ordinary commercial indorsement, and assumed to control the ultimate destiny and use of the proceeds. If the money was to be relinquished and not to be applied on the mortgage debt, it is clear that complainant understood that the legal rights of the parties required that it be placed back on the mortgaged premises, and hence the stringent provisions to that end in the agreement of January, 1872; and it was, of course, understood that the restoration of the building on the premises would inure as well to the benefit of the owners of the fee as to that of the owner of the life estate. So I say complainant dealt with the insurance not as Mr. Scammon's money, but as a further security furnished under the mortgage, and as something which affected the rights of all the mortgagors in the property, and in which all were interested.

§ 574. Effect of a stipulation in a mortgage that the insurance money, in case of a loss, should be paid on the mortgage debt.

If this be the correct view of the question the remaining question, which relates purely to the rights of the parties, would seem not to be difficult of solution. The provision of the policy, that the loss should be payable to the mortgagee, operated to give the mortgagee precisely the same rights and interest in the policy which it would have had if, without such words, the policy had been assigned as collateral security to the mortgage debt. 1 Jones on Mortgages, § 407, and cases cited. The proceeds of the insurance in the hands of complainant represented the insured property and the interests of all the mortgagors therein. The control exercised over the same by the mortgagee was equivalent to an election by it, under the provisions of the mortgage, to collect and receive the money. This being so, it was complainant's duty to use and apply it in accordance with the spirit of the provisions of the mortgage, and for the benefit of the parties beneficially interested, unless they consented to some other disposition of it. Indeed, it is difficult to perceive why, upon general principles of equity, so far as the rights of the owners of the reversion were concerned, complainant could not have been required to have had recourse to the insurance money as collateral security for payment pro tanto of the mortgage. If, in any view of the equities of the case, complainant might, without the knowledge of the owners of the fee, agree with the life tenant to place the money back on the mortgaged premises, it was bound to see that such agreement was carried out, and that the money was so used. Failing in this, and having as mortgagee received and undertaken to deal with the insurance proceeds as a fund representing the property, equity will consider that as done which ought to have been done, and must, therefore, so far as the interests of the non-consenting mortgagors are concerned, charge complainant with this fund and treat it as operative to satisfy the mortgage pro tanto.

The case at bar is distinguishable from Gordon v. Ware Savings Bank, 115 Mass., 588, which was cited by the learned counsel for complainant on the argument. That was a case where mortgaged premises were injured by fire, and the amount of the loss was paid by the insurer in pursuance of its agreement with the mortgagor to the first mortgagee, who subsequently paid the amount to the mortgagor to be applied in repairing the premises, so as to make them as valuable as before the fire; and in this case it was held, under the facts, that the holder of a second mortgage had no equity to have the amount so received applied in reduction of the debt secured by the first mortgage. The facts were that at the time the first mortgagee received the insurance money the mortgage debt was not due, and the mortgagor did not consent to the application of the money on the mortgage; and, moreover, and as a controlling feature

of the transaction, the money was applied by the mortgagor to the restoration. of the impaired security, for the benefit alike of all parties interested. These circumstances, of course, vitally affected the equities of the second mortgagee. § 575. Powers of a court of equity properly to apportion the benefit of insurance money between life tenants and reversioners.

The point was made on the argument that the insurance money could not be applied on the mortgage debt without reducing the liability of the defendant Scammon equally with that of his co-obligors on the bond, which would be manifestly wrong. And the question was put, where can the line be drawn in the proposed application of this money in reduction of a liability which is joint, and which is secured by the pledge of interests that are undivided? The answer is that the rules of equity practice are sufficiently flexible to meet the case. The life estate may be charged with the same burden of liability as it was originally chargeable with, added to which is the personal liability of the defendant Scammon; and the estate of the owners of the fee may be charged with the proper proportion of liability, namely, $5,000, and interest. The decree can provide for a sale of the life estate as a security for the debt, unaffected by anything that has transpired between its owner and complainant, and suitable provision can be made touching the personal liability of the defendant Scammon for any deficiency. Further, the same decree can direct a sale of the interest of the other mortgagors to pay so much of the debt as is in excess of the $15,000 realized from the insurance. To the extent indicated the exceptions to the master's report will be sustained, and decree in conformity to this opinion.

§ 576. Policy obtained by mortgagee.- The mortgagor cannot claim the benefit of insurance made by the mortgagee at his own expense for his own benefit. Russell v. Southard, 12 How., 139 (491-509).

$ 577. Where a mortgagor covenants with the mortgagee to keep the premises insured for the benefit of the mortgagee, the latter has a lien upon the proceeds of the policy which will be enforced by a court of equity for his benefit, and if his mortgage is duly recorded, the covenant for insurance is regarded as running with the land, and as giving of the right to others, so that no subsequent assignment of the policy would affect his rights. In re Sands Ale Brewing Co., 3 Biss., 175, 178.

$578. The fact that the policies are not assigned to the mortgagee does not defeat his equitable interest therein. Ibid.

