
    ANDREW CORRIGAN v. THE TRENTON DELAWARE FALLS COMPANY.
    1. Proceedings under tbe “ Act to prevent frauds by incorporated companies,” passed February 16th, 1829.
    .2. Distribution of the assets.
    8. Character of assets, whether legal or equitable.
    In May, 1843, an injunction was granted, and receivers appointed to take possession of the property of ‘‘ The Trenton Delaware Falls Company,” under the act “ to prevent frauds by incorporated companies,” passed February 16th, 1829.
    In November, 1843, a decree was made, directing the receivers to make sale according to law of all the lands and real estate of the company, including the race-ways, and all the chartered rights, privileges, and franchises belonging to the company and appertaining to the said race-ways, (a supplement to the above-stated act, passed March 11th, 1842, authorizes a sale of the chartered rights and privileges of such companies.) Nothing was said in the decree as to the encumbrances on the lands and works of the company, nor did it give any directions how the sale should be made.
    The receivers being of opinion that under the said decree the property could not be sold free from encumbrances, obtained an act of the legislature, passed February 15th, 1844, authorizing them to sell the real estate, franchises and works of the company, free and clear of all encumbrances; and this act provides that nothing therein contained shall be construed to affect the rights of the several creditors of the company to receive their share of the proceeds of the sale according to law. The act, as well as the decree, is silent as to any mode of sale in reference to the encumbrances and the proper apportionment of the proceeds.
    The receivers sold all the real estate of the company and their chartered rights, at one bid, to Charles S. Olden, for $50,000, free and clear of all encumbrances. The sale was confirmed by the court, and a deed given accordingly.
    
      A report was subsequently made by the receivers, showing that, in addition to the said sum of $50,000, they had received rents to the amount of $2714.86, and that, after their disbursements, &c., there remained for distribution $49,751.82. This account was confirmed, and an order was thereupon made directing the receivers to ascertain the amount and order of priority of the mortgage and judgment debts, and the amount of the other debts, to the end that a final order of distribution might be made according to law.
    The race-way of the company runs through lands north of the Assunpink, acquired from different persons, and crosses the Assunpink, and extends on lands lying south thereof.
    The receivers reported the order and priority of the debts as follows:
    1. The Hargous mortgage, on 17 acres south of the Assunpink, dated November 27th, 1830, for......$3,300 00
    2. Two mortgages to the Trenton Bank, on all the real estate of the company, both dated April 2d, 1833, one for $4000, and the other for $6700; and a judgment against said company, dated May 22d, 1834, for $6237.87................................................. 16,937 87
    3. A mortgage to Thomas Cadwallader and others, dated May 23d, 1834, on the real estate north of the Assunpink, for....,......................................... 15,491 47
    They then state the persons who have presented certificates said to be secured by this mortgage, amounting in all to $24,057.05.
    4. A note to the Trenton Bank, dated October 1st, 1835, for $2087; another note to said bank, dated October 28th, 1835, for $3504.......................... 5,591 00
    That, to secure these notes and the mortgages and judgment of said bank above stated, the company, in October, 1835, assigned to the bank three leases; one to S. & T. J. Stryker, at $450.67 per annum; one to James Hoy, at $750 per annum; and one to J. McKelway, at $166.90 per annum.
    5. That, on the 19th of December, 1835, the company assigned toWm. Potts, trustee, &c., the lease to Fish, Green & Co., at the annual rent of $500, to secure certain persons the interest on their debts; and that seven claims (stating them) have been presented to the receivers under this assignment, amounting in all to $4,900 00
    In reference to each of which the receivers state that the interest has been paid by the rents.
    6. A mortgage on certain lands of the company, dated June 2d, 1836, to Benjamin Pish and others, for $9220.97 ; under which, certificates transferable were issued by the company to each person named in this mortgage, stating the amount due each. Claims have been presented under this mortgage, amounting to ............................................................. 11,269 76
    7. A mortgage of like character on certain lands of the company, dated June 4th, 1836, to Armitage Green and others, for $7395.45. Claims have been presented under this mortgage, amounting to......... 9,672 47
    8. A mortgage on all the real estate of the company, dated June 3d, 1837, to Samuel S. Stryker and others, for $10,000; reduced, February 3d, 1844, to...................................................... 7,016 36
    On the 21st of February, 1843, a judgment was entered for the same debt in the Mercer Pleas, and execution issued thereon.
    Three claims, represented to be secured by this mortgage, were presented, amounting to said sum of $7016.36.
    9. A mortgage on all the real estate of the company, dated February 25th, 1843, to Richard I. Bond, trustee, &c., for $20,450.74. Certificates were issued under this mortgage, and claims have been presented under it amounting to.......................... 4,563 49
    10. A judgment of Peter T. Smith against the company, recovered in the Supreme Court, February 28th, 1843, for.............................................. 3,953 94
    11. A judgment of Patrick McMahon against the company, recovered in the Supreme Court, February 28th, 1843, (same day,) for.....;......................... 507 38
    12. A judgment of Andrew Corrigan against the company, of same date, in Supreme Court, for......v 2,809 00
    
