Coe v. N. J. Midland Railway Co.

that the property is in better condition than it was when it came to the hands of the receivers. It has been in the power of the petitioners, at all times since the appointment of the receivers, to retake their property, and sell it to raise the amount remaining due to them.

The receivers do not appear to have contracted to purchase the property. They appear to have been willing, up to the time when they were warned not to do so, to pay for it according to the agreement between the petitioners and the company.

It might have been a very improvident act on their part to have paid the rent under the lease. If the allegations made in their answer are true, it would have been. The fact that they applied for leave to issue certificates to pay the rent neither binds them nor the trust. The question as to the propriety of paying the rent was not before the court. The propriety of making provision to cover that and other expenses, was. There is nothing in the application of the receivers, and the order in pursuance of it, to bind the trust estate to the payment of the rent to the petitioners under the lease.

I am unwilling to grant the prayer of the petition until I shall be satisfied that it is for the interest of the trust that it should be done. If the petitioners are willing to accept for the property in the hands of the receivers what it is in fact worth, irrespective of the price fixed in the agreement, and to allow on account of such price what has been received by them on account of rent, the receivers will be authorized to purchase the nine locomotives and tenders of them at their true value, and pay for them in the certificates.

And, in any event, the petitioners will be allowed just compensation for the use of the property since it has been held by the receivers.

Hill's Administrators v. McCarter.

HILL'S ADMINISTRATORS vs. MCCARTER and others.

1. The rule in equity is well established, that where mortgaged premises are sold in separate parcels successively to different purchasers, with covenants against encumbrances, the parcels are liable to sale to satisfy the mortgage, in the inverse order of their sale. But the rule will not be applied in any case where its application would work injustice.

2. A conveyance of part of mortgaged premises, expressly subject to existing mortgages, is an assurance to the subsequent purchaser of the other parts, that the property will be subject to its due proportion of the burden of such mortgages.

3. Where part of mortgaged premises is conveyed subject to mortgages thereon, and the rest of the property is sold and conveyed in fee in parcels to other persons, the part first conveyed is bound to pay its due proportion of the mortgages, according to the comparative value of the respective portions at the time of its conveyance.

4. A purchaser of part of mortgaged premises is not entitled to the benefit of a release by a prior mortgagee from the lien of his mortgage, of another part of the premises, when the mortgagee had not actual notice of the conveyance at the time of making the release.

On bill to foreclose. On final hearing on pleadings and proofs.

Mr. Thomas Kays, for complainants.

Mr. W. S. Whitehead, for Albert P. Condit, surviving

trustee.

Mr. R. Hamilton, for McCarter's assignee in bankruptcy, and others.

THE CHANCELLOR.

The question presented arises between the purchasers of certain land containing sixty-nine and fifty-two hundredths acres, which, on the 5th of June, 1865, was owned by John McCarter, as to the manner in which the burden of two mortgages which are on the property, and were given by him, shall be borne. On one of these mortgages there was at that date

Hill's Administrators v. McCarter.

due of principal, $2500, besides interest. It was originally given to secure $4000, but $1500 of the amount had been paid. This mortgage was given to Frances M. Anderson, and was by her assigned to the complainants' intestate. The other mortgage was for $1000 and interest, and was given to Ross C. Browning. On the 5th of June, 1865, McCarter sold part (forty-nine and thirty-six hundredths acres,) of the premises to William M. Babbitt, for the consideration of $8255, and conveyed it to him by deed in fee simple, with the usual full covenants, including warranty general. Following the description of the premises, is this statement: "These lots are sold subject to one mortgage to Frances M. Anderson, of $2500, and the interest thereon after April 1st, 1865, and a mortgage given to Ross C. Browning, for $1000, interest from same time." McCarter subsequently, and on the 27th of June, 1865, sold and conveyed in fee simple to Emma Barrett, another part (seventeen and forty-two hundredths acres,) of the land, which was subject to the mortgage of $2500, and on the same day the complainants' intestate released that land from the lien of his mortgage. Subsequently, the rest of the property was sold and conveyed in fee, in parcels to other persons. No part of the purchase money of the sale to Babbitt was paid by him in cash, but at or about the time of the delivery of the deed from McCarter to him, he delivered to the latter an assignment, executed by himself and William M. Vermilye, of a mortgage made by Sardius Stewart and Farrand K. Stagg, to them, upon certain real estate in Wayne county, Pennsylvania, to secure the payment of $10,000 in installments, with interest. This assignment contained the following covenant, made by Babbitt and Vermilye: "And we do hereby covenant and agree to and with the said John McCarter, that there is now unpaid on the said bond and mortgage the sum of $10,000 of principal, and for the consideration aforesaid, ($10,000,) and as part of the agreement under which this assignment is made, we do hereby guarantee the payment of the said bond, and do bind ourselves, our heirs, executors and administrators, jointly and severally, firmly by these presents, to pay to the said John McCarter,

