty years, and she had given her a bond for £260, and, in one month afterwards, she made her will and gave her £500 ; and, in another clause, she gave the rest of her servants £5 apiece, but not to Jane Greese, the legatee ; "because," 1 Accord: Devise— Garret v. Evers, Mosely 364 (1730); Allen v. Allen, 13 S. Car. 512 (1879) ; Fetrow v. Krause, 61 111. App. 238 (1895). Specific legacy— Smith v. Marshall, 1 Root, Conn. 159 (1790) ; Cloud v. Clinkin- beard. 8 B. Mon. 397 (1848) ; Rusling v. Rusting, 42 N. J. Eq. 594 (1887). igo SATISFACTION AND PERFORMANCE says the testatrix, "I have done well for her before"; and she also made provision for her debts and legacies. Lord Hardwicke thought the circumstances above stated took the case out of the general rule, and decreed the legacy to be no satisfaction for the debt. 2 Richard- son v. Greese, 3 Atk. 65 ; Nichqjs v. Judson, S. P., Atk. 301 ; Clarke v. Sewall, S. P., 3 Atk. 97. So, where the testator was indebted for goods on an open account, a legacy for a larger sum was not held a satisfaction, because he might not know whether he was indebted or not; and, 'therefore, no presumption was to arise, that he intended merely to pay a debt. 1 P. Will. 299; Powell's Case, 10 Mod. 201. In the case at bar, the consideration for the legacy appears from the will to have been for the services of the legatee. A presumption that the legacy was intended to be a satisfaction of the bond, also, must rest on the fact, that the bond was given for the same services ; of which fact there is no evidence before us. It may have been for a different cause. We can only presume that it was for a lawful one. It appears, also, from the will, that the testator intended his debts and legacies should be paid, before his residuary legatees should take anything. The pecuniary legacy to the plaintiff, also, is not so much as the debt; and, therefore, cannot be considered as a payment of it. Neither is there any declaration of the testator, that the specific articles given should be considered as a satisfac- tion of the debt. It appears, also, that there are sufficient assets. From a consideration of the principles and decisions applicable to this case, we are, therefore, all of opinion that the plaintiff ought to recover. 8 IN RE RATTENBERRY. In the Chancery Division, 1906. (1906) 1 Ch., 667. Mrs. Rattenberry, the testatrix in this action, by her, will, dated Noverrfber 23, 1903, made the following bequest: "I give and bequeath to my sister, Clara Alberta Ray, the sum of £400," and after giving some other legacies, directed the residue of her estate to be divided among all her nephews, and appointed C. A. Ray and Margaret Fraser Dallas executrixes. The will did not contain any direction to pay debts. The- testatrix died on February 22, 1904, 'Accord: Wallace v. Pomfret, 11 Ves. 543 (1805); Le Sage v. Couss- maker, 1 Esp. 187 (1793) ; Succession of Palmer, 137 La. 190 (1915). Contra: Ellard v. Phelan (1914), 1 I- R- 76. See also, Matter of Tracy, 179 N. Y. soi (1904). 'See further, Byrne v. Byrne, 3 S. & R., Pa. 54 (1817) ; Cloud v. Clinkinbeard, 8 B. Mon. 397 (1848) ; Van Riper v. Van Riper, 2 N. J. Eq. 1 (1838); Horner v. McGaughy, 62 Pa. 189 (1869); Harris, v. Rhode Island H. T. Co., 10 R. I. 313 (1872); Boughton v. Flint, 76 N. Y. 476 (1878); Reynolds v. Robinson, 82 N. Y. 103 (1880) ; Deichman v. Arndt, 49 N. J. Eq. 106 (1891) ; Thompson v. Wilson, 82 111. App. 29 (1898) ; Stewart v. Conrad, 100 Va. 128 (1902). IN RE RATTENBERRY . 191 and her will was proved by C. A. Ray alone, Mrs. Dallas having renounced probate. The testatrix was at her death indebted to her sister, C. A. Ray, in the sum of £150. Of this the testatrix had borrowed £100 on January 26, 1899, and signed the following receipt: "Received of Mrs. Ray (my sister) the sum of one hundred pounds on January 26, 1899. Interest to be paid £5 per annum in half-yearly instal- ments of £2 10s." On August 17, 1899, the testatrix borrowed from Mrs. Ray another sum of £50, and signed a receipt in a similar form. On November 7, 1902, the testatrix signed a memorandum in the presence of two witnesses in the following form: "I owe my sister, Clara A. Ray, one hundred and fifty pounds, for which I am paying five per cent, interest." Interest was regularly paid up to the testatrix's death. Her estate was more than sufficient to pay her debts and the legacies given by her will and expenses. Mrs. C. A. Ray had retained the £150 and interest out of the estate. This summons was taken out by C. A. Ray for the determina- tion of the question whether the debt of £150 was satisfied by the legacy of £400. The defendant was a nephew of the testatrix and one of the residuary legatees. 1 Swinfen Eady, J. : The rule is that a legacy to a creditor of an amount equal to or greater than the debt is prima facie to be considered a satisfaction of the debt. This rule was established two centuries ago ; but no sooner was it established than it was frequently disapproved of, and exceptions were engrafted upon it. In In re Horlock (1895), 1 Ch. 516, Stirling, J., said that he joined with the many judges who had disapproved the rule laid down, and that he equally disapproved of the exceptions which had been grafted on it, but that both were binding upon him; they are both equally binding upon me. The present case is in my opinion within the rule, unless there is sufficient indication of intention to exclude it. The debt was £150, money borrowed by the testatrix in 1899 from her sister, the plaintiff, upon which the testatrix paid interest at five per cent, during her life, and it was payable on demand. The legacy is a general pecuniary legacy of £400 without any time being specified for payment, and without any mention of interest. The will bears date November 23/1903, and does not contain any direction to pay debts. , It is sought to exclude the rule on the ground that the debt carries interest from the death and the legacy only from one year after the death. But it was decided by Lord Hardwicke in Clark v. Sewell, 3 Atk. 96, that where the legacy is in satisfaction of a debt and no time is fixed for payment of the legacy, it carries interest? from the death of the testator. If the will mentions a date for payment, then interest will only run from that date; and this was 1 Arguments of counsel are omitted. 192 SATISFACTION AND PERFORMANCE the ground upon which Haynes v. Mico, i Bro. C. C. 129, and Adams v. Lavender, 1 M'Cl. & Y. 41, were decided, as pointed out by •Stirling, J. Indeed, in Clark v. Sewell, 3 Atk. 96, Lord Hardwicke said: "According to the rule of this court, a legacy that ought to be deemed a satisfaction must take place immediately after the death of the testator ; for the debt, whether of a principal sum or for inter- est, is due at the death of the testator, and therefore the legacy must be so, to . . . whether the postponing the legacy is a month only or a longer time, it makes no manner of difference." Lord Hard- wicke, in referring to a legacy that "must take place immediately after the death of the testator," means a legacy the payment of which is not postponed by the testator. A legacy is within the rule laid down by Lord Hardwicke if it is an immediate legacy, although, of course, only payable in a due course of administration and after debts and funeral expenses have been provided for. In Fowler v. Fowler, 3 P. Wms. 353, where the debt due at the date of the will was £200 for arrears of pin money, and a general pecuniary legacy of £500 was given, Talbot, L. C, held that the legacy was a satisfaction of the debt. In Gaynon v. Wood, 1 Dick; 331, there was a bond debt of £200 and a legacy of £500 given to the creditor by a subsequent codicil, and the master of the rolls held that the legacy must be taken in satisfaction of the debt, and the fact that since the death the executors had paid the bond debt to the creditor made no difference in adjusting the rights of the parties. So, again, In re Fletcher, 38 Ch. D. 373, before North, J., is an instance of a legacy being given in satisfaction of a debt, where the debt carried interest, and where no time was fixed for payment of the legacy. In that case the debt was in fact paid off "by the testator in his lifetime, and the actual decision was that the legacy had been adeemed, but the learned judge first considered how the matter would have stood if the debt had not been so paid off. He said: "Suppose the debt had not been paid, could the widow have taken the debt as well as the legacy ? I think clearly not." The fact, therefore, that the legacy is given generally, without any reference to fime of payment or interest, will not exclude the rule. Reliance was also placed on the fact that the plaintiff was appointed executrix and could retrain her own debt, but in my opin- ion this makes no difference. 2 As I have already pointed out, in the case of Gaynon v. Wood, I Dick. 331, the debt had been actually paid by the executor. I am therefore bound by the authorities to which I have referred to hold that in the present case the legacy is a satisfaction of the debt. 3 The distinctions between the cases on the satisfaction of debts by annuities are very slender, as may be seen by comparing Atkinson v. Littlewood, L. R. 18 Eq. 595, before Malins, V. C, and In re Dowse, 50 L. J. (Ch.) 285, before Hall, V. C, which latter case 'See as to retainer, 2 Williams on Executors (7 Amer. Ed.), 258. "Accord: Wesco's Appeal, 52 Pa. 19s (1866); Allen v. Merwin, 121 Mass. 378 (1876) ; Adams v. Adams, 55 N. J. Eq. 42 (1896). IN RE HUISH 193 was followed by Stirling, J., in In re Horlock (1895), 1 Ch. 516; but it is by the decisions on cases of legacies, which leave no room for doubt, that the present case is governed. IN RE HUISH. In the Chancery Division, 1889. 43 Ch. D., 260. On the 15th of March, 1878, Mrs. Margaret Huish, widow, executed and handed over to her nephew, Marcus Bourne Huish, who was thep about to be married, a bond in the sum of £2000, the condition of the bond being that it should be void, "If the executors or administrators of the said Margaret Huish shall within twelve calendar months next after her decease pay to the said Marcus Bourne Huish, if he shall be then living, or to his executors, admin- istrators or assigns, in case he, the said Marcus Bourne Huish, shall have died leaving issue surviving him, but not otherwise, the sum of £1000, together with interest for the same after the rate of £5 per cent, per annum from the day of the death of the said Margaret Huish." This bond was immediately assigned by M. B. Huish to the trustees of his marriage settlement, to be held by them upon the trusts thereof. Margaret Huish was not in loco parentis to her nephew, but it appeared from the evidence that she knew of his approaching marriage, and that the bond was to be and had been included in the settled property. By her will, dated the nth of January, 1887, Margaret Huish, after devising certain freehold property to her said nephew, M. B. Huish, bequeathed legacies to various persons, including a legacy of £3000 to her said nephew; and she also settled certain articles upon trusts for him and his issue as heirlooms. She also bequeathed certain pictures and other articles to -her said nephew absolutely. After directing that all legacies should be paid free of legacy duty, the testatrix gave her residuary real and personal property to her sister and niece equally. In a codicil, dated the same day, the testatrix said : "I wish all my funeral expenses and all just and lawful debts that I may owe to be paid at once." Margaret Huish died on the 21st of March, 1889, leaving M. B. Huish surviving her. This was an originating summons by the trustees and executors of the will to ascertain (amongst other ques- tions) whether the legacy of £3000 was given in satisfaction of the whole or any part of the bond debt of iiobo. 1 ' Counsel's arguments are omitted. 194 SATISFACTION AND PERFORMANCE Kay, J. : I confess I think it is most expedient to abide by broad general rules in cases of this kind. If fine distinctions are to be made in each case the law is left in a state of great embarrass- ment and doubt. Here is the case of a lady who, in her lifetime, gave a bond to Marcus Bourne Huish, which was made payable to him on an event which has happened, and on her death, which has also happened. After she had given the bond, she made a will by which she gave him different benefits — real estate, chattels, a specific legacy and a legacy of £3000. She said nothing about the bond in her will. The bond was actually given to Mr. Huish on the occasion of his marriage, and was intended by him to be subject to the settlement then made, and was in fact included in it, as it appears she knew. She made a codicil to her will, in which she said that she wished her debts to be paid at once after her death. v It was argued rightly that this is a direction to pay debts at once, and it singularly affects this particular debt, because by the terms of the bond the debt was to be payable within twelve calendar months after her death, and she may have had this very bond in her mind, and wished that it should be paid at once. However that may be, there is in the codicil that which was not strictly necessary, namely, a direction for the payment of debts. Now, it has long been settled that in the case of a debt owing by a testator, if the testator after- wards makes a will and gives a legacy of the same or a greater amount to the creditor, and then in his will directs that his debts and legacies shall be paid, that direction rebuts the presumption of satisfaction of the debt by the legacy. Now, what difference is there between a direction to pay debts and legacies and a direction to pay debts only? There is none, because the gift of a legacy is in itself a direction that the legacy shall be paid. Therefore, all that -is mate- rial is, that there should be a direction that debts should be paid. If,' after giving a legacy to his creditor, a testator says, "I direct my debts to be paid," that means, "Although I have given a legacy to my creditor, I direct that my debt to him be paid also." It seems to .me to make no difference where the testator directs that his legacies, as well as his debts, shall be paid. Accordingly, I think that the case of Edmunds v. Low, 3 K. & J. 318, which appears to have drawn a distinction between a direction to pay debts and legacies and a direction to pay debts only, was not sufficiently considered ; and I find that the balance of authority is against it. Indeed, the same learned judge who decided that case, in a later decision of Dawson v. Dawson, Law Rep. 4 Eq. 504, after referring to several other decisions, seems to have come to the conclusion that a direction to pay debts only was sufficient to rebut the presumption of satisfac- tion. I think, therefore, on the whole, it is better to abide by that as a broad "rule,, which is very easy to understand, and which can be followed as a guide in cases of this kind. It is not necessary in a will to give any direction to pay debts at all. If such a direction is inserted it may be assumed to be there for some purpose. It is very likely, if the testatrix knew anything about the law, as I am bound to presume that she did, that she desired in this way to prevent PLUNKETT v. LEWIS 195 the suggestion of the satisfaction of the debt which she owed by the legacy. I therefore hold that there is no satisfaction, and that the debt and legacy must both be paid. 2 PLUNKETT v. LEWIS. In Chancery Before Sir James Wigram, 1844. 3 Hare, 316. In 1827 two sums (£10,500 and £2048) were invested in the name of C. Munro, upon trust for Lyndon Evelyn for life, with remainder to his son and daughter, Colonel Frederick Evelyn and Elizabeth Evelyn. In 1828 these funds were, transferred by the trustee to Lyndon Evelyn and his children and in 1833 the securi- ties were sold and the proceeds, amounting to £11,445, applied by Lyndon Evelyn to his .own use, principally in the purchase of real estate. In 1837 Colonel Evelyn died. In 1838 Elizabeth Evelyn married Mr. Plunkett, and by the marriage settlement Lyndon Evelyn advanced £16,000 to clear incumbrances from Mr. Plunkett's estates, covenanted that £20,000 should be paid within six months of his decease, and settled land on the daughter and her husband. In 1839 Lyndon Evelyn died, and by his will devised and bequeathed his real and personal estate to the defendant, Francis Evelyn, and named the defendant, Robert Lewis, his executor. This bill was filed by Mr. and Mrs. Plunkett, praying that the executor might be decreed to replace the trust funds and that an account might be taken of what was due from Lyndon Evelyn's estate in respect thereof. 1 The Vice Chancellor: In considering the second question, which I shall first notice, it is to be observed that the claim of the plainfTff was to one-half of the £11,445, after her father's death; and the advance he makes upon her marriage is £16,000 in ready money, and £20,000 more within six months after his death, besides a settlement of land, the property thus settled being estimated at £70,000 in the whole. It was not argued before me (nor could it have been argued with success) that such provision would not satisfy Miss Evelyn's claim, by reason only that the advances so made and agreed to be made were, in their nature and character, so different from "the father's liability that one could not be presumed to be a satisfaction of the other; or that satisfaction is not to be presumed in this case, unless from the terms and construction of the entire settlement (consisting of the three deeds), or from the whole trans- action, the application of the doctrine of satisfaction ought to be excluded. 'Accord: Edelen v. Dent, 2 G. & J., Md. 185 (1830) ; Fort v. Gooding, 9 Barb. 371 (1850) ; Smith v. Smith, 83 Mass. 129 (1861) ; Gibbons v. Wood- ward, 3 Walk. Pa. 303 (1883) ; H eider v. Sharp, 44 N. J. Eq. 167 (1888) ; Matter of Dailey, 43 N. Y. Misc. 552 (1904). 'The statement of facts is condensed, the arguments omitted and only so much of the judgment given as relates to Mrs. Plunkett's claim. 196 SATISFACTION AND PERFORMANCE Now, the rule, as stated (2 Roper, Leg. 57), and, I believe, correctly stated, is this : that where a debt exists from a parent to a child, "an advancement upon the child's marriage, or upon some other occasion, of a portion equal to or exceeding the debt, in the parent's life, shall prima facie be deemed a satisfaction." I think this presumption, in the abstract case, is just and reasonable. If a debtor pays to his creditor a sum equal to his debt, the presumption must be that he intends by the payment to discharge the debt; and if, instead of paying it into the hands of the creditor, he pays it to another for the use and benefit of the creditor, as part of a trans- action to which the creditor is a consenting party, the presumption in the abstract must be the same. I say in the abstract, because all the cases show that the presumption may be rebutted, and that the circumstances of each case must be considered before the court can decide whether, upon the whole case, the presumption is to be admitted or rejected. In this case, the existence of a debt of ascer- tained amount, and the advance by the father to an amount far exceeding the amount of the debt, and that, on behalf of the daughter, in a transaction to which she was a party, all concur. But it was said, first, that, in the settlement by Lyndon Evelyn, distinct considerations (which I have already noticed) were expressed, and that the expression of those considerations excluded the satisfac- tion; secondly, that the entire settlement was a purchase from the husband, and that, as he gave value for the lady's settled fortune, it would not be presumed that the whole intention of the parties was not expressed in the settlement; and, thirdly, that the husband had no notice of his wife's rights in the trust stock, and, therefore, could not be barred. In Wood v. Bryant (2 Atk. 521), the father was administrator durante minore aetate of an estate under which his daughter was interested to an extent not exceeding £500. On her marriage the father agreed to give his daughter £800 as a portion, and in consid- eration of natural love and affection ; and in that case, as in this, the argument was founded, inter alia, upon the expression of considera- tion. Lord Hardwicke went fully into the law upon the broad prin- ciple of satisfaction ; and, independently of some delay, to which he adverted, held it a satisfaction. He said: "There are very few cases where a father will not be presumed to have paid the debt he owes to a daughter, where, in his lifetime, he gives her in marriage a greater sum than he owed her ; for it is very unnatural to suppose that he would choose to leave himself a debtor to her, and subject to an account." And he expressed his disapprobation of Chidley v. Lee (Pre. Cha. 228), in which Sir J. Trevor went upon the ground that the husband was ignorant of his wife's claim. The case of Seed v. Bradford (1 Ves. 500) contains a very clear expression of Sir John Strange's opinion upon the abstract point, although he fortified his opinion upon that point by the acquiescence, to which he referred. In that case, also, the husband appears not to have known of his wife's right until after the marriage. In Chave v. F arrant (18 Ves. 8), the father, owing £150 to his children, as executor of their SHARP v. WIGHTMAN 197 grandfather, covenanted in their settlements to pay £1000 each for the portions of his daughters. It did not appear that the husbands knew of the debt. Sir W. Grant was clear upon the point. The above cases, which bring the law down from Lord Hard- wicke to the time of Sir W. Grant, have, I believe, always been con- sidered as showing the law of the court. They clearly decide that neither the expression of natural love and affection as the reason of the gift, nor the ignorance of the husband of his wife's rights, will necessarily prevent the application of tne doctrine of satisfaction. And if the acts and declarations of the parties, as proved in evidence, are to be taken into account in this case (as in some of the cases they have been), it is impossible to say they do not, in the clearest manner, confirm the conclusion to which, without those acts and declarations, I should come. It must not, however, be understood as intimating an opinion that the expression of natural love and affection, as the considera- tion of a portion give*n by a parent on the marriage of a child, may not, in any case, be entitled to weight. In the case of a portion being the exact amount of the parent's debt to his child, perhaps it might be material, at least in conjunction with other circumstances; for it might be safd that natural love and affection could not be the motive for discharging a legal or equitable obligation; but that reasoning can have little weight where the father, as in this case, gives a portion so far exceeding his liability. There is here ample to satisfy the natural love and affection, without excluding the pre- sumption that the debt was intended to be satisfied also. 2 SHARP v. WIGHTMAN. Supreme Court of Pennsylvania, 1903. 205 Pennsylvania, 28s. 1 Dean, J. : John G. Wightman, the defendant, is the son of Jane A. Wightman, for whom the plaintiff is executor. The mother died on August 24, 1901, possessed of considerable estate. In her lifetime she had frequently given to her son money in amounts of two hundred dollars and three hundred dollars, for which she took his promissory notes, which were in her possession uncanceled at her death. On these notes, amounting with interest to over three thousand dollars, the executor brought suit against the son; the son made affidavit of defense, averring: 1. That one note of over one thousand five hundred dollars was made up of several of the 'Accord: MacDowell v. Halfpenny, 2 Vern. 484 (1704); Seed v. Brad- ford, 1 Ves. Sr. 501 (1750) ; Chave v. Farrant, 18 Ves. 8 (1810) ; Hayes v. Garvey, 2 J. & La. T. 268 (1845); Hardinpham v. Thomas, 2 Drew. 353 (1854); In re Lawes (1876), 20 Ch. 81; Glover v. Patten, 165 U. S. 394 (1896). Compare Reade v. Reade (1881), 9 Ir. 409; Crichton v. Crkhton (1896), 1 Ch. 870. 1 Arguments of counsel and part of the opinion are omitted. 198 .SATISFACTION AND PERFORMANCE smaller notes, which he had neglected to take up when the larger note was given. 2. That there was between him and his mother at the time the notes were given a parol agreement, that in case the son survived her, they were to be treated as part of his estate and can- celed, but in case she survived were to be collected. 3. That a rea- sonable interpretation of his mother's will, which he makes part of his affidavit, shows such to have been her intent. 4. He further avers an ability to prove the parol agreement by a disinterested witness. On a rule for judgment for want of a sufficient affidavit of defense, the court below made the rule absolute, and defendant appeals. The question is whether the affidavit averred sufficient to pre- vent judgment. That brings us to an interpretation of the will. After making certain bequests of household goods and personal jewelry, as to the residue of her estate, she directs as follows : "Fourth. — The rest, residue and remainder of my estate, real, personal and mixed, I give, devise and bequeath to my trustees here- inafter named, their successor or successors, in trust, nevertheless, for the following purposes, to wit : "To invest and keep the same invested in such manner as they shall deem best, and to pay the net interest, income and profits thereof into the hands of my said son, John Gerry Wightman, M.D.* from time to time so long as he shall live free from his present or future debts, contracts and engagements. If he should die leaving issue at his death, I direct that my said trustee or trustees, their successor or successors, shall assign, transfer and convey said trust estate to said issue as if my said son had survived his wife and died possessed thereof intestate and a citizen of Pennsylvania." If we give this language a technical construction to accord with the strict import of the words, it would in effect constitute a gift to her son of the amounts represented by the notes, for the income is to be free from his present debts; the notes .evidence a present indebtedness of the son to the mother. But a general and well settled rule here comes in, which avoids the technical construction. That rule is this: "A legacy by a testator to his debtor does not operate as a release or extinguishment of his debt, unless it clearly appears that it was the intention of testator that it should so oper- ate." This rule is recognized by the text-writers and by our own cases: 2 Story's Equity Jurisprudence, Sec. 1123; Matlack's Appeal, 153 Pa. 402. 2 It will be noticed, however, that it does not exactly meet the words of this bequest; the gift is not only of the net "Accord: Wttmot v. Woodhouse, 4 Br. Ch. 227 (1793); Sorrell v. Craig, 8 Ala. 566 (1845) ; Smith v. Chandler, 67 Mass. 524 (1854) ; Snyder v. Warbasse, 11 N. J. Eq. 463 (1857); Strong v. Bass, 35 Pa. 333 (i860); Blackler v. Boott, 114 Mass. 24 (1873) : Brokaw v. Hudson, 27 N. J. Eq. 135 (1876) ; Bowen v. Evans, 70 la. 368 (1886) ; Sleeper v. Kelley, 65 N. H. 206 (1889) ; Irvine v. Palmer, 91 Tenn. 463 (1892) ; Estate of Foster, 38 N. Y. Misc. 347 (1902); Cochran v. Cochran, 3 Pennyw. Del. 524 (1002); De Haven's Estate, 207 Pa. 147 (1903) ; Leask v. Hoagland, 64 N. Y. Misc. 156 (1909). For the distinction between debts and advancements, see Went- ■worth v. Wentworth, 75 N. H. 547 (1910). HURST AND ANOTHER v. BEACH AND OTHERS 190 income, which of itself would not warrant an inference that the debt was to be canceled, but is at once followed by the words "free from his present or future debts." It would not be free from his present debts if the one he owed the testatrix was to be paid. We may say then, that, taking the view most favorable to the appellee, the intention of the testatrix was doubtful. All the authorities agree that if the intention be doubtful we can have resort to evidence, as Judge Story says, aliunde, or as Chief Justice Sterrett says in Matlack's Appeal, supra, evidence dehors the instrument, or more elaborately by Gibson, C. J., in Zeigler v. Eckert, 6 Pa. 13, "It (the evidence) is not adduced to control the will, but to rebut a pre- sumption from matter extrinsic to it." He then cites from Lord Loughborough's opinion of Aston v. Pye, 5 Ves. 350: "A father who has taken two bonds from his daughter's husband for money lent, said in a letter to the husband's mother that the debt was for- given and expressed the same thing to others, whose testimony was Corroborated by cash accounts in testator's handwriting. The chan- cellor decreed not only payment of the legacy, but that the other bond should not be demanded." 3 , We assume, then, that the intention of testatrix by the will is at least doubtful, what then is the evidence dehors the will averred in the affidavit? He avers, quoting from the affidavit: "Upon several occasions when her property (the mother's) became the subject of my mother's talk with her confidential' friend, Cathe- rine Bard — who for more than ten years prior to my mother's death lived with her as a companion — my mother said she had taken the notes which I had given her so that the money would be repaid if I died first ; otherwise she did not wish me to repay them and in that way benefit her nephews and nieces." Taking into consideration the doubtfulness of the intention as expressed in the will, the facts that the son was her only child and the sole legatee of the income of her residuary estate, and that the evidence of Catherine Bard, if believed by the jury, would make clear an intention not to have the notes collected if he survived her, we think the evidence dehors the will should have been submitted to them. The judgment of the court below is reversed, and it is directed that the trial be proceeded with according to law. HURST AND ANOTHER v. BEACH AND OTHERS. In Chancery Before Sir John Leach, 1820. 5 Madd., .v>i- By the will of B. Heath, dated the 2d January, 1812, several legacies were given, and the will proceeded this: "I also give and bequeath to John Bach (meaning John Beach), now living with me, the sum of £300, all which said legacies I direct and desire may be "See Eden v. Smith, 5 Ves. 341 (1800) ; Clark v. Bogardus, 2 Edw. Ch. N. Y. 387 (1834), and compare Woodruff v. Migeon, 46 Conn. 236 (1878). 200 SATISFACTION AND PERFORMANCE paid immediately after my decease, and bear legal interest from . my death till paid." By a codicil to her will, dated the eleventh day of February, 1814, the testatrix, after giving several legacies of £500 each, gave "to my man servant John Beach, a like legacy or sum of £500." The testatrix then gave a like sum of £500 to her maid servant; and all these legacies she directed to be paid at the end of six months after her decease. The testatrix died on the 15th February, 1814. The bill was filed by the executors, and prayed that the legacy of £500 bequeathed by the codicil to Beach might be declared to be given in lieu and satis- faction of the legacy of £300 left by the will. 1 The Vice Chancellor: In cases of this class considerable confusion has been introduced from the inaccuracy of reporters. The material errors in Atkyn's report (2 Atk. 636) of the leading case of the Duke of St. Albans v. Beauclerk are pointed out by Lord Bathurst in his judgment in Hooley v. Hatton (stated in a note to Ridges v. Morrison, 1 Bro. C. C. 390, and S. C. 2 Dick. 491 ) ; and no person can read Lord Thurlow's reported judgment upon this subject without observing that he is often made to contradict him- self. I think the true result of the decisions, as they apply to the present point, is to be stated thus: Where a testator leaves two testamentary instruments, and in both has given a legacy simpliciter to the same person, the court, considering that he who has twice given must, prima facie, be intended to mean two gifts, awards to the legatee both legacies; and it is indifferent whether the second legacy is of the same amount, or less, or larger than the first. 2 But if in such two instruments the legacies are not given simpliciter, but the motive of the gift is expressed, and in both instruments the same motive is expressed, and the same sum is given, the court considers these two coincidences as raising a presumption that the testator did not by the second instrument mean a second gift, but meant only a repetition of the former gift. 3 The court raises this presumption only where the double coinci- dence occurs, of the same motive, and the same sum in both instru- ments. It will not raise it, if in either instrument there be no motive, or a different motive expressed, although the sums be the same ; nor will it raise it if the same motive be expressed in both instruments, and the sums be different. The presumption cannot therefore be raised in this case, although it be admitted that the motives are the same, inasmuch as the sums are different, and upon the face of these instruments the defendant is entitled to both sums. 1 'The arguments of counsel as well as the judgment on another point are omitted. 'Duke of St. Albans v. Beanclerk, 2 Atk. 636 (1743); Lee v. Pain, 4 Hare 201 (1845) ; Roch v. Cullen, 6 Hare 531 (1848) ; Russell v. Dickson, 4 H. L. Ca. 293 (1853) ; Johnstone v. Earl of Harrowby, 1 DeG., F. & J. 183 (1859) ; Wilson v. O'Leary, 7 Ch. App. 448 (1872). 'Suisse v. Lowther, 2 Hare 424 (1843); McKinnon v. Peach, ,2 Keen 555 (1855). HURST AND ANOTHER v. BEACH AND OTHERS 201 This reasoning has no application to cases where the second instrument affords intrinsic evidence that it was intended by the testator in substitution of the first instrument, as in the cases of The Duke of St. Albans v. Beauclerk, Coote v. Boyd (2 Bro. C. C. 521) and the late case of Attorney General v. Harley, before me (4 Madd. 263). Upon the question whether evidence is admissible to prove that the testatrix did not mean that the defendant should take both sums, there are no decisions in courts of equity. There are obiter dicta for the admission of such testimony ; but, in The Duke of Leeds v. Osborne, the point was fully argued, and Lord Alvanley appears to have inclined against receiving it. It did not,- however, become necessary there to decide the question. It is to be collected from the digest that it was admitted by the civil law. This court has nb original jurisdiction in testamentary matters ; it acts with respect to them only upon the ground of administering a trust; and is bound to adopt, in questions of legacy, the principles and rules of the ecclesiastical court. I found it necessary, there- fore, to direct inquiry to be made in that court upon this point, and the answer that I have received is that no decision has taken place there upon this question, and that no settled opinion is formed upon it. It remains then to be considered upon the principles of evidence which are received in our own law. Our primary principle is that evidence is not admissible to contradict a written instrument. In some cases, courts of equity raise a presumption against the apparent intention of a testamentary instrument, and there they will receive evidence to repel that pre- sumption; for the effect of such testimony is not to show that the testator did not mean what he has said; but, on the contrary, to prove that he did mean what he has expressed. Thus, where the court raises the presumption against the inten- tion of a double gift, by reason that the sums and the motive are the same in both instruments, it will receive evidence that the testator actually intended the double gift he has expressed. In like manner, evidence is received to repel the presumption raised against an executor's title to the residue, from the circumstance of a legacy given to him ; and to repel the presumption that a portion is satisfied by a legacy. In all these cases the evidence is received in support of the apparent effect of the instrument, and not against it. 4 Here the evidence tendered is not in support of the apparent effect of the instrument, but directly against it. This codicil leaves unrevoked the former legacy of £300 to the defendant, and makes to him a further substantive gift of £500. The evidence tendered 'Hal! v. Hall, 1 Dr. & Wr. 116 (1841) ; Guv v. Sharp, 1 Mv. & K. S89 (1883). 202 SATISFACTION AND PERFORMANCE is, that the testatrix did not mean this as a further gift of £500, but meant to substitute the £500 in place of the former £300. I am of opinion, therefore, that such evidence cannot be received without breaking in upon the primary rule, that parol evidence is not admissible against the expressed effect of a written instrument. The minutes of the decree were thus : "Declare that the defend- ant, John Beach, is entitled as well to the legacy of £300 given to him by the will of Betty Heath, the testatrix in the pleadings named, as to the legacy of £500 given to him by the codicil to the said testatrix's said will. 5 CHARLES WALLACE, GUARDIAN OF JENNIE WARD MAITLAND, v. MARY M. DuBOIS AND OTHERS. Court of Appeals of Maryland, 1885. 65 Maryland, 153. Appeal from the circuit court, of Baltimore city. Benjamin Maitland died in April, 1884, leaving a last will and testament duly executed on the 23d of June, 1879, by which he appointed Charles E. Phelps and John V. L. Findlay his executors. The estate was fujly administered, except as to that portion of it which has given rise to the present controversy. The testator bequeathed to his son, Lindley H. Maitland, the sum of six thousand dollars. This son had married, and there was fruit of the marriage, the infant, Jennie Ward Maitland. The father having deceased, Charles Wallace was appointed the guardian of the child, and as such guardian claimed the whole of the legacy left to the father. Creditors of Lindley claimed that they should be paid the amount of their bills out of his distributive share. Legatees under the will of Benjamin Maitland claimed that certain promissory notes of Lindley, given to his father and found among his effects, as also the amount of receipted bills paid by him for the funeral expenses of Lindley and of "his wife, should be treated as a partial ademption or satisfaction of the legacy, left to the said Lindley. On a bill filed by the executors to obtain the advice and direction of the court as to their duty in respect of these conflicting claims, a decree was passed rejecting the claims of the creditors of Lindley, and direct- ing that the promissory notes executed by the said Lindley, and the 'Hooley v. Hatton, 1 Br. Chi. 390 n. and notes in White and Tudor's Leading Cases in Equity; 2 Pomeroy's Eq. Jurisp., Sec. 544. See also, DeWitt v. Yates, 10 Johns. N. Y. 156 (1813) ; Jones v. Creveling, 19 N. J. Eq. 127 (1842)'; Edwards v. Rainer, 17' Ohio St. 597 (1867) ; Rice v. Boston P. & S. A. Soc, 56 N. H. 191 (1875) ; Tyson's Estate, 47 Pa. Super. Ct. 108 (1911). Thompson v. Leek, 74 Conn. 576 (1902). A clause in the will contained these words: "I give and bequeath absolutely as follows To my sister Emily Leek, three thousand dollars To Emily Leek, three thousand dollars." Held: The legatee was entitled to one legacy only, the pre- sumption being that one of the bequests was but a repetition of the same gift CHARLES WALLACE, GUARDIAN, v. MARY M. DuBOIS, &c. 203 bills for funeral expenses of said Lindley and his wife, should be treated and considered as a partial ademption and satisfaction of the legacy to the said Lindley from his father, and rejecting the claim of the guardian of Jennie W. Maitland to receive the amount of said promissory notes and bills for funeral expenses. From this decree the guardian appealed. 1 Robinson, J. : This is a question in regard to ademption or satisfaction of a legacy. The testator gave to his son Lindley a legacy of six thousand dollars, and to each of his other children he also gave legacies, except Burgwynm, who had received already, the testator says, more than his share of the estate. The will was made in 1879, and Lindley died in 1883, in the lifetime of his father, leaving a daughter, the appellant, his only child and heir at law. The testator died in 1884, without revoking the bequest to Lindley, and among Jiis papers were found three promissory notes of Lindley, dated February 10, April 26 and July 20, 1882, respec- tively, amounting in the aggregate to two thousand dollars ; also a promissory note dated August 2, 1880, for one hundred and eighty- seven dollars and thirty cents ; also accounts of the funeral expenses of both Lindley and his wife, all of which were paid by the testator. These notes and accounts, it is contended, are to be considered as an ademption or satisfaction pro tanto of the legacy to Lindley. The law in regard to the ademption of legacies is quite well settled, and the only difficulty lies in its application to ]the facts of each particular case. Where a father gives a legacy to a child with- out stating any particular purpose for which it is given, the legacy is in itself regarded as a portion of the estate intended for such child. And if the testator afterwards makes an advancement to such child on his marriage or upon going into business, the money thus advanced will be presumed to be in payment or satisfaction of the legacy, either pro tanto or in full, as the money advanced may be equal to or less than the legacy. 2 This presumption is founded on the equitable principle that a father in making a distribution of his property by will among his children, means to give to each the amount which he ought to have, in view of the claims of all upon his bounty; and if he afterwards deems it proper to make an advancement to one or more of them, the amount thus advanced ought to be deducted from the portion of the child benefited. It is a rule adopted by courts of equity to prevent a child from getting a double portion, an inequality which it is but fair to presume the testator did not intend. Shudal v. Jekyll, 2 Atk. 518; Ex parte Pye, 18 Ves. 150; Suisse v. Lowther, 2 Hare 424; Pym v. Lockyer, 5 My. & Cr. 34; Kirk v. Eddowes, 3 Hare 509; Hopwood v. Hop- wood, 7 House of Lords' Cases 726. 1 Counsel's arguments are omitted. 'Pym v. Lockyer, 5 My. & C. 29 (1840), established the rule that a portion of less amount than the provision in the will is a satisfaction pro tanto only. 204 SATISFACTION AND PERFORMANCE And if the money is advanced or paid by the father under such circumstances as not to raise a presumption of satisfaction of the legacy, parol evidence may be offered to show that such was his intention. Now in this case the three promissory notes, amounting to two thousand dollars, are ordinary promissory notes, and upon their face import merely an indebtedness on the part of Lindley to the testator. But. the proof shows they were given for money advanced by his father for the purpose of setting him, Lindley, up in business, and further, that the money thus advanced was intended by the father, and so understood by Lindley, to be in part payment of the legacy. And this being so, the amount of these notes must be deducted from the legacy. As to the note, however, dated August 2, 1880, for one hundred and eighty-seven dollars and thirty cents, there is nothing on its face, nor is there a particle of proof, to show that it was given for money advanced on account of the legacy. It bears date eighteen months before Lindley started in business, and in the absence of proof to the contrary it must be regarded merely as a debt due by him to his father. And so as to the accounts for the funeral expenses of Lindley and his wife. These accounts were paid, it is true, by the testator, but the evidence does not show that they were paid by him on account or in part satisfaction of the legacy. Mrs. DuBois says, it was her father's intention to deduct them from the legacy — that he often spoke about it. But what he said, and ati what time the declarations were made, does not appear. And besides, upon cross-examination, her father, she said, always expected to be paid the amount advanced by him in payment of the funeral expenses. If this be so, if he considered it an indebtedness and not a gift, the payment by him would not operate as an ademp- tion pro tanto of the legacy. For the distinction between a loan and a gift is the right reserved by that father to demand payment of the money ; if this right be reserved, it is a loan and not a gift. Harley v. Harley et al., 47 Md. 340. Lindley having died in the lifetime of the testator, the legacy to him did not, by operation of the code, lapse, but passed directly to his daughter. Art. 93, Sec. 304. It constituted no part of the assets in the hands of his executor or administrator. His daughter took it by force of the statute. This was expressly decided in Glenn v. Belt, 7 G. & J. 360. "The time of the transfer," says the court in that case, "is the death of the testator, and as the legatee died before the testator he would not be the person meant as the object of the statutory transfer. But the law refers to such persons >then in esse, entitled by law to the distribution of the legatee's estate in case of intestacy — that is, his representatives." So here, the legatee having died in the lifetime of the testator, the daughter of the legatee takes the legacy directly from the testator. She takes unaffected by the debts of her father, the FOWKES v. PASCOE 205 deceased legatee. His creditors have no right to claim the payment of their debts out of such a legacy. For these reasons the decree below will be affirmed in part, and reversed in part, and the cause remanded. 3 FOWKES v. PASCOE. Court of Appeal in Chancery, 1875. L. R. 10 Ch. App., 343- Sarah Baker, the testatrix in this cause, had one child only, a son, who had died leaving a widow. The widow (Elizabeth Ann Pascoe) married again and had children, two of whom, John Irving Pascoe and Mary Ann Pascoe (afterwards Heritage), survived the testatrix. Sarah Baker, by her will, dated November 9, 1843, gave the residue of her estate to her daughter-in-law for life and after her death to such of her children as should attain the age of twenty-one years. Between 1843 and 1848 Sarah Baker purchased stock in the names of herself and John Irving Pascoe amounting to £7000. On December 3, 1850, Sarah Baker died, and John Irving Pascoe caused the stock to be transferred to his own name. Elizabeth Ann Pascoe died March 12, 1872, and thereafter the trustees of the marriage settlement of Mary Ann Heritage filed this bill to determine whether John Irving Pascoe was entitled to the £7000 which he claimed as a gift. The master of the rolls was of opinion that Mr. Pascoe was trustee for Mrs. Baker and decreed accordingly. Mr. Pascoe appeals. 1 Sir W. M. James, L. J. : The case of the plaintiffs is simply this: Certain sums of stock have been discovered to have been standing in the joint names of a lady deceased and the defendant, John Irving Pascoe. They were partly purchased with the lady's money, partly transferred from her name to the joint names. This, it is alleged, proves a resulting trust for the lady. And it is further 'Accord: Richards v. Humphreys, 32 Mass. 133 (1833); Langdon v. Astor, 16 N. Y. 1 (1857) ; Miner v. Atherton, 35 Pa. 528 (i860) ; Roquet v. Eldridge, 118 Ind. 147 (1888); Richardson v. Eveland, 126 111. 37 (1888), s. c, 1 L. R. A. 203; In re Furness (1901), 2 Ch. 346; Matter of Weiss, 39 N. Y. Misc. 71 (1902) ; Nail v. Wright, 26 Ky. L. R. 253 (1904) ; Estate of Baker, 168 Cal. 766 (1914) ; Hayes v. Welling, 96 Atl. 843 (R. I. 1916). As to devises and conveyances of realty, compare Allen v. Allen, 13 S. Car. 512 (1879); Burnham v. Comfort. 108 N. Y. 535 (1888); Fisher v. Keithley, 142 Mo. 244 (1897), with Carmichael v. Lathrop, 108 Mich. 473 (r896). 'The statement of facts is condensed, arguments of counsel omitted and only so such of the judgment given as relates to satisfaction. 206 SATISFACTION AND PERFORMANCE alleged that the onus of rebutting the presumption of resulting trust is on the defendant, and that' he has failed to discharge himself. The master of the rolls was of that opinion, hence this appeal. The relations between the lady^md the defendant were of a character very natural, but singular in this respect, that nothing like them appears to have occurred in .any of the reported cases. Mrs. Baker was a widow lady of considerable property. She was, at the time of the transactions in question, childless, but she had had an only son, who had left a childless widow. The younger widow lived with her father-in-law and mother-in-law, and after the death of the father-in-law, with the latter, whose home was her home, until she found a second husband, whom she married from that home. This marriage does not appear to have diminished the feel- ings of maternal and filial affection between the mother-in-law and the daughter-in-law. Everything in the case shows that the mother- in-law looked upon her daughter-in-law, her children and grands children as if they had been her own descendants, the issue of her own body. There was, amongst other issue of the second marriage, a son, the defendant, and two daughters, one deceased, the other Mary Ann Heritage, whose trustees are the present plaintiffs. The son, when a youth, and for some years from and up to his marriage, lived with Mrs. Baker. In course of time, that is to say, in the year 1844, he married and had children. He resided after his marriage near Birmingham, but whenever he came to London he made his abode in Mrs. Baker's house. His children were actually brought from Birmingham to London to her house to be baptized from there at her church, and by her clergyman, and the likenesses of the little ones were the favourite ornaments of her room. (His lordship read the evidence on this subject.) She made her will in the year 1843. By that will she gave certain real property to the defendant, and the residue of her property, which was large, she gave to her daughter-in-law for life, charged with annuities for the daughters, and after her death it was to go to the children of the daughter- in-law. [His lordship then stated and commented on the evidence of John Irving Pascoe and of his wife, observing that his story was highly probable and credible, and coming to the conclusion that if the onus was on the defendant he had proved his case.] It was, however, contended that if, under the circumstances, the theory of gift would prevail, the same circumstances and evi- dence would show that the gift was so made as to be an ademption or partial satisfaction of the share of the residue to which the defendant was entitled under the will. And if one were permitted to guess — if one were permitted to ask on any instinctive feeling of what probably was the testatrix's intention, that is probably the result which the court would arrive at. But is it possible, consistently with established rules, to arrive at that result ? In the first place, no parol evidence of such an inten- tion is admissible, for such parol evidence would be to alter the written will. That effect if produced at all must be produced by FOWKES v. PASCOE 207 operation of law. The rule of law is that legacies given by a father, or a person in loco parentis, are or may be adeemed by gifts between the will and the death. The principle is that the will shows the dis- tribution which the father thinks just and expedient for his children, and if, after having made such a scheme for distribution, he advances one of his children on marriage, or going out to establish himself in the world, or the like, it is to be presumed, as a presumptio juris et de jure, that the advancement is an anticipation of the testa- mentary provision, just as under the Statute of Distributions an advancement is to be brought into hotchpot. But this presumption applies only to fathers, or persons who have put themselves in loco parentis. What in any particular case is putting oneself in loco parentis, is probably one of the most difficult of legal problems to solve. It used to be laid down in the treatises that nothing short of assuming the whole functions and duties of the father would do, and in particular that such a character could not be predicated where the child was actually living with her own father and main- tained by him, and could not be predicated even between a grand- father and grandson if the father were alive. But in the case of Pym v. Lockyer, 5 My. & Cr. 29, before Lord Cottenham, that rule was certainly not acted on to the full extent. (His lordship then read the facts of the case in Pym v. Lockyer.) That case went beyond the former rule, but even that case must be considerably extended in order to meet the case before us. In that case the grandfather had directed and controlled the children, had been referred to on the treaties for their marriages, and had provided marriage portions for them. Nothing of the kind took place in this case. There are very strong expressions about adoption, proved by the defendant himself, but it does not appear that Mrs. Baker ever did provide, or had occasion to provide, for the maintenance, educa- tion, marriage portion or setting out in the world of the children of her daughter-in-law, except that the son did live with her a few years before his marriage, and had a handsome present on his marriage. What she did was, that, having no nearer or dearer object of her testamentary bounty, she selected her daughter-in-law and the children of her daughter-in-law to be her heirs, and all her expressions and her conduct are to be explained by and referred to her adoption of the family in that sense. On full consideration, I am satisfied that such conduct is far from bringing this case within the rule as to ademption or satisfac- tion of legacies, and that if we extend the rule to this case we cannot stop short of applying it to every case of gifts made after the will to one of a family selected as the residuary legatees of a testator. It may be further observed that the case of Montefiore v. Guedalla, 1 D. F. & J. 93, was the first case in which the doctrine of ademption or satisfaction was applied to residuary legatees ; and in the case of Meinertzagen v. Walters, Law Rep. 7 Ch. 670, we came to the con- clusion that it could only be applied between children against a child in favour of a child, not in favour of a stranger. It would, there- 208 SATISFACTION AND PERFORMANCE fore, be necessary in this case to show, not only that the testatrix had placed herself in loco parentis to the defendant, but to his sister, of which there is ho trace. 2 Sir G. Mellish, L. J., concurred. Decree discharged. IN RE SMYTHIES. In the Chancery Division, 1902. (1903) 1 Ch., 259. Originating summons. By a codicil dated June 23, 1896, a testator made the following bequest : "I give and bequeath to Mrs. Georgiana Sophia Smythies the legacy or sum of £500, free of all estate or other duty, in trust for my great-niece Eva Marian Smythies for her own sole use and benefit, and I direct that such legacy shall be paid to the said Eva M. Smythies either in whole or in part at such time or times and in such manner as the said Georgiana S. Smythies may in her dis- cretion think fit." By a settlement dated October 24, 1900, and made between the testator of the one part and Georgiana Sophia Smythies, hereinafter called the trustee, of the other part, after reciting that the testator was desirous of making some provision for his great-niece, Eva Marian Smythies, and had paid to the trustee the sum of £500 to be held by her upon the trusts thereinafter contained, the testator declared that the trustee should retain the said sum of £500 in trust to invest the same and to pay or apply the income arising therefrom to or towards the maintenance, education and benefit of his great-niece until she should attain the age of twenty-four years or marry under that age, and on her attaining that age or marrying to pay the prin- cipal to her ; and in case of her death before she should have attained the age of twenty-four years or have married to stand possessed of the said sum of £500 and the investments thereof in trust for the testator if then living, and if then dead in trust to pay the same to the trustees of his will to be applied by them as part of his residuary personal estate. 'See also, Shudal v. Jekyll, 2 Atk. 516 (1742) ; Ex parte Pye, 18 Ves. 140 (1811) ; Booker v. Allen, 2 R. & M. 270 (1831) ; Powys v. Mansfield, 3 My. & Cr. 359 (1837) ; Watson v. Watson, 33 Beav. 574 (1864) ; Sivails v. Smith, 117 Fed. 707 (.1902) ; Kramer v. Kramer, 201 Fed. 248 (1912) ; Swails, 98 Ind. 511 (1884) ; In re Ashton (1897), 2 Ch. 574; Wilson v. Johnson v. McDowell, 134 N. W. 419 (la. 1912). IN RE SMYTHIES 209 The testator, who was not in loco parentis to his great-niece, died on December 18, 1900. This summons -was issued to determine whether the legacy of £500 was adeemed by the subsequent settlement of that amount. The great-niece was still an infant. 1 I ; Swinfen Eady, J. : The legacy of £500 was a general legacy payable out of general personalty, and, no case of loco parentis being made, it was a legacy to a stranger. It is, therefore, not adeemed unless it appears on the face of the codicil to have been given for a particular purpose, which is satisfied by the subsequent settlement. The question is* therefore, whether the legacy to the trustee for the benefit of the great-niece was given for a particular purpose within that rule. In Pankhurst v. Howell, L. R. 6 Ch. 136, testator gave his wife a legacy of £200, to be paid within ten days after his decease. Shortly before his death he gave her £200, in order that she might have a sum of money which she could control immediately on his death his liability under the covenant was reduced to £1000 consols, the legacy was'not adeemed, for that providing the wife with ready money immediately after the testator's decease was not a particular purpose within the rule. In referring to the rule, James, L. J., says: "I think this refers to a legacy given for a particular specific purpose, as, for instance, a legacy given to purchase an advowson for a son, which would be adeemed, or. perhaps it would be more correct to say satisfied, by the father afterwards purchasing the advowson for him." This means that the legacy must not be given merely for bounty, but for a particular specific purpose. In In re Pollock, 28 Ch. D. 552, 556, Lord Selborne, L. C, pointed out that to constitute a particular purpose within the rule, it was not neces- sary that some special use or application of the money, by or on behalf of the legatee (e. g., for binding him an apprentice, purchas- ing him a house, advancing him upon marriage, or the like), should be in the testator's view, but that the rule extended to a case where the bequest was expressed to be made in fulfilment of some moral obligation appearing on the face of the will, such as "according to the wish of my late beloved husband." No authority, however, has been cited to show that a mere legacy to A,. in trust for the benefit of B, an infant, is a legacy for a particular purpose within the rule. In my opinion, there is no particular purpose indicated in»this codicil, and I therefore hold that the legacy was not adeemed. 2 1 Arguments of counsel are omitted. 'Accord, legacy not satisfied: In re Aynsley (1914), 2 Ch. 422, affirmed, (1915)1 1 Ch. 172; In re Youngerman, 136 la. 245 (1907), s. c, 15 Ann. Ca. 245 and note; Ellard v. Ferris, 91 Ohio 339 (1915). Compare, legacy satis- fied: Taylor V. Tolen, 38 N. J. Eq. 91 (18&+) ; Tanton v. Keller, 167 111. 129 (1897); Ritter's Estate, 10 Pa. Super. Ct. 352 (1899) ; Johnson's Estate, 201 Pa. 513 (1902) ; In re Corbett (1903). 2 Ch. 326. 210 SATISFACTION AND PERFORMANCE IN RE TUSSAUD'S ESTATE. Court of Appeal, 1878. L. R. p Ch. D., 363. Cotton, L. J., now delivered the judgment of the court (James, Brett and Cotton, L. JJ.) : x This is an appeal from a judgment of the master of the rolls, whereby he in effect decided that a sum of £2800 which Mr: Tussaud, the testator in the cause, settled by his will for the benefit of Mrs. White and her children, was intended to be in satisfaction' of his liability under a covenant contained in a settlement made previously to the marriage of Mrs. White, and that such of the persons inter- ested under the settlement as were also interested under the will must elect under which instrument they would take. The facts are these : Mrs. White was a daughter of the testator. In February, 1867, a settlement was executed previously to and in contemplation of .her marriage. By that settlement Mr. Tussaud, the testator, covenanted with the trustees that his executors should, within six months from his death if he should survive his wife, or, if he should predecease her, then within six months from the death of his wife, transfer to the trustees £2000 consols. It was declared that these consols, when transferred, should be held upon trust for such persons as Mrs. White, with the previous consent of the trustees, should from time to time, notwithstanding coverture, by any writing or by her last will, direct and appoint, and in default of such appointment upon trust for Mrs. White for her life for her separate use, after her death for her husband for his life, and after the death of the survivor for the children of the then intended mar- riage who should attain twenty-one, or in the case of daughters marry under that age; and in default of children, in trust for Mr. White, his executors, administrators and assigns. In the year 1871 the testator paid £1000 to the trustees of the settlement in part performance of his covenant to the extent of £1000 consols. In 1873 the testator in the cause died, having made his will, which was dated on the 30th of July in that year, and by his will and a codicil thereto he directed that £2800, part df his estate, should be held by trustees upon trust for Mrs. White for life for her separate use without power of emancipation, and after her death for her children by any marriage who should attain twenty-one. If there were no children who attained a vested interest, the fund fell into the residue and went to the testator's own sons. At the time of the testator's death his liability under the covenant was reduced to £1000 consols. 'Only the judgment of the court of appeal is printed. IN RE TUSSAUD'S ESTATE 211 The master of the rolls decided that the legatees claiming under the will were bound to elect between the provision made for them by the will and that made by the settlement, on the ground that there was not sufficient to prevent the presumption that a father does not intend to make a double provision for a child from applying to the case. It is well established that there is such a presumption which, as stated by Lord Cranworth in Lord Chichester v. Coventry, L. R. 2 H. L. 89, "is in these cases founded on the assumption that in making the second instrument the maker of it supposes himself to be substantially satisfying the obligations of the first." But this presumption must yield to any sufficient indication of intention on the part of the maker of the instrument, if expressed on the face of that document, or if there is no expression of intention on the face of the instrument, it may, like any other presumption of law, be rebutted by extrinsic or parol evidence to show what was the intention of the testator when he made his will. In the present case, Mr. Davey tendered parol evidence to rebut the presumption, and this, after argument, we held to be admissible. But after having heard the evidence, we are of opinion that it does not aid the case of the testator's daughter, Mrs. White, and her children. The question therefore must be, is there sufficient on the face of the will to show that the testator did not intend the provision thereby made to be in lieu of that made by the settlement, or, in other words, to satisfy his obligation under that instrument? In arriving at a conclusion on this question, we must, of course, look at the settlement, for the purpose of seeing what the obligations of the testator under that instrument and the provision thereby made for his daughter's family were. What we have to consider is well expressed by Lord Colonsay in the case of Lord Chichester v. Coventry, L. R. 2 H. L. 98, in these words: "But I can conceive no consideration more important upon a question of double portions than the consideration of whether the parties to be benefited by the one are the same as the parties to be benefited by the other, or whether the nature of the benefit conferred in the one case is the same as the nature of the benefit conferred in the other." It must be remembered that slight differences between the two provisions will not be sufficient to prevent the presumption from arising. Slight differences, however, in the words of Sir John Leach, in Weail v. Rice, 2 Russ. & My. 268, are such "as, in the opinion of the judge, leave the two provisions substantially of the same nature," and he adds, "every judge must decide that question for himself." What, then, are the differences in the present case between the two pro- visions ? In the first place, under the settlement, Mrs. White, with the consent of the trustees, had an absolute power to deal in any way she thought fit with the fund which the testator had thereby covenanted to settle. The will did not give Mrs. White any such power. Under the settlement Mr. White took, subject to the life estate of his wife, a life interest in the fund; and if no children attained a vested interest, he, unless his wife dealt with the fund, under the power, became absolutely entitled thereto, while under the will no interest was given to him in the legacy thereby settled ; 212 SATISFACTION AND PERFORMANCE . and if there was no child of Mrs. White who attained a vested interest, the settled fund went to the testator's sons. These differ- ences, in our opinion, cannot be considered as slight. They are substantial differences between the two provisions. However, if the legacy given by the will was intended to be a satisfaction of the testator's obligation under the settlement, it could only be so by putting the parties claiming under the will to their election; and the fact that one of the persons who took a substantial interest under the settlement takes no interest under the will is a strong reason for coming to the conclusion that the testator did not intend the gift by will to be in lieu of, or in satisfaction of, his liability under the former instrument. In our opinion it is erroneous to treat the difference between the persons interested under the two interests merely as creating a difficulty in carrying into effect the testator's intention. If the intention is expressed,*it must be carried into effect so far as practicable, and difficulties in completely effecting the inten- tion cannot alter the construction. But where the court has to determine whether a presumption arises — that is, whether a partic- ular intention ought to be assumed— the circumstance that the limi- tations of the will, as to which there is no doubt, are not consistent with effect being given to that intention which the court is asked to presume, is a strong argument against assuming that the testator had any such intention. We are of opinion that there are such substantial differences between the provision made by the will and that made by the settlement, both of which we consider as portions provided for the testator's daughter, Mrs. White, as prevent the presumption against double portions applying to the present case — that is, as satisfy us judicially that the testator did not, in making his will, suppose himself to be substantially satisfying the obliga- tions of the settlement. It is unnecessary for us to go through the numerous cases which were referred to in argument. But it must be remembered that the case is one, not of ademption, but of satisfaction, and the two classes of cases are pointedly distinguished in the case of Lord Chichester v. Coventry, L. R. 2 H. L. 71. 2 In a case of ademption, where the will is first, that is a revocable instrument, and the testa- tor has an absolute power of revoking or altering any gift thereby 2 "The distinction between ademption and satisfaction lies in this : in ademption the former benefit is given by a will, which is a revocable in- strument, and which the testator can alter as he pleases, and consequently when he gives benefits by a deed subsequently to the will, he may, either by express words, or by implication of law, substitute a second gift for the former, which he has the power of altering at his pleasure. Conse- quently; in this case the law uses the word ademption, because the bequest or devise contained in the will is thereby adeemed, that is taken out of the will. But when a father, on the marriage of a child, enters into a covenant to settle either land or money, he is unable to adeem or alter that covenant, and if he give benefits by his will to the same objects, and states that this is to be in satisfaction of the covenant, he necessarily ' gives the objects of the covenants the right to elect whether they will take under the covenant, or whether they will take under the will." Per Lord Romilly m Lord Chichester v. Coventry. SOWDEN v. SOWDEN 213 4 made. But where the obligation is earlier in date than the will, the testator, when he makes his will, is under a liability which he cannot revoke or avoid. He can only put an end to it by payment, or by making a gift with the condition, expressed or implied, that the legatees shall take the gift made by the will in satisfaction of their claim under the previous obligation. It is therefore easier to assume an intention to adeem than an intention to give a legacy in lieu or in satisfaction of an existing obligation. We mention this to show that many decisions where, in cases of ademption, differences between the two provisions have been held insufficient to prevent the pre- sumption against double portions from applying, cannot be consid- ered as authorities in the present case. There are very few cases in which a gift by will has been held a satisfaction of a previous liability, in which the persons interested under the will have not included all interested under the 1 previous settlement. M'Carogher v. Whieldon, L. R. 3„Eq. 236, was, however, such a case. But the decision in that case cannot be considered as proceeding on any prin- ciple inconsistent with our present decision. There, by the settle- ment, the testator had covenanted to leave one-fifth of his residuary estate to trustees for his son for life, then for his intended wife for life, and afterwards for their children ■ and all that the master of the rolls in that case decided was that an absolute bequest to the son of one-fifth of the testator's estate was a satisfaction of the life interest which the son took under the father's covenant in one- fifth of his estate. In our opinion the decision of the master of the rolls must be reversed, and a declaration made that the provision made by the will and codicil for Mrs. White and her children is not to be consid- ered as a satisfaction of the testator's liability under the covenant in the settlement. 8 SOWDEN v. SOWDEN. In Chancery Before Sir Lloyd Kenyon, M. R., 1785. 1 Br. Ch., 582. 1 Robert Sowden, being about to marry Mary Row, by settlement previous to the marriage, bearing date September, 1779, in consid- eration of £1050, her marriage portion, covenanted to pay to the trustees £1500, to be laid out [either together or in parcels, and with or without any further sum to be advanced by him] in the purchase of some freehold estate of inheritance in the county of Devon, upon "Accord: Cartwright v. Cartwright (1903), 2 Ch. 306; In re Blundell (1906), 2 Ch. 223; Re Vernon (1906), 95 L. T. 48. Among the older cases, see lesson v. lesson, 2 Vern. 255 (1691) ; Bruen v. Bruen, 2 Vern. 439 (1702); Byde v. Byde, 2 Eden 19 (1761) ; Moulson v. Moulson, 1 Br. Ch. 82 (1780); Warren v. Warren, 1 Br. Ch. 305 (1783); Hanbury v. Hanbury, 2 Br. Ch. 352 (1788) ; Sparkes v. Cator, 3 Ves. 530' (1797) ; Lethbridge v. Thurlow, 15 Beav. 334 (1851). ■S. c, I Cox 165; 3 P. Wms. (Cox Ed.), 228 n. 214 SATISFACTION AND PERFORMANCE trust, out of the rents and profits thereof, to pay to Mary Row an annuity of £15 per annum, for her life, in case she survived her said intended husband; and, after the decease of both, to raise by sale £1500 or £2000, as the case might be, for the portion or portions of the child or children of the marriage, in such shares, etc., as the survivor should appoint. He also covenanted to pay to the trustees the further sum of £500 to similar uses ; and that, in case the lands purchased should not sell for £2000, the deficiency should be made up out of his personal estate. Robert Sowden did not pay the £1500 or £500 to the trustees, but, soon after his marriage, purchased a freehold estate called Pound, for the price of £2150, and the estate was conveyed to him and his heirs ; and he died without making any settlement of that estate, leaving Mary his widow, Thomas his son and heir at law, and Mary his daughter, who were the only children of the marriage. He died seised and possessed of other real and personal estate ; the real estate descended on the eldest son, and the . widow took out administration of the personal estate. The daughter filed her bill against the son and widow, praying that the trusts of the settlement might be decreed to be performed, and that the estate called Pound might be declared to be subject to the trusts of the settlement, or that the £2000 covenanted to be paid by her father might be raised out of his personal estate, if sufficient, or the deficiency made good out of his real estate, and the £2000, when raised, might be applied according to the trusts of the set- tlement. The cause was heard on the day of December, 1784, and 3d of February, 1785, when the following cases were cited: Took v. Hastings, 2 Vern. 97; Roundell v. Breams, 2 Vern. 482; Wilcox v. Wilcox, 2 Vern. 558; Bridges v. Bere, 2 Eq. Abr. 34; Wilks v. Wilks, 5 Viner 293 ; Lechmere' v. Lechmere, Ca. Temp. Talb. 80, 3 P. Wms. 211; Coffin v. Dyke, or Dyke v. Leeds, 7th July, 1740; Deacon v. Smith, 3 Atk. 323; Attorney General v.. Whorwood, 1 Ves. 534. There were also mentioned 5 Brown's Parlt. Ca. 522; Edwards v. Freeman, 2 Wms. 435, 665; Lewis v. Hill, 1 Ves. 274. Some parol evidence was offered to show the intention of Robert Sowden in purchasing the estate was to perform his covenant, and it was read, but it was very slight. His Honor was of opinion the evidence ought not to be admitted. He thought Lechmere v. Lechmere decided the case. He. conceived the principle established to be that, "where a man is bound to do an act, and he does what may enable him to do the act, it shall be taken to have been done by him with the view of doing that which he was bound to do." He therefore was of opinion that the Pound estate was to b« considered as purchased by Sowden, with a view to perform the covenants in the settlement, and therefore was bound in equity to the performance of them; and decreed accordingly. 2 * "An important distinction exists between satisfaction and perform- ance. Satisfaction supposes intention; it is something different from the BLANDY v. WIDMORE 215 BLANDY v. WIDMORE. In Chancery Before Lord Cowper, 1716. 1 P. Wms., 324. 1 Upon the marriage of A with B, there were articles reciting that, in consideration of the marriage and of the portion, it was agreed that if B, the wife, should survive A, her intended husband, A should leave B £620; and accordingly A covenanted with B's trustees that his executors, within three months after his decease, should pay B £620 if she should survive him. A died intestate and without issue, upon which B, the wife, by the Statute of Distribu- tion, became entitled to a moiety of the personal estate, which was much more than £620, and the question was, whether the distributive share belonging to B, being more than £620, should go in satisfac- tion of it. Serjeant Hooper: This £620 is a debt, and debts must be first paid, after which the distribution is to be made ; and if the intestate had made a will, probably he would have given to his wife some- thing additional to this £620. Now, what the statute gives is not his gift, and being not his gift, is not to be taken as his payment; or, supposing it to be his gift, still it cannot be said to be his payment. Lord Chancellor : I will take this covenant not to be broken, for the agreement is to leave the widow £620; now the intestate in this case has left his widow £620 and upwards, which she, as admin- istratrix, may take presently upon her husband's death; wherefore let her take it; but then it shall be accounted as in satisfaction of, subject of the contract, and substituted for it; and the question always arises, was the thing done intended as a substitute for the thing covenanted? A question entirely of intent. But with reference to performance the question is, has that identical act which the party contracted to do been done?" Per Sir Thomas Plumer, M. R., in Goldsmid v. Goldsmid, I Swans. 211 (1818). See Lechmere v. Lady Lechmere, T. Talbot 80 (i735). s. c. (Lechmere v. Earl of Carlisle), 3 P. Wms. 211; Sudgen on Vendors (Ed. 1839), Appendix 25, and the notes to this case in White and Tudor's Leading Cases in Equity. See also, Tunbridge v. Teather, 1 Vern. 346 (1685) ; Tooke v. Hastings, 2 Vern. 96 (1689) ; Wilcocks v. Wilcocks, 2 Vern. 558 (1706) ; Deacon v. Smith, 3 Atk. 323 (1746) ; Perry v. Phelips, 4 Ves. 108 (1798) ; Ex parte Poole, DeGex 581 (1847) ; Trench v. Harrison, 17 Sim. in (1849) ; Barham v. Earl of Clarendon, 10 Hare 126 (1852) ; Thacker v. Key, L. R. 8 Eq. 408 (1869) ; Pullan v. Koe (1913), 1 Ch. 9. 'Affirming 2 Vern. 710. 2i6 ELECTION and to include in it, her demand by virtue of the covenant ; so thaj she shall not come in first as a creditor for the £620, and then for a moiety of the surplus. And Mr. Vernon said, it had been decreed in the case of Wilcox v. Wilcox (2 Vern. 558), Trin. 1706, that if a man covenants to settle an estate of £100 per annum on his eldest son, and he leaves lands of the value of £100 per annum to descend upon such son, this shall be a satisfaction of the covenant to settle; and that this last was a stronger, case, it being the case of an heir, who is favoured in equity; also the case of Phinney v. Phinney (2 Vern. 638) was cited. Whereupon the decree made (February 15, 1715, Reg. Lib. A. 1715, fol. 203) by Sir John Trevor, master of the rolls, was now affirmed by Lord Chancellor Cowper. 2 CHAPTER V. ELECTION. LACY v. ANDERSON. In Chancery, 1581-82. Choyce Cases, 155. The suit is to stay a suit at law in a writ of dower made by the defendant for that the defendant's wife had certain copyhold lands devised to her in lieu of her thirds at law, which she accepted of and enjoyed twenty years, and yet seeketh now to recover dower of the freehold lands. The defendants demurrre because copyhold lands can be no bar of dower. 1 But the court thinks it no conscience she should have both. Therefore ordered to answer. 