There explains the case of Champion v. Brown as merely deciding that the covenant there made the defendants stand in the place of the intestate of complainant, and that they assumed the payment to Champion & Storrs which the estate of the intestate stood charged with. fore the court claims that it is not an authority for the specific performance of a covenant merely for indemnity, but that the obligation of the covenant was directly to pay; and so with the case of Ranelaugh v. Hayes, 1 Vern. 189. I do not understand that Chancellor Kent decided that the covenant made the parties Champion & Storrs directly liable to the original party for the debt which Paddock had agreed to pay. It is true, the chancellor used the following language in that case: "In the case before me, the defendants, by their covenant of indemnity, and purchase of the contract between C. & S. and P., undertook to relieve the estate of P. from the burden of that contract. This is the true intent and meaning of the agreement; and it is as just that they should be decreed to clear the representatives of P. from the charge which they assumed for them as it is that a principal debtor should exonerate his surety before he is sued, and not leave 'a cloud always hanging over him.'" John The statement of the case, we think, makes this clear. It appears that Henry C. and Lemuel Storrs agreed to sell and convey to John Paddock 952 acres of land for the sum of $8,000, $500 to be paid in cash, and the residue to be paid in six annual installments. Paddock died, intestate, November 16, 1816; and his administrators and heirs, being unable to perform the contract, for want of personal assets, on the 1st of June, 1818, entered into an agreement with the defendants, John Brown and Jacob Brown, by which the defendants covenanted and agreed that "they would take up and cancel" the contract made between Champion & Storrs and Paddock, etc., by the 1st day of August then next, or in case Champion, the survivor of Storrs, should refuse to give up and cancel the said contract, then the defendants covenanted to indemnify and save harmless the administrators of Paddock, etc., from all damages, costs, charges, and expenses which they might sustain or be put to on account of the claims, covenants, and agreements in said agreement contained, etc. Lemuel Storrs died intestate, and, in the distribution and settlement of the estate, all his interest in the contract became vested in the plaintiff, William L. Storrs. Soon after the agreement between the defendants and the administrators of P., the former entered and took possession of the land, and have since continued in possession, exercising ownership, receiving rents, cutting timber, etc. But they have made no payments, nor taken up the contract between Paddock and Champion & Storrs, but the representatives of P. still remain liable to be sued upon it. The bill prayed for a discovery, and that the defendants may be decreed specifically to perform the contract between Champion & Storrs and Paddock according to the true intent of the agreement between the defendants and Paddock, and for their indemnity, the heirs offering to ratify and confirm the conveyance of the land to the defendants in fee, etc., and for general relief. So, the original contract had not been taken up, and the purchasers Brown had not be come directly liable to the original vendors, and they could not have sued directly upon said obligation. The opinions of the supreme court referred to by counsel are not, we think, in point. The case of Wicker v. Hoppock, 6 Wall. 94, was a suit at law, and the question was as to the measure of damages for the nonperformance of an agreement to bid in certain property which was to be sold under a decree obtained by the party who subsequently sued, the agreement being that the party there sued would bid in the property for the amount of the judgment, with interest and costs. The court below allowed the amount of the judgment, with interest and costs, as the measure of damages, and in the supreme court Justice Swayne says: "If the contract in the case before us were one of indemnity, the argument of the counsel for the plaintiff in error would be conclusive. In that class of cases the obligee cannot recover until he has been actually damnified, and he can recover only to the extent of the injury he has sustained up to the time of the institution of the suit. But there is a well-settled distinction between an agreement to indemnify and an agreement to pay. In the latter case a recovery may be had as soon as there is a breach of the contract, and the measure of the damages is the full amount agreed to be paid." It is evident the learned justice was considering the question only from a legal standpoint. The case of Mills v. Dow's Adm'r, 133 U. S. 424, 10 Sup. Ct. 413, was a case at law, and the obligation of the covenant was not only to save harmless, but directly to pay the contracting party's obligation. The case of Johnson v. Risk, 137 U. S. 308, 11 Sup. Ct. 111, is equally without application. There the question was whether or not there was a federal question, and whether the Tennessee statute of limitation applied. The case of Refeld v. Woodfolk, 22 How. 318 (not cited by counsel), is in principle more applicable to the question under consideration. The facts in that case are, briefly, these: A man named Notrebe