hoven mortgage, the importance of those special provisions would have appeared.21

SCOTT, J., in DAY V. MUNSON, 14 Ohio St. 488.

(1863.)

The case, then, stands thus: The plaintiffs' mortgages, not having been re-filed, pursuant to statute, are void as to Younglove & Hoyt, the third mortgagees; but the plaintiffs retain their priority of lien over Warren, who holds under Wilcox, the second mortgagee, and whose mortgage was taken with actual notice of the plaintiffs' prior mortgages. Warren's lien under the Wilcox mortgage, has priority over that of the third mortgagees, and is not to be affected by the laches of the plaintiffs. The plaintiffs' mortgages, are then, not to affect the rights of the third mortgagees; nor is the laches of the plaintiffs to affect the rights of the second mortgagee; and whatever rights these conditions leave to the plaintiffs, they still retain. The result will be, if the fund is insufficient for the discharge of all mortgages, that the third mortgagees, Younglove & Hoyt, are entitled to so much of the fund as would be applicable on their mortgage, after satisfying Warren's prior lien. Warren is entitled to so much of the fund as would be applicable to the satisfaction of his claim, leaving the third mortgage out of the question, and preserving the plaintiff's priority of lien. And the plaintiffs are entitled to the residue.

COOPER, J., in GOODBAR & Co. v. DUNN, 61 Miss. 618. (1884). Dunn has a mortgage on these ten acres void for uncertainty as against Goodbar & Co., but good as against Lemmon & Gale, who had notice of the mistake, while Lemmon & Gale have a mortgage which sufficiently describes the land and which has priority over the attachment of Goodbar & Co.

What are the rights of the parties under these circumstances? On a casual examination it would seem that Dunn could take the proceeds of the land from Lemmon & Gale, and that Goodbar & Co. could take it from him, and that Lemmon & Gale could re-take it to lose it again to Dunn, and so the one in possession of the fund would always find his rights postponed to one of the other claimants. We think, however, the rights of the respective parties are preserved under such circumstances by the following rule:

If the proceeds of the property are insufficient to discharge all the liens but exceed the amount of the second mortgage, an amount equal to the second mortgage is to be set aside and the balance so far as necessary appropriated to the payment of the third encumbrancer. The priority of the first mortgage over the second is to be retained on a settlement of their rights for an amount equal to the first mortgage debt after subtracting therefrom the sum paid to the third 21 Same case on appeal, supra.

encumbrancer; if, however, the sum realized by a sale of the property does not equal the second mortgage debt, the third encumbranceer is to be ignored, and the fund distributed between the first and second mortgagees, the first being paid his debt in full. In this way. the rights of all the parties are preserved, for the third encumbrancer is entitled to nothing until the second is paid, and the second has no right to any of the fund until an amount equal to the first mortgage has been taken therefrom, and the first mortgagee should not be permitted to charge against the second any sum which by reason of his laches has been appropriated to the third.22

22 Compare Porter v. Ourada, supra.

CHAPTER XI.

CONVEYANCE OF THE EQUITY OF REDEMPTION.

KELLER v. ASHFORD.

SUPREME COURT OF THE UNITED STATES, 1889.
133 U. S. 610.

This was a bill in equity by Henrietta C. Keller, the holder of a promissory note for $2,000, made by one Thompson, secured by his mortgage of land in Washington, against Francis A. Ashford as grantee of the land subject to this mortgage, and who by the terms of the deed to him assumed payment of incumbrances on the land. The bill prayed for a decree in the plaintiff's favor against Ashford for the amount of that note, and for general relief. The case was heard upon pleadings and proofs, by which it appeared to be as follows:

On August 17, 1875, Thompson, being seised in fee of lot 5 in square 889 in the city of Washington, conveyed it to one Rohrer, by a deed of trust in the nature of a mortgage, to secure the payment of Thompson's promissory note of that date for $1,500 payable in three years with interest at ten per cent, held by one Harkness.

On February 21, 1876, Thompson conveyed the same lot by like deed of trust to one Gordon, to secure the payment of Thompson's note of that date for $2,000, payable in one year, with interest at eight per cent. yearly until paid, to the order of Moses Kelly; and Kelly endorsed this note for full value to the plaintiff.

On January 1, 1877, Thompson, at the instance and persuasion of Kelly, executed and acknowledged and delivered to Kelly a deed; expressed to be made in consideration of the sum of $4,500; conveying this lot, together with lots 6, 7 and 8 in the same square (each of which three lots was also in fact subject to a mortgage for $2,000) to Ashford in fee, "subject, however, to certain incumbrances now resting thereon, payment of which is assumed by paid party of the second part;" and containing covenants by the grantor of warranty against all persons claiming from, under or through him, and for further assurance. At the date of this deed, the only incumbrances on the land conveyed were the five mortgages above mentioned, and some unpaid taxes assessed against Thompson while owner of the land. On January 22, 1877, this

deed, together with a notary's certificate of its acknowledgment by the grantor, was recorded in the registry of the District of Columbia.