2 "Accord: Lee v. Cox, 3 Atk. 419 (1746) ; s. c, 1 Ves. Sr. 1; Garthshore v. Charlie, 10 Ves. 1 (1804) ; Goldsmid v. Goldsmid, 1 Swans. 211 (1818). The principle has been held not to apply where a legacy is given by will. To operate as a performance in such a case it must appear that the legacy was given with that intention. Haynes v. Mico, 1 Bro. Ch. 129 (1781) ; Devese v. Pontet, 1 Cox Ch. 188 (1785), s. c, Prec. Ch. 240 n., Wood v. Wood, 7 Beav. 183 (1844). See Lang v. Lang, 8 Sim. 451 (1837). Nor does the principle apply where the benefit under the covenant is an annuity or life interest only. Couch v. Stratton, 4 Ves. 391 (1799) ; Salisbury v. Salisbury, 6 Hare 526 (1848) ; James v. Castle, 33 L. T. 665 (1875). *As not being an estate in jointure within the Statute of Uses (27 Hen. VIII, Ch. 61, so as to constitute a bar at law. 'See Kitson_v. Kitson, Pre. Ch. 351 (1712) ; Villareal v. Lord Galway, Amb. 682 (1769) ; Wake v. Wake, 1 Ves. Jr. 33s (1791), and compare Lawrence v. Lawrence, 3 Br. P. C. 483 (1717) ; Adsit v. Adsit, 2 Johns. Ch. N. Y. 445 (1817) : Gibson v. Gibson, 1 Drew. 42 (1852) ; In re Thomas, 34 Ch. D. 166 (1886). ANONYMOUS 217 ANONYMOUS. In Chancery Before Lord Cowper, 1708. Gilbert Equity Reports, 15. The case was this : A was seised of two acres, one in fee, the other in tail; and having two sons, he by his will devises the fee simple acre to his eldest son, who was issue in tail; and he devised the tail acre to the youngest son and died. The eldest son entered upon the tail acre, whereupon the youngest son brought his bill in this court against his brother, that he might enjoy the tail acre devised to him, or else have an equivalent out of the fee acre, because his father plainly designed him something. Lord Chancellor: This devise being designed as a provision for the younger son, the devise of the fee acre to the eldest son must be understood with a tacit condition, that he shall suffer the younger son to enjoy quietly, or else, that the younger son shall have an equivalent out of the fee acre, and decreed the same accordingly. 1 'Accord: Noys v. Mordaunt, 2 Vern. 581 (1706); Streatfield v. Streat- field, T. Talbot 176 (1735) ; Kirkham v. Smith, 1 Ves. Sr. 258 (i749) ; Mac- namara v. Jones, 1 Br. Ch. 481 (1785) ; Wake v. Wake, 1 Ves. Jr. 335 (1791) ; Blake v. Bunbury, 1 Ves. Jr. 514 (1792); Whistler v. Webster, 2 Ves. Jr. 367 (1794) ; Earl of Darlington v. Pulteney, 3 Ve$. Jr. 384 (1797) ; Dillon v. Parker, 1 Swanst. 358 (1818), and note; Gretton v. Howard, 1 Swanst. 409 (1819), and note; In re Vardon's Trusts (1885), 31 Ch. D. 275; In re Bradshaw (1902), 1 Ch. 436. See 1 Pomero/s Eq. Jurisp. (3d Ed.), Sec. 461; Bispham's Equity (9th Ed.), Sec. 295; 11 Amer. & Eng. Enc. of Law (2d Ed.), 57. "Every testator intends that his will shall take full effect, and any- thing that prevents the will from being wholly effectual of course frus- trates the intention of the testator to that extent. ... It is quite fixed, I think, that it is wholly immaterial whether the testator thought that he had the power to convey the property, or knowing that he had not the power, usurped it. The rule in regard to election is in either case pre- cisely the same." Per Lord Moncheiff, in Cooper v. Cooper, 7 Eng. & Ir. App. S3 (1874); , , . , -.,,,_,, "The doctrine of election rests upon the principle that he who seeks equity must do it, and means, as the term is ordinarily used, that where two inconsistent or alternative rights or claims are presented to the choice of a party, by a person who manifests the clear intention that he should not enjoy both, then he must. accept or reject one or the other; and so, in other words, that one cannot take a benefit under an instrument and then repudiate it." Per Fuller, C. J., in Peters v. Bain, 133 U. S. 670 (1800). 218 ELECTION CATHERINE BEETSON v. MARIE E. STOOPS. Court of Appeals of New York, 1906. 186 New York, 456. 1 Chase, J. : Andrew Moll and Kathrina Moll were husband and wife and resided in the city of New York. They had one child, their only heir at law, who died, leaving two children, the plaintiff and the defendant Stoops, then small girls, who, after the death of their father, resided with their grandparents, the said Andrew and Kathrina Moll. Andrew Moll was the owner in fee simple absolute of the real property at 177 Seventh Avenue, in the city of New York, and Kathrina Moll was the owner in fee simple absolute of the real property at 267 West Twenty-second Street, in the city of New York. On the twenty-eighth day of June, 1887, Kathrina Moll died intestate seized of said real property on West Twenty-second Street. The title to said real property descended to her said grand- children in equal shares, subject to the life estate of Andrew Moll, her husband. Said grandchildren continued to reside with their grandfather and he retained the possession of said real property on Twenty-second Street. On the fourth day of February, 1902, Andrew Moll was living on said Twenty-second Street property and on that day he died seized of the Seventh Avenue property. He left a will dated the fifteenth day of February, 1900, by which he directed that his debts, funeral and testamentary expenses be paid. The will then provided : "Second. — I hereby give, devise and bequeath unto my dear grandchild, Catherina Margaretha Moll, born at New York City, July 24th, 1881 (Plaintiff), the house and lot known as Number One Hundred and seventy-seven (177) Seventh (7th) Avenue . . . (describing it), and to her heirs and assigns forever absolutely. "Third. — I hereby give, devise and bequeath unto my dear grandchild, Marie Emma Moll, born at New York City, March 1st, 1883 (defendant Stoops), the house and lot now known as number Two Hundred and sixty-seven (267) West Twenty-second (22nd) Street . . . (describing it), and to her heirs and assigns forever absolutely." By the will the testator expresses the wish that each of said grandchildren will keep the real property so given to them until they attain the age of twenty-six years, and he then gives to said grand-* children, in equal shares, the rest, residue and remainder of his estate. The said two pieces of real property were each worth twenty- four thousand dollars. Neither Andrew nor Kathrina Moll owned any other real property, and the personal property of the said Andrew Moll was about sufficient to pay his indebtedness and the expenses of administering his estate. The will of Andrew Moll was probated and thereupon the plaintiff claimed the title and owner- 1 Counsel's arguments are omitted. CATHERINE BEETSON v. MARIE E/ STOOPS 219 ship of the Seventh Avenue property, under the will of Andrew Moll, deceased, and took and has retained the exclusive possession of the same. She then brought this action to partition the Twenty- second Street property, and alleges in her complaint that she is the owner of an undivided one-half interest therein, and that the defend- ant Stoops is the owner of an undivided one-half interest therein, and she further alleges that she owns no other lands as tenant in common with her sister, the defendant Stoops, and she demands judgment for the partition and sale of the Twenty-second Street property, and that it be decreed that said Andrew Moll was never seized of the premises in Twenty-second Street, and that he had no right or authority to devise the same or any part thereof. The defendant Stoops invokes the rule in equity that where a testator assumes by his will to devise property owned by him, and also other property not owned by him, that the person to whom is devised the property owned by «uch testator cannot accept such devise, with knowledge of all the facts, without being precluded from asserting a claim to other property devised by the same instrument. No question arises in this court relating to an election by the plaintiff, because the counsel for the plaintiff stated upon the argument that if the plaintiff be required to elect she will accept the Seventh Avenue property and renounce all interest in the Twenty-second Street property. The language used by the testator in devising real property to his grandchildren is exactly the same in each case, and there is no doubt or uncertainty as to the testator's intention. The plaintiff argues, however, that the testator was in possession of the Twenty- second Street property as a tenant for life, and, consequently, at the time of making the will he had an interest in such property. A will speaks from the death of the testator. The testator's life estate in the Twenty-second Street property ceased at the very moment when the will took effect. He did not have an interest in the real property that survived his death, and it could not be transferred by will. It is clear that the testator did not make. his will with the mistaken and absurd idea that he could transfer his life estate to his grand- child, for the language of the will itself is unmistakable evidence of the testator's intention to give to the defendant Stoops the fee simple absolute of trie Twenty-second Street property. The facts to which the equitable doctrine of election applies are clearly established. The equitable rule invoked by the defendant has been followed by the courts for centuries, and it is thoroughly established in England and in this country. It was provided in Justinian's Insti- tutes (Lib. 2, Tit. 20, Sec. 4) that a testator may not only bequeath his own property or that of his heir, but also the property of others ; and if the thing bequeathed belongs to another the heir can be obliged either to purchase and deliver it or to render the value of it if it cannot be purchased. The section, however, provided that it should be understod to mean that the bequest could be made if the deceased knew that what he bequeathed belonged to another, and not if he was ignorant of it. It would seem, however, by. refer- 220 ELECTION ence to the Roman Digest (Lib. 31, L. 67, Sec. ,8) and the Code (Lib. 6, Tit. 42, 1. 25, and Lib. 6, Tit. 37, 1. 10) that a bequest made upon an erroneous supposition. that the subject belonged to the testa- tor would not be void if the legatee stood in a certain degree of relationship to the testator or the subject was the property of the heir. The Code Napoleon substantially recognizes the rule, but reversed it by providing in Section 1021 of said code that "where a testator shall have bequeathed an object belonging to another the legacy shall be annulled whether the testator, were aware or not that it did not belong to him." The rule was early adopted in England and it is there held, as it is in this country, that it dpes not make any difference in its application whether the testator at the time of making his will erroneously supposed that he owned the property bequeathed or knew that it belonged to another. The rule in England was stated by Lord Erskine in Thellusson v. Woodford (13 Ves. 209) as follows : "The jurisdiction, exercised by this court, compelling election, may be thus described. A person shall not claim an interest under an instrument without giving full effect to that instrument, as far as he can. If, therefore, a testator, intending to dispose of his property, and making all his arrangements under the impression that he has the power to dispose of all, that is the subject of his will, mixes in his disposition property that belongs to another person, or property as to which another person has a right to defeat his dispo- sition, giving to that person an interest by his will, that person shall not be permitted to defeat the disposition, where it is in his power, and yet take under the will. The reason is the implied con- dition, that he shall not take both; and the consequence follows, that there must be an election ; for though the mistake of the testator cannot affect the property of another person, yet that person shall not take the testator's property unless in the manner intended by the testator . . . without reference to the circumstance, whether the testator had any knowledge of the extent of his power, or not; nothing can be more dangerous than to speculate upon what he would have done, if he had known one thing or another; it is enough to say, he had such intention ; and the court will not specu- late upon what he would have done in the different cases put: if the instrument is such as to indicate what the intention was, the only question is, did he intend the property to go in such a manner : not, whether he had power to do so, and would have done it, had he known, he could not without a condition imposed upon another person : whether he thought he had the right, or, knowing the extent of his authority, intended* by an arbitrary execution of power to exceed it, no person, taking under the will, shall disappoint it." The rule is well stated by Mr. Swanston in his notes to Dillon v. Parker (1 Swans. 359), from one of which I quote: "The owner of an estate having in an instrument of donation, applied to the property of another, expressions which, were that property his own, would amount to an effectual disposition of it to a third person, and having by the same instrument disposed of a portion of his estate CATHERINE BEETSON v. MARIE E. STOOPS 221 m favor of the proprietor whose rights he assumed, is understood to impose on that proprietor the obligation of either relinquishing (to the extent at least of indemnifying those whom, by defeating, the intended disposition, he disappoints), the benefit conferred on him by the instrument, if he asserts his own inconsistent proprietary rights, or if he accepts that benefit, or completing the intended dis- position by the conveyance in conformity to it of that portion of his ' property which it purports to affect. The foundation of the doctrine is still the intention of the author of the instrument; an intention which, extending to the whole disposition, is frustrated by the failure of any part ; and its characteristic, in its application to these cases is, that by equitable arrangement effect is given to a donation of that which is not the property of the donor ; a valid gift, in terms absolute, being qualified by reference to a distinct clause, which, though inoperative as a conveyance, affords authentic, evidence of intention. The intention being assumed, the conscience of the donee is affected by the condition (though destitute of legal validity), not express but implied, annexed to the benefit proposed to him. To accept the benefit, while he declines the burden, is to defraud the design of the donor. The doctrine of election, in common with many other doctrines of our courts of equity, appears to be derived .from the civil law." In a note to the first American edition of Coke upon Littleton (Vol. 1, p. 525), it is said: "The doctrine of election, in equity, is chiefly applicable to cases here a devisee or legatee claims under, and also against the will. There have been numerous cases on this subject, the result of which appears to be, that a person shall not claim an interest under an instrument, without giving full effect to that instrument, as far as he can. This rule has been said to be universal and without exception." The decisions of the English courts, affecting said rule, since the publication of the note by Mr. Swanston, have been very numer- ous and approve the rule with substantial unanimity. Our court of chancery, in Leonard v. Crommelin (1 Edwards' Ch. Rep. 206), says: "It is an elementary principle, upon which the doctrine of election is founded, that a person shall not claim an interest under one instrument (either deed or will, for it applies to both) without giving full effect to it as far as he can, and renounc- ing any right to property which would defeat the disposition {Thel- lisson v. Woodford, 13 Ves. 220) ; or, to use Lord Rosslyn's words, as quoted in Moore v. Butler (2 Sen. & L. 267), 'no person puts himself in a capacity to take under an instrument without perform- ing the conditions of the instrument, and the conditions may be express or implied.' " This court, in Havens v. Sackett (15 N. Y. 365), refers to the rule as a well-established rule of the courts of equity, which may be expressed in these terms : "One who accepts a benefit under a deed or will must adopt the whole contents of the instrument, conform- ing to it all its provisions and renouncing every right inconsistent with it. For example, if a testator has affected to dispose of prop- 222 ELECTION erty not his own, and has given a benefit to the person to whom that la. 481 (1900); Boileau's Estate, 201 Pa. 493 (1902); Barrier v. Kelly, 82 Miss. 233 (1903); Tripp v. Nobles, 136 N. Car. 99 (1904); Cunningham v. Dougherty, 220 111. 45 (1906); Stoepler v. Silberberg, 220 Mo. 258 (1909). 1 Parts of the opinion on other points are omitted. ANN EVANS' APPEAL 239 her sole use and benefit as long as she lives," naming Her as executrix. The will was proven in the probate court on September 16, 1882 ; the appellant duly qualified as executrix. After settlement of their account there remained for distribution both real and personal estate. On September 25, 1882, she gave a written notice to the probate court that she declined to accept the provisions of the will, and claimed in lieu thereof dower and all other rights to which by law she ,was entitled. On March 19, 1883, she gave written notice to the court that she claimed under the will and under the Statute of Distribution, the use of the entire estate, real and personal, for life, and one-half of the personal estate absolutely; and asked the court to decree accordingly. The court denied her petition, ordered dower to be set to her in one-third of the real estate, and distribu- tion of the personal estate according to law to the heirs at law of the testator, to wit, herself, his brother and nephew. She appealed. Concerning the notice of September 25, 1882, it is found that the appellant had been previously advised by the judge of probate that she was not entitled to a fee in either the real or personal property under the will, but only to a life use of both; that if she chose to decline the provisions of the will the statute would give her one-half of the personal property absolutely, and the use for life of one-third of the real estate; that she was not entitled to the provisions both of the will and the statute; and advised her to take other counsel, which she omitted to do, except as to the form of the notice. She filed it under the advice thus given. The statute required her to file her declination of the provisions of the will in the probate court. We think that the petition for leave to with- draw was properly addressed to that court, and should have been heard and granted by it. For the declination was the act of a woman who, having reason for believing that she had been fully and cor- rectly advised by a competent person as to her rights, yet remained to a certain extent in ignorance. Without negligence she fell into an error, and before any order of distribution had been made she asked leave to withdraw her declination. This may well be regarded as a case of misapprehension as to rights without fault ; as a mistake from the effects of which a court of equity has power to grant relief. In Macknet v. Macknet, 29 N. J. Eq. 54, the marginal note is that "a widow's election to take her dower instead of a legacy in lieu thereof, made under a mistake as to her rights, may be "revoked nunc pro tunc and she placed in statu quo, unless the situation be so changed since her election that it cannot be done without preju- dice - to the subsequently acquired rights of others." In Pusey v. Desbouvrie, 3 P. Wms. 315, a daughter accepted a legacy of £io,ooo, releasing rights worth £40,000. Upon a petition to set aside the release Lord Chancellor Talbot said : "If the courts themselves have not till very lately agreed in what shares or proportions these cus- tomary parts shall go, the daughter surely might he well ignorant of her right, and ought not to suffer or give others advantage by such her ignorance." 240 ELECTION The testator gives to the appellant the life use of the entire estate; of necessity this is in lieu of dower; the use of the whole displaces the use of a part and renders the latter impossible. He has made no disposition of the fee; that is intestate estate; there being no children, she takes one-half of the personalty absolutely by the statute. The superior court is advised to reverse the decree of the probate court denying the appellant's petition for leave to withdraw her renunciation of the provisions of the will. 2 In this opinion the other judges concurred. PENH ALLOW v. KIMBALL. Supreme Court of New Hampshire, 1882. 61 New Hampshire, 596. Bill in equity filed March 2, 1882. Facts agreed. Frances M. Penhallow, the plaintiff, who brings this bill by James T. Drown, her guardian, is the widow of Oliver W. Penhallow, deceased. The defendants are the executors of the will of Harriet L. Penhallow, deceased, who was the only child of Oliver W. by a former wife. Oliver W. died testate in July, 1873, leaving real and personal estate. The plaintiff is now about sixty-eight years of age, and the annual expense of supporting and caring for her is about the sum of five hundred dollars. Harriet L. Penhallow was appointed her guardian June 15, 1877, on the ground that the plaintiff was insane, and continued to act in that capacity until her decease. For the purpose of this case it is agreed that the plaintiff was, at the time of her husband's death, and ever since has been of unsound mind and. wholly incapable of exercising the discretion necessary to enable her to waive the provisions of his will made in her behalf. The plaintiff claims that this court, acting for her, has juris* diction to waive the provisions made for her in her husband's will, and to elect to take for her the distributive share of his estate allowed by law, and to require the defendants to file an inventory of his estate. 1 SM'nte, J. : Upon the death of Oliver W. Penhallow, in 1873, the plaintiff, as his widow, had her election to accept the provisions "Accord: Watson v. Watson, 128 Mass. 152 (1880) ; Woodburris Estate, 138 Pa. 606 (1890) ; Goodrum v. Goodrum, 56 Ark. 532 (1892; ; Richardson v. Justice, 125 N. Car. 409 (1899) ; Mellinger v. Mellinger, 73 Ohio St. 221 ( 1906) ; Whitesell v. Strickler, 167 Ind. 602 ( 1906) ; Eddy v. Eddy, 168 Fed. 590 (1909) ; Cooley v. Houston, 229 Pa. 495 (T911) ; In re McFarlin, 78 Atl! 281 (Del. 1910).- 1 Counsel's arguments are omitted. PENHAUfPYV- w. KIMBALL 241 made, for her in his will, or, waiving,, such provisions, to take her distributive share in his estate. No laches can be imputed to her on account of the delay .in, filjng this bill, for she has been, incapable of making an election since the decease of her husband by reason of her mental condition. The prayer of the bill is, that;the court will elect for her to take her distributive share in the estate of her husband. ,., ■ .?,. , • ■ ! .*i 1 At common law it has always been held that a lunatic cannot elect. Ashby v. Palmer, 1 Mer. 296; In re W 'hart on , 5 E)e, G. M. & C33. Nor can an infant. Carry. Ellison, 2 Bro. Ch, 56; Van v. Bwrnett,, lg Ves. J02; By,rrv. Sim, 1 Whart. 252, 265. Nor a married woman* 1 W- & T. L. Cas. Eq. 272, and authorities cited in note. See, also, note to Lady Cavan w.Pulteney, 2 Ves, Jr. 544 (§umner's Ed.). The right qf election is .personal and can be exercised only by the person entitled to elect, or in case of incapacity, by a .court of. chancery «acting,. for him. Merrill v. Emery, 10 Pick. 507; Sherman v. Newton, 6 Gray 307; Atherton v. Corliss, joi Mass. 40 ; Crozier"s Appeal, 90 Pa. St. 384 ; Wright y. West, 2 Lea 78 ; Kennedy v. Johnston, 65 Pa. St. 451; Welch v. Anderspn, 28 Mp, 293; Hamilton v. 0' Neil, 9 Mo. 11; Boone v. Boone, 3. H,& M.c H. 95 ; Collins v. Carman, 5 Md. 503 ; Heavenridge v. Nelson, 56 Ind. 90; Lewis v. Lewis, 7 Ired. 72 ; Andrews v. Hall, 15 Ala- 85, 90; 1 Washb. Real Prop. 272. 1 , Aihusband's right, to dispose of his estate, by will is limited by his widow's right to waive any provision in her behalf, and to take under the statute. The right to elect to take under the will or under the statute is given to her, and npt to those who may inherit from her. G- L., Chap. 202, Sees. 7-10. The right does not pass to her representatives at her decease. 2 It is not necessarily a question of mere pecuniary advantage. Pier knowledge of the family arrange- mentSiand of the motives and wishes of her husband, and other con- siderations better known and appreciated by her, may have weight and influence with her in determining her election, Pinkerton, y. Sargent, 102 Mass, 568., In that case the widow, was .insane. A waiver of the provisions of her husband's will signed, by herself, also a waiver signed by her guardian, were seasonably filed. The privilege pf waiver was held to be a personal right which cannot be exercised by the widow if insane, nor by her guardian in her behalf. See, ?\scy, Leivjis v, Lewis, 7 Ired. 72. In Kennedy v. Johnstpny,&$ Ea., St.,45Jj the court says: "The election pf one of two. things, when only one can be chosen for the lunatic, is undoubtedly a judi- cial not a ministerial act, and belongs to the court and not to the committee. The act of election settles the title, and makes, that ahsplute which was before uncertain and, optional. Where, the title may attach to either of two subjects of property by election, it requires a comparison of benefits and a choice to settle the title upon one of them absolutely. This the committee undoubtedly cannot do from the provision of a mere power of management, for 'Accord: McClintock's Estate, 240 Pa. 543 (1913)- 242 ELECTION that implies a title already to the thing to be managed, and for the same reason the power to elect does not flow from a power to sue for and recover the property of a lunatic. It also implies a pre- existing title in the lunatic; while the election is required to be made before title absolutely accrued. It was therefore not in the power of the committee of his own motion to relinquish the pro- vision made for the wife in the will of her husband, and cast himself upon the dower. It was his duty to apply to the court of common pleas having, jurisdiction over the person and estate of the lunatic for leave to elect the dower, which the court would grant only on due consideration of the advantages and disadvantages of the choice." See, also, Wright v. West, 2 Lea 78; Turner v. Street, 2 Rand. 404; Ebrington v. Ebrington, 5 Mad. Jj; Gretton v, H award, 1 Swanst. 413. In Crenshaw v. Carpenter, 69 Ala. 572, the question whether the chancery court possesses the power to make an election for an insane widow was left undecided. See, also, authorities cited in 2 Sto. Eq. Jur. (13th Ed.), Sec. 1097, note (b), concerning election by persons under disability. In England the court of chancery has the care of the persons and estates of idiots and lunatics, and in cases of election the juris- diction is generally exercised by that court. 2 Maddock Ch. 48-60; 2 Sto. Eq. Jur., Sees. 1075-1085, 1097, 1098, 1362-1365; Cauffman v. Cauffman, 17 S. & R. 16, 24-26; Kennedy v. Johnston, 05 Pa. St. 451. When necessary the matter is referred to a master to inquire what will be most beneficial to the lunatic. The practice as to infants is the same; also as to married women in jurisdictions were their common law disabilities have not been removed. Streat- field v. Streat field, reported cas. temp. Talb. 176 (1 W. & T. Lead. Cas. Eq. 273) ; see, also, Chetwynd v. Fleetwood, 1 Bro. P. C. 300; Ashburnham v. Ashbumham, 13 Jur. un; Gretton v. Haward, 1 Swanst. 409, 413; 1 W. & T. Lead. Cas. Eq. (Hare & Wallace's notes) 420; Addison v. Bowie, 2 Bland. 606, 623; McQueen v. McQueen, 2 Jones Eq. i6. B Equity as a branch of the law has always existed as a part of the common law in its broadest sense in New Hampshire. Wells v. Pierce, 27 N. H. 503, 512; Walker v. Cheever, 35 N. H. 339; Ela v. Pennock, 38 N. H. 154, 159; Copp v. Henniker, 55 N. H. 179, 211; Truesdale v. Straw, 58 N. H. 208, 222. This court having "the powers of a court of equity in cases cognizable in such a court" (G. L., Chap. 209, Sec. 1), and having the same protective juris- 3 See also as to infants, Turner v. Street, 2 Rand. Va, 404 (1824); Blunt v. Lack, 26 L. J. Ch. 748 ( 1856) ; Chipman v. Montgomery, 63 N. Y. 221 (1875); Haggard v. Benson, 3 Tenn. Ch. 268 (1876); In re Lord Chesham, L. R. 31 Ch. D. 466 (1885), p. 472; Thorn v. Thorn, 101 Md. 444 (1905). As to married women, see Cooper v. Cooper, 7 H. L. Ca. 53 (1874) ; Howell v. Thomkins, 42 N. J. Eq. 305 (1886) ; In re Tongue (1915), 1 Ch. 390. Compare: Robinson v. Buck, 71 Pa. 386 (1872). Where modern stat- utes have removed the disabilities of coverture, a married woman should have the same capacity to elect as any person sui juris. 1 Pomeroy's Eq. Juris. (3d Ed.), Sec. 508. PIKE COUNTY v. SOWARDS 243 diction over the persons and property of lunatics as the English court of chancery, may elect for the lunatic where the lunatic has the right of election. It has the power, "and it is its duty, to protect those who have no other lawful protector. In making such election the court is guided by considerations for the benefit of the lunatic, without regard to what the advantage may be to his heirs. If, in this case, it is found that the effect of an election to waive the provisions of the will will be to divert property from the channel in which the testator intended it to go, and if the diversion is not required by the wants and circumstances of the widow, the prayer of the bill cannot be granted. The case will be heard at the trial term.* PIKE COUNTY v. SOWARDS. Court of Appeals of Kentucky, 1912. 147 Kentucky, 37. James Sowards was county attorney of Pike County for the term expiring on the first Monday in January, 1902, and during his term of office collected certain taxes due the county. After his term expired and on April 12, 1902, an action was brought by the county against him to recover therefor. 1 Hobson, C. J.: Hester A. Sowards left a will by which she devised all of her property to her two children, leaving nothing to her husband. The county by an amended petition undertook to subject the interest which James Sowards, as her surviving husband, would take in her estate under Section 2132, Kentucky Statutes, if she had left no will, or if Sowards had renounced the will. In Bains v. Globe Bank and Trust Co., 136 Ky. 332, we held that a married woman may dispose of her property by will ; that the hus- band may elect to take under the statute and not under the will; but that his creditors cannot complain of his election to take under the will or compel him to exercise his election to take under the statute. We adhere to the rule laid down in that case, and we do not see that it is a material circumstance that the will makes no provision for the husband. The husband is bound by the will unless he elects to take under the statute, and this is a personal privelege 'Accord: In re Marriott, 2 Molloy 516 (1816) ; Van Steenwyck v. Washburn, 59 Wis. 483 (1884); State v. Hunt, 88 Minn. 404 (1003); Mc- Donald v. Shaw, 92 Ark. 15 (1909) ; Harding v. Harding, 140 Ky. 277 (1910) ; In re Estate of Connor, 254 'Mo. 65 (1913) ; In re Bringhurst, 250 Pa. 9 (1915). Compare: In re Estate of Andrews, 92 Mich. 449 (1892); I ones v. Maguire, 221 Mass. 315 (191S). statute. 1 Only so much of the case as relates to election is printed. 244 ELECTION which the .creditors cannot compel him to exercise. On the whole case we see no substantial error ,in the judgment.' Judgment affirmed. 2 COLVERT v. WOOD. Supreme Court of Tennessee, 1894. • ; ' 93 Tennessee, 454. Thomas Leek died in 1878 and by his will devised various tracts of land to his widow and children. Two children, James A. Leek and Tennessee Colvert, and the children of a deceased child, Isaac Leek, declined to take under the will and filed a bill in the chancery court against the widow and other heirs, claiming that part of the property disposed of belonged to a firm composed of the testator, the dissenting devisees and another. After protracted litigation it was decided by the supreme court that said property was partnership property in which the testator held a one-fifth interest. Subsequently the partnership property was sold and the interest of 1 the testator, Thomas Leek, amounted to six 1 thousand five hundred and twenty-two dollars and sixty-nine cents. In proceedings for the distribution of this fund in appeared that the only parties interested were Elizabeth Leek (the widow), M. M. Leek, James A. Leek, Tennessee Colvert and the heirs of Isaac Leek, the other beneficiaries having been satisfied. Elizabeth Leek and M. M. Leek claimed the fund in compensation for the deficiency in the devises made to them by the action of the other parties: The chancellor decreed that this could not be sustained, since James A. Leek, Isaac Leek and Tennessee Colvert had never received anything under the will, and that the fund must be dis- tributed as if Thomas Leek had died intestate as to the same. On appeal the chancellor's decree was reversed and it was held that the assets in controversy must be applied to compensate Elizabeth Leek and M. M. Leek for the deficit in their legacies, which would more than consume the fund. A petition for a rehearing was filed. 1 Wilkes, J.: In this cause a very earnest petition to rehear is filed, and supported by elaborate printed brief and argument, the main point of which is that the court erred in holding that the present is a proper 1 case to apply the doctrine of election. In order "Accord: Shields v. Keys, 24 la. 298 (1868) ; Huffman v. Cop eland. 139 Ind. 221 (1894); Traudt v. Haderman, 27 Ind. App. 150 (1901) ; Fleming's Estate, '217 Pa. 610 (1907); Bottom V. Fultz, 124'Ky: 302 (1907); Bains v. Globe Bank, 136 Kv. 332 (iqio). Contra: Hessetimueller v. Mulrooney, 4 Ohio N. P. 50 (18Q7) ; Tripp v. Nobles, 136 N., Car, 09 {1904), semble. See also Tenbrook v. Jessup, 60 ;N, I. Eq. 234 (1900) r Healey v. Tillberry, 192 Mo. App. 509 (1915)- 1 The proceedings prior to the rehearing are briefly summarized. COLVERT v. WOOD 245 that petitioner's position may be correctly stated, a quotation is made from the brief: ' ' • "The doctrine of election never applies, and is never enforced to make good the disappointed legatee, except in cases where the refractory legatee get's something or claims something under the will, out of which he can make good the loss to the disappointed legatee. He must not only get something out of the will, but he himself must, by taking his own "property, thereby render the will inoperative as to the disappointed legatee. The court manifestly understood the doctrine of election to apply, and that refusing to take under the will was electing against the will ; whereas, by all the authorities, to elect against the will" is to claim a devise or bequest given, and, at the same time, to claim property which belonged to such devisee, which the testator had Undertaken to give away to another. The 'doctrine of election never applies except when the legatee has property given to him by the will and property of his own given away, or attempted to be given away, to another." The' court differs from counsel in his contention that the doc- trine' of election never applies except in cases where the refractory legatee actually takes or claims something under the will. On the contrary, when he elects against the will, he takes nothing under it until after the disappointed legatee is made whole in his legacy. When he ; elects to take under the will, then he surrenders his own property conveyed by the will, even though he owns such property independently of the will. Counsel illustrates his position as f oHbWs : "The testator may devise a tract of land which belongs to his son John to his other son William, and, in the same instrument, give John another tract of land. In this, John is put to his election ; and that is, he may, of course, keep his own property willed to William. But, on the other hartd; he. may elect to take under the will. When he elects to take under the will, he must let the devise to William stand, though it was his property willed; or, rather, under the authorities, the law is now settled that, to the extent only of his legacy, is he required to make good the legacy to William; and this, upon the equitable doctrine that the court will reform the words of the will, and do justice between John and William as legatees. ( See Pomeroy, Vol. I, Sees. 464-467 ; also, Story, Vol. II, Sees. 1078 to 1983, especially 1083.) This is the whole of the doctrine of election. There is nothing else in it." Now, the case thus put by counsel is when John elects to take under the will, in which case the devise to William must stand also. But John may elect to take against the will — that is, claim his own property by his superior title. In that event, he can take nothing under the will, but must allow the devise intended for him to go over to William as compensation for that which William cannot get under the will. The mistake of counsel is in forgetting that there may be ^h election against the will as well as for the will. This alternative privilege is the groundwork of the doctrine of election. The true 246 - ELECTION statement of the doctrine is that election applies when property of the testator is attempted to be given to the devisee or legatee at the same time the testator attempts to give away the property of the devisee or legatee to another by will. The devisee or legatee, in all such cases, must elect whether to claim his own property or that given him by the testator; and, when he elects to take the one, he surrenders the other, so far as is necessary to make up the share of any devisee or legatee that may thus be diminished or destroyed by his election against the will. Now, in this case the testator tendered to these partners his undivided one-fifth interest in the partnership property which he owned, but coupled it with a gift of the entire property, four-fifths of which he did not own. When the partners elected to hold the partnership property by their paramount title, then they surrendered the interest of the testator in the partnership so far as was required to make up to Mrs. Leek and M. M. Leek, the disappointed legatees, their legacies. They did not become individually liable to the disap- pointed legatees, because they received nothing under the will. Counsel is in error in treating the six thousand five hundred dollar fund as partnership funds, and in stating that Thomas Leek's interest in the same is one-fifth, or one thousand three hundred and fifty dollars. On the contrary, the six thousand five hundred dollars is Thomas Leek's share in the partnership, and the whole of it is his as such share, and it is so shown in the reports and decrees in the cause. It is this fund of six thousand five hundred dollars which was tendered to the partners by the will, and which they elected not to take, which must go to Mrs. Leek and M. M. Leek to make up their shares; and the partners, having elected not to take it under the will, cannot take it as heirs until after the disappointed legatees are made up their full amounts. 2 The petition to rehear must be dismissed. * "It was long a debatable question whether the refractory legatee for- feited absolutely all the benefits intended for him by the will, or only so much as might be required to make good that part of the scheme of the testator which his action had disappointed. The question can hardly be said to be entirely at rest yet ; but, though the foundation of the chan- cellor's action is a forfeiture_ by the assertion of a conflicting right, yet the better opinion now certainly is that such forfeiture will be enforced only so far as may be necessary to make good the failure of the testator's other intent; in other words it is forfeiture only for the purpose and to the extent of compensation." Per Mitchell, J., in Vance's Estate, 141 Pa. 201 (1891). See also, Kinnaird v. Williams, 8 Leigh, Va. 400 (1836) ; McGinnis v. McGinnis, 1 Ga. 496 (1846) ; Lewis v. Lewis, 13 Pa. 79 (1850) ; Wilbanks v. Wilbanks, 18 111. 17 (1856) ; Howells v. Jenkins, 1 DeG., J. & S. 617 (1863) ; Pigerskillv. Rodger, L. R. 5 Ch. D. 163 (1876), p. 173; Young v. Young, 51 N. J. Eq. 491 (1893) ; Farmirtgton S. Bank v. Outran, 72 Conn. 342 (1899) ; Barrier v. Kelly, 82 Miss. 233 (1903) ; In re Hancock (1905), 1 Ch. 16. HORTON W. JONES, Adm., v. ASHMUN A. KNAPPEN 247 HORTON W. JONES, ADMINISTRATOR, v. ASHMUN A. KNAPPEN. Supreme Court of Vermont, 1891. 63 Vermont, 391. * Ross, C. J. : The widow waived the provisions of the will, and took the share of the estate allowed by law. The contention is whether this waiver accelerated the time when the special legatees and next of kin are to come into the enjoyment of the respective proportions of the estate. Generally the termination of the life estate before the decease of the life tenant lets the reversioner into immediate enjoyment qf the estate. When the widow waives the provisions of the will, and takes under the law, such action usually diminishes the amount of the estate available for the other legatees or devisees pro rata, and it is equitable that they should come earlier into the enjoyment of their diminished legacies to compensate them for the diminution caused by such action. Such waiver blots out all the provisions of the will for the widow, and leaves the remaining provisions of the will in force, to be accommodated equitably to tha state of the testator's property as left by such action. 2 The testator in the present case left about fifteen thousand dollars in property. He gave his wife one thousand dollars of this, and the use and income of all of his estate during life. In specific pecuniary legacies to be paid at her decease he disposes of seven thousand five hundred dollars of the estate of which she was given the use for life, and the residue he gave to be divided half and half between his next of kin and her next of kin. The action of the widow in waiving the pro- visions of the will and taking what the law allows operated to diminish largely the residue of the estate given to the next of kin of the testator and of his wife, if distribution is to be made at once. There is enough of the estate remaining to pay the specific pecuniary legacies in full. But these legatees will receive just what the testator set apart for them if the payment of their legacies is postponed until the decease of the widow. Such postponement would to some extent, and perhaps wholly, compensate the next of kin for the diminution caused by the action of the widow of that part of the estate given by the testator to them. I have found very few decided 'The statement of facts, arguments, and part of the opinion are omit- ted. S. c, 14 L. R. A. 293. < 'McLaren v. Lucas Trustees, 8 Sess. Ca. (4 series) 502 (1881) ; Branden- burg v. Thorndyke, 139 Mass. 102 (1885) ; Mcintosh's Estate, 158 Pa. 528 (1893); Sherman v. Baker, 20 R. I. 613 (1898); Castleman v. CastjLmiffi 184 Mo. 432 (1904) ; Pittmon v. Pittman, 81 Kan. 643 (1910) ; Wakemprtt Wakefield, 256 111. 296 (1912), s. c, Ann. Ca. 1913. E. 414, and note; Wty of Reynolds, 151 Wis. 375 (1912). 248 ELECTION : cases where the action of the widow has affected the relative rights of the specific and residuary legatees as it does in this case. It is the first time this precise question has been considered by this court. Firth v. Denny, 2 Allen 468, presented this identical question. With- out any discussion of the questibn of acceleration of payment of specific pecuniary legacies, it was held that the estate should be held to accumulate for the benefit of the residuary legatees until the decease of the widow. This question is raised and decided In re Ferguson's Estate, 138 Pa. 208. It is there held that the election of the 1 widow to take under' the laV was equivalent to her death, and that what refnained of the estate after the widow took what the law allowed should be distributed at once, although such holding operated wholly to disappoint the residuary legatee. The court' rests this decision largely upon Coover's App., 74 Pa.' r i43. An exarriinatidn of that case shows that it did not present the identical contention undef^ consideration. "The testator gave his wrfe'a life 'eStarte^ arid the 1 rernairidef he. divided info ten eq"ual : shares, and gav£ each share to a particular individual or her lawful issue, with a further pro- vision for its distribution in case the individual dted without ?ssue. It did not present the question of the effect of such election, when it operated to diminish the portion 'given to one class of ' legatees only. In Sdndoe's App., 65 Pa. 314, the election of the wid<¥w operated to affect some of the ' specific legatees unequally. '"■ The couft'states this to be the rule in such a case : "The rule in equhy treats the substituted devises and bequests to the wife as a trust 'in her for the benefit of the disappointed claimants, to the amount of their interest therein ; and the court will assume jurisdiction to sequester the benefit intended for the refusing wife, in order' to secure 'compensation in those whom her election disappoints."_'Wb£r'- nef, Administration," 119, says on fhis subject: "The rejection 'by the widow of the provisions made for her by will generally 'results in the diminution or contravention of devises and legacies to 'dther parties. The rule in 1 such case is that the devise or le'gaty' which the widow rejects is to be applied in compensation of those wh6m her election disappoints." To the same effect are W'd'dd V. WbWd) i Met: (Ky.) 512, and Dean v. Hart, 62 Ala: 308. This satrie reSsult in principle is reached by accelerating the enjoyment of the remain- der, whert the election of the widow 6nly affects equally those to whom the remainder is given. Foic v. Rtimety, 68 Me. 121; State v. Smith, 16 Lea 662; Holderby v.' Walker, 56 N. C. 46; Robinson v. Harrison, 2 Terin. Ch. "11; Armstrong v. Park, 9 Humph: 195; Capron v. Capron, 6 Mackey 225, 12 Cent. Rep. 43.* In Adams v. Gillespie, 55 N. C. 245, the facts appear to raise the question raised by the case at bar, but the decision does not touch ■ * 'l t - ■ ! " - ' 1 • ■ ■ . . i, 1 ;t % Woodburtfs Estate, 151 Pa. 586 (1892); In re S chutes Estate, 113 Mich. 592 (1897) ; Beideman v. Sparks, 61 N. J. Eq. 226 (1900) ; Klenke's Estate (No. z), 210 Pa. 575 (1905) ; Kirchner v. Kirchner, 71 N. Y. Misc. 57 (1911). The principle will not be applied': contrary to' testator's inten- RANDAL v. COCKRAN 249 upon' it further than to hold that the election of the Widow removed her life estate from the property, and accelerated the enjoyment of the next life taker. The other cases cited by the counsel for the appellant do hot' bear specially' upon the point under consideration. The controlling and, we think, the more reasonable principle announced in most of these cases is the one expressed by Woefner, supra, viz.', to use the : denounced devises and legacies given By the will to the widow, to compensate, so far'as may be, ! the devises and legacies diminished by such renunciation. When the remainder- men are affected pro rata by such renunciation, acceleration of the enjoyment of their devises" or legacies, diminished proportionally, will equitably compensate them, so far as possible, for such diminu- tion. But in this' case acceleration of enjoyment would increase the specific pecuniary legacies, to the detriment of the residuary legatees, whose shares only are diminished . by the renunciation. Applying the principle stated, die life use of the property given by the will to the widow, and renounced by her, should be used to. compensate the residuary legatees, the next of kin of the testator and of his wife. This may be accomplished by allowing that portion of the estate not taken by the widow to accumulate during her natural life, or, by the consent of the parties interested, the same result could be reached by reducing to their present worth the specific pecuniary legacies on the basis of the expectation of the life of the widow, and dis- tributing the estate at once. The latter could only be done by con- sent, but would save the expense of caring for that portion of the estate which is available for the specific and residuary legatees, and avoid liability of loss from keeping it invested. This result affirms the judgment of the county court. 4 Judgment affirmed. CHAPTER VI. SUBROGATION. RANDAL v. COCKRAN. In Chancery Before Lord Hardwicke, 1748. 1 Ves. Sr., g8. The. king naving granted general letters of reprisal on the Spaniards for the benefit of his subjects, in consideration, of the losses they sustained by unjust captures,, the commissioners would tion, Cotton v. Fletcher, 77 N. H. 216 (1914); Adams v. Legro, ill Me. 302 (1913) ; Sawyer v. Freeman,, 161 Mass. 543 (1894), Miller v. Miller, 91 Kan,.* 1. (1913), s. c, L. R. A. 1915, A. 671, note. 'Accord: Firth' v. Denny,' 84* Mass. 468 (i86l)<; Hinckley v. House of Refuge, 40 «' When the contractor Abandoned the work the borough called on the Massachusetts company to complete it, and this company in turn called on its indemnitor, the United States company, to com- plete the contract. The United States company did so; as the repre- sentative of the Massachusetts company, and ' the Massachusetts company thereby fulfilled its obligation to the borough and was enti- tled to be subrogated to the rights of the borough in the money retained on the contract^ to reimburse it as far as it would go for the expense it incurred through its "agent in completing the contract. The borough has no further claim against- the surety, the- Massa- chusetts company, this company having done through the agency, of the United States company all it had agreed to do. CLARK W. DUNLOP.f. FREDERICK T. JAMES 253 If Ijhere were, a conflict between the surety companies over this fund and it, became necessary so to do, there is ample authority to justify the finding that the United States company on completing the work as the indemnitor or surety of the Massachusetts com- pany, the immediate surety is entitled to the same equity of subroga- tion to, the funds in question as the Massachusetts company. Sheld. Subr., Sec. 106, etc. There is no controversy, however, between the surety companies. They have made themselves parties to this action, and by their joint cross-bill they ask that the moneys retained by the borough be paid to them or either of them. And as no sufficient reason has been suggested why this should not be done, a decree will be advised that the funds retained under the contract and in the control of the defendant, the borough of Bogota, should be paid to the Massachusetts company. 2 CLARK W„ DUNLOP v. FREDERICK T. JAMES. Court of Appeals of New York, 1903. . t , 174 New York, 41 1. 1 1 Haight, J. : The rector, church wardens and vestrymen of Trinity Church had leased certain real estate in the city of New York to Peck, Stowe & Wilcox Company, for the term of twenty- one years. The lease contained a covenant to the effect that the lessee and its assigns would pay the rent stipulated and taxes assessed upon the premises as they became due during the life of the lease, and also provided for a re-entry by the lessor in case of a failure to 1 Subrogation is an equity called into existence for the purpose of enabling a party secondarily liable, but who has paid the debt, to reap the benefit of any securities which the creditor may hold against the prin- cipal debtor, and by the use of which the party paying may thus be made whole. Forest Oil Company's Appeals,. 118 Pa. 138 (1888). The principle is a general one and will apply to every instance, except the case of a mere stranger, where when one man has paid a debt for which another is- primarily liable, Sands v. Durham, 98 Va. 392 (1900), citing Bispham's Equity (see 8th Ed.,; Sees. 335-339). In Townsend v. Cleveland- F. P. Co., 18 Ind. App. 568 (1897), it is said that "subrogation takes place: (1) For the benefit of insurers; (2) for a surety who pays the debt of his prin- cipal ; (3) for one co-surety against another to compel contributions ; (4) for ■ a purchaser who extinguishes an incumbrance on an estate purchased ; (5) ■ for a creditor who satisfies a lien of a prior creditor ; (6) for an heir who pays the debt of the succession; (7) for one who has paid his own debt,' which for a valuable consideration was assumed by another but not paid.'" This enumeration is by no means exhaustive. See Sheldon on Subrbgation, Sec. 3; 6 Pomeroy's Eq. Jurisp., Sec. 921. In England the doctrine is stated in a more restricted form. 13 Halsbury's Laws 149; in the case of guarantors, 15 Halsbury's Laws 509; and in insurance, 17 Halsbury's Laws 518. 'The arguments of counsel are omitted. 254 SUBROGATION make these payments. By mesne assignments the lease had been acquired by the defendant in this action, who took the same, subject to the covenants, conditions and provisions already mentioned. After acquiring the leasehold premises the defendant, desiring to borrow money thereon, assigned his lease to one Marietta Wilsey, who thereupon borrowed the money desired of the plaintiff, and executed and delivered to him her personal bond, secured by a mort- gage upon the leasehold premises for the amount of such loan. Thereupon she reassigned the lease to the defendant, James, who took the same, subject to the bond and mortgage, but without agree- ing to personally pay or be liable therefor. After the defendant had acquired the lease of the premises, and during the time that he was the owner thereof, ground rent became due to the amount of one thousand one hundred and twenty-five dollars and taxes to the amount of one thousand three hundred and sixty-two dollars and sixty-two cents. He was requested to pay the same, but, having neglected to do so, the plaintiff was compelled to and did pay the same, in order to protect his mortgage interest in the premises and prevent the officers of Trinity Church from re-entering the premises under the terms of their lease. Thereupon this action was brought to recover from the defendant the amount paid, and at the close of the trial the learned justice presiding directed a verdict in favor of the plaintiff for the amount of such rent and taxes. The judgment entered upon this verdict has been affirmed by the appellate division and is now brought here for review, the appellant claiming that no privity of contract exists between the plaintiff mortgagee and the defendant, the assignee of the lease; and that a common law action cannot be, maintained to recover the amount of rent and taxes paid. If the plaintiff's claim ,jn this action was based upon privity of contract he might have some difficulty in maintaining his judgment, but such was not his claim. As we have seen, the lessee agreed in the lease to pay the land rent and the taxes as they matured and became due. The defendant took an absolute assignment of the lease and thereby became liable to the lessor to pay the rent and taxes. In the case of Stewart v. Long Island R. R. Co. (102 N. Y. 601- 507), Rapallo, J., speaking for this court, says: "The rules relating to the effect of an assignment of a lease are so well settled that it is hardly necessary to do more than refer to them. Where a lessee assigns his whole estate without reserving any reversion therein in himself, a privity of estate is at once created between his assignee and the original lessor, and the latter has a right of action directly against the assignee on the covenant to pay rent, or any other cove- nant in the lease which runs with the land." As we have also seen, the defendant had neglected and refused to pay the rent and taxes that had accrued, and the defendant as mortgagee was compelled to pay the same in order to protect his interest and save the mortgage from being cut off by a re-entry of Trinity Church, as it had the right to do. The taxes having become due, Trinity Church had the right to pay the same, and then maintain an action at law against the defendant for the amount thereof for the accrued rent. The plaintiff CLARK W. DUNLOP v. FREDERICK T. JAMES 255 in making the payment was not a mere stranger making a voluntary payment of the debt of another. Instead, he was vitally interested. He had loaned a large sum of money and had taken as a security for its repayment a mortgage upon the leasehold property. He had the right, therefore, to make the payment and protect his interest. It may readily be conceded that formerly subrogation was con- sidered as purely an equitable remedy, and that it was so held as late as the case of Ontario Bank v. Walker (1 Hill 652). But long previous to this courts of law had begun to sustain actions founded on equitable assignments of claims which were cognizable at law, both in England and in this country. In the case of Sarah J. Weed (2 Low. 555-562), subrogation is defined as "an equitable assign- merit, operated by the law itself, when justice requires it; as, for instance, when a surety pays the debt of his principal; ... or when one having an interest in the property or res, or honestly believing himself to have an interest, pays an earlier incumbrance." In modern times courts of law have dealt with subrogation as they would with assignments, and when the right of action to which the plaintiff asks to be subrogated is a legal right of action, a court of law may treat a plaintiff who is entitled in equity to subrogation as an assignee, and allow him to maintain an action of a legal nature upon the right to which he claims to be subrogated. (See notes to French v. Vix, 30 Abbott's N. C. 158-176.) In the case of Cole v. Malcolm (66 N. Y. 363-366), Earl, J., after citing a number of cases, states the rule for the application of the. doctrine of subrogation very pointedly, as follows: "It is gener- ally and most frequently applied in cases where the person advancing money to pay the debt of a third party stands in the situation of a surety, or is only secondarily liable for the debt; but it is also applicable to cases where a party is compelled to pay the debt of a third person to protect his own rights or to save his own property." In Cottrell's Appeal (23 Penn. St. 294), Woodward, J., said: "Subrogation is founded on principles of equity and benevolence, and may be decreed where no contract or privity of any kind exists between parties. Whenever one not a mere volunteer discharges the debt of another he is entitled to all the remedies which the creditors possessed against the debtor." In Lidderdale's Exrs. v. Robinson's Admr. (2 Brockenbrough 159-168), Chief Justice Marshall said: "Where a person has paid money for which others were responsible, the equitable claim which such payment gives him on those who were so responsible shall be clothed with the legal garb with which the contract he has discharged was invested, and he shall be substituted, to every equitable intent and purpose, in the place of the creditor whose claim he has discharged." In the case of Stevens v. King (84 Maine 291), Peters, C. J., said : "Legal subrogation lakes effect to its full extent for the benefit of one who being himself a creditor pays the claim of another who has a preference over him by reason of his liens and securities. (Bouv. Law Diet. Subrogation.) It applies to a great variety of cases, and is broad enough to include every instance in which one 256 SUBROGATION party pays a debt for which another is primarily Habk, and which in equity and good conscience should have been discharged by the latter; not, however, in the interest of mere , volunteers . and inter- meddlers; nor is it allowed so as to do injury , to the rights of others. It ignores the" form and looks to the substance. ,lt construes pay- ment to be purchase, and purchase to be payment, as justice may be demanded. It substitutes one ..person for another, or property for property." (See, also, Sidenberg v. Ely, 90 N. Y. 257; Roberts y. Ely,. 1x2, N. Y. 128-131.) ' ,,,, It appears to us that the principles enunciated in these authori- ties fully sustain the plaintiff's claim, that by making the, payment Under the circumstances alluded to, he became an equitable assignee of the church's claim against the defendant and entitled to be subro- gated to its rights, and to maintain, the same action that it could have maintained. This, does not change, alter or enlarge the liability of the defendant in the premises. 2 The judgment should be affirmed, with costs. O'Brien, Bartlett and Martin, J J., concur; Parker, Ch. J., and Gray, J., dissent; Vann, J., not voting. Judgment affirmed. CHARLES V. LOOK v. MARTIN HORN. Supreme Judicial Court of Maine, 1903. 97 Maine, 283 / Strout, J. : On March 31, 1876, Benjamin Horn and Oliver R. Horn received conveyance of a farm in Fairfield from Samuel Kim- ball, and on the same day the Horns mortgaged the farm to Kimball to secure the payment of five hundred and thirty-four dollars and fifty cents of the purchase money. Benjamin occupied the farm thereafter, except a piece conveyed to his son Calvin, till his con- veyance to his son Martin, one of the defendants, on May 12, 1898, since which time Martin has been in possession. Benjamin and his son paid the mortgage to Kimball, and had it discharged of record ' Accord: Young v. Williams, 17 Conn. 393 (1845); Blue v. Blue, 38 111. 9 (1865) ; Hosier's Appeal, 56 Pa. 76 (1867) ; Millburn v. Phillips, 143 Ind. 93 (1895); Elliott v. Tainter, 88 Minn. 377 (1903); Bennett v. First Nat'l Bank, 128 la. i (1905) ; Wunderle v. Ellis, 212 Pa. 618 (190s) ; Capital Nat'l Bank v. Holmes, 43 Col. 154 (1908). For applications of the principle in the case of heirs, devisees and legatees, see Jenness v. Robinson, 10 N. H. 215 (1839) ; Taylor v. Taylor, 8 B. Mon. 419 (1848); Winston v. McAlpine, 65 Ala. 377 (1880); Dean v'. Rounds, 18, R. I. 436 (1893); Cutchin v. Johnston, 120 N. Car. 51 (1897); Suydam v. Voorhees, 58 N. J. Eq. 157 (1899); Overton v. Lea, 108 Tenn. 50s (1901). 'Arguments of counsel are omitted. HOME SAVINGS BANK v. MARY STEWART BIERSTADT 257 on January 23, 1895. Oliver never paid anything and never occu- pied the farm. Oliver R. Horn, by deed of January 27, 1881, under- took to convey one-half of the farm to the plaintiff, but the mortgage to Kimball heing then in force, Oliver's deed conveyed only his one- half of the equity of redemption from that mortgage. The plaintiff seeks in this action to recover one-half of the rents and profits of the farm from January 26, 1895, to January 26, 1901. Benjamin Horn and his sons having paid that portion of the Kimball mortgage which should have been paid by Oliver, are enti- tled in equity to have Oliver's one-half of the farm subjected to its payment. This right is unaffected by the discharge of record of the mortgage. It may be treated in equity as still subsisting for the protection of Benjamin and Martin, or Oliver's one-half may be regarded as subject to a lien for the amount paid on the mortgage for Oliver's benefit. In no event can the plaintiff, as Oliver's grantee, recover rents #nd profits until Benjamin and Martin have been reimbursed their payment for Oliver, either from the rents and profits of Oliver's one-half, or in some other manner. It is very clear from the evidence that the net profits from the farm for the time covered by plaintiff's claim have been little, if anything, in excess of necessary repairs and taxes — certainly wholly insufficient to reimburse the payment for Oliver on the mortgage. Whatever net profits defendants may have received from one-half of the farm, they are entitled to hold towards their reimbursement. Until that is accomplished plaintiff can have no claim upon the rents and profits. 2 Judgment for defendants. THE HOME SAVINGS BANK v. MARY STEWART BIERSTADT. Supreme Court of Illinois, 1897. 168 Illinois, 618. On the thirtieth day. of June A 1892, William K. Lowrey was the owner of seven certain lots in a subdivision of land laid out by him at the northeast corner of Western and Park Avenues, in Chi- cago, and on that date he executed to William J.Goudy, of the firm of Goudy, Shanklin & Company, trust deeds upon each of these lots to secure a gross sum of twenty-two thousand four hundred and "Accord: Sumner v. Rhodes, 14 Conn. 135 (1840); Roddy's Appeal, 72 Pa. 98 (1872), statute; Randolph v. Stark, 51 La. Ann. 1121 (1899); Truss v. Miller, 116 Ala. 494 (1897) ; Williams v. Beatty, 88 Md. 1 (1898) ; Davenport v. Timmonds, 138 S. W. 349 (Mo. 1911) ; H oilman v. Oxford, 168 S. W. 437 (Tex. 1914) ; Smith v. Alderson, 116 Va. 986 (1914) ; Brown v. McCullough, 60 Pa. Super. Ct. 98 (1915) ; Turner v. Turner, 69 So. 503 (1915). And see Koboliska v. Swehla, 107 la. 124 (1898). Subrogation has been conceded to a joint debtor paying the entire 258 SUBROGATION fifty dollars, with interest at six per cent., and with a provision that if default should be made in any instalment of interest the entire sum might, at the option of the holder, become due and payable. Each of these seven trust deeds were recorded in th~e recorder's office' of Cook County July 21, 1892, and then became a first lien upon the lots mentioned. On August 10, 1892, Lowrey executed a trust deed to one C. K. G. Billings, conveying lots 1, 2 and 3, referred to, to secure a note for five thousand two hundred and fifty dollars, payable to the Home Savings Bank of Chicago one year after date. This trust deed, dated July 1, was not delivered until August 19, 1892, and on the following day was filed for record in the recorder's office. On October 22, 1892, the firm of Goudy, Shanklin & Company became dissatisfied with the Lowrey loans which they held, and desired him to take them up by procuring a new loan. A written agreement was entered into, which recited that Lowrey was indebted to them in the sum of twenty-five thousand three hundred dollars, of which twenty-five thousand dallars was secured by the trust deeds mentioned, and that an attachment was levied against the seven lots for the small amount, reciting further that Lowrey should apply to Horace A. Hurlbut for a first mortgage loan of twenty-five thou- sand dollars for the seven lots mentioned. To induce the same, Goudy, Shanklin & Company agreed to pay the commission Hurlbut should charge, together with expenses of examination of abstract. The loan was requested by Lowrey, and the money was paid Goudy, Shanklin & Company at Lowrey's request. It was also agreed that Goudy, Shanklin & Company should join with Lowrey in a bond to remove the small attachment lien upon the property. Hurlbut made the' loan and received from Lowrey an abstract of title brought down to include the 28th of October, 1892, being the date his trust deed was recorded. This abstract did not show the deed of trust from Lowrey to Billings, which was given to secure the note of the appellant bank. Upon the showing of this abstract, Hurlbut, who was acting for and negotiating the loan for appellee, Mary Stewart Bierstadt, paid to Goudy, Shanklin & Company twenty-fiVe thousand dollars, whereupon the trust deeds held by them were released. Appellee had no notice of the deed of trust from Lowrey to Billings until in June, 1895, when she filed her bill to foreclose the trust deed given to Hurlbut for her benefit. Her bill charged the loan was made and obtained for the purpose of debt. Coffee v. Tevis, 17 Cal. 239 (1861) ; McCready v. Van Antwerp, 24 Hun N. Y. 322 (1881) ; Ackerman's Appeal, 106 Pa. 1 (1884) ; Greenlaw v. Pettit, 87' Tenn. 467 (1889) ; Buchanan v. Clark, 10 Gratt. 164 (1853) ; Theus v. Armstead, 116 La. 795 (1906). Contra: Hammatt v. Wyman, 9 Mass. 137 (1812) ; Stanley v. Nutter, 16 N. H. 22 (1844) ; Towe v. Felton, 55 N. Car. 216 (1859); Hendrickson v. Hutchinson, 29 N. J. L. 180 (1861) ; Tompkins v. Fifth Waft Bank, 53 111. 57 (1869) ; Holmes v. Day, 108 Mass. 563 (1871) ; Morley v. Stevens, 47 How. Pr. 228 (1874). As to partners, cotnpare Sands v. Durham, 99 Va. 263 (1901), with Fessler v. Hickerell, 82 Pa. 150 (1876). HOME SAVINGS BANK v. MARY STEWART BIERSTADT 259 paying off the seven trust deeds heretofore mentioned, and further charged that at the time of the execution and recording of the trust deed made of Lowrey to Billings to secure the note of the Home Savings Bank, both Billings and the bank knew of the trust deeds to Goudy upon the lots conveyed to Billings, and took their deeds of trust subject to that of Goudy. The bill set forth the payment by her, through Hurlbut, of the Goudy trust deeds without any notice on her part of the existence of the Billings trust deed, and that her loan was made to Lowrey with the full belief that it was a first lien and for the sole and single purpose of discharging the Goudy trust deeds. She asks in her bill that her trust deed should be declared to be a first lien, and in equity she be declared entitled to be subrogated to the rights and lien of Goudy, Shanklin & Com- pany. . To that part of appellee's bill in which she alleges the knowl- edge of Billings and the bank of the existence of the Goudy deeds, and the making of the loan for the purpose of satisfying those notes and deeds of trust at the request of Lowrey, appellants filed their demurrer. The demurrer was overruled and appellants elected to stand by it, whereupon the parts of the bill demurred to were taken as confessed. The case was referred to a master, who found the allegations of the bill true, and reported that appellee was entitled to a first lien upon these lots prior to the Billings trust deed. The amount due appellee was found by the master and a decree entered accordingly, which, on appeal to the appellate court, was affirmed, and this appeal is prosecuted. 1 Phillips, C. J.: Subrogation, as a principle of equity juris- prudence, is generally confined to the relation of principal and surety and guarantors, or to a case where a person is compelled to remove a superior title to that held by him in order to protect his own, and also to cases of insurers. The general principle of subrogation is confined and limited to these classes of cases. (Bishop v. O'Conner, 69 111. 431 ; Borders v. Hodges, 154 id. 498.) Whilst these general heads include the doctrine and principles of subrogation, that doc- trine has been steadily expanding and growing in importance and extent in its application to various subjects and classes of persons. This equitable principle is enforced solely for the accomplishment of substantial justice, where one has an equity to invoke which cannot injure an innocent person. The right of subrogation which springs from the mere fact of the payment of a debt, and which is included under the heads first above stated, is what is termed legal subrogation, and exists only where included within those classes. But in addition to this principle of legal subrogation there exists another principle, which is termed conventional subrogation, which results from an equitable right springing from an express agreement with the debtor, by which one advances money to pay a claim for the security of which there exists a lien, by which agreement he is to 'The arguments of counsel are omitted. 260 SUBROGATION have an equal lien to that paid off, whereupon he is entitled to the benefit of the security which he has satisfied with the expectation of receiving an equal lien. 2 Coe v. Maryland Railway Co., 31 N. J. Eq. 105; Tyrrell v. Ward, 102 111. 29; Tradesmen's Ass. v. Thomp- son, 32 N. J. Eq. 133. This principle has been before this court, and the necessity and effect\t»f such an agreement were considered in White v. Cannon, 125 111. 412, where it was said (p. 415) : "It is only where the pay- ment of incumbrances is necessary to protect rights of the payer, or where they are paid pursuant to an agreement with the debtor that the payer shall hold them as security for the money advanced, that the payer will be subrogated to the rights of the holders of such liens and the liens will be kept alive for his benefit. Where the demand of a creditor is paid with the money of a third person not himself a creditor, without any agreement that the security shall be assigned or kept on foot for the benefit of such third person, the demand is absolutely extinguished." It is the agreement that the security shall be kept alive for the benefit of the person making the payment which gives the right of subrogation, because it takes away the character of a mere volun- teer. Here the agreement between the debtor and the appellee, who advanced the money, was to the effect that appellee was to advance sufficient money to discharge the seven Goudy deeds of trust, and should receive from the debtor, by way of security for the money so advanced, a first mortgage upon the seven lots. In equity -that was an agreement that the Goudy deeds of trust should become security for her loan. That was the substance of the transaction, and equity will effectuate the real intention of the parties, where no injury is done to an innocent party, by applying the principle of conventional subrogation. Draper v. Ashley, 104 Mich. 527; Tyrrell v. Ward, supra; Union Mortgage Co. v. Peters, 72 Miss. 1058; Levy v. Martin, 48 Wis. 198 ; Wilton v. Mayberry, 75 id. 191 ; Dillon v. Kaufman, 58 Tex. 696. This principle will be applied even where the record shows a release of Fhe satisfied incumbrance, as the lien so satisfied will be removed for the benefit of the party satisfying the same, where there has not been gross negligence and where justice requires it should be done, and this will be done as against a subsequent incum- brancer whose incumbrance has not been taken or his position changed because of the record showing the discharge of the senior a "Subrogation is either legal, that is given by the law, or it arises out of convention or contract. Legal subrogation is allowed only in cases where the person advancing money to pay the debt of a third person stands in the situation of a surety or is compelled to pay the debt to protect his own rights. Conventional subrogation results from an agreement, made either with the debtor or creditor, that the person paying shall be subro- gated." Per Stevens, V. C, in First Nafl Bank v. Thompson, 61 N. J. Eq. 188 (1900). See also Wilkins v. Gibson, 113 G-a. 184 (1901) ; Aetna Ins. Co. v. Hann, 72 So. 48 (Ala. 1916) ; Boley v. Daniel, 72 So. 644 (Fla. 1916). HOME SAVINGS BANK v. MARY STEWART BIERSTADT 261 incumbrance. Tyrrell v. Ward, supra; H amnion v. Barker, 61 N. H. 53 ; Campbell v. Trotter, 100 111. 281 ; Emmert v. Thompson, 49 Minn. 386; Union Mortgage Cot v. Peters, supra; Bruse v. Nelson, 35 Iowa 157; Draper v. Ashley, supra; Levy v. Martin, supra. The Goudy deed of trust was in existence and recorded when the Billings deed of trust was made and recorded, as was the latter when appellee's deed was made and recorded. So far as shown by this evidence there was only constructive notice to Billings of the Goudy deed and to appellee of the Billings deed. And as said in Campbell v. Trotter, supra (on p. 284) : "Campbell took his mort- gage with knowledge of Trotter's first mortgage of March 19, 1869, and as a second mortgage subordinate to Trotter's, and it should be held subordinate to that mortgage. There has nothing occurred since, which, in equity, should displace priority. The taking the new mortgage of August 30, 1877, and entering satisfaction of the first mortgage was, as deigned by the parties, but in continuation of the lien of the first mortgage. . . . The transaction was entirely irrespective of Campbell. ... It was with no reference to his benefit, and should not be made to redound thereto by the advance- ment of his mortgage to a priority over the lien of Trotter. . . . It was through ignorance, in fact, of the existence of Campbell's mortgage that Trotter entered satisfaction of the first mortgage and surrendered the notes, and which he would not have done had he known of Campbell's mortgage. This Trotter testifies to, and the nature of the transaction itself would satisfy, one that such must have been the case." The failure of appellee or her agent to learn of Billings' trust deed was not negligence which would bar her right to relief, when the only notice is constructive, and not actual. Tyrrell v. Ward, supra; Young v. Morgan, 89 111. 199; Smith v. Dinsmoor, 119 id. 656; Campbell v. Trotter, supra. The contention urged by appellants that the payment made by appellee was that of a mere volunteer, cannot be sustained. Where a payment is made at the request of the debtor, the person so paying is never a volunteer ; and in this case, the payment having been made at the request of the debtor, appellee was not a volunteer, merely. Emmert v. Thompson, 49 Minn. 386; London Co. v. Tracy, ^58 id. 201 ; Carr V. Caldwell, 10 Cal. 380; 24 Am. & Eng. Ency. of Law 290. The judgment of the appellate court for the First District is affirmed. 3 Judgment affirmed. "Accord: Union Mtq. <5n Tr. Co. v. Peters, J2 Miss. 1058 (1895) ; Gore v. Brian, 35 Atl. 897 (N. J. 1896) ; Allen v. Caylor, 120 Ala. 251 (1897). Compare: Rice v-. Winters, 45 Neb. 517 (1895); Campbell v. Foster Home Ass'n, 163 Pa. 609 (1894) ; Blair v. Mounts. 41 W. Va. 706 (1896). And see notes to Capen v. Garrison, 193 Mo. 335 (1906), in 5 L. R. A., N. S., 838, and to Southern C. O. Co. v. Napoleon H. C. Co., in 46 L. R. A., N. S., 1049 (Ark. 1913)- • 262 SUBROGATION WILLIAM H. FAY v. EDWIN J. FAY. » Court of Chancery of New Jersey, 1887. 43 New Jersey Equity, 438. Bird, V. C. : Kate F. Fay died at the age of eleven years, with- out personal estate, but the owner of an undivided interest in lands which have since been sold on proceedings for partition in the court of chancery. The interest of Kate has been ordered to be paid into this court, upon application by persons who claim to be her creditors and to have an interest in the fund. Middleton, an undertaker, buried Kate November 28, 1884, at a cost of eighty-five dollars. This bill has since been paid him by T. W. Fay, one of the adminis- trators of G. J. Fay, deceased, who was the grandfather of said Kate, and from whom the said lands descended to her. T. W. Fay, having discharged the said obligation by paying the undertaker, desires to have so much of the said money as is necessary therefor, applied to the payment of that obligation, claiming that he stands in the right of the undertaker and can^ as it is alleged the undertaker could, enforce this claim against the estate of said Kate. To this end he has been appointed administrator of the said infant, Kate F. Fay. The payment of this bill is opposed by the heirs at law of Kate, on the ground that the payment by T. W. Fay, as one of the admin- istrators of his father's estate, was voluntary ; and, being voluntary, he does not stand in the place of the undertaker. I find myself obliged to conclude that this seems to be the true attitude in which the petitioner stands. He was not obliged to pay this claim to the undertaker, as one of the administrators of his father's estate; the relation of debtor and creditor not existing there in any sense what- ever. Nor was he under any obligation in any other respect to pay the undertaker. His act was simply the payment of a debt due from one pe/son to another, not at the request of that other, or of his representative, and that, too, without taking an assignment of the debt or claim, or any writing whatsoever to show that it was meant to be something else than an absolute discharge qf a debt. In other words, he took nothing to show an intention to preserve the vitality of the claim as it existed in the hands of the undertaker. TTie under- taker, beyond doubt, had a claim' which he could have enforced. It may have been the intention, perhaps was, of Mr. Fay to preserve all the qualities of that claim against the estate of Kate, but whatever his intentions were, there is nothing in the case to show that he did it. The rule seems to be very well settled, so clearly so that it would be folly to contend otherwise, that a volunteer never can claim the benefit of the law of subrogation. See North River Construction MERCANTILE TRUST CO. v. HART 263 Co.'s Case, 11 Stew. Eq. 433, and S. C, 13 Id. 340. In advising a decree, it is most plainly my duty to follow the law so clearly pointed out. The petition should be dismissed, with costs. 