$579. In the absence of a covenant or agreement on the part of the mortgagor that the premises shall be insured for the benefit of the mortgagee, the latter cannot claim the benefit of a policy underwritten by the mortgagor on the mortgaged property. Columbia Ins. Co. of Alexandria v. Lawrence, 10 Pet., 508.

$580. A mortgagee may insure his interest in the property without regard to the mortgagor, and, in case of loss, he may recover the amount without any liability to account to the mortgagor. The mortgagee's right to recover under a policy providing for an apportionment of the loss in case of any other insurance on the property, is not affected by an insurance of the mortgagor's interest where the policy is made payable to the mortgagee without his knowledge. Johnson v. North British & Mercantile Ins. Co., 1 Holmes, 117.

§ 581. Insurance at expense of mortgagor.— There is an implied obligation arising from the procuring of the insurance upon the request of the mortgagor, or at his expense, that the insurance money, when paid, shall be applied to the mortgage debt. Holbrook v. Am. Ins. Co., 1 Curt., 193.

$582. Alienation clause.-A conveyance which equity will treat as a mortgage does not terminate the interest of the assured, or make void the policy under the alienation clause. Ibid.

173

IX. FIXTURES.

SUMMARY · Steam-engine, when not a fixture, § 583.

§ 583. A mortgagor may remove a steam-engine not connected with the freehold which was placed on the land after the mortgage was executed. Cope v. Romeyne, § 584.

COPE v. ROMEYNE.

(Circuit Court for Michigan: 4 McLean, 384-387. 1848.)

Opinion by the COURT.

STATEMENT OF FACTS.- This is an action of trover. A mortgage was given to the Bank of the United States on the 8th of April, 1840, to secure the payment of the sum of $10,641.57 on lots fifteen, sixteen and seventeen, in Port Sheldon, a town on paper only, by the Port Sheldon Land Company. An association was formed, called the "Port Sheldon Land Company," in Michigan, to lay out a town, build a steam mill, and to make other improvements. The assignees of the bank bring this suit. Before action was commenced on the mortgage, the trustees of the land company released the equity of redemption to the plaintiffs. The loan was made to the company by the Bank of the United States, the 18th of April, 1838, which was negotiated by Mr. Jaudon, who was cashier of the bank, and was one of the land company. When the release of the equity of redemption was given, it was stipulated that the proceeds of the property should be applied in payment of the mortgage debt. Mr. Jaudon, being sworn, stated that he acted as agent for the land company, and in that character purchased an engine to put into a saw mill which they had constructed on one of the lots mortgaged. That being in possession in 1843, as agent, and one of the land-owners, he took down the engine and shipped it with its apparatus to Detroit, accompanied by a bill of lading, which was indorsed to Romeyn, and which he indorsed to the "Bank of Sinclair." Romeyn was authorized to sell the engine, and he did sell it to the Bank of Sinclair, and indorsed to it the bill of lading. Pitts purchased it for the bank in good faith, without notice from Romeyn, the bank having made advances on the engine. A bill was filed to foreclose the mortgage-defense withdrawn. No steps have been since taken on it. Mr. Jaudon says the release of the equity of the mortgage was released only on the condition that it should be in full payment of the mortgage, and the assignors so understood at the time of the assignment. The plaintiffs admitted by a letter to Jaudon, 11th March, 1847, that the mortgage was limited to the lots expressed.

The counsel for the plaintiffs insist that the mortgagee, after forfeiture, may sue in trover for any part of the freehold, severed before or after the mortgage became due, though out of possession. 17 Eng. Com. Law, 272. Mortgagor is less than a tenant. The personal property, when severed, still belongs to the mortgagee. Admits that if the mortgagor had sold the property, including the engine, the title would have been good. But he insists that, the engine being severed, a sale by the mortgagor does not give a good title. Recording acts have nothing to do with the present question. 3 Wend., 104; 8 id., 584; Powell on Mort., n. 165; 2 Greenl., 387; 33 Eng. Com. Law, 115; 1 Doug., 21, 256; 15 Eng. Com. Law, 486. The only question which is raised by the pleadings is, whether the engine could properly be claimed by the mortgagees.

584. When mortgagor may remove steam-engine.

At the time the mortgage was executed there were no improvements on the lots. A saw mill was subsequently constructed. Now, it is admitted that all improvements, such as a saw mill, essentially connected with the freehold, could not be removed by the mortgagors. But was the engine so connected as to make it the property of the mortgagees? It was necessary to the operation of the mill, but was it so attached to the soil, as a fixture, that the mortgagors could not remove it? The mortgagors, after building their mill, were not bound to keep it in operation or to repair it. They, having erected it, had a right to abandon it. Had the improvements been on the premises at the time the mortgage was executed, the mortgagees, by an action, might have turned them out of possession, or restrained them from committing waste. The mortgage debt was due at the time the mortgage was given. But if it be admitted that the engine was a fixture, and could not be severed from the freehold, that could not affect the right of the Bank of Sinclair. Pitts, the agent of the bank, purchased it, without notice, bona fide, and the bill of lading was indorsed to him by Romeyn, to whom the engine was consigned. The bill of lading, in regard to the transfer of the property, like a bill of exchange, is good, unless affected by notice. And it is not pretended that there was bad faith on the part of the Bank of Sinclair, or that its agent had notice. We think, therefore, that as a matter of law, the above facts being admitted, the jury must find the defendants not guilty. On this intimation, a non-suit was suffered, and a motion was afterward made to set it aside, which the court overruled.