      The receivers further report, by way of recommendation, that each encumbrancer be paid his whole amount, according to the date of his encumbrance, as far as the fund will go, whether his encumbrance is on all the estate or only on a part of it.
    Separate appeals from the report were filed by Peter T. Smith, Patrick McMahon and Andrew Corrigan, judgment creditors, and by John McKelway, a mortgage creditor of the company, interested in the mortgage to -Fish and others, stating their respective grounds of appeal.
    The exceptions or grounds of appeal will sufficiently appear in the argument of counsel and the opinion of the court.
    
      W. Halsted, for the appellants.
    There are mortgage creditors, judgment creditors, and simple contract creditors. The question is as to the manner of distributing the fund in court.
    The receivers were authorized to sell not only the real estate, but the franchises. The franchises were not included in the mortgages, and could not be sold on execution. The real estate and franchises were all sold together at one bid, for $50,000. The receivers report, in a previous report, that the real estate was worth only $11,000. The report was confirmed. We have, therefore, $39,000 derived from a sale of the franchises, not available to the mortgagees. How is this to be distributed ? The judgment of the Trenton Bank is prior to all the mortgages, and is for $17,000; and this takes all the real estate, for that was valued at only $11,000. The property mortgaged, therefore, is swept away by that judgment. A fund arising from the sale of the franchises, and not bound by the mortgages, is in court for distribution. Have the mortgages a priority on that fund ? or have the judgment creditors a priority ? or are these assets equitable assets, distributable, pro ratá, among creditors of all classes ?
    He contends they are legal assets, and that the judgment creditors are entitled to priority. In this state, an equity of redemption may be sold at law, and therefore is legal assets. The English rule, then, does not apply here. Judgment debts are the only debts entitled to preference here. Our law knows no distinction in favor of mere specialties. The real estate, then, being swept away from the mortgagees, they have only their bonds left, and the judgments are entitled to priority over them.
    Eor the purposes of this argument, he admits that the act authorizing the sale free from encumbrances was constitutional, but says the legislature gave no rule for distribution ; that they could not have intended to change priorities, and deprive the judgment creditors of their priority. If the legislature intended to make the proceeds equitable assets, they would have directed distribution among all the creditors, ratably.
    The Smith and Corrigan judgments were obtained before the bill was filed on which the decree in this case was made; and the decree does not authorize a sale free from encumbrances. So far as a mortgage is a lien in rem it has a preference; no further. But in reference to funds derived from other sources, judgment creditors are preferred by the very terms of the statute under which the bill in this case was filed.
    The judgment creditors might have filed a bill in this court to subject the franchises . to the payment of their judgments; and on filing their bill they would have obtained a*preference. The franchises could not be. sold, either under a decree of this court or under a judgment at law. The legislature made them liable, and did not give character to the proceeds of the sale of them, either as legal or equitable assets. He contends that they are legal assets, and that the judgment creditors have priority; that a judgment is a general • lien on all property, including what cannot be levied on. The mortgagees have no standing here in reference to the proceeds of the sale of the franchises.
    Next, certain leases came into the hands of the receivers, and they received rents on them. How are these rents to be distributed ? They arose from the lands bound by our executions. There is no pretence that they are equitable assets. The mortgagor would have received the rents. The receivers took them for the benefit of the mortgagor and his creditors. They are legal assets, and go to the judgment creditors.
    Next, when the Sertorie property (seventeen acres south of the Assunpink) was purchased by the company, it was subject to the Hargous mortgage of $3300. He contends this is not a debt of the company ; and that the holder of the mortgage is not a creditor of the company; and that the purchaser at the receivers’ sale is liable for it to Hargous. That the act under which the receivers sold, authorizing them to sell free from encumbrances, intended only encumbrances created by the company. The purchaser at the receivers’ sale bought subject to the mortgage.
    