1 MERCANTILE TRUST CO. v. HART. Circuit Court of Appeals of United States, 'Eighth Circuit, 1896. 76 Federal, 673. Thayer, , Circuit Judge: This is an appeal from a decree in favor of David W. Hart, the appellee, which was rendered on an intervening petition tfiat was filed by said Hart in a pending fore- closure suit. The facts disclosed by the record are substantially these: On June 28, 1895, the Mercantile Trust Company, the appel- lant, filed .a bill in the circuit court of the United States for the district of Colorado to foreclose a deed of trust, in the nature of a mortgage, on certain property situated in the city of Denver, Col., which at the date of the execution of the deed of ttust belonged to a corporation known as the "Colorado Mining-Stock Exchange." The deed of trust had been executed by the last-mentioned company for the purpose of securing the payment of an issue of negotiable bonds to the amount of two hundred and fifty thousand dollars. On August 12, 1895, David W. Hart, the appellee, filed an intervening petition in said cause, wherein he alleged that on October 17, 1892, he was the treasurer of the county of Arapahoe, State of Colorado ; that certain taxes had become due on the property covered by the aforesaid deed of trust, which it was his duty as treasurer to collect and pay over to the State of Colorado and to the proper municipali- ties and school corporations to which such taxes belonged, and for whose benefit they had been imposed; that on October 17, 1892, and on October 25, 1892, the Hicks & Bailey Investment Company, and the firm of Hicks & Bailey, respectively, drew checks in his favor, as treasurer of Arapahoe County, on certain banks in the city of 1 Accord: Gadsen v. Brown, Speers, S. C. 37 (1842); Simmons V. Walker, 18 Ala. 664 (1851) ; Richmond v. Marston, 15 Ind. 134 (i860) ; Smith v. Austin, 9 Mich. 465 (1862) ; Eastman v. Crosby, 90 Mass. 206 (1864) ; Wormer v. Waterloo A. W., 62 la. 699 (1882) ; Aetna L. I. Co. v. Middle port, 124 U. S. 534 (1887) ; Wilson v. Wilson, 6 Ida. 597 (1899) ; Brown V. Rouse, 125 Cal. 645 (1899) ; Webb v. Harris, 124 Ga. 723 (1905) ; Lackawanna T. Co. v. Gomeririger, 236 Pa. 179 (1912) ; Journal Pub. Co. v. Barber, 165 N. Car. 478 (1914); Wagner v. Alderson, 91 Wash. 157 (1916). Compare: Emmert v. Thompson, 49 Minn. 386 .('1892); Contoocook P. v. Hopkinton, 71 N. H. 574 (1902) ; Lee v. Newell, 96 Neb. 209 (1914)- See note to Crumlish v. Improvement Co., 38 W. Va. 390 (1893), >" 23 L. R. A. 120. " 264 SUBROGATION Denver, for an amount sufficient to pay said taxes, which then amounted to the sum of two thousand two hundred and thirty-eight dollars and thirteen cents, and delivered said checks to said treasurer in payment of said taxes ; that at the time of receiving said checks, he, as treasurer, executed receipts for said taxes and delivered the same to the drawers of said checks, and caused entries to be made on the public records kept in his office that said taxes were paid; that, supposing the drawers of said checks to be solvent, and under a legal obligation to pay said taxes, he thereafter, in his settlements as county treasurer, paid over the amount of said taxes on the prop- erty aforesaid to the proper authorities ; that, at the time of making such settlements and paying over said taxes, he had no intention of paying the same out of his own funds, but believed and was assured by the drawers of the checks that they would deposit funds in bank sufficient to meet said checks; and that, relying on such belief and assurance, he made the settlements and payments aforesaid. The intervener further alleged that the drawers of said checks had both become insolvent, and that, finding themselves so insolvent, they had subsequently surrendered to him the aforesaid tax receipts which had been executed and delivered when the aforesaid checks were drawn. In view of the premises, the intervener prayed that he might be subrogated to all the rights of the State of Colorado, the city of Denver and the board of education, as if said taxes had neither been paid nor receipted for, and that the lien "decreed in his favor might be adjudged to be superior to that of the mortgage bondholders, and that said lien might be satisfied out of the current income of the mortgaged property. The Mercantile Trust Company, hereafter termed the "Trust Company," first demurred to the inter- vening petition, and, said demurrer having been overruled, it there- upon answered the intervention. The answer so filed showed, among other things,Jhat the mortgaged property in question, and all the rents derivable therefrom since the foreclosure suit was insti- tuted, would be wholly inadequate to pay the outstanding mortgage indebtedness ; that neither the trust company, nor any of the mort- gage bondholders, had any knowledge or notice of any of the facts alleged in the intervening petition, until it was filed ; that, under the "provisions of the mortgage sought to be foreclosed, the trust com- pany, acting as trustee for the mortgage bondholders, might have caused a suit for foreclosure toTiave been instituted, and might have procured the appointment of a receiver and the sequestration of the rents and profits of the mortgaged property for the benefit of the bondholders, in the fall of the year 1892, if it had been advised that the taxes due in October, 1892, had not in fact been paid by the mortgagor; that the official records of the county treasurer's office had at all times shown, since the latter part of October, 1892, that said taxes were fully paid and discharged ; that the payment of said taxes by the intervener was purely voluntary payment ; and that the laws of the State of Colorado required the payment of taxes to be made in cash. As the case was disposed of in the' circuit court on pleadings MERCANTILE TRUST CO. v. HART 365 showing substantially the aforesaid facts, without the introduction of any testimony, the question presented by the appeal is whether the decree which sustained the intervener's claim, and granted the relief prayed for, can be upheld. This question, we think, should be answered in the negative. On the state of facts disclosed by the record, and heretofore stated, the payment made by the intervener- of the taxes in question must be regarded as a voluntary payment. He was under no legal obligation to any one to advance and pay the taxes upon the mortgaged property. It was his duty simply to collect the taxes thereon in the mode and within the time provided by law, and, when collected, give the proper receipts, make the proper entries in his official record, and pay over the money received to the proper authorities. He was under no obligation to accept checks in payment of said taxes when the same were tendered in payment. The laws of the State of Colorado made the taxes in question payable in cash only. Mill's Ann. St. Colo. 3854. There- fore, if he saw fit to accept checks in lieu of money, and to enter the taxes as paid upon the official records of the county when the checks were received, and 'if he thereafter elected to pay over the amount of the taxes to the state and municipalities to which they belonged, in reliance upon the promise of the makers of the checks that they would deposit the requisite funds to make the same good, he must be regarded as having acted throughout of his own free will, and at his own peril, for the accommodation of the taxpayer. Even if he thought proper to accept checks from taxpayers in lieu of money, no obligation rested upon him to enter the taxes as paid in the Books kept in his office, or to give receipts therefor, until the checks had been collected. In assuming to enter the taxes as paid in advance of the collection of the checks, he acted voluntarily. It is no answer to this view to say that, because the various duties of his office were discharged by deputies, the intervener did not act voluntarily, or that he labored under a mistake of fact in paying the aforesaid taxes. He is responsible for the conduct of his depu- ties, and must be presumed to have had knowledge of all acts done or performed by them in an official capacity. The case must be regarded in the same light as if the intervener had personal cogni- zance of the acceptance of the checks and of all subsequent trans- actions. Indeed, the record fails to show that he did not have such personal knowledge of the various transactions aforesaid. Inas- much, then, as the intervener was under no obligation, either as a surety or otherwise, to pay the taxes in question, and inasmuch as his conduct seems to have been inspired wholly by a desire to accom- modate the taxpayer, it must be ruled that he cannot be subrogated to the rights of the state with respect to the taxes which he advanced and paid. It is uniformly held that the right of subrogation does not exist and cannot be invoked under such circumstances. The case of In re Wallace's Estate, 59 Pa. St. 401, is very much in point. In that case taxes due from a property owner had been advanced and paid by the collector of taxes, and subsequently the owner had con- fessed a judgment in favor of the collector for the taxes so advanced. 266 SUBROGATION The collector claimed the right to be subrogated to the lien of the state, but the right was denied. The court said, in substance, that it might well be doubted whether a person could ever claim subro- gation to the rights of the state as respects a lien for taxes, but that such right could not be claimed where the payment of taxes was voluntary, nor where subrogation, if allowed, would prejudice the rights of a third party, such as a subsequent judgment creditor. In the case of Wilkinson v. Babbitt, 4 Dill. 207, Fed. Cas. No. 17,668, a collector of internal revenue who had paid to the government cer- tain public moneys which one of his deputies had unlawfully depos- ited in a bank that had subsequently failed, was held not entitled to subrogation to the right of the United States to claim a preference against the assigned effects of the insolvent bank. Also, in the case of Griffing v. Pintard, 25 Miss. 173, and Hinchman v. Morris, 29 W. Va. 673, 2 S. E. 863, it was held that a tax collector and a sheriff, respectively, who'had advanced and paid certain taxes for taxpayers, were not in a position to be subrogated to the rights of the state in whose behalf a lien for the taxes had been created. Inasmuch as a public tax is a debt of such a character that it cannot be assigned or farmed out by the state or municipality to whom it is due (Mc- Inerney v. Reed, 23 Iowa 410, 415), a case must be very excep- tional and peculiar when the right arises to be subrogated to the lien of the state or a municipality. It would certainly be contrary to sound public policy to concede that a collector may accept pay- ment of taxes in a mode not authorized by law, and thereafter, when confronted with a possible loss, be allowed the right of subrogation. In re Wallace's Estate, 59 Pa. St. 401, 405 ; Hinchman v. Morris, 29 Va. 689, 2 S. E. 863. See, also, Insurance Co. v. Middleport, 124 U. S. 534, 547, 8 Sup. Ct. 625 ; Sheld. Sur., Sec. 240. 1 But, aside from the foregoing considerations, the right of sub- rogation ought not to be conceded in the case at bar, because the rights of the mortgage bondholders, for the reasons fully disclosed in the answer of the trust company, would be injuriously affected. By the provisions of the mortgage, a failure on the part of the debtor to pay, when due, the taxes that Were assessed against the mortgaged property, constituted a default, on account of which a suit for foreclosure might have been maintained, in which proceeding the income of the mortgaged property might have been appropriated to the satisfaction of the mortgage debt shortly after the default occurred. No such action was brought until the present suit was 'Accord: Griffing v. Pintard, 25 Miss. 173 (1852); Repass v. Moore, 98 Va. 377 (1900). See Harwell v. Worsham, 2 Hump. Tern. 524 (1841) ; Whither v. Hemingway, 22 Me. 238 (1842) ; Bigelow v. Provost, 5 Hill, N. Y. 566 (1843); Clevinger v. Miller, 27 Gratt. 740 (1876); Feamster v. Withrow, 12 W. Va. 611 (1878); Montgomery v. Charleston, 99 Fed. 825 (1900). Compare: People v. Onondaga, 19 Wend. N. Y. 79 (1837) ; Staples v. Fox, 45 Miss. 667 (1871) ; Gillette v. Hill, 102 Ind. 531 (1885). And see notes to Wilson v. White, 82 Ark. 407 (1907), in 12 Ann. Ca. 378; Gibson v. Western L. I. Co., 161 Ky. 697 (1914), in L. R. A. 1915, D. 697. MARY E. SKINNER v. LEONARD V. TIRRELL 267 instituted on June 28, 1895, because the trust company and the bond- holders were induced to believe, by the action of the intervener, that the taxes for the year 1892 had been fully paid and discharged. It now transpires that the property covered by the mortgage is inadequate to pay the mortgage debt, and that the mortgagor is insolvent. The loss of the taxes which were advanced by the inter- vener must fall on some one, and, in view of the circumstances under which they were paid, it is certainly more equitable that the loss should be borne by the intervener, than that it should be cast on the bondholders. It was because the intervener accepted checks in pay- ment of the taxes, which was an act not authorized by law, that he incurred the loss in question. Under these circumstances, he has no equitable right, as against the bondholders, to be subrogated to the lien of the state or the municipalities to whom the taxes belonged. 2 The decree of the circuit court is reversed, and the case is remanded to that court, with directions to dismiss the intervening petition, at the cost of the intervener. MARY E. SKINNER v. LEONARD V. TIRRELL. Supreme Judicial Court of Massachusetts, 1893. 159 Massachusetts, 474. Morton, J. : This is a bill in equity, in which the plaintiff, who has advanced money to the defendant's wife while living apart from her husband, which she expended, it is alleged, in the purchase of necessaries, seeks to be subrogated to the rights of the persons fur- nishing the necessaries, and prays that the defendant may be ordered to pay to her the amount so advanced. The defendant demurred to the bill. The demurrer was sustained and the bill was dismissed, and the plaintiff appealed. The demurrer was a general one, and it was claimed at the argument, as one ground of it, that the bill did not set out sufficient facts to show that the wife was living apart from her husband for justifiable cause. Without considering whether this objection was well taken, we assume that, if valid, it could be removed by amend- ment. The question then is whether the bill, if amended so as to remove this objection, can be maintained either on the ground of subrogation or on the ground of a general equity. We think it cannot stand on either. There can be no subrogation unless there is something to be subrogated to. A debt or liability cannot be created where none 'Accord: Allen v. Perrine, 103 Ky. 516 (1898). See also, McGitmis's Appeal, 16 Pa. 44s (1851) ; Rankin v. Coar, 46 N. J. Eq. 566 (1890) ; Dwight v. Lumber Co., 82 Mich. 624 (1890) ; Comm. v. Horan, 45 Pa. Super. Ct. 608 (1911)- 268 SUBROGATION existed for the purpose of effecting a substitution. There never was any liability on the part of the defendant to the parties who fur- nished the wife with the necessaries. The goods were sold to her and were paid for by her. They were not furnished on the defend- ant's credit, but on the wife's. The money that was advanced by the plaintiff was not advanced to the parties who furnished the necessaries, but to the wife, to be expended by her as she saw fit. There is no ground, therefore, for the application of the doctrine of subrogation. Although the right of subrogation does not depend on contract, but rests on natural justice and equity, there must be either an agreement, express or implied, to subrogate, or some obligation, interest or right, legal or equitable, on the part of the party making the payment or advance in respect of the matter con- cerning which payment is made or money advanced, in order to entitle him to subrogation. Hart v. Western Railroad, 13 Met. 99; Amory v. Lowell, 1 Allen 504; Wall v. Mason, 102 Mass. 313; Aetna Ins. Co. v. Middleport, 124 U. S. .534; Gans v. Thieme, 93 N. Y/225, 232; Arnold v.. Green, 116 N. Y. 566; Nolte v. Creditors, 7 Mart. *(N. S.) La. 602; Johnson v. Barrett, 117 Ind. 551"; McNeil v. Miller, 29 W. Va. 480; Miller's Appeal, 119 Penn. St. 620; Sup- piger v. Garrels, 20 Bradw. (111.) 625; Gadsden v. Brown, Speers Eq. 37, 41; be Concilio V. Brownrigg, 25 Atl. Rep. 383; Brewer v. Nash, 16 R. I. 458, 462 ; Blackburn Building Society v. Cunliffe, 22 Ch. D. 61 ; Stevens v. King, 84 .Maine 291 ; Sheldon on Subroga- tion, Sees. 2, 3, 240. A mere volunteer is not entitled to subrogation. Aetna Ins. Co. v. Middleport, Arnold v. Green and' Gadsden v. Brown, ubi supra; Sheldon on Subrogation, Sees. 241, 242, and cases cited. Nor is one who lends money to another to pay a debt entitled as a matter of right to stand in the creditor's shoes. Sheldon on Subro^ gation, Sees. 241, 242, and cases cited. So far as subrogation is concerned, the plaintiff's contention resolves itself into the piopo- sition that the defendant's wife could have bought on her husband's credit the necessaries which she purchased and paid for with the money advanced to her by the plaintiff ■ that if the plaintiff had paid the parties supplying the necessaries their several demands, she would have been entitled to be subrogated to their claims against the defendant ; and that therefore a decree should be entered in her favor against the defendant in this suit. If the premises are correct, manifestly the conclusion does not follow from them. There are ancient and modern cases in England which hold that a person advancing money to a married woman under circum- stances like those in this case can recover the same of the husband in equity. Harris v. Lee, 1 P. Wms. 482; Marlow v. Pit field, 1 P. 1 The same principle has been applied in the case of infants, Marlow v. Pit field, 1 P. Wms. 558 (1719) ; Price v. Sanders, 60 Ind. 310 (1878) ; De Branwere v. De Branwere, 203 N. Y. 460 (1911). MARY E. SKINNER v. LEONARD V. TIRRELL 269 Wms. 558; Deare v. Soutten, L. R. 9 Eq. 151 ; Jenner v. Morris, 3 De G. F. & J. 45. See, also, In re Wood, 1 De G. J. & S. 465. 1 These cases have been followed in this country in Connecticut (Kenyon v. F arris, 47 Conn. 510), and there is a dictum in a' case in Pennsylvania. Walker v. Simpson, 7 Watts & Serg. 83. To the same effect certain text writers, also following the English cases, have stated the law to be as there held. 1 Bish. Mar., Div.,& Sep., Sees. 1190, 1 191; Pom. Eq. Jur., Sees. 1299, 1300; 2 Kent Com. 146, note; Schouler Domestic Relations, Sec. 61, note. But those cases do not appear to us to rest on any satisfactory principle. It was apparently conceded by the lord chancellor in Jenner v. Morris, supra, that they did not. He seems to have yielded .to them simply as precedents which he was bound to follow. The earliest one, Harris v. Lee, on which the subsequent ones rely, referred the juris- diction, without much discussion or consideration of it, to the principle of subrogatian. For reasons already given, we think that principle inapplicable. It is said that equity has jurisdiction, because there is no remedy at law. It is admitted that there is none at law. But it is contended that the defendant was bound to furnish his wife with necessaries; that the money which the plaintiff advanced to her was actually expended in good faith by her for necessaries; that it will be no hardship upon the defendant to be obliged to- pay for necessaries which the law would have compelled him to furnish ; and that in the interests of justice equity should compel him to pay the plaintiff the sums which she has advanced. In effect this is the same as saying that in equity money advanced to a wife living separate from her husband and for justifiable cause, and expended by her in good faith in the purchase of necessaries, should itself be regarded as necessaries and recoverable accordingly. At law it is clear that money is not necessaries, and that a married woman living separate from her husband cannot borrow money on his credit to purchase necessaries. 2 What is necessaries must be the same in equity as at law. It cannot be one thing on one side of the court and another thing on the other. There may be strong reasons why married women, compelled by their husbands' misconduct to live apart from them, should be allowed to borrow money on their hus- bands' credit for the purchase of necessaries. It is for the legisla- ture, if it deems it advisable, to give them such power. In this state they are not without a remedy in such cases. The probate court may, upon their petition, order the husband to pay to them from time to time such sums of money as it deems expedient for their support. Pub. Sts., Chap. 147, Sees. 33 et seq. It is possible that this statute should be taken as a declaration of the legislative sense that a married woman living apart from her husband should obtain 'Compare: Marshall v. Perkins, 20 R. I. 34 (1898), with Wells v. Lachenmeyer, 2 How. Pr. 252 (1885); Kenny v. Merslahn, 69 N. Y. App. Div. 572 (1902). 270 SUBROGATION money for necessaries through the aid of the probate court, and not by pledging his credit. However that may be, a majority of the court can discover no satisfactory ground on which jurisdiction in equity of the present suit can rest. 3 Decree affirmed. PFEILER, APPELLANT, v. PENN ALLEN PORTLAND CEMENT COMPANY. Supreme Court of Pennsylvania, 1913. 240 Pennsylvania, 468. Per Curiam : The plaintiff obtained a judgment in an action for personal injuries against the Penn Allen Portland Cement Com- pany, which became insolvent and was adjudged a bankrupt. He filed a bill for subrogation to the rights of the cement company under an indemnity policy of accident insurance issued to it by the Aetna Life Insurance Company and for a decree requiring the insurance company to pay to him the amount of his judgment against the cement company. The court sustained a* demurrer and dismissed the bill. The insurance policy provided that: "No action shall lie against the company to recover for any loss or expense under this policy unless it shall be brought by the assured for loss or expense actually sustained and paid in money by him after actual trial of the issue, nor unless such action is brought within two years after payment of such loss or expense." The cement company has paid nothing and under the express terms of its contract it is not entitled to recover from the insurance company. % Since it has no right of action there is nothing to which the plaintiff could be subrogated. For this reason the bill was dismissed by the learned judge of the common pleas, and in the decree entered we fully concur. 1 The decree is affirmed at the cost of the appellant. "Contra: Kenyon v. Farris, 47 Conn. 510 (1880); Walker v. Simpson, 7 W. & S. Pa. 83 (1844) ; Lenppie v. Osborn, 52 N. J. Eq. 637 (1894) ; Reed v. Crissey, 63 Mo. App. 184 (189s) ; De Branwere v. De Branwere, 203 N. Y. 460 (1911), semble; Deare v. Soutten, L. R. 9 Eq. 151 (1869). "See also, McGay v. Keilback, 14 Abb. Pr. N. Y. 142 (1861) ; Knapp v. Sturges, 36 Vt. 721 (1864) ; Miller v. Stout, 5 Del. Ch. 259 (1878) ; Leavitt v. Canadian P. R. Co., 90 Me. 153 (1897) ; Weir-Boozer D. G. Co. v. Kelly, 30 Miss. 64 (1902); Cambridge v. Hanscom, 186 Mass. 54 (1904); In re Brit-- tish Power T. & £■ Co. (1910), 2 Ch. 470; McArthur v. Kerr, 155 N. Y. App. Div: 690 (1913). HAMPTON v. PHIPPS- 271 HAMPTON v. PHIPPS. Supreme Court of the United States, 1882. 108 United States, 260. Bill in equity by a creditor to obtain the benefit of securities held by sureties of the principal debtor. The appellee, who was complainant below, was the holder, and filed his bill in equity, on behalf of himself and the other holders of bonds, executed and delivered by Theodore D. Wagner and William L. Trenholm, to the amount of seven hundred and ten thousand dollars, and paid to creditors in settlement of the liabilities of two insolvent firms, in wh'ich they were two of the copartners. These bonds were dated January 1, 1868. The payment of- the principal and interest of each of these bonds was guaranteed, by writing indorsed thereon, by George A. Trenholm and James T. Welsman, who were sureties merely. These sureties entered into a written agreement each with the other dated May 3, 1869, in which it was recited that, in becoming parties to said guaranty, they had agreed between themselves that the said George A. Trenholm should be liable for the sum of four hundred thousand dollars, and the said James T. Welsman for the sum of three hundred and ten thousand dollars, of the aggregate amount of the bonds, and no more, and that each would be respectively liable to the other for the full dis- charge of the said sum and proportion by them respectively under- taken, and that each would save and keep harmless and indemnify the other from all claim, by reason of the said guaranty, beyond the amount or proportion respectively assumed, as stated; and it was thereby further agreed that, at any time when either of them should so require, each should, by mortgage of real estate, secure to the other more permanent indemnity, because of the said guaranty. Thereupon, and on the same date, each executed to the other a mortgage upon real estate of which they were respectively the own- ers, the condition of which was that the mortgagor should perform on his part the said agreement of that date. The guarantors, as well as the principal obligors, had become insolvent before the bill was filed. It also appeared that, of the sum of five hundred and seventy- three thousand three hundred dollars due on account of outstand- ing bonds, George A. Trenholm, one of the guarantors, had paid one hundred and eight thousand four hundred and fifty-four dollars, leaving still due from his estate to make good the proportion assumed by him, two hundred and fourteen thousand five hundred and thirty-two dollars ; and that the proportion for which the estate . of James T. Welsman, the other guarantor, was liable, was two hundred and fifty thousand three hundred and fourteen dollars, of 272 ' SUBROGATION which nothing had been paid. The appellees claimed that the mort- gages interchanged between the guarantors inured to their benefit as securities for the payment of the principal debt, and prayed for a foreclosure and sale for that purpose. This was resisted by the appellants, one of whom, Hampton's administrator, as a judgment creditor of George A. Trenholm and James T. Welsman, claimed a lien on the mortgaged premises; the others, executrixes of James Welsman, deceased, being subsequent mortgagees of the same property. A decree passed in favor of the complainants, according to the prayer of the bill, from which appeal was taken. 1 Matthews, J. : The ground on which the court below pro- ceeded seems to have been that the mortgages given by the co-sure- ties, each to the other, were in equity securities for the payment of the principal debt, which inured to the benefit of the creditors upon the principle of subrogation. The application of the principle of subrogation in favor of creditors and of sureties, has undoubtedly been frequent in the courts of equity in England and the United States, and is an ancient and familiar head of their jurisdiction. Tt was distinctly stated, as to creditors, in the early case of Maure v. Harrison, i Eq. Ca. Abr. 93, where the whole report is as follows: "A bond creditor shall, in this court, have the benefit of all counter-bonds or collateral security given by the principal to the surety; as if A owes B money, and he and C are bound for it. A gives C a mortgage or bond to indemnify him, B shall have the benefit of it to recover his debt." And the converse of the rule was stated by Sir William Grant in Wright v. Morley, 11 Vesey 12, where he said: "I conceive that as the creditor is entitled to the benefit of all the securities the prin- cipal debtor has given to his surety, the surety has full as good an equity to the benefit of all the securities the principal gives to the creditor." And it applies equally between sureties, so that securities placed by the principal in the hands of one, to operate as an, indemnity, by payment of the debt, shall inure to the benefit of all. 2 Many sufficient maxims of the law conspire to justify the rule, To avoid circuity and multiplicity of actions ; to prevent the exercise of one's right from interfering with the rights of others; to treat that as done which ought to be done ; to require that the burden shall be bprne by him for whose advantage it has been assumed ; and to secure equality among those equally obliged and benefited, are per- haps not all the familiar adages which may legitimately be assigned in support of it. " It is, in fact, a natural and necessary equity which 'The arguments of counsel and part of the opinion of the court are omitted. 2 See note to Johnson v. Martin, 83 Wash. 364 (1915), in L. R. A, 1916 G, IOS7- HAMPTON v. PHIPPS 273 flows from the relation of the parties, and though not the result of contract, is nevertheless the execution of their intentions. For, when a debtor, who has given personal guaranties for the perform- ance of his obligation, has further secured it by a pledge in the hands of his creditor, or an indemnity in those of his surety, it is conformable to the presumed intent of all parties to the arrange- ment, that the fund so appropriated shall be administered as a trust for all the purposes, which a payment of the debt will accomplish; and a court of equity accordingly will give to it this effect. All this, it is to be observed, as the rule verbally requires, presupposes that the fund specifically pledged and sought to be primarily liable for the payment of the debt ; and it is because it is so, that equity impresses upon it the trust, which requires that it shall be appro- priated to the satisfaction of the creditor, the exoneration of the surety, and the discharge of the debtor. The implication is, that a pledge made expressly to one is in trust for another, because the relation between the parties is such that that construction of the transaction best effectuates the express purpose for which it was made. It follows that the present case cannot be brought within either the terms of the reason of the rule; for, as the property, in» respect to which the creditors assert a lien, was not the property of the prin- cipal debtor, and has never been expressly pledged to payment of the debt, so no equitable construction can convert it by implication into a security for the creditor. But the claim of the complainants fails for another reason. The right of subrogation, on which they rest it, is merely a right to be substituted in place of each of the co-sureties in respect to the other, in order to enforce the mortgages given by them respectively according to their terms. But the conditions of those mortgages have not been broken, and the very fact, which is supposed to confer the right upon the creditor to interpose — the insolvency of the sureties — has rendered it impossible for either to fasten upon the other a breach of the condition of his mortgage. As neither can pay his own proportion of the liability he agreed to divide, neither can claim indemnity against the other for an overpayment. It is entirely clear, therefore, that neither of the sureties could be, under the circumstances as they appear, entitled, as mortgagee, to fore- close the mortgage against the other. The condition of each mort- gage was, that the mortgagor would perform his part of the agree- ment and indemnify the mortgagee against the consequences of a failure to do so. Unless one of them had been compelled to pay, and had in fact paid, an excess beyond his agreed share of the debt, there could have been no breach of the conditions of the mortgage, and consequently no right to a foreclosure and sale of the mort- gaged premises. And the amount which the mortgagor could be required to pay, as a condition of redeeming the mortgaged premises in case of foreclosure, would be, not the amount which the mort- gagee, as between himself and the common creditor, was bound to pay on account of the debt, but the amount which, as between him- 274 SUBROGATION self and his co-surety, the mortgagor, he had paid beyond the pro- portion which, by the terms of the agreement between them, w,as the limit of his liability. The mortgages were not created for the security of the principal debt, but as security for a debt possibly to arise from one surety to the other. As to which of them has there been as yet any default? Plainly none as to either. And yet the complainants assert the right to foreclose them both — a claim that is self-contradictory, for, by the very nature of the arrange- ment, it is impossible that there should be a default as to both. The fact that one mortgagor had failed to perform his part of the agree- ment could only be on the supposition that the other had not only fully performed it on his part, but had paid that excess against which his co-surety had agreed to indemnify him. There is, there- fore, no right to the subrogation insisted on, because there is nothing to which it can apply. 3 It results, therefore, that the complainants were not entitled to participate in the benefit of the mortgages in question, nor to share in the proceeds of the sale of the mortgaged premises ; but that the same should have been applied to the payment of the other judg- ment and mortgage liens upon the premises, in the order of their priority. The decree of May 29, 1879, therefore, being the one from frhich the appeal was taken, is reversed, and the cause remanded with directions to take such further proceedings therein, not incon- sistent with this opinion, as justice and equity require. ' Decree reversed. ■ JOSEPH KNAFFL v. KNOXVILLE BANKING & TRUST COMPANY. Supreme Court of Tennessee, 191 5. 133 Tennessee, 6SS- Fancher, J. : The suit in which this petition is filed is a pro- ceeding by complainants on behalf of themselves and all other creditors of the Knoxville Banking & Trust Company for the pur- pose of administering the affairs of said corporation as an insolvent concern. This particular intervening petition was filed by Charles H. Bacon to recover of the receiver of said Knoxville Banking & Trust Company in round numbers twenty-eight thousand dollars, being the amount, with interest, of a bond executed by the said "Accord: Taylor v. Farmers' Bank, 87 Ky. 398 (1888); Henderson- A chert Co. v. The John S. Shillito Co., 64 Ohio 236 (1901) ; O'Neill v. State Savings Bank, 34 Mont. 521 (1906); Hasbrouck v. Carr, 145 Pac. 133 (N. Mex. 1914). JOSEPH KNAFFL v. KNOXVILLE BANKING & TRUST CO. 275 Charles H. Bacon and others, as sureties for the Knoxville Banking & Trust Company, as principal, to secure the city of Knoxville in the deposit of moneys in said banking institution. Petitioner avers that judgment was rendered against him and ■ all the other sureties on said bond, which judgment was paid by him alone ; the other sureties being insolvent. This bond provided that the Knoxville Banking & Trust Company will "truly keep all sums of money deposited with it by the city of Knoxville, and shall pay over the same, and each and every part thereof, upon the written demand of the said city of Knoxville." Petitioner avers, in effect, that he is entitled to recover of the receiver such pro rata as he may be entitled to on the twenty-eight thousand dollars paid by him, upon the ground that he will be subro- gated to all the rights of the city of Knoxville to the extent of the payment made by him to the city on this obligation. The petition does not aver that this payment was in full of all sums of money so deposited. On the contrary, it is admitted in the petition that the city had on deposit more than the amount of the bond, and has received only a thirty per cent, dividend. The amount of the city's deposit is shown by the bill or petition of the said city of Knoxville, filed in the general cause which was ordered to be sent up with the transcript, to be sixty thousand dollars, and in the briefs of counsel this sum is treated as the total amount of the deposit. The receiver demurred to this intervening petition upon three grounds. The first ground of demurrer, we think, is conclusive of the case, to wit, that it was not averred that the entire indebtedness due the city of Knoxville from the Knoxville Banking & Trust Com- pany has been paid, and, consequently, the petitioner would not be entitled to subrogation or to any other relief against the Knoxville Banking & Trust Company or its receiver. It appears that, if the city should receive the full amount which will be finally paid in the receivership proceeding, it will not receive a sufficient amount to cover the entire indebtedness. A surety is not entitled to subrogation until the debt is paid in full, the creditor in the meantime left in control of the debt, and all the remedies for collection. A pro tanto assignment or subrogation will not be allowed. The reason is that subrogation is a creature of equity and will never be allowed to the prejudice of the creditor. Harlan v. Sweeny, 1 Lea 686; Gilliam v. Esselman, 5 Sneed 86; 37 Cyc. 408. . "If the surety, upon making a partial payment, became entitled to subrogation pro tanto, and thereby became entitled to the position of an assignee of the property to the extent of such payment, it would operate to place such surety upon a footing of equality with the holders of the unpaid part of the debt, and, in case the property was insufficient to pay the remainder of the debt for which the guarantor was bound, the loss would logically fall, proportionately upon the creditor and upon the surety. Such a result would be 276 SUBROGATION grossly inequitable." Columbia Finance, etc., Co. v. Ky. Un. R. Co., 60 Fed. 794, 9 C. C. A. 264. In New Jersey Midland R. Co. v. Wortendyke, 27 N. J. Eq. ' 658, the New Jersey court said : "The right of subrogation cannot be enforced until the whole debt is, paid. And until the creditor be wholly satisfied there ought and can be no interference with his rights or his securities which might, even by bare possibility, preju- dice or embarrass him in any way in the collection of the residue of his claim." * In the present case Bacon was not liable for the debt beyond the amount of his bond, but the obligation to pay the bond was con- ditioned that the bank should "well and truly keep all sums of money deposited by the city and pay over the same and each and every part thereof." So that the bond was an obligation limited to twenty-five thou- sand dollars, but conditioned that the bank should well and truly keep all sums of money and pay over the same and each and every part thereof. The full amount of the bond has been discharged by the surety, but the condition expressed has not been complied with. The bank has not well and truly kept all sums of money deposited with it and paid over each and every part thereof. The principal liability still exists in part, though the surety has paid the penalty of the bond. This, however, did not satisfy the creditors' demands against the principal, which was to determine the liability on the bond. The' amount of the liability is satisfied so far as Bacon is concerned, but the cause and determination of that liability is not satisfied in full. The particular prejudice to the city by permitting a pro tanto assignment in this case to the extent of the payment by the surety lies in the fact that the pro rata which the city woujd receive from the principal debtor would become less. But it is said that this case does not involve the doctrine of equitable subrogation alone. The bond provided for what is termed conventional subrogation in the following words : "In case of default hereunder and the payment of a claim under this bond, the said surety shall be forthwith subrogated to all the rights of the said city of Knoxville against the said bank, its receiver or any person or corporation as respects such funds to the amount of such payment; and the city of Knoxville, Tennessee, covenants to execute all papers required and to co-operate with the said surety in order to secure for the said surety such rights." "Accord: Stamford Bank v. Benedict, 15 Conn. 436 (1843); Fare- brother v. Wodehouse, 23 Beav. 18 (1856) ; Loeb v. Fleming, 15 111. App. 503 (1884) ; Forest Oil Co.'s Appeals, 118 Pa. 138 (1888) ; Lumbermen's Ins. Co. v. Sprague, 59 Minn. 208 (1804) ; Featherstone v. Emerson, 14 Utah 12 (1896) ; Bronder v. Hill, 136 Fed. 821 (1905) ; Webb v. Stone, 201 Fed. 850 (1912) ; American F. Co. v. East Ohio S. P. Co., 101 N. E. 671 (Ind. App. 1913) ; Taltey v. State, 121 Ark. 4 (1915) ; United States F. <&■> G. Co. V. Union Bank, 228 Fed. 448 (1915). Compare: Brice's Appeal, 95 Pa. 14s (1880); Nettleton v. Ramsey Co. L. Co., 54 Minn. 395 (1893); Skinkle v. Huffman, 52 Neb. 20 (1897). JOSEPH KNAFFL v. KNOXVILLE BANKING & TRUST CO. 277 This provision must be considered in connection with the under- taking, of which it is a part, to secure the city against all loss. It does not provide for subrogation pro tanto upon payment of a part of the obligee's claim. The bond was not to pay a particular twenty- five thousand dollars, but was an obligation to pay any deficit left unpaid by the principal, to the extent of twenty-five thousand dollars. Had it chosen to do so, the city might have deferred action on the bond until it had received the last dollar from the receiver, and then it could sue the surety on the bond and recover the full amount of the penalty, not exceeding the total debt unpaid. But the city did not have to exhaust the assets of the principal before a recovery from the surety. The fact that it recovered judgment and received payment from the surety before exhausting the principal does not alter the case. We are of opinion that this contractual subrogation is nothing more than the usual equitable right which the surety would have without stipulation. Before the court would permit a subrogation in favor of a surety that would be to the detriment of the obligee in the bond, the contract should be so certain as to admit of no doubt on that question. In the present case the main object of the bond was to secure and save harmless the city of Knoxville on all deposits it might make in the Knoxville Banking & Trust Company. We see no provision in the contract for a subrogation inconsistent with that purpose. The subrogation mentioned in the bond to be forth- with made in case of default and payment of a claim thereunder did not contemplate a subrogation which should lessen the recovery of the city, but only a subrogation in harmony with the purpose of the bond, which must have been' upon such payment and under such conditions as would preserve all the rights to the city to receive its full debt. In other words, the subrogation not being stated otherwise, must be considered as in harmony with the obligation to well and truly keep all sums of money deposited by the city and pay over the same and each and every part thereof. Counsel for petitioner cite Ex parte Rushforth, 10 Vesey Jr. 409, in which a bond with surety in the penalty of £10,000 was con- ditioned for the payment of such sums as would be advanced to the principal. Twenty thousand pounds were advanced to the prin- cipal, who then became bankrupt. The surety paid the penalty and sought subrogation against the estate of the principal. In the opinion Lord Chancellor Eldon said: "I think the bankers are not entitled in equity to say as against the surety that their demand is more than £10,000, the amount of the bond he has given, upon which he would be prima facie entitled to stand in their place ; as to the residue of their debt they ought to be considered, if I may so express it, as their own insurers." We think there is fault in the reasoning of this case, and that it is not in harmony with the principles of equity governing the doctrine of subrogation. The condition of the bond was to pay such sums as would be advanced to the principal without limiting the amount which should be advanced. The fault in the reasoning is 278 SUBROGATION readily seen when it is considered that the obligee may first apply all that the principal obligor can pay, and then resort to the bond for any amount left unpaid not exceeding the amount of the penalty ; for it is the final amount left unpaid by the principal which is intended to be secured by the surety. It results that, in our judgment, there was no error in the decree of the chancellor, and it is affirmed. 2 GRAND COUNCIL OF PENNSYLVANIA ROYAL ARCANUM v. CORNELIUS. Supreme Court of Pennsylvania, 1901. 198 Pennsylvania, 46. Replevin for seven United States bonds of the aggregate value of two thousand dollars. Before McClung, J. At the trial it appeared that the bonds in controversy were the property of the plaintiff, but had been in the custody of Charles E. Cornelius before his death, which occurred on October 15, 1898. The bonds were seized by the sheriff in the possession of defendant. Defendant did not give any property bond, and the bonds were delivered to plaintiff. It appeared that Cornelius in his lifetime gave three notes to the Peoples' Savings Bank of Pittsburgh, and as security for the third note he fraudulently pledged the bonds in controversy. After his death defendant with moneys of the estate paid off all three of the notes, and received the bonds, but refused to deliver them to plaintiff until she was paid the amount of the third note. The court charged as follows: I instruct you that under the evidence in the case and under 'Ex parte Rushforth is explained and distinguished in Ellis v. Em- manuel, L. R. 1 Exch. Div. 157 (1876), where it is said, per Blackburn, J., "I think that the class of cases referred to do not lay down any general doctrine that where there is a surety, with a limit on the amount of his liability, for the whole debt exceeding that limit, he is entitled to the benefit of a rateable proportion of the dividends paid on the whole debt, but only that where the surety has given a continuing guarantee, limited in amount, to secure the floating balance which may from time to time be due from the principal to the creditor, the guarantee is as between the surety to be construed, both at law and in equity, as applicable to a part only of the debt, co-extensive with the amount of his guarantee ; and this upon the ground, at first confined to equity, but afterwards extended to law, that it is inequitable in the creditor, who is at liberty to increase the balance or not, to increase it at the expense of the surety." See also, Midland Banking Co. v. Chambers, L. R. 7 Eq. Ca. 179 (1868). In Queen v. O'CaU laghan, 1 Ir. Eq. 439 (1838), the court declined to follow Ex parte Rush- forth, to the prejudice of the crown. GRAND COUNCIL OF PENN. ROYAL ARCANUM v. CORNELIUS 279 the conceded facts in the case, it is entitled to recover. That is, that the bonds belong to it without payment of this alleged lien of two thousand dollars, and you will, therefore, render a verdict for the plaintiff with nominal damages ; that is, a verdict for the plaintiff in the sum of six and one-fourth cents. Verdict and judgment for plaintiff for six and one-fourth cents. Defendant appealed. 1 Fell, J.: The undisputed facts upon which a verdict was directed for the plaintiff were these: Shortly before his death Charles E. Cornelius procured three loans from the People's Savings Bank of Pittsburgh on his notes with the pledge of collaterals. Each note by its terms made the collateral given with it a pledge for that note, and also for any other indebtedness then existing or which might thereafter be incurred to the bank. The securities pledged with the first and second notes belonged to Cornelius ; those pledged with the third note we're negotiable United States bonds, which were the property of the plaintiff, the Grand Council of the Royal Arcanum, with the custody of which Cornelius had been intrusted, and his use of them was unauthorized. The notes matured after the death of Cornelius, and the defendant, his executrix, with notice of the breach of trust, offered to buy the note with which the bonds were pledged, but the bank refused to sell it. She then paid the bank the amount of all the notes with money which she had collected as executrix, and received all the collaterals. The collateral pledged with each note was more than sufficient to secure its payment, and the defendant was riot required to pay the third. note in order to preserve the securities of the estate which were pledged with the other notes. At the trial the defendant claimed the right to retain the bonds until paid the amount which she had expended in payment of the notes for which they were pledged. This claim was based on the proposition that upon the death of Cornelius his estate became a trust fund for distribution among his creditors, whose rights became fixed at the instant of the death of their debtor, and that as the estate is insolvent, equity, in order to preserve the rights of the creditors, will treat the debt as still existing and subrogate the defendant to the same rights the bank had in regard to the bonds. We see no grounds on which the claim to be subrogated to the rights of the bank can be sustained. The funds of the estate were not used in the purchase of the bonds and did not in any manner enter into them, nor were they used for the purpose of releasing them from the grasp of an innocent holder for value who had a right to retain them. Their release was an incident only of the payment of the debt by one whose duty it was to pay it, and with funds pledged to its. payment. True, the payment of the note and the release of the bonds operated to discharge the claim which the plaintiff had against the estate growing out of the wrongful con- 1 Arguments of counsel are omitted. 2&> SUBROGATION version by Cornelius, and which because of the insolvency of his estate could not have been collected in full; but a payment in dis- charge of a just debt cannot be recovered back, even though because of a deficiency of assets it be an overpayment* and the creditor receiving the payment will not be required to refund in favor of other creditors. Carson v. McFarland, 2 Rawle 118; Montgomery's App., 92 Pa. 202 ; Miller v. Hulme, 126 Pa. 277. There was not a purchase of the note which carried with it a right to the collateral. Payment of a debt by the real debtor is prima facie an extinguish- ment of it. Moreover, this was the actual intention of the parties. The bank refused to sell the note, and it was paid and marked "paid" .before it was delivered. Nor can the right of subrogation arise from the equity of con- tribution, as in the case of those who are equally liable for the same debt, nor from the equity of exoneration, as in the case of those who are successively liable. The plaintiff had assumed no liability. The object of subrogation is to place a charge where it ought to rest, by compelling the payment of a debt by him who ought in equity to pay it. "In short, the doctrine of subrogation is that one who has been compelled to pay a debt which ought to have been paid by another is entitled to exercise all the remedies which the creditor possessed against that other, and to indemnify from the fund out of which should have been made the payment which he made." Sheldon on Subrogation, Sec. n. There can be no right of subrogation in one whose duty it is to pay, or in one claiming under him, against one who is secondarily liable, or, as in this case, not liable at all. In such a case payment is extinguishment. Nor will subrogation ever be enforced where the equities are equal, or the rights not clear, nor to the prejudice of the legal or equitable rights of others. Cornelius was not only the principal, but the only debtor, and no payment by him or fpr him or in his interests or that of his estate could give rise to any claim to the bonds on the part of a person making such payment. 2 The judgment is affirmed. C. B. WILKINSON v. JAMES C. BABBITT. United States Circuit Court, Eighth Circuit, 1877. 4 Dillon, 207. This was an appeal from a decree of the district court sustain- ing a demurrer to the bill of complaint and dismissing the bill. The bill charged that the defendant is the assignee in bankruptcy 'Accord: Russell v. Pistor, 7 N. Y. 171 (1852)'; Rogers v. Meyers, 68 III. 02 (1873) ; National Bank v. Cushing, 53 Vt. 321 (1881) ; Probst field v. Csizek, 37 Minn. 420 (1887) ; Martin v. Aultman, 80 Wis. 150 (1891) ; Witt v. Rice, 90 la. 451 (1894) ; Sacramento Bank v. Pacific Bank, 124 Cal. 147 (1899) ; Home Savings Bank v. Shallenberger, 82 Neb. 507 (1908) ; American Bonding Co. v. State Sav. Bank, 47 Mont. 332 (1913). C. B. WILKINSON v. JAMES C. BABBITT 281 of the Union German Savings Bank; that the bank had been adjudged a bankrupt April 3, 1873; tnat at tne ti me of the bank- ruptcy there was on deposit in the bank one thousand and sixty-two dollars and sixty-two cents; moneys belonging to the United States, which had been placed there by one Voede, who, at the time of such deposit, was a deputy collector under the complainant, who was collector of internal revenue; that the moneys so deposited were moneys arising for collections of internal revenue. The complain- ant, as required by law, paid the aforesaid sum into the treasury. The complainant, in his bill, claimed that by the deposit of the money in the bank he became the surety of Voede, and of the bank to the United States; and that the United States, until the 3d of April, 1873, had a cause of action against the bank and Voede ; and that, by virtue of the payment of the said sum of one thousand and sixty-two dollars and sixty-two cents to the United States by com- plainant, he became entitled to the preference of the United States as against the bank, and asked to be so subrogated as a preferred creditor. The defendant demurred. Dillon, Circuit Judge : The deposit of the money by Voede in the Union German Savings Bank was the act of complainant; the deputy, who is his appointee, authorized by law, derives the breath of life from the collector — is appointed by, and receives his pay from, and is removable at the pleasure of, the collector. The deposit of money in the bank did not create the bank the principal debtor, and the complainant the surety. The various sections of the Internal Revenue Act of 1862 show that the collector is the only person known to the law as the custodian of the revenue collected, until it is paid into the proper depository. While the doctrine of subroga- tion, which entitles the surety to all of the liens and securities of the creditor, on paying the latter the debt of the principal, is fully recognized in equity, and in certain cases at law, this is not a case for its application, and complainant is not entitled to be subrogated to the rights of the United States as a preferred creditor against the bank; and, moreover, under the acts of Congress, the deposit of the money in the bank, by Voede or Wilkinson, wa^ positively forbidden, and the deposit there was unlawful. The complainant, therefore, is not in a position to ask the aid of a court of equity to give him the fruits of an unlawful act, and to do so would encourage other officers in the violation of the law. 1 Affirmed. "Accord: Farmer? Loan & T. Co. v. Carroll, 5 Barb. N. Y. 613 (1849) ; Bleakley's Appeal. 66 Pa. 187 (1870) ; Guckenheimer v. Angevine, 81 N. Y. 304 (1880) ; Rowley v. Towsley, 53 Mich. 329 (1884) ; Johnson v. Moore, 33 Kan. 90 (1885) ; Devine v. Horkness, 117 111. I4S (1886) ; German Bank v. VrAted States, 148 U. S. 573 (1893) ; Starke v. Bernheim, 102 Ala. 464 (1893) ; Mansur T. Co. v. Jones, 143 Mo. 253 (1897) ; Estate of Ramsay V. Whiibeck, 183 111. 550 (1900) ; Greig v. Rice, 66 S. Car. 171 (1902) ; Brown v. Sheldon State Bank, 139 la. 83 (1008). So where the complainant has been negligent: Conner v. Welch, $1 Wis.. 431 (1881) ; Fort Dodge B. & L. Ass*n v. Scott, 86 la. 431 (1892) ; Hargis v. Robinson, 63 Kan. 686 (1901) ; Coonrod v. Kelly, 119 Fed. 841 (1902). 282 * SUBROGATION UNITED STATES FIDELITY AND GUARANTY CO. v. CARNEGIE TRUST CO. AND GEORGE C. VAN TUYL, Jr., SUPERINTENDENT OF BANKS. Supreme Court of New York, Appellate Division, 1914. 161 N. Y. App. Div. 429. Scott, J.: The sole question to be determined in this contro- versy is whether or not the plaintiff, as a surety for the Carnegie Trust Company, an authorized depositary of state funds, and which has fulfilled the condition of its undertaking by paying to the state the full amount for which it was liable thereunder, is entitled to be subrogated to a preference and priority of payment in the distribu- tion of the funds of said trust company, it having been decided that the state itself is entitled to such preference and priority. 1 (Matter of Carnegie Trust Company, 151 App. Div. 606; 206 N. Y. 390.) The right of the plaintiff to reimbursement out of the assets of the Carnegie Trust Company is not questioned, and it has already been paid, in common with other general and unpref erred creditors, thirty-five per cent, of its claims. It is conceded that there remains in the hands of the superintendent ofi banks an undistributed amount of money, assets of said Carnegie Trust Company, more than suffi- cient to pay plaintiff's claim in full. We find, therefore, as a starting point for the consideration of the question submitted the following propositions either conceded by the defendants or firmly established by law : First, that the claim of the state, for the payment of which plaintiff was the surety, was entitled to a preference and priority of payment over general creditors. Second, that plaintiff by virtue of its payment to the state of the amount for which it was bound as surety, has become entitled, by subrogation, to the reimbursement out of the assets of the trust company, of the amount paid to the state in satisfaction of its obligation as surety. The sole question remaining is whether or not the plaintiff is also subrogated to the state's right to a preference over general creditors. Although this question has not been directly passed upon in this state, it has been the subject of frequent consideration in other jurisdictions, and it appears to have been invariably held, save in the case of bail given for a person charged with crime, that a surety paying a debt to the state for which the latter would have been entitled to a preference, takes by subrogation a like preferential right against his principal. Where the right to such subrogation 1 Parts of the opiniop are omitted. The judgment was affirmed by the court of appeals, 213 N. Y. 629. U. S. FIDELITY AND GUAR. CO. v. CARNEGIE TRUST CO., &c. 283 was denied to bail for an alleged criminal, the decision was put upon grounds of public policy, because it was considered that the general rule should not be extended to such cases, "for this would be to aid the bail to get rid of their obligation and to relieve them from the motives to exert themselves in securing the appearance of the prin- cipal." But the court was careful to show that it considered this case to be- an exception to the general rule, for speaking of that rule it says : "This is clearly the rule where the principaj obligation is the payment of money or the performance of a civil duty." (United States v. Ryder, no U. S. 729.) In Matter of Lord Churchill, Manisty v. Churchill (58 L. J. 136; L. R. [1888] 39 Ch. Div. 174), the plaintiff, who had been surety for Lord Churchill for the payment of a debt due the crown and who had p'aid the debt, claimed, in proceedings to administer the insolvent estate of the principal debtor, to stand in place of the crown with all incidents of priority to other creditors. It was held that he was so entitled, and while the court refers to the Mercantile Law Amendment Act of 1856 (19 & 20 Vict., Chap. 97, Sec. 5) as one which had removed any possible obstacle in the way of the successful assertion of such a claim, it expressed the opinion that, without that act, the plaintiff would have been entitled to the priority which he claimed. The plaintiff calls our attention to a number of other cases which, under one set of circumstances or another, seem to sustain its contention. (The King v. Bennett, Wightw. 1; American Bonding Co. v. Rey- nolds, 203 Fed. Rep. 356; Enders v. Brune, 4 Rand. [Va.] 438; Orem v. Wrightson, 51 Md. 34, 41 ; American Bonding Co. v. Mechanics Bank, 97 Md. 598; Myers v. Miller, 45 W. Va. 595; Watts v. Eufaula Nat. Bank, 76 Ala. 474, 478; Lewis v. United States Fidelity & Guaranty Co., 144 Ky. 425.) The defendant criti- cises some of these authorities, but it is significant that we are cited to no case, save that of bail for an alleged criminal, that supports the contention of defendant that the surety paying a debt due from his principal to the government may not avail himself of all the rights and remedies which the government had, including the right to priority. But apart from the reported decisions we consider that the plaintiff's contention is wholly sound. It is familiar law that a surety paying the debt of his principal is entitled to be subrogated to all of the creditor's rights, privileges, liens, judgments and mort- gages, and that to enjoy the benefit of these no assignment from the creditor is necessary. The surety, by the mere fact of payment, is put into the shoes of the creditor. If, in the case at bar, the state had a lien, in the conventional sense, upon the assets of the Carnegie Trust Company, and plaintiff as surety had paid the debt of the trust company, it would have been entitled upon the plainest prin- ciples to be subrogated to the state's lien and to enforce the same. (Memphis, etc., Railroad v. Dow, 120 U. S. 287; Sgobel v. Cappa- donia, 8 App. Div. 303.) The state's absolute right to preference in the distribution of the assets of the trust company, if not tech- nically a first lien thereon, was equivalent to a lien and had all the 284 SUBROGATION effect which a specific lien would have had. If, as seems to be undoubted, the plaintiff would, upon payment, have succeeded to a lien, we can see no reason why it should not be held to have suc- ceeded to the equivalent. No injustice will be done to the general creditors of the trust company by allowing plaintiff's claim to a preference, as it merely continues in force the preferential right of the state, subject to which all creditors become such, and it is tp be borne in mind that plaintiff's bond was not given for the benefit of any other .creditor than the state. It is further urged, in behalf of the defendant, that plaintiff waived its right to a preference because while it filed its claim for reimbursement immediately after its payment of the trust company's debt, it did not claim a preference until after the court of appeals had decided favorably the claim of the state to a preference. We do not consider that this constituted a waiver, which is generally a question of intention. By filing its claim generally, without then claiming a preference, the plaintiff did nothing inconsistent with its subsequent and present claim that it was entitled to priority of payment, and there is no claim that by postponing this claim the plaintiff has put the trust company or its creditors at a disadvantage, or has in any way estopped itself. Judgment for the plaintiff. 2 A. J. EVANS, ADMINISTRATOR, v. B. F. ROBERTSON. Supreme Court of Mississippi, 1877. 54 Mississippi, 683. This was assumpsit by B. F. Robertson against A. J. Evans, administrator, upon an account for necessary plantation supplies furnished him in 1873 and 1874, while cultivating the farm of his intestate under orders of the chancery court, as provided in Section 1 156, Code 187 1, the administrator having reported the proceds of the crop to the court as assets, and applied the same to the payment of the general creditors of the estate, refusing to satisfy the plain- tiff. The defendant demurred, on the grounds that the claim was not against the corpus of the estate ; that the data to fix the income for 1873 and 1874 were not given ; and that the court had no juris- * Accord: Hunter v. United States, 5 Peters 173 (1831) ; Knighton v. Curry, 62 Ala. 404 (1878) ; Richeson v. Crawford, 94 111. 165 (1879) ; Robert- son v. Trigg, 32 Gratt. Va. 76 (1879); Jackson v. Davis, 4 Mackey, D. C. 194 (1885) ; Bolus's Estate, 133 Pa. 7? (1890) ; Stokes v. Little, 65 111. App. 255 (1895) ; Skipwith v. Hurt, 94 Tex. 322 (1901) ; United States F. &i G. Co. v. Borough Bank,. 161 N. Y. App. Div. 479 (1914). A, J. EVANS, Administrator, v. B. F. ROBERTSON 285 diction of the suit. Declining to plead further after the overruling of the demurrer, the defendant suffered judgment nil dicit for the whole amount of the account, and brought up the case. 1 Chalmers, J. : Where an administrator or executor is carrying on the farm of the decedent under the orders of the chancery court, in pursuance of Section 1156, Code 1871, the creditor who advances money or supplies in the making of the crop must look alone to the proceeds of the crop, and takes the risk of a profit being made in the farming operations. If, in fact, a profit is made and applied by the administrator to the payment of the general debts of the estate, leaving unpaid the debts contracted in the farming operations, the holders of these latter debts will have a right to go against the corpus of the estate. In such case the fund primarily devoted by the statute to a satisfaction of their demands having been applied to the pay- ment of general debts, they will be equitably entitled to be sugro- gated to the rights Qf general creditors against the body of the estate, to the extent that there was a profit made in the farming operations, and to the extent that such profit was actually applied to the discharge of general debts. Emanuel v. Norcum, 7 How. (Miss.) 150; Farley v. Hord, 45 Miss. 96, 105. It is quite evident that this right cannot be asserted in a court of law. It involves issues impossible of satisfactory solution in such a tribunal, inquiries as to the nature of the claim sued upon, as to whether there was a profit in the farming operations; if so, to what amount, and how much of this profit was applied to the general debts of the estate. That a court of law is incapable of dealing with such inquiries is abundantly shown by the result in this case, where a demurrer to the declaration having been overruled, and the defend- ant having declined to plead further, judgment nil dicit was entered for the whole amount sued for, leaving undetermined all of those matters upon the existence of which the right to recover really depended. Had the proceedings been in chancery, a pro confesso would have been followed by a reference to the master for a settle- ment of these questions. 2 Judgment reversed, demurrer sustained, and action dismissed. 'The arguments of counsel are omitted. "See also, Smith v. Harrison, 33 Ala. 706 (1859); Allen v. Phelps, 4 Cal. 256 (1854) ; Meyer v. Mintonye, 106 111. 414 (1883) ; Moore v. Watson, 20 R I. 495 (1898) ; Wilder v. Wilder, 75 Vt. 178 (1903) ; Mcllvaine v. Big Stony L. Co., 105 Va. 613 (1906) ; Fitcher v. Griffiths, 216 Mass. 174 (1913). In Polhemus v. Prudential R. Corp., 74 N. J. L. 570 (1906), it is said: "Where the very right of subrogation is in question, it may be that the remedy is in equity, but when the right of subrogation itself is practically conceded, and there remains to be eniorced only the right of realizing the value of the subject-matter, such right may, on proper occasion, be within the cognizance of a court of law." See also, Paulin v. Kaighn, 29 N. J. L. 480 (1861) ; Springer v. Springer, 43 Pa. 518 (1862) ; German Amer. S. B. v. Fritz, 6B Wis. 390 (1887) ; Dunlap v. James, 174 N. Y. 411 (1903), supra, this chapter; Craig v. Lininger, 61 Pa. Super. Ct. 339 (1915)- 286 . SUBROGATION POWELL & POWELL, INC., ET AL., v. WAKE WATER CO. Supreme Court of North Carolina, 1916. 171 North Carolina, 290. This is an appeal from an order allowing certain insurance com- panies to institute an action against the receiver of the Wake Water Company that was under contract, at the time of the injuries com- plained of, to furnish the city of Raleigh and its inhabitants with water and to perform other obligations. The court, being requested by attorneys for receiver of Wake Water Company to find the facts, found the following facts: That W. B. Grimes was appointed receiver of the defendant, Wake Water Company, on 29 August, 1912, and at once qualified and entered upon the discharge of his duties as such receiver. That pursuant to order of court in said action, a notice was published in the Baltimore Sun and in the Raleigh Evening Times for twenty days, commencing 30 May, 191 3, notifying all parties having claims against the said water company or the receiver thereof tg file the same with said receiver on or before 15 July, 1913, and further giving notice that all parties who failed to so file their claims would be barred from participating in the distribution of the assets of said water company, a copy of which notice is attached to the amended answer to the petition herein. That the petitioners above named had issued policies of fire insurance upon the property of the News and Observer Publishing Company, situated in the city of Raleigh, N. C, which property was destroyed or damaged by fire on 24 April, 1913, and that the petitioners paid to the said News and Oberver Publishing Company several amounts aggregating four thousand nine hundred and ninety- five dollars and fifty cents, and that the said petitioners filed with the receiver an itemized statement of said amounts on 23 Novem- ber, 191 5. That heretofore, to wit, in July, 1913, the News and Observer Publishing Company brought suit, by leave of this court granted, against the receiver of the Wake Water Company, and in the com- plaint filed 21 November, 1913, in said action it was alleged that the News and Observer Publishing Company carried insurance upon the property damaged and destroyed by fire to the amount of twenty- six thousand nine, hundred and one dollars and twenty-four cents, and the defendants in said action in answer filed admitted the fact of insurance, but denied upon information and belief the amount thereof. That the said publishing company alleged in its complaint the value of the property destroyed to be one hundred and ten thousand nine hundred and fifty-one dollars and forty-eight cents, and prayed POWELL & POWELL, Inc., et al., v. WAKE WATER CO. 287 judgment for the difference, eighty-nine thousand and fifty dollars and twenty-four cents, a copy of which said complaint is attached to said amended answer. That thereafter in said action the plaintiffs and the defendants comprised the matters involved in said litigation, and a judgment was entered at the December term, 1914, of this court, dismissing the action brought by the plaintiff and adjudging that each party pay its costs, the matters and things having been settled by agreement; and in this action as above entitled an order was made approving the settlement between the News and Observer Publishing Company and the receivers of the Wake Water Com- pany and the payment of twelve thousand five hundred dollars by the said receiver to the said News and Observer Publishing Com- pany in settlement of the demands of the said News and Observer Publishing Company, a copy of which release is attached to said amended answer; but that previous thereto, to wit, in September, 191 3, the petitioners received from the said News and Observer Publishing Company a subrogation contract in the form a copy of which is attached. That none of said insurance companies applied to be made parties to the suit brought by said publishing company. That the loss by said fire to the property covered by all insur- ance policies was appraised and adjusted by said insurance com- panies on 27 May, 1913, at forty-one thousand two hundred and sixty-five dollars and fifty cents, and that settlement subsequently' made by said insurance companies was made upon that appraisement and adjustment. That said insurance companies at the time of such appraise- ment and adjustment knew that said water company was in the hands of a receiver, and at the time of the paynient by them of the loss under their policies on 12 September, 1913, knew that said water company was in the hands of a receiver, and that said publishing company had brought suit against the receiver of said water com- pany for damages by reason of alleged negligent failure to furnish water and pressure to extinguish said fire. That the contract between the Wake Water Company and the city of Raleigh was made in 1906, a copy of which is attached hereto, and that the first five of said petitioners filed a petition in this action to be allowed to sue the receiver in January, 1915, and the same had been continued from time to time to this term of the court, and the rest of said petitioners filed petition for leave to sue on 23 November, 1915. Upon the foregoing facts the court finds that the petitioners have a prima facie cause of action and right of action against the receiver. And it is further found as a fact by the court that the receivers of the Wake Water Company have not yet distributed all the funds in their hands arising from the sale of the property of the said Wake Water Company, but they now have in hand sufficient funds to meet the demands of the petitioners. This order is made without prejudice to any defense which the Wake Water Company or the receiver thereof or any of the defend- ' 288 SUBROGATION ants herein may see fit to interpose to any of said proposed suits. R. B. Peebles, Judge Presiding. The receiver excepted and appealed. 1 Allen, J. : The provisions in the contract between the city of Raleigh and Wake Water Company upon which the receiver relies to take this case out of the principle adopted in Gorrell v. Water Co., 124 N. C. 328, are in substance the same as those in the contracts considered in Jones v. Water Co., 135 N. C. 553, and Morton v. Water Co., 168 N. C. 582, and we therefore hold, following these authorities, 'that the News and Observer Publishing Company had a right of action against the defendants as receivers of the Wake Water Company upon the allegations of negligence contained in the petition. If so, have the petitioners, the insurance companies, who have paid the loss in part, any interest in this right of action which can be maintained in their own name ? When property, upon which there is insurance, is destroyed or damaged by the wrongful act of another, the liability of the wrong- doer is primary and that of the insurer secondary, not in order of time, but in order of ultimate liability ; the right of action is for one indivisible wrong, and this abides in the insured, through whom the insurer must work out his rights upon payment of the insurance, the insurer being subrogated to the rights of the insured upon pay- ment being made. Hall v. R. R., 80 U. S. 367; R. R. v. Jurey, n r U. S. 595; Phoenix Ins. Co., 117 U. S. 321 ; R. R. v. Ins: Co., 139 U. S. 235. "The right (of subrogation) arises not out of the contract between the insured and the insurer, but has its origin in general principles of equity" (14 Mod. Am. L. 159), and in this respect the standard form of policy, which has been adopted by legislative enactment (Rev., Sec. 4760), in making provision for subrogation, is but declaratory of principles already existing. 2 The great weight of authority is in favor of the position of the receiver, that when the loss exceeds the insurance, as the cause of action is indivisible and the right of the insurer is not because of any interest in the property destroyed or damaged, and is enforced upon the equitable principle of subrogation, the action must be, brought by and in the name of the owner of the property, and that he is entitled to recover the entire damages, without diminution on) 1 Part of the statement of facts is omitted. ' "Subrogation is based upon equity, and no doubt the statute, in directing through its standard form of insurance policy the subrogation of the insurers to the rights of the insured against the party primarily re- sponsible for the loss, meant that it should be administered on equitable principles. But the effect of the statute is to put subrogation on the footing of legal right, which must prevail unless a stronger equity be shown against it." Per Mitchell, J., in Stoughton v. Manufacturers N. Gas Co., 165 Pa. 428 (1895). POWELL & POWELL, Inc., et al., v. WAKE WATER CO. 289 account of the insurance, and that he holds the recovery first to make good his own loss, and then in trust for the insurer ; but if the insurance paid equals or exceeds the loss or damage, as the insured in that event has no further beneficial interest, the insurer is entitled to be subrogated to the entire cause of action of the insured, and the action may be maintained in the name of the insurer or of the insured to the use of the insurer. 8 The controlling principles and the conclusions reached by the courts are stated accurately in the first case cited from the circuit court of appeals as follows : "When an insurance company pays to the insured the amount of a loss of the property insured, it is subrogated in a corresponding amount to the assured's right of action against any other person responsible for the loss. This right of the insurer against such other person is derived from the assured alone, and can be enforced in his right only. At common law it must be asserted in the name of the assured.* In a court of equity or of admiralty, or under the modern codes of practice, it may be asserted by the insurance com- pany in its own name, when it has paid the insured the full value of the property destroyed. 5 St. Louis I. M. and S. Ry. Co. v. Commer- cial Union Ins. Co., 139 U. S. 223, 235, 11 Sup. Ct. 554, and cases cited; Marine Ins. Co. v. St. Louis, I. M. and S. Ry. Co., 41 Fed. 643. But the rule seems to be well settled that when the value of the property destroyed." 