The transfer of the equity may, however, give rise to an obligation on the part of the transferee to indemnify his immediate transferor against the liability, if any, of the latter to the mortgagee or to the person from whom he acquired the equity. The obligation may be express or implied. If a limited obligation to indemnify is expressed in the transfer, a more general obligation cannot be implied (p), and there is no implied obligation if the transfer contains a covenant against incumbrances, but in the absence of an express stipulation the general rule is that if land is transferred subject to a mortgage the transferee is under an implied obligation to indemnify the transferor against the latter's liability in respect of the mortgage (q). The rule as applied to mortgages of land is only an instance of the principle that if a person buys property which is subject to a charge and it is the intention of the parties that the purchaser is to take the property cum onere, the purchaser is bound, irrespectively of the form of the contract, to indemnify the vendor against the charge, for ex hypothesi the purchaser is paying only the value of the property less the amount of the charge and he is not entitled to get the property freed from the charge at the vendor's expense (r).

In the absence of an express covenant, the implication of an obligation on the purchaser's part to indemnify the vendor arises from the fact of purchase with the intention that the purchaser should pay the charge and not from the terms of the transfer, and the implication may be rebutted by oral evidence shewing that the apparent purchaser was not the purchaser in fact or that it was not the intention of the parties that the purchaser should indemnify the vendor (s). Thus there is no implied obligation to indemnify on the part of the grantee in a conveyance which is absolute in form but which is made to him as nominee of the real purchaser or merely as security, the relation of transferor and transferee not being that of vendor and purchaser (t).

(p) Mills v. United Counties Bank, [1912] 1 Ch. 231.

(q) Waring v. Ward, 1802, 7 Ves. 332, at p. 336; Jones v. Kearney, 1841, 1 Dr. & W. 134, at p. 155; Walker v. Dickson, 1892, 20 O.A.R. 96, at p. 102.

(r) Boyd v. Johnson, 1890, 19 O.R. 598; Gooderham v. Moore, 1899, 31 O.R. 86. The principle has been applied in the case of the transfer of bank shares which are subject to the double liability. Boultbee v. Gzowski, 1898, 39 Can. S.C.R. 54, 24 O.A.R. 502, 28 O.R. 285. It has been applied also in the case of the purchase of a share in a partnership so as to impose upon the purchaser the obligation to indemnify the vendor against the liabilities of the partnership. Dodson v. Downey, [1901] 2 Ch. 620.

In Mills v. United Counties Bank (u), Fletcher Moulton L.J. speaks of " the doctrine . . . that there is an implied covenant on the part of a purchaser of an equity of redemption to indemnify the vendor against the mortgage debt." Farwell L.J., in the judgment which follows, asserts that the obligation belongs to a class of equities independent of contract, which "are now sometimes erroneously called implied contracts." The apparent contradiction between the two learned lords justices may perhaps be mitigated, if not resolved, if we observe that the implied contracts of the common law were themselves introduced because there was no contract in fact. The only real difference between an equity founded in conscience and an implied contract would seem to be that for historical and accidental reasons the courts of common law could not or would not extend to the former class of cases the presumption which they made in the latter (v). It is probably more accurate nevertheless to describe the obligation in question as an equitable obligation (w), and in accordance with this view it has been held that where land is conveyed to a married woman subject to a mortgage she is not bound to indemnify her grantor unless she expressly contracts to do so, that is to say, the obligation to indemnify which is ordinarily implied on the part of a purchaser is not one arising from contract and therefore does not bind the separate estate of a married woman (x).

(s) As to the admission of oral evidence to rebut the implied obligation, see Beatty v. Fitzsimmons, 1893, 23 O.R. 345; British Canadian Loan Co. v. Tear, 1893, 23 O.R. 664.

(t) Walker v. Dickson, 1892, 20 O.A.R. 96; Corby v. Gray, 1888, 15 O.R. 1; Fraser v. Fairbanks, 1894, 23 Can. S.C.R. 79; Fullerton v. Brydges, 1895, 10 M.R. 431; Campbell v. Douglas, 1916, 54 Can. S.C.R. 28, 32 D.L.R. 734, affirming 34 O.L.R. 580,, 25 D.L.R. 436.

(u) [1912] 1 Ch. 231, at p. 241.

There is of course no obligation on the part of a purchaser to indemnify the vendor if the latter is himself not liable in respect of the mortgage, for instance, if the vendor had purchased on the terms that he should not assume the mortgage but that it should be paid by the person who sold to him. So it has been held that where a mortgagee sold the land under the power of sale for a price sufficient to pay the principal, interest and costs, he could not without sufficient reason treat the sale as a nullity and have recourse to the former personal liability of the mortgagor, and that if the latter paid the mortgage, not being then personally liable, he could not compel his transferee to indemnify him (y).

If the mortgagor is sued on his covenant by the mortgagee, and is entitled to be indemnified by his transferee, he may obtain an order adding the latter as a third party and is entitled to a lien on the land for the amount which he is obliged to pay (z). Payment by the mortgagor is not a condition precedent to his right of action on the purchaser's obligation to indemnify him, and the purchaser may be protected by a direction to pay the money into court (a).