      Mr. H. cited 1 John. Ch. Rep. 130; 2 Fonbl. 403, note 1, 405; 1 Story’s Eq., § 551, 554; 4 John. Ch. Rep. 626, 687; 10 Paige 43, 598; 2 Howard’s Rep. 608; 20 John. Rep. 554; 1 Paige 536, 637; 1 Story’s Eq., § 60, 64, 79, 576; 4 Wheat. 122; 8 Ibid. 1; 7 John. Rep. 477 ; 1 Bay. Rep. 179; Domat’s Civil Law 5; 2 Cranch 277; Leaming and Spicer 427, § 6; Ibid. 369; 2 Dall. 310; 2 Bay. Rep. 38; 2 Black. 345; Puffend, Book 8, ch. 5, § 7; Grotius, Book 7, ch. 14, art. 7, 8; 15 John. Rep. 262; 1 Com. Dig. Assets 609; 2 Story’s Eq., § 577; Prec. in Ch. 128; 2 Vernon 405, 525; 2 P. Wms. 416. 463; 1 Bro. Ch. 135; 1 Vernon 67; 4 Ves., Jr., 538; 3 Atk. 244; 3 Vesey 32; 5 Ibid. 438; 2 Ves. and Beam, 252; 1 Green’s Ch. Rep. 516; 1 Swanst. 573; 3 Halst. 317; 2 Bro. Ch. 57, 101, 152; 3 John. Ch. 229, 253; 4 Peters’ Rep. 121; 13 Ibid. 464; Cases Temp. Talbot 224; 3 Paige 517; 1 Scho, and Lef. 236; 10 John. Rep. 517, 532; 2 Paige 867; 2 Stuart 378; 1 Dickens 150; Williams on Ex’rs 660, 1034; Salk. 42; 7 Paige 477; 9 Barn. and Cressw. 156, 160; Ram. on Assets 184, 317, 143-9.
    
      S. G. Potts, contra.
    
    On the 14th of October, 1843, the receivers made a report that the debts amounted to $120,000; that the rents unassigned were $4779; and that the value of the real estate was $11,100. November 6th, 1843, the court made an order directing the receivers to sell all the real estate and the franchises. On the 16th of February, 1844, before the sale was made, the legislature passed an act authorizing the receivers to sell free from encumbrances. The receivers sold accordingly; and the whole property was sold together for $50,000. The receivers then made the report from which these appeals have been taken.
    