sold to Woodfolk a plantation in Arkansas. At the time of the purchase, there was an incumbrance arising out of Notrebe's subscribing 300 shares of the Real-Estate Bank of Arkansas, and mortgaging the land for $30,000. Notrebe and wife. obligated themselves to Woodfolk that, upon the payment of the purchase money, they would convey to him by good and sufficient deed, with general warranty of title duly executed according to law. Woodfolk, the purchaser, paid all of the purchase money. Notrebe died, and, in winding up the Real-Estate Bank of Arkansas, there was a danger of a heavy liability upon the original mortgage to the Woodfolk filed his bill for indemnity against the mortgage, and the court below gave him a decree requiring that the heirs of Notrebe "remove the incumbrance whenever it can be done, and then to convey the land by a deed with warranty, and with the relinquishment of dower by the widow, and meanwhile that they should deposit with the clerk of the court bonds of the state of Arkansas, for the amount of Notrebe's note and the interest ($61,500) to be held and appropriated under the order of the court as an indemnity, or that the executors might, in part, or for the whole, convey to the clerk unincumbered real estate of the same value, for the same object, and under the same conditions." The supreme court reversed the case, holding that as the transaction between the parties was bona fide, and the purchaser knew of the existing incumbrance, he must rely upon the covenants of his deed, and could not get the indemnity in advance; but I do not understand this case deciding that a court of equity had not jurisdiction to grant indemnity, but merely that the facts in that case did not authorize the relief granted, and that, by the terms of the contract between the parties, the purchaser was to rely upon the general warranties of his deed. The recent English case of Wolmershausen v. Gullick [1893] 2 Ch. 514, is one in which the court, in a very elaborate opinion, sustained the jurisdiction to give indemnity to a surety against a co-surety. In that case the court (Justice Wright) reviewed the English authorities, and held that a court of equity would grant relief for indemnity to a surety although he had not paid. The case is a very elaborate one, and all of the English authorities seem to be reviewed. It is conceded by counsel for the demurrant that there are cases where sureties have been protected by a court of equity against liability before payment; but it is insisted that it is only in cases where the defendant is liable directly on the debt, or where by the agreement he has agreed to pay as well as indemnify. The case of Wolmershausen v. Gullick was one of surety, in which the indemnity was granted without payment, but no such distinction was taken by the court; and the jurisdiction was put entirely upon equitable grounds, and not because of the liability of the surety on the original contract. In some of such cases the original creditor was not before the court at all; and in none where the relief was granted was it because of any right of the original creditor, or because of a contract by the defendant with a creditor. If relief is given to a surety, it is given upon the equitable principle of equality. If given to party holding a contract of indemnity, and not directly liable to the original creditor, the relief is given upon the contract of indemnity, and the equity arising therefrom. Thus, in Stirling v. Forrester, 3 Bligh, 575, in the house of lords. Lord Redesdale, said: "The principle established in the case of Dering v. Lord Winchelsea, 1 Cox, Ch. 318, is universal, that the right and duty of contribution is founded upon doctrines of equity. It does not depend upon the contract." And in the case of Lacey v. Hill, L. R. 18 Eq. 182, Jessel, M. R., said: "Whatever be the case at law, it is quite plain in this court that any one having a right to be indemnified has a right to have a sufficient sum set apart for that indemnity. It is not very material to consider whether he is entitled to have the sum paid to him, or whether it must be paid directly over to the creditor. If the creditor is not a party, I believe it has been decided that the party seeking indemnity is entitled to have the money paid over to him." This, of course, would be with proper security that the money thus paid over would be properly applied. Our attention has not been called, in the very elaborate briefs of counsel, to a case like the one at bar in which the relief now sought had been refused. It must not be overlooked that the com plainant in this case was a trustee for the defendant bondholders; that, by the terms of the mortgage, complainant was not bound, except upon the request of the holders of a majority of the bonds, with an indemnity by them or others against all costs or expenses, to foreclose the mortgage; that the action of the complainant was entirely in the interest and for the benefit of the bondholders in thus instituting the suit and foreclosing the mortgage; that there was neither a direct nor an implied obligation upon the part of the trustee that it should advance the expenses of the litigation, and look alone to the mortgaged property, but, on the contrary, if there had been no provision for indemnifying the trustee for the expenses of the litigation, and the foreclosure had been at the request