Hill's Administrators v. McCarter.

his executors, administrators or assigns, the said sum of money unpaid on and secured by the said bond and mortgage." This assignment is dated on the 2d of June, 1865. By an instrument of writing, under seal, dated on the tenth of the same month, executed by McCarter, and delivered to Babbitt, the conveyance of the land by the former to the latter, and the existence of the encumbrances of the mortgages thereon were recited, and it was also recited that in payment of the purchase money of the property, Babbitt had, with Vermilye, assigned and set over to McCarter the Stewart and Stagg bond and mortgage, and that after deducting from the amount of that bond and mortgage the amount of the consideration ($8255) of the conveyance of the property sold and conveyed by McCarter to Babbitt, there was a balance of $1745, for which, and Babbitt's note to McCarter for $881, McCarter had assigned to Babbitt a mortgage for $2424, príncipal and interest, given to him by Richard Sherred, on other land. The instrument thereupon declared that in order to effectually secure Babbitt against loss or damage by reason of the two mortgages on the property conveyed to him by McCarter, being liens and encumbrances on that property, it was thereby expressly understood and agreed by McCarter with Babbitt, that so much of the interest money as might become due from year to year on the Stewart and Stagg bond and mortgage, and as might be necessary for the purpose, should be applied to the payment of the interest money which might become due on the two mortgages on the land conveyed to Babbitt by McCarter, and that when the last payment should become due on the Stewart and Stagg mortgage, so much thereof as might be necessary for the purpose should be applied by McCarter to pay off and discharge the mortgages on the land conveyed by him to Babbitt.

On the 30th of December, 1865, McCarter, for the consideration of $6500, assigned the Stewart and Stagg bond and mortgage, and Babbitt and Vermilye's guaranty thereof, to James A. Goodale, in trust to collect the money secured by them, with the interest, as fast as the installments should fall

Hill's Administrators v. McCarter.

due, and to apply the first $6500 collected on account of the principal and the interest thereon, to Goodale's own use, and after receipt of the $6500 of principal, to take up, pay off and discharge, and cause to be canceled, the two mortgages on the property conveyed by McCarter to Babbitt; and until such payment, satisfaction and discharge, to pay to the holders of those mortgages the interest which should be received on the Stewart and Stagg bond and mortgage over and above the interest on the $6500, or such part thereof as should remain unpaid, as interest on those mortgages, semi-annually on the first days of January and July of each year, until they should be paid off and discharged; and it was thereby declared to be the intention of the parties to the instrument, to apply, out of the principal of the Stewart and Stagg mortgage, the last $3500 to the payment of the mortgages on the Babbitt property, and to apply the surplus of the interest collected on the Stewart and Stagg mortgage, after deducting the interest on the $6500, or so much thereof as might remain unpaid, to the payment, half yearly, of the interest on the mortgages on the Babbitt property. And this further trust was declared: In case the last mentioned mortgages should be collected by the holder or holders thereof, before the last $3500 should be collected on the Stewart and Stagg mortgage, to pay over to McCarter the $3500, or such part thereof as might not have been paid by Goodale under the provisions of that instrument, with the interest which might have been collected by him. McCarter guaranteed to Goodale the payment of the Stewart and Stagg mortgage, on condition that Goodale should, in case of any default of payment thereon, prosecute Babbitt and Vermilye on their guaranty. Default was made in the payment of the interest on the Stewart and Stagg mortgage, and Babbitt, on being called on to do so, paid the interest on the two mortgages on his property. In or about June, 1869, Goodale prosecuted Babbitt and Vermilye, in the name of McCarter, in the Supreme Court of this state, on their guaranty, and recovered judgment on the 8th of November following, for $7405.13 damages and costs. Both Babbitt and Ver