5 St. Louis I. M. and S. i?y. Co. v. Commer- brought in the name of the assured. Aetna Ins. Co. v. Hannibal and St. J. R. Co., 3 Dill. 1, Fed. Cas. No. 96; Assur. Co. v. Satins- bury, 3 Doug. 245 ; Ins. Co. v. Bosher, 39 Me. 253 ; Hart v. R. R. Corp., 13 Mete. (Mass.) 99 ;" Connecticut, etc., Ins. Co. v. New York, etc., R. Co., 25 .Conn. 2, 65, 278; Insurance Co. v. Frost, 37 HI- 333; Fland Ins., pp. 360, 481, 591 ; Marine Ins. Co. v. St. Louis, I. M. and S. Ry. Co., supra. In such an action the assured may recover the full value of the property from the wrongdoer; but as to the amount paid him by the insurance company he becomes a "Citing: Ins. Co. v. Oil Co., 59 Fed. 984 (1894) ; Railroad Co. v. Pullman Co., 139 U. S. 79 (1890) ; Ex parte Ins. Co., 86 S. Car. 52 (1910) ; Ins. Co. v. Frost, 37 III. 333 (1864); Ins. Co. v. Railroad Co., 25 Conn. 277 (1853); Insurance Co. v. Lainsburg, 3 Doug. 245 (1783) ; Ins. Co. v. Bosher, 39 Me. 253 (1855); Ins. Co. y- R- R- Co., 41 S. Car. 408 (1893); Ins. Co. v. L. Co., 93 Mich. 139 (1892) ; Aetna Ins. Co. v. Hannibal, 3 Dill. 1 (1874) ; Hart v. Railroad Co., 54 Mass. 99 (1847) ; Swarthout v. R. R., 49 Wis. 625 (1880) ; Railroad v. Blaker, 68 Kan. 244 (1904), s. c, 1 Ann. Ca. 883; Ins. Co. v. Railroad Co., 20 Ore. 569 (1891) ; Rankin v. Railroad Co., 82 Vt. 390 (1909), s. c, 18 Ann. Ca. 708; Railroad Co. v. Shutt, 24 Okla. 96 (1909) ; Railroad Co. v. Blount, 165 Fed. 258 (1908) ; Tel. Co. v. Watts, 66 Fed. 460 (1895) ; Hampton v. Power Co., 124 La. Ann. 562 (1908) ; 19 Cyc. 893.. 'Gales v. Hallman, 11 Pa. 515 (1849); Hall v. Railroad Companies, 80 U. S. 367 (1871) ; Railway Co. v. Fire Association, 60 Ark. 325 (1893). 'Connecticut F. Ins. Co. v. Erie R. Co., 73 N. Y. 399 (1878) ; Chicago, B. &• O. R. v. German Ins. Co., 2 Kan. App. 395 (1895) ; Hartford F. I. Co. v. Wabash R. Co., 7 A Mo. App. 106 (1898). 2S» SUBROGATION trustee, and the defendant will not be permitted to plead a release of the cause of action from the assured or to set up as defense the insurance company's payment of its part of the loss. Hart v. R. R. Corp., supra; Hall v. R. R. Co., 13 Wall. 367. In support of this rule it is commonly said that the wrongful act is single and indi- visible and can give rise to but one liability. "If," says Judge Dillon in Aetna Ins. Co. v. Hannibal and St. J. R. Co., supra, "one insurer may sue, then, if there are a dozen, each may sue ; and if the aggre- gate amount of all the policies falls short of the actual loss, the owner could sue for the balance. This is not permitted, and sp it was held nearly a hundred years ago, in a case whose authority has been recognized ever since both in Great Britain and in this country." The cases of Ins. Co. v. R. R., 132 N. C. 75, and Cunningham v. R. R., 139 N. C. 427, belong to this latter class, as in each the insurance was equal to or exceeded the loss. It is also generally held that there is no right to subrogation until the insurance is paid, and that when the right once attaches it cannot be destroyed or extinguished by a release or discharge exe- cuted by the insured. Ins. Co. v. Oil Co., 59 Fed. 987 ; Hart v. R. R., 54 Mass. 100; Ins. Co. v. R. R., 73 N* Y. 405 ; Swarthout v. R. R., 49 Wis. 628; Ins. Co. v. Hutchinson, 21 N. J. Eq. 107; R. R. y, Ins. Co., 59 Kan. 435. "After the loss has been paid by the company, the wrongdoer, having knowledge of the fact, cannot make settlement with the insured for the loss, his liability being to the company to the extent •of the insurance paid." 19 Cyc. 895 and cases in note. "In regard to the right of the insurance company to sue in the name of the assured, we think the cases fully affirm the position that by accepting payment of the insurance the assured do impliedly assign their right of indemnity from a party liable to the assured. It is in the nature of an equitable assignment, which authorizes the assignee to sue in the name of the assignor for his own benefit ; and this is a right which a court of law will support, and will restrain and prohibit the assignor from defeating it by a release. The formal discharge, therefore, given by the nominal plaintiffs, is not a bar to the action." Hart v. R. R., 54 Mass. 100. "The courts have likewise been very firm in supporting the right of the insurance company to bring an action in the name of the assured, and will not allow the latter to defeat such action, even by a release of discharge of the person by whose act the damage was occasioned." Swarthout v. R. R., Wis. 628. "It is also settled that if the railroad company had nof paid Hutchinson his damages, or had paid them to him, knowing that he had received the amount insured from the complainants, that they are liable to the complainants in a suit at law, which they have the right to bring in the name of Hutchinson, without his consent, to repay them the damages to the amount of the sum paid by them, and that a release by Hutchinson would be no defense to such suit." Ins. Co. v. Hutchinson, 21 N. J. E. 107. POWELL & POWELL, Inc., et al., v. WAKE WATER. CO. 291 The case from New York is in many respects like the one before us. There the loss was greater than the insurance, and the owner settled with the wrongdoer for the difference between the value of the property and the insurance, reserving the right to the insurance, and executed a release, and it was held that the insurer could maintain his action ; and the reasoning in the case from Kansas on a similar state of facts leads to the same result. It would seem, therefore, that the following principles are established. 1. That the right of action to recover damages from the wrong- doer is in the insured, and that this right of action is one and indivisible. 2. That upon payment of the insurance the insurer is subro- gated to the rights of the insured as against the wrongdoer. 3. That if the insurance is equal to or exceeds the loss, this right of subrogation extends to the whole right of action in the insured, and operates as an equitable asignment, and the action may thereafter be prosecuted in the name of the insurer. 4. That if the insurance is less than the total loss, the right of subrogation still exists; but as the right of action is indivisible, and as the insurer has only paid a part of the loss and is not entitled to an assignment of the whole cause of action, the action must ba prosecuted in the name of the insured. 5. That a release by the insured does not extinguish the right of subrogation. They also seem to establish the proposition that if the insurance is less than the loss, and the insured has settled the difference between the insurance and the total loss with the wrongdoer, leaving unsettled only the amount of damages, measured by the insurance, that the cause of action for this damage would be in the insurer, for the reason that the insured has parted with all beneficial interest in the right of action, and, while the cause of action was indivisible, it has been divided by the act of the parties. Applying these principles, we are of the opinion that there is no error in granting the prayer of the petitioners, as it appears that the News and Observer Publishing Company alleged in its com- plaint against the receiver of the Wake Water Company that the value of the property destroyed was one hundred and ten thousand nine hundred and fifty-one dollars and forty-eight cents, that the insurance on the same amounted to twenty-six thousand nine hun- dred and one dollars and twenty-four cents, and that it asked for judgment for the difference between the two amounts ; and it further appears that the claim of the publishing company has been settled with knowledge of the payment of the insurance. The receiver has the right to be relieved from a multiplicity of suits, and the petitioners or the receiver may require all insurance companies that have participated in the payment of the loss to the publishing company to be made parties to the action. This opinion is based on the facts alleged in the petition, as the petitioners are not now required to do more than make out a prima facie right to sue. 292 MARSHALING SECURITIES We make no intimation on the issue of negligence, which the petitioners must establish, as none of the evidence bearing upon negligence is before us. We further reserve the question of laches, and whether the right to subrogation may prevail as against the owner of bonds secured by mortgage or trust deed, until the facts are fully devel- oped. 6 Affirmed. CHAPTER VII. MARSHALING SECURITIES. GIBSON v. SEAGRIM. In Chancery Before Sir John Romilly, 1855. 20 Beav., 614. In 1 85 1 Charles Seagrim mortgaged certain real estate to Henry, Johnson, with a power of sale, to secure £1200. Afterwards, in 1852, Seagrim mortgaged the same estate to Godwin to secure £700, and by deed of even date transferred ten shares in the Winchester Gas Light and Coke Company, by way of additional security. In 1853 Seagrim mortgaged all his lands, including those in the former mortgage, to the plaintiff, but the gas shares were not com- prised in the security. On the 17th August, 1853, the plaintiffs instituted the present suit to realize their securities, and they regis- tered the suit as a lis pendens, in pursuance of the act (2 & 3 Vict., Chap. 11). 'See further: 41 L. R. A., N. S., 719; Commercial U. Ins. Co. v. Lister, L. R. 9 Ch. 483 (1874) ; Allen v. Chicago & N. W. R. Co., 94 Wis. 93 (1896) ; United States v. Amer. Tobacco Co., 166 U. S. 468 (1897) ; Leavitt v. Can- adian P. R. Co., 90 Me. 153 (1897) ; Mutual F. I. Co. v. Showalter, 3 Pa. Super. Ct. 452 (1897); Gaugher v. Chicago M. & P. R. Co., 197 Fed. 79 (1912) ; Fire Ass'n y. Wells, 94 Atl. 619 (N. J. 1915) ; Grain D. Ins. Co. v. Railway Co., 94 Kan. 344 (1916) ; Stevens v. Stewart Warner Co., 223 Mass. 44 (1916). Compare: Roos v. Phila. W. & B. R. Co., 13 Pa. Super. Q. 563 (1900) ; New Eng. Box Co. v. N. Y. Cent. R. Co., 210 Mass. 465 (1912); Farren v. Maine Cent. R. Co., 112 Me. 81 (1914), s. c, 52 L. R. A., N. S., 203; In re Comm. Trust Co., 247 Pa. 508 (1915). The principle is not applied in life and accident insurance, Conn. Mut. L. Ins. Co. v. New York, N. H. & H. R. Co., 25 Conn. 265 (1856) ; Insur- ance Co. v. Brame, 95 U. S. 754 (1877) ; Aetna L. Ins. Co. v. Parker, 06 Tex. 287 (1903). But where under workmen's compensation legislation the employer or insurer is liable for injuries to a servant, the statute may require a third party tort feasor to indemnify them in the amounts so expended. Thompson v. North Eastern M. Eng. Co. (1903), 1 K. B. 428; Nettleingham v. Powell (1913), 1 K. B. 113; McGarvey v. Independent O. & G. Co., 156 Wis. 580 (1914) ; Grand Rapids L. Co. v. Blair, 157 N. W. 29 (Mich. 1916). GIBSON v. SEAGRIM 293 On the 10th October, 1853, Seagrim became bankrupt, and his assignees were made parties to the suit. On the 4th November, 1853, the first mortgagees sold the real estate included in their mortgage for £1895, and, after paying them- selves, they handed over the surplus to Godwin, who applied it in part payment of his mortgage debt, and he then, on the 13th Decem- ber, 1853, sold the gas shares, and having paid himself in full, handed over the balance (being about £206 10s. id.) to the assignees of Seagrim. The plaintiffs claimed to have this sum applied in satisfaction of their debt, in lieu of the surplus of the proceeds of the real estate intercepted by Godwin. The question was adjourned from chambers for argument in court. 1 Mr. R. Palmer and Mr. Giffard for the plaintiff : Godwin had two securities, the estate and the gas shares, while the plaintiff had one only, viz., the estate. The principle of marshaling is therefore applicable, and the plaintiff is entitled to require that Godwin should be paid out of the gas shares alone, so as to exonerate the real estate for the plaintiff's benefit. Mr. C. C. Barber for the assignees, contra: This is a mere foreclosure suit, in which the plaintiff would have been simply entitled to redeem the prior mortgages and foreclose the mortgagor ; it raises no particular equity. The first and second mortgagees have realized their securities, as they were entitled to do, and the surplus of the gas shares has been handed over to the assignees; this was quite proper, for the plaintiff never had any interest in those shares. The Master of the Rolls: I am of opinion that the two estates ought to be marshaled. I can have no doubt that if these securities had been sold by the direction of the court, and the money had been paid into court, the second mortgagee would not have been allowed to exhaust the proceeds of the real estate in paying off his charge upon it, to the injury of the plaintiffs, and then to hand over the surplus proceeds of the gas shares to the mortgagor, or to his assignees, which is the same thing, and thereby enable them to receive something to which they were not entitled. On the con- trary, according to the principle laid down in the case of Baldwin v. Belcher (3 Dru. & War. 173), Lanoy v. Duke of Athol (2 Atk. 444), Aldrich v. Cooper (8 Ves. 382) and that class of cases, the court will order the funds to be marshaled; but I agree with what was decided by the Vice Chancellor Knight Bruce, in Barnes v. Racster (1 Y. & Coll. C. C. 401), that if two estates are mortgaged to A, and one is afterwards mortgaged to B, and the remaining estate is afterwards mortgaged to C, B has no equity to throw the whole of A's mortgage on C's estate, and so destroy C's security. As between B and C, A is bound to satisfy himself the principal, interest and costs due to him out of the two estates ratably, accord- ing to the respective values of such two estates, and thus to leave "Parts of the arguments of counsel are omitted. 294 MARSHALING SECURITIES the surplus proceeds of each estate to be applied in payment of the respective incumbrances thereon. But, in my opinion, that rule does not apply to the present case, to which a different equity is applicable. It is obvious that there are three modes of dealing with this: case; the first is, to allow the plaintiff to throw the whole of the second mortgagee's charge upon the gas shares, and make them solely available for payment; the .second, to apportion the second mortgage ratably on the two properties, as was done in Barnes v. Racster; or, thirdly, to let the mortgagor have the whole surplus of the produce of the gas shares after satisfying the claim of the second mortgagee. But, in my opinion, neither of these last two principles apply to this case. Here a mortgagor having mortgaged two prop- erties to one person, and one of them to another, and the security of the latter having been exhausted by the prior mortgagee, he is entitled to say, as against the mortgagor, that his mortgage shall be thrown upon the other security, and that he is entitled to be recouped out of it. I do not say what would have been the effect if the sale and payment over of the surplus had taken place before any suit had been instituted, but here the decree reserves the question, and the suit having been registered as a lis pendens before the sale took place, had the effect of preserving all the equities, in the same manner as if the plaintiff had taken proceedings to have the money paid into court. I am of opinion that the plaintiff is entitled to have the £206, which is now in the hands of the assignees, applied in payment of his mortgage security, and that the second incumbrancer was bound, as between the plaintiff and the mortgagor, to apply the gas shares in the first instance towards the discharge of his debt. 2 I will certify accordingly. UNION POINT GINNERY AND WAREHOUSE CO. v. HARRIMAN NATIONAL BANK. Supreme Court of Georgia, 1914. 142 Georgia, 727. Equitable petition. Before James B. Park. Greene superior court. January 27, 1914. A suit was instituted in the superior court of Greene County by the Union Point Ginnery and Warehouse Company against the *Sagitary v. Hyde, 1 Vern. 455 (1687); Porey v. Marsh, 2 Vern. 182 (1690); Lanoy v. Athol, 2 Atk. 445 (1742) ; Aldrich v. Cooper, 8 Ves. 382 (1803) ; Cheeseborough v. Millard, 1 Johns. Ch. 409 (1815) ; Lloyd v. Galbraith. 32 Pa. 103 (1858) : First Nafl Bank v. Roder, 114 Fed. aei (1002) ; Moore v. Cofield, ic Ga. App. 197 (19H). Bispham's Equity" (gth Ed.), Sec. 340; 6 Pomeroy's Eq. Jurisp., Sec. 865; 26 Cyc. 927, 19 Amer. & Eng. Enc. of L. (2d Ed.), 1256. UNION POINT GINNERY v. HARRIMAN NATL. BANK ' 295 Harriman National Bank and the Athens Trust and Banking Com- pany and designated individuals. The following was alleged in the petition : The plaintiff is a domestic corporation without any charter authority to invest in the stock of other corporations. The Harri- man National Bank is a foreign corporation, and the Athens Trust and Banking Company was chartered in this state to do a banking business. The other defendants were attorneys for the Harriman National Bank. Without any authority from the plaintiff's board of directors, or charter power to do so, the president of the plaintiff undertook to subscribe for ten shares of the capital stock of the Athens Trust and Banking Company, and signed therefor a note for one thousand dollars due at a future date. About the time the note fell due, the Athens Trust and Banking Company, being insolvent, failed without having issued the stock for which the note was given, and the plaintiff did not receive any consideration for the note.. The Harriman National Bank, through the other individual defend- ants as agents and attorneys (the latter having an interest in the recovery), has instituted suit in the city court of Greensboro on the note. The Harriman National Bank claims to be an innocent pur- chaser, and that plaintiff's defense that the note was issued without authority or consideration cannot be urged against it. The Harri- man National Bank holds the note only as collateral security for an indebtedness of the Athens Trust and Banking Company, not exceed- ing fifteen thousand dollars. It also holds other collateral notes for security of the debt, all being valid debts and collectible, so that the aggregate security amounts to more than twenty-five thousand dollars. The Harriman National Bank in equity and good conscience should be required to exhaust the other collaterals before coming upon plaintiff. If plaintiff should be required to pay the note, it would be remediless, the Harriman National Bank being a nonresi- dent and the Athens Trust and Banking Company being insolvent. The city court of Greensboro is without equitable jurisdiction and cannot take an account of the matter alleged and frame a decree that would protect plaintiff. The prayers were : (a) that the Harri- man National Bank be required to account in regard to all the collat- erals which it holds for the debt for which the note executed by plaintiff's president is held, and be required to exhaust all valid collaterals before asserting any claim against plaintiff; (b) that such bank and its attorneys above mentioned be enjoined from prosecuting the suit in the city court; (c) that plaintiff's note be decreed to be void, etc. The defendants made a motion to dismiss the petition, on the grounds that it did not set forth a cause of action and there was no equity in it. Whereupon the plaintiff offered an amendment alleging the following: The Harriman National Bank claims a balance due, on the debt for which plaintiff's debt is held as collat- eral security, of between four and five thousand dollars. The capital stock of plaintiff is only three thousand five hundred dollars, and it is unable to raise and tender to the Harriman National Bank the amount which it claims to be due it. The amendment was rejected 296 . MARSHALING SECURITIES as immaterial, and upon renewal of the motion to dismiss it was sustained. The plaintiff excepted to these rulings. Atkinson, J. : The election of a pledgee holding several col- lateral securities for the principal debt, as to which of the securities shall be resorted to in order to enforce payment of the unpaid debt, is subject to the equitable principle known as marshaling securities ; but this rule has no application to debtor and creditor. Colebrooke on Collateral Securities (2d Ed.), Sec. 98; Carter v. Neal, 24 Ga. 346 (71 Am. D. 136) ; 276 (5), and note on p. 280. 1 The trial judge properly dismissed the petition on general demurrer. Judgment affirmed. All the justices concur, except Fish, C. J., absent. WILLIAM BURGESS v. JOHN P. HITT. Missouri Court of Appeals, St. Louis, 1886. 21 Missouri Appeals, 313. Thompson, J.: The appeal in this case is prosecuted from a decree enjoining the sale of a tract of land under two.deeds of trust, on the theory that the plaintiff has a judgment lien on a portion of the tract, and that the defendants ought to be required to resort to that portion upon which the plaintiff has no lien before resorting to that portion upon which the plaintiff has a lien — in other words, on the doctrine of marshaling securities. An insuperable difficulty in the way of sustaining the decree is that the plaintiff does not appear to be a judgment lien holder. He indeed recovered a judgment in a proceeding in equity seeking to charge the tract of land in contro- versy as the separate estate of Mrs. O'Donoghue while under cover- ture, and had a special execution thereon under which the property was sold by the sheriff; but the court, subsequently, a year after the rendition of the judgment, set aside the sale, quashed the execu- tion, and also set aside the judgment itself. An appeal was prose- cuted from this order to the supreme court, but clearly an appeal prosecuted from an order setting aside a judgment does not have the effect of reinstating the judgment. 1 The status of the plaintiff, then, is, that he has an action pend- ing, the object of which is to charge a debt upon this particular estate, in which action he may or may not get a judgment. This does not give him a lien or any security which he can have mar- 1 Watkins v. W orthington, 2 Bland Md. 509 (182?) ; White v. Polleys, 20 Wis. 503 (1866) ; Boone v. Clark, 129 111. 466 (1889). 1 Part of the opinion is omitted. HOWELL v. DUKE 297 shaled, as between himself and the defendant mortgagee, so as to compel the latter to resort for satisfaction of his debt to a particular portion of the land. He has not even the status of a creditor, for it has not been judically determined that he is such. It cannot even be said upon this record that he is a simple contract creditor ; for he has not attempted to prove that in any way, except by showing that he has obtained a judgment which has been set aside. We do not mean to decide that the doctrine of marshaling securities is not in any case applied except in favor of a party who has a lien on a por- tion of the fund ; we decide that it cannot be applied in favor of one who claims to be a creditor, until it is judicially established that he is a creditor. All the books say that he must have a right to resort to a portion of the common fund, and this right he does not have until he gets a judgment. 2 The judgment will be reversed and the petition dismissed. It is so ordered. All the judges concur. HOWELL v. DUKE. Supreme Court of Arkansas, 1882. 40 Arkansas, 102.' Smith, J. : John B. Caldwell died in Pope County in the year 1870, seized of two hundred and seventy acres of land, all of which he devised to his son, Moses H., besides bequeathing to him the greater part of his personal estate. The will was proved and Moses qualified as executor. He seems to have neglected one very impor- tant duty of an executor, viz., to pay the debts of his testator. For we find that his successor in the administration — the present appellee — applied to and obtained from the probate court license to sell these lands upon a petition suggesting that the personalty of the deceased had been squandered and his debts had been left unpro- vided for. It further appears that Moses had in 1876 mortgaged one hundred and thirty acres of the land to secure his own private debt; that this mortgage had afterwards been regularly foreclosed by adecree of the Pope circuit court, and that at a commissioner's sale had in pursuance of said decree Howell, the appellant, had purchased the mortgaged premises and was now in possession of the same. 'See also, Lupton v. Cutter, 8 Pick. Mass. 298 (1829) ; Gore v. Clisby, 8 Pick 55s (1829) ; Shedd v. Bank of Brattleboro, 32 Vt. 709 (i860) ; Em- mons v. Bradley, 56 Me. 333 (1868) ; Anstey v. Newman 39 L. J. Ch. 769 (1870) ; The Edith, 94 U. S. 518 (1876) ; Moses v. Home B. & L. Assn, 100 Ala 465 (1893) ; Scharff v. Meyer, 133 Mo. 428 (1895) I Steele L. Co. v. Laurens L. Co., 08 Ga. 329 (1896). 'Appellant's argument is omitted. 298 MARSHALING SECURITIES Howell seeks to enjoin the sale of this tract of one hundred and thirty acres upon the ground that the remaining one hundred and forty acres are amply sufficient to satisfy all the debts of John B. Caldwell, and such a sale would cast a cloud upon his title. Upon demurrer the circuit court dismissed his bill. An heir or devisee takes the estate subject to the debts of his ancestor or testator; and he can transfer to another no greater right or interest than he himself possesses. Howell, by virtue of his purchase, takes the land subject to all the liabilities, and he is clothed with all the rights which attached to it in the hands of Moses. All the lands of the testator may be sold, if they are required, to pay his debts. But Howell, who has acquired the devisee's title to a part of the lands, has an equity to have the assets marshaled so as to place the burden where it must ultimately rest, namely, upon such of the lands as the devisee has not alienated. "Where one party has a lien or interest in two estates and another has a lien on or interest in one of those estates only, the latter is entitled to throw the former upon that estate which he cannot reach, if that be neces- sary to adjust the rights of both parties and can be done without prejudice to him who holds the double security. In administering these equities, the court does not assume to divest or postpone incumbrance, but simply to so* apply and limit it, that equal justice may be done to all concerned in the fund to which it attaches." Agri- cultural Bank v. Pollen, i Freeman Ch. 419; 8 Smedes & Mar- shall 337 ; Terry v. Rosette, 32 Ark. 478. Thus, if a judgment is rendered, which is a lien on the defend- ant's land and he sells and conveys part of it, the judgment creditor ought and indeed may be compelled to proceed in the first instance against the unsold portion. Mevey's Appeal, 4 Pa. 80 ; In re McGill, 6 Pa. 504 ; Chapin v. Williams, 9 Pa. 341 ; James v. Hubbard, 1 Paige 228 ; Watson v. Bain, 7 Maryland 1 17 ; Gill v. Lyon, 1 Johns. Ch. 447; Clowes v. Dickinson, 5 Johns. Ch. 235 ; S. C. 9 Cowen 403. The decree below is reversed and the cause remanded with directions to overrule the demurrer to the bill. 2 DELAWARE & HUDSON CANAL COMPANY'S APPEAL. Supreme Court of Pennsylvania, 1861. 38 Pennsylvania, 512. Appeal from the decree of the common pleas of Wayne County distributing the proceeds of real estate of Thomas Thomas sold by the sheriff at three different sales. ' Hayes, v. Ward, 4 Johns Ch. 123 ( 1819) ; Bank v. Howard, 1 Strob., s. c, Eq. 173 (1846) ; Edwards v. Applegate, 70 Ind. 325 (1880) ; Bishop B. B. As^n v. Kennedy, 12 Atl. 141 (N. J. 1888) ; Hill v. Crowley, 55 Ark. 450 (1802) ; Bacon v. Devinney, 55 N. J. Eq. 449 (1897). DELAWARE & HUDSON CANAL COMPANY'S APPEAL 299 The following judgments entered between 1855 and 1857 were the first four liens upon all of land at the date of the sales, viz.: (1) Lydia A. Forbes, forty dollars; (2) W. H. Dimmick, seven hundred and ninety-nine dollars and fifty-three cents; (3) E. Owen, six hundred and ten dollars and eight cents ; (4) Ciprian Carr, two hundred and sixty-six dollars and sixteen cents. Subsequent to these judgments was a mortgage covering part of said real estate given to the Delaware & Hudson Canal Company to secure three judgment notes of two thousand dollars, which was recorded Decem- ber ii, 1857. Afterwards, in the spring of 1858, a number of other judgments were entered against Thomas, which became liens upon all of said land, the first of which was that of Lemuel Stone for three hundred and fifty-four dollars. On September 3, 1858, under a fi. fa. issued on Owen's judg- ment the sheriff levied on and sold one of the pieces of land which was embraced in the canal company's mortgage for one thousand five hundred dollars. The auditor distributed this fund in satisfac- tion of the first three judgments and in partial satisfaction of the fourth (Carr's judgment), leaving undisposed of the question of the canal company's claim to be subrogated to these judgments. On February 7, 1859, the sheriff, on a writ issued on Lemuel Stone's judgment, sold all the balance of Thomas' land not embraced in the mortgage for nine hundred and fifty dollars and brought the money into court, pending the settlement of the claim to subrogation. On April 29, 1859, the sheriff sold the balance of Thomas' land covered by the mortgage on a judgment entered on one of the notes secured thereby for four thousand nine hundred and thirty dollars, and after payment of costs this was distributed to the canal company, leaving a balance unpaid of two thousand and sixty-nine dollars and fifty-six cents. The balance of Carr's judgment was also paid. The canal company claimed to be subrogated to the rights of the first lien creditors to the extent of one thousand five hundred dollars, raised from the sale of the mortgaged tract. The court below refused subrogation and thus appeal was taken. 1 Strong, J.: It surely can no longer be doubted that where a creditor has a lien upon two funds belonging to one debtor, and another creditor has a subsequent lien upon only one of them, the former is under obligation to exhaust first the fund upon which he has an exclusive lien, before he can resort to the other. This obligation is founded upon the plainest principles of justice and equity. It is nothing more than the obvious duty so to use one's own as not to injure another. It is an equally plain principle of equity, that if the paramount creditor resorts to the doubly charged fund or property, the junior creditor will be substituted to his rights, and will be satisfied out of the other fund, to the extent to which his own may have been exhausted. This is an equity against the debtor 'The statement of facts is abridged and the arguments of counsel omitted. 300 MARSHALING SECURITIES himself, that the accidental resort of the paramount creditor to the fund doubly encumbered shall not enable him to get back the other fund discharged of both debts. And being an equity against the debtor, it is of course equally such against his subsequent judgment creditors, who have no greater rights than their debtor had at the, time their judgments were entered. These principles are too familiar to justify any citation of authorities. Applying them to the case in hand, it is not to be doubted that the appellants are entitled to the subrogation for which they ask. When their mortgage was taken, they acquired against Thomas, the mortgagor, the right to have his other lands, not included in the mortgage, applied first to the pay- ment of the four earlier judgments which were liens upon them. This right it was not in the power of the mortgagor to defeat by confessing judgments to other creditors, or by contracting subse- quent debts. And when a portion of the mortgaged premises was sold, and the proceeds applied to the four paramount judgments, equity ceded those judgments to the mortgagees. True, they were discharged at law, but payment does not of course discharge a judg- ment in equity. Indeed, there never can be subrogation until the creditor is fully paid; for a right to subrogation is rather against the debtor than the creditor. The latter cannot be compelled to xede his claim while anything remains due upon it. It is no satisfactory objection to the appellants' claim to subro- gation, that they took judgment notes with the mortgage, and failed to have judgments entered upon them. Of this the debtor cannot complain ; for the mortgage itself carried with it to the mortgagees an equitable right to have the paramount judgments first satisfied out of the lands not included in it. And as in fact they have been paid out of the mortgaged property, the rule is, as we have seen, that they are to stand for the benefit of the creditors whose security they have taken away. The entry of judgments by the mortgagees would therefore have given them no greater rights than they now possess, so far as relates to the land not included in the mortgage. True, it would have been the substitution of a legal lien for an equitable right to use the liens of the paramount judgment creditors, but the result would not have been changed. The mistake in the court below was in conceiving that the judgment creditors subse- quent to the mortgage have rights superior to those of their debtor. That they have not was shown in Ramsay's Appeal, 2 Watts 232 ; Dunn v. Olney, 2 Harris 223, and so it has been often decided. They are affected by all the equities which existed against him when they obtained their judgments. 2 Nor have the appellants forfeited their right to subrogation by paying to their mortgagor considerable sums of money for services rendered by him, for right of way, and for "Accord: Page v. Thomas, 43 Ohio 38 (iS^) ; Harney v. First Natl Bk., 52 N. J. Eq. 607 (1894) ; Buchan v. Sumner, 2 Barb. Ch. N. Y. 165 (1847) ; Harron v. DuBois, 64 N. J. Eq. 657 (1003). Compare: Dorr v. Shaw, 4 Johns. Ch. 17 (1819) ; Gusdorf v. Ikelheimer, 74 Ala. 148 (1883). REYNOLDS v. TOOKER & HAIT 301 lumber manufactured in part out of timber cut on the lands embraced in the mortgage. Most of these payments were made before the judgments of the appellees were entered, and all of them before the first instalment fell due on the mortgage. It was not in the power of the appellants to retain, or to restrain the removal of timber, and the payments were therefore no wrong to the subsequent judgment creditors, even if they can be regarded as sureties of the mortgagor. They do not, however, stand in the attitude of sureties, and, a for- tiori, have lost no equitable right through the acts of the appellants. The order of the court of common pleas refusing a decree of subrogation is reversed, and it is ordered that the appellants be sub- rogated to the place of the plaintiffs in the four judgments entered against Thomas Thomas before the mortgage to the appellants was executed.* REYNOLDS v. TOOKER & HAIT. Supreme Court of New York, 1836. 18 Wend., 591. Motion as to the application of moneys raised on executions as between conflicting plaintiffs. In August, 1835, Tooker & Hait, the judgment debtors, entered into a contract to build a ship for the Dutchess Whaling Company, at a price per ton which amounted in the aggregate to about thirteen thousand dollars ; the company to cake certain specified payments as the work progressed, the last payment to be made when the vessel should be delivered afloat. She was to be launched on or before the 1st April, 1836, but was not until June. On the 7th June the ship was delivered to and received by the company, in pursuance of the contract. The company had made payments, from time to time, to Tooker & Hait, commencing in November last, and on the 18th June had paid in all, over twelve thousand four hundred dollars, which was more than the value of the work at the contract price. In November last the Dutchess County Bank recovered a judg- ment in this court against Tooker & Hait for nine thousand dollars and upwards, on which a fieri facias was issued to the sheriff of Dutchess, who on the 25th May, levied the execution on the ship, and on other articles of personal property belonging to the debtors. On the 28th June last the plaintiffs severally recovered judgments against Tooker & Hait in this court, the first for seven hundred and eleven dollars and seventy-six cents and the other seven hundred 3 See also, Ross v. Duggan, 5 Col. 85 (1879) ; Brown v. Thompson, 79 Tex. 58 (1890); Il'yman v. Fort Dearborn N. Bk., 181 111. 279 (1899); Boice v. Conover, 63 N. J. Eq. 273 (1901). 302 MARSHALING SECURITIES and sixty-three dollars and seven cents. Fieri facias were issued the same day on both of these judgments and delivered to the same officer. The sheriff advertised the ship and other personal property to be sold, by virtue of the three executions, on the 14th July. The plaintiffs in the two junior judgments appeared and insisted that the sheriff should first sell the ship to satisfy the execution of the bank, which was a lien upon it, leaving the other personal property (if the ship sold for enough to pay the bank) to apply on their judgments. This was objected to; and the sheriff adjourned the sale to the 25th July. On that day the bank assigned its judgment to the whaling company, and the assignees gave notice to the sheriff that the ship was discharged from the lien of the execution, and directed him to abandon the levy. The sheriff still offered to sell the ship on the bank judgment if the two junior judgment creditors would indemnify him; but that was declined. The sheriff then sold the other personal property of the debtors, which brought six hundred and ninety-two dollars and ninety-three cents. The amount due on the bank judgment at the time of the sale was upwards of five thousand dollars. The judgment debtors were insolvent. The whaling company, in consequence of the lien of the bank execution and of their being obliged to purchase the judgment, will lose more than three thousand dollars by Tooker & Hait. The Reynolds will lose the whole of their judgment if they cannot reach the money in the hands of the sheriff. Notice was given to the sheriff not to pay over the money on the bank judgment, and a motion is now made for an order requiring him to pay it over on the two first above mentioned judgments. Bronson, J. : The whaling company purchased the bank judg- ment to protect, their title to the ship. For all the purposes of this motion they stand in the place of the bank — having neither gained nor lost anything, as against the junior judgment creditors, by taking the assignment. It was said that the company as assignees of the bank were bound to pursue the lien on the ship. They were bound to do so, if that course was obligatory upon the bank before the transfer, and not otherwise. If the bank could discharge the levy on the ship and still pursue the other property, the assignees could do the same. The question then is, what were the rights of the judg- ment creditors as between themselves, and also in reference to the interests of third persons ? As between the judgment creditors, and without regard to the rights of third persons, the bank should have resorted in the first instance to the ship for the satisfaction of its judgment. The ship and the other personal property of the debtors, Tooker & Hait, may perhaps be regarded as two funds; upon both of which the bank execution had been levied; while the junior judgment creditors could only reach one of those funds — the ship having passed beyond the influence of their executions. It is a just and equitable prin- ciple, that where there are two creditors of one debtor, the first having two funds to which he may resort for the satisfaction of his debt, and the second only being able to reach one of the funds, the REYNOLDS v. TOOKER & HAIT 303 first shall resort to that source for obtaining payment which is exclu- sively within his control, and thus leave to the junior creditor the only means he has for obtaining satisfaction of his demand. This course works no injury to either creditor, but does justice to both. Evertson v. Booth, 19 Johns. R. 492 ; Hayes v. Ward, 4 Johns Ch. 132; 1 Hopk. 469. It is upon the same principle of doing equal justice to all as far as may be practicable that a creditor having a lien upon real estate, part of which has been alienated, may be required to sell in the first instance that portion of it which still remains in the hands of the debtor ; and where there have been several sales bye the debtor at different periods, the creditor will be required to sell in the inverse order of the alienations. Clowes v. Dickenson, 5 Johns. Ch. 235 • 9 Cowen 403, S. C. ; James v. Hubbard, 1 Paige 228. Although these rules are derived from courts of equity, I think they may be enforced by this court by way of controlling the proper execution of its process. The creditors in the two junior judgments insist that the prin- ciple which has been mentioned establishes their right to the money in the hands of the sheriff; that the bank (or its assignees) having relinquished the fund over which it had exclusive control, and which was sufficient for the satisfaction of the debt, had no right to resort to the other property, and thus deprive the junior judgment cred- itors of the only fund which they could reach. This argument would be unanswerable if it did not overlook the important consideration that the whaling company had purchased the ship and paid the full price for it before the junior judgments were recovered. The ship was delivered and the title passed to the company on the 7th of June, and the payments to Tooker & Hait were completed on the eighteenth day of that month. The judgments of the applicants were not obtained until the twenty-eighth; and until that time they had no lien, either legal or equitable, upon the property of their debtors. It must not be forgotten that it is a rule of equity on which the applicants rely. It is never applied where it will work injustice. Indeed, the party who seeks to enforce it must show affirmatively that it would be equitable in relation to all parties to afford him that kind of relief. Dorr v. Shaw, 4 Johns. Ch. 17 ; Ex parte Kendall, 17 Vesey.20. What then were the equitable rights of the whaling company at the time the applicants recovered their judgments? They had purchased and paid for the ship, and were entitled to hold it as against all the world — subject only to the lien of the bank execution. They did not agree to pay off that charge, but took the property subject to it, for the reason that they had no other alternative. What then were the equities as between the bank and the whaling company, the only persons who at that period had any valid claims upon the property of Tooker & Hait? It was most evidently just that the bank should resort in the first instance to the other prop- erty of the debtors, and not touch the ship until they had exhausted all the other means within their reach for obtaining satisfaction of the judgment. This course was required by the rule of equity which has already been considered. It was the only practicable mode of 304 MARSHALING SECURITIES dealing equal justice to both parties. The right of the whaling company as purchasers to insist that the bank should first resort to the other property before touching the ship,' had attached before the junior judgments were recovered; and that right could not be divested by any subsequent act of the debtors, as by making a further sale of their property, or confessing judgments to other creditors. The equity set up by the applicants consequently did not arise; and it cannot be allowed to prevail without overturning the prior and therefore better equity of the whaling company. It is no doubt just that the junior judgment creditors should be paid, but they cannot reach the money in the hands of the sheriff without interfering with the rights of the creditor who had gained a valid preference over them. 1 It was the duty of the bank, while it held the judgment, to sell the other property before resorting to the ship. By purchasing the judgment, the whaling company did not destroy their equity, but acquired the legal means of enforcing it. The proper course has been pursued by the sheriff, and he must be left as in other cases to apply the money derived from the sale of the personal property to the oldest execution in his hands. As this was a fair question in relation to the rights of different parties and the duty of the sheriff under the process of the court, and has been properly presented for consideration, no costs are ordered. Motion denied. BARNES v. RACSTER In Chancery Before Sir J. L. Knight Bruce, 1842. 1 Y. & C. Ch., 401. The original bill prayed a foreclosure of the estates mentioned in the pleadings. A sale having been made, the cause came on for further directions with a view to a division of the fund in court among the mortgagees, the sum realized being insufficient .to pay all parties their principal, interest and costs. Racster, being seized of Foxhall Coppice and a piece of land, marked in a plan of the estate No. 32, mortgaged in 1792, Foxhall to Barnes; 1795, Foxhall to Hartwright; 1800, Foxhall and No. 32 to Barnes ; 1804, Foxhall and No. 32 to Williams. The subsequent incumbrances were taken with notice of the "Accord: Bealey v. Lawrence, 11 Paige Ch. 581 (1845); Hughes v. Williams, 3 MacN. & G. 683 (1850) ; Reilly v. Mayer, 12 N. J. Eq. 55 (1858) ; Lech v. Stribling, 51 Md. 285 (1878) ; Monarch Cycle Co. v. Haagener, 59 Kan. 271 (1898) ; Perry v. Elliott, 101 Va. 700 (1003) ; First N. Bk. v. Fowler, 54 Wash. 65 (1909) ; Washburn v. Mining Co., 56 Ore. 578 (1910) ; Gallagher v. Stem, 250 Pa. 292 (1915)- BARNES v. RACSTER 30s prior incumbrances. The question was, whether as No. 32 was sufficient to pay the whole of Barnes' demand, Hartwright could, as against Williams, compel Barnes to resort to No. 32, thereby leaving Hartwright the first incumbrancer on Foxhall. 1 The Vice Chancellor: Racster, having two estates, one called Foxhall and another which has been called No. 32, mortgaged Foxhall alone to Barnes in 1792, and afterwards, by way of second charge, mortgages Foxhall (alone), in 1795, to Hartwright, who at the time has notice of Barnes' security. Subsequently, in 1800, Racster mortgages both No. 32 and Foxhall to Barnes to secure a further advance, and in such a manner as to make No. 32 and Foxhall liable each to the whole of Barnes' two advances, Barnes at the time having notice of Hartwright's security. After this both No. 32 and Foxhall are mortgaged by Racster, in 1804, to Williams, who at the time has notice of the former securities. The present proceedings were commenced subsequently to the year 1804, nor until after that year was any step taken by any party for enforcing either of the securities, or obtaining payment. All the mortgages cannot be paid in full. Foxhall alone is not sufficient to pay the first charge upon it, but No. 32, without Foxhall, is sufficient to pay the whole of Barnes' demands. Hartwright, there- fore, claims to throw Barnes on No. 32 exclusively. To this Barnes is indifferent; but Williams objects, contending that as he is an incumbrancer for value, the burthen of the first mortgage ought to be borne at least ratably by Foxhall and No. 32, upon which latter Hartwright never took a charge. This' is the question to be decided, and I think that it may be decided without necessarily involving either of two other points to which the argument has extended itself. I mean, first, the question what would have been the rights of Hart- wright and Williams had Barnes' security upon No. 32 preceded and not been subsequent to Hartwright's security on Foxhall; and, secondly, the question, what would have been the rights of the parties had Williams' security not existed at all, or not existed until after the commencement of these proceedings ? Upon each of these two points I entirely reserve myself. As to the matter to be determined, the first observation, to be made is, that, considered without any reference to Hartwright or to Williams, the nature and effect of the security of 1800 were, as I conceive, to make No. 32 and Foxhall pari passu, and ratably, according to their values, liable to Barnes' two charges. That, I think, would have been the result between the different heirs of Racster, had he died intestate and insolvent as to his personal estate, leaving one person his heir as to No. 32, and another person his heir as to Foxhall. At least the heir of Foxhall could not have claimed more against the heir of No. 32. Taking this to be so, I am unable to see that Hartwright had 1 Part of the statement of facts and the arguments of counsel are omitted. 306 MARSHALING SECURITIES in or before the year 1804 (when Williams took his security) acquired any right in No. 32, or any equity against Racster to pre- clude him from dealing with it on that footing for any purpose that his necessities might require. Contract certainly, as to No. 32, Hartwright had none. It was to him an accident, a matter with which he had neither privity nor concern, that Racster happened in 1800 to mortgage No. 32 to Barnes. Could not Barnes and Racster at any time after 1800, as against Hartwright, have sold or mortgaged No. 32 separately to a stranger, though with notice, leaving Foxhall charged as if it was in 1795, and leaving Hartwright in the same situation as if the security of 1800 had never existed? If Barnes and Racster could have done this as against Hartwright, why should not Racster be able as against Hartwright to do so ? In my opinion, it would be more than justice to him, and less than justice to Racster, to hold that the security of 1800 rendered No. 32 to any degree, or in any respect, less available for the necessities of Racster than the rights of Barnes required. I think that Hart- wright had not any equity to prevent Racster from doing what he did, namely, carrying this estate to market, and selling or pledging it as charged only according to the tenor of the security of 1800, that is, ratably and pari passu with -Foxhall. Again, suppose judgments to have been recovered by strangers in 1794, 1799 and 1801 against Racster, who was, I believe, previ- ously to 1800, seised equitably and not otherwise of No. 32." Sup- pose the security of 1800 good against all these judgments; what would have been the relative rights of Hartwright and the several judgment creditors (with or without elegit s) as to No. 32? Can Williams be in a worse situation than that in which he would have stood if his security had consisted of a judgment .only instead of what it did? If it were conceded in the present case, that had Williams' charge not existed, the right claimed by Hartwright could now be enforced against Racster, it does not in my judgment follow that in 1804 (in the absence at the time of any suit or proceeding for applying the property in question, or otherwise relating to it) any such right had arisen. The position of Williams, who took his security with notice, has been in argument assimilated to that of the heir of Racster, or of a person claiming merely as a volunteer under him. To this comparison I am not prepared to agree. To render it just, it ought to be established either that eo instanti when Barnes took his second security, Hartwright acquired a lien on No. 32, or that it was inequitable in Racster, however much in need of money, and however fair his intentions, to use No. 32 as part of his prop- erty, unless by the consent of Hartwright, or on the condition of paying him his whole debt. I am of opinion that neither proposition can be established, and that Hartwright's title, if any, against No, 32 does not extend beyond such interest in it, as before the institu- tion of these proceedings Racster did not alienate for value ; holding, as I do, the notice to be as immaterial as notice to a purchaser of a judgment recovered against a vendor, when the latter having a power, and being seised in fee subject to the power, can make a title THE BANK OF COMMERCE v. FIRST N. BK. OF EVANSVILLE 307 and alienate the fee by an exercise of that power, destroying the creditor's security. Upon the whole, I retain the opinion which on a former occasion I expressed, that circumstanced as the present case is, Hartwright and Williams stand with regard to the matter in dispute on an equal footing; that Barnes must be paid out of the respective proceeds of No. 32 and Foxhall, pari passu, and ratably according to their amounts ; that the residue of the produce of Foxhall must be applied towards paying Hartwright, and that the residue of the produce of No. 32 must be applied towards paying Williams — a conclusion, as I consider, entirely in accordance with the principles on which Larioy v. Duchess of Athol, Aldrich v. Cooper and Aver all v. Wade were decided. 2 THE BANK OF COMMERCE OF EVANSVILLE v. FIRST NATIONAL BANK OF EVANSVILLE. Supreme Court of Indiana, 1898. 150 Indiana, 588. Hackney, C. J.: David J. Mackey owned several parcels of real estate, estimated to be of the value of two hundred thousand dollars, upon which were certain judgment liens of about thirteen thousand dollars in favor of parties not here interested. Mackey gave to the First National Bank, appellee, a mortgage on parts of said real estate, referred to, for convenience, as No. 1, for about one hundred thousand dollars. Thereafter he executed to one Cook, as trustee, a conveyance of the remaining parts of said real estate, which we will refer to as No. 2, the purpose of the trust being the sale of parcels included in No. 2, and the application of the proceeds to certain claims for a large sum owing to the Bank of Commerce, appellant. Still later the Bank of Commerce purchased the judg- ments mentioned. The trustee sold a large part of No. 2 and applied the proceeds to the claims of the appellant, other than said judg- ments. In a foreclosure proceeding instituted by the appellee, First National Bank, the question was made as to the rights of said appellee to require said judgments, so held by said appellant, to be made first from the property No. 2. The lower court held that they should be so enforced, and this appeal is from that holding. The learned counsel for the appellant makes this concession: 2 Accord: Budgen v. Bignold, 2 Y. & C. Ch. 377 (1843); Wellesley v. Lord Mornington, 17 Weekly Rep. 355 (1869) ; Taylor v. Sweeney, 12 Can- adian L. T. 446 (1892) ; Flint v. Howard, L. R. (1893), 2 Ch. 54. Compare: Tighe v. Dolphin (1906), 1 Ir. R. 305. And see, 22 Law Quarterly Rev. 307. American cases in accord : Gilliam v. McCormack, 85 Tenn. 597 ( 1886) ; Green v. Ramage, 18 Ohio 428 (1849) ; Williams v. Washington, 16 N. Car. 137 (1828) ; Richards v. Cowles, 105 la. 734. See- note to Newby v. Fox, 90 Kan. 317 (1913). in 47 L- R- A.. N. S., 302. 308 MARSHALING SECURITIES "Of course, the general doctrine that where a creditor has access to two funds for the payment of his debts, and another creditor is confined to one of those funds, the dominant creditor will be com- pelled in the first instance to exhaust the fund upon which the other creditor has no security before resorting to the latter, is conceded." It is practically conceded, also, that, in the hands of the original judgment creditors, equity might have enforced the lien of the judg- ments, fpr the appellee's protection, against No. 2 alone. In Bispham's Principles of Equity, Section 27, it is said: "The doctrine of marshaling grows out of the principle that a party having two funds to satisfy his demand shall not, by his election, disappoint a party who only has one fund. Thus, a party who has a mortgage on two parcels of land, ought not, in fairness, to resort in the first instance to one of them, upon which there also happens to be a junior mortgage which is not otherwise secured ; for in so doing the junior mortgagee might be altogether cut out. Equity, however, is loath to interfere with the rights of a' creditor to enforce payment out of any of his securities, and therefore the remedy usually afforded to the junior disappointed mortgagee is to substitute him to the rights of the paramout mortgagee as against the other property." The same proposition is announced and illustrated by the author in Sec- tion 342, et seq., of the same work. In Section 341 it is said that "the equity of marshaling would seem to be capable of being carried into effect in one of two ways, either, first, by restraining the party against whom it exists from using a security to the injury of another, or, second, by giving the party entitled to the protection of this equity the benefit of another security in lieu of the one of which he has been disappointed. In other words, the right might be enforced either by injunction against the paramount creditor, or by subroga- tion in favor of the junior creditor." In the same section it is further said: "The rights of every one can be protected, and there is no harm in throwing the paramount creditor at once on the singly, charged fund. So, too, when the paramount creditor has been guilty of some negligence or default, as where he has put one of the funds beyond his own reach with the full knowledge that his debt cannot be satisfied out of the other fund without injury to the interests of third persons, he 'may be restrained from coming in upon the second fund." In Fetter on Equity, page 256, it is said "that a person having resort to two funds shall not by his choice disappoint another having one only. The practice adopted in the early days was to summarily forbid the creditor with two funds to touch that which was the sole resource of the other. The remedy by injunction is, however, rarely applied in modern times. The usual course. is to permit the double creditor to enforce his claim as he pleases; but, if he chooses to resort to the only fund on which the other has a claim, that other is subrogated to all his rights against the fund to which otherwise ho could not have resorted." In Jones on Liens, Section 1045, the same rules are stated, and wherever stated, are fortified by abundant authority. THE BANK OF COMMERCE v. FIRST N. BK. OF EVANSVILLE 309 One contention on behalf of the appellant is, that while the right to require enforcement of the judgment against No. 2 alone existed at all times, prior to the execution of the trust deed, after that time it did not exist ; that the right was not fixed, but was inchoate and to be enforced only with reference to conditions existing at the time of enforcement. If this were true, the rule that subrogation was the more modern and approved remedy would be defeated, since subrogation depends upon the previous conduct of the dominant creditor, either in disregarding his duty to seek the property not covered by the junior lien, and in enforcing it against that upon which the junior lien rests, or, as said by Bispham, where he "has been guilty of some negligence or default." The theory of subroga- tion would be incomplete without the supposition that the dominant creditor had either enforced his claim against the doubly burdened property, or had lost the right to pursue the property to which equity carries the junior lien in subrogation. The idea at the basis of the equity is that the dominant creditor, having otherwise ample security, shall not disappoint the junior creditor. Unless that which disappoints the junior creditor has been done there is nothing for which subrogation is awarded. To give the disappointed creditor "the benefit of another security in lieu of the one of which he. has been disappointed," necessarily implies that he has been placed in a position by the dominant creditor where his security is not avail- able. Bispham says, Section 342, that "the right of marshaling cannot be defeated by the intervention of creditors of a later date," citing authority. We are convinced, therefore, that where, as in this case, a creditor takes a mortgage on property, it then being apparent that all prior liens can be fully paid from other property covered by them, the right to require such payment will continue and be protected as against such prior liens. It is insisted, however, that the- enforcement of the rule under the circumstances in this case is an injury to the appellant, now the dominant creditor by the purchase of the. judgments, and that equity will not enforce the rule to the injury of a third person. As to the ownership of the judgments, we observe no stronger equity in the appellant than in the assignor, the original judgment creditor. Nor do we perceive that the trust deed added anything to the equities of the appellant, under the judgments, as against the appellee. Equity forbade the assignor of the judgments to enforce them so as to dis- appoint the appellee. In other words, good faith demanded that the judgments should be enforced against No. 2, property encumbered only by their lien and ample to pay them. We know of no reason why this equity should be broken by the transfer of the judgments to another. The judgment creditor could perform, no act affecting the equity in favor of the mortgagee. In the hands of the appellant the judgments have been held without enforcement, for the manifest purpose of pushing them over upon No. 1. The trust deed, the sales of property included in No. 2, and the application of the proceeds to credits in favor of the appellant, other than the judgments, have had the effect to remove much of No. 2 from the reach of the judg^ 310 MARSHALING SECURITIES ments, and to destroy, in the main, the possibility of subrogation. In other words, the judgments, as confessed by allegation, were purchased and employed by the appellant for its protection, that is, to secure the payment of its other claims from No. 2, hoping thereby to avoid the obligation to collect the judgments from that property and to be enabled to collect them, or such part as might be neces- sary, from No. 1. The appellant, as to the judgments, does not occupy the position of a third party ; it occupies the position of the original judgment creditor. Nor is it, as the dominant lienor, injured by the rule here in question. If injured, it is not by the rule, but in the violation thereof by the appellant, in securing the diversion of No. 2 to other sources than the payment of the judgments. If, instead of a trust deed for appellant's benefit, Mackey had conveyed No. 2 to a stranger, it would not have been released from the lien of the judgments. If he had sold out a part of it, the residue would have been first subject to sale upon the judgments and then, for any balance, the part sold would have been subject to sale. This con- clusion results from the universally established equitable rule that property subject to a lien, if sold by the debtor in parcels, is subject to resale, for the discharge of the lien, in the inverse order of its alienation. Authorities are unnecessary to a proposition so thor- oughly understood as this. The appellee, in taking its mortgage, occupied the position of a purchaser of a part of the property cov- ered by a lien, and was entitled to require the remaining portion to be sold first for the payment of the lien. Hahn v. Behrman, 73 Ind. 120; Merritt v. Richey, 97 Ind. 236; Denton v. Ontario, etc., Bank, 28 N. Y. Supp. 293 ; Appeal of Robeson, 117 Pa. St. 628; 12 Atl. 51 ; Kendig v. Landis, 135 Pa. St. 612, 19 Atl. 1058. The trust deed and sales under it, for the appellant's benefit, had the effect to release the property from the lien of the judgments, as to the appellant, and such release would operate as a relinquish- ment of the right to go upon No. 1 for the judgments. Alsop v. Hutchings, 25 Ind. 347; Turner v. Flenniken, 164 Pa. St. 469, 30 Atl. 486, 44 Am. St. 624.. Cases in their essential feature quite like the present are Appeal of Robeson, supra, and Kendig v. Landis, supra. In the first, Graham owned two tracts of land subject to two judgments in favor of Woods. Upon the Hale tract he gave two mortgages, and later gave one upon the Decatur tract. Both tracts were sold under the judgments, and the proceeds brought into court for marshaling. The appeal was on behalf of the mortgagees of the Hale tract, claim- ing precedence in distribution over the mortgage on the Decatur tract. The court said : "If the contest were, one between the appel- lants and the debtor alone, can it be doubted that the appellants would in equity be entitled to have Woods resort to the proceeds of the Decatur tract in order that they might avail themselves of the proceeds of the Hale tract? As the equity is against the debtor himself, certainly he would not be allowed to insist upon a pro rata payment of the Woods judgments from the two funds respectively, in order that he might pocket part of -the money. THE BANK OF COMMERCE v. FIRST N. BK. OF EVANSVILLE 311 "But when the appellees subsequently recorded their mortgage upon the Decatur tract, it is contended that, as mortgagees, they acquired a lien, and that their equity was equal to that of the appel- lants : that the equities were in equilibrio. We do not think so. The appellants acquired against Graham, the mortgagor, the right to have his other lands, not included in the mortgage, applied first to the payment of the earlier judgments which were liens against them. This right it was not in the power of the mortgagor to defeat by confessing judgments to other creditors, or by contracting subse- quent debts. Bona fide purchasers, and perhaps mortgagees, might be unaffected by an equity of which they had no notice in fact. Hoff's Appeal, 84 Pa. St. 42. But when the appellees took their mortgage they could plainly see that the Woods judgments were entered as first liens against the Decatur tract, and that their mort- gage in the regular course of distribution, could not be paid until these judgments were satisfied. It is true that it appeared by the records that the Woods judgments were liens also upon the Hale tract, but the same search would show the existence of the appellants mortgage. The appellees, in the absence of proof to the contrary, will be presumed to have taken their mortgage with full knowledge of all the facts disclosed by the record, and would thus be affected with notice of all the equities, which, owing to the peculiar condition of the respective liens, the appellants had as against the Woods judgments." From the case of Kendig v. Landis, supra, we quote as follows : "The appellant has two funds out of which to claim his money. One of the funds is the proceeds of the sale of the Manor township farm, which was sold by the sheriff for a sum sufficient to pay appellant's judgment in full. The money is in the hands of the sheriff, but the appellant declines to take it out. The other fund is the proceeds of the sale of the Millersville property. This property was sold by the sheriff subsequently to the sale of the Manor farm. The mechanics' lien creditors have a claim upon this fund, but they are subsequent to the lien of the plaintiff's judgment. The appellant insists upon his right to^take his money out of the latter fund. If he succeeds, he takes the only fund the merchanics' lien creditors have. "The application of the familiar rule that where one creditor has two funds out of which to make his money, and another creditor has but one, the creditor having the two shall first exhaust the fund upon which the other has no claim, would throw the appellant upon the Manor farm. This rule must prevail, unless the appellant has an equity which would make the application of the principle unjust in the particular instance. The reason why he objects to it is that he is the holder of a second judgment which is also a lien upon the two properties, but as to the Millersville property, it is subsequent to the mechanics' claims. Hence, he desires to first absorb the Millersville fund, in- which case his second judgment is good upon the Manor farm. In this, however, he has no equity. When the mechanics put their work and material upon the Millersville prop- 312 MARSHALING SECURITIES erty, they could see, of course, that it was bound by the lien of, appellant's first judgment. But they also knew that the same judg- ment was a lien on the Manor farm, and that said farm was amply sufficient to pay it. With this knowledge, they had a right to expect that the appellant would seek to get his money out of the farm, and not deprive them of the security of their liens. They further knew that they could compel him to do so if necessary. Is this right to be taken away because the appellant acquired another judgment which was also a lien upon both properties, and which was entered after the mechanics' liens had attached to the Millersville property? The appellant has no equity as to his second judgment, for the reason that it is subsequent to the mechanics' liens, and he cannot,. by tacking his own judgments together, deprive the mechanics of their equity to have the first judgment satisfied out of the Manor farm." Counsel for appellant rely with confidence upon Gilliam v. Mc- Cormack, 85 Tenn. 597, 4 S. W. 521. We make no effort to distin- guish between that case and the general rules and authorities upon which we rely for our conclusion. It seems to support the appel- lant's contention, but, with deference, we submit that the weight of authority, and the necessary force of the rule of equity involved, lead to the conclusion we have reached. The rulings of the lower, court were correct. 1 The judgment is affirmed. PAULINE STERNBERGER v. BERTHOLD SUSSMAN. Court ofChancery of New Jersey, 1905. 69 New Jersey Equity, 199. Stevens, V. C. : This is a suit to foreclose a mortgage upon an undivided interest in lands in Monmouth County. It is admitted that the mortgage is a valid instrument and a first lien, and that the money secured is due. The only defense is that complainant's mort- gage is also a lien upon lands in- the city and State of New York, and that, as these lands are apparently an adequate security for the money, the mortgage should be first foreclosed in the courts of New York, and that only in the event of a deficiency there should the first mortgagee be allowed to continue his suit here. This defense is made by a person who was formerly a second mortgagee of the land that is being foreclosed in New Jersey, but who has himself fore- closed here and became the purchaser at the foreclosure sale. The principle invoked is that he who has two funds for the sat- isfaction of his claim shall not, by his election, disappoint him who "Accord: Conrad v. Harrison, 3 Leigh. Va. 532 (1832) ; Hunt v. Town- send, 4 Sandf. Ch. N. Y. 510 (184.7) ; Orangeburg Bank v. Cohn, 52 S. Car. 120 Ct8g7) ; Woods v. Douglas, 46 W. Va. 657 (1899). See, Dise v. Beacham, 81 Md. 603 (1895") ; Ingersoll v. Somers L. Co.. 89 Atl. 288 (N. J. 1913) ; Southern T. Co. v. Wilkins, 101 S. Car. 457 (1915). ROBERT S. BROWN v. DAVID S. COZARD, Sr. 313 has only one, and that equity, to satisfy both, will throw him who has the two upon the fund which he alone possesses, so that the other fund may remain clear to him who has but the one. Aldrich v. Cooper, 8 Ves. 382. This rule is subject to several qualifications, and among them, I think, to the qualification that, except in very special cases, both funds must be within the jurisdiction and control of the court. Lewis, Trustee, v. United States, 92 U. S. 623; Aldrich v. Cooper, 2 Lead. Cas. Eq. (3d Am. Ed.) 276, Am. note; Ad. Eq. (8th Am. Ed.) *272, note. There seems to have been some divergence of view on this subject. In the York and Jersey Steam- boat Ferry Co. v. Associates of Jersey Co., Hopk. Ch. 522, it was held by Chancellor Sandford, in New York, that a mortgagee having a lien upon boats in that state and also upon lands in New Jersey would be required, at the instance of a mortgagee of the boats only, to first proceed against the New Jersey land. The case has been questioned, and both on reason and authority it is clear that this course of procedure should be taken only where it is manifest that the creditor having the two funds will not sustain any loss, delay or additional expense by being required to adopt it. A case of this sort would rarely occur in practice. The second mortgagee may be protected by requiring the first mortgagee to place his remedies at the disposition of the second mortgagee after they have served the purpose of satisfying his own debt. 2 Lead. Cas. Eq. (3d Am. Ed.) 276. In the case in hand it is argued by defendant that there are special circumstances. It is said that the property in New York is an adequate security for the complainant's claim. All that it seems to me that the evidence shows is that it may be. The mort- gagor appears to have the legal title to an undivided interest in valu- able New York property, but what his beneficial interest may be, how far it may be encumbered or available, does not clearly appear. It is evident that the foreclosure of the first mortgage there will necessarily be attended with delay and expense. The first mort- gagee should not, therefore, be compelled to litigate in New York at his own costs for the benefit of the answering defendant. Assum- ing that the facts of this case are such as to present the question, the defendant must fail in his contention. 1 ROBERT S. BROWN v. DAVID S. COZARD, Sr. Supreme Court of Illinois, 1873. 68 Illinois, 178. Writ of error to the circuit court of Marion County. Sheldon, J. : The owner of a certain quarter section of land, in the southwest quarter of which he had a homestead right, having given a mortgage on the quarter section, in which he had released 'Accord: Lewis v. United States, 92 U. S. 618 (1875); Calloway v. Peoples Bank, 54 Ga. 572 (1875) ; Morton v. Graffin, 68 Md. 545 (iF~~ 314 MARSHALING SECURITIES his homestead right, and there being a judgment against him which was a lien upon the quarter section, the judgment creditor brought this bill in equity against the mortgagee and the common debtor, to compel the former to resort first for the satisfaction of his mort- gage to the southwest quarter of the quarter section, so that the judgment, with the residue of the mortgage debt, if any, might be satisfied out of the remaining portion of the land. A demurrer to the bill in the court below was sustained, and the bill dismissed. This is assigned for error. In support of the bill, that principle of equity is invoked, that if one party has a lien on or interest in two funds for a debt, and another party has a lien on or interest in one only of the funds for another debt, the latter party has a right in equity to compel the former to resort to the other fund, in the first instance, for satisfac- tion, if that course is necessary for the satisfaction of the claims of both parties, whenever it will not operate to the prejudice of the party entitled to the double fund. The question is, whether this is a case for the application of the principle. The mortgagee has an undoubted right to sell the homestead for the satisfaction of the mortgage; the judgment creditor has not that right, as respects the judgment. It will produce no injury to the mortgagee to be com- pelled to resort first to the tract in which the homestead right exists, as respects the judgment, but has been released as respects the mortgage. So far, the principle may apply; but the doctrine is attended with this qualification : that no injustice be done to the common debtor, i Story, Eq. Jur., Sec. 642. The statute provides, that no release or waiver of the homestead exemption shall be valid, unless the same shall be in writing, subscribed by the householder and his wife, if he have one, and be acknowledged, etc. The object sought by this suit is to make the release of the homestead exemption, which has been made to the mortgagee, opera- tive for the benefit of a judgment creditor, to whom there has been no release of the homestead right in writing. If the end sought should be attained, the judgment creditor will have derived the benefit of the release of the homestead exemp- tion, not by virtue of a release of it, in writing, to himself, but by an order of the court. The waiver of the homestead exemption was in favor of the mortgagee, and might have been made in the per- sonal confidence that he would first exhaust all the residue of the quarter section of land before resorting to the particular tract in which the homestead right existed, and in the belief that such residue would be sufficient to satisfy the mortgage, so that the homestead would remain untouched. Farwell v. Bigelow, 112 Mich. 285 (1897). Contra: Willey v. St.. Charles Hotel Co., 52 La. 1581 (1900). "These rules never assume to take from a prior incumbrancer any sub- stantial right." Per Cooley, J., in Sibley v. Baker, 23 Mich. 312 (1871). See also, Cohen v. Shropshire, 59 Ala. 542 (1877) ; Adams v. Young, 200 Mass. 588 (1901) ; Bank v. Ryan, 123 N. W. 040 (la. 1909J. GAINES et al. v. HILL 315 The mortgagee himself, of his own accord, may first resort, for the satisfaction of his mortgage, to the tract in which the home- stead right exists as against the judgment; of this the mortgagor would have no cause to complain, because it would be in the exer- cise of a power which he himself had voluntarily bestowed upon the mortgagee. But when the mortgagee, not by his own voluntary action, and for his own benefit, but at the instance and for the benefit of a judgment creditor, for the purpose of having his judgment satisfied, is compelled to resort first for the satisfaction of his mort- gage to the tract subject to the homestead exemption as respects the judgment, the mortgagor then would seem to have just cause of complaint, that his homestead had been taken from him in a mode and for the benefit of a. creditor, not contemplated by the statute, and whereto he had never given his assent. This would be in viola- tion of the intent of the statute, that the homestead right should not be injuriously affected for debt, without the express assent, in writ- ing, of the debtor. The purpose of the statute is a benign one: to secure to the debtor and his family a home, sacred from sale for debt, save by the freely given assent of himself and his wife, in writing. And we think a court of equity should act in the exercise of the power which is invoked in the present instance, so far as may be, in such a way as to advance and not to thwart the policy of the statute. Being of opinion that the relief sought would be in contraven- tion of the spirit and policy of the Homestead Act, and to the injury of the common debtor, we think the demurrer was properly sustained and the bill rightly dismissed. 1 The decree is affirmed. GAINES ET AL. v. HILL. Court of Appeals of Kentucky, 1912. 147 Kentucky, 445. W. R. Clay, Commissioner: On April 14, 1893, W. T. Gaines borrowed of the Ohio Valley Banking & Trust Company the sum of one thousand one hundred and fifty dollars, for which be executed and delivered his two promissory notes, one for four hundred dollars, payable in four months, and one for seven hundred and fifty dollars, payable in twelve months from date. To secure the payment of the notes, W. T. Gaines and his wife, Mary Gaines, the mother of appel- 1 Accord : McArthur v. Martin, 23 Minn. 74 ( 1876) ; Smith v. Wait, 39 Wis. 512 (1876) ; Grant v. Palmer, 67 la. 31 (1885) ; Frick v. Ketels, 42 Kan. 527 (1889) ; Koen v. Brill, 75 Miss. 870 (1898) ; Ralls v. Prather, 21 Ky. L. R. 555 (1899) ; Bank v. Moody, 204 Fed. 963 (1912). Contra: Hall- man v. Halltnan, 124 Pa. 347 (1889) ; Peoples Bank v. Brice, 47 S. Car. 134 (1896), but not as to unsecured creditors. Pearson v. Pearson, 59 S. Car. 367 (1900). 