No consideration was actually paid for the conveyance. The value of the lots conveyed was, according to Thompson's testimony, $4,000 each or $16,000 in all, or, according to Ashford's testimony, not less than $3,400 each or $13,600 in all.

Thompson testified that he never had any negotiations with Ashford about the property; and that he was induced to make this deed by the assurance of Kelly that the grantee would assume the incumbrances upon the land and relieve him from liability upon the notes he had given secured by mortgage.

Ashford testified that he never had any negotiations with any one about the purchase of the land; and that in February, 1877, Kelly, who was his father-in-law, to whom he had lent much money and for whom he had endorsed several notes, told him that, in order to secure him from loss, he had procured a conveyance to be made to him of these four lots, in which he thought "there was considerable equity;" informed him at the same time that there were incumbrances or mortgages upon the property, but did not specifically mention any of them, except the $1,500 mortgage upon lot 5; told him that the interest on this was pressing, and that, if he would pay it, Kelly would relieve him from any further trouble as to the incumbrances; and advised him to go on and collect the rents of the property, so as to indemnify himself against that interest and pay the taxes in arrears.

It was proved that Ashford in March, 1877, entered into possession of the four lots, and paid the taxes previously assessed upon them, and also paid interest accruing under the mortgage for $1,500 on lot 5, and collected the rents of the four lots, until December 4, 1877, when he sold and conveyed lots 7 and 8 to one Duncan, subject to existing incumbrances thereon; and continued to collect the rents of the other two lots, and to pay the interest accruing under the mortgage for $1,500 on lot 5, until March 14, 1878, when this lot was sold, pursuant to the provisions of that mortgage, by public auction, and conveyed to Harkness for the sum of $1,700, which was insufficient to satisfy the amount then due on that mortgage.

On comparing Ashford's testimony with that of Boarman, the plaintiff's attorney, and with a letter written by Ashford to Boarman on October 3, 1877, it clearly appears that Ashford was informed of the clause in the deed to him, assuming payment of incumbrances, and was requested to pay the plaintiff's mortgage, as early as September, 1877, and then, as well as constantly afterwards, declined to pay it, or to recognize any personal liability to do so. There was no direct evidence that he knew of this clause before September, 1877.

The plaintiff brought an action at law upon the note against Thompson as maker and Kelly as endorser on November 13, 1877, and recovered judgment against both in December, 1877, on which execution issued and was returned unsatisfied, April 15, 1878.

The present bill was filed May 13, 1878. A decree dismissing the bill was rendered in Special Term, May 9, 1882, which, after the death of Ashford and the substitution of his executrix in his stead, was affirmed in general term, February 16, 1885, upon the grounds that Ashford had never accepted the deed to him, and also that the plaintiff's remedy, if any, was at law. 3 Mackey, 455.

GRAY, J.

The questions to be decided concern the extent, the obligation and the enforcement of the agreement created by the clause in the deed of conveyance from Thompson to Ashford of this and three other lots, "subject, however, to certain incumbrances now resting thereon, payment of which is assumed by said party of the second part."

The five mortgages made by the grantor, namely, the plaintiff's mortgage for $2,000 and a prior mortgage for $1,500 on lot 5, and a mortgage of $2,000 on each of the three other lots, and some unpaid taxes which had been assessed against the grantor, were incumbrances, and were the only incumbrances existing upon the granted premises at the time of the execution of this conveyance. Rawle on Covenants (5th ed.) sec. 77. The clause in question, by the words "certain incumbrances now resting thereon," designates and comprehends all those mortgages and taxes, as clearly as if the words used had been "the incumbrances," or "all incumbrances," or had particularly described each mortgage and each tax. We give no weight to Thompson's testimony as to Kelly's previous conversation with him to the same effect, because that conversation is not shown to have been authorized by or communicated to Ashford, and cannot affect the legal construction of the deed as against him. It was argued that, because the deed contains a covenant of special warranty against all persons claiming under the grantor, the words "certain incumbrances" cannot include the mortgages made by the grantor, but must be limited to the unpaid taxes which, it is said, would not come within the covenant of special warranty. But the answer to this argument is that any person claiming title by virtue of a lien created by taxes assessed against the grantor would claim under the grantor, equally with one claiming by a mortgage from him; and incumbrances expressly assumed by the grantee are necessarily excluded from the covenants of the grantor.1

1 "The clause in a deed referring to the existence of a prior mortgage is of much importance in other ways than in determining whether the purchaser engages to pay the mortgage, or merely buys subject to it.