(v) 28 L.Q.R. 122-3 (April, 1912).

(w) Cf. Campbell v. Morrison, 1897, 24 O.A.R. 224; S.C. sub nom. Maloney v. Campbell, 28 Can. S.C.R. 228. On the other hand there are dicta in favour of the view that the obligation arises from implied contract in Beatty v. Fitzsimmons, 1893, 23 O.R. 245; Oliver v. McLaughlin, 1893, 24 O.R. 41.

(x) McMichael v. Wilkie, 1891, 18 O.A.R. 464, Osier J. A at pp. 469 ff., Maclennan J. A. at pp. 474 ff. If the conveyance to a married woman contains an express covenant on her part to pay the mortgage debt the covenant may be enforced against her separate estate. Small v. Thompson, 1897, 28 Can. S.C.R. 219.

(y) Patterson v. Tanner, 1892, 22 O.R. 364.

The doctrine now under discussion has in Ontario been expressed in statutory form in the Execution Act which authorizes the sale under a writ of execution of an equity of redemption (&), and provides that if a person other than the mortgagee becomes the purchaser, and if the mortgagee, his executors, administrators or assigns shall enforce payment of the mortgage debt by the mortgagor the purchaser shall repay the debt and interest to the mortgagor, and in default of payment thereof within one month after demand the mortgagor may recover the debt and interest from the purchaser, and shall have a charge therefor upon the mortgaged land (c)

It is provided by the' Manitoba Real Property Act (d) as follows:

97. In every instrument transferring an estate or interest in land under the new system, subject to mortgage or encumbrance, there shall be implied, unless otherwise expressed, the following covenant by the transferee with the transferor, that is to say: that such transferee shall pay the interest, annuity or rent charge secured by such mortgage or encumbrance at the rate and at the time specified in the instrument creating the same, and will indemnify and keep harmless the transferor from and against the principal sum or other moneys secured by such instrument and from and against the liability in respect of any of the covenants therein contained or under this Act implied on the part of the transferor.

(z) Hamilton Provident Loan Co. v. Smith, 1888, 17 O.R. 1; McMurtry v. Leushner, 1912, 3 O.W.N. 1176, 3 D.L.R. 549.

(a) Mewburn v. Mackelcan, 1892, 19 O.A.R. 729; Noble v. Campbell, 1911, 21 M.R. 597; In re Richardson, Ex parte Governors of St. Thomas's Hospital, [1911] 2 K.B. 705; Shaver v. Sproule, 1913, 4 O.W.N. 968, 9 D.L.R. 641; cf. McDonald v. Peuchen, 1918, 42 O.L.R. 18, 41 D.L.R. 619

(b) See chapter 16, Execution Creditors of the Mortgagor, Sec. 154.

(c) R.S.O. 1914, c. 80, s. 33.

(d) R.S.M. 1913, c. 171, s. 97. See Ross & Phillips v. Schmitz, 1913, 6 S.L.R. 131, 14 D.L.R. 648, and annotation 14 D.L.R. 652 ff.

Under the Land Titles Acts of Saskatchewan, Alberta and the Northwest Territories a similar covenant on the part of the transferee is implied "in every instrument transferring land, for which a certificate of title has been granted, subject to mortgage or encumbrance." The Northwest Territories statute (e) does not specify in whose favour the covenant is implied and presumably, as under the Manitoba statute, the covenant is with the immediate transferor only. Under the former Saskatchewan statute (f) the covenant was "with the transferor and so long as such transferee shall remain the registered owner with the mortgagee or incumbrancee," and under the Alberta statute (g) it is "both with the transferor and the mortgagee." Under the present Saskatchewan statute (h) the covenant is "with the transferor."

Under the Alberta statute the mortgagee may sue the transferee upon the covenant (i), but in the other provinces the transferor is not liable to the mortgagee unless the covenant or obligation is assigned to the latter (j). It was held under the former Saskatchewan statute that the covenant was implied only if the whole of the mortgaged property was transferred (k). In Alberta it has been held that the covenant is implied only if there is a complete transfer of his interest on the part of the transferor and therefore no covenant is implied in a transfer absolute in form which is intended as security merely (I), and that in any case the implied covenant may be negatived by apt words in the transfer (m).

(e) R. S. C. 1906, c. 110, s. 69.

(f) R.S.S. 1909, c. 41, s. 63.

(g) Alberta statutes, 1906, c. 24, s. 52. By the statute 1916, c. 3, s. 15, the court is authorized to make an order directing the registration of a transfer if the transferee declines to register it.

(h) Sask. statutes, 1917 (2nd sess.), c. 18, s. 64. (i) Great West Lumber Co. v. Murrin & Gray, 1916, 11 A.L.R. 173, 32 D.L.R. 485.

(j) See Sec. 135, infra.

(k) Montreal Trust Co. v. Boggs, 1915, 25 D.L.R. 432; Dominion of Canada Investment and Debenture Co. v. Carstens, 1917, 10 S.L.R. 272, 36 D.L.R. 25; Dominion of Canada Investment and Debenture Co., v. Gelhorn, 1917, 10 S.L.R. 278, 36 D.L.R. 154.