The mortgagor is not bound to. enforce the purchaser's obligation to indemnify him for the benefit of the mortgagee, and the position is not changed by the death of the mortgagor. In that event the mortgagee's right is to claim against the estate of the mortgagor. If the mortgagee makes such a claim, but not otherwise, the personal representative of the deceased mortgagor would be obliged, as regards the general body of creditors, to call upon the purchaser to make good the amount by which the assets were diminished by being applied in payment of the mortgage (n). A mortgagee who obtains judgment on the-covenant against the mortgagor is not entitled to the appointment of a receiver for the purpose of enforcing the purchaser's obligation to indemnify, even though the plaintiff sues on behalf of himself and all other creditors of the mortgagor (o).

There is no privity of contract or implied obligation between the mortgagee and the purchaser of the equity of redemption which will enable the former to sue the latter for payment of the mortgage money, even though the latter has covenanted with the mortgagor to pay the money (p).

(l) Short v. Graham, 1908, 7 W.L.R. 787.

(m) Bernard v. Faulkner, 1914, 7 A.L.R. 439, 18 D.L.R. 174.

(n) Higgins v. Trusts Corporation of Ontario, 1900, 27 O.A.R. 432.

(o) Palmer v. McKnight, 1899, 31 O.R. 306.

(p) Frontenac Loan and Investment Society v. Hysop, 1892, 21 O.R. 577; Canada Landed and National Investment Co. v. Shaver, sequently D procured from A and B assignments of the covenants in their favour respectively. It was held (1) that D's covenant, notwithstanding its form, was merely a covenant to indemnify C, (2) that the assignments from A and B released C from any liability to indemnify, A and B being the only persons to whom he could be liable and no cause of action having meantime arisen by C against D, and (3) that consequently D could not be liable to indemnify C. The action by the mortgagee against D was therefore dismissed (u).

The right to indemnity may, however, be assigned by the person entitled to it to a person entitled to recover the mortgage debt (q), so that if the right is assigned to the mortgagee, he may enforce it (r), and, in the case of two successive transfers of the equity of redemption upon the terms that the transferee in each case assumes the mortgage, if the second transferor assigns the right of indemnity to the first transferor, the latter may enforce it against the second transferee (s). The measure of the indemnifier's liability is the liability, not the capacity, of the person indemnified to pay (t).

The obligation of the purchaser of land subject to a mortgage towards the vendor is essentially only a contract of indemnity, even though the purchaser expressly covenants with the vendor to pay the mortgage, and if the purchaser obtains a release from the only person who could in any way damnify the vendor, he is under no liability. This is illustrated in a striking way by the following case. The equity of redemption was sold by A to B, by B to C, and by C to D, there being in the case of each sale a covenant by the purchaser to pay the mortgage and indemnify his immediate predecessor. The mortgagee, seeking to make D pay the mortgage, procured an assignment from C of D's covenant. Sub-

1895, 22 O.A.R. 377. As to the special statutory provisions in Alberta, see Sec. 134.

(q) Maloney v. Campbell, 1897, 28 Can. S.C.R. 228, affirming Campbell v. Morrison, 24 O.A.R. 224. If the assignment is made before any right of action has accrued against the person to be indemnified, the assignment cannot become operative until the accrual of the right of action. S.C. 28 Can. S.C.R. at p. 233.

(r) British Canadian Loan Co. v. Tear, 1893, 23 O.R. 664; Morice v. Kernighan, 1908, I8 M.R. 360.

(s) Smith v. Pears, 1897, 24 O.A.R. 82.

(t) Therefore the fact that the person indemnified is a married woman who has no immediate separate property affords no defence. British Union and National Insurance Co. v. Rawson, [1916] 2 Ch. 476.

Sec. 136. Mortgagee may disable himself from enforcing indemnity. If a mortgagee takes an assignment from the mortgagor of the purchaser's covenant to pay the mortgage and indemnify the mortgagor, and so deals with the covenant as to disable himself from restoring it unimpaired to the mortgagor, he cannot sue the mortgagor for payment in so far as the disability exists. A mortgagor having sold the equity of redemption and taken a covenant from the purchaser to pay the mortgage and indemnify the mortgagor, assigned the covenant to the mortgagee. The purchaser then sold the land in three parcels to three sub-purchasers each of whom assumed and covenanted to pay his proportion of the mortgage debt. The covenants of the sub-purchasers were assigned by the purchaser to the mortgagee who agreed not to make any claim against the purchaser until he had exhausted his remedies against the sub-purchasers and against the lands. The mortgagee having brought an action against the mortgagor for payment, it was held that the extent to which the purchaser's covenant in favor of the mortgagor had been impaired by the mortgagee's agreement with the purchaser could be determined only by the exhaustion of the remedies provided for in the agreement and that in the meantime the mortgagee was not entitled to sue the mortgagor for payment (v). The mortgagee subsequently exhausted the remedies against the subpurchasers and against the lands, and obtained from the purchaser a release of the agreement with him, at the same time agreeing not to sue him, but reserving the mortgagor's rights to sue the purchaser in the event of the purchaser's covenant being reassigned by the mortgagee to the mortgagor. The mortgagee then brought a new action against the mortgagor and was held entitled to judgment for the amount owing on the mortgage less the proper sum, if any, to be allowed to the defendant as compensation for the impairment, if any, of the security afforded by the purchaser's covenant owing to the mortgagee's agreement with the purchaser (w).

(u) Smith v. Pears, 1897, 24 O.A.R. 82.

The relations of the mortgagee, the mortgagor and the pur- chaser who agrees with the mortgagor to assume the mortgage and covenants with the mortgagor to indemnify the latter are not those of creditor, surety and principal debtor respectively. Therefore if the mortgagee makes a binding agreement to give time to the purchaser or otherwise deals with him without the consent of the mortgagor, the mortgagor is not discharged, and may be sued upon the mortgage provided that when he is sued the mortgagee is not then disabled from restoring to the mortgagor the unimpaired property or the unimpaired obligation of the purchaser to indemnify the mortgagor (x). If the relations of the parties were really those of creditor, principal debtor and surety, the surety would, of course, be absolutely discharged if, without his consent or without a reservation of rights against him, the creditor should make a binding agreement to give time to the principal debtor or impair the security, notwithstanding that the extension of time has expired or the impairment of the security has been made good before the surety is called upon to pay (y).

(v) McCuaig v. Barber, 1898, 29 Can. S.C.R. 126, reversing Barber v. McCuaig, 24 O.A.R. 492.

(w) Barber v. McCuaig, (No. 2), 1900, 31 O.R. 593.

(x)Forster v. Ivey, 1901, 2 O.L.R. 480. As to the general principle that mortgagee may be disentitled to sue the mortgagor for payment if he has disabled himself from restoring the mortgaged property unimpaired, see chapter 23, Action on the Covenant, Sec. 227.