316 MARSHALING SECURITIES lants, Morris and Sarah Gaines, mortgaged to the Ohio Valley Bank- ing & Trust Company three lots of ground in Henderson, Kentucky. Two of these lots belonged to W. T. Gaines, while the third belonged to Mary Gaines, it having been conveyed to ner by Alexander Rankin and wife by deed dated December i, 1885, and recorded in Deed Book No. 11, page 250, Henderson County clerk's office. On August 27, 1896, W. T. Gaines executed to appellee, Eli Hill, a mortgage on his individual property theretofore mortgaged to- the Ohio Valley Banking & Trust Company, to secure Hill as surety in two notes to the Henderson Trust Company, of Henderson, Ken- tucky. On April 22, 1897, the Ohio Valley Banking & Trust Com- pany brought suit to enforce its mortgage lien, and to subject the mortgaged 'property to the payment of the two notes executed to it by W. T. Gaines. In December, 1899, appellee, Eli Hill, alleging that he had paid the indebtedness for which he was surety, brought r.uit to recover a personal judgment against W. T. Gaines, and to enforce his mortgage lien. These actions were brought during the lifetime of Mary Gaines, and were afterwards consolidated. On February 26, 1898, and after the death of Mary Gaines, the Ohio Valley Banking & Trust Com- pany amended its petition, and set forth the death of Mary Gaines and the names of her surviving children, to wit : Morris C. Gaines, Sarah Gaines, William Gaines, Harris Gaines, Mamie Gaines and Virginia Gaines, all infants, who were thereafter brought before the court by proper process. At that time the ages of the children were as follows : Morris, fifteen ; Sarah, thirteen ; William, eleven ; Harris, ten ; Mamie, seven, and Virginia, three. Prior thereto certain prop- erty belonging to W. T. Gaines had been sold, and the greater por- tion of the bank's debt was satisfied. There remained unsold the lot belonging to Mrs. Gaines and the lot involved in this controversy. On September 13, 1902, it was adjudged that there was still due the bank on its original judgment the sum of three hundred and thirty-eight dollars and fifty-eight cents, with interest from July 23. 1900, and costs, and that the lot belonging to Mary Gaines be sold for the payment thereof. This lot was appraised at six hundred dollars. It was purchased by Thomas E. Ward, attorney for W. T. Gaines, for the latter, but he having declined to pay for it, it was turned over to the bank. As a defense to the suit of Eli Hill, W. T. Gaines pleaded a discharge in bankruptcy. Hill charged fraud on the part of Gaines* This contention was sustained, and on January 29, 1904, personal judgment was rendered in favor of Hill. Subsequently it was found that one lot belonging to W. T. Gaines remained unsold, and the court ordered a sale of this lot to satisfy Hill's judgment. The lot was sold, and appellee Hill became the purchaser at the price of five hundred and ten dollars. To this branch of the case the infant children of Mary Gaines were not parties, as their father, who was alive, was sole owner of the property mortgaged to Hill. After the sale, however, appellants, Morris and Sarah Gaines, filed their peti- tion, asking to be made parties, and that it be taken as an answer, GAINES et al. v. HILL 317 counter-claim and cross-petition against appellee, Hill. In addition to the foregoing facts, the petition alleges that appellants, as children of their mother, succeeded to two-sixths' interest in their mother's property on her death, subject to their father's right of courtesy; that the lot in controversy having been sold to pay their father's debt, they were entitled to be subrogated to the rights of the bank in the remaining lot owned by their father, and to have the lot sold to repay them for their lot sold to satisfy his debt. Appellee filed an answer admitting practically all the allegations of the petition, but denied that the debt to the Ohio Valley Banking & Trust Company was the debt of W. T. Gaines, and alleged that the money was borrowed for the benefit of appellants' mother, Mary Gaines. This latter allegation was denied by reply. Upon submission of the case, judgment was entered dismissing appellants' position, and confirm- ing the commissioner's report of sale. From that judgment this appeal is prosecuted*. As the two notes executed to the Ohio Valley Banking & Trust Company and the mortgage by which they are secured show thsft the money was borrowed by W. T. Gaines, we must hold in the absence of evidence to the contrary that the debt was his, and that Mary Gaines, his wife, mortgaged her property merely to secure his. debt. With this question eliminated, we have the following case: W. T. Gaines borrowed from the bank one thousand one hundred and fifty dollars. To secure this indebtedness, he and his wife mort- gaged not only his but her property. Her property being pledged as security for his debt, she, though incurring no personal liability, was in effect his surety to the extent of the property so mortgaged. The mortgage to the bank was duly recorded. Subsequently appellee Hill took a mortgage from W. T. Gaines, in which the latter's wife did not join, covering only W. T. Gaines' individual property embraced in the mortgage to the bank. Pending the proceedings by the mortgagees to enforce their liens, Mary Gaines, the mother of appellants, died. She left six children, appellants and four others, all of whom were infants. Their mother's property descended to them subject to their father's right of courtesy. The property descending to them was subjected by the bank to the payment of their father's debt, leaving unsubjected the lot in controversy, which belonged to their father, the principal debtor. The question is, are they entitled to be subrogated to the rights of the bank in this lot as against appellee, the second mortgagee? For appellee it is insisted that as he had a lien on the husband's property only, while the bank had a lien on both the husband's and wife's property, he could have compelled the bank, under the doctrine of marshaling, to exhaust the wife's property before proceeding against the husband's property. The doctrine of marshaling, however, applies where the two funds or pieces of property belong to a common debtor, and, therefore, has no application to the facts of this case. 1 On the contrary, it is well 'Accord: Ex parte Kendall, 17 Ves. 514 (1811) : Thompson v. Spittle, 102 Mass. 207 (1869); Cannon v. Hudson, 5 Del. Ch. 112 (1876); Knouf's 318 MARSHALING SECURITIES settled that a creditor who has a claim against two debtors, one a principal and the other a surety, cannot be compelled by another creditor of the principal debtor to exhaust his remedy against the surety before proceeding against the principal. {Trentman v Eldridge, 98 Ind. 525 ; Garrett v. Burlington Plow Co., 70 Iowa 6974 29 N. W. 395, 59 Am. Rep. 461 ; Thompson v. Spittle, 102 Mass 207; Mason v. Hull, 55 Ohio St. 256, 45 N. E. 632; Stewart v. Stewart, 207 Pa. St. 59, 56 Atl. 323.) For a like reason a second mortgagee having a lien on a husband's property cannot require a prior mortgagee having a lien on the same property and also on the property of the wife which was pledged merely to secure the hus- band's debt, first to exhaust the wife's property before proceeding to subject the husband's property. In this case the bank's mortgage was on record. Appellee acquired his mortgage with notice of the fact that all of the property covered by it was embraced in the mortgage to the bank, and that the bank if necessary could subject it to the payment of the debt. Therefore, if appellants are held Subrogated to the rights of the bank in the property in controversy, appellee's position is no worse than if the bank had first subjected the property in controversy, which, manifestly, it had the right to do. That being true, there can be no doubt that the mother of appel- lants, if alive, could have successfully asserted her right to subro- gation. Consequently, appellants who stand in her shoes, and whose property was taken to pay their father's debt, should have the same right {National Exchange Bank v. Silliman, 65 N. Y. 475). Nor is the fraud of appellants 1 father sufficient to defeat their right. They do not claim through him, and what he did, therefore, cannot affect them. Nor can laches be imputed to them, for, being infants, it cannot be said that they have failed for an unreasonable length of time to assert their rights. The lot formerly owned by Mary Gaines descended to appel- lants and her other children subject to their father's right of cour- tesy, which was a life estate in the whole thereof, as he and Mary Gaines were married, and the lot was acquired, and they had issue born alive before the enactment of the Weissinger Act of 1894. {Rose v. Rose, 104 Ky. 48; Mitchell v. Violett, 104 Ky. jj). This lot sold for three hundred and fifty dollars, a sum sufficient to pay the balance of the bank's lien. Being subrogated to the bank's lien on the lot in controversy which belonged to their father, to the extent of the value of their interest in the lot that belonged to their mother and which was sold to pay their father's debt, it follows that they are entitled to a lien on the lot in controversy for the sum of three hundred and fifty dollars, the price the lot brought less the cash value of their father's life interest therein on the day the lot formerly belonging to their mother was sold. As the other children of Mary Appeal, 91 Pa. 78 (1879) ; Mason v. Hall, 55 Ohio St. 256 (1806) ; Quinnipiac B. Co. v. Fitzgibbons, 73 Conn. 191 (1900) ; Cooper Wagon Co. v. Irvin, 83 Neb. 832 (1909) ; Birch R. Co. v. Glendon Co., 76 S. E. 167 (W. Va. 1912). ALBERT P. CARTER v. TANNERS LEATHER COMPANY, 319 Gaines are necessary parties to the action, appellants, on the return of the case, will make them parties plaintiff with their consent, or parties defendant in case they refuse to unite as plaintiffs. The court will then adjudge appellants and the other children of Mary Gaines a lien on the lot in controversy as above indicated, which, if voluntarily discharged by appellee, will entitle him to have the sale confirmed. In the event of his refusal to pay off the lien so adjudged, the court will set aside the sale, and order a resale of the property, and apply the proceeds thereof first to the payment of the lien in Favor of the children. Judgment reserved and cause remanded for proceedings con- sistent with this opinion. ALBERT P. CARTER v. TANNERS LEATHER COMPANY. Supreme Judicial Court of Massachusetts, 1907. 196 Massachusetts, 163. Bill in equity by the assignee under a common law assignment for the benefit of creditors by the Tanners Leather Company, seek- ing instructions regarding the distribution of the proceeds in his hands from the liquidation of the assets of the assignor, filed in the Supreme Judicial Court for the county of Suffolk, May 16, 1906. The case was referred to a master, who made a report to which objections and exceptions were filed. The case was heard before Rugg, J., who reserved it for consideration and determination by the full court. The facts are stated in the opinion. Sheldon, J. : The petitioner is the assignee under a common law assignment for the benefit of creditors, made in March,, 1903, by the Tanners Leather Company, a corporation organized in March, 1902. The petitioner has converted all or nearly all the assets so assigned to him into cash, and asks the instructions of the court as to its distribution. The case has been sent to a master, and he has found and reported to the court the names of the creditors of the corporation and the amounts of their several demands. Among these demands are seven promissory notes of the corporation to the amount of thirty thousand dollars, each of which was indorsed by one Kimball and one Van Tassel. There was evidence, which the master received de bene only, that these notes were issued by Kim- ball, its treasurer, without its authority; but that they are now in the hands of holders who took them before maturity in good faith, for value, and in the belief that their proceeds were for the use of the corporation. It is not denied that these notes can be enforced against the corporation. This evidence tended to show also the following facts: Each one of these notes was really issued and its proceeds were used solely for the benefit of Kimball and Van Tassel, in a mining operation in which they were engaged. Other similar notes" of the Tanners Company were issued by Kimball, in the same way, for the benefit of Van Tassel and himself, and indorsed -by 320 MARSHALING SECURITIES them, which have been found not to be held by takers in due course, and so have not been allowed against the corporation. Van Tassel held an agreement with one DuBois, dated October 23, 1901, by which DuBois agreed to pay to Van Tassel the market price, less certain deductions, of the bark which should be cut and peeled in the future on certain lands in Pennsylvania, this market price to be fixed by agreement or arbitration from year to year. Van Tassel assigned this contract, hereinafter called the bark contract, directly to his wife, by assignment dated December 24, 1901. Immediately after the Tanners Leather Company made its assignment to the peti- tioner as aforesaid, Van Tassel and his wife assigned the bark, con- tract to the trustees, to be "held by them in trust for the payment of the principal and interest of" the notes signed by the Tanners Leather Company and indorsed by Van Tassel, amounting to fifty thousand dollars. It was also provided that "any dividend or pay- ment received" by the holders upon said notes "from the said Tan- ners Leather Co. or from said Wm. F. Kimball shall be duly credited upon the same." The agreement containing these provisions was executed by the holders of the seven notes aforesaid. The present trustees under this assignment have now, about four years after the assignment to them, received about thirty thousand dollars, a large part of which, however, is an advance to be repaid from the proceeds of future cuttings; and it is estimated that the contract will yield them, if the cutting is made at the same rate as heretofore, a total sum of about sixty thousand dollars; but nothing has yet been paid to the beneficiaries under the trust. The Atlantic Bank, one of the creditors of the Tanners Leather Company, claims that upon these facts the holders of the seven notes indorsed by Kimball and Van Tassel should not be permitted to participate in any distribution of the general assets in the hands of the petitioner until they shall have exhausted their security undeu the Van Tassel bark contract, and then only for the balance of their several claims after deducting such amounts as they shall have received from that security ; and this claim raises the questions which are presented before us. There are doubtless here two classes of creditors: First, the general creditors of the Tanners Leather Company, who can hold only the general assets of the company in the hands of the peti- tioner; and, second, the holders of the seven notes indorsed by Kimball and Van Tassel, who can hold both these assets and the funds that have been and hereafter shall be realized upon the bark contract. In behalf of the former class, it is claimed that the assets should now be marshaled, so as to require the holders of the Van Tassel notes to look first to the latter fund, upon the equitable rule stated in Cheesebrough V. Millard, 1 Johns. Ch. 409,. that a person having a right to satisfy his debt or claim out of two funds, to but one of which another person can resort, shall be compelled first to exhaust the fund to which the other cannot resort before, coming upon the one available to both ; and that thus the person having an interest in the double fund is prevented by a court of equity from ALBERT P. CARTER v. TANNERS LEATHER COMPANY 321 exercising his right to enforce that interest to the prejudice of the person having an interest in the single fund only. It is not worth while to attempt to refer to the numerous cases in which this general principle has been declared and recognized. Nor is it disputed that, as a general rule at any rate, it is not to be applied where the two funds to which the creditors or sets of creditors may resort are not derived from a common source, or are not in the hands of a common debtor. There is no question here that the holders of these seven notes, being holders in due course, have a right to hold both the Tanners Leather Company as promisor and Van Tassel as indorser. They have a right to look to each one of their debtors until they shall have received full satisfaction. If they held no security from either, they could prove in bankruptcy against the estates of each, and receive full dividends from each until they should have obtained complete payment. Mercantile Bank v. McFarlane, 71 Minn. 497; In re Baxter, Fed. Cas. No. 1122; Moch v. Market Street National Bank, 107 Fed. Rep. 897. Nor would the right to prove in full and receive dividends against the estate of one party be abridged by the fact that the creditor held security from the other party. Hale v. Leatherbee, 175 Mass. 547; Gorman v. Wright, 136 Fed. Rep. 164; In re Head- ley, 97 Fed. Rep. 765; In re Dunkerson, Fed. Cas. No. 4157; In re Cram, Fed. Cas. No. 3343. 1 These are illustrations of the general principle that the rule of marshaling assets will not be enforced to the prejudice of the creditor against whom it is sought to be applied. The Atlantic Bank, however, rests its demand upon its conten- tion that, as between the debtors, the burden of paying these notes ought to be thrown upon Van Tassel, for the relief of the Tanners Leather Company. It contends that, when it appears that between the two debtors there are equities whereby one ought to pay the debt for the relief of the other, there is an exception to the general rule that assets will be' marshaled only among creditors of a common debtor, .and that marshaling may be resorted to to give effect to the equities in favor of the creditors of that debtor who is only secon- darily liable for the debt, or ought to be called upon only after the exhaustion of the other means. This was the rule adopted in New- som v. McLendon, 6 Ga. 392. Although we are not aware of any other decision in which it has been actually applied, it has been fre- quently declared both in text-books and in the judicial opinions, following the statement of Lord Eldon in Ex parte Kendall, 17 Ves. 514, that the doctrine of marshaling will not be carried to this extent unless founded on some equity giving to one debtor the right for his own sake to compel the creditor to seek payment from the other debtor. Dorr v. Shaw, 4 Johns. Ch. 17 ; Ayres v. Husted, 15 Conn. 504; Wise v. Shepherd, 13 111. 41. 2 So Story, Eq. Jur., Sec. 642, 'See 41 Amer. L. Reg. 453 and Sec. 57 of the U. S. Bankruptcy Act of 1898. 'See also, Huston's Appeal, 69 Pa. 48s (1871) ; Hodges v. Hickey, 67 Miss. 715 (1890); Foy v. Sinclair, 93 Tenn. 296 (1893); Guggenhcimer v. Martin, 93 Va. 634 (1896). 322 MARSHALING SECURITIES after stating the general rule that equity will not marshal assets as between different creditors unless they are creditors of the same common debtor, adds, "At least it will not do so unless it should appear that the debt . . . ought to be paid by one of the debtors only, or there should be some other supervening equity." See, also, Quinnipiac Brewing Co. v. Fitzgibbons, 73 Conn. 191 ; McCormick's Appeal, 57 Penn. St. 54; Dorr v. Shaw, 4 Johns. Ch. 17. In Thomp- son v. Spittle, 102 Mass. 207, and Swift v. Kortrecht, 112 Fed. Rep. 709, there was no such equity in favor of the debtor whose creditor asked for the interposition of the court as upon the facts as claimed to exist here. See Mason's Appeal, 89 Penn. St. 402. There is no doubt that upon the facts which the evidence tended to prove, these notes ought to be paid by Kimball and Van Tassel, and that the Tanners Company had a right to insist that this should be done. If the petitioner as the assignee of the corporation shall be held to pay anything upon them out of its assets, he will have; it may be assumed, a right of action against Kimball and Van Tassel for the amount of such payment. But the holders of the notes have a right to treat the corporation as their primary debtor anoVto look in the first instance for their payment to the funds of the corporation in the hands of the petitioner. He could not compel them before doing this to bring suit against the indorsers and to exhaust their assets. Downing v. Traders' Bank, Fed. Cas. No. 4046; In re Bab- cock, Fed. Cas. No. 697. The creditor who can hold two funds, even where there is only one common debtor, is not required to address himself first to that one which he alone can claim, when he can obtain the benefit of that fund only by litigation, especially if final satisfaction is somewhat uncertain. Kidder v. Page, 48 N. H. 380; Emmons v. Bradley, 56 Maine 333; Mason's Appeal, 89 Penn. St. 402;'Moore v. Wright, 14 Rich. Eq. (S. C.) 132, 134; Walker v. Covar, 2 S. C. 16; Wolf v. Smith, 36 Iowa 454; Simmons Hard- ware Co. v. Brokaw, 7 Neb. 405. Nor will he ordinarily be restricted, even in the first instance, to one fund unless that fund appears to be sufficient to satisfy his demand, without materially delaying him in obtaining his payment. Coker v. Shropshire, 59 Ala. 542 ; Briggs • v. Planters' Bank, Freem. Ch. (Miss.) 574; Trapnell v. Richardson, 13 Ark. 543 ; Pennock v. Hoover, 5 Rawle 291 ; Detroit Savings Bank v. Truesdail, 38 Mich. 430 ; Barnwell v. Wofford, 67 Ga. 50 ; Gillian v. McCormack, 85 Tenn. 597. In this case there was evidence that the fund now in the hands of the trustees under the bark cont tract amounts to about thirty thousand dollars, and it is expected that it will yield in all nearly sixty thousand dollars ; but it is left wholly uncertain when the cutting of the bark will be completed ; and all that appears is that there was evidence tending to prove that the other party to the contract, upon whose diligence both the amount to be realized and the time for such realization must depend, has acted reasonably in cutting the bark, and it is for his interest to do so in the future. The notes amount to fifty thousand dollars ; and it is manifestly wholly conjectural whether this fund will be suffi- cient to pay them, or, if so, when that result can be reached ; and in ALBERT P. CARTER v. TANNERS LEATHER COMPANY 323 the meantime, as against this fund, by the terms of the trust agree- ment, interest has been running upon these notes since their respec- tive maturity in 1903, at the rate of three thousand dollars per year, so that the amount due upon them is likely soon to exceed the prob- able proceeds of the security. 3 It is to be observed moreover that the only specific right to hold this fund is that given by the trust agreement of March 17, 1903, between Van Tassel, the trustees, and the holders of the notes. This trust is indeed declared to be "for the payment of the principal and interest of said notes" ; but it also provides that "any dividend or payment received by" the holders of the notes upon them "from the said Tanners Leather Company or from said William F. Kim- ball shall be duly credited upon the same." The secured creditors have acquired in the proceeds of the bark contract only the rights which are given by this agreement; and the effect of this provision is to> give them the rfght to hold only so much of such proceeds as may be necessary, with what they shall have been able to receive from the Tanners Company and from Kimball, to make up full payment of their notes with interest. This is, accordingly, the only right of which the unsecured creditors of the corporation could in any event require them to avail themselves; and that consideration is fatal to the claim made here by the Atlantic Bank. We do not mean that the petitioner, as representing the unsecured or general creditors of the corporation, would not have a good cause of action at law against Kimball and Van Tassel for whatever he may be obliged to pay upon these Van Tassel notes, but only that neither he nor such general creditors could in equity, even after paying these secured notes in full, take by subrogation any greater rights in the security than the rights which were secured to the original holders of the notes. Simpson v. Thompson, 3 App. Cas. 279; Knapp v. Sturges, 36 Vt. 721 ; Leavitt v. Canadian Pacific Railway, 90 Maine 153." Walsh v. McBride, 72 Md. 45; Franklin Savings Bank v. Taylor, 131 111. 376; Campan v. Molle, 124 Cal. 415; S warts v. Siegel; 117 Fed. Rep. 13; Gray v. Taylor, 14 Dick. 621. Accord- ingly, the general creditors themselves have no right in equity to compel the holders of the Van Tassel notes, to their certain delay and risk and with .the uncertainty of the final result, to resort to the proceeds of the bark contract before taking a dividend from the estate of the maker of their notes, whom they have the right to regard as the principal debtor. Neither the peitioner nor the general creditors have, or could acquire by subrogation, any beneficial right in the proceeds of the bark contract. They have only the right, through the petitioner, of resorting to the general assets of Kimball and Van Tassel for what the petitioner may have to pay upon the Van Tassel notes. Accordingly, the exceptions of the Atlantic National Bank to 'Morrison v. Kurtz, 15 111- 193 (1853) : Walker v. Covar, 2 S. Car. 16 (1879) ; Detroit S. B. v. Truesdail, 38 Mich. 430 (1878) ; Hudkins v. Ward, 30 W. Va. 204 (1887) ; Jenkins v. Smith, 21 N. Y. Misc. 750 (1897). 324 MARSHALING SECURITIES the master's report should be overruled, and a final decree entered instructing the petitioner to divide the assets in his hands, less his necessary expenses and the costs of the suit, ratably among the cred- itors of the Tanners Leather Company as these have been found by the master. So ordered. THE FIRST NATIONAL BANK OF ST. MARY'S v. W. H. TAYLOR. Supreme Court of Kansas, 1904. 69 Kansas, 28. This was an action by the First National Bank of St. Mary's to recover from W. H. Taylor and J. F. Taylor, commission merchants at Kansas City, the sum of six hundred and thirty-three dollars and nineteen cents, the proceeds of the sale of certain mortgaged cattle and hogs alleged to be in the hands of the Taylors to which the bank asserted a right, prom the facts as found by the trial court it appeared that on November 10, 1899, the Taylors advanced to one Joseph Read one thousand eight hundred and sixty-six dollars and ninety-two cents with which to purchase sixty-four head of steers, Reed giving a chattel mortgage, duly recorded, on the cattle and, further, agreeing as part of the consideration for the loan, that the cattle when fattened should be shipped to the Taylors for sale, who were to take out of the proceeds the money advanced as well as six hundred and forty-two dollars and fifty-seven cents, a prior indebt- edness of Reed to the Taylors. In March, 1900, Reed gave McGee, Zooks, Whitford & Co., another commission firm, a first mortgage, duly recorded, on thirty- two head of other cattle. On May 14, 1900, Reed gave the plaintiff bank a mortgage for two thousand three hundred and seventy dollars on all of the cattle covered by the Taylor and McGee mortgages, also on four cows, one hundred head of hogs, one hundred acres of growing corn, eight horses, one thousand five hundred bushels of corn in the crib, wagon, harness and farming implements located in Jackson County, Kansas, where the mortgage was recorded. A second mortgage for six hundred dollars was given to the bank covering practically the same property. About October 16, 1900, hogs and cattle covered by these mort- gages were shipped to the Taylors and sold for six thousand three hundred and nineteen dollars and thirty-three cents, which, by direc- tion of Reed, was distributed as follows : To the Taylors on their chattel mortgage $1944.70 To the Taylors on their verbal mortgage 642.57 To McGee & Co 1349.25 To Josiah Reed — Cash 10.00 FIRST NATIONAL BANK OF ST. MARY'S v. W. H. TAYLOR 325 To First National Bank of St. Mary's 2372.91 Total $6319.43 The bank had no actual knowledge of the Taylors' mortgage until Reed ordered this distribution. After the distribution there still remained due the bank six hundred and thirty-three dollars and nineteen cents. After the proceeds of the first shipment had been distributed the bank was informed by the Taylors, on October 25, 1900, that Reed still had on his farm the balance of the property covered by the bank's mortgage, amounting to about one thousand nine hundred dollars, and the Taylors requested the bank to pursue it and apply it to the balance of their claim, which the bank promised to do. A few days later hogs were shipped to Kansas City, and the proceeds of the sale, seven hundred dollars, deposited in the plaintiff bank with which to pay Reed's debts, but authority was given to Reed's daughter to use and control the same. The other property covered by the bank's mortgage remained in the possession of Reed and within reach of the plaintiff until December 1, 1900, but the bank, although its mortgage was due and it was entitled to possession, never made any effort to apply the property to its debt. Upon these facts the court below held that the plajntiff had no cause of action and entered judgment for the defendants. The plaintiff alleges error. 1 Johnston, C. J. : The principal question presented here is whether the facts in the case justified the decision of the trial court denying a recovery to the bank of the proceeds of mortgaged prop- erty which the Taylors applied to the satisfaction of their verbal mortgage. There was no substantial dispute as to the existence and validity of the several mortgages involved nor in regard to their relative positions as to seniority, except as to the unwritten mort- gage from Reed to the Taylors. Reed gave a first mortgage to the Taylors on sixty-four head of cattle to secure an indebtedness of one thousand eight hundred and sixty-six dollars and ninety-two cents. He gave to McGee, Zooks, Whitford & Co. a first mort- gage on thirty-two head of other cattle to secure a debt of one thousand three hundred and forty-nine dollars and twenty-five cents. Later he gave a mortgage to the bank to secure a debt of two thousand three hundred and seventy dollars, which covered the property previously mortgaged to the Taylors and to McGee, Zooks, Whitford & Co., on which it was a second mortgage, and it also covered a lot of horses, cows, hogs, farming implements and har- vested and growing corn, upon which it was a first mortgage. Sub- sequently, Reed gave another mortgage to the bank on substantially the same property that was covered by the one last mentioned, to secure an indebtedness of six hundred dollars. That the debts secured by both of the mortgages executed by Reed to the bank were 'The statement of facts is abridged. 326 MARSHALING SECURITIES bona fide was not questioned, nor could there be any doubt that the mortgages were valid and created liens which were superior to that claimed by the Taylors under the verbal mortgage. It was also con- ceded that when the stock was shipped to the Taylors they paid themselves the debt secured by both their written and verbal mort- gages, and only forwarded to the bank two thousand three hundred and seventy-two dollars and ninety-one cents, which left unpaid on the bank's indebtedness the sum of six hundred and thirty-tliree dollars and nineteen cents. There is a contention as to the status of the claim of the Taylors for six hundred and forty-two dollars and fifty-seven cents, and whether it was in any sense a lien on the sixty-four head of cattle. It was not in writing and had never been reduced to judgment. There was an agreement, however, that the cattle should stand as security for that debt. It was part of the consideration for the larger and later loan obtained to purchase the cattle, and the money was advanced by the Taylors to Reed upon the condition that the cattle, after being fed and. fattened by him, should be returned to the Taylors, who would then sell them and take out of the. proceeds of the sale the amount of the claim. Under this agreement they obtained an equitable lien on the cattle, which was certainly binding as between themselves and Reed, and under our decisions the con- tract constituted a verbal chattel mortgage as to the parties and those having actual notice of the contract, about the legality of which there can be no doubt; at least, after the possession of the cattle was delivered to the Taylors in pursuance of the contract. (Bates v. Wiggin, 37 Kan. 44, 14 Pac. 422, 1 Am. St. Rep. 234; Weil v. Ryus, 39 id. 564, 18 Pac. 524.) The court was, therefore, warranted in treating the oral agreement as a lien, binding upon the contracting parties, and one which could not be ignored by those having knowledge of its existence. In determining the rights of the parties the court was not only authorized, but also required to apply equitable principles. "The general rule enforced in equity is that, where one cred- itor is secured by mortgage on several pieces of property, while another creditor is secured by a junior mortgage on only a part of the property, the prior creditor, when chargeable with actual notice of the rights of the junior creditor, is bound to exhaust his security on the property not covered by the junior lien, and that he must account to the junior lien holder if he releases his security on, or pays over to the mortgagor, the proceeds of the property not covered, by the lien of the junior mortgagee, after actual notice of the junior lien." (Burnham v. Citizens' Bank, 55 Kan. 545, 551, 40 Pac. 912. See, also, M'Lean, Assignee, v. Lafayette Bank, 4 McLean [C. C] 430, Fed. Cas. No. 2889; Dunlap v. Dunseth, 81 Mo. App. 17; Aldrich v. Cooper, .8 Ves. 382; Turner v. Flenniken, .164 Pa. St. 469, 30 Atl. 486, 44 Am. St. Rep. 624; 2 Jones, Mortg':, Sec. 1628.) After the sale of the stock by the Taylors and the payment by them to the bank of two thousand three hundred and seventy-two dollars and ninety-one cents, it had full knowledge of the junior lien of the Taylors under their verbal mortgage. It was also well FIRST NATIONAL BANK OF ST. MARY'S v. W. H. TAYLOR 327 acquainted with the fact that there was abundant property covered by its mortgage alone to satisfy the balance of its debt. There remained at that time mortgaged property to the value of one thou- sand nine hundred dollars to secure a debt of only six hundred and thirty-three dollars and nineteen cents, which the junior mortgage did not cover. The attention of the bank was specially called by the Taylors to this unexhausted security, with the request it avail itself of that property to satisfy its debt. The bank then promised to look to that property or fund to discharge the balance due under its mortgage. If it had done as it agreed to do it would have found available property which in value was treble the amount of the mortgage debt. Again, some of the property mortgaged to the bank and not to the Taylors was shipped to market with the knowledge of the bank, and the proceeds of the sale were returned and deposited in the bank. It had notice of the character of the deposit and the source from which it was derived, and, although promptly advised by the Taylors to protect itself from this deposit, the fu*nds so placed in its hands were surrendered and paid out by it. The deposit was seven hundred dollars, which was more than sufficient to discharge its mortgage debt. Reed's purpose was to use this deposit for the payment of his debts, and, while he placed it to the credit of his daughter, there was nothing to show that she had any claim against him or any lien upon the property sold. The bank, therefore, had abundant opportunity to protect itself. It promised to do so, and the loss of the sum which was available to it alone was due to its wilful neglect. When the bank agreed with the holders of the junior lien to pursue the property covered by its mortgage alone, which was accessible and sufficient, and to apply the same on the balance of its debt, it in effect elected to rely only on that fund, and it would be inequitable now to allow it to change its position. This agreement, together with the surrender of the fund which was in its hands and which was not available to the junior creditor, constituted a waiver of any right to the security taken by the Taylors, and, under the general principles of equity, defeats a recovery from them. We think there was sufficient testimony to sustain the findings of fact made by the court, and the judgment which was entered on those findings should be affirmed. 2 All the justices concurring. "Accord: James v. Brown, 11 Mich. 25 (1862); Sexton v. Pickett, 24 Wis. 346 (1869) ; Shields v. Kimbrough, 64 Ala. 504 (1879) ; Turner v. Flenniken, 164 Pa. 469 (1894) ; First Nat. Bk. v. Simms, 49 W. Va. 442 (1001). 328 MARSHALING SECURITIES McILVAIN v. THE MUTUAL ASSURANCE COMPANY. Supreme Court of Pennsylvania, 1880. 93 Pennsylvania, 30. Error 1 to the Court of Common Pleas No. 3 of Philadelphia County. Of January Term, 1878. No. 248. Scire facias sur mortgage by the Mutual Assurance Company, assignee of the Pennsylvania Company for Insurances on Lives and Granting Annuities, against John Power, owner, and John Palmer, terre tenant. The pleas were payment with leave, etc., and specially that the amount claimed was not a just proportion of what ought to be levied of .the premises. The replication to the first pleas was non solvit and issue, and to the special plea a common traverse. J. G. Mcllvain, assignee for the benefit of creditors of John A. Palmer, was subsequently substituted as defendant. The mortgage upon which the scire facias issued was given on the 15th of July, 1874, by Power to the Pennsylvania Company, to secure the sum of ten thousand dollars, with interest, etc., upon premises southwest corner of Thirty-ninth and Locust Streets, one hundred feet front on Thirty-ninth Street by one hundred and twenty feet in depth. In the spring of 1875 the said Palmer entered into a written contract with Power, to erect a stone dwelling upon the lot thirty feet front on Thirty-ninth Street by one hundred and twenty feet in depth. Palmer made inquiry, and found the above- mentioned mortgage of ten thousand dollars upon the lot in the name of the Pennsylvania Company, and was advised by his con- veyancer that the mortgage covered the entire one hundred feet front on Thirty-ninth Street, and that he was safe. On the 20th of May, 1875, Palmer took possession of said thirty feet front on Thirty- ninth Street and commenced work under his contract. On Or about the 10th of November, 1875, the Mutual Assur- ance Company, plaintiffs, sent their representative to examine said premises, who went through the house, which was then in an unfin- ished condition, only having the rough coat of plaster on, and made his report to said company. The company then agreed to purchase said mortgage and release seventy feet front on said Thirty-ninth Street,' in two lots of thirty and forty feet respectively. The plain- tiffs, on the 9th of November, 1875, under the above mentioned agreement, took an assignment of said mortgage from the Penn- sylvania Company and recorded the same on the 12th of November, 1875 ; and on the same day released thirty feet front of said large lot by one hundred and twenty feet in depth from the lien of said mortgage. Palmer, upon hearing that the Mutual Assurance Company, had taken an assignment of said mortgage and released a portion of the mortgaged premises, notified the plaintiffs, in February, 1876, of his position and requested them not to release. The fact that such notice was given was denied by the company. McILVAIN v. THE MUTUAL ASSURANCE COMPANY 329 On the 17th of April, 1876, the company, plaintiffs, executed a second release for forty feet front of said lot by one hundred and twenty feet in depth, leaving but thirty feet front of said lot subject to the lien of said mortgage. Palmer subsequently filed his lien for building said house as per contract, had the premises sold by the sheriff in July, 1876, and for his own protection purchased the prop- erty. On the 25th of November, 1876, the plaintiffs brought this suit on the mortgage. Among the points presented at the trial by the plaintiffs were the following, all of which the court affirmed : 2. That unless Palmer, before the plaintiffs released any por- tion of the mortgaged premises from the lien of their mortgage, gave them distinct notice of his lien as contractor for the erection of the house at the corner of Thirty-ninth and Locust Streets, and cautioned them against such release, he has no defense to this action, and the plaintiffs are entitled to recover the full amount of the mortgage with arrears of interest and collection fee. 3. That there is no evidence that Palmer gave to the plaintiffs such notice, prior to their releasing the lot containing thirty feet front on Thirty-ninth Street, sold to Walker. If the jury, in weigh- ing the testimony, come to the conclusion that Palmer did, before the release to Power of the forty feet on Thirty-ninth Street, dated April 22, 1876, give the plaintiffs notice of his lien and request them not to release, then, in that case, the defendant is entitled to a deduction from the full amount of the mortgage only of the propor- tionate amount which the said forty feet lot ought to bear of the whole amount of this mortgage; in other words, the plaintiffs are entitled to recover the full amount of the mortgage debt with inter- est and collection fees, less the proportionate amount, which the said lot ought to bear. 4. That the occupation of the lot at the corner of Thirty-ninth and Locust Streets by Palmer, as contractor for the erection of the building thereon, and his being employed in such erection, was not such notice as required by law, and the plaintiffs are entitled to recover the full amount of the mortgage with interest and collection fee, notwithstanding such occupation and employment. They did not impose on the plaintiffs the duty of inquiry as to the existence of a lien in favor of Palmer. 5. That there is no evidence that the plaintiffs, by their action, deprived Palmer of an opportunity to give them further notice than his possession and the erection of a building. In the general charge, the court submitted a calculation made by the plaintiffs as to the proportionate amount due, if the jury should find that the plaintiffs had notice not to release the forty- foot front lot. This calculation simply deducted the proportionate value to the whole lot of forty feet front on the same from the whole amount of the mortgage debt. And after submitting this calcula- tion, the court charged : "If you find notice was given, you must find for plaintiffs the amount as per their calculation." The verdict was for the amount as thus ascertained by this 330 MARSHALING SECURITIES calculation, and after judgment thereon, the defendant took this writ and alleged that the court erred in affirming' the plaintiff's points and in the foregoing portion of the charge. 1 Sterrett, J.: Palmer, the assignor of the plaintiff in error, with actual as well as constructive notice of the mortgage previously given by Power to the Pennsylvania Company, contracted to erect a building on one of the mortgaged lots, and proceeded immediately to fulfill his contract. When the building was up and in process of completion, the mortgage was assigned to the defendant in error, who three days thereafter recorded the assignment, and released from the lien of the mortgage a lot thirty feet front, adjoining the one on which the new building was erected. This was done without any notice of knowledge of Palmer's contract or lien thereunder other than what might be inferred from a knowledge of the fact that the work of completing the building was then progressing. It was alleged by Palmer that about three months thereafter, on being informed of the release, he gave notice of his lien on the corner lot, and warned the Mutual Assurance Company not to release any part of the premises. This was denied by the company, but the verdict establishes the fact that the notice was given. Afterwards, in April, 1876, the company released another lot, forty feet front, adjoining the one first released. Palmer completed the building, filed his lien, and under proceedings thereon purchased the property at sheriff's sale, and as terre tenant defended against the scire facias in this case. The principal question is, whether the occupation of the lot by Palmer as contractor for erection of the building, coupled with the fact that he was actually at work completing the same when the mortgage was assigned and the first lot released, was such notice to the company of his lien as gave him an equitable right to insist on a reduction of the mortgage debt proportionate to the value of the lot so released. The court held that these facts were not notice, and did not impose on the company the duty of inquiring as to the exist- ence of a lien in favor of the contractor. In this case there was no error. While such facts would be sufficient to put a purchaser on inquiry they impose no such duty on a mortgagee. The maxim caveat emptor applies to the former, but not to the latter. The pur- chaser must satisfy himself that the vendor is seised in his own right of the interest he proposes to 'convey, for while the legal title may be in him, there may be an equity in another affecting it in his hands. Actual knowledge of its existence is not necessary to charge a purchaser with an outstanding equity. It is enough if he is cognizant of such facts and circumstances, indicating an equity in another, as would prompt a prudent man to inquiry ; and if inquiry thus becomes a duty and its performance be neglected, he is prop- erly held to have known such facts as it would have brought to light. But the owner of a mortgage or other real estate security, in assigning or releasing the same, is dealing with his own property, 'The arguments of counsel are omitted. McILVAIN v, THE MUTUAL ASSURANCE COMPANY 33* and has a right to do as he pleases, provided he does not violate the maxim, sic utere tuo ut alieno -non laedas. A mortgagee, for example, may at the request of the mortgagor, release part or the whole of the mortgaged premises without inquiring whether a junior incumbrance has intervened. It is the duty of the latter, if he intends to claim an equity through the prior incumbrance, to give the holder notice, so that he may act with his own understand- ingly ; and if he fails to do so the consequences of his neglect must be visited on himself. While the law makes it the duty of every man to so deal with his own as not to injure another unnecessarily; it imposes on the latter a greater obligation to take care of his own property than it does on a stranger to take care of it for him. To hold otherwise, would compel the senior incumbrancer to do for the holder of the junior security what in equity and good conscience he ought to do for himself. The doctrine is one of equity juris- prudence, and not of positive law, and hence to affect the conscience of the former he should have actual and not merely constructive notice of the equity claimed by the latter. Taylor's Exit's v. Maris, S Rawle 51; James v. Brown et al., n Mich. 25; Ward's Exr's v. Hague, 25 N. J. Eq. 379, and Cheesebrough v. Millard, 1 Johns. Ch. 409. The case first cited decides that the owner of a judgment lien on lands, a portion of which is covered by a subsequent mortgage, does not, by releasing part of the land, impair his right to be paid out of the remainder, including the portion embraced in the mort- gage, unless, prior to the release, the mortgagee has distinctly noti- fid him of his mortgage, and cautioned him against doing any act by which his security might be impaired, and that the record of the mortgage is not such notice. In that case, Mr. Justice Sergeant said: "It was the duty of the defendant, if she meant to gain an equity, to notify the plaintiff distinctly of her position, and caution him not to do ah act by which her security might be diminished." The same general doctrine is ably maintained in Ward v. Hague, supra, in which it was held that the mere fact of the building being in progress, and so known to the holder of a prior mortgage when he released part of the premises, was insufficient to entitle the holder of a building lien to demand a reduction of the mortgage security. The chancellor, in his opinion, said : "Whether the lien claimant in such a case as this would be entitled to the equity here set up must depend on something more than the mere fact that when the release was made the building was in progress and the releasing creditor knew it." The ground of the equity referred to is so familiar that it is unnecessary to do more than refer to the cases above cited. 2 It is contended that the company, by releasing the lot contem- poraneously with the recording of the assignment, deprived Palmer of the opportunity of giving any other notice than that afforded by 2 See also, Guion v. Knapp, 6 Paige Ch. N. Y. 35 (1836), s. c„ 29 Amer. Dec. 741, 'note; McLean v. Bank, 4 McLean, 430 (1848) ; Blair v. Ward, 10 N. J. Eq. 119 (1854) ; Clark v. Bancroft, 13 la. 320 (1862) ; George v. Wood 91 Mass. 80 (1864) ; Trust Co. v. Thaw, 16 Grant's Ch., Canada, 446 (1869') Matteson v. Thomas, 41 111. no (1866) ; Turner v. Flinn, 67 Ala. 529 (1880) 332 , RECEIVERS the occupancy and unfinished condition of the building. In the absence of actual notice the mortgagee was not bound, as we have seen, to wait and inquire whether there was a junior liefi that might be prejudiced by the release. When Palmer contracted to put up the building he had actual as well as constructive notice of the mort- gage, and if he intended to affect the mortgagee with an equity in favor of himself, it was his duty to notify him not to release. If he had done so the equity thus asserted might perhaps have followed the mortgage in the hands of the assignee. But, while Palmer acquired no equity by reason of the release of the first lot, the jury has found that it was otherwise as to the second lot; that the assignee of the mortgage had notice of his lien on the corner lot, and was warned not to release to his prejudice. It is, contended, in view of the facts so found, that the mortgage debt should be reduced in the proportion of the value of the forty feet front released to that of the seventy feet then bound by the mortgage, and not to that of the one hundred feet front originally bound thereby ; and that an erroneous basis of calculation was sanc- tioned by the court. The first lot, as we have seen, was released without previous notice of Palmer's lien. This left the remaining seventy feet front bound by the mortgage, and thus the matter stood when notice not to release was given by him. So far as the mortgage security was then concerned it was precisely the same, in effect, as if it had been originally taken on the seventy instead of one hundred feet front. The assignee of the mortgage, in disregard of the notice, released forty feet or four-sevenths of the land covered by the mortgage. Assuming the land to be of uniform value per foot front, Palmer acquired an equity to claim a reduction of four-sevenths instead of four-tenths of the mortgage debt. There appears to be no error except in the basis of calcula- tion submitted to the jury, and the fifth assignment alone is sustained. Judgment reversed and a venire facias de novo awarded. CHAPTER VIII. RECEIVERS. MIDDLETON v. DODSWELL. In Chancery Before Lord Erskine, 1806. 13 Ves. Jr., 266. A motion was made, before answer, for a receiver; upon affi- Annan v. Hays, 85 Md. 505 (1807) ; Ocobock v. Baker, 52 Neb. 447' (1897) ; Hardy v. Beverly St. Bk., 175 Mass. 112 (1900); Hart v. Anderson, 198 Pa. 558 (1901). While accepting the general principle the cases are not in accord as to what should constitute notice to the senior creditor. The most common requirement is either actual notice given by the junior creditor, or such circumstances must exist as will make it the duty of the senior creditor to make inquiries. MIDDLETON v. DODSWELL 333 davit, by the son of the testator, one of the residuary legatees; stating that one of three executors and devisees in trust had let, part of the trust premises to the Barrack Board at Hull, in his own name only; reserving a rent of £480 to himself alone; that large sums had been received by him, and were not laid out upon the trusts of the will, viz., in real securities, or the public funds; that a bond had been take in the names of two of the executors only for the produce of the sale of some shares in ships; and that the prop- erty in his hands is in danger of being lost or misapplied. Mr. Leach, in support of the motion. Mr. Wingfield, for the two other executors, consented to the motion. Mr. Heald, for the executor, who resisted the motion: In the instance of an administrator, the court does upon a very slight case appoint a receiver. But an executor is a person fixed upon by the testator. In Jacob v. Hall, a very strong case of misapplication by an executor, Lord Eldon refused a receiver, unless they could state some fact showing that the executor was utterly insolvent. The mere omission by an executor to lay out the property for a year or two is not a ground for appointing a receiver. No fact is stated showing that the property is in danger. In a late case at the rolls an executor had expended above £5000 upon the funeral; and the other executors declined to interfere ; the master of the rolls refused a receiver. In another late case, upon strong facts of misapplication and misconduct by an executor in the mode of sale, Lord Eldon would not grant such an application; requiring a positive affidavit; of insolvency. Mr. Leach, in reply, having observed that there was no dis- tinction between the affidavit, stating that the fund in the hands of this executor is in danger of being lost, and an affidavit of insolvency, that the cases referred to must have some further ground, and in the case at the rolls there was evidence of a direction by the testator to the executor, to bury him in the same manner as his daughter had been buried, was stopped by the court. The Lord Chancellor: I shall grant this motion. In the case of Dyot v. Morgan, in which I this morning refused a similar application, I stated my view of this subject ; that it is for the testa- tor, not the court, to say in whom the trust for administration of the effects shall be reposed ; and, though a suit may be instituted by a party having an interest in the effects, it does not follow that the trust created by the testator is to be set aside. But this court does exercise a concurrent jurisdiction with the spiritual court, upon the principle that executors and administrators are trustees, and in that character come under the control of this court by its ordinary jurisdiction. The administration is therefore not upon slight grounds to be taken from an executor. In the case I have mentioned the testator directed his executor to pay over the rents and profits of his estate to his wife for life, and after her death to his children. Part of the estate consisted of leasehold houses ; one of which the execufor had let to a painter (the same trade which the testator had carried on) for fourteen years; stating, by his answer, that he 334 RECEIVERS intended to let the other premises. Why should he not ? He was trusted by the testator, and was the hand to receive ana make tne payments for the benefit of the widow and children, and the provi- dence of management was confided to his care. But if a manifest abuse of the trust, by wasting the property., appears, which does appear in this instance, not from a single act, but an habitual and prospective course of dealing, bringing the property into danger, can it be said that this court is not to treat an executor as every other trustee ; and an executor may say that, unless he is proved to be insolvent, the court is to overlook the misapplica- tion and refuse a receiver ? To the proposition, thus nakedly stated, the answer is obvious. Lord Eldon's decision must have been the same that I shall make ; that, to induce the court to interfere, espe- cially before answer, a strong, special ground must be made. It is true, the time is not come at which he is bound to put in an answer ; but he appears by counsel, and comments upon the affidavit, though he makes no affidavit himself. Yet, if it rested there, I should not grant the motion. I ground the order upon this : that there is what, may be considered, though, perhaps, not the strongest way of expressing it, an affidavit that the property is in danger from insolvency, existed or suspected, by which only it can be in danger. -Another ground is that the testator did not trust this executor alone but in conjunction with two other -persons, who are also executors and devisees in trust. Their consent gives great strength to the application. Agreeing, therefore, that the administration is not to be taken from an executor upon slight grounds, I must in this case make the order for a receiver. 1 WILLIAMSON v. WILSON. High Court of Chancery of Maryland, 1826. I .Bland. Ch., 418. By this bill, filed on the 3d of April, 1826, it is stated that the plaintiff, Charles A. Williamson, and the defendants, John B. Wilson and John N. Woodard, had formed a partnership, as commission ^Havers v. Havers, Barnard Ch. 22 (1740); Taylor v. Allen, 2 Atk. 213 (1741); Anonymous, 12 Ves. 4 (1806); Barkley v. Lord Reay, 2 Hare 306 (1843) ; Evans v. Coventry, 5 DeG., M. & G. 911 (1854) ; In re Fowler, L. R. 16 Ch.D. 723 ( 1881 ) ; Jenkins v. Jenkins, 1 Paige Ch. N. Y. 243 (1828); Dougherty v. McDougald, 10 Ga. 121 (1851); Ex parte Walker, 25 Ala. 81 (1854) ; Price v. Price, 23 N. J. Eq. 428 (1873) ; State v. Wilmer, 65 Md. 178 (1885) ; Farley v. Stockwell, 2 Pa. D. R. 197 (1892) ; 93 111. App. 309 (1900); 4 Pomeroy's Eq. Jurisp. (3d Ed.), Sec. 1330; 2 Story's Equity (13th Ed.), Sec. 829; Bispham's Equity (9th Ed.), Sec. 576; High on Re- ceivers ; Kerr on Receivers. A receiver may be appointed for the preservation of the estate in bank- ruptcy proceedings under the U. S. Bankruptcy Act of 1898, Sec. 2, CI. 3. Boonville Bank v. Blakey, 107 Fed. 891 (1901). WILLIAMSON v. WILSON 33s merchants and auctioneers, in the city of Baltimore, on the 7th of April, 1824, for the term of three years from that date, by the name of Wilson, Williamson & Company; that they gave bond, with David Williamson their surety, to the city as auctioneers; that the business of the partnership was carried on accordingly until the 4th of January, 1826, when the firm became insolvent and stopped payment; that the defendants have since held and retained in their possession exclusively all the goods, effects, books, papers, the vouchers of the firm, and are collecting the debts due and wasting and misapplying the property of the partnership, to the ruin of the plaintiff, and to the prejudice of the creditors of the firm. Upon which the plaintiff prayed for an injunction to restrain the defend- ants from collecting the debts, and that a receiver might be appointed to collect them and to take charge of and preserve the goods, debts and effects of the firm for the benefit of all concerned. The bill was sworn to*by the plaintiff in the usual form. On the same day the bill was filed it was submitted to the chan- cellor, upon which it was ordered that David Williamson, Jr., be appointed receiver, and that an injunction be granted as prayed. But leave was granted to the defendants to move for rescinding the order, and the dissolution of the injunction either before or after filing their answers on giving five days' notice of such motion ; and the register was directed to annex a copy of the order to the writ of injunction. On the 12th of the same month the defendants, having filed their answers, gave notice to the plaintiff that they should, on the 14th instant, move, as allowed by the order of the 3d instant. All the material admissions and allegations of the answer are sufficiently set forth by> the chancellor in his view of the case. On the same day, and together with the answer of the defendants, I. & J. Pogue and others, as creditors of the firm, filed their petition objecting to D. Williamson, Jr., being considered as a receiver, and recom- mending Jacob Schley to be appointed in his stead for the benefit of the creditors of the partnership. And, on the next day, the plaintiff filed exceptions to the answer of the defendants, and David William- son, as another creditor of the firm, insisted by his petition on the receiver being continued. 1 24th April, 1826. Bland, Chancellor: This case standing ready for hearing on the motion to rescind the order appointing a receiver, the counsel on both sides were heard, and the proceedings read and considered. There have been, of late, many applications to this court for the appointment of a receiver. The power of making such an appointment, by some, has been contemplated as, at least, a new exhibition of the jurisdiction of this court. It seems to have been considered in the argument as one of an unsettled and questionable 1 Only so much of the case as relates to the appointment of the re- ceiver is printed. Subsequent proceedings are omitted. 336 RECEIVERS nature. That it is a power which has not, until of late, been very frequently resorted to may be admitted, but there can be no doubt of its being an authority properly belonging to this court. In an order, passed about twenty years ago, the then chancellor speaks of the power as one which rightfully belonged to- the court, and respecting which there was then no question whatever. 2 It is a power of the court of chancery of England, which appears to have been very frequently called into action during more than a century past. All the leading principles in relation to it were well established there, long before our revolution; and it was then, : and has ever since been considered, there and here, as a power of as great utility as any which belongs to a court of chanoery. And that it is so will appear very evident from a review of the nature and the variety of the exigencies in which it has been called into action, either to prevent fraud, to save the subject of litigation from material injury or to rescue it from inevitable destruction. Much the greater number of the English reported cases, con- cerning receivers, relate to real estates, and most frequently are such as have arisen between mortgagors and mortgagees. In almost all of them the office and duty of the receiver have been extended no further than to exclude trespassers, to make such repairs as are indispensably necessary and to collect and account for the rents and profits. But where the preservation of personal property has beert the object, the receiver has been, in many respects, invested with the authority of a curator bonis of the Roman law. He has been directed to take into his possession all the moveables, and if any were of a perishable nature, to sell them. He has been directed to collect and sometimes to pay debts. Where there has been a breach of duty by a partner, a receiver has been appointed and charged with the winding up of an unsettled commercial concern. 3 And in all cases he has been held bound to render a strict account of his stewardship. A receiver is an officer of the court. He is considered as truly and properly the hand of the court; but his appointment determines no right, nor does it affect the title to the property in any way; it will not even prevent the running of the Statute of Limitations. The holding of the receiver is the holding of the court for him from whom the possession was taken; therefore, should any loss happen it must be borne by him from whom the property was taken, not by the party at whose instance the receiver was appointed. (Pow. Mort. 294, note; 2 Mad. Chan. 233.) But it has been argued that a measure so prompt and vigorous as that which has been adopted upon the present occasion may be applied to the most pernicious purposes; that it is open to the greatest abuse, and that the consequences of such a procedure among ' The Warf Case, 3 Bland. Ch. 361 (1806). * Peacock v. Peacock, 16 Ves. 49 ( 1809) ; Harding v. Glover, 18 Ves. 281. (1810). WILLIAMSON v. WILSON ' 337 commercial people may become most mischievous and irreparably ruinous in its operation. I have meditated upon what has been urged in this respect. That this court should have the power in unusual and pressing emgergencies, at the instance of a party interested, effectually and without delay to put its hand upon property, so far as to prevent waste, inextricable confusion or total destruction, seems to be admitted by all to be clearly right, or at least highly beneficial. The apprehension of abuse from such a power, when exercised by means of a receiver, seems to have arisen from a contemplation of the circumstances of this case. These parties were merchants, who had been extensively engaged in trade in the great emporium of our state. And any merchant, it has been said, by means of this power of the court of chancery, may have his counting house closed, his trade broken up and his commercial reputation utterly blasted at a single blow by a malignant application for the appointment of a receiver, founded on a statement of facts altogether fabricated and false. There is one general answer that may be given to this assertion, which is, that the plainest, most temperate and best guarded forms of judicial proceedings known to the common law have been abused and made the instruments of malice. Of which the multitude and variety of the reported examples, in actions for malicious prosecu- tions and arrests, afford too strong proof; and, even in this very case, the defendants, by their answer, desire it to be recollected, that the welt guarded common law process of replevin has been wantonly and grossly perverted and abused to their great wrong and injury. But upon the present occasion, since these applications have of late become more frequent, it may be well to consider this matter more particularly. A receiver is never appointed before answer, but upon very strong special ground supported by affidavit ; * for, as is the practice in this state, on a bill sworn to by the complainant, or, in case of his not being in this state, by some one conusant of the facts stated. A motion to rescind an appointment is always heard on a short notice, and a receiver is in no sense permitted to take charge of the property without having first given bond with approved surety. So far then this chancery power is at least as little susceptible of abuse as the process of replevin, as is shown by the example furnished by the defendants' answer. But this is not all; there are other safeguards against the abuse of this power. The court always reluctantly inter- feres against the legal title, only in a case of fraud clearly proved, and of imminent danger ; and a receiver will not be appointed wher the matter in dispute depends on the legal title, unless strong grounds are shown, and the rents and profits are in imminent danger. 5 'Duckworth V: t Trafford, 18 Ves. 283 (1810). 'Lloyd v. Passingham, 16 Ves. 59 (1809); Norway v. Rowe, 19 Ves. 148, note (1812) ; Maguire v. Allen, 1 Ball & Beat. 75 (1809). 338 RECEIVERS Where a plaintiff is permitted to come into a court of chancery in behalf of himself and other creditors, or may sue here because of the equitable nature of his claim, and in respect of a fund in the hands of the defendant, out of which he has a right to ask payment, he may, under certain circumstances, have a receiver put upon the property or assets liable to his claim. But under no other circum- stances does it appear that the estate of a debtor may be put into the hands of a receiver at the instance of a creditor. In most cases the application is founded upon the fact that waste or peril has assailed or does then immediately threaten the property in question. But there are cases in which it may become necessary to interpose for the purpose of keeping the profits of an estate in litigation apart from those arising from another which is not .the subject of contro- versy, on the ground that they are likely to become so inextricably mingled as to render it extremely difficult or impossible to make a correct estimate of those of the litigated estate after the right to it shall have been regularly determined. In such cases the court will appoint a receiver of the rents and profits of the litigated property. As where certain wharves were claimed by the plaintiff in opposi- tion to the city of Baltimore, a receiver was directed to' collect the wharfage of those wharves, the right to which had been made the subject of litigation, and keep it separate from that collected for the use of other wharves under the authority of the city. 6 This, however, is not the case of a third person attempting to stop the course of a firm, or of any one then actually engaged in trade ; but is the case of a partnership where one of the partners has averred that their trading has ceased, and that the firm is utterly insolvent, and thereupon asks for the appointment of a receiver as the only means of saving him and their creditors from the fraudu- lent practices of his copartners. Now, in cases of partnership, it must strike every one that to whatever extent of malignancy of fraud a partner might be urged or tempted to go in a condition ot actual insolvency; yet, under other circumstances, his own interest would withhold him from attempting to have this power of the court of chancery applied to an unjust and pernicious purpose; for it is rare that a man coolly indulges his malice to the ruin of his own interests. And, therefore, it cannot often happen that a partner will deliberately abandon a gainful and prosperous traffic in which he is in the undisturbed participation and maliciously endeavor to break it up by fabricating such a statement as will induce the chan- cellor to order the joint funds into the hands of a receiver. (Gow. Partner 244.) But suppose a partner in a prosperous and lucrative concern to be actuated by such malignant feelings ; how far could he carry the abuse of this power, and to what extent, by its means, could he injure his antagonist? The appointment of a receiver does not, of itself, divest any one of possession; it merely authorizes the receiver ' The Warf Case, supra. WILLIAMSON v. WILSON 339 to demand and to accept the possession when voluntarily delivered or to take it when held by no one else. For, if the holder of the property refuses to deliver it, the receiver or party interested must apply to the court for an order to deliver possession, or to show cause to the contrary. In all cases, where the order making the appointment has been made ex parte, and before answer, the defend- ant is allowed to come in at an early day and move to have the order rescinded. And, as regards third persons, who may have an interest in property thus ordered to be taken possession of by a receiver, they too are allowed, in a summary way on notice of motion, to come in and be examined pro inter esse suo. (2 Mad. Chan. 245.) Upon the whole, from whatever point of view this chancery, power may be contemplated, or in relation to whatever of the various emergencies to which it has been applied, it may be considered, it will be found in all respects as safe, and as little liable to abuse as any judicial procedure known to the common law. It will be found in practice that little or no useless pressure can be produced in any case, and that, in no instance, can the mischief continue long before the party aggrieved may have an opportunity of being fully heard and of obtaining complete relief. This bill has been filed by one partner against his copartners, charging them with a design to consume and waste the joint prop- erty, or to apply it to their own use, and it avers that the firm, is absolutely insolvent. The answer denies these charges of the bill, but admits the insolvency of the firm, and then charges the plaintiff with a design so to apply the joint funds as to give an undue and improper preference to one or more of their creditors. These parties have, in many respects, given an opposite and very different account of the state of affairs between them. They both, however, admit) the present insolvency of the firm, and agree that according to the stipulations of their contract of copartnership the term of its dura- tion has not yet expired. It seems to be admitted, where a specified period of time is limited for the continuance of a partnership, that neither party can, at his option alone, dissolve the connection. But, although such a partnership cannot be terminated at the pleasure of either party, yet where, as in this instance, there is no express stipulation to the contrary, the partnership is virtually dissolved by the death of either of the parties. And it is said that in England the bankruptcy of one partner operates, like death, as a virtual dissolution of the firm. In point of principle, and so far as relates to the matter now under consideration, there can be no difference between a bankruptcy according to the English law and an actual insolvency in fact accord- ing to our law. So long as a man carries on his business, and has a prospect of gain, he is not considered as insolvent; but if, in addi- tion to such deficiency of property, his business so far declines as to leave him no prospect of paying his debts, he is then, according to the universal sense of mankind, insolvent. Whether he is declared to be in this condition according to the technical process of the 340 RECEIVERS English bankrupt law, or is admitted to be so in fact, the effect upon the contract of copartnership must be the same. The insolvency is the total destruction of the pecuniary capacity of the partner to fulfill his contract of copartnership. But his pecuniary capacity was the basis on which it rested. The contract itself, therefore, must be considered as effectually annulled, as if the party were dead. If both of them be insolvent or dead, there is no efficient or living capacity left to execute the contract ; if one only be dead or insolvent, the terms of it cannot be complied with ; and where personal confi- dence was the principal inducement for making the agreement, as in contracts of this nature, it would be unreasonable; and, therefore, the other party shall not have the executor, administrator, trustee or assignee of the deceased, or of the insolvent, intruded upon him. Consequently, the partnership between these parties must be. consid- ered as having been virtually and effectually terminated by their insolvency. It can be extended over no new transactions nor be allowed to expand itself any more. It must be wound up and brought to a close; and, except for such purposes, must be deemed to have totally ceased to exist. 7 While a man continues solvent, the order in which he pays his creditors is a matter of indifference, since none can suffer ; and, therefore, no one creditor has a right to complain of the preference given to another. But so soon as he becomes insolvent, that privi- lege ceases, and equity requires that he should make an equal dis- tribution of his effects among them all. The giving of an undue and improper preference, under such circumstances, is denounced by the express provisions of our insolvent laws, as a fraud. And in all cases, where a court of chancery can be called on, and does interpose for the purpose of administering the assets of an insolvent debtor, it is governed by the rule of equality, because equality is equity. The assets, if insufficient to pay all, are always distributed proportionately. But, although this is the duty of an insolvent debtor, and is what a court of chancery will do for him in all cases, where his effects can be subjected to its control; yet if a creditor can fairly and legally obtain full payment from his insolvent debtor, equity will not deprive him of his legal advantage and compel him to refund. These parties admit themselves to be insolvent debtors. The plaintiff charges his copartners, the defendants, with a design to waste the joint property, and to apply it to their own use. The defendants deny these allegations, and charge the plaintiff with a design to misapply the funds, and to give to some of the creditors an undue preference. Taking the charges of the plaintiff and of the defendants or of either party to be true, or allow that each or either party was about to waste the property, or has his favorite creditors to whom it is his design to give an undue preference, and V *£* parte Williams, n Ves. 5 (1805) ; Harding v. Glover, 18 Ves. 281 fi8io): Uulliamy v. Noble, 3 Meriv. 614 (1809); Crawshay v. Maule, 1 Swan. 506 (1818). WILLIAMSON v. WILSON 341 it is clear that one or the other or both of them have formed a fixed resolution to violate one of the greatest principles of equity, which it is the peculiar province of tfais court to prevent. None of the creditors of these insolvent debtors, so far as it appears, have, as yet, obtained any legal advantage. It is proper, therefore, that this court should now lay its hands upon the joint property of this partnership, and let all the creditors come in pari passu, and according as., their respective priorities, if any, should appear. Both parties profess to have had this equitable distribution in contemplation; both ackowl- edge themselves to be in that insolvent condition in which the making of such an equitable distribution has devolved upon them as a duty. And yet each charges the other with having made an effort and formed a fixed design to disregard this duty. Neither of them seems to have the least confidence in the other. Under all these circum- stances, I consider this as a case in which it is peculiarly fit and proper that a receivet should have been appointed before answer, and should now be continued, as a means of winding up the affairs of. this partnership in safety, and with justice and equality to all concerned. 8 It follows as a necessary consequence of appointing a receiver before answer that the selection of the person to be appointed must be made by the chancellor on the ex parte recommendation of the party applying for the appointment. In England, 9 the selection of a suitable person is, most commonly, referred to a master, by whom both parties may be heard; but here that duty must be performed by the chancellor himself. And in this case the selection of a suit- able person, as well as every other matter in relation, to the applica- tion for the appointment of a receiver, is now as entirely open' for consideration as if nothing had been previously done. The appoint- ment that has been made may be rescinded; the continuance of a receiver may be 'altogether refused, or the appointment may be now made more suitable to the circumstances of the case. The recommendations of those most interested, and who are most likely to sustain injury without an appointment of a receiver, have generally been most regarded. 