of the cestuis que trustent under the mortgage, there would be an implied obligation to repay to the trustee, if the mortgaged property was insufficient, the expenses of the litigation. Here, if this procedure be considered as one for a specific performance, the language of the contract justifies the payment by defendants of the liability which has accrued in the mortgage foreclosure, since the obligation is not only to indemnify, but "to hold harmless the trustee from any loss or damage on account of costs, counsel fees, or other expenses in such litigation." It cannot be said that these bondholders are holding the complainant harmless from any loss on account of counsel fees or other expenses of the litigation, if the complainant is required, as indicated by the argument for the demurrant, to pay counsel fees, and then litigate with the signing bondholders the reasonableness of the compensation thus paid. We have concluded, therefore, under the circumstances, that a court of equity has jurisdiction to grant the relief prayed. It is not intended to indicate an opinion as to whether or not the allowance made in the foreclosure suit is binding upon the defendants, or whether or not the scope of the order making such allowance is to bind the complainant. We are considering the demurrer as it must be upon the facts as stated in the bill. It follows from this view that the demurrer must be overruled, and it is so ordered PINE MOUNTAIN IRON & COAL CO. et al. v. BAILEY et al. AGENT OF Seller and BUYER · AGENT'S KNOWLEDGE · TITLE. - EFFECT ON BUYER'S An agent and director of a trust company sold a mortgage belonging to the company to one for whom he sometimes acted as agent in similar transactions, and who was depending on his judgment as to the safety of the investment. Held, that the agent's knowledge of defects in the title should not be imputed to the purchaser. Richards, Boskin & Ronald and Keith, Evans, Thompson & Fairchild, for complainants. Wilson & Van Derlip, for defendants. LOCHREN, District Judge (orally). The evidence shows that the plaintiffs, corporations of the state of Kentucky, on August 10, 1892, at Louisville, Ky., entered into a written contract with John D. Blake, of Minneapolis, Minn., by the terms of which he was acquiring property rights, and on his part contracted to convey to plaintiffs, or one of them, real estate situate in Minnesota, and preferably in Minneapolis, to the amount in value of $100,000, the values to be affixed by appraisers, and that of this land there should be no part on which there should be mortgages for more than half the value, and the mortgages on the whole should not aggregate more than $20,000 on the $100,000 worth of property. The appraisal was had, and on the 25th of October following he presented deeds to these companies, containing descriptions of the land which he offered them, and I suppose, also, of the incumbrances upon the lands, for among the descriptions was a statement of this mortgage of $17,200 to the Metropolitan Trust Company of Minneapolis, dated August 29, 1892. Objection was made to this mortgage, and a supplementary agreement was entered into between the parties at the time, upon which it was agreed that the reception of the deed should not prevent plaintiffs from objecting to the validity of this mortgage. I really do not understand how plaintiffs would be in a situation at that time to object to that mortgage if it had been delivered at the time it was dated, even although it was subsequent to their agreement in relation to these lands, because no particular land had been designated as the land to be conveyed. Blake was to select and have appraised and offer to plaintiffs lands to the amount of certain values in Minnesota, but there was nothing to prevent him from selling any of the lands that he owned in the meantime. If the mortgages should exist upon the lands offered above the amount that was stipulated, that would give the companies a right, of course, to refuse to accept such lands; but I do not see how it would invalidate any conveyances that Blake would make in the meantime, whether mortgages or not. But he certainly would not have a right to put on mortgages after the deeds were made and accepted; and it appears that these deeds of Blake were given to these companies, or one of them, on the 25th of October, and this mortgage was not in fact delivered to the Metropolitan Trust Company until the 27th of October, some two days later, and was put on record that day. If the deed to the Pine Mountain Iron & Coal Company had been recorded promptly, it would probably have come in ahead of the mortgage, but that course was not taken. On the contrary, the notice,-Exhibit L, or Exhibit I,— Mr. Keith: The deed was recorded the next day after that notice. It was recorded on the 28th. The Court: This notice it is not needful to dwell upon. It is somewhat vague. It does not state in any way the rights of the Pine Mountain Iron & Coal Company to this land, or any reason why they have a right to object to the giving of any incumbrances upon it by Mr. Blake. But the testimony goes further than that. These contracts, or some of them, were sent to Mr. Moore, reaching him the following day, and he had another interview with the Metropolitan Trust Company upon that day, in which he claims to have notified them more particularly in relation to the |