      In that report the receivers adopted this principle, that the judgments and mortgages are liens on the whole fund, and are entitled to priority according to their respective dates.
    It is contended that the $50,000 is the product of two different kinds of property, viz., the real estate, valued at $11,100, and the product of the sale of the franchises, $39,000 ; and that the judgments are entitled to be first paid out of the proceeds of the franchises, and that the mortgages are only entitled to the $11,100. This he opposed. He does not go into the doctrine of legal and equitable assets, believing that the contest will be settled before reaching that question. If the property sold was subject to the mortgages, the product of the sale ig so subject, and the report is right.
    By the act of incorporation, the company have power to convey their property, with the privileges granted by the act. By the terms of the mortgage, the company mortgaged the land, raceway, water, and the right to take water frorn the Delaware.
    A power to convey includes a right to mortgage. Saxton 18. The mortgages, then, are liens, not only on the' lands, but on the privileges^ and on the right to improve and make profit of the works. The decree authorized the sale of the lands and all the rights, privileges, and franchises of the company; and the act of February, 1844, authorized the sale of the real estate, franchises, and works.
    The report of the receivers, valuing the real estate, is no authority here. It cannot be true, because the receivers state the annual rents are $8000. They must have excluded the race-way, as mere land covered with water, and worth nothing as such. It cannot be Supposed that $11,100 was the value of the company’s property. Debts to the amount of $120,000 were incurred upon it.
    The error is in classing the franchises as personal property. The things granted by the act were, 1st, to exist as a corporation ; 2d, to improve, &c., and draw water from the Delaware to make, a water-power. The first class of franchises are political, and cannot be sold. The second class are property franchises, and may be sold, and were sold. The act of 1844 created a new company, by a new name. The political franchises of the old company were not destroyed.
    
      If the purchasers at the receivers’ sale bought the political franchises of the old company, then they must be the old company, and are liable for its debts. The second class of franchises are property franchises, and these passed by the sale.
    The estate sold consisted of the lands, race-way, water, and rights appurtenant to the estate, and necessary to its enjoyment. And this was nothing more nor less than the estate mortgaged. These rights and privileges had been used ; the dam was erected ; the head and tail races made, and the water drawn; and the mortgages were of the property, and these improvements, and the right to draw the water. It cannot be doubted that this was the idea of the mortgagors and the mortgagees. The language of the mortgages is as broad as possible.
    This class of franchises may be sold; and if the legislature think the principle of succession necessary, they may give the purchasers the political franchises. If a toll-bridge be mortgaged, and sold under the mortgage, would not the purchaser acquire the right to take toll ? In reference to the property in this case, the whole value of it is the right to take the water, and the improvements made for the purpose of taking it, for use as water power.
    By the franchises authorized by the legislature to be sold, property franchises only are intended. If this be so, the $50,000 is the proceeds of the property mortgaged, and is to be distributed among the mortgage and judgment creditors, according to their respective priorities. The property, as it stood at the time of the sale, was the product of the moneys borrowed on these mortgages. The mortgagees lent the money to construct the work and acquire the water power. Shall they have the security of a dry ditch only ?
    There never was just such a fund in court to be distributed. We shall meet with a sea of difficulties if we attempt to travel the road pointed out by the opposite counsel. That counsel says there are two funds ; one real, i. e., lands ; the other personal, i. e., franchises. And the foundation of this distinction is a loose saying in the report, that the real estate was worth only $11,100.
    The property on which the canal is was taken by appraisement, and the amount of the appraisement is $35,000. Thera are no data by which the court can solve the question how much of the $50,000 was bid for the land, and how much for the works and property franchises. The object of the legislature in granting the act of incorporation, was to create a public work; and by the act of February, 1844, directing the sale, and constituting a new company, they intended to preserve it entire. Its value was as an entirety.
    It may be asked, if the mortgages embraced all the land and the property franchises, why was it necessary for the legislature to interfere ? Answer: Here is a title novel in its character. A question might arise among the bidders, whether the purchaser would get the right to keep up the dam, &c., and draw water. If a doubt exisited, the creditors would suffer. This was a sufficient reason for the legislature to interfere and provide for thé sale of the property franchises. These are, in terms, expressly included in the mortgages ; and the $50,000 is the proceeds of the mortgaged premises.
    It was next insisted by the opening counsel, that the rents received by the receivers were legal assets, and belong to the judgment creditors. We admit they, are legal assets but say, 1st. That the incidental expenses have exhausted them ; 2d. If they were in court, they would be applicable, first to pay the bank judgment; the bank being both a mortgage and judgment creditor prior to the Cadwallader mortgage, the rents should go to the bank judgment, in aid of the claimants under that mortgage, the judgment of the appellants being subsequent to that mortgage. 3d. The Stryker judgment is-prior to the judgments of the appellants, and would take the rents; and the holder of it is not here complaining.
    P. D. Vroom, in behalf of the Hargous mortgage, now held by McCall, and of the purchasers.
    The McCall mortgage was an encumbrance on the property when it was purchased by the company, and the money due on it was a part of the purchase money. The company became bound to indemnify the vendor. They paid the interest to the spring of 1842.
    The receivers reported this as an encumbrance on the property at the time of'the sale, to be first paid.
    
