The daily exchange. [volume] (Baltimore, Md.) 1858-1861, 1858-04-10

clear In my opinion, that upon authority and prin
cple, and in accordance with the highest equity
the holders of the present income bonds and al
other purchasers from the defendants of SINH
lar income bonds, would be entitled to a pre-
terence and priority, because the Messrs Garrett!
had the evidence in the cause shows and their an
swer admits, knowledge that Sd mortgage bond;
were to be issued and so stated. (See the testimony
of Oelrichs Lurman.) And as the Sd mortgage
was never recorded in Baltimore, the purchasers OF
the income bonds could not be presumed to
know know that it existed, Or if they did know, its
terms and objects were not understood bv them
to be in conflict with the security of the income
bonds. (See testimony of Mr.. Lurman.)
Without, however, upon this occasion deciding
what rank Court of Chancerv in MARYLAND
should give to holders of the different bonds of
this road, should its insolvency and settlement
call for a distribution of its assets accord
ing, to the rules adopted in such cases. |
will now contine my decision to this particular
case, and the evidence which is full and think
satisfactorily to show that the Messrs. CARROTS.
whether Intentionally not, did by their conversa
tons and conduct, lead Mr.. Olrichs and Mr.. Lurman
10 beleve that nothing would be done bv the Cen
| tral Ohio Railroad Company, themselves as its
agents to impair the security of the income bonds
which they purchased for the defendant Nav and
| others.
! The denials in the answers are positive but con-
versations referred to from which a misappre-
hension could arise. and if MAY or his agent pur-
| chased the bonds in question upon such conyersa-
tlons, regarding them or understanding them as
! representations favorable to the character and
value of these bonds then it certainly should entitle
the complainant to be placed at least within the ben
emit ot that doctrine which regards anv representa-
tlons thus made, by party having full knowledge
% ac5ns as OF ms co-deicndants whether
oy aIsigh OF other"lse, either before or after the
! purchases, the ground for relief, as against the
| party making these representations The Messrs
ot IN tls case after the sale to May and
others, became the holders Of the Sd mortgage to
large amount; and claimed now to hold them as
sec" 10 themselves TOR large Indebtedness to them,
py sald complanants, as lrGjerred bonds in their
naIus over the income bonds, and objections to the
toS;nio of M Nalter nave 1een ned' as also to the
.es'inohy u! MeSSrs. oelrlchs and Lurman. Leay
h9 OUT Oh yleW ior the present. the evidence given
Dy ,Oatef,l ma nothing In the testimony of Mr..
oelchs or Mr. Lurman, 'ehtch 'eo"jd not be odn,is
Messr in n ana ma conduct OF the
bnth hf IN reference 10 the income bonds,
0iaha anu = altei tley soiu them TO Messrs
eiiiIns anu hurlnan the former acting as an agent
m iot tnen;-anu the law applicable to the repre-
sehUatlohs ana conduct OF an agent would, think,
IN IN case IKE this, control and determine this ques
'i1m.-t9ec I@ey on aJency.
me uelehaahts' the Messrs Garretts, who now
@ i,olu tnese "u mortgage bonds, received them as
"9e"S' ana not as purchasers nltoW notice of the
prior lhcumprances. And although the Sd mort
sdSe conveyed the legal title to the road
anu 10 itS tollS ana earnings, and the income
pohuholuerS nave only an equitable title to the in
come OF Tolls ana earnings. Yet to enable the Sd
mortgages 10 mold priority, the rule of equity
qulreS that the id mortgages should not have
ceiVea tne same r' notice OF the prior incumbrance
at the time of lending their money or taking the
mortgage (See Coote on Mortgages, p. AIS, who
SaySt Is by Lending the money without notice that
ne becomes an honest creditor" From the opinion
| OF Lord Keeper Henley, also lst Eden, $50 (same
docrlne). The maxim is ''in e9Uo lure 1neLior est
eo"ditio possidemis" "Where equities are equal the
law shall prevail
That Is the legal titleupon equal equities shall pre-
vail are the equities of the Messrs. CARROTS
ng up the I'D mortgage bonds over the income bonds
IN TINS SUIT, equal to that OF the holders of the in
| come bonds? think not They are not purchasers
without notice. or third parties buying without no
tice 1T is not the of a creditor or purchaser
without notice Of prior lien equity, taking
subsequent incumbrance or mortgage and | am
very clear that in case like this and upon the
facts disclosed in the record, the equities of the COM
plalnants and defendants are not equal. Again, she
VINO asks equity must do equity" See Coote. PIP.