10 The being a near relation of either party is not in itself an absolute disqualification, but it must be allowed to have its weight when connected with other circum- stances. In this case I am of opinion that the present receiver, David "See further, West v. Chasten, 12 Fla. 315 (1868); Slemmer's Appeal, 58 Pa. 168 (1868) ; Pini v. Roncoroni (1892), t Ch. 633; Conover v. Tansey, 73 N. J. Eq. 562 (1907) ; Miller v. Miller, 80 N. J. Eq. 47 (1912) ; Baker v. Bohnert, 158 Wif. 337 (1914) ; Bacon v. Engstrom, 129 Minn. 229 (1915). * For modern practice, see Rules of Supreme Court of Judicature, Order 50, Rules 15 and 16. "Fripp v. Chard Ry. Co., 11 Hare 241 (1853) ; Wright v. Vernon, 3 Drew. 112 (1855); Baker v. Backus. 32 111. 70 (1863); Reynolds v. Austin, 4 Del. Ch. 24 (1867) ; In re Lloyd, L. R. 12 Ch. D. 447' (1879) ; Etowah M. Co. v. Wills M. Co., 104 Ala. 492 (1894) ; Coy v. Title Guarantee & T. Co., 157 Fed. 794 (1907). 342. RECEIVERS Williamson, Jr., ought to be removed. Jealousies have been excited against him. He is the brother of one of the parties, and the son of one who claims to be a large creditor of the firm. He is admitted by the plaintiff to have taken an active part in this controversy as his agent and friend. And he is charged by the defendants with having been active by undue means to their great prejudice. His feelings and affections appear to have become too much enlisted to permit him to be as unbiased and impartial as a receiver ought Lo be in winding up the partnership affairs of these insolvent debtors. Jacob Schley has been recommended by some of the creditors, or those who allege that they are creditors of the firm, and the counsel of these litigating parties admit him to be in all respects capable and fit; I shall therefore appoint him. This receiver will, as usual, be at present invested with no other authority than to receive and take care of the effects of these insolvents; but any further authority and directions that may be necessary will be given when applied for and as circumstances may suggest and require. The compensation of the receiver removed and of the one now appointed will be determined on a representation of their trouble, skill and merits, as to which the parties will be heard. From what has been said the reasons for continuing the injunc- tion must be sufficiently qvident. It is, in this case, a suitable auxiliary to the appointment of a receiver; and therefore will be allowed to operate until the hearing or further, order. SCHLECHT'S APPEAL. Supreme Court of Pennsylvania, 1869. 60 Pennsylvania, 172. Appeal from the decree of the Court of Common Pleas of Philadelphia. In Equity. No. 23, to January Term, 1869. This was a bill filed December 7, 1867, by John Q. A. Schlecht and William F. Schlecht and such other of the children of John M. Schlecht, deceased, as shall come into the suit, against George W. Schlecht and William P. Schlecht. The bill alleged: 1. That John M. Schlecht died on the 22d of December, 1859, leaving a widow, Elizabeth, and seven children, viz., John Q. A. Schlecht, one of the plaintiffs ; Benjamin F. Schlecht (since deceased, leaving a widow and minor child, W. F. Schlecht, the other plaintiff) ; Elizabeth Clark, Mary Ann Schlecht, Charles Schlecht and the defendants. 2. That the decedent died seised of a number. of houses, amongst which was a house No. 430 Girard Avenue. 3. That an alleged will of the decedent was presented for probate to the register December 27, 1869, and being contested, an issue was directed to the court of common pleas to try the validity of such will, and the issue is still pending. 4. That notwithstanding the pendency of the issue, G. W. Schlecht and William P. Schlecht, SCHLECHT'S APPEAL 343 the defendants claiming to act under letters testamentary, proceeded to collect the rents of the houses of the decedent until November 30; 1867, when they were dismissed from their trusts by the orphans' court. 5. That W. P. Schlecht, after such dismissal, demanded and received the rent of the house No. 430 Girard Avenue, and has demanded rents from tenants of other houses of the decedent. 6. That Charles Schlect, alleging that the decedent died intestate, has commenced actions of ejectment for the real estate of the decedent. 7. That the plaintiffs are entitled to a portion of the rents of real estate of the decedent, and there is no one authorized to collect them, and they fear that the defendants will continue to demand and receive the rents as heretofore, which is contrary to equity. The plaintiffs prayed for a receiver to take possession of the said real estate, pay the rents to the parties entitled to the same and take charge of the real estate until the further order of the court, and that the defendants be» restrained from collecting, etc., the rents, or in any way intermeddling, etc., with the said real estate. An injunction was granted and a receiver appointed. The defendants afterwards filed an answer, in which they admitted that the decedent left six children, but were ignorant as to the seventh; they admitted the second paragraph of the bill; they admitted the allegations of the third paragraph, and that the will of the decedent was admitted to probate, and letters testamentary granted to them ; they averred that by the will of the decedent a large portion of the real estate of the decedent, specifying it and including No. 430 Girard Avenue, was' devised to them; that the devises are subject to the dower of the decedent's widow, who is a lunatic, and by her committee has elected to take against the will. They admitted that they were dismissed as executors; that they had collected rents as devisees and not as executors; they admitted the sixth paragraph of the bill. They denied that the plaintiff had any interest in the> premises devised to the defendants unless it be decided that the decedent died intestate, and that until then their title is indefeasible in a collateral proceeding; that the bill is defective in not making the devisees under the will and the committee of the widow parties. They attached to their answer the will of the decedent by which he devised his real estate (part of it subject to the interest of his wife) to G. W. Schlecht, William P. Schlecht, Mary Ann Schlecht and John Q. A. Schlecht. The defendants on the filing of their answer moved to dissolve the injunction and vacate the appointment of the receiver. The motion was overruled and the defendants appealed to the supreme court. They assigned for error the granting the injunction and con- tinuing the decree after the filing of the answer. 1 Sharswood, J.: This is an appeal from an interlocutory order or decree granting a special injunction under the Act of Assembly of February 14, 1866, Pamph. L. 28. 'The arguments of counsel are, omitted. 344 RECEIVERS The plaintiffs are two of the children of John M. Schlecht, who file this bill on behalf of themselves and the other heirs at law against the defendants, two other children. The defendants are specific devisees under a will of their father, which has been admitted to probate by the register, but from his decree there is an appeal pend- ing in the register's court. The bill also avers that another child, not one of the plaintiffs, has instituted actions of ejectment for the several pieces of property devised by the will for the purpose of contesting it ■ and that the defendants, claiming as executors, pro- ceeded to collect the rents, but have since been dismissed from their offices by the orphans' court. It also alleges that one of the defend- ants, since his dismissal, demanded and received the rent from one of the tenants occupying No. 430 Girard Avenue, which it appears from the will, a copy of which is annexed, was devised to him specifically; and as there is no one authorized to receive the rents, it prays for an injunction and receiver. The bill was filed Decem- ber 7, 1867, and on December 18th an injunction was granted and a receiver appointed. We have no copies pi any affidavits or testi- mony taken on the motion, which is usual on such applications: Eden 231, Newland 218, and which certainly ought to be filed and accompany the record on an appeal, for the Act of Assembly evi- dently intends that this court shall rehear and decide the case on the merits. On the 4th of March, 1868, the answers of the defend- ants came in, denying what seems to be the only possible equity of the bill, to wit, that they claimed to collect any of the rents as execu- tors, but admitting that they did claim the rents of the property specifically devised to them, and of which they were in possession when the injunction was granted. On the same day a motion was made to dissolve the injunction and vacate the appointment of receiver, and on March 19, 1868, the motion was overruled. It is impossible to sustain this proceeding in any aspect of the case. Dismissing the consideration of all formal objections, the bill discloses no equity to give the court jurisdiction. The defend- ants under the will and probate had a prima facie legal right to the lands which were specifically devised to them, and of which they were in possession ; but even if they had not, if they were in posses- sion without color of title, that adverse legal claimants should come into a court of equity and obtain an injunction, preliminary or final, to turn them out of possession, is a proceeding entirely unprece- dented. The plaintiffs have a full and adequate remedy at law. They can recover possession by an action of ejectment, and the mesne profits either in that action or a separate action of trespass. No authority has been adduced in support of such an arbitrary and unreasonable power in any court summarily to turn any man out of his house or farm and appoint a receiver to collect the rents. An injunction and receiver are resorted to in any case only to preserve property in statu quo pending a contest. For any waste the law has provided a remedy by estrepement, or an injunction may be obtained if preferred, but anything like an averment of waste is not to be found in this bill. In Carron v. Ferrier, 18 Law Times W. K. F. VILA et al. v. GRAND IS. ELEC. ICE & C. ST. CO. et al. 345 Rep. N. S. 806, it was decided that where a mere legal right is in dispute, there being no privity between the different claimants, no receiver will be appointed; and in Talbot v. Hope Scott, 4 Kay & Johns. Ch. Rep. 96, it was held to be too clear for any contention that in the absence of fraud, and when there is no privity between the parties, the court will not interfere at the instance of a pefson claiming real property under a legal title, to grant a receiver against parties in possession. "No one has ever dreamt," says the Vice Chancellor Wood in that case, "of approaching this court, however heavy the litigation between the parties, for the purpose or oDtaming a receiver until he had established his right at law to possession of the whole. The court cannot interfere with a legal title of any description unless there be some equity by which it can affect the conscience of the defendant." 2 It is contended that under the Act of Assembly we can only reverse the decree for an injunction, and cannot interfere with the order for the appointment of a receiver. But it is too clear for argument that the decree is a unit — the appointment of the receiver but ancillary of the injunction. Indeed, the order for the receiver is itself an injunction — it directs the tenants to attorn and pay the rents to him, giving him full authority to lease and manage the property. The appellees may well say, "let the injunction go — we are satisfied with the residue of the decree ; for practically it is the same thing." We have no doubt of our power under the Act of Assembly to reverse the decree in. toto, and accordingly so adjudge. Decree reversed at the costs of the appellee. WALTER K. F. VILA ET AL., APPELLEES, v. GRAND ISLAND ELECTRIC ICE & COLD STORAGE CO., IMPLEADED WITH REXFORD E. HULETT ET AL., INTERVENERS, APPELLANTS. Supreme Court of Nebraska, 1903. 68 Nebraska, 222, 234. On December 6, 1900, appellees filed in the district court for Hall County a petition making the Grand Island Electric Lights Ice & Cold Storage Company a defendant, alleging that it had, on June 18, previous, mortgaged its plant and other property to appellee, Vila, for fifteen thousand dollars ; that four thousand dollars of this had been used for other purposes than paying off a prior mortgage as agreed ; "that said defendant is now and will be wholly unable to 'Accord: Willis v. Corties, 2 Edw. Ch. N. Y. 281 (1834) ; Patterson v. McCunn, 46 Hon. Pr. 182 (1873) ; Rollins v. Henry, 77 N. Car. 467 (1877) ; Squire v. Howlett, 141 Mass. 597 (1886) ; Oehme v. Rucklehaus, 50 N. J. Eq. 84 (1887) ; Kelley v. Boettcher, 89 Fed. 12s (1898) ; Benallack v. Rich- ards, 125 Cal. 427 (1899) ; Freer v. Davis, 52 W. Va. 35 (1902) ; Union B. 346 RECEIVERS pay the interest or any part thereof to become due on its said mort- gage indebtedness on January i, 1901 ; that defendant is also wholly without ability or means to pay any part of its floating indebtedness amounting to about the sum of eighty-six hundred and sixty-two dollars ($8,662) and its creditors are threatening to attach the mort- gaged property hereinbefore described"; that defendant had failed to keep its plant in repair as required by the mortgage ; and that by the terms of the mortgage the noncompliance with its covenants entitled plaintiff to an appointment of a receiver. Another clause of the mortgage quoted ,in the petition authorizes such appointment "upon the commencement of suit to foreclose," and the petition contained the following prayer : "Wherefore the plaintiffs pray that a receiver be appointed for defendant and the said receiver be given authority to do each and all of the things mentioned in said mort- gage, to wit: To take possession of all the defendant's property covered by said mortgage and to manage and. operate the business and to collect its income and profits and to apply the same upon the expenses and charges for maintaining and operating said busi- ; ness and paying the obligations secured by plaintiffs' mortgage and for such other and further relief as to the court may seem meet and proper." On the next day the following answer was filed on behalf of the, defendant : "Now comes the above named defendant and for answer to the plaintiff's petition admits the facts therein stated and consents to the appointment of a receiver in this action as prayed in the plaintiff's petition." On the same day a receiver, was appointed to take charge of the "property, business and assets of the defendant" (part of which is enumerated) "and all other property of every kind or character, belonging to or pertaining to said defendant and its business." By 1 the terms of this order the receiver is directed, inter alia, "to operate and carry on the business of the defendant." The next order appear- ing in the record is dated March 5, 1901, and recites "that it is for the best interest of the parties hereto, of the said trust and all persons interested therein that the business of the said defendant, the Grand Island Electric Light, Ice & Cold Storage Company be speedily closed and the affairs thereof wound up as soon as possible." In this order also the receiver is directed to notify all creditors of the Co. v. Samish, 33 Wash. 144 (1903) ; Red R. P. Co. v. Bernardy, 126 Minn. 440 (1914). Compare, under exceptional circumstances: Finch v. Haughton, 19 Wis. 149 (1865); McFadden v. Nolan, 15 Phila. 187 (1881) ; Bigbee v. Summerom, 101 Ga. 201 (1897) ; Smith v. Lusk, 119 Ala. 394 (1898) ; Whyte v.' Spransy, 19 App. D. iC. 450 (1902) : Levin v. Florsheim, 161 Ind. 457 (1903). In England under the Judicature Act of 1873, Section 25, the power of the Court in relation to receiverships is enlarged. Hence in an action to recover possession of land, there is now power to appoint a receiver in the discretion of the court. John v. John' (1898), 2 Ch. 573; Charrington v. Camp (1902), 1 Ch. 386; Whitbread v. Grain (1907), 23 Times Rep. 462. But the power will not be exercised where the' plaintiff's claim is doubtful.". Fox-well v. Van Grutten (1897), 1 Ch. 64. W. K. F. VILA et al. v. GRAND IS. ELEC. ICE & C. ST. CO. et al. 347 defendant to file their claims. It does not appear in the record upon what this order is based or at whose instance it was obtained. On March 25 the several appellants filed individual petitions of inter- vention, alleging the recovery of judgments before a justice of the peace on claims Tor labor performed in defendant's behalf. The aggregate amount of these claims was about seven hundred dollars, and each petitioner prayed that his claim should be given prefer- ence, and alleged that the property in the hands of the receiver included about nine thousand dollars worth of personalty which was not covered by plaintiffs' mortgage, and each prayed that he might share in the fund arising from the sale thereof. An order granting leave to intervene as prayed was entered on the same day that these petitions were filed, and on the following day the receiver filed a report as to the condition of the business, in which he recom- mended a speedy sale of the entire property in his hands. Objections to this application to sell were filed by the interveners, and also by appellee Kinkel, a stockholder in the defendant corporation. These were overruled, and an order made requiring an inventory and appraisement of the property, in pursuance of which the appraisers fixed the valuation of the plant in the aggfegate at twenty-five thou- sand dollars. On May 6 a decree was rendered, in which demurrers to the several petitions of intervention were sustained, but the claims of the interveners, among others, were allowed, less the court costs of placing them in judgment. By this decree the court also found that certain of the property in the receiver's hands was personalty and was not covered by plaintiffs' mortgage but it also found "that all of the property, goods and franchises, real, personal or mixed, coming into the hands of the said receiver, save that which is herein specifically found to be personal property, is covered by the said plaintiff's mortgage." The decree directed a sale, subject to the mortgage, of all property covered thereby, and a separate sale of the remaining personalty, and on June 8th the entire property was sold to G. H. Payne, trustee, president of appellee, Payne-Knox Company, for two thousand eight hundred dollars for the mort- gaged property and one hundred and fifty dollars for the balance. This is about one-third of the floating debt alleged, as we have seen, to exist at the beginning of the suit. Objections to confirmation of the sale were filed by interveners, they having previously objected to the appraisement, but these were overruled and the sale confirmed on June 22. Interveners bring the cause here by appeal, attacking both the decree of May 6th, directing a sale, and also the order of June 22d, confirming the same. The supreme court reversed the decrees complained of and vacated the order appointing the receiver. Subsequently, a rehear- ing was ordered. 1 Holcomb, J. : A rehearing having been granted, this cause has 1 The statement of facts is derived from the opinion of the court on the first hearing which is omitted. Part, also, of the opinion on rehearing is omitted. 348 RECEIVERS been submitted on oral arguments and printed briefs for further consideration*. An examination of the petition in the case at bar renders it obvious that no cause of action is stated therein disclosing a right to the recovery of a money judgment' for the amount called for by the bonds, or any portion thereof, or for a foreclosure of the mort- gage in satisfaction of any sum which might be found to be due; in other words, none of the debt secured by the mortgage had at the time matured, and there was no breach nor default in the conditions of the mortgage disclosed by the pleadings warranting a fore- closure of the title to and equity of redemption of the property mort- gaged, owned and held by the defendant company. This, manifestly, is the view taken by the parties to the suit and the trial court, since no attempt was made to enforce the obligation secured by the mort- gage, or for the sale of the property of the defendant company and the application of its proceeds in satisfaction thereof. What was in fact done was to seize all the property of "the corporation, place it in custodia legis by means of the receivership, manage it under the direction of the court for a short period of time, and then dispose of it at receiver's sale subject to the mortgage and the indebtedness secured thereby, mentioned in the pleadings as being held and owned by the plaintiffs. The cause of action, therefore, stated or attempted to be stated, was not in respect of plaintiff's right to collect its indebtedness held against the defendant and enforce their mortgage lien, but their right under the allegations of the petition to have a receiver appointed to take charge of and manage the property and business of the defendant company, and to wind up its affairs by a sale of the plant subject to plaintiff's lien, and the distribution of the proceeds, after paying the costs and charges of the receivership, to those found entitled thereto. We are thus brought to a consideration of the proposition as to whether the plaintiff was warranted in asking solely for the appointment of a receiver to take charge of and administer the cor- porate estate and to sell the same as was done, and whether the court was authorized to make such appointment and to enter the orders and decree thereafter made and rendered in the further proceedings, to which exceptions are taken. It is to this proposi- tion that counsel have devoted most of their arguments and to which our attention will now be directed. In the former opinion, it was held that a receivership is a purely ancillary remedy and cannot be maintained in a proceeding instituted solely for that purpose. The enunciation of this proposition is vigorously challenged by appellees' counsel, but a full investigation and consideration of the subject has dispelled from our minds all doubts, if any have here- tofore existed, as to its being a correct and sound declaration of the principles of equity governing and controlling a suit when applied to a condition of facts such as are presented by the record in the case at bar. Of course, where the statute authorizes it, and in some well-recognized exceptions to the general rule, the appointment of a receiver may be and is the main object and purpose of the suit or W. K. F. VILA et al, v. GRAND IS. ELEC. ICE & C. ST. CO. et al. 349 proceedings. It is likewise true that in some cases of extraordinary character affecting quasi public corporations, and where public inter- ests are so involved as to demand the extension of the equitable prin- ciples applicable to receiverships so as to protect such interests, some courts have assumed jurisdiction, and claim authority to appoint a receiver where that is the main purpose of the suit, yet such cases have been characterized as announcing a doctrine both novel and unusual. In all such cases the object of such appoint- ment is to preserve and hold intact the property intrusted to the receiver, and not to destroy, dismember or by receiver's sale dis- possess the corporation of its property and franchise. Possibly the subject may be made a little clearer by some reference to the nature and character of receiverships and the principles underlying the subject, as gathered from the text-writers and the decisions of the courts of last resort. A receiver by his. appointment does not become a litigant in the action, nor does he represent one more than the other of any of the parties to the controversy. He, when appointed", takes possession of the property as the right arm, of the court for the benefit of the party ultimately entitled to it. Beach, Receivers, Sec. 2. "A receiver is," says the same author, "a ministerial officer of a court of chancery, appointed as an indifferent person between the parties to a suit merely to take possession of and preserve, pen- dente lite, the fund or property in litigation." 2 Beach, Private Corporations, Sec. 772. The sequestration of property by a receiver in a suit in equity is analogous to the seizure of property by attach- ment in an action at law. The appointment of receivers^ says the supreme court of Ohio, is classed as one of the provisional remedies, like the proceedings by injunction or in attachment. Says the court : "A provisional receivership is, in effect, an injunction, and some- thing more stringent still. It is to be granted with great caution, and only in a case of apparent pressing necessity. Edwards, Receiv- ers 13. The appointment of a receiver is. an equitable remedy, and bears a similar relation to courts of equity that proceedings in attach- ment bear to courts of law. Hence the appointment of a receiver has been said to be an equitable execution. Jeremy, Equity Juris- diction 249." Cincinnati, S. & C. R. Co. v. Sloan, 31 Ohio St. 1, 7. See also Davis v. Gray, 83 U. S. 203, 217, 21 L. Ed. 447. It must be made to appear affirmatively that there is a reasonable possibility that the plaintiff will ultimately succeed in obtaining the general relief sought in the suit in which the receivership is asked. Smith, Receiverships, Sec. 5 (b) ; Beach, Receivers, Sec. 48. "The appoint- ment of a receiver," says the supreme court of Pennsylvania, "is the exercise of a power in aid of a proceeding in equity, and is the subject of sound discretion." Chicago & Allegheny Oil & Mining Co. v. United States Petroleum Co., 57 Pa. St. 83. "The law of receiverships is peculiar in its nature in that it belongs to that class of remedies which are wholly ancillary or pro- visional, and the appointment of a receiver does not affect, either directly or indirectly, the nature of any primary right, but is simply a means by which primary rights may be more efficiently preserved, 350 RECEIVERS protected and enforced in judicial proceedings. It adjudicates and determines the rights of no party to the proceeding and grants no final relief directly or indirectly." Smith, Receiverships, Sec. 2; Beach, Receivers, Sec. 51 ; Pomeroy, Equity Jurisprudence, Sees. 171, 1319, 1330; Miller v. Bowles, 58 N. Y. 253. In support of the rule announced by the text-writers to the effect that generally the appointment of receivers at the instance of private parties is an ancillary remedy administered by' the court, provisional in character, and in aid of the primary object of the litigation, may be cited French Bank Case, 53 Cal. 495, 550; Jones v. Bank of Leadville, 10 Col. 464; Union Mutual Life Ins. Co. v. Union Mills Plaster Co., 37 Fed. 286; Wallace v. Pierce-Wallace Publishing Co., 101 la. 313, 38 L. R. A. 122, 63 Am. St. Rep. 389 ; Barry v. Briggs, 22 Mich. 201 ; People v. Weigley, 155 111. 491. Aside from the question of the sufficiency of the petition because the appointment of a receiver is the sole and primary .object of the suit, and no cause of action or ground for equitable relief otherwise being stated, another insuperable obstacle, and one closely related to the subject heretofore discussed, is the fact that the jurisdiction of a court of equity is invoked for the purpose of seizing the cor- porate property of the defendant company and winding up its affairs without statutory authority therefor, and without the case being brought within equitable principles sanctioned and taken cognizance of by the courts of chancery of England, from which tt\e equity jurisdiction exercised by the courts of this state is derived. Some authorities are cited by counsel for appellees to the effect that a sale of all the corporate property does not necessarily work a dissolution of the corporation or terminate its legal existence. This, doubtless, is true, and in the cases cited the property, in all probability, was properly seized in satisfaction of just obligations, leaving the cor- porate entity unaffected, and nothing further was attempted. It may be, and probably is, true that a dissolution of a corporation in a technical sense can be accomplished by the expiration of its charter or the decree of a court of competent jurisdiction forfeiting the same. Yet in the case at bar, in truth and substance, the corporation has been, through the instrumentality of a receiver and by the order and decrees complained of, stripped of its estate, divested of its property and franchise, and its affairs brought to a final termination as completely and successfully as if its dissolution were the avowed object and purpose of the suit. In Neall v. Hill, 16 Cal. 145, 149, it is said: "We are also of opinion that the court erred in the appointment of a receiver, and in decreeing a sale of the property and a settlement of the affairs of the corporation. This decree, if permitted to stand, must result in the dissolution of the corporation; and in that event the court will have accomplished in an indirect mode that which, in this pro- ceeding, it had no power to do directly. It is well settled that a court of equity, as such, has no jurisdiction over corporate bodies, for the. purpose of restraining their operations or winding up theif concerns. We do not find that any such power has ever been exer- cised, in the absence of a statute conferring the jurisdiction." W. K. F. VILA et al. v. GRAND IS. ELEC. ICE & C. ST. CO. et al. 351 In Wallace v. Pierce-Wallace Publishing Co., 101 la. 313, 322, it is said: "It is certainly true that, in the absence of express statu- tory authority, jurisdiction of courts of equity does not exist over the corporate bodies to such an extent as to justify them in dis- solving corporations, or of winding up their affairs and seques- trating their property. This seems to be so well settled that there is scarcely a dissenting voice in authority." See also Wheeler v. Pullman Iron & Steel Co., 17 L. R. A. (111.) 818; Link Belt Machin- ery Co. v. Hughes, 63 N. E. (111.) 186; State v. Second Judicial District Court, 15 Mont. 324. We have examined with diligence and care the many authorities cited by appellee in support of its contention as to the authority of the court on equitable grounds to appoint a receiver, the regularity of the appointment in the case at bar, and the subsequent proceed- ings had, but we find none of them to give substantial support to the doctrine contended for. In each and all of the authorities save the exceptional cases heretofore referred to, the jurisdiction of the court in appointing a receiver was invoked as an exercise of power ancillary and incidental to the principal relief sought by the parties to the litigation. The parties all appear to have been either stock- holders or creditors who had an actual and subsisting demand, a present right or claim which it was sought to have enforced, and the appointment of a receiver was in aid of and for the purpose of making effective a prospective judgment or decree to be rendered in the action which, prima facie, they were shown to be entitled to at the time of its commencement and the appointment of such receiver. We find no authority giving unqualified support to the doctrine that a mere mortgagee of corporate property, because of an anticipated default of the indebtedness, a possible inability to continue much longer the conduct of the business, threatened attach- ments, financial weakness or insolvency, and in the event. of the' suspension of husiness, a consequent depreciation of the value 01 the mortgaged property, may for these reasons, in an independent action and for no other purpose, have a receiver appointed, the corporate property sequestered, the business conducted by the receiver until by a receiver's sale the estate may be sold subject to the mortgage indebtedness, and the affairs of the corporation termi- nated. To establish such a doctrine in this jurisdiction is, in our judgment, unwarranted, unsupported by authority and fraught with dangerous consequences. The petition, we are satisfied, states no cause of action, nor warrants the granting of any equitable relief, and therefore the order of sale of the corporate property and the confirmation thereof, as well as the appointment of a receiver, was without authority, unsupported by the pleadings, and for such reasons the judgment heretofore rendered reversing the orders and decrees so entered should be adhered to, which is accordingly done. 2 Former decision adhered to, "Accord: Wheeler v. Pullman I. & S. Co., 143 111. 197 (1802) ; Laurel S. L. Co. V. Fougeray, 50 N. J. Eq. 756 (1893) ; Murray v. Superior Court, 352 , RECEIVERS LAZAR STERNBERG ET AL. v. DAVID WOLFF ET AL. Court of Errors and Appeals of New Jersey, 1897. 56 New Jersey Equity, 389. Depue, J.: On the 25th of July, 1892, Sternberg, Wolff and Misch became incorporated under the General „ Corporation Act under the name of L. Sternberg & Company, with a capital stock of one hundred thousand dollars, divided into one thousand shares, the par value of which was one hundred dollars each. The object for which this company was incorporated was to carry on a general merchandise business. At a meeting of the stockholders on the 26th of August, 1897, Sternberg was the owner of four hundred and ninety-nine shares; Rosa Sternberg, his wife, of one share; David Wolff, one share, and Rosa Wolff, his wife, four hundred and ninety-nine shares ; the situation being that one-half of the capital stock was held by Stern- berg and his wife, and the other half by Wolff and his wife. At this meeting the by-laws were amended so that the board of directors should consist of four members, and the whole number of directors should be necessary to a quorum, and the four persons above named were elected directors ; Lazar Sternberg was elected president, David Wolff being secretary and treasurer. Among. the by-laws was the provision that Lazar Sternberg and David Wolff and Henry Kern, the general superintendent, should not be subject to discharge or reduction of salary by any officer of the company, or by the board of directors, without the consent in writing of the majority in interest of the stockholders; that other employees might be discharged either by Lazar Sternberg or David Wolff, and new employees should be employed only with the concurrence of both Lazar Sternberg and David Wolff, unless 'otherwise ordered by the board of directors. It is unnecessary to go into particulars; it is sufficient to say that after the meeting last referred to Sternberg and his wife, as the one party, were the owners of one-half of the capital stock of the company, and Wolff and his wife the owners of the other half. Difficulties and dissensions arose between these four persons, in which Sternberg and -his wife, the one-half in number of the board of directors, were engaged on the one side, and Wolff and his wife, the other half of the board of directors, were engaged on the other 129 Cal. 628 (1900) ; Barber v. Trust Co., 73 Conn. 587 (1901) ; State v. Judge, 108 La. 521 (1902) ; Richardson v. Clinton W. t. Co., 181 Mass. 580 (1902); Hastings v. Tousev, 121 N. Y. App. Div. 815 (1907): Carson v. Allegany W. G. Co., 189 Fed. 791 (1911). Compare: Decker v. Gardner, 124 N. Y. 334 (iSgi) ; Treat v. Penna. M. F. J. Co.. 203 Pa. 2t (1902). Thompson's Receivership, 44 Pa. C. C. 518, contra, annotated 30 Harvard L. Rev. 273, was reversed by the Supreme Court of Pa., May 7, 1917. LAZAR STERNBERG et al. v. DAVID WOLFF et ai> 353 side. By reason of these dissensions the management of the busi- ness by the board of directors was in a deadlock, although the com- pany was largely engaged in the conduct of the business for which it was incorporated. In consequence of the disputes between these parties, in October, 1897, Sternberg and his wife filed a bill in the court of chancery against Wolff to restrain him, among other things, from exercising the duties of treasurer and from discharging employees, or interfering with the regular business of the company for his own personal ends, with a further prayer that if necessary a receiver might be appointed to take charge of said company and manage the same pending the decision of this suit. No answer had been filed by Wolff when the hearing on this application was had before the vice chancellor, but Wolff in his affidavit states that he believes that the safety of the business demands the appointment of a receiver at least during the pendency of the litigation, and until an adjustment of the interests of the stockholders can be arrived at. Rosa Wolff was not a party to the bill, but- she made an affidavit stating that she was the owner of half of the company's stock and claiming that it was necessary for the protection of her interests that a receiver should be appointed for the corporation at least during the pendency of this litigation, and until the rights and powers of the officers and stockholders of the company shall have been adjusted and fixed under the order of the court. This matter coming on for hearing before the vice chancellor on bill, affidavits and counter-affidavits, the vice chancel|or advised an order dated November 6, 1897, denying the application for a receiver, but ordering that, pending this suit, an injunction do issue enjoining David Wolff, the defendant herein, from drawing any promissory notes or checks of the company, or on behalf thereof, except for ascertained debts due by the said company, or from drawing any check to the order of himself, except for salary due him, after deducting all charges against him for rent and goods; the disputed items of $206 and $140 for banquet and stable account, respectively, not to be included in the ascertainment of said charges against him, the same being reserved until the final hearing of the case; and from discharging employees, except for cause, and that by the permission of the court; or from employing any new employees without the permission of the court, and from making or procuring to be made any list of the customers of said company ; and from continuing to act as treasurer of the said company, unless within ten days from the date hereof he should file a bond in the penal sum of twenty thousand dollars, conditioned for the faithful performance of his duties as treasurer of the defendant corporation ; and that the complainant, Lazar Sternberg, be likewise enjoined from drawing any promissory notes or checks of the company, or on behalf thereof, except for ascertained debts due by the said company; or from drawing any checks to the order of himself, except for salary due him after deducting all charges against him for rent and goods; and from discharging employees, except for cause, by the permission of the court ; or from employing any new ,354 RECEIVERS employees without the permission of the court ; and from making or procuring to be made, any list of the customers of said company; and from inducing the employees of the company to fail to pay proper respect to the defendant and other officers of the company, and from inducing them to refuse obedience to their orders. The vice chancellor, in granting the injunction against Stern- berg, seems to have gone upon the ground that the mutuality of the injunction was necessary to protect the interests of all the stock- holders in the affairs of the company pendente lite r It is within the power of the court of chancery, in granting to a suitor an injunction, to impose terms, and I have no doubt that the terms imposed in this case were such as it was in the power of the court to impose, enjoining a defendant on the terms that an injunction relating to the same subject matter should go against the complainant. The business of the company, at the time these orders were made, in manufacturing and selling clothing, was very large, the company having its main place of business in the city of Newark and eleven branches located elsewhere in the state, and it is undeni- able that the pendency of these injunction orders seriously inter- feres with the business of the company; and, in the judgment of this court, it is wholly impracticable for the court of chancery to take upon itself the control of the details of the business of this company in conformity with this injunction, as well as quite impos- sible that the business of the company should be profitably carried on without those who are engaged in the management of the busi- ness being allowed to manage and conduct the same upon business methods, rather than by the methods proposed by these injunction orders. But it is apparent from the facts that appear in the bill and affidavits that some relief pending this litigation should be afforded in these proceedings. The two parties to the controversy — Stern- berg and his wife on the one side and Wolff and his wife on the other side — are the owners each of one-half of the capital sto*ck. These four individuals are directors of the company, and, by the by-laws, the whole number is necessary to make a quorum for the transaction of business. The dissensions between these two parties — Sternberg and his wife on one side and Wolff and his wife on the other side — have brought the affairs of this company to a dead- lock, so far as any corporate action by the board of directors is concerned. It may be assumed that the court of chancery has no jurisdic- tion to dissolve a solvent corporation and distribute its assets on the ground that the business of the corporation is improperly con- ducted by the board of directors, even though such mismanagement be with the concurrence of a majority of the stockholders ; but the jurisdiction of the court of chancery to control the business of a company, especially a trading company, pending a litigation over the management and conduct of its business, must necessarily exist, and, we think, pending a litigation such as that which is inaugurated LAZAR STERNBERG et al. v. DAVID WOLFF pt al. , 355 by the proceedings in this case, a receiver may be appointed. Cor- porations such as the one now before us are mere trading companies, with a corporate organization for the convenience of conducting the business for which they were incorporated. Such a corporation has not the qualities of corporations created for public purposes. No reason appears why, in the matter of the control and conduct iof its business, the corporation and its officers should not be within the control of the court of chancery to an extent corresponding with the control of that court over the business of a mere partnership. The cases establish the power of the court in virtue of the general jurisdiction to preserve the subject of litigation pendente lite, though it may relate to the affairs of a trading company in form organized as a corporation. The two cases cited by the vice chan- cellor in his second opinion are to that effect. Featherstone v. Cook; Trades Auxiliary Co. v. Vickers, L. R. 16 Eq. Cas. 298, 303. In the first case the complications in the affairs of the company arose out of a division in the board of directors, which made it absolutely impossible that the affairs of the company could be conducted with advantage. Vice Chancellor Malins in that case said : "With regard to private partnerships, nothing is of more frequent occurrence than the quarrels of partners. If partners quarrel, oust each other from the management or so conduct themselves that the partnership cannot go on with advantage, it is every day's practice for the court to interfere by injunction and appoint a receiver if necessary. With regard to public companies, I apprehend the same principle is applica- ble. If a state of things exists in which the governing body are so divided that they cannot act together, and there is the same kind of feeling between the members as there is frequently in the case of private partnerships, it is clearly within the rule of this court to interfere, and it will do so." The court in that case intervened by injunction and receiver simply to protect the property of the com- pany, to continue, however, no longer than until a governing body was duly appointed. In the latter case the dissension was aiso in the board of directors, one set of which closed the office doors of the company's building, and*the other set, with the aid of some laborers, broke open the doors with crowbars and forced the office open. The prayer of the bill was for the appointment of the receiver until the proper board of directors was constituted. The vice chancellor placed the affairs of the company in the hands of a receiver pendente lite until a new governing body was appointed. The vice chan- cellor's opinion states the principle to be that the court will not interfere with the internal affairs of joint stock companies unless they are in a condition in which there is no properly constituted governing body^ or there are such dissensions in the governing body that it is impossible to carry on the business with advantage to the parties interested; in such a case the court will interfere, but only for a limited time, and to as small an extent as possible. Chancellor Runyon, in Einstein v. Rosenfeld, 11 Stew. Eq. 309, after citing the two cases already cited, did not dissent from the ruling of the vice chancellor in those cases. He denied the appoint- 356 RECEIVERS ment of a receiver on the ground that the business of the company was being carried on, and that there was no need of immediate interference on the part of the court for the protection of the prop- erty or business interests of the company. In Archer v. American Water Works, 5 Dick. Ch. Rep. 33, the present chancellor, after referring to the three cases above cited, said that "if the present directors of the company continue their dissensions so that the affairs of the company are not speedily attended to, upon a proper applica- tion I will care for the property, pending the determination of the suit, through the instrumentality of a receiver. Such action will be supported by precedents and authority. My interference, however, by injunction and receiver, will be limited to the imperative require- ments of the present emergency." In an earlier case Vice Chan- cellor Van Fleet said : "The power of this tourt to appoint a receiver of a corporation, either because it has no properly constituted gov- erning body or because there are such dissensions in its governing body as to make it impossible for the corporation to carry on its business with advantage to its stockholders, I think must be regarded as settled, but I think it is equally well settled that this power is subject to certain limitations, namely, it must always be exercised with great caution and only for such time and to such an extent as may be necessary to preserve the property of the corporation and protect the rights and interests of its stockholders." Edison v. Edison United Phonograph Co., 7 Dick. Ch. Rep. 620, 625, 626. In Fougeray v. Cord, 5 Dick. Ch. Rep. 185, 756, this court did not deny the power of the court of chancery to appoint a receiver pendente lite for the management of the affairs of an incorporated company organized for the purposes of trade. The ruling of this court was that "the disturbance of corporate functions incident to a receiver- ship are extreme powers, and may not be decreed by a court of equity when the specific acts complained of are capable of redress and complete restitution, and those apprehended fall within the ordinary jurisdiction by injunction." The order of the court of chancery appointing a receiver in that c^se was set aside by this court, not on the ground of a want of power in the court of chancery to resort to the proposed mode of relief, but on the ground that, in the judgment of this court, that power was in that instance improp- erly exercised. That some redress should have been afforded under the bill filed in this case is apparent from the facts disclosed in the bill and affidavits. That the vice chancellor granted injunctions which so completely interfered with the affairs of the company, as to make the conduct of its business by its officers in ordinary business methods impossible, and assumed the administration of its business affairs to such an extent as to be utterly impracticable, affords a con- vincing argument for such relief as is practicable through the inter- vention of the court of chancery under the circumstances. Such relief, we think, could be afforded only by the appointment of a receiver pendente lite. JOSEPH WISWALL v. DAVID SAMPSON 35; On both appeals the injunction orders should be vacated, and the record should be remitted to the court of chancery, to be pro- ceeded with in accordance with these views. 1 JOSEPH WISWALL, PLAINTIFF IN ERROR, v. DAVID SAMPSON, LESSEE OF EDWARD HALL AND EDWARD S. DARGAN. Supreme Court of the United States, 1852. 55 United States, 52. 1 Nelson, J. : This is a writ of error in the circuit court of the United States for the southern district of Alabama. The suit in the court below was* an action of ejectment against Wiswall to recover the possession of a lot of land situated in the city of Mobile. The lessors of the plaintiff gave in evidence two judgments against John Ticknor — one in favor of Fowler & Company for four thousand four hundred and ninety-one dollars, rendered 28th Decem- ber, 1840, the other in favor of Crouch & Sneed for seven thousand one hundred and sixty-seven dollars and twenty-five cents, rendered 31st December of the same year, each of them in the circuit court of the United States. Executions were issued upon each of the judgments within the year, and returned by the marshal "no prop- erty found." An alias fieri facias was issued on the judgment in favor of Crouch & Sneed on the 24th February, 1845, and the lot in question levied on; an alias fieri facias was also issued on the judgment in favor of Fowler & Company on the 7th April, 1845, and a levy made on the same; and on the 7th July the lot was sold "The vote of the judges, some of whom concurred in part only is omitted. See further. 21 N. J. L. J. 74. Mere dissatisfaction and internal dissensions will not warrant the ap- pointment of a receiver. Ranger v. Champion P. Co., 52 Fed. 609 (1892) ; Rep. S. M. Co. v. Brown, 58 Fed. 644 (1893) ; Edison v. Phonograph Co., 52 Fed. 620 (1894) ; Warrior Coal Co. v. Hooper, 105 Ala. 665 (1894) ; Wallace v. Pierce W. Co., 101 la. 313 (1897), s. c, 38 L. R. A. 122; Clark v. Nat. Linseed O. Co., 105 Fed. 787 (1901) ; North Amer. T. Co. v. Wat- kins, 109 Fed. 101 (1901). But gross mismanagement, fraud and violation of trust may warrant the appointment of a receiver to protect the prop- erty. State v. District Court, 15 Mont. 324 (1895) ; Miner v. Ice Co., 93 Mich. 97 (1892) ; Cowan v. Plate Glass Co., 184 Pa. 1 (1898) ; De Puy v. Terminal Co., 82 Md. 408 (1896); Acker .v. Irrigation Co., 72 Fed. 591 (1896) ; Jackson v. Hooper, 76 N. J. Eq. 592 (1909), semble; Columbia N. S. Co. v. Washed B. Co., 136 Fed. 710 (1905), And where the dissension is such that the business cannot be conducted a court of equity, at the suit of a stockholder or creditor, may intervene pending a proper adjust- ment of conditions. Featherstone v. Cooke, L. R. 16 Eq. 298 (1873) ; Thomp- kins v. Catawba Mills, 82 Fed. 780 (1897) ; Jasper L. Co. v. Wallis, 123 Ala. 652 (1898). Compare: Zeltner v. Zeltner, 79 N. Y. App. Div. 136 (1903), affirmed, 174 N. Y. 247. "The statement of facts is omitted. 358- RECEIVERS on both executions, and bid off by Dargan, one of the lessors of the plaintiff, for the sum of seven thousand five hundred dollars, and a deed executed to him by the marshal on the 13th August of the same year. Dargan quit-claimed the premises to Hall, the other lessor. The lessors of the plaintiff claim title under this sale. The defendant, Wiswall, gave in evidence a judgment in his favor against Ticknor-in the circuit court of the state for two thou- sand two hundred and thirty-three dollars and seventeen cents, ren- dered 14th June, 1842; an execution issued 1st July of '\ the same year, which was returned by the sheriff "no property found"; also a deed of the lot in question from Ticknor to one James L, Day, bearing date 28th April, 1840; and the exemplification of a decree and the proceedings in chancery on a bill filed 7th February, 1843, by Wiswall against Ticknor and Day, setting aside the deed to Day as fraudulent and void against creditors. The decree was rendered April Term, 1845. Also the appointment of a receiver by the court, to whom possession of the property was delivered on the 27th June of the same year. The receiver remained in the possession till the lot was sold by the master, 1st March, 1847, under the decree in chancery, and was purchased in for the defendant, Wiswall, for the sum of six thousand five hundred dollars. The defendant claims under this title. Notice was given, on the day of sale, by the marshal, under the two judgments, of the pendency of this suit in chancery and of the appointment of a receiver, and that he was in the possession of the property. It appeared, also, that the lot was bid off by Dargan at the marshal's sale, by an arrangement between the attorneys represent- ing the two judgments, Dargan being the attorney for the one in favor of Crouch & Sneed, that if the title thus acquired should enable him to recover the property, the judgment in favor of Fowler & Company should be paid out of it ; but, if he should fail to recover it, then the sale was to be considered a nullity and no money was to be paid. It further appeared that an application had been made by the attorney in the judgment in favor of Fowler & Company to the court to amend the marshal's return so as to set forth the fact that no money had been paid, and that the motion was then pending in court. And, further, that a bill had been filed in chancery by the assignee in bankruptcy of the judgment of Fowler & Company against the defendant and others, to have the proceeds of the sale of the property on the decree applied to the payment of that judg- ment, and in which bill it is insisted that the sale under the two judgments was inoperative, on account of the agreement between the attorneys under whom it was made, and that this suit was then pending. It further appeared that Dargan applied to the court of chancery on the 26th November, 1845, by petition, setting out his title under the two judgments to have the possession of the lot by the receiver delivered up to him, or if that should not be ordered, then that he JOSEPH WISWALL v. DAVID SAMPSON 359 might be at liberty to bring an action of ejectment against the receiver to recover the same; that the defendant, Wiswall, put in his answer, setting up the same matters now relied on to invalidate the sale to Dargan, and also claiming a paramount lien upon the prop- erty by virtue of his judgment, and bill in chancery and decree setting aside the fraudulent conveyance to Day, directing a sale and application of the proceeds to the payment of his judgment, the appointment of a receiver, etc.; that the chancellor overruled the application and dismissed the petition on the ioth December, 1845. From which order an appeal was taken to the supreme court, and the decree or order arffimed. After the evidence was closed, the court charged the jury, that the title of Dargan under the marshal's sale upon the two judgments was superior to that of the defendant under the sale upon the decree in chancery, and directed a verdict for the plaintiff. And further, that the decree in chancery on the petition of Dargan was not con- clusive upon the rights of the parties — that he was not bound to go into that court for relief, as his remedy was at law. The case is now before us on exceptions to this charge. It was made a question, on the argument, whether or not the lien of the judgments under which the marshal's sale took place had not been postponed to that of Wiswall, on account of laches in the enforcement of them by execution. But in the view we have taken of the case, the validity of the liens, at the time of sale, will be conceded, without, however, intending to express any opinion upon the question. Wiswall filed his bill in chancery against Ticknor and Day to set aside the, fraudulent conveyance to the latter, and have the prop- erty applied to the satisfaction of his judgment, on the 7th Febru- ary, 1843. In that bill he prayed for a sale of the real estate, and for the appointment of a receiver to take charge of it, with other assets of the judgment debtor; and also for an injunction. A tem- porary injunction was granted. On the coming in of the answers of the defendants, the complainant, on the nth April of the same year, moved for the appointment of a receiver, and the defendants, at the same time, moved to dissolve the injunction. The court denied the motion to appoint the receiver, and dissolved the injunction, expressing the opinion that the answers so far explained the circum- stances under which the deed to Day was given as to remove the charge of fraud against it. An appeal was taken to the supreme court, and on the ioth April, 1844, that court reversed the order of the court below, and remanded' the cause for further proceedings ; and on the 15th April, 1845, trI e chancellor made a decree that the deed was fraudulent and void, as against the complainant, and referred the case to a master, to take and state the account between the parties. He further ordered and decreed that a receiver should be appointed to take possession of all the property embraced in the fraudulent conveyance, and particularly that possession should be delivered to him of the premises in question; and further, that the receiver, under the direction of the master, should sell the same 360 RECEIVERS and apply the proceeds to the payment of the complainant's judg-* ment, with costs, etc. The receiver was appointed on the 27th June, 1845, and on the same day Ticknor, who was in possession of the premises, attorned to him, who held possession until the sale was made in pursuance of the decree. It will be recollected that the execution on the judgment in favor of Crouch & Sneed was issued and levied on the 24th February, 1845, and on that in favor of Fowler & Com- pany 7th April of the same year, and that the sale took place under which the lessors of the plaintiff claim, 7th July, 1845. At the time, therefore, of this sale, the receiver was in the possession of the premises, under the decree of the court of chancery — in other words, the possession and custody of them were in the court of chancery itself (as the court is deemed the landlord), to abide the final decree to be thereafter rendered in the suit pending. The appointment of a receiver is a matter resting in the dis- cretion of the court; and, as a general rule, in making the appoint- ment on behalf of a complainant seeking to enforce an equitable claim, or a claim which is the subject of equitable jurisdiction, against real estate, it will take care not to interfere with the rights of a person holding a prior legal investment in the property. Thus, where there is a prior mortgagee having the legal estate, the court will not, by the appointment of a receiver, deprive him of his right to the possession; but, at the same time, it will not permit him to object to the appointment by any act short of a personal assertion of his legal rights, and the taking of possession himself. I. J. & Vy. 648; 2 Swanst. 108, 137; 3 Id., 112, n. 115; 3 Daniel's Pr. 1950, 1951- If the person holding the legal interest is not in possession, the equitable claimant against the property is entitled to the interference of the court, not only for the purpose .of preserving it from waste, but for the purpose of obtaining the rents and profits accruing, as- a fund in court to abide the result of the litigation. For until the person holding the legal interest takes possession, or asserts his right to the possession, the accruing rents and profits present a question simply between the parties to the litigation. And the court will also appoint a receiver, even against a party having possession under a legal title if it is satisfied such party has wrongfully obtained that interest in the property. Thus, where fraud can be proved, and immediate danger is likely to result, if possession, pending the liti- gation, should not be taken by the court in the meantime. 13 Ves. 105; 16 Id. 59; 3 Daniel's Pr. 1955." The effect of the appointment is not to oust any party of his right to the possession of the property, but merely to retain it for the benefit of the party who may ulti- mately appear to be entitled to it ; and when the party entitled to the estate has been ascertained, the receiver will be considered his receiver (T. & R.. 345 ; Daniel's Pr. 1982) ; and the master will usually be directed to inquire what incumbrances there are affecting the estate, and into the priorities respectively. 10 J. R. 521, Codwise V. Gflston, JOSEPH WISWALL v. DAVID SAMPSON 361 When a receiver has been appointed, his possession is that of the court, and any attempt to disturb it, without the leave of the court first obtained, will be a contempt on the part of the person making it. This was held in Angel v. Smith, 9 Ves. 335, both with respect to receivers and sequestrators. When, therefore, a party is prejudiced by having a receiver put in his way, the course has either been to give him leave to bring an ejectment or to permit him to be examined pro interesse suo. 1 J. & W. 176, Brooks v. Great- hed; 3 Daniel's Pr. 1984. And the doctrine that a receiver is not to be disturbed extends even to cases in which he has been appointed expressly, without prejudice to the rights of persons having prior legal or equitable interests. And the individuals having such prior interests must, if they desire to avail themselves of them, apply to the court either for liberty to bring ejectment, or to be examined pro interesse suo; and this, though their right to the possession is clear. 1 Cox, 422 ; 6 Ves. 287. The proper course to be pursued, says Mr. Daniel in his valu- able treatise on Pleading and Practice in Chancery, by any person who claims title to an estate or other property sequestered, whether by mortgage or judgment, lease or otherwise, or who has a title paramount to the sequestration, is to apply to the court to direct the plaintiff to exhibit interrogatories before one of the masters, in order that the party applying may be examined as to his title to the estate. An examination of this sort is called an examination pro interesse suo, and an order for such examination may be obtained by a party interested, as well where the property consists of goods and chattels or personalty, as where it is real estate. And the mode of proceeding is the same in the case of the receiver. 6 Ves. 287 ; 9 Id. 336; 1 J. & W. 178; 3 Daniel's Pr. 1984. A party, therefore, holding a judgment which is a prior lien upon the property, the same as a mortgagee, if desirous of enforcing it against the estate after it has been taken into the care and custody of the court, to abide the final determination of the litigation, and pending that litigation, must first obtain leave of the court for this purpose. The court will direct a master to inquire into the circum- stances, whether it is an existing unsatisfied demand or as to the priority of the lien, etc., and take care that the fund be applied accordingly. Chancellor Kent, in delivering the opinion of the courj: in Cod- wise v. Gelston, as chief justice, observed "that if a fund for the payment of debts be created under an order or decree in chancery, and the creditors come in to avail themselves of it, the rule of equity then is, that they shall be paid in pari passu, or upon a footing of equality. But when the law gives a priority, equity will not destroy it, and especially where legal assets are created by statute, as in case of a judgment lien, they remain so, though the creditors be obliged to go into equity for assistance. The legal priority will be protected and preserved in chancery." The settled rule, also, appears to be that where the subject matter of the suit in equity is real estate, and which is taken into the possession of the court pending 36z RECEIVERS the litigation, by the appointment of a receiver, or by sequestration, the title is bound from the filing of the bill; and any purchaser, pendente lite, even if for a valuable consideration, comes in at his peril. 3 Swanst. 278 n., 298 n.; 2 Daniel's Pr. 1267; 6 Ves. 287; 9 Id. 336; 1 J. & W. 178; 3" Daniel's Pr. 1984. It has been argued that a sale of the premises on execution and purchase occasioned no interference with the possession of the receiver, and hence no contempt of the authority of the court, and that the sale, therefore, in such a case should be upheld. But, con- ceding the proceedings did not disturb the possession of the receiver, the argument does not meet the objection. The property is a fund in court, to abide the event of the litigation, and to be applied to the payment of the judgment creditor, who has filed his bill to remove impediments in the way of his execution. If he has suc- ceeded in establishing his right to the application of any portion of the fund, it is the duty of the court to see that such application is made. And, in order to effect this, the court must administer it independently of any rights acquired by third persons, pending the litigation. Otherwise, the whole fund may have passed out of its hands before the final decree, and the litigation become fruitless. It is true, in administering the fund, the court will take care that the rights of prior liens or incumbrances shall not be destroyed, and will adopt the proper measures, by reference to the master or otherwise, to ascertain them, and bring them before it. Unless the court be permitted to retain the possession of the fund, thus to administer it, how can it ascertain the interest in the same to which the prosecuting judgment creditor is entitled, and apply it upon his demand? There can be no difficulty in ascertaining the prior liens and incumbrances, as all of them are matters of record. Several of the judgment creditors came in, in this case, and received their share in the distribution. These two judgment creditors had notice of the suit before the sale, and might have made themselves parties to it, and claimed application of the fund according to the priority of their liens. They were also before the court, pending the litigation, on the petition of Dargan, who had purchased for their benefit, to have the posses- sion of the receiver delivered up to the purchaser. There is no pretense, therefore, for saying that they have not had notice of the praceedings in the equity suit. The prayer of the petition was denied, among other grounds, because their appropriate remedy was a motion to the court, founded on their judgments to have the pro- ceeds of the sale under the decree applied to them according to priority. We agree that the person holding the prior legal lien or incum- brance must have notice and an opportunity to come in and claim his priof right to the property or interest in the fund before his legal right can be affected; and the proper way is by summons or notice upon the order or direction of the court. This notice can be readily given on the report of the master of the prior liens or incum- brances resting upon the estate. But it is not necessary to go this length in the case before us, JOSEPH WISWALL v. DAVID SAMPSON 363 as it is sufficient to say that the sale under the judgment, pending the equity suit, and while the court was in possession of the estate without the leave of the court, was illegal and void. We do not doubt but that it would be competent for the court, in case the judg- ment creditor holding the prior lien had not come in. and claimed his interest in the equity suit, to decree a sale in the final disposition of the fund subject to his judgment. The purchaser would then be bound to pay it off. But this disposition of the legal prior incum- brance is a very different matter, and comes to a very different resuft, from that of permitting the enforcement of it,. pendente lite, without the leave of the court. The rights of the several claimants to the estate or fund is then settled, and the purchase under the decree can be made with a full knowledge of the condition of the title, or charges to which it may be subject Neither do we doubt but that it is competent, and might, in some cases, be fit and proper for the court, where the property in dispute is ample, and the litigation protracted, to permit the execution to issue, and compel the prosecuting creditor to pay off the judgment. 3 Beav. 428. But it is manifest that these proceedings, on behalf of the private incumbrancer, should be under the control of the dis- cretion of the court, as the condition of the title to the property may frequently be so complicated and embarrassed that unless the sale was withheld until the title was cleared up by the judgment of the court, great sacrifice must necessarily ensue to the parties inter- ested. This case affords an apt illustration of the remark. The ■marshal's sale was made under an arrangement that no money was to be paid by the purchaser unless he succeeded in obtaining a title to the property under it. It is obvious, therefore, if the purchase had been unconditional, and at the risk of the purchaser, it must have been bid off for a nominal consideration. As we have already said, it is»sufficient, for the disposition of this case, to hold that while the estate is in the custody of the court, as a fund to abide the result of a suit pending, no sale of the property can take place either on execution or otherwise, without the leave of the court for that purpose. And upon this ground we hold that the sale by the marshal on the two judgments was illegal and void, and passed no title to the purchaser. We are also inclined to think that the question of title to the property under the marshal's sale is concluded between these parties by the judgment of the court in the proceedings on the petition by the purchaser for the removal of the receiver, and to be let mto the possession. This, we have seen, is the appropriate remedy on behalf of a person claiming a. paramount legal right to an estate which has been brought into the possession and safe keeping of the court of chancery. This proceedings was explained by Lord Eldon in Angel v. Smith (9 Ves. 335), speaking of the rule in respect to sequestrators, and which he held was equally applicable in the case of receivers. "Where sequestrators," he observed, "are in posses- sion under the process of the court, their possession is not to be dis- turbed, even by an adverse title, without leave ; upon this principle, 364 RECEIVERS that the possession of the sequestrators is the possession of the court, and the court being competent to examine the title, will not permit itself to be made a suitor in a court of law, but will itself examine the title. And the mode is, by permitting the party to come in to be examined pro inter esse suo; the practice being, to go before the master to state his title, and there is the judgment of the master, and afterwards, if necessary, of the court upon it. See also 10 Beav. 318; 2 Daniel's Pr. 1271 ; 2 Mad. 21 ; 1 P. Wms. 308. An. appeal to the House of Lords will lie from the order or decree of the chancellor upon exceptions to the master's report in the matter. 2 Daniel's Pr. 1273 ■ 3 Id. 1633, 1634. In the petition to the chancellor in the case before us, the pur- chaser set out his title at large under the marshal's sale, and claimed the possession of the property by virtue of his title, that the receiver might be removed, and the possession delivered to the petitioners. The answer of Wiswall set up his right to the property under the decree in the suit against Ticknor and Day. The right of the peti- tioner, therefore, under his title, to the possession of the property as against the right of Wiswall under the proceedings in equity and the decree in his favor, would seem to be a question directly involved. The court so understood the issue and passed upon it, holding, as we hold in this case, that the sale was illegal and void, having been made while the estate was in the possession and safe keeping of the court of chancery. From this decision an appeal was taken to the supreme court, where the order or decree of the court below was affirmed. 11 Ala. R. 938, Dargan v. Waring and others. The. question is one depending very much upon the local law of Alabama, and the judgment, therefore, in the matter, by the highest court of the state, is entitled to the highest respect. For these reasons we are of opinion that the judgment of the court below was erroneous and must be reversed, and the case remitted for further proceedings. 2 2 As to a receiver, it is said in Union Bank v. Kansas City Bank, 136 U. S. 223 (1890) : "The utmost effect of his appointment is to put the property from that time in his custody as an officer of the court, for the benefit of the party ultimately proved to be entitled, but not to change the title, or even the right of possession in the property." See also, Anonymous, 2 Atk. 15 (1737); Cooke v. Gwyn, 3 Atk. 689 (1748); Field v. Schley, 11 Ga. 413 (1852) ; Ellis v. Railroad, 107 Mass. 28 (1871) ; Keeney v. Home Ins. Co., 71 N. Y. 306 (1877); Y eager v. Wallace, 44 Pa. 294 (1863); Heffron v. Gage, 149 111. 182 (1894) ; Cheney v. Maumee Co., 64 Ohio 205 (1901) ; Harrison v. Warren Co., 183 Mass. 123 (1903) ; Pa. Steel Co. v. N. Y. City R. Co., 198 Fed. 721 (1912) ; Gobble v. Orrell, 163 N. Car. 489 (1913). To interfere with the possession of a receiver is contempt of court. In re Tyler. 149 U. S. 164 (1892). As to the modern practice of intervening by petition and motion, see Allan v. Manitoba & N. W. R. R. Co., 10 Manitoba 106 (1894); Pelletier v. Greenville L. Co., 123 N. Car. 596 (1898). COMMONWEALTH ex rel. v. OVERHOLT 365 COMMONWEALTH EX REL. v. OVERHOLT. Superior Court of Pennsylvania, 1903. 23 Pa. Super. Ct. 199. 1 Orlady, J. : This is a proceeding in the nature of quo warranto through which the relators seek to be continued in the offices of president, vice president, etc., of a society incorporated under the laws of this commonwealth. From the record it appears that at a convention which convened at Wilmington, Del., in February, 1900, the relators "were duly elected to their respective offices. It further appears that at this convention a resolution was unanimously adopted fixing Carlisle, Pa., as the place for holding the annual meeting for the year 1901. Prior to the meeting at Carlisle a bill in equity was filed against the association, in which a receiver was prayed for, and a decree was entered therein on March 17, 1901, the important part of which, as far as it affects this case, is as follows : "6. The said defendant corporation, its officers, directors, managers, committees, agents and employees, are hereby enjoined from retaining- or taking possession of any money, assets or property belonging to the said defendant corporation and from transferring, delivering or assigning any of the assets, property, books, papers, franchises, rights and privileges of the said defendant corporation to any person or persons except to the said receivers, and from collecting or receiving any of the money, assets, securities or property of the said defendant cor- poration." The appellants frankly state in their argument as follows : "The whole question turns on the validity of the convention at Carlisle in 1901 ; if this was a rump convention then under the common law the old officers hold over until their successors are duly elected and qualified ; if the Carlisle convention was legal that is an end to the relator's case." It appears that the proceedings at Carlisle were regular as far as they relate to the time and place of meeting, and that the persons who acted were duly qualified as members of the convention. After the election of a full corps of new officers, in accordance with the usage and custom of the association, Bethlehem, Pa., was selected as the place for the annual meeting of 1902, and the Carlisle meeting was adjourned to meet at Bethlehem on May 6, 1902, at which time and place, after all members had legal notice, a full majority of all the constituent members of the association met in their annual meet- ing and fully ratified the action of the convention held at Carlisle on May 7, 1901, and elected officers to serve for the ensuing year. The effect of the appointment of a receiver is to remove the ' The arguments of counsel are omitted. 366 RECEIVERS parties to the suit from the possession of the property, but at the same time the right to the property is in no way affected by such appointment and the receiver merely holds the property as a custo- dian for the benefit of him who may be ultimately entitled to it. Bispham's Principles of Equity, Sec. 579. The fact that a receiver is appointed does not destroy the existence of the corporation, which must be preserved for many purposes, and the decree entered by .the court, as above quoted, was not violated in any way by electing officers to continue the corporate life of the association under its by-laws. The appointment of the receiver superseded the power of the officers to carry on the business of the association, as the receiver was required to take possession of the books, records and assets of every description, but the corporate franchise of the association was not dissolved, and, as a legal entity it continued to exist. Bank of Bethel v. Bahquioque Bank, 81 U. S. 383 ; 14 Wallace 383 ; 5 Thomp. on Corp., Sec. 6666. Both the Carlisle and Bethlehem meetings were regularly called and those entitled to participate were notified. How- ever, without regard to the Carlisle meeting, the ratification at the Bethlehem meeting of what was done the previous year at Carlisle would justify the decree entered by the court below. After due notice to all meYnbers there was held an actual meeting of members who constituted more than a quorum, and a majority of that quorum was competent .to elect officers and preserve the corporation in form. The corporation was composed of an indefinite number of persons and a majority of those present acted within the authority granted in the by-laws. Craig v. First Presbyterian Church, 88 Pa. 42; Juker v. Commonwealth ex rel. Fisher, 20 Pa. 484. The assignments of error are overruled and the decree entered by the court below is affirmed. 2 CENTRAL TRUST CO. v. EAST TENNESSEE LAND CO. Circuit Court of the United States, Eastern District Ten- nessee, 1897. 79 Federal, 19. Upon the intervening petition of Ford, Eaton & Company. Severens, District Judge: In this case the petitioners seek to recover the purchase price of some land which the petitioners claim to have sold to the East Tennessee Land Company by executory * Accord: Taylor v. Phila. & R. R. Co., 7 Fed. 381 (1881) ; Lehigh C. Co - Y- <£*?'