      It is objected, 1st. That it is not the debt of the company, but the personal debt of the mortgagor; that the bond is not extinguished. 2d. That the company bought only the equity of redemption; and that the receivers sold nothing more, and sold subject to this mortgage.
    He answers, 1st. This was the property of the company. The fee was theirs, as much as if they had bought it free from encumbrance and then put a mortgage on it. And the receivers reported it to the court, the creditors and the public, as a part of the real estate of the company.
    2d. The order for the sale was to sell the property of the company. Before the sale was made, the legislature, for obvious reasons, interposed, and directed the sale to be made free from encumbrances. The title to be given to the purchasers was to be free from encumbrances. The terms of the act are “ as good a title as the company had, free from encumbrances.” Not from encumbrances made by the company, but from all-encumbrances. Now, what title had the company ? If it was a fee, that title passed free, &c. If the act had said nothing of the title to be given, the question might have come up. But the power and language of the legislature reaches over all the objections. Was not the property sold free from encumbrances made by the company ? On what principle ? Simply because the legislature ordered it to be so sold.
    The purchasers bought the property on the terms mentioned in the act. Are they to pay this mortgage in addition to what they bid ? The act gives one rule as to all the mortgages. It would be a surprise, not to say a fraud on the purchasers, to charge them with this mortgage. The act was not necessary to sell the property. The object of the act was to give confidence to bidders; to sell the whole property and title; and to give the purchasers a title free from all encumbrances.
    This view tdoes no injustice to the appellants; for, if sold subject to the mortgage, the property would have brought so much the less. If the property had been sold by the sheriff, or by the receivers without the act, grave questions would have arisen. But the act removed all difficulties. Were the bidders to inquire who put on the encumbrances?
    There is no dispute that the property covered by this mortgage is worth more than the mortgage on it. It is put down by the receivers as part of the realty, at $10,000.
    This mortgage was the debt of the company in respect of that land. The authorities on the other side do not alter the equitable rights of the parties. True, the company did not become the legal debtor, but they were in equity bound to indemnify the mortgagor.
    It is not a question made by McCall, whether the legislature could take his fund, or the land mortgaged to him. McCall submits, and comes here for his portion of the fund. Has he not a right to come here and say he will take the money ? If McCall had filed his bill against the purchasers, a question might have arisen whether the legislature could direct a sale free from his mortgage. But he foregoes it and comes here, and the value of the land being more than equal to his mortgage, he is entitled to the amount of his mortgage. By this ■construction no one sustains loss ; and it was for the benefit of the after creditors that the property should be sold in this way.
    Mr. Vroom spoke also to the first question argued by Mr. Potts, and concurred in his views. He said, also, that if the property had been sold simply under the mortgages, the purchasers would have taken all the property, dams, embankments, &c., and the right to use them, the same as the company had the right; and could enjoy it all without being incorporated. The old company would still exist, but their property would be gone.
    The act conferred new political franchises on the purchasers. The purchasers hold their political rights under the act. But if it should be supposed they hold their political rights under the sale made by virtue of the act, how much more was bid on that account? The question is answered by asking how much it would cost to get an act of incorporation. He presents this alternative view, but submits that the view taken by Mr. Potts is the correct one.
    