400, 39S, Nc; I'd Vernon, III, 394, &C., ''If
| mortgage be made of chattel real, and the mort
gagor die indebted to the mortgagee by simple
tract and the executor of the mortgagor brings his
bill to redeem, he must pay both debts" &c.
The next question is, did the pledge of the income
oonGs form lien In equity on the land, &C.? If it
iad oeen gwen by a formal recorded deed, or by
devise, the decisions in Maryland referred to would
so determine. But the case in Simons' Reports is
reHed on FOR contrary doctrine The mere legal
utle TO property without any equity to sustain it,
would present different case: but where the legal
ana equltaDe estate passes, 1t would confer Alright
which the holder of it, without special notice of a
prior equity, could not be dvested of: That is, how
not TINS case Tor herelt rests chiefly II not en-
tiey' oi the houGG ana knowledge OF the defendants
thata prior equitable lien existed blythe terms of the
income bonds on the very tolls and earnings of the
roa9 {Whlch regard as meaning the income of the
.pau; i III otner words, the 81 mortgage conveyed
% ne Ioi Pus, Vi properly, before sPecEcuy Ptedged
~ ~ Inese very uelehuahts ana the H. H. Co., which
tney now nold ana set up IN derogaton OF theequi-
| " 9l the income ponds, known to them to exist,
anu oI "hiGh Iney haG notice and the CARROTS re
t 'ei HoM iol tilelr own security the "a
IL
ldple liens vi the income DohdS Which they them
siNes h"u previously solG 10 the complalnants IN
tii SUI ne testi'hony Vi MI. oelrlchs, at page
4, says that ne haa, prior TO the negotiation and
PuIchase vi tle pohuS' (lhcome) from Jno. W.
U"itc.', lcIeu dS tne agent OF MesSrS Jarrett
sons lcr the sale OF THESE ponds, and that they had
authoriEeu MIN 10 sell them aS lar back as 1854,
Wnen ne was IN Europe.
The conversations OF Mr.. May with Mr.. 0elrichs
are lnadmlssable he being party to the suit. But
at page Mr.. Oelrichs says he had several CONVEX
sations with the defendants, Messrs. Garrett 4
sons, that IS with Mr.. Jno. W. Garrett, after he
purchased the bonds for Mr.. May-one as late as
June, 1850, when, in answer to inquiry wheth-
er they had more of the income bonds for sale and
at what price, he, Jno. ". Garrett answered they
were about issuing the Sd mortgage bonds, which
were to take the place of tie income bonds. and the
income bonds they had therefore withdrawn; that
the witness now holds $4,000 of the income bonds
for c. d w. Carstanyer, in Germany, and $4,000
for X. D.. Warner, Jr did not know at the time of
the purchase made for Mr.. May, that Mr.. Lurman,
his partner, was to be trustee under the Sd mort
uage-earned it afterwards; purchased the bonds
for the German houses before he purchased Mr..
| Mays.
Gustav W. Lurman, another witness, examined at
page 10 OF the testimony, says he applied to in
JAM or Feb, lS55, by Mr. Jno. Garrett to be trus-
tee under the 3dm ortgage. He represented to me,
and these reasons induced me to become the trus-
tee, that the object of negotiating this Sd mortgage
was to pay of the floating debt of the company and
provide in easy money times for the redemption of
the income bonds-the amount of which was about
100000. He did not then state, as far as | can
recolect, the amount of the floating debt; but said
it was the purpose to establish a sinking fund of
SlO0, ,OOO-the annual interest of which was to be
re-invested in third mortgage bonds-and SlOO 900
of said bonds were to be retained by the trustees to
constitute the sinking fund In my first conversa-
tiOn MIR. John W. Garrett stated that the