• R - N - L ' 3S N " J - ^ 349 (l882) ; State v - Merchant, 37 Ohio ,251 (1881). And see, Bank v. Bahquioque Bank, 81 U. S. 383 (1871) ; Rice V.Barnard, 127 Mass. 241 (1879) ; Decker v. Gardner, 124 N. Y. 334 (1891) Kirkpatnck v. Assessors, 57 N. J. L. 53 (1894) ; Rosenbaum v. Credit S Co' 61 N. J. L. 543 (1898); Brynjolfson v. Osthus, 12 N. Dak. 42 (10m) ; People v. N. Y. City R. Co., 57 N. Y. Misc. 114 (1907). ' KNIGHT v. LORD PLYMOUTH 367 contract prior to the commencement of this suit, and for the enforce- ment of an alleged vendor's lien upon the land so sold. The master to vVhom this and other matters were referred has reported against the petitioner, placing his decision upon the lack of a good title in the petitioners. 1 But there is another ground which is not stated expressly as a ground of his action by the master, but which, nevertheless, is apparent upon the facts of the case. This contract, when the receiver was appointed, was executory. The receiver was not bound , to execute that contract, but might adopt it or hot, as he should think for the best interests of the estate committed to his charge. Being in charge of an insolvent estate, he could elect whether he would execute the contract, or abide the damages resulting from its breach; and in exercising his discretion he may properly take into account the equities of the holders of other unperformed obligations of the East Tennessee Land Company. Wabash W. Ry. Co. v. United States Trust Co., 150 U. S. 287, 14 Sup. Ct. 86; Dushane v. Beall, 161 U. S. 513, 515, 516, 16 Sup. Ct. 637. He has at no time signified his adoption of the contract, but, on the contrary, has resisted its enforcement. No doubt there would still be left to the vendor a claim in damages for the breach of the contract if at the . time when it went into solvency and was transferred to the receiver a cause of actionhad arisen; but this would be a claim at large, and would not be accompanied by a vendor's lien. If the petitioner in this case was proceeding for relief of that kind, it ought probably to be allowed; but, as that is not the object of the petition, and would, in the existing state of the main case, be substantially fruit- less, it is not supposed to be worth while to deal with the petition on that aspect further. For the reasons above stated, the exception to the master's report will be overruled. 2 KNIGHT v. LORD PLYMOUTH. In Chancery Before Lord Hardwicke, 1747. 3 Atk., 480. A person who had been appointed receiver under, an order of this court of Lord Plimouth's estate, having received the sum of 1 Part of the opinion on another point is omitted. 1 "The general rule applicable to this class of cases is undisputed that an assignee or receiver is not bound to adopt the contracts, accept the leases or otherwise step into the shoes of his assignor, if in his opinion it would be unprofitable or undesirable to do so ; and he ■ is entitled to a reasonable time to elect whether to adopt or repudiate such contracts." Per Brown, J., in U. S. Trust Co. v. Wabash R. Co., 150 U. S. 287 (1893). Accord: Comm. v. Franklin Ins. Co., 115 Mass. 278 (1874); Florence Gun Co. v. Hanby, iqi Ala. 15 (1893) ; Spencer v. Worlds C. Expos., 163 111. 117 (1896); Dushane v. Beall, 161 U. S. 513 (1896); Worthington v. Oak P Imp. Co., 100 la. 39 (1896) ; Russ Co. v. Water Co., 120 Cal. 521 (1898) ; Griffith v. Boom Co., 46 W. Va. 56 (1899) ; Schrady v. Kirk, 51 N. Y. App. Div 504 (1900); Wells v. Manilla Co., 76 Conn. 27 (1903). 368 RECEIVERS seven hundred pounds and upwards in rents, did not think it safe to remit the money to London, and therefore paid it to Winsmore, a considerable tradesman in Worcester, and took bills of exchange from him drawn on persons in London; Mr. Winsmore very soon after becomes a bankrupt, and there was an application to the court some time ago against the receiver, that he may make good to the estate the loss that has happened; lord chancellor referred it to a master to inquire into the fact, and to state it with all the circum- stances to the court. It came on today upon the master's report, and upon the state of it, as certified by the master, it appeared the receiver did it only for the greater safety, as it was a large sum of money to remit in specie, and that he had no notice of Winsmore's being in declining circumstances, who, till a week before he broke, had as great credit as any person in Worcester. Upon the circumstances of the case, his lordship said, it would be very hard to oblige the receiver to make good a loss which was not owing to any default of his, but as the sum was large, it was a necessary precaution to remit it by bills, rather than in specie, and at the time the money was paid to Winsmore, he had no reason to doubt its being lodged in a safe hand, and therefore indemnified the receiver in the act he had done. But said, at the same time, he would not lay it down generally that the court will indemnify a receiver appointed by them, If it should appear he had been guilty of any fraud or collusion in a transaction of this kind, and that the money was lost by his wilful default, and placing it in what he knew at the time to be an improper hand ; for he should then be of opinion, the court, as he is an officer appointed by them, would oblige him to answer the loss out of his own pocket. 1 STATE CENTRAL SAVINGS BANK OF KEOKUK v. FAN- NING BALL BEARING CHAIN CO. Supreme Court of Iowa, 1902. 118 Iowa, 698. Appeal from an order of the Keokuk superior court on excep- tions to the reports of G. W. Fanning, receiver of the Fanning Ball Bearing Chain Company. 1 'Compare: Wren v. Kirton, 11 Ves. 377 (1805); Salway v. Salway, 2 R. & M. 215 (1831). And see, 24 Halsbury's Laws 398. "Ordinary care is the test of the responsibility of the receiver." Hamm v. Stone L. S. Co.. 18 Tex. Civ. App. 414 (1896). And see, In re Union Bank, 37 N. J. Eq. 420 (1883) ; Heffron v. Rice, 149 111. 216 (1894) ; Alston v. Mussenburg, 125 N. Car. 582 (1899) ; In re Angell, 131 Mich. 345 (1902) ; Pangburn v. Amer. Vault Co., 205 Pa. 93 (1903) ; Plis m son v. Duncan, 36 Canada Sup. Ct. 647 (1905). 1 The statement of facts and part of the opinion are omitted. STATE CENT. SAV. BK. OF KEOKUK v. FANNING B. B. CH. CO. 369 Ladd, C. J. : The proposal of the Fannings that a receiver be appointed for the purpose of continuing business met with opposi- tion from the other stockholders of the company," who alleged that the plant had been operated at a loss, and demanded the appoint- ment of a disinterested person to effect a sale of the property. The court, in selecting G. W. Fanning, evidently adopted the view of the objectors ; for, in doing so, C. E. Fanning, the only person, as the evidence shows, competent to manufacture the bicycle chains, was rejected, and the appointee merely directed to take "charge of all the property of any kind, the books, papers, patent rights of the corporation, and hold the same subject to the direction of this court." The extent of a receiver's authority is always to be measured by the order of appointment, and such subsequent directions as may from time to time be given. He must stand indifferent as between the parties, though appointed on the application of one of them, and prudently preserve and protect the property intrusted to him as an officer of the court. The property is in custodia legis, and the receiver acts for the court, as its creature or officer, having no powers save those conferred upon him by its orders, or reasonably to be implied therefrom. Bank of Montreal v. Chicago C. & W . R. Co., 48 Iowa 518; Booth v. Clark, 17 How. 322 (15 L. Ed. 164) ; Davis v. Gray, 16 Wall. 203 (21 L. Ed. 447) ; Attorney General v. Insur- ance Co., 89 N. Y. 94; Bishop, Equity (3d Ed.), par. 580. Indeed, the receiver has been aptly termed the arm or hand of the court, by which it seizes property in controversy, and preserves it for tne benefit of whomsoever shall ultimately become entitled thereto. 20 Am. & Eng. Enc. Law (1st Ed.) 158. The primary object is the preservation of the property, and every person under- taking the duties of a receivership must be assumed to appreciate the main and controlling purpose to be subserved in his selection. It is no injustice to him, then, that the object of his appointment be kept in mind in adjusting his accounts, and that courts, after seizing the property of litigants, will not approve of its dissipation in useless expenses, or shut their eyes to its loss through the negligence or mismanagement of its officers. Not every act within the letter of an order can be sanctioned, nor everything done without with direc- tion of the court condemned. The tests to be applied are : (1 ) Was the act under investigation within the authority conferred by an order of court? (2) If so, was it performed with reference to the preservation of the estate, as a man of ordinary sagacity and pru- dence would have performed it under like circumstances?- (3) If without authority, was it beneficial to the estate? These principles are so elementary that authorities need scarcely be cited. But see Yetzer v. Applegate, 85 Iowa 121 ; Kaiser v. Kellar, 21 Iowa 95 ; Beach, Receivers, Sec. 229, 301 ; 20 Am. & Eng. Enc. Law (1st Ed.) 120; Carr's Adm'r v. Morris (Va.), 6 S. E. Rep. 613. The property, though temporarily in the keeping of the court, is sheltered by the same rights of ownership as before seized. It 'does not sit as a bandit dividing booty," as was remarked by the court of appeals of New York in Attorney General y. Insurance 370 RECEIVERS Co., 91 N. Y. 57 (43 Am. Rep. 648). Its duty is to see that the property is conserved with the same care as is exacted from trus- tees generally. The same degree of diligence should be exacted from the receiver in keeping down expenses and shielding the prop- erty from unjust exactions as a prudent man would exert in pro- tecting and realizing from his own property. Any other rule would be inconsistent with the high responsibility involved in divesting owners of possession for the purpose of a safer administration and more just .distribution by the court. See Spieser v. Bank (Wis.), 86 N. W. Rep. 243; Henry v. Henry (Ala.), 15 South. Rep. 916. With those general rules in view, let us turn to the report of this receiver. Upon his own application, he was directed to sell a milling machine for one hundred dollars and three screw machines for seven hundred and fifty dollars. As to the first, issue was joined as to whether -the lien for rent, or of the wages of employes, within thirty days previous to his appointment, should have priority, and he was ordered to hold the proceeds of both sales subject to existing liens and "the further orders of the court." In utter disregard of these specific instructions, he paid out the entire amount for expenses in operating the plant. In passing on his conduct and in adjusting his accounts, this fund must be treated as though held as directed. Without an order, he sold a press, a chain tester and a drilling machine for two hundred and seventy dollars. This also was in violation of the order of his appointment to hold the property. Having no authority to sell; it necessarily follows that he had none to pay out the proceeds of the sale, unless fairly to be inferred f fom instructions obtained from the court. As will hereafter appear, neither the sale of this machine, nor the use of the proceeds, was contemplated by any order made ; and the receiver must be charged with its fair value, which the record fails to show was other than the price received. It seems that an electric , motor, which had not been paid for, was replevined; and in his report of October 15, 1896, the receiver advised the court of this, and that twenty-two dollars and fifty cents was* due for rent; that he had no funds to pay the same; "that, since the removal of the motor aforesaid, said receiver is without power and the means to procure same, and that, for the purpose of preserving the property and continuing the business intrusted to him, it is necessary to have some power for operating the machinery ; that orders for chains are coming in, and the machinery idle, and that it is necessary he be permitted to obtain funds for the purpose of carrying on the business, and caring for and protecting the machinery, property, business and good will of the Fanning Ball Bearing Chain Company ; that a suitable and reasonable amount for the uses and purposes stated would be three hundred dollars." He prayed for an order authorizing him "to borrow the sum of three hundred dollars wherewith to conduct the business aforesaid, and issue a receiver's certificate therefor." The court entered the fol- lowing order: "And the cause coming to be heard on the applica- tion of G. .W. Fanning, receiver, to borrow three hundred dollars STATE CENT. SAV. BK. OF KEOKUK v. FANNING B. B. CH. CO. 371 to pay out and to procure power to run the machinery to finish and put on the market the manufactured product of the defendant com- pany, and the court, after hearing the motion and arguments of counsel, and the court being fully advised in the premises, doth order and direct, by and with consent of all the parties to the suit, that the receiver be authorized and empowered to borrow three hundred dollars ($300), and issue a certificate therefor, which shall be first paid from the property, which certificate may bear interest, not exceeding eight per cent, per annum, from date of issue until paid, and the money so borrowed, or as much thereof as may be neces- sary, may be used by the receiver for the purposes aforesaid." The order entered must be construed with reference to the application, and also, we think, to the powers already possessed. Prior thereto he was without authority to operate the plant. For this purpose he asked that an indebtedness of only three hundred dollars be incurred l»y the estate, and represented that this would be a suitable amount for the purposes proposed. The parties to the litigation, all of whom were before the court, had the right to infer that this would not be exceeded. They were doubtless ready to take the risk to this extent, and yet not consent to the dissipation of property by the operation of the plant at an enormous expense and with little profit. Under the order, two purposes were to) be sub- served: (1) Power procured to run the machinery, and (2) the partially manufactured product of the company finished and put on the market. The money borrowed was to "be used by the receiver for the purpose aforesaid." Nowhere is he permitted to take other funds which might come into his hands, or to involve the estate in debt, in order to effect the objects mentioned. No other money could have been thought available, save possibly the proceeds to be derived from the sale of the bicycle chains when completed. To carry out the order, the receiver undoubtedly had the right to engage such assistance as might be reasonably' necessary. Lehigh Coal & Nav. Co. v. Central Railroad Co., 41 N. J. Eq. 167, 185 (3 Atl. Rep. 134) ; Taylor v. Sweet, 40 Mich. 736; Beach, Receivers, Sec. 275. No exception should be taken to the employment of his brother, who appears to have been possessed of special skill in making and hardening the chains. But his authority to hire was both limited in the amount to be expended and the work to be done. The broad- est construction of the order possible would not justify him in plung- ing the estate in debt for the improvement and perfecting of the machinery, and the manufacture of new tools and of articles not theretofore produced, such as chains for cigarette machines. Appellant says that "during the nine months C. E. Fanning was employed, he was working at the several machines, at the different processes, and in hardening and putting chains together, and in general work all through the plant." He admits having spent a good deal of money in getting up special dies for the Winston Cigarette Machine Company. That company soon got into trouble, and com- paratively few of the heavy chains were sold to it. He testified that : ". . . The light chains had been furnished to them before, and 372 .RECEIVERS did not prove satifactory. We had to change the method of manu- facture in order to manufacture a heavy chain. All new dies had to be made to make them, and new tools had to be made. The old chain that we have constructed could not be used. A new chain had to be made, heavier. I bought some heavy steel. . . . There were other avenues of business which I thought I might open up, and I thought I might make a chain to be used for running small machines. The bicycle business had gone to pieces, and I was endeavoring to put it over on some more substantial basis. I was figuring on putting it on light machinery, and I was trying to get it in shape so that it could be used on automobiles." The most liberal interpretation of the order could not justify the receiver in thinking the court's design was to set him up in business, and allow the use of the property of litigants in carrying on his experiments. What he did in that respect must be treated sible. A small amount was realized from the sale of the heavy as done on his own account, for which the estate is in no way respon- chains, but the record fails to show how much, and for this reason we are unable to make a proper credit for the item. It does not in finishing the chains as contemplated, and paying one month's rent, appear that more than three hundred dollars was necessarily used and only this sum should be allowed for that purpose. A statement of the receipt for goods sold and his expenses incurred for the eight months beginning November 10, 1896, may throw some light upon appellant's peculiar notions of conducting business for the court : First_ month's receipts $24.77 expenses $120.76 Second " " 3°-Q3 Third " " 105.91 Fourth " " 35.63 Fifth " " 44.93 Sixth " " :.... 168.48 Seventh " 59.71 Eighth " " 41.89 178.32 142.29 223.97 143-94 206.43 I33-83 112.14 This computation is on the basis of paying C. E. Fanning one hundred dollars per month for his work, and includes nothing for the rent of twenty-two dollars and fifty cents per month, nor for the serv- ices of the receiver, who claims to have devoted all of. his time to the business, and that it was worth one hundred dollars per month. These items are included in the report, and the receiver modestly asks the approval by this court of his management of a business so conducted as that the gross receipts during eight months were five hundred and eleven dollars and thirty-five cents, and his expenses two thousand two hundred and forty-one dollars and sixty-eight cents. Thereafter he received for goods put on the market one hundred and seventy-four dollars and eighty cents and paid in expenses one hundred and twenty-two. dollars and twenty-seven cents. The figures given, though possibly not entirely accurate, are substantially so. STATE CENT. SAV. BK. OF KEOKUK v. FANNING B. B. CH. CO. 373 Excuse or justification is attempted in several ways: (a) He testified that he could not discharge his brother until he had enough money to pay him. But he knew when the amount he was author- ized to expend was exhausted. One working from such an office takes his chances of being paid when money is available. The excuse is frivolous, (b) Again, and with no little elation, he points out that, while the company previous to his appointment operated the plant at a loss of six hundred and fifty dollars a month, he had managed to sacrifice but little over two hundred of the litigant's property during each like period. Even this financial feat does not appeal strongly to men accustomed to think the object of business enterprise to be gain, (c) He claims to have had. a prospect of dis- posing of the patents owned by the company in England, and that, if the plant were not kept in operation, that fact would be ascer- tained, and a sale defeated. The company had been in correspond- ence/concerning this matter before his appointment, and he received a few letters thereafter. These were from agents inquiring about the patents, and assuring him all possible was being done to effect a sale. But he received no offers, and but one inquiry whether he would accept a stated sum. There was nothing in the situation calculated to excite confidence in the probability of a sale, nor to indicate that, if likely, stopping the plant would affect it. Even if both were probable, however, he was not authorized to operate the plant for any such purpose, and the objects suggested furnished no justification for so doing, (d) It is said that he talked with the successive judges of the superior courtsconcerning the receivership. He so testified, and that one of them directed him to advise with the judge, rather than his attorneys, which the court had authorized him to employ. That particular judge has departed this life, and probably this accounts for the testimony being undisputed. Reliance is not put on any definite order. The general statement that he talked or consulted with the judges seems to have been thought enough. Our curiosity to learn the particular virtue of having con- versed with such an officer has not been satisfied by any explanation in the record. The statute places the receiver under the direction of the court or judge. Sections 3823, 3824, Code. The instructions or orders are at all times to be in writing and entered of record. See Sections 3784, 3846, Code; Bank v. Judd, 116 Iowa 26. As there is no pre- tense that any order was made, save in writing, or that the judges had any knowledge that the property was being dissipated by the receiver in the pretended operation of the plant, this evidence has no bearing on the case, (e) Appellant has much to say of the fact that Audrus' lease of the building had a long period to run. We do not understand what bearing this should have, save in moving the court in entering orders. Certainly it furnished no excuse for the receiver, as property might better be subjected to the lien for rent than squandered, (f) It. is argued that several of those intefestgd knew something of what the receiver was doing. If so, they did nothing to indicate acquiescence therein. The details were not 374 RECEIVERS understood, and no one is shown to have had knowledge that he was operating the plant otherwise than as directed. The authorities agree that very little discretion is allowed a receiver in the matter of expenses, and generally he is not to be credited with payments of those incurred without leave of the court. Beach, Receivers, Sec. 750; Patrick v. Eells (Kan.), 2 Pac. Rep. 116; In re Sheets Lumber Co. La. (27 So. Rep. 809) ; Cowdrey v. Railroad Co., 93 U. S. 352 (23 L. Ed. 950). It is not to be understood that the receiver must go to court with every trifling matter. Modern practice permits them to exercise their sound discretion in many matters relating to the care and man- agement of property in their custody, subject to the subsequent approval of the court, which will be given when the officer has acted in good faith, and what he has done appears to have been beneficial to the parties interested. Beach, Receivers, Sec. 269., See U. S. v. Late Corporation of Church of Jesus Christ of Latter Day Saints (Utah), 21 Pac. Rep. 506; Railroad Co. v. Herndon (Tex. Civ. A PP-)> 33 S. W. Rep. 377; Henry v. Henry (Ala.), 15 South. Rep. 916. But this is done at their own risk. In so important a matter as the operation of a manufacturing plant, an order should be first obtained, and the receiver keep strictly within its limits. Here, as we have seen, he disregarded the terms of the order, and, in incur- ring the large indebtedness, acted entirely outside of the authority conferred. But even were we to construe the order as permitting discretion in the matter of expenses, we should have no hesitation in declaring that the continuance of the business under the circum- stances disclosed was in disregard of his duty to preserve the estate. Not that such officers 'must always reap profits when conducting the business of insolvents. They may often be justified Jn operating at a loss. But when it becomes apparent that the business cannot be continued saye at the expense of the estate, and no ulterior benefit is reasonably to be anticipated, the officer, in the exercise of reason- able prudence in the care of the property intrusted to his keeping, must stop and proceed no further without specific directions. The appellant has received on accounts and for property sold one thousand nine hundred and sixty-seven dollars and sixty-one cents. Of this he was authorized to use three hundred dollars in paying a month's rent, of twenty-two dallars and fifty cents, and finishing uncompleted materials. He should also be allowed interest on this item, of nineteen dollars and twenty-seven cents. Besides the above, he has paid Andrus two months' additional rent, or forty- five dollars. Deducting these credits, there remains one thousand five hundred and seventy-nine dollars and eighty-four cents. Forty- four dollars and forty-two cents were expended for insurance. A loss occurred, and one hundred and thirty-two dollars was collected. This is claimed to have b een expended in repairing the property injured, but without the direction of the court. Such expense is not shown to, have been of any benefit to the estate. Some of the receipts must have been from sales of the heavy chains. The court ordered the receiver to pay into the clerk's hands one thousand FOSDICK v. SCHALL 375 dollars and thirty dollars for the attorney who defended him. The misconduct of the receiver occasioned that expense, and its payment by him cannot be complained of. Was the difference between this one thousand dollars and the one thousand five hundred and seventy- nine dollars and eighty-four cents, less receipts for heavy chains, together with the balance of insurance money, reasonable compen- sation for all the expenses in the care and sale of the property? Ordinarily it should have been much less, but in view of many sales in small quantities, and the circumstances disclosed, we are inclined to approve the order made by the superior court. 2 Affirmed. FOSDICK v. SCHALL. Supreme Court of the United States, 1878. 99 United States, 235. In 1873 the Chicago, Danville & Vincennes Railroad Company made an agreement with Michael Schall to purchase a number of coal cars which until paid for were to remain his property. Notes were given by the railroad, of which forty-four thousand three hundred and twenty-three dollars were paid and one hundred and ten thousand three hundred and thirty-four dollars remained unpaid. Prior to this the railroad had mortgaged all its franchises and prop- erty to Fosdick and Fish, trustees, to secure . certain bonds. On February 22, 1875, the railroad was placed in the hands of receivers appointed by the Illinois state court, but these receivers were super- seded in June, 1875, by Anderson, the receiver appointed by the United States circuit court in proceedings brought by Fosdick to foreclose the mortgages. The receiver Anderson, finding that the cars were necessary for the use of the road, entered into an arrange- ment with Schall, subject to the approval of the court, by which they were valued at four hundred and twenty dollars each, and it was agreed that Schall should be paid seven dollars a month for each car as rent. On February 7, 1876, by decree of the court, the mortgaged property was sold for one million four hundred and fifty thousand dollars, not, however, including the cars of Schall, who had intervened in the proceedings. Upon final hearing the court- ordered the cars restored to Schall and that fourteen thousand five hundred and sixty-nine dollars and seventy-two cents be paid to him out of the funds in court as rent for the cars for the six months prior to the state receivership and during the state receivership. It nowhere appeared that there were any funds in court to the credit 2 See also, Hooper v. Winston, 24 111. 353 ( i860) ; Cowdrey v. Galveston R Co., 93 U. S. 352 (1876) ; Lehigh C. Co. v. Cent. R. N. J., 35 N. J. Eq 426 (1882) ; Wycoff v. Scho field, 103 N. Y. 630 ( 1886) ; Cake v. Mohun, 164 U. S. 311 (1896) ; Gillespie v. Blair G. Co., 189 Pa. 50 (1899) ; Henry v. Henry, 103 Ala. 582 (1893) ; Rochat v. Lee, 137 Cal. 497 (1902) ;■ Schwartz v. Gravel P. Co., no La. 619 (1903)- 376 RECEIVERS of the cause except such as arose from the sale of the mortgaged property. From this decree Fosdick and Fish and the intervening bondholders appealed. 1 Waite, C. J. : Was the order for the payment out of the fund .11 court of the rent of the cars, during the time they were used by the receivers appointed by the state court and for six months before, justifiable under the circumstances of this case? As to the second question, we have no doubt that when a court of chancery is asked by railroad mortgagees to appoint a receiver of railroad property, pending proceedings for foreclosure, the court, in the exercise of a sound judicial discretion, may, as a condition of issuing the necessary order, impose such terms in reference to the payment from the income during the receivership of outstanding debts for labor, supplies, equipment or permanent improvement of the mortgaged property as may, under the circumstances of the particular case, appear to be reasonable. Railroad mortgages and the rights of railroad mortgagees are comparatively new in the history of judicial proceedings. They are peculiar in their character and affect peculiar interests. The amounts involved are generally targe, and the rights of the parties oftentimes complicated and con- flicting. It rarely happens that a foreclosure is carried through to the end without some concessions by some parties from their strict legal rights, in order to secure advantages that could not otherwise be attained, and which it is supposed will operate for the general good of all who are interested. This results almost as a matter of necessity from the peculiar circumstances which surround such litigation. The- business of all railroad companies is done to a greater or less extent on credit. This credit is longer or shorter, as the neces- sities of the case require; and when companies become pecuniarily embarrassed, it frequently happens that debts for labor, , supplies, equipment and improvements are permitted to accumulate, in order that bonded interest may be paid and a disastrous foreclosure post- poned, if not altogether avoided. In this way the daily and monthly earnings, which ordinarily should go to pay the daily and monthly expenses are kept from those to whom in equity they belong, and used to pay the mortgage debt. The income out of which the mort- gagee is to be paid is the net income obtained by deducting from the gross earnings what is required for necessary operating and man- aging expenses, proper equipment and useful improvements. Every railroad mortgagee in accepting his security impliedly agrees that the current debts made in the ordinary course of business shall be paid from the current receipts before he has any claim upon the income.' If for the convenience of the moment something is taken from what may not improperly be called the current debt fund, and put into that which belongs to the mortgage creditors, it certainly is not inequitable for the' court, when asked by the mortgagees to "The statement of facts is abridged and the arguments of counsel and part of the opinion of the court omitted. FOSDICK v. SCHALL 377 take possession of the future income and hold it for their benefit, to require as a condition of such an order that what is due from the earnings to the current debt shall be paid by the court from the future current receipts before anything derived from that source goes to the mortgagees.. In this way the court will only do what, if a receiver should not be appointed, the company ought itself to do. For, even though the mortgage may in terms give a lien upon the profits and income, until possession of the mortgaged premises is actually taken or something equivalent done, the whole earnings belong to the company and are subject to its control. Galveston Railroad Company v. Cowdrey, 11 Wall. 459; Gilman et al. v. Illinois & Mississsippi Telegraph Co., 91 U. S. 603; American Bridge Co. v. Heidelbach, 94 id. 798. The mortgagee has his strict rights which he may enforce in the ordinary way. If he asks no favors, he need grant none. But if he calls upon a court of chancery to put forth its extraordinary powers and grant him purely equitable relief, he may with propriety be required to submit to the operation of a rule which always applies in such cases, and do equity in order to get equity. The appoint- ment of a receiver is not a matter of strict right. Such an applica- tion always calls for the exercise of judicial discretion; and the chancellor should so mould his order that while favoring one, injus- tice is not done to another. If this cannot be accomplished, the application should ordinarily be denied. We think, also, that if no such order is made when the receiver is appointed, and it appears in the progress of the cause that bonded interest has been paid, additional equipment provided or lasting and valuable improvements made out of earnings which ought in equity to have been employed to keep down debts for labor, supplies and the like, it is within the power of the court to use the income of the receivership to discharge obligations which, but for the diversion of funds, would have been paid in the ordinary course of business. This, not because the creditors to whom such debts are due have in law a lien upon the mortgaged property or the income, but because, in a sense, the officers of the company are trustees of the earnings for the benefit of the different classes of creditors and the stockholders ; and if they give to one class of creditors that which properly belongs to another, the court may, upon an adjustment of the accounts, so use the income which comes into its own hands as, if practicable, to restore the parties to their original equitable rights. While ordinarily this power is confined to the appropriation of the income of the receivership and the proceeds of moneyed assets that have been taken from the company, cases may arise where equity will require the use of the proceeds of the sale of the mortgaged property in the same way. Thus it often happens that, in the course of the administration of the cause, the court is called upon to take income which would otherwise be applied to the payment of old debts for current expenses, and use it to make permanent improvements on the fixed property, or to buy additional equipment. In this way the value of the mortgaged property is not unfrequently materially 378 RECEIVERS increased. It is not to be supposed that any such use of the income will be directed by the court, without giving the parties in interest an opportunity to be heard against it. Generally, as we know both from observation and experience, all such orders are made at the request of the parties or with their consent. Under such circum- stances, it is easy to see that there must sometimes be a propriety in paying back to the income from the proceeds of the sale which is thus again diverted from the current debt fund in order to increase the value of the property sold. The same may sometimes be true in respect to expenditures before the receivership. No fixed and inflexible rule can be laid down for the government of the courts in all cases. Each case will necessarily have its own peculiarities, whch must to a greater or less extent influence the chancellor when he comes to act. The power rests upon the fact that in the admin- istration of the affairs of the company the mortgage creditors have got possession of that which in equity belonged to the whole or a part of the general creditors. Whatever is done, therefore, must be with a view to a restoration by the mortgage creditors of that which they have thus inequitably obtained. It follows that if there has been in reality no diversion, there can be no restoration; and that the amount of restoration should be made to depend upon the amount of the diversion. If in the exercise of this power errors are committed, they, like others, are open to correction on appeal. All depends upon a proper application of well-settled rules of equity jurisprudence to the facts of the case, as established by the evidence. In this case no special conditions were attached to the order appointing a receiver in the circuit court of the United States ; and it is not contended that the intervener had brought himself within the rule fixed by the state court, in respect to the payment of general creditors. He asks to be paid a rent for his cars; but he entered into no express contract with the company which requires such a payment, and there is nowhere to be found any proof of an implied obligation to make such compensation. Two years and more before the appointment of a receiver by the state court, he contracted to sell his cars to the company at an agreed price, payable In Instal- ments, secured by what was in legal effect a paramount lien upon the cars. Payments were made according to the contract until October, 1874, when they stopped. The cars remained in use after that, not under a new contract of lease, but under the old contract of sale. The price agreed upon not having been paid in full, the power of reclamation, which was reserved, has been exercised and sustained. The cars were not included in what was sold at the fore- closure sale, and consequently have contributed nothing directly to the fund now in court for distribution. So far as appears, no moneys growing out of the receivership remain to be applied on the bonded debt ; and, if there did, through the rent already paid by Receiver Anderson, full compensation has been made for all addi- tions to that fund by means of the use of the cars. There is nothing to show that the current income of the receivership or of the com- pany has been in any manner employed so as to deprive this creditor CHICAGO & ALTON R. R. CO. v. U. S. AND MEX. TRUST CO. 379 of any of his equitable rights. In short, as the case stands, no equita- ble claim whatever has been established upon the fund in court. Prima face that fund belongs to the mortgage creditors, and the presumption which thus arises has not been overcome. Schall, for the balance, his due, after his own security has been exhausted, occupies the position of a general creditor only. The decree of the circuit court will be reversed so far as it directs the payment of the sum of fourteen thousand five hundred and sixty-eight dollars and seventy-five cents to Schall, the appellee, from the fund in court; but in all other respects it is affirmed, and the cause remanded with instructions to so modify the decree as to make it conform hereto. 2 The costs of the appeal must be paid by the appellee; and it is so ordered. CHICAGO & ALTON RAILROAD CO. v. UNITED STATES & MEXICAN TRUST CO. Circuit Court of Appeals of the United States, Eighth Cir- cuit, 1915. 225 Federal, 940. Suit by the United States & Mexican Trust Company and others against the Kansas City, Orient & Mexico Railway Company and others, in which the Chicago & Alton Railroad Company inter- vened. From a judgment denying the intervener relief, it appeals. 1 Sanborn, J.: The complaint of the appellant in this case is that the court below refused to order one thousand and seventy- four dollars and fourteen cents, balances due it from the Kansas City, Orient & Mexico Railway Company for car repairs, loss and damage claims on shipments of freight and overcharges, paid out of the corpus of the latter's property in preference to the claims of bondholders secured by a prior mortgage thereon. The mortgage was made on February 1, 190 1, and it created a lien upon the prop- erty, the after-acquired property and the income of the Orient Com- pany to secure the payment of the bonds issued thereunder. The repairs and overcharges were made, and the loss and damage claims were incurred between January 9, 1910, and March 7, 1912, when a creditors' bill was filed against the Orient Company, and receivers were appointed by the court below, who took possession of its prop- 2 See Bispham's Equity (9th Ed.), Sec. 344, and Howes v. Railroad, 29 N. T- Eq. 4 (1878) : Karn v. Rarer I. Co., 86 Va. 754 (1800) ; KneelanA v. Luce, 141 U. S. 491 (1891) ; Lewis v. Steel Co., 183 Pa. 248 (1897) ; Trust Co. v. Goble R. Co., 44 Ore. 370 (1904) ; International T. Co. v. Decker, 152 Fed. 78 (1907); III. Steel Co. v. Ramsey, 176 Fed. 853 (1910I. For England, see In re British Power Co. (1906), 1 Ch. 497, (1910) 2 Ch. 470; In re Boynton (1910), 1 Ch. 519; Moss S. S. Co. v. Whinney (1912), A. C. 254- 1 Part of the opinion of the court is omitted. 380 RECEIVERS erty and proceeded to operate its railroad. Afterwards, on Augtist 7, 191 2, the trustee named in the mortgage filed a bill to foreclose it, and on December 24, 1912, the two suits were consolidated, the receivership was extended over the foreclosure suit, and the income of the railway company was first impounded for the benefit of the bondholders secured by the mortgage. On January 6, 1914, the Chicago & Alton Railroad Company intervened in the consolidated cause, set forth its claim and prayed its payment in preference to the payment of the claims of the bond- holders'. On February 2, 1914, a decree of foreclosure of the mort- gage and of sale of the mortgaged premises to pay the bonds, aggre- gating twenty-four million five hundred and thirty-eight thousand dol- lars, which were thereby adjudged to be secured by the mortgage by a first lien from February 1, 1904, on the property, the after-acquired property and the income of the railroad company, was rendered, and on July 6, 1914, the mortgaged property was sold for six million and one thousand dollars to the Kansas City, Mexico & Orient Rail- road Company. There was no diversion of the income of the railway company from the payment of the current expenses of the ordinary operation of the railroad for wages, materials, supplies and like necessities of operation to the payment of claims of an inferior class, such as for interest on a bonded debt, for borrowed money and for unnecessary improvements of the mortgaged property, and the only question was whether or not the claim of the intervener was entitled in equity to a preference over the claims of the bond- holders in payment out of the proceeds of the body of the property. The court below was of the opinion that one thousand and seventy- four dollars and fourteen cents of it was not so entitled, and the intervener has appealed to this court to reverse that decision. The first impression which the facts in this case make upon the mind is that the ruling of the court was right. The railway company made and recorded a trust deed of its property, its after- acquired property, and its income on February 2, 1901, whereby it fastened a very lien thereon to secure the payment of the bonds issued thereunder. Thereafter the intervener, in the face of the prior mortgage, extended credit to the Orient Railway Company for the balances of car repairs, loss and damage claims, and over- charges for which it makes its claim. The lien of the mortgage was of record, and the intervener had legal notice of it. After that mortgage was made and recorded the Orient Company had no power by any contract or promise it could make to give any of its other debts a lien on its property superior to that of the mortgage bond- holders. When these balances for car repars, loss and damage claims and " overcharges are analyzed and thoughtfully considered, they amount to nothing more than simple debts of the Orient Company for labor done and for money advanced by the intervener for the mortgagor company subsequent to and with notice of the prior lien of the mortgage. So it seems that the intervener has no right at law or in equity by virtue of any promise or agreement of the Orient Company, or of the bondholders, to payment in preference to the latter out of the proceeds of the mortgaged property. CHICAGO & ALTON R. R. CO. v. U. S. AND MEX. TRUST CO. 381 It is true that a mortgagee of the property and income of an operating railroad company impliedly agrees that the current expenses of the ordinary operation of the railroad for wages, sup- plies, materials and such necessities of operation for six months before the impounding of the income for its benefit may be first paid out of the gross income of operation, before that net income arises which the mortgagee's lien holds fast, and that a court of equity administering railroad property in a foreclosure suit may prefer unpaid claims for such current expenses incurred within six months before the impounding of the income to the claims of bond- holders secured by a prior mortgage in its distribution of the surplus income of the property, and that if income has been diverted from the payment of -such current expenses, leaving some of them unpaid, to the payment of other debts of the mortgagor not in this prefer- ential class, the court may restore from the proceeds of the corpus of the property the amount thus diverted and apply it to the / payment of such current expenses. But if there has been no diversion there can be no restoration, and the amount of the restoration cannot exceed the amount of the diversion. Conceding, without admitting, that the consideration of the claim of the intervener is a part of the current expenses of the ordinary operation of the railroad for necessities of operation, such as wages and supplies, so that it might be preferred in payment out of surplus income, or out of moneys taken from the proceeds of the corpus of the property and restored to the place of moneys diverted from the payment of current expenses, yet there is no such surplus income in this case, and there was no such diversion, therefore there can be no restoration, and no payment of this claim out of the proceeds of the sale of the prop- erty. It is only when current income has been diverted from the payment of current expenses of the ordinary operation of the rail- road for wages, supplies and such necessities of operation, leaving a part of such current expenses unpaid, and applied to the payment of interest on bonds, or of claims for construction, or for unneces- sary betterments and the like, which inure to' the benefit of the bondholders, that claims for such current expenses may be paid out of the proceeds of the body of the property. Gregg v. Metropolitan Trust Co., 197 U. S. 183, 190, 25 Sup. Ct. 415, 49 L. Ed. 717 ; Carbon Fuel Co. v. Chicago, C. & L. R. Co., 202 Fed. 172, 174, 120 C. C. A. 460 ■Illinois Trust & Savings Bank v. Doud, 105 Fed. 123, 131, 132, 148, 149, 44 C. C. A. 389, 52 L. R. A. 481 ; Rpdger Ballast Car Co. v. Omaha, K. C. & E. R. Co., 154 Fed. 629, 632, 83 C. C. A. 403. . Notwithstanding the facts, and the established principles and rules of equity adverted to, counsel for the intervener insist that its claim should be preferred in payment out of the proceeds of the sale of the body of the mortgaged property. They contend that it should be so preferred in payment because the intervener was a common carrier, and a connecting carrier with the mortgagor company, and was in duty bound under law to accept and carry shipments of freight billed over its road by the mortgagor, and they cite in support of this contention the Act of Congress which imposes on the initial carrier 382 RECEIVERS liability to the holder of a bill of lading or receipt for an interstate shipment for any loss or damage to the property shipped caused by it, or by any common carrier to which the property is delivered — 34 Stat. 584, 595, C. 3591, Sec. 7^ U. S. Comp. Stat. 1913, Sec. 8592, P- 3^75 (11) — and the fact that it is unlawful for a common carrier engaged in interstate commerce to overcharge a shipper. They cite no Act of Congress, however, and no decision of any court, that a mortgagor railway company, which, as a common carrier, or a com- mon carrier which, as a connecting carrier therewith, or both together, may, by failing to pay their debts to each other, or by over- charging shippers, or by any other wrongful act, deprive bondholders of the mortgagor company of their prior lien, or impose upon them penalties for the wrongdoing of the carriers. Conceding, but not admitting, that it is the duty of connecting carriers engaged in inter- state commerce to receive and carry freight billed over their lines by other railroad companies, it does not follow that the discharge of that duty, or the failure to discharge it, deprives bondholders secured by a prior mortgage of their lien, or makes any debt or obligation of the mortgagor company arising out of the discharge or out of the failure to discharge that duty superior in equity to the lien of the bondholders. As the assumption of the duties and the conduct of the business of a common carrier, and the continuance of that assumption and the discharge of that duty, are not com- pulsory upon any corporation, but constitute a voluntary undertak- ing, a corporation which enters into or continues that undertaking in the face of a mortgage on a connecting line does not thereby render its claims against the mortgagor company arising therefrom superior in equity to those of the bondholders secured by a prior mortgage upon its property. The second contention of counsel for the intervener is that its claim is entitled to preference in payment out of the corpus of the mortgaged property, because it is founded on services rendered by it which were "absolutely necessary to the business of the railway to keep the road a going concern from day to day, so that the com- pany's property would be preserved, and its public duty discharged." It is.a complete answer to this contention that the supreme court has decided, and that decision still stands without reversal or modifica- tion, that even a claim of such a nature accruing within six months prior to the receivership may not be preferred in payment out of the corpus of the mortgaged property to the claim of the bondholders secured thereon in the absence of that diversion of income which is lacking in this case. Gregg v. Metropolitan Trust Co., 197 U. S. 183, 190, 25 Sup. Ct. 415, 49 L. Ed. 717. Moreover, there are two grounds — (1) the diversion of income, and (2) the necessity or business policy of immediate payment — on which claims for current expenses for necessities of operation have been paid out of the corpus of the property. Miltenberger v. Logans- port Railway Co., 106 U. S. 286, 398, 311, 1 Sup. Ct. 140, 27 L. Ed. 117; Union Trust Co. v. Illinois Midland Co., 117 U. S. 434, 457, 6 Sup. Ct. 809, 29 L. Ed. 963. But the decisions of the supreme CHICAGO & ALTON R. R. CO. v. U. S. AND MEX. TRUST CO. 383 court in the cases in which such claims were allowed on the second ground were rendered more than fifteen years ago, before the series of decisions founded in Kneeland v. American Loan & Trust Co., 136 U. S. 89, 98, 10 Sup. Ct. 950, 34 L. Ed. 379; Morgan's Co. v. Texas Central Railway, 137 U. S. 171, 196, 198, 11 Sup. Ct. 61, 34 L. Ed. 6^5 ; Thompson v. Valley Railroad Co., 132 U. S. 68, 71, 73, 10 Sup. Ct. 29, 33, L. Ed. 256; Thomas v. Western Car Co., 149 U. S. 95, no, 13 Sup. Ct. 824, 37 L. Ed. 663; Southern Railway Co. v. Carnegie Steel Co., 176 U. S. 257, 296, 20 Sup. Ct. 347, 44 L. Ed. 458; Lackawanna Iron & Coal Co. v. Farmers' Loan & Trust Co., 176 U. S. 298, 315, 20 Sup. Ct. 363, 44 L. Ed. 475, and Gregg v. Metropolitan Trust Co., 197 U. S. 183, 190, 25 Sup. Ct. 415, 49 L. Ed. 717, which so narrowly limit and clearly define preferential claims, were rendered, and the earlier cases were largely controlled by the element of estoppel. A thoughtful consideration of those cases and others which have followed them, and of the opinions in the later cases in the supreme court which have been cited, convinces that if claims of the nature of those allowed as preferential in the Miltenberger and Union Trust Company cases were now presented, under objection of bondholders under no estoppel, to the supreme court, they would be denied preference over the claims of the bond- holders in payment out of the corpus of the mortgaged property. Again, if a claim for the current expenses of the necessities of the operation of a railroad is payable in preference to the claims of secured bondholders out of the corpus of the property in any case in the absence of diversion of the income from such expenses, it is only when such preferential payment is necessary to keep the rail- road a going concern, or when its preferential payment is necessary to prevent a loss at least equal to the amount of the payment. Gregg v. Metropolitan Trust Co., 197 U. S. 186, 187, 25 Sup. Ct. 415, 49 L. Ed. 717; Moore v. Donahoo, 21J Fed. 177, 181-183, 133 C. C. A. 171 ; Taylor v. Delaware & E. R. Co., 213 Fed. 622, 624, 130 C. C. A. 214. The evidence in this case goes no further than the testi- mony of one witness that it was not necessary for the mortgagor company, or the receivers, to ship freight on the railroads of other companies, but that they could take it on junction settlement, instead of on interstate account, although they generally have such interline accounts with connecting carriers as that out of which the inter- vener's claim for the balances arose, and that if these claims for balances were unpaid, and the connecting carriers refused to carry their freight, this would disrupt their freight, and be a serious detri- ment to their business. This evidence falls far short of proof that the preferential payment of the intervener's claim was either neces- sary to keep the Orient Company's railroad a going concern, or to prevent a loss as great as the amount of its payment, and it is there- fore not entitled to preference in payment on that ground. 2 Order affirmed. 2 See 'further. Virginia Co. v. Cent. R. of Ga., 170 U. S. 355 (iS Amer. B. & S. Co. v. Pere Marquette R. Co., 205 Fed. 14 (1913); Taylor 384 RECEIVERS RAHT v. ATTRILL ET AL. Court of Appeals of New York, 1887. 106 N'ew York, 423. Appeals by various claimants from order of the general term of the supreme court, in the second judicial department, made Sep- tember 16, 1886, which reversed an order of special term confirming the report of a referee as to the disposition of surplus moneys arising on foreclosure sale herein. This action was brought to foreclose a mortgage executed by defendant, Attrill, to one Littlejohn, and by him assigned to plain- tiff's testator. In February, 1880, the Rockaway Beach Improve- ment Company, Limited, was organized under the Business Cor- poration Act, Chapter 611, Laws 1875. It bought over one hundred acres of land at Rockaway Beach, subject to a purchase money mortgage, which is the mortgage in suit. On April 1, 1880, said company executed a mortgage on the same property to William K. Soutter, trustee, to secure the payment of seven hundred bonds of one thousand dollars each. Twenty-six of these bonds were dis- posed of for value, the balance pledged at fifty cents on the dollar, as collateral for loans to the company. The company became emuar- rassed, and on August 2, 1880, Henry Y. Attrill, a large stockholder, began an action against it on behalf of himself and all other stock- holders who should unite with him, praying for the appointment of a receiver and the dissolution of the company. A receiver was appointed, who under various orders of the court, specified in the opinion herein, issued his certificates as therein stated. The order of the special term awarded the surplus to the holders of the receiv- •ers certificates issued under the first order. 1 Andrews, J. : The scheme set on foot by the principal stock- holder, with the consent of a majority of the trustees of the Rock- away Beach Improvement Company, for the administration of its affairs and for the completion, furnishing and operating the hotel through the instrumentality of a receiver appointed by the court, has proved a signal and disastrous failure. The receiver was appointed August 2, 1880, within six months after the organization of the company. Prior to that date the company had expended more than three hundred and fifty thousand dollars, raised on the sale and hypothecation of its bonds, secured by the trust mortgage to Soutter, leaving the hotel building and structures but partially com- v. Del. & G. R. Co., 213 Fed. 622 (1914) ; Pa. Steel Co. v. City R. Co., 216 Fed. 458 (1914) ; Moore v. Donahoo, 217 Fed. 177 (1914). 1 The statement of facts, arguments of counsel and part of the opinion are omitted. The order of the general term was affirmed with 'modifica- tions. RAHT v. ATTRILL et al. 38s pleted, and had exhausted all its available means, and was indebted in the sum of nearly three hundred thousand dollars for labor, mate- rials and furniture, which it had no means to pay. The receiver, a few days after his appointment, made his first application to borrow money on receiver's certificates, and on the 17th of August an order was made ex parte at special term, authorizing him to borrow one hundred and thirty thousand dollars, for the "purpose of paying the employees of said company," and to issue therefor certificates containing on their face a declaration that the debt represented thereby was "a debt of the receiver incurred for the benefit and protection of the property in his hands, and a first lien thereon prior to the mortgage to William K. Soutter, trustee, for seven hundred thousand dollars, executed April 1, 1880, and to the interest on said mortgage." From time to time thereafter, and up to May, 1881, orders of a similar character were obtained, authorizing the issuing of further certificates for money to "furnish, finish and operate the hotel," also with priority of lien over the Soutter mortgage. Certifi- cates were issued under the various orders to the amount in all of between three hundred and fifty thousand dollars and four hundred thousand dollars, the proceeds of which presumably were used to carry forward the hotel enterprise. In May, 1881, while the Attrill suit, in which the orders were granted, was pending, an action was commenced by the attorney general to dissolve the corporation. Thereafter, in September, 1881, an action was commenced by Raht, executor, to foreclose the original purchase money mortgage of seventy-two thousand dollars, which went to a decree April 10, 1882, and under which the hotel property was sold January 31, 1883, making a surplus of 'eighty-six thousand two hundred and eighty- three dollars and thirty-nine cents, the distribution of which is the subject of the present controversy. It will be seen from this general * statement that the efforts of the receiver to administer the property "for the benefit of all concerned," were terminated after a million dollars had been expended in improving it, in a sale of the whole property of the corporation for a sum of less than two hundred thousand dollars, and all that is left from the wreck for the payment of creditors, whose aggregate claims exceed eight hundred thousand dollars, is the salvage of eighty-six thousand dollars. This case illustrates what I apprehend has been the common experience where a court departing from its appropriate judicial function has under- taken to manage and carry on the business of a failing and insolvent, corporation. The principal controversy is between the mortgage creditors under the Soutter mortgage and the holders of the one hundred and ten thousand dollars of certificates issued under the order of August 17, 1880. There is a controversy between the holders of the different classes of certificates. The holders of certificates issued under the orders subsequent to August 17, 1880, insist that they are entitled to share ratably in the surplus with the holders of the certificates first issued, which claim has been adjudicated against them in this action. The question becomes unimportant if it shall be held that the mort- 386 RECEIVERS gage creditors have the first lien on the fund in question, as their claims largely exceed the whole surplus. Except for the provision in the order of August 17, 1880, giving to the certificates issued thereunder priority of lien to the Soutter mortgage, there, of course, could be no question as to the right of the bondholders to a preference. As between creditors by mortgage and general creditors, the former are entitled to priority of payment out of the mortgaged property by their contract, and by law of the land. The law recognizes the validity of contracts of mortgage and enforces them, subject to certain regulations for the protection of subsequent purchasers or incumbrancers. The lien of the mortgage attaches not only to the land in the condition at which it was at the time of the execution of the mortgage, but as changed or improved by accretions, or by labor expended upon it while the mortgage is in existence. Creditors having debts created for money, labor or materials used in improving the mortgaged property acquire on that account no legal or equitable claim to displace or subordinate the lien of the mortgage for their protection. The order of August 17, 1880, assumes to create a prior equitable lien in favor of the holders of certificates. This is put in the order on the ground that the debt authorized was for the benefit and protection of the property. There are no facts recited in the order nor were any presented to the court in the affidavit upon which the order was granted, which afford the slightest justification for subverting and postponing the prior legal lien of the mortgage creditors, without their consent, to the debtr authorized to be created by the order. The fact that the company was owing debts for labor created no equity for their payment in preference to the bondholders. In view of the decision in the case of Metropolitan Trust Company v. Tonawanda Valley and Cuba Railroad Company (103 N. Y. 245), it is needless to say that, how- ever meritorious these claims were, this of itself presented no reason or justification for paying them out of the property of the bond- holders by depriving them of the security pledged to them before the labor debts were contracted. The affidavit upon which the order of August 17th was based shows that the company was in serious financial embarrassment, but falls far short of disclosing any extraor- dinary emergency which called for extraordinary methods for the preservation of its property. But the validity of the order, so far as it assumes to give priority to holders of certificates to be issued thereunder, was sought to be supported on the inquiry before the referee in the surplus money proceedings, on a ground which was not presented to the court when the order was granted. This ground, as stated in the report of the referee, is, in substance, that a large number of workmen, com- prising eight hundred or a thousand men, whose wages, during May, June and July, were in arrears, but who had continued work under promises of payment, all of which had been broken, had reached a state of absolute destitution and, in many cases, of starvation, and that at the time the order was made they had stopped working, but remained on the premises and had become riotous in their language RAHT v. ATTRILL et al. 387 and demeanor and threatened, unless paid, to burn the hotel building and erections and personal property therein, and the referee found that but for the action of the bankers who took the certificates and advanced the funds by which the receiver was enabled to pay off the arrears of wages, the hotel and other property of the company "would, in all probability, have been destroyed or seriously injured." The question presented is, whether these circumstances justified, or, if presented to the court, would have justified, the order prefer- ring advances made thereunder to the lien of the mortgage. Before coming to this question, however, it is to be observed that the order was granted in a suit to which neither the trustee of the mortgage nor the bondholders were at the time parties, and without, so far as appears, any notice of the application for the order having been given to them or any of them. The original parties to the suit were Attrill, the principal stockholder of the company; who was plaintiff, and the corporation, the Rockaway Beach Improvement Company, which was sole defendant. On the 13th of August, 1880, an order was made on the application of the receiver, enjoining certain bondhold- ers named from selling or transferring bonds issued under the Sout- ter mortgage, held by them in pledge, which order was served on the persons and firms named therein. But so far as appears they were not then made parties to the action, and the order was doubtless pro- cured to arrest the apprehended danger of a sacrifice of the bonds by the pledgees, referred to in the complaint. This order gives no intimation of an intention to apply for an order authorizing the issue of receiver's certificates. Soutter, the trustee under the mortgage, was made a party defendant at a subsequent stage of the action, but after the certificates under the order of August 17th were issued and the advances made. The granting of the order without notice to the mortgagee or to the bondholders did not bind them as an adju- dication, assuming that the court had jurisdiction to appoint a receiver in the Attrill action, a point which will be assumed without examination. The bondholders, or their trustee, were entitled, by the plainest rules of law and justice, to notice and the right to be heard before their rights under the mortgage could be affected ■ and it was open to them on the hearing before tHe referee to contest the order, both on the facts and the law. As was said by Blatchford, J., in Union Trust Company v. Illinois Midland Company (117 U. S. 434, 456), "the receiver, or those lending money to him or certifi- cates issued on orders made without prior notice to parties inter- ested, take the risk of the final action of the court in regard to the loans." On the merits we are of opinion that a case was not made out either before the court which granted the order or before the referee on the reference, which, within any recognized doctrine regulating or defining the powers of a court of equity in the administration of property through a receiver, justified the order of August 17th, post- poning the lien of the Soutter mortgage. The power of a court to appoint a receiver, when a proper case is presented, is undoubted. It rests in the sound discretion of the court. The power itself and 388 RECEIVERS the object of its exercise were stated long since with admirable clear- ness by Lord Hardwicke in Skip v. Harwood (3 Atk. 564. : "It is a discretionary power exercised by the court with as great utility to the subject as any authority which belongs to it ; and it is provisional only for the more speedy getting of a party's estate and securing it for the benefit of such person who shall appear to be entitled, and it does not at all effect the right." The act of the court in taking charge of property through a receiver is attended with certain neces- sary expenses of its care and custody ; and it has become the settled rule that expenses of realization, and also certain expenses which are called expenses of preservation, may be incurred under tne order of the court on the credit of the property, and it follows, from neces- sity, in order to the effectual administration of the trust assumed by the court, that these expenses should be paid out of the income, or when necessary, out of the corpus of the property before distribu- tion, or before the court passes over the property to those adjudged to be entitled. It is claimed that the money advanced in this case to protect the property from an incendiary burning, created a debt for preservation, which may be preferred to the claim of the bond- holders. We are of a contrary opinion. No doubt a serious emer- gency existed, growing out of the discontent and riotous disposition of the workmen. But the state primarily assumes the duty of the preservation of public order, and the repression and punishment of crime. It enacts laws, constitutes courts and commissions officers to this end. It specially makes provision intended to prevent riots, and it seeks to insure prompt action on the part of local officers and communities by imposing upon the latter pecuniary responsibility for injuries to property caused by riotous assemblages. In this case no attempt, so far as appears, was made by the receiver or by the company to secure the intervention of the public authorities to sup- press the apprehended disturbance, or to arrest those who threatened to burn the property of the company. It clearly ought not to have been assumed that the ordinary agencies of the law were inadequate to the situation, or that the law, operating through its regularly appointed, channels, was impotent to control it. It would be difficult to define by a rule, applicable in every case, what are expenses of preservation which may be incurred by a receiver by authority of the court. It was said by James, L. J., in Regents Canal Iron Works Company (L. R. 3 Ch. Div. 411, 427) that "the only costs for the preservation of the property would be such things as the repairing of the property, paying rates and taxes which would be necessary to prevent any forfeiture, or putting a person in to take care of the property." Wherever the true limit is, we think it does not include the expenditure authorized by the order of August 17th, and that such an expenditure is and ought to be excluded from the definition. There must be something approaching a demonstrable necessity to justify such an infringement of the rights of the mortgagees as was attempted in this case. We have not lost sight of the recent very important cases decided in the supreme court of the United States, involving the RAHT v. ATTRILL et al. 389 question of the power which may be vested by the court in receivers of insolvent railroad corporations, and the right of the court to provide for the payment of certain debts contracted before or after the appointment of a receiver out of income, and if that is inade- quate, out of the corpus of the property. These cases and decisions are the outcome of the growth of railroad enterprises and business within a comparatively recent period. It has been held that under special circumstances the court may direct the payment of ante- receivership debts for labor or supplies contracted within a limited period before the insolvency, the adjustment and payment of traffic balances in favor of connecting roads, and may direct the receiver to operate the road pending the foreclosure, and to that end purchase necessary rolling stock for the use of the road and make repairs and improvements thereon, the expense of which shall be a charge on the property in priority to legal liens. ( Wallace v. Loomis, 97 U. S. 146 ; Fosdick v. Schall, 99 U. S. 235 ; Barton v. Barbour, 104 U. S. 126; Miltenberger'v. Logansport Railway Co., 106 U. S. 286; Union Trust Co. v. ///. Mid. and R. R. Co., supra.) It cannot be success- fully denied that the decisions in these cases vest in the courts a very broad and comprehensive jurisdiction over insolvent railroad cor- porations and their property. It will be found on examining these cases that the jurisdiction asserted by the court therein is largely based upon the public character of railroad corporations ; the public interest in their continued and successful operation; the peculiar character and terms of railroad mortgages, and upon other special grounds not applicable to ordinary private corporations. It was said by Waite, C. J., in Fosdick v. Schall (supra), that railroad mort- gages and the rights of railroad mortgagees are comparatively new in the history of judicial proceedings. They are peculiar in their character and affect peculiar interests; and, in Barton v. Barbour (supra), that "the new and changed conditions of things which if presented by the insolvency of such a corporation as a railroad com- pany has rendered necessary the exercise of large and modified forms of control of its property by the courts charged with the settle- ment of its affairs and the disposition of its assets." These cases furnish, we think, no authority for upholding the order of August 17th, or for subverting the priority of liens which, according to the general rules of law, the bondholders acquired through the trust mortgage on the property of the company. It would-be unwise, we think, to extend the power of the court in dealing with property in the hands of receivers to the practical subversion or destruction of vested interests, as would be the case in this instance if the order of August 17th should be sustained. It is best for all that the integ- rity of contracts should be strictly guarded and maintained and that a rigid, rather than a liberal, construction of the power of the court to subject property in the hands of receivers to charges, to the prejudice of creditors, should be adopted. There is no ground for alleging an estoppel against the bond- holders, barring their right to a review of the action of the court. The claim of estoppel is based upon the assumed fact that the trustee 390 RECEIVERS knew that a receiver had been appointed, and did not intervene to prevent the issuing of the certificates. The trustee at the time was not a party to the action, and had no notice of the application for the order, or of the issuing of the certificates until after the advances were made. He was designated as a trustee by the company before the bonds were issued, and was one of the directors and stockholders of the corporation, positions which might bring his duty and interest into conflict. It would be most unjust under the circumstances to conclude the bondholders by his inaction or for the reason that after the advances on the certificates had been made, he, as one of the board of directors and as a stockholder of the company, partici- pated in the action of meetings of directors and stockholders in which the order for the issuing of certificates was approved. 2 BOEHM v. GOODALL. Supreme Court of Judicature, Chancery Division, 1910. (1911) 1 Ch., 155. Adjourned summons. The action was an ordinary partnership action brought by one partner against his copartners for the dissolu- tion of the partnership and the winding-up of the partnership affairs. The business of the partnership was the working of certain mines, minerals and quarries situate at Caldbeck and Uldale, in the county of Cumberland, held under a lease dated November 1, 1905. On April 9, 1907, the writ in the action was issued. On July 12, 1907, the plaintiff moved for the appointment of a receiver and manager of the partnership business, and on the hearing of the motion (which the parties agreed should be treated as the trial of the action) a consent judgment (dated July 15th) was pronounced. The court thereby declared that the partnership ought to be dis- solved as from July 12, 1907 (the date of the motion), and, all parties thereunto consenting, the court directed (1) an inquiry who were the persons interested in the partnership and in what shares and proportions; (2) an account of all dealings and transactions between such interested persons as copartners from June 21, 1905 ; and (3) an account of what the credits, property and effects then belonging to the partnership consisted. The court then ordered that the partnership business, with the good will, assets and effects, be sold as a going concern, and that the money to arise by such sale 'Accord: Bernard v. Union Trust Co., 159 Fed. 620 (1908). See also. Securities Co. v. Brighton A., Ltd., (yz L,. J. Ch. 566 (1893); Osborne v. Big S. G. C. Co., g6 Va. 58 (1808); International Tr. Co. v. Tucker, 152 Fed. 78 (1907); Lockport Felt Co. v. United Box. Co., 74 N. J. Eq. 686 (1908) ; Cent. Tr. Co. v. Chester E. Co., 80 Atl. 801 (Del. 1911) ; Knicker- bocker T, Co. v. Oneonta C. & R. S. R. Co., 201 N. Y. 379 (1911) : Knicker- bocker f. Co. v. Green Bay Phos. Co., 62 Fla. 519 (1911). Compare: Vandalia v. St. Louis R. Co., 209 111. 73 (1904). BOEHM v. GOODALL 391. be paid into court to the credit of the action, and, the plaintiff under- taking to be answerable for what James Todd, the receiver and manager thereinafter appointed, should receive or become liable to pay until he should have given security, the court appointed James Todd to collect, get in and receive the debts then due and outstand- ing and other assets, property and effects belonging to the partner- ship and to manage the same. A period was limited beyond which the 'receiver was not to act, and a direction was given that he should give security, and the order contained the common form of direction for delivery over by the plaintiff and defendants to the receiver of the stock in trade and effects, securities and books and papers of the partnership. The order proceeded: "And it is ordered that the said James Todd do out of the first moneys to be received pay the debts due and to become due from the said part- nership." Then there was the ordinary direction to the receiver to pass his accounts and pay his balances. On September 3, 1907, an order was made authorizing the receiver to borrow a sum not exceeding £500 on the security of the partnership assets, property and effects, such security to be a first charge thereon subject to the costs of realization and the receiver's remuneration, for the purpose of enabling him to carry on the part- nership business as a going concern and preserving the lease of the Caldbeck mine from forfeiture and paying the wages and other outgoings and meeting the liabilities in connection with the partner- ship business. In January, 1910, the assets of the partnership were sold and the proceeds of sale paid into court to the credit of the action. Sub- sequently to the sale the receiver duly passed his first and final account as receiver and manager, and by a certificate of the master, dated June 3, 1910, it was certified that there was due to the receiver as the balance of such account the sum of £1020 2s. 7d. By an order dated May 14, 1910, the sum of £646 os. 3d. consols in court to the credit of the action representing proceeds of sale was directed to be sold, and the proceeds thereof, together with £3 16s. cash in court on the like credit, were directed to be paid to the receiver. The consols were sold and the proceeds thereof with the cash, amounting in all to the sum of £538 13s. 8d., were received by the receiver out of court on July 16, 1910, and applied towards repayment of the moneys borrowed by him pursuant to the order of September 3, 1907. There was now due to the receiver under the master's certifi- cate the sum of £481 8s. nd., being the balance due upon his account after giving credit for the money received out of court. There were no assets of the partnership available for the payment of this balance. This was a summons taken out in the action by the receiver asking that the plaintiff and defendants (other than one who had become bankrupt and whose trustee in bankruptcy had been added as a defendant) might be ordered (1) to pay to him the balance of £481 8s. 1 id. due to him; (2) that he might be discharged and his security vacated; and (3) that if necessary for the purposes afore- 392 RECEIVERS said the plaintiff and the defendants might be directed to prosecute forthwith the judgment in the action. 