      Mr. Halsted, in reply
   The Chancello®.

The mode suggested by the counsel for the appellants for ascertaining the product of the sale of the franchises, cannot be adopted. The tract of seventeen acres, south of the Assunpink, was valued by the receivers at $10,000, and all the rest of the real estate of the company at only $1100. It is evident the receivers valued the land occupied by the canal, race-ways, and their banks, as mere land. The canal and raceways cost the company some $75,000.

Is there any other mode of ascertaining the product of the sale of the chartered rights, as distinct from the proceeds of the sale of the real estate ? Certainly none. The product of the receivers’ sale, therefore, is an entire fund, of one character. They are not equitable assets, distributable pro rata among creditors of all classes. The counsel on both sides admit they are to go to the mortgage and judgment creditors according to law. The difficulty is as to the legal priorities.

Several of the mortgages cover the whole property of the company, and several cover only separate parts of it. It is clear that, so long as the sale stands, and the decree confirming it, it being a sale of the whole property together for an entire sum, it is impossible to adopt any other order of priority than the dates of the respective encumbrances. The receivers might, possibly, have sold in such parcels as would have enabled them to give to each encumbrancer his share “according to law,” in reference to the liens on the different parts and on the whole and the dates of the lieiis. But the race-way and the franchises appurtenant thereto could not be sold separately with any propriety, nor the canal and race-ways sold in parts. The legislature, therefore, in directing that the several creditors should receive their respective shares of the proceeds “according to law,” could not have understood these words to have the meaning before referred to. As the sale was made, and contemplated by the legislature to be made, there was no law remaining according to which the proceeds of the sale could be distributed, but the law of priority in date of encumbrance. All other law is absolutely precluded and excluded.

On this part of the case, therefore, the decree confirming the sale is the law of the case, and no rule of distribution exists except the one adopted by the receivers.

The next subject of inquiry is No. 4 in the report of the receivers. The lessors, the company, assign the rents to accrue on certain leases, as security for the payment of their notes. Does this constitute a lien on the fund in court' for the amount of the notes, in preference to subsequent mortgage and judgment creditors ? I cannot see that it does.

No. 5 in the report of the receivers is a claim of the same kind.

Next, the rents received by the receivers go to the judgment creditors. The Trenton Bank has the first judgment, which is a lien on the whole fund in court, as well the proceeds of the receivers’ sale as these rents.

Next in priority of date is a mortgage, whose lien is only on the proceeds of the receivers’ sale, and not on these rents.

Next in priority of date is a judgment creditor, whose lien is also on the whole fund in court, including the rents. The fund in court, exclusive of the rents, is sufficient to pay the bank judgment and part of the mortgage. Is it the duty of the oourt to apply the rents to the payment of so much of the bank judgment, in aid of the mortgage, and in prejudice of the subsequent judgment creditor ?

It is so claimed on the part of the mortgagee. I think not. The equity of the mortgagee is not more than equal to that of the subsequent judgment creditor, and between equal equities the court does not interfere.

The next inquiry relates to the Hargous mortgage, now held by McCall, on seventeen acres of land south of the Assunpink, through which the race-way runs. This mortgage was on the property when the company bought it. It is contended by the counsel for the appellants, that the purchaser at the receivers’ sale bought subject to this mortgage, and that it should not be paid out of the proceeds of that sale. It seems to-me that the legislature, by the act of February, 1844, intended that the purchaser at the receivers’ sale should take the property of the company free from all encumbrances whatever. That McCall might compel the payment of the bond by Hargous, the obligor and mortgagor, notwithstanding the act, and the sale under it, would make no difference in this court. In that case, Hargous would be let in upon the fund for the amount paid by him. There may be something extraordinary in the nature and provisions of the act of February, 1844, but our present inquiry relates simply to the distribution of the fund; and we have nothing to do but to carry out what seems to be the intention of the act.

The exception to certificates for interest upon interest, to holders of claims under some of the mortgages, is allowed.  