X. REGISTRATION AS AFFECTING PRIORITY.

SUMMARY - Mortgagee an innocent purchaser, § 585; so is trustee in a deed of trust, § 586.

$585. A mortgagee in good faith, of land of which the mortgagor is in full possession under a regularly recorded deed, is "an innocent purchaser," and acquires a valid lien. Bailey v. Crim, § 587.

$ 586. A trustee in a deed of trust is also a purchaser for value. He occupies the same ground with respect to notice, either actual or constructive, of any outstanding equities, that a mortgagee does. Kesner v. Trigg, §§ 588, 589.

[NOTES.

See §§ 590-619.]

BAILEY v. CRIM.

(Circuit Court for Indiana: 9 Bissell, 95-98. 1879.)

Opinion by GRESHAM, J.

STATEMENT OF FACTS.-On the 18th day of September, 1877, Henry Bailey, of Randolph county, and Noah Crim, of Henry county, entered into a written. agreement for the exchange of the farms upon which they were then living, each surrendering to the other full possession. Crim's farm was incumbered, and by the terms of the agreement he was to pay all the liens, except $2,000, on or before the 25th of December. Deeds were duly signed and acknowledged and placed in the hands of James Brown, a loan agent residing at New Castle, Henry county, there to remain until the terms of the contract were complied with. At the time Brown became custodian of the deeds it was understood and expected by the parties that Crim, through Brown, would raise money on the land conveyed to him, to remove the incumbrances, less $2,000, upon the land which he conveyed to Bailey. This seems to have been the reason for depositing the deeds with Brown. On the 22d of November, 1877, Brown,

without the knowledge of either party, had Bailey's deed to Crim recorded in Randolph county, and made one or more unsuccessful efforts to negotiate a loan for Crim. Just what Bailey was to do before being entitled to his deed from Crim, the agreement and evidence fail to show, but on the 29th day of January, 1878, he demanded and received from Brown Crim's deed for the Henry county land. On the 22d of April, 1878, James Moorman, of Randolph county, loaned Crim $2,100, and took a mortgage on the land described in Bailey's deed to Crim to secure the loan. This Moorman did in good faith, and without any knowledge of the circumstances under which the deeds had been placed in the hands of Brown or of Bailey's rights. Instead of applying the money obtained from Moorman to remove the incumbrances on the lands conveyed to Bailey, Crim used it for other purposes, and a few days thereafter went into bankruptcy. Bailey paid off the incumbrances and filed his bill against Moorman and Crim's assignee to enforce his vendor's lien, for the amount so paid, against the land conveyed to Crim, demanding priority over the mortgage held by Moorman.

§ 587. Mortgagee an innocent purchaser.

Moorman set up his mortgage in a cross-bill, demanding protection as an innocent purchaser. The master reported in favor of Moorman, and the case is now submitted on exceptions to the report. Moorman had reason to believe, and did believe, that Crim was the absolute owner in fee of the lands upon which he took the mortgage. He found Crim in full and undisputed possession under a deed from Bailey, which was duly recorded. It is not pretended that he knew any fact or circumstance which was sufficient to put him on inquiry as to Bailey's rights. While laches cannot be imputed to Bailey for depositing his deed to Crim with Brown as an escrow, yet in doing so Bailey put it in Brown's power to mislead Moorman. On account of Brown's conduct either Bailey or Moorman must suffer loss, and I think the latter has the better equity. The agent of Bailey, in disregard of instructions, had his deed recorded before Crim had complied with his agreement to remove the liens on the lands conveyed to Bailey. This was Bailey's misfortune. He put it in the power of Brown to inflict the injury, and it would be against natural justice to require Moorman to sustain the loss. At the time of the exchange, Bailey understood that Brown was to assist Crim in raising money by mortgaging the land described in Bailey's deed. It was in this way that Crim was expected to be able to comply with his agreement to remove the liens, and it may be that Bailey was less surprised at finding his deed to Crim and the latter's mortgage to Moorman recorded than he was by Crim's refusal to use the money in discharging the liens.

It is urged by counsel for plaintiff that the paper placed in Brown's hands by Bailey was no more than an escrow; that the recording of it did not make it a deed; that its delivery without compliance with the conditions upon which it was held passed no title to Crim, and that therefore Crim conveyed no title to Moorman. Berry v. Anderson, 22 Ind., 40, and Everts v. Agnes, 6 Wis., 453, are cited in support of this position. In Everts v. Agnes it was held that the fraudulent procurement of a deed deposited as an escrow from the depositary, by the grantee, did not operate to pass the title, and that a subsequent purchaser from such grantee, without notice and for a valuable consideration, derived no title thereby, and could not be protected. In Berry v. Anderson the deed was procured from the custodian, who held it as an escrow, by fraud, and the grantor still remained in possession, which latter fact, of itself, was