1 Warrington, J. : This is an application made- in a partnership action, not by one of the parties to the action, but by a gentleman who has been appointed receiver and manager of the partnership property by an order of the court, and his application is that the plaintiff and the defendants (other than one who is in a particular position) may be ordered to pay him what is, in effect, the balance found due to him on taking his accounts, and that, if necessary for this purpose, the plaintiff and the defendants may be directed to prosecute forthwith the judgment in the action. The receiver puts his case on two grounds. First, he says that he undertook at the request of the partners, who all consented to the order of July 15, 1907, to perform certain duties on their behalf, and that any expenditure made or liabilities properly incurred by him in the performance of those duties was so made or were so incurred by him on an implied promise of indemnity arising out of the relation of the parties, or, if not that, out of the fact that the expenditure was made and the liabilities were incurred at the request of the partners. Secondly, he says that, at all events so far as the balance is made up of moneys expended by him in the payment of rent or other debts for which the partners were liable, he is entitled under the doctrine of subrogation to stand in the place of the cred- itors whom he has paid and so recover from those who are the ulti- mate debtors. Cases have been referred to on the first point which establish this, with regard to trustees and persons who stand in a fiduciary capacity towards those for whom they act, that such persons in incurring liability and making expenditure in the property perform- ance of their duties are entitled to be indemnified, not only out of the property in respect of which they are trustees, but also by the beneficiaries personally. The whole question I have to determine is whether the principle of those cases is applicable to the case of a receiver and manager appointed by the court. What is the position of such a receiver and manager? It is described by Lord Cairns (then Sir Hugh Cairns, L. J.) in Gardner v. London, Chatham and Dover Ry. Co., L. R. 2 Ch. 201, 211, thus : "When the court appoints a manager of a business or undertaking, it in effect assumes the management into its own hands ; for the manager is the servant or officer of the court, and upon any question arising as to the character and details of the management, it is the court which must direct and decide." The same point was dealt with by Lord Esher, "M. R., in Burt, Boulton & Hayward v. Bull (1895), Q. B. 276, 279, 280, 284. He says: "What is the position of such a receiver and manager? He is not the agent of the company" — in that case the receivers and managers had been appointed in a debenture holders' action. "They do not appoint him; he is not bound to obey their directions; and 1 The arguments of counsel are omitted. BOEHM v. GOOIDALL 393 they, cannot dismiss him, however much they may disapprove of the mode in which he is carrying on the business. Only the court can dismiss him, or give him directions as to the mode of carrying on the business, or interfere with him, if he is not carrying on the business properly." Then later he says: "Therefore there might be cases in which such a manager would not be personally liable"— that is, for goods which he orders in the ordinary course of his man- agement — "but, if there is no special stipulation, of that kind, and, if the terms of the order merely amount to a statement that the giver of it, being a manager appointed by the court, gives such an order, then I think the only business inference is that the tradesman is to look to the personal credit of the manager, and that the manager trusts to the funds in hand or the other assets of the concern for indemnity. The two lords justices who took part in that-- decision adopted the same view of the position of the receiver, namely, that he was not fhe agent of the company nor of the plaintiffs, but was an officer of the court, and personally liable for the obligations he might incur. Rigby, L. J., does, it is true, in one passage of his judgment appointing him was by consent and, by consenting, all the receiver might look ultimately to certain persons^ for reimbursement ; he speaks A "looking for indemnity to the assets or the persons for whose benefit ultimately the business was carried on." Whether he really considered the question of personal indemnity or not I do not know, but no authority which has been cited to me comes near the point for which the receiver is contending. Do the principles of the cases with reference to trustees or persons standing in a fiduciary capacity apply to the case of a receiver and manager appointed by the court? I cannot come to the conclusion that they do without running counter to the decisions in all the cases relating to receivers and managers appointed by the court. Such a receiver and manager is not the agent of the parties, he is not a trustee for them, and they cannot control him. He may, as far as they are concerned, incur expenses or liabilities without their having a say in the matter. I think it is of the utmost impor- tance that receivers and managers in this position should know that they must look for their indemnity to the assets which are under the control of the court. The court itself cannot indemnify receiv- ers, but it can, and will, do so out of the assets, so far as they extend, for expenses properly incurred; but it cannot go further. It would be an extreme hardship in most cases to parties to an action if they were to be held personally liable for expenses incurred by receivers and managers over which they have no control. But the receiver here says that this is not the ordinary case, because the judgment appointing him was by consent and, by consenting, all the parties have impliedly requested him to incur these liabilities. In my opinion that fact makes no difference at all. If I were to accede to that argument, I should have to hold in every case that the person who puts the court in motion and gets a receiver appointed would have to indemnify the receiver. The fact that the order was made 394 RECEIVERS by consent does not, in my opinion, distinguish this case from the numerous cases in which orders have been made without consent. The receiver also puts his case on another ground. He says that he has paid certain special and urgent debts and is entitled to be subrogated to the rights of the creditors. That is, in good truth, the same ground over .again, because he could only be entitled to be subrogated if he had paid the debts at the request, express or implied, of those whose debts they were. The cases referred to are all cases where the person who paid the debt stood in the position of agent of the debtor. It is true that in those cases the payments were in excess of the authority of the agent and yet he was held entitled to be indemnified so far as no loss was occasioned to the assets of the principal by what had been done. Those cases all depend on the fact that the persons making the payments were agents of the debtor and therefore do not apply to the present case. Then it is said that the parties ought to prosecute the judgment in the action and that there might then be a fund out of which the receiver could be paid, but that contention breaks down on the facts. The assets have all been realized, and there is nothing for the court to do except to settle the rights of the partners inter se. That will not bring in any assets to the firm. It would merely determine whether money is due from A to B, and what sum, if any, but it would not bring in any assets out of which the court could indemnify the receiver. I have not expressly referred to the fact that the order appointing the receiver contained the usual form of direction to the receiver to pay the debts due and to become due from the partner- ship out of the first moneys to be received by him, but it must not be forgotten that there is in the order no express authority to the receiver to incur debts or do anything for which he could look to be indemnified except out of the assets. The application fails, and I must refuse it. I think, therefore, that I must make no order on the summons except that, as the applicant is not a party to the action, he must pay the costs of the parties whom he has served, other than the plaintiff, who does not ask for them. 2 1 In England a receiver is entitled to be reimbursed for expenses prop- erly incurred out of the assets. Burt v. Bull (i8q.O. i Q. B. 276: Strapp v. Bull (1805), 2 Ch. 1 ; In re British Power Co. (1907), 1 Ch. 528. setnble. In the United States, while cases may occur in which, under the special circumstances, it is equitable to require the parties at whose instance the receiver is appointed to meet the expenses, the general rule is that such expenses are a charge on the fund, and mere insufficiency of properly to meet the expenses does not entitle the receiver to hold the complainant personally liable. Atlantic Trust C t o. v. Chapman, 208 U. S. 360 (1907),, and cases there cited. The exceptional cases are those in which the receivership was illegal or improper. See, Highley v. Deane, 168 111. 266 (1897) ; Farmers Bank v. Backus, 74 Minn. 264 (1898) ; Horn v. Horn, 96 Md. 8 (1902) ; Torrence v. Shedd, 202 111. 498 (1903) ; Forrester v. Boston, Etc., Copper Co., 30 Mont. 181 (1904); Frick v. Frits, 124 la. 529 (1904); Hendrie v. Parry, 37 Col. 359 (1906). JOHN L. SCREVEN, Receiver, v. WILLIAM L. CLARK 395 JOHN L. SCREVEN, RECEIVER, v. WILLIAM L. CLARK. Supreme Court of Georgia, 1873. 48 Georgia, 41. Equity. Receiver. Before Judge Johnson. Muscogee superior court. October term, 1872. John L. Screven, as receiver of the Brunswick and Albany Railroad, brought trover against William L. Clark for eight box railroad freight cars, of the value of fifteen thousand dollars. The defendant pleaded the general issue. Upon the trial, the only evi- dence introduced of the authority of the plaintiff to institute said suit, was the following order: "Rufus B. Bullock, Governor, who sues for the interest of the State of Georgia* et al. v. Jacob Dart et al. "Bill, etc., in Glynn Superior Court. "At Chambers, Blackshear, Ga., Oct. 30th, 1871. "It appearing to the Court that since the filing of complainant's bill in the foregoing cause, John L. Screven, the receiver appointed by the Governor of Georgia, has accepted said trust : "It is ordered that said John L". Screven be ; and he is 'hereby appointed, temporary receiver of the Brunswick and Albany Rail- road Company, and of all its property of every kind. And he is hereby ordered to collect immediately all said property together, and hold the same subject to the further order of the Court. Granted by me at Chambers, this 30th day of November, 1871. (Signed) "William M. Sessions, J. S. C, B. S." When the evidence was closed, the court charged the jury that the order aforesaid did not authorize the receiver to institute a suit ; to which charge the plaintiff excepted. The jury returned a verdict for the defendant. Whereupon the plaintiff assigns the charge aforesaid as error. McCay, J. : The rule is perhaps an arbitrary one, but it is, never- theless, well settled that a receiver has no right to sue without express -authority from the chancellor; his general authority to collect and keep the assets is not sufficient to justify him in bringing an action. Daniel's Chancery Practice 1988, et seq. A receiver is at last only an officer of the court, and the foundation of the rule probably is, that it is always for the court itself to determine whether it shall be dragged into litigation. 1 At law, the party having the 1 Wynn v. Lord N ewborough, 3 Br. Ch. 88 (1789) ; Green v. Winter, 1 Johns. Ch. N. Y. 60 (1814) ; Swaby v. Dickson, 5 Sim. 629 (1833) ; Booth v. Clark, 17 How. U. S. 322 (1854); Singerley v. Fox, 75 Pa. 112 (1874); Foster v. Towmshend, 68 N. Y. 203 (1877) ; Davis v. Snead, 33 Gratt. Va. 705 (1880) ; In re Sacker, L. R. 22 Q. B. D. 179 (1888) ; Davis v. Ladoga C. Co., 128 Ind. 222 (1890) ; Tibbets v. Cohn, 116 Cal. 365 (1897) ; Simmons v. Taylor, 106 Tenn. 729 (1901) ; Viola v. Anglo-Amer. C. S. Co. (1912) ; 2 Ch. 305; Denver W. Co. v. Atner. W. Co., 81 N. J. Eq. 139 (1913) ; Malone v. Averill, 147 N. W. 13S (la. I9H)- 396 RECEIVERS legal right to sue is the proper party, and if one comes suing ror the property of another, he must show, as part of his right to recover, the authority he has to come into a court of law, asserting another's right. We think this failure to show any authority to sue is fatal to the case of the plaintiff below, and do not go into the other question argued; though we think the evidence of a right of prop- erty in the company is strong, and that the order in favor of the Dawson Manufacturing Company does not affect the title. Their claim on the fund by the terms of the order did not cease until they got the cars. Judgment affirmed. SOUTHERN GRANITE CO. v. WADSWORTH. Supreme Court of Alabama, 1896. 115 Alabama, 570. Appeal from the circuit court of Colbert. Tried before the Hon. J. B. Moore, special judge. This was a statutory action of detinue, brought by the appellant, the Southern Granite Company, against the appellee, Herbert Wads- worth* as receiver of Chapman, Reynolds & Company, suing to recover certain specifically described pieces of granite. The defendant pleaded the following plea in abatement: "The said defendant by his attorney prays judgment of the complaint and that the same may be quashed, because he says that he is the receiver of Chapman, Reynolds & Company, duly appointed by the Circuit Court of the United States for the Northern Division of the Northern District of Alabama, in the suit of Union National Bank of Chicago against Chapman, Reynolds & Company in equity, that the court has not granted consent to plaintiff herein to. bring this action, and this suit is not a suit in respect to any act or transaction of defendant, in carrying on the business connected with such prop- erty, but is a suit for tfae purpose of taking out of defendant's pos- session property coming in his hands under his appointment as such receiver." To this plea the plaintiff filed the following replications ; "Comes the plaintiff and, for replication to the plea in abatement in this cause, says the suit in this cause is against the defendant and is in respects to his acts and~transactions as such receiver, in carrying on the business connected with his appointment as such receiver, in this, he is, under the color of his office as such receiver, holding the property and claiming it is a part of the assets of Chapman, Rey- nolds & Company, and as such receiver he is depriving the plaintiff of the possession and control of its property; and as such receiver he has applied for an order to sell the property as a part of the assets of Chapman, Reynolds & Company. 2. That the plaintiff has the right under the statute of the United States to institute this suit without first obtaining an order of the Federal Court appointing SOUTHERN GRANITE CO. v. WADSWORTH 397 said receiver, because the acts and wrongs complained of grew out of the acts and transactions of defendant in carrying on the busi- ness connected with his receivership and the property belonging to the receivership." After filing this replication, the plaintiff, upon its motion, was allowed to amend its complaint by striking out after the name of the defendant, Herbert Wadsworth, the words "as receiver of Chap- man, Reynolds & Company." The cause was tried without the intervention of a jury, upon an agreed statement of facts. It is deemed unnecessary to set out in detail these facts; since the opinion sufficiently states such facts as are necessary to an understanding of the decision on the present appeal. Upon the introduction of all the evidence the court rendered judgment in favor of the defendant. The plaintiff appeals from this judgment and assigns the rendition thereof as error. 1 Haralson, J. : Mr. High, in his work on Receivers, Section 5, states a generally accepted rule in respect to receivers to be that, "A receiver being appointed for the preservation of the fund or property pendente lite, and for its ultimate disposal according to the rights and priorities of the parties entitled, the remedy is regarded as in the nature of a sequestration, rather than as an attachment of the property, and it ordinarily gives no advantage or priority to the person at whose instance the appointment is made, over other parties in interest. Nor does it change the title to or create any lien upon the property ; its purpose in this respect being rather like that of an injunction pendente lite, to preserve the subject matter until the rights of all the parties may be judicially determined." The same doctrine is expressed by the supreme court of the United States as follows: "A receiver derives his authority from the act of the court appointing him, and not from the act of the parties at whose suggestion he is appointed; and the utmost effect of his appoint- ment is to put the property from that time into his custody as an officer of the court, for the benefit of the party ultimately proved to be entitled, but not to change the title, or even the right of pos- session, in the property." Union Bank of Chicago v. Kansas City Bank, 136 U. S. 223; Talladega M. Co. v. Jenifer Iron Co., 162' Ala. 259. Mr. High states another rule so sanctioned by authority as not to be questioned, that "A receiver being an officer of the court, acting under its direction, and in all things subject to its authority, it is contrary to the established doctrine of courts of equity to permit them to be made a party defendant to litigation, unless by consent of the court appointing him. And it is in all cases necessary that a person desiring to bring suit against a receiver in his official capacity should first obtain leave of the court by which he was appointed, since the courts will not permit the possession of the 1 The arguments of counsel are omitted. 398 RECEIVERS receiver to be disturbed by suit or otherwise, without its consent or permission. The rule is established for the protection of receivers against unnecessary and expensive litigation, and in most instances a party aggrieved may have ample relief by application on motion to the court appointing the receiver. And when an action is substi- tuted against a receiver in his official .capacity, without first obtain- ing leave of the court, the plaintiff in such action is guilty of a contempt of court and will be punished accordingly." High on Receivers, Sec. 254." It is true that Congress by Act of March 3, 1887, as revised and corrected August 13, 1888 (see act quoted in High on Receivers, p. 222), provided for the bringing of suits against receivers appointed by any of the courts of the United States, in respect of any act or transaction of his in carrying on the business connected with such property, without previous leave of the court in which such receiver or manager was appointed, which suit shall be subject to the general equity jurisdiction of the court in which such receiver or manager was appointed, so far as the same is necessary to the ends of justice. The effect of this act, as has been held, is to allow such suits in all matters growing out of the management of the property in the charge of receivers, to the extent of allowing the establishment of a debt by the judgment of another court against the receivership, leaving the matter of its payment and the adjustment of all equities between different claimants interested in the property, to the deter- mination of the co,urt which appointed the receiver, and that no court can interfere with the custody of property held by another court through a receiver. High on Receivers, Sec. 3956, and author- ities there cited. 8 2 Accord: Angel v. Smith, 9 Ves. 335 (1804); DeWinton v. Brecon, 28 Beav. 200 (i860); Searle v. Choat, L. R. 25 Ch. D.^7'23 (1884); Palys v. Jewett, 32 N. J. Eq. 302 (1880) ; Porter v. Kingman, 126 Mass. 141 (1879) ; Matter of Jensen, 128 N. Y. 550 (1801); Smith v. Circuit Judge, 84 Mich. 564 (1891) ; Wayne P. Co. v. State, 134 Ind. 672 (1893) ; Mulcahey v. Straus, 155 111. 70 (1894) ; Links v. River B. Co., 66 Conn. 277 (1895) ; Melaney v. Receivers, 4 Pa. D. R. 644 (1895) ; McNeal v. Brick Co., 85 Kan. 277 (1911). As to whether failure to obtain leave to sue is a jurisdictional defect ren- ■ dering the proceedings void, or whether the objection may be waived, compare: Barton v. Barbour., 104 U. S. 126 (1881) ; Reed v. Axtell, 84 Va. 231 (1887) ; Smith v. St. Louis S. F. R. Co., 151 Mo. 391 (1899) ; Chalmers v. Littlefield, 103 Me. 271 (1907), with Tobias v. Thomas,. 51 Ohio 519 (1804) ; Burke v. Ellis, 105 Tenn. 702 (1900) ; Ratcliff v. Adler, 71 Ark. 269 (1903); Pruyn v. McCreary, 105 N. Y. App. EHv. 302 (1005) ; Amer. Steel Co. v. Bearse, 194 Mass. 596 (1907). a "Every receiver or manager of any property appointed by any court of the United States may be sued in respect of any act or transaction of his in carrying on the business connected with such property, without the previous leave of the court in which such receiver or manager was ap- pointed; but such suit shall be subject to the general equity jurisdiction of the court in which such manager or receiver was appointed so far as the same may be necessary to the ends of justice." Judicial Code, Act of Congress, March 3, 191 1, Chap. 231, Sec. 66, 36 Stat. 1104. See also, In re Tyler, 149 U. S. 164 (1893) ; Bennett v. North Pac. R. Co., 17 Wash. 534 (1897) ; Erb v. Morash, 177 U. S. 584 (1900) ; Cent. Tr. Co. v. Wheeling & SOUTHERN GRANITE CO. v. WADSWORTH 399 It is shown in this case, that under the decree of the United States circuit court, defendant was appointed receiver for Chapman, Reynolds & Company, and as such "was ordered to take charge of all the property of Chapman, Reynolds & Company, and (he) did take charge and possession of the stone in this suit under such order, and claims the same (as) in his possession as such receiver; that no order or leave has been granted by the court appointing defend- ant as receiver of Chapman, Reynolds & Company to bring this suit." It was also shown that the "defendant, as receiver, applied to the United States court for an order to sell this stone with other stone in his hands as such receiver, and the order has been granted by the Judge of the United States Court for the Northern Division of the Northern District of Alabama." Under the pleadings in this case as interposed, it is manifest that this suit was not rightly instituted against the defendant as receiver. This difficulty was sought to be remedied by plaintiff by striking out, by leave of the court, the words "as receiver" follow- ing the name of the defendant in the complaint, with the view of making it a suit against the defendant individually, and not against him as receiver. These pleas are in the case as presented, with the evidence directed to the issues raised by them, and to show that the title to the stone was in the appellant at the institution of this suit, and that Chapman, Reynolds & Company were not the owners of the property when the receiver was appointed, or at any other time. The evidence, however, fully establishes the fact that the defendant did not, at the institution of the suit or previously, take possession of, or have anything to do with the property involved, in his indi- vidual capacity, or otherwise, except as receiver. The United States court had certainly assumed control of this property, and at the commencement of this action it was in its custody by its receiver. It had ordered it to be sold. Whether the title to the property had passed out of the plaintiff and became invested in the firm of Chap- man, Reynolds & Company at the time the plaintiff began this action or not, does not alter the fact that the court did assume possession and control of the property. Whether it did so rightfully or not we need not inquire. By that act, the title, to whomsoever it may belong, has not been disturbed, and the question of ownership is one which the United States court is fully competent to decide. The plaintiff was not prevented to go into that tribunal, to claim its rights ; and all the relief sought in the present case if the plaintiff is entitled thereto, may as well be obtained by its intervention on peti- tion in that court. That mode of procedure is commended by con- sideration of a wise judicial policy in not allowing the jurisdiction of one court, once attached, to be interfered with by that of another. Gay, Hardie & Co. v. Brier field C. & I. Co., 94 Ala. 308.* L. R. Co., 189 Fed. 82 (1911) ; Investment R. Co. v. Chicago R. Co., 204 Fed. 500 (1913) ; Chicago G. W. Co. v. Hulbert, 205 Fed. 248 (1913). ' See note to Shedd v. Sheffield, 230 111. 118 (1907). in 13 L. R. A., N. S., 709; Murphy v.. Hoffman, 211 U. S. 562 (1908) ; and Odell v. Batterman, 223 Fed. 292 (1915)- 400 RECEIVERS We do not enter upon the question of title — in whom it may rest — which counsel have so elaborately urged ; for, under our view of the case, that question is one over which we have no jurisdiction. It belongs to the federal court. 12 Am. & Eng. Encyc. of Law 367. The cause was tried by the court without a jury and its judg- ment is affirmed. Affirmed. JOEL H. HILLS v. WILLIAM M. PARKER AND OTHERS. Supreme Judicial Court of Massachusetts, 1873. in Massachusetts, 508. Replevin of a locomotive engine from William M. Parker and the Boston & Albany Railroad Company. Writ dated November 21, 1870. At the trial in the superior court, before Rockwell, J., the plaintiff introduced evidence tending to show that in November, 1869, Henry N. Farwell, a director of the Boston, Hartford & Erie Railroad Company, which was then in embarrassed circumstances, bought this engine from the maker; that the defendant, Parker, who was the superintendent of the railroad, asked him to let him have the engine to use on the railroad; that Farwell said he would not deliver it to the company, but would deliver it to Parker to be run on the railroad, Parker to be personally responsible for it; and that;Parkef took it with that understanding. The defendants introduced evidence tending to show that Far- well sold the engine to the Boston, Hartford & Erie Railroad Com- pany, and that it was used on that railroad until the autumn of 1870, when it was sent for repairs to the repair shop of the Boston & Albany Railroad Company. It appeared that Farwell sold the engine to the plaintiff on November 19, 1870, while it was still in the repair shop. The defendants introduced evidence that on a bill in equity in this court against the Boston, Hartford & Erie Railroad Company, receivers were appointed to take possession of all the property of the company; that in August, 1870, the receivers took possession of the property, directed Parker to continue in the employment of the receivers as superintendent, and to hold all the property of the railroad for them ; that he agreed so to do ; that after that time the railroad was run on their account; that the engine in question was in use on the railroad when they took possession, and continued so to be used until it was sent to the repair shop; that all the profits from its use were received by them ; that Parker, after the appoint- ment of the receivers, held the engine for them, and acted for them in sending the engine to the repair shop; and that Farwell applied to the receivers for the engine and they refused. The plaintiff admitted that he had never applied to this court for leave to bring the action. JOEL H. HILLS v. WILLIAM M. PARKER AND OTHERS 401 The defendants asked the judge to rule as follows: "If, after the appointment and qualification of the receivers, they were, as receivers, in possession of and used and ran the engine by Parker, as their agent, or by other employees, and claimed it as the property of the Boston, Hartford & Erie Railroad Company, and Farwell applied to the receivers to give it up, and they declined to do so, and the engine, while being so used, was injured, and Parker, acting for the receivers, and as, their agent, sent it to the repair shop of the Boston & Albany Railroad Company to be repaired, and while at that shop it was replevined by the plaintiff, and the plaintiff did not obtain of the court which appointed the receivers permission to bring this action, the plaintiff cannot recover. Such possession of the receivers would be the possession of the court which appointed them, and the plaintiff could not legally intrf ere with that possession except by authority from that court, and it is immaterial whether Farwell, or the plaintiff, or the Boston, Hartford & Erie Railroad Company had or toad not any title to the engine. The proper and only remedy for the plaintiff in such case would have been to apply to the court appointing the receivers either to hear and pass upon his right, or for permission to bring a suit to try his title." The judge refused so to rule ; and ruled that the superior court had the same power to try the case as if no receivers had been appointed, and that the question was whether the plaintiff had proved his title. The jury returned a verdict for the plaintiff, and the defendants alleged exceptions. Gray, J.: The defendants fail to bring themselves within the principle on which they rely for their defense. That principle is, that when property had been put by the decree of a court of chan- cery into the hands of a receiver, his possession is the possession of the court which appointed him, and any rights in the property can only be asserted by application to that court. All the decisions cited for the defendants relate to property in which the person or corporation whose estate has been placed by the court of chancery in the custody of the receiver had a title. In such a case, the property in the hands of the receiver as an officer of the court is in the custody of the law, and cannot therefore be seized or sold on execution, or distrained for rent, without leave of the court which appointed the reiceiver. Wiswall v. Sampson, 14 How. 52; Russell v. East Anglian Railway Co., 3 Macn. & G. 104; Noe v. Gibson, 7 Paige 513; Robinson v. Atlantic & Great Western Railway Co., 66 Penn. Stat. 160. And the question whether cred- itors claiming a paramount right, by mortgage or otherwise, in the property of the debtor, shall be permitted to enforce their rights by action at law against the receiver, is within the control of the same court, which may treat the bringing of such an action without its leave as a contempt of its authority; but leave to bring such an action, when applied for, is granted by the court of chancery as of course, unless it is clear that there is no foundation for the claim.; and when the action is brought without applying for such leave, the 402 RECEIVERS possession of the receiver is not necessarily a valid defense at law, and the court of chancery, if applied to for an injunction, may in its discretion allow the action to proceed to judgment and to be defended by the receiver. Bryan v. Cornish, I Cox Ch. 422 ; Anon., 6 Ves. 287; Angel v. Smith, 9 Ves. 335; Brooks v. Greathed, 1 Jac. & W. 176; Aston v. Heron, 2 Myl. & K. 390; Rand field v. Rand- field, 3 De G., F. & J. 766. The decree of a court of chancery appointing a receiver entitles him to its protection only in the possession of property which he is authorized or directed by the decree to take possession of. When he assumes to take or hold possession of property not embraced in the decree appointing him, and to which the debtor never had any title, he is not acting as the officer or representative of the court of chancery, but is a mere trespasser, and the rightful owner of the property may sue him in any appropriate form of action for damages or to recover possession of the property illegally taken or detained. Parker v. Browning, 8 Paige 338; Paige v. Smith, 99 Mass. 395; Leighton v. Harwood, 1 1 1 Mass. 67. In the present case, the order of this court sitting in chancery, appointing receivers of the property of the Boston, Hartford & Erie Railroad Company, did not authorize them to take possession of the property of any other person, and therefore afforded them no justifi- cation or protection for claiming or assuming possession of property in which that corporation never had any interest, and did not deprive the lawful owner of such property of the right to assert his title before a jury in an action at common law. 1 Exceptions overruled. McDERMOTT v. CROOK. Court of Appeals of the District of Columbia, 1902. 20 App., D. C, 465. This action was brought by the appellee, Harrison Crook, to recover for personal injuries alleged to have been caused by the negligence of the City and Suburban Railway Company of Wash- ington. The injury is alleged to have been suffered on the thirteenth day of June, 1901, and on the eleventh day of October following the railroad corporation was placed in the hands and control of the appellant, McDermott, as receiver, by the supreme court of the district, sitting in equity. Shortly thereafter the action was brought 'Accord: In re Young, 7 Fed. 855 (1881) ; Curran v. Craig, 22 Fed. 101 (1884) ; Staples v. May, 87 Cal. 178 (1800) ; Bank v. Scott, 19 Tex. Civ. App. 22 (1808) ; Kirk v. Kane, 87 Mo. App. 274 (iooo") ; Brein v. Light, 36 N. Y. Misc. 112 (igoi) ; Bowman v. Hasen, 69 Kan. 682 (1904) ; Hetzel v. Fadner, 162 111. App. 639 (19I1). Compare: Comm. v. Young, 11 Phila. 606 (1876). McDERMOTT v. CROOK 403 by the plaintiff against the railroad company and its receiver to recover damages sustained by the injury. To the declaration against the two defendants, McDermott, the receiver, interposed a demurrer, upon the ground that he was not a proper party to the action — the injury sued for having been inflicted by the railroad company before any receiver was appointed. The demurrer was overruled by the court below, and the receiver has brought the case here by special- appeal. . Alvey, C. J. : The only question presented by the appeal is the one, whether the receiver was properly joined with the corporation as a defendant to the action. It is quite clear there could be no joint judgment entered against the corporation and the receiver. The judgment against the cor- poration, if one be recovered, would be against the defendant gener- ally and absolutely; whilst the judgment against the receiver would not be personal, but in his official character, payable only out of funds that might' be in his hands subject to such demands. There may be decisions' found, especially among the earlier cases, which would appear to support the contention of the plaintiff, as to the right to maintain the action against the receiver, though it accrued prior to his appointment. But those cases are exceptional, and do not belong to the class of the present action. In cases Tor personal injuries suffered by the alleged negligence or wrongful act of a corporation prior to the appointment of any receiver thereof, the doctrine would seem to be settled that the action can only be maintained against the offending corporation, and not against the receiver subsequently appointed. This doctrine is founded upon the principle that the receiver is only answerable for the consequences of the acts and negligence of his own servants and employees oper- ating the franchise of the corporation; and not for the acts and negligence of the corporation itself before he assumed control and management of it. The corporation is doubtless answerable for its acts and negligence before the appointment of a receiver, but it does not follow that such liability devolves upon the receiver on his appointment. He does not represent the corporation in respect to such transactions, nor does he assume liability therefor. The pos- session of the receiver is not the possession of the corporation, but is adverse and antagonistic thereto ; and the corporation does not In any manner control either the receiver or his employees. The negli- gent acts or wrongs committed by the corporation, before the appoint- ment of the receiver, are independent transactions, for which the corporation alone is responsible. High on Rec, Sees. 395 to 398, inclusive, and cases referred to; Decker v. Gardner, 124 N. Y. 334, Arnold v. Suffolk Bank, 27 Barb. 424; Finance Co. v. Charleston R. R. Co., 46 Fed. Rep. 426; Hiles v. Chase, 9 Bliss 549. There is nothing.in the case of McNulta v. Lochridge, 141 U. S. 327, at all inconsistent with the principle we have just stated. In ihat case, the question was whether a person holding the office of receiver could be held responsible for the acts of his predecessors in the same office, and it was held that an action would lie by and 404 RECEIVERS against a receiver for causes of action accruing under his predecessor in office. This ruling was made upon the theory that the receiver- ship was a continuing office; and that an action properly brought against a receiver was in effect brought against the receivership, and would devolve in succession from one receiver to another. In the conclusion of its opinion, the supreme court said : "So long as the property of the corporation remains in the custody of the court and is administered through the agency of a receiver, such receiver- ship is continuous and uninterrupted until the court relinquishes its hold upon the property, though its personnel may be subject to repeated changes. Actions against the receiver are in law actions against the receivership, and his contracts, misfeasances, negligences and liabilities are official and not personal, and judgments against him as receiver are payable from the funds in his hands." The opinion throughout proceeds upon the principle that an action at law cannot be sustained against a receiver upon a cause ■of action which accrued against the corporation before it was placed in the hands of a receiver, or before a receivership commenced. It follows that the judgment of the court below overruling the demurrer of the receiver must be reversed, and the cause be remanded that the proper judgment be entered upon the demurrer, but allowing the cause to proceed against the defendant corporation ; and it is so ordered. 1 Judgment appealed from reversed and cause remanded. McNULTA v. LOCKRIDGE. Supreme Court of Illinois, 1891. 137' Til. 270. Supreme Court of the United States, 1891. 141 United States, 325. On the fifteenth day of January, 1887, James Molohan and Mary E. Molohan, his wife, while attempting to cross the track of the Wabash, St. Louis and Pacific Railway Company in a sleigh, at a public crossing in Christian County, were struck by a locomo- tive engine and tender and killed. On the thirteenth day of July following, Lockridge, the defendant in error, as administrator of their respective estates, brought suits against plaintiff in error, as receiver j)f the Wabash, St. Louis and Pacific Railway Company, for causing their deaths. The declarations in the two cases were 'Accord: Decker v. Gardner, 124 N. Y. 334 (1891) ; North Pac. R. v. Hefiin, 83 Fed. 93 (1897) ; Wagner v. Keystone M. B. Ass'n, 8 Pa. D. R. 231 (1899) ; Healy v. Bank, 160 111. App. 625 (1911) ; Allen v. Railroad, 184 Mo. App.. 492 (1914); Andrews v. Jeter, 17 S. W. 838 (Tex. 1914). Compare: Pigersgill v. Myers, 99 Pa. 602 (1882). McNULTA v. LOCKRIDGE 405 alike, except as to the name of the decedent, and by agreement of parties they were consolidated and tried as one case. The results of a jury trial were verdict and judgment for defendant in error and against said receiver for six thousand dollars damages, and the judgment was afterwards affirmed in the appellate court. The writ of error now in question brought the record to this court. The declarations upon which the causes were tried each con- tained three counts, and the negligences alleged in the respective counts of each declaration were, that the statutory signals were not given on approaching the crossing; that trees, shrubbery, etc., were permitted to remain on the right of way upon and about the crossing, which obstructed the view of persons traveling on the highway, and prevented the deceased from seeing the engine and tender in time to avoid them; and that the engine was driven at a high and reckless rate of speed. The declarations each also alleged "that on the 16th day of December, 1886, in a certain cause in equity then pending in the Circuit Court of the United States for the Southern District of Illinois, wherein the Central Trust Company of New York, and others, were complainants, and the Wabash, St. Louis and Pacific Railway Company, and others, were defendants, one Thomas M. Cooley was, by the order of said court, appointed receiver of the Wabash, St. Louis and Pacific Railway Company, and was then and there duly qualified as such receiver, and from thenceforward, until the 1st day of April, A. D. 1887, had possession of, used and operated said railway," etc. And each declaration concluded as follows: "And the plaintiff further avers, that said Thomas M. Cooley afterwards, to wit, on the 1st day of April, A. D.~ 1887, resigned his said office of receiver,, as aforesaid, and the said Circuit Court of the United States for the Southern District of Illinois accepted the resignation of said Thomas M. Cooley as such receiver, and afterwards, to wit, on the 1st day of April, A. D. 1887, the court last aforesaid, by an order entered in the said cause aforesaid, appointed the defendant, John McNulta, receiver of said Wabash, St. Louis and Pacific Railway Company; that said defendant, John McNulta, then and there duly qualified as such receiver, and he thenceforward has been in possession of, using and operating said railway as such receiver," etc. The only pleas interposed by the defendant were pleas of not guilty. At the close of the evidence introduced by the plaintiff below (defendant in error here), the defendant below (plaintiff in error here) moved the court to instruct the jury that upon the evidence before them the administrator was not entitled to recover ; but the court refused to so instruct the jury, and an exception to its ruling in that behalf was duly taken. 1 Baker, J.: First — A receiver of a railroad company, who is exercising the franchises of such company and operating its road, is, in his official capacity, amenable to the same rules of liability that 1 Part of the statement of facts, the arguments of counsel and part of the opinion of the court are omitted. 406 RECEIVERS are applicable to the company when it is operating the road by virtue of the same franchises. For torts committed by his servants while operating the railroad under his management, he is responsible upon the principle of respondeat superior. The liability, however, is not a personal liability, but a liability in his official capacity only; and the damages for such torts are not to be recovered in suits against him personally, and collected on executions against his individual property, but recovered in suits or proceedings in which he is named or designated as receiver, and to be paid only out of the fund or property which the court appointing him has placed in his posses- sion and under his control. The corporation itself, having no control over either the receiver or his servants, is not, in the absence of an absolute liability imposed upon the company by statute, responsible for the negligence or torts of the employees of the receiver, and no suit against it for damages occasioned thereby can be maintained. These rules of law are well settled, and have been held in many adjudicated cases and are laid down in the text-books. In the case at bar, the judgment was not against McNulta personally, but against him in his official capacity of receiver, and no execution was awarded against him, either personally or other- wise. The judgment was, that the plaintiff "have and recover of and from said defendant, John McNulta, receiver of the Wabash, St. Louis and Pacific Railway Company, the said sum of $6000 as hi« damages aforesaid, to be paid in due course of administration of the trust, together with his costs and charges herein expended." It seems to us that the expression found in the judgment, "to be paid in due course of administration of the trust," affords the key for the solution of the question whether or not an action at law can be maintained against a receiver for the tort of the servants of his predecessor in office. The judgment, in substance and in fact, is not a judgment against John McNulta, but a judgment against John McNulta, receiver, etc., and to be paid out of the funds and property in his hands as such receiver — in other words, a judgment against the matter of the receivership, which the court of chancery authoritatively organized in a certain cause in equity pending therein, wherein the Central Trust Company of New York and others were complainants, and the Wabash, St. Louis and Pacific Railway Com- pany and others were defendants. The judgment is, as it were, in the nature of, a judgment in rem, and the res — the thing against which it has validity and force — is the matter of the receivership, the administration in the chancery court of the trust, and the fund and property which are the subjects of the trust. The receiver is sued as such, and merely because he is, for the time being, the tangible representative of the matter of the receivership. Although Cooley may have been at one time receiver, and may have resigned, and McNulta may have been appointed his successor in office, yet all the while the identity of the res — the matter of the receivership constituted by the court in the chancery suit brought by the Central Trust Company and others — was preserved. The liability for the torts and negligences charged in the declarations was upon the administration undertaken by the chancery court, and was, through McNULTA v. LOCKRIDGE 407 such court, enforceable against the fund and property which were the subjects of the trust being administered, and followed such fund and property into whomsoever's hands they came as receiver. The torts which are complained of in the declarations were not the personal negligences of Cooley, but the negligences of his servants in his capacity of receiver — in other words, the negligences of the receiver; and when McNulta succeeded him in the same receiver- ship, they continued to be negligences of the receiver, and negli- gences for which such receivership was liable, and, by relation, neg- ligences of McNulta, receiver, since he, and he only, was the legal representative of the receivership. The ground of the liability of plaintiff in error, as receiver, grows out of the relation of Cooley, the former receiver, to the railroad which he operated, and the con- tinuation and identity of that relation in plaintiff in error, as his successor in the same receivership. In Davis v. Duncan, 19 Fed. Rep. 477, the court said : "The proceedings against a receiver, as receiver, for the wrongs of his employees, is in. the nature of a proceeding in rem, and renders the property in his hands as such liable for compensation for such injuries." In Farmers' Loan and Trust Co. V. Central Railroad Co. of Iowa, 7 Fed. Rep. 539, "It is therefore obvious that suits against receivers are really and substantially suits against the fund or property of which they are custodians. They represent the property or fund. If judgment be obtained against them, the court orders it to be satisfied out of the fund or property." The defendant in error alleges negligence on the part of the employees of Cooley, receiver, whereby his intestates were killed, and he claims that he is lawfully entitled to recover damages there- for. No suit lies against the company whose railroad was being operated by Cooley. (High on Receivers, Sec. 396; 2 Rorer on Railroads 896.) No suit can be maintained against Cooley person- ally or as an individual. (High on Receivers, Sec. 395; 2 Rorer on Railroads 298.) Cooley having been discharged from the receiver- ship, no suit can be prosecuted against him in an official or repre- sentative capacity for torts committed by his employees while he, was receiver. 2. Rorer on Railroads 889; High on Receivers (2d Ed.), Sec. 398 b, and authorities there cited. In New York and Western Union Telegraph Co. v. Jewett, 115 N. Y. App. 166, the court says: "Obviously, after the -receiver had been discharged and the property, by the action of the court, has all been taken out of his hands, there can be no propriety whatever in any further proceedings against him, because thereafter he ceases to represent any one. He can no longer act for or represent the company or its creditors, or any other person interested in the property; and manifestly the court could not thereafter make an order that he should pay a creditor, he no longer having any funds out of which payment could be made. {Farmers' Loan and Trust Co. v. Central Railroad Co. of Iowa, 2 McCrary 181.) It would be a very singular proceeding to permit a creditor to litigate his claim 408 RECEIVERS with a person who was formerly a receiver, but who has ceased to be such, and who is no longer the officer or agent of the court, or subject to its control." There being, then, no right of action either against the railroad company or personally against Cooley, the late receiver, or against Cooiey in any representative capacity, is defendant in error without remedy at law for the enforcement of his purely legal rights of action ? Section 2 of the Act of Congress of March 3, 1887, provides as follows : "That whenever, in any cause pending in any court of the United States, there shall be a receiver or manager in possession of any property, such receiver or manager shall manage and operate such property according to the requirements of the valid laws of the state in which such property shall be situated, in the same manner the owner or possessor thereof would be bound to do if in possession thereof." And Section 3 of the act reads thus : "That every receiver or manager of any property, appointed by any court of the United States, may be sued in respect of any act or transaction of his in carrying on the business connected with such property, without the previous leave of the court in which such receiver or manager was appointed ; but such suit shall be subject to the general equity juris- diction of the court in which such receiver or manager was appointed, so far as the same shall be necessary to the ends of justice." It is unnecessary to state in detail the defects and mischiefs. in the administration of the law which this Act of Congress was intended to remedy. Suffice it to say, that it is the evident intention of the statute that a plaintiff who has a strictly legal right of action, and a claim for unliquidated damages enforceable against and pay- able out of property which is in the possession and under the control of a receiver appointed by a federal court, shall not be deprived ol his action at law, and of the right of trial by jury. In construing a remedial statute, its language, so far as is consistent with a fair construction of the law, should be so interpreted as to promote and advance the remedy. It was the legislative intention that the suits provided for in the act should be maintainable in respect to all acts or transactions of receivers in carrying on the business connected with the property in their possession and control. It is improbable that it was the intention that defendant in error should have the benefits conferred by the act provided Cooley continued to be receiver, but should be deprived of such benefits in the event Cooley resigned and was succeeded in the office of receiver by McNulta. It is unreasonable to suppose that it was- the intention of Congress that actions at law should not be maintained for torts committed by the employees of a receiver unless such actions were brought and prosecuted to judgment while such particular receiver remained in office, for in that event the right to prosecute suits at law, and the right to trial by jury, which are the rights which the statute intended to preserve and protect, could at any and all times be cut off and destroyed by the resignation or discharge of the particular receiver McNULTA v. LOCKRIDGE 4 oy during whose administration of the receivership the torts were committed or injuries received. If it is not manifestly in conflict with the language of the act, it should receive such an interpretation as will be commensurate to the mischiefs which were intended to be remedied by it. The word "every" and the clause "may be sued in respect of any act or transaction of his," found in Section 3, should not receive the narrow and restricted construction contended for by plaintiff in error. The word "his" refers to the officer who is the receiver or manager of the property which is the subject of the trust organized by the court and is not to be restricted to some one individual who, at a particular time during the existence of the receivership, filled that office. Our conclusion then is, that an action at law can be maintained against one receiver for the torts of the servants of his predecessor in the same receivership. The judgment of the appellate court was affirmed. Defendant thereupon sued out a writ of error in the supreme court of the United States. 2 Brown, J.: The Act of March 3, 1887, declares that "every receiver . . . may be sued in respect of any act or transaction of his in carrying on the business connected with such property, with- out the previous leave of the court in which said receiver or manager was appointed." We agree with the supreme court of Illinois that it was not intended by the word "his" to limit the right to sue to cases where the cause of action arose from the conduct of the receiver himself or his agents ; but that with respect to the question of liability he stands in place of the corporation. His position is somewhat analogous to that of a corporation sole, with respect to which it is held by the authorities that actions will lie by and against the actual incumbents of such corporations for causes of action accruing under their predecessors in office.* Polk v. Plummer, 2 Humphreys 500; Jansen v. Ostrander, 1 Cowen 670. If actions were brought against the receivership generally or against the cor- poration by name, "in the hands of" or "in the possession of," a receiver without stating the name of the individual, it would more accurately represent the character or status of the defendant. So long as the property of the corporation remains in the custody of the court and is administered through the agency of a receiver, such receivership is continuous and uninterrupted until the court relin- quishes its hold upon the property, though its personnel may be subject to repeated charges. Actions against the receiver are in law actions against the receivership, or the funds in the hands of the receiver, and his contracts, misfeasances, negligences and liabilities are official and not personal, and jurgments against him as receiver are payable only from the funds in his hands. As the right given by the statute to sue for the acts and transactions of the receivership is unlimited, we cannot say that it should be restricted to causes of 'A part only of the opinion is printed. 410 RECEIVERS action arising from the conduct of the receiver against whom the suit is brought, or his agents. 8 The defense is frivolous, and the judgment of the supreme court of Illinois must be affirmed. RICHARD F. OLPHERTS v. FRANK SULLIVAN SMITH. Supreme Court of New York, Appellate Division, 1900. 54 New York Appellate Division, 514. 1 Appeal by the plaintiff, Richard F. Olpherts, from a judgment of the supreme court in favor of the defendant, entered in the office of the clerk of the county of New York on the ninth day of Feb- ruary, 1900, upon the verdict of a jury rendered by direction of the court. McLaughlin, J. : On the 30th of June, 1897, the defendant was appointed receiver of the Worcester Cycle Company by the United States circuit court for the district of Connecticut, and as such receiver took possession of its factory and plant and entered upon the discharge of his duties. The order appointing him, among other things, provided that "The said receiver is hereby fully authorized and directed to take immediate possession of all and singular the property above described, wherever situated or found, and to collect all accounts and sums due or to become due to the Worcester Cycle Manufacturing Company, and to wind up its affairs,, and for that purpose to carry on and continue the business of said defendant company as the same is now carried on, so far as may be necessary to preserve its rights under its contracts, acting in all things under the order and direction of this court. . . . Said receiver is hereby fully authorized to continue to operate and carry on the business of the defendant Cycle Company in such manner as the same is now conducted' or in such manner as will, in his judgment, produce the most satisfactory results, so far as may be necessary for the preser- vation from loss of the outstanding contracts of said defendant Cycle Company. . . . Said receiver shall, from time to time, out of the funds coming into his hands, from the operation of the prop- erty and otherwise, pay the expenses of operating the same and executing his trust, and all taxes and assessments upon the said property,. or any part thereof." In the discharge of his duties under the order he purchased certain merchandise from the Wilmot & Hobbs Manufacturing Com- 3 See also, Comm. v. Runk, 26 Pa. 235 ( 1856) ; Camp v. Barney, 4 Hun, N. Y. 373 (1875) ; Brown v. Gray, 76 Tex. 444 (1890) ; Sloan v. Cent. R. la., 62 la. 728 (1883)^ McNulta v. Ensch, 134 111. 46 (1890); Schmidt v. Gayner, 59 Minn. 303 (1894) ; Vasele v. Grant St. E. R. Co., 16 Wash. 602 (1897) ; Pfeffer v. Kling, 58 N. Y. App. Div. 179 (1901) ; Lyons v. Sampsell, 168 III. App. 542 (1912) ; Smith v. Jones L. Co., 200 Fed. 647 (1912). 'Affirmed, without an opinion, 173 N. Y. 593 (1903). RICHARD F. OLPHERTS v. FRANK SULLIVAN SMITH 411 pany, amounting at the agreed price to seventy-two dollars and eighty-five cents, and for which, on the 30th of July, 1898, it drew a draft on him, of which the following fs a copy : "The Wilmot & Hobbs M'f'g Co. "Bridgeport, Conn., July 30th, 1898. "Forty-five days after date, pay to the order of National Shoe & Leather Bank, New York, Seventy-two 8 % o dollars, value received, and charge the same to account of The Wilmot & Hobbs Mfg. Co. "To Receiver Worcester Cycle Mfg. Co. "P. L. Bryning, Secy. "$72. 8 %oo. "Countersigned by Frank A. Wilmot, Pres't." When the draft was presented it was accepted, the following being written across the face of it : "Accepted, Frank Sullivan Smith, Receiver, Lewis.F. Wilson, Attorney." The draft was not paid, and was subsequently assigned to the plaintiff, who brought this action to recover the amount of it from the defendant personally. At the close of the trial, both parties having moved for the direction of a verdict, a verdict was directed for the defendant, and from the judgment entered thereon the plain- tiff has appealed. We think the direction was right.. The order of the court appointing the defendant receiver authorized him "to carry on and continue the business of said defendant company," so far as neces- sary to enable him to collect the accounts and sums due or to become due. This authorized the defendant to purchase property so far as such purchase became necessary to carry on the business contem- plated in the order. Under this authority the property — the consid- eration of the draft — was purchased. It was purchased by the defendant as receiver and not individually, and this fact the evidence clearly establishes was known to and acted upon by the Wilmot & Hobbs Manufacturing Company at the time the sale and delivery of the merchandise was made and the draft drawn. The goods were all billed "To Receiver Worcester Cycle Mfg. Co." ; the draft was drawn "To Receiver Worcester Cycle Mfg. Co."; the complaint alleges, "that the defendant, at the time of making said draft, was conducting the business of the Worcester Cycle Company under the title of receiver, and that said draft was given to secure the pay- ment of merchandise sold and delivered by said Wilmot & Hobbs Manufacturing Company, to the said defendant, conducting the busi- ness as aforesaid as such receiver." Considering the nature of the property purchased, the business in which it was used, and the powers given to the receiver under the order appointing him, the presumption arises that the purchase was made in obedience to that order and for the purpose intended by the court, rather than that it was made for a purpose not contemplated by it. (Soger Manu- facturing Co. v. Smith, 45 App. Div. 358.) We are, therefore, of the opinion that the defendant was expressly authorized to make the purchase, and that the Wilmot & Hobbs Manufacturing Com- 412 RECEIVERS pany knew it was made by the defendant as receiver and not indi- vidually, and, with this knowledge, sold and delivered the merchan- dise to him and drew the draft in question, intending to give credit to the receivership alone. If we are correct in this conclusion, then it necessarily follows that the defendant did not personally obligate himself to pay the purchase price or the draft. {Soger Manufac- turing Co. v. Smith, 45 App. Div. 358; Nasdn Manufacturing Co. v. Garden, 52 id. 363; High, Rec, Sec. 272; Cook, Corp., 878.) Sager Manufacturing Co. v. Smith {supra) is directly in point. That was an action brought against this same defendant, in which it was sought to hold him personally liable for merchandise pur- chased, under facts quite similar' to those involved in the action before us. There the court held, after reviewing many authorities, that if a receiver, authorized to continue and carry on the business of a corporation, and to purchase supplies and materials for that purpose, enters into a contract as receiver for the furnishing of such supplies, and discloses the capacity in which he assumes to act, he will incur no personal liability; that in such case the vendor has a cause of action against him as receiver only. 2 Under this authority, as well as the others cited, we think the judgment appealed from is right and must be affirmed, with costs. Rumsey, Patterson and O'Brien, JJ., concurred; Van Brunt, P. ]., dissented. Judgment affirmed, with costs. SCHWARTZ v. KEYSTONE OIL CO. COMMERCIAL BANK'S APPEAL. Supreme Court of Pennsylvania, 1893. 153 Pennsylvania, 283. Audit of receiver's account. Exceptions to the account, by appellants, as creditors, objected to the receiver's compensation and counsel fees and claimed a sur- charge for interest. The account was referred to C. A. Myers, Esq., as auditor, from whose report the facts appear as stated in the opinion of the supreme court. Exceptions were filed by appellants to the auditor's allowance, inter alia, of compensation and counsel fees, and refusal to surcharge interst. The exceptions were over- ruled and a decree entered by the court, Taylor, P. J., allowing the credits claimed by the receiver. 1 Williams, J. : The actual appellee in this case is the receiver, since all the questions raised relate to his duties and his compensa- * Accord: McGowan v. Ingalls, 60 Fla. 116 (1010) ; Willett v. Janecke, 85 Wash. 654 (1915). And see, Vanderbilt v. Cent. R. N. J., 43 N. J. Eq. 669 (1887) ; Brunner v. Central Glass Co., 18 Ind. App. 174 (1897). "The arguments of counsel are omitted. SCHWARTZ v. KEYSTONE OIL CO. COMM. BK'S APPEAL 413 tion. Before entering upon any of these questions, this case seems to require a restatement of some venerable elementary principles applicable to such officers that ought never to be lost sight of. A receiver is the officer, the executive hand, of a court of equity. His duty is to protect and preserve, for the benefit of the persons ulti- mately entitled to it, an estate over which the court has found it necessary to extend its care. He occupies a fiduciary relation to the owners of the property under his care and to all who have claims upon it. He is subject in all things to the direction and control of the court whose officer he is, *tnd when in doubt about his duty in any particular it is his privilege to apply to the court for specific instructions. His compensation is not regulated in this state by statute, but must be settled by the chancellor who appointed him and has jurisdiction of his accounts. 2 The amount of his compensation does not depend on his wealth or social standing, or the demands made upon his time by private business; nor yet upon the estimate that gentlemen who are themselves in receipt of an ample income may put upon his services from the standpoint they occupy. The considerations that should be controlling with the court are the time and labor needed, not necessarily the time and labor expended, in the proper performance of the duties imposed ; the fair value of such time and labor measured by the common business standards; the degree of activity, integrity and despatch with which the work of the receivership is conducted. When there has been delay in closing up his accounts, inattention to his trust, use of the trust fund by the receiver in his own private business or a want in any particular of the good faith and integrity that a court of equity uniformly requires of all its agents and officers, the compensation may be reduced below the ordinary standard or denied altogether, as justice and right may require.* In support of these general principles it seems altogether unnecessary to refer to authorities, as they will be found stated in the most familiar text-books: Brightly, Eq. Juris- prudence 884; Kerr on Receivers 209; Pomeroy's Equity 1336. Allowances for expenses are not a matter of course. Such bills should be carefully scrutinized by a chancellor. If they are unneces- sary or extravagant expenditures they should be reduced or dis- allowed altogether. The same is true of bills for the employment of counsel and the expenses incident to the conduct of litigation. A receiver is appointed not to plunder or dissipate an estate, but to preserve it, and in passing upon bills the question which should con- trol their allowance is, "Would a man of ordinary business capacity 'See Day v. Croft, 2 Beav. 488 (i&to) ; Grant v. Bryant. 101 Mass. 567 (1869) ; Boston S. D. Co. v. Chamberlain, 66 Fed. 847 (1895") : Mann v. Poole, 48 S. Car. 154 (1896) ; Culver v. Allen M. Ass'n, 206 111. 40 (1903) ; Lembeck v. Jarvis T. C. S. Co., 68 N. J. Eq. 352 (1904) ; Eames v. Claflm Co., 231 Fed. 693 (1916). 'See Clapp v. Clapp, 49 Hun, N. Y. X95 (1888) ; Receivership Sheets L. Co., 52 La. Ann. 1337 (1900) ; Speiser v. Merchants E. Bk., no Wis. 506 (1901); Hickey v. Parrot, 32 Mont. 143 (190S) ; Dalliba v. Wmschell, 11 Ida. 364 (1905); State v. Germania Bk., 103 Minn. 129 (1908). 4U RECEIVERS and prudence in the conduct of his own business be likely to incur the same expenses or enter upon the same course of conduct?" In other words, would he have paid the same salaries to his employees, surrounded himself with the same array of professional advisers at the same cost, and adopted the same general line of management if he had been transacting his own business ? If not, his bills should be reduced so as to bring them within proper limits. He is a trustee, and bound as such to the exercise of prudence and good faith in all his dealings with the trust estate, and to bring to the discharge of his official duties the same measure of skiH and the same personal super- vision that he would give if the estate was his own. In the light of these familiar principles we proceed to consider the questions raised on this record, not in the order in which they are presented by the assignments of error, but in their natural order. First. What was the nature of the trust committed to the receiver in this case? It was to take possession of the property of the Key- stone Oil Company, preserve it and convert it into money, as the hand of the court appointing him, so that distribution might be made as speedily as practicable among those entitled to the fund. This made it necessary to make prompt collections of outstanding bills, to convert the assets into money as soon as it could be done without loss, to adjust the claims of creditors where this was practicable, and to facilitate distribution of the fund. If delay in distribution was unavoidable, then the receiver should have paid the money raised into court or invested it at interest under the order of the court for the benefit of those to whom it should be awarded. Second. What duties did the acceptance of the trust impose upon the receivers? Among others was the duty to give his per- sonal attention and supervision to the conduct of the trust estate. He could employ superintendents and clerks when such assistance was necessary. He might secure legal advice and assistance to guide him in the proper performance of his duties. He might go into court when in doubt and ask instructions as to his powers and duties. But if he employed unnecessary help, incurred unnecessary expenses or entered upon unnecessary litigation, he should be charged, and not the fund, with the expenses so incurred. Again, it was the duty of the receiver to keep the trust funds separate from his own. He had no right to mingle them. In depos- iting them in bank, he should have made sure that they were placed to his credit as receiver, for it was in that capacity alone that he was entitled to their custody, and they were at all times subject to the order of the court, in whose hands, in contemplation of law, the found actually was. If he found himself with such a sum on hand, as if it had been his own he would have invested, it was his duty to ask leave of the court to invest it, and to try, in good faith, to keep it invested for the benefit of the owners. When the assets were turned into money it was his duty to make out his account and submit the fund to the direction of the court. SCHWARTZ v. KEYSTONE OIL CO. COMM. BK'S APPEAL 415 Third. How were the duties of the trust performed by the appellee? He was appointed on the third day of November, 1887. Between that date and the fourteenth day of June, 1888, the prop- erty of the Keystone Oil Company was sold and the estate substan- tially converted into money. More than eighteen months later, on the thirtieth day of January, 1890, he filed his first account, but not until after he had been ruled to do so. After another eighteen months he filed his final account in June, 1891, more than three and one-half years after his appointment. Meantime the fund had been under his control and practically in his hands for over three years. He does not seem to have ever deposited it to the credit of the court, or himself as receiver, but to his own individual credit and in his own individual bank, so that it was mingled with and indistinguish- able from his private funds. The auditor finds this fact, but, strangely enough, reports, as a conclusion of law, that this gross violation of duty was atoned for in a court of equity by the oral direction given to his bank clerks to be ready at all times to pay the money over, if called upon for it. But as it was deposited to his own individual credit, no one could call for it but himself. The direc- tion therefore meant nothing. The conclusion of the auditor has absolutely nothing on which to stand, and is in violation of one of the familiar principles to which we have already referred. The plain fact is that for three years this large sum of trust money was mingled with the private funds of the receiver and used by the bank which he owned, as other deposits were used, in making loans to customers at the usual rate of discount. Another item that deserves attention is that in preparing his account he has improperly increased the total sum of his debts and credits by putting upon both sides of the accounts of the trust estate an item of forty-five thousand and thirty-eight dollars and ninety- one cents, the price of a pipe line that belonged to Smithman and formed no part of the estate of the Keystone Oil Company. He sold the pipe line with the refinery, but he sold it not as a receiver, but as the agent of Smithman under a written power, as follows: "I will authorize and empower you in my place and name to offer the said pipe line for sale, and sell the same in connection with the refinery; and upon payment of the said sum of $45,038.91 to me or the giving of satisfactory security therefor, I will convey the said pipe line to the purchaser." Under this authority he sold the pipe line with the refinery, and at once paid the agreed price to Smithman as the owner. Striking out this item, which has no business in the account, the total of the receipts by the receiver is ninety-six thou- sand one hundred and eighty-one dollars and seventy-four cents. We come now to the expenses of collecting this fund. They are stated thus: For attorney's fees $4,685-56 Superintendent and clerk hire 2, °fil aa Compensation of receiver 11,366.00 Total $18,054.96 416 RECEIVERS This is nearly twenty per cent, upon the amount raised. It is sincerely to be hoped that the records of the courts of equity in this state present few parallels to this exhibit. It would afford some relief to the chancellor if it appeared that this fund, collected at such an enormous cost, had been promptly invested and kept at interest for the benefit of its unfortunate owners. But as we have already seen, this was not done. On the contrary, an offer made by a bank in good credit to borrow fifty thousand dollars of the fund at five per cent, interest, accompanied by an offer of ample outside security, was resisted by him and at last defeated. Such being the manner in which the duties imposed by this trust have been performed in some important particulars, it remains to inquire, finally, what compensation should be allowed the receiver. Compensation is made by one of two methods; either a reasonable commission is allowed on the fund, or a fair price for the labor and time employed in its collection. In some states the rate of commis- sion that may be allowed to trustees is fixed by statute. In others it is regulated by the courts. The New York rule has been to allow five per cent, on the first one thousand dollars, two and one-half per cent, on the next four thousand dollars, and one per cent, on all sums above five thousand. In this state the rule is more flexible. The usual allowance ranges from two to five per cent., while in exceptional cases commissions as high as ten per cent., and possibly even higher than that, have been allowed. Where compensation is charged for labor and expenses, instead of a commission on the fund, some statement of the time spent and labor done should be furnished, by which the reasonableness of the charge made may be determined. No such account is furnished in this case. The work was mainly done in the first six months, during which time superintendents and clerks were employed to conduct it under the general direction of the receiver. Only part of his own time was given during this six months to the receivership. It would be helpful if we knew how much, but he has not chosen to inform us. The auditor seems to have had no trouble with this question, for in a comprehensive finding of fact he affirms "that the services performed by the receiver were worth the amount charged and for which he has claimed credit in his account, and should be allowed unless as a law proposition he is not entitled to that sum." This was followed by an equally comprehensive finding of law in which he declares that there is no "law proposition" to interfere with the allowance, and he accordingly awards him the sum he has charged in his account. If the auditor had ascertained the time spent, and fixed a value by the day or month upon the receiver's services, his conclusion that they were worth "the amount charged" would have something on which to rest. If, for example, he had found the time spent to be one hundred and ten days, and fixed the value of the receiver's work at one hundred dollars per day, we could at least understand the process by which he reached his conclusion, whether we adopted his conclusion or not. As it is, we can doubt neither SCHWARTZ v. KEYSTONE OIL CO. COMM. BK'S APPEAL 417 his conclusion of fact nor his conclusion of law on this subject. Upon the consideration of all the evidence we are disposed to allow a salary of three thousand dollars for the first year's services, and the further sum of one thousand dollars for subsequent services, making a total allowance of four thousand dollars. With the remaining seven thousand three hundred and sixty-six and sixty-six one hundredths dollars charged for services, he is surcharged. But what ought a court of equity to require as to compensation for the use of this fund for three years ? It did not belong to the receiver as an individual. He had no business to use one dollar of it, or to mingle it with his own funds. He was a trustee, the custodian ot this fund, bound to use and preserve it for the owners as a prudent man would use his own. After the filing of the first account, and after this question was raised, some of it was loaned, and it is inter- esting to observe what the trustee did. He loaned to three banks. To his own bank in Oil City , $43,000 To his own bank in Franklin i5iOQO Total $58,000 To the First National Bank of Oil City $5,ooo The interest received upon these loans and credited to the fund amounts to one thousand nine hundred and twelve dollars and fifty cents. He was still making profit put of the trust fund. It is true that an improvident order of the court below permitted these loans, and if they had been made in good faith to strangers it may be that for the time covered by them the trustee ought not to be required to account for more than he received in the way of interest, but on the circumstances of this case the receiver is in no position to shield himself behind the order. He knew the value of money. He had no right to profit by the use of this fund, and he ought to account as though the order had never been made. We charge him with interest for three years at four per cent, on the fund $7,560.00 Upon this should be credited the interest accounted for. . . 1,912.50 Balance of interest surcharged $5,647.50 Surcharged out of compensation 7,366.66 Total surcharge $13,014.16 Decree. And now, October 6, 1892, it is ordered that the decree of the court below be reversed and set aside and the exceptions to the report of the auditor so far as they relate to interest upon the funds in the hands of the receiver, and to the compensation charged by him, be sustained, and the compensation allowed is fixed at four thousand dollars. The interest to be accounted for by the receiver is fixed at five thousand six